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Rolls-Royce Downgrades Profit Forecast Again

Rolls-Royce Downgrades Profit Forecast Again

Rolls-Royce has downgraded its profit forecasts for 2015 and 2016, just four days after Warren East took over as the company's new chief executive.

The British engineering company said on Monday that profits for 2015 would now be as much as 5% lower than previously thought, coming in at between £1.325bn and £1.475bn.

It had previously said its 2015 profit would be between £1.4bn and £1.5bn

Rolls-Royce pointed to a deterioration in oil and gas markets as the cause of the downgrade.

Following the announcement, the company's shares dropped nearly 9% in what is its worst day for stock since October 2014.

The company has been showing signs of difficulty for several months, issuing a warning in February that profits for this year could fall by as much as 13 percent.

Plans were also announced at the end of 2014 to cut 2,600 jobs , with falling commodity prices again cited as a reason for the move.

Profits for 2016 are expected to drop by £300m due to lower demand and pricing for its Trent 700 engines, as well as reduced demand for business jets.

The downgrades come despite the fact that Rolls Royce announced in April it had agreed its biggest ever order with the Dubai-based Emirates airline.

The order, worth £6.1bn, will see Rolls-Royce providing Trent 900 engines to power 50 Airbus A380 superjumbos.

In a statement on the company’s website new chief executive Warren East said: "I am clearly disappointed by today's announcement and the impact this will have on our investors and employees."

"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 for the next few years."

East, the former boss of chip designer ARM Holdings, took over as chief executive just four days ago.

He replaced John Rishton, who stepped down following a 14 year tenure as CEO and CFO.