--- Writes through with broker comment and updated share price ---
A broker has advised investors to offload Rolls-Royce (LON:RR.) after the jet engine maker warned on profits and forecast sharply weaker demand next year.
Investec said the rapid decline in aerospace revenues and profit flagged by the company was worse than its already cautious expectations.
It also said a sharp recovery in the group's fortunes was unlikely in the medium term.
The broker pointed to costs of developing a new engine for the Airbus A380 "super-jumbo" as one of the challenges faced by Rolls.
It also highlighted weakness in the once-lucrative spares and maintenance market as a major potential hurdle going forward.
Investec said: "Weakness in the after-market for older Trent engines should raise questions on the assumptions Rolls and investors make on the useful lives of Rolls engines and the embedded value in the portfolio."
AJ Bell investment director Russ Mould said: "It is being hit particularly hard in its aerospace and offshore marine markets and it is clear the problems will take some time to resolve."
Keith Bowman at Hargreaves Lansdown said: "On the upside, clearly the new chief executive is looking to completely reset investor expectations, whilst a new wide-ranging restructuring programme is be implemented from 2016, targeting cost savings of £150-200mln per annum."
Shares in Rolls sank 129.5p or 19% to 537.5p after it left 2015 guidance unchanged, but said it expected profit to be at the lower end of the stated range.
It also signalled it may scrap its dividend to cope with pressures on the business.
It said issues had arisen in its aerospace and marine power markets in the third quarter that would create extra pressure in 2015.
Those pressures would also affect its 2016 trading more than previously expected, it said.
Rolls said they included sharply lower volumes of corporate jets powered by the company's engines and more weakness in demand for corporate jet after-sales services.
There had also been further significant declines in aftermarket service demand for its engines on 50-70 seat regional jets and more conservative assumptions on demand reductions for some legacy programmes.
Rolls said demand for new wide-bodied engines in the third quarter had stayed the same as in the summer and it expected increased demand for after-sales services.
But it had begun to see some airlines reducing use of older wide-bodied engines and that was starting to affect after-sales revenue and profit.
In addition, the company's offshore marine markets had continued to worsen throughout the year, 2016 forecasts had weakened further and demand was set to fall another 15%-20%.
Rolls said the combined profit impact of the issues in 2016 would amount to about £650mln.
Chief executive Warren East said the business faced too many fixed costs and was inflexible in managing that in response to changing markets.
He said restructuring measures were still on track to save £115mln year-on-year in aerospace and marine in 2016, led by significant job losses and plant reductions and closures.
East said: "Proposals for major structural changes are being finalised for implementation during 2016.
"These will simplify the organisation model, streamline senior management, reduce fixed costs and add greater pace and accountability to decision making.
"This wide-ranging cost reduction programme will target incremental savings of around £150-200m per annum, with the benefits accruing from 2017 onwards, while maintaining key investments in capital equipment and R&D."