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Jet engine maker Rolls-Royce (LON:RR.) blamed a downturn in aerospace and marine markets for a profit warning, sparking broker downgrades.
Rolls expects a £300mln hit to its civil aerospace business in 2016 due to weakness in Trent 700 engine, business jet and regional jet after-sales service markets.
The group also flagged up a continued decline in offshore markets, which it said would reduce profits in its marine business by about £85mln this year and next.
Rolls makes engines for commercial shipping and vessels used by the oil & gas industry, coast guards and the military.
It forecast group underlying pre-tax profit of between £1.325bn and £1.475bn, compared to previous guidance of £1.4bn to £1.55bn, reflecting the deterioration in offshore.
It stayed upbeat about prospects, saying it believed it could still improve returns and cash flow significantly, although later than expected.
Chief executive Warren East hinted at potential job losses, although he did not give details.
"I am clearly disappointed by today's announcement and the impact this will have on our investors and employees," he said.
"Notwithstanding the market developments, it is our responsibility to build a business that is sustainable and resilient no matter what is thrown at us and this will be my fundamental priority.
"Our immediate priority is to find the performance improvements needed."
Shares in Rolls-Royce fell 54.5p to 802p.
Broker Charles Stanley said it was cutting its recommendation on the stock to 'reduce' from 'hold' until more concrete evidence of progress emerged.
The broker's Tina Cook said Rolls's long-term prospects were positive, but she added: "Following a tough 2014, this latest profit warning is yet another blow to investor confidence and we expect material cuts to consensus and a correspondingly negative response in the share price."
Broker Liberum Capital also said it was reviewing its 'hold' advice on Rolls shares. "Once these downgrades are worked through, we believe the new chief executive (Warren East) is the right choice for the group's future and should be well received."
Keith Bowman at Hargreaves Lansdown said: "For now, despite management changes and a still sizeable order book, current consensus analyst opinion of a 'hold' is likely to come under further downward pressure."
In civil aerospace, the group expects the impact of reduced Trent 700 deliveries to be greater than initial estimates, reflecting further adverse developments in demand for engines, spares and related pricing.
In addition, lower-than-expected demand for engines to power business jets and a softening regional after-market would also hit profit, but it said the negatives should be offset by growth in the market for wide-body aircraft spares.
The marine division was now expected to either break even or make an underlying profit of up to £40mln, compared to previous guidance of between £90mln and £120mln.
It said it was reviewing further cost reductions and restructuring in marine to improve performance which, including asset impairments, was set to lead to an exceptional charge of £70mln to £100mln.