Rolls-Royce Steps Up Land & Sea Cost Cuts as East Waits in Wings

Rolls-Royce Holdings Plc said it will step up cost cuts in its land and sea division as the lower oil price weighs on marine-engine sales to the offshore industry, adding to the challenges facing incoming chief Warren East.

A plan to cut 2,600 jobs at Rolls’s main aircraft-engine arm following the completion of development work on the Airbus Group NV A350 and Boeing Co. 787 powerplants is meanwhile half-way complete, the London-based company said in a statement today ahead of its annual shareholder meeting.

Rolls-Royce named East as its new chief executive officer on April 22 in a surprise announcement following a series of earnings misses that put pressure on John Rishton, who has held the top job since 2011. Investec Ltd. last year called for Rolls to consider splitting off the land and marine unit, something East will need to review when taking over in July.

A breakup would allow the U.K. company to focus fully on the core aero business, where production of the Trent XWB engine for the A350 is ramping up.

The cash cost of restructuring efforts will be weighted toward the first half, with the benefits being seen later in the year, Rolls said, adding that its 2015 guidance for a pretax profit of 1.4 billion pounds to 1.55 billion pounds ($2.2 billion to $2.4 billion) -- down from 1.62 billion last year -- remains unchanged.

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