Rolls-Royce Shares Slide as Supply Chain Challenges Remain

On Thursday, Rolls-Royce Holdings (LON: RR.) announced its trading update for the period ending October 31, 2024, sending its shares over 3% below the previous session’s close. 

While the company reported strong performance and reaffirmed its full-year guidance, concerns about supply chain challenges have led to a decline in its share price.

Rolls-Royce told investors that its current trading is in line with expectations, and the full-year 2024 guidance of underlying operating profit between £2.1 billion and £2.3 billion and free cash flow between £2.1 billion and £2.2 billion remains unchanged.

Despite the persistent supply chain issues, Rolls-Royce remains optimistic. The company said it has taken proactive measures to address the challenges, focusing on 15 key suppliers to improve performance and mitigate potential disruptions.

“The aerospace industry supply chain remains challenged,” said the company. “However, we continue to work with focus and intensity across our supply chain to support growing OE and aftermarket volumes. We have concentrated our efforts on 15 suppliers, where our interventions have driven performance improvements.”

In the Civil Aerospace segment, demand for both business aviation and widebody aircraft is said to remain robust. The company added that it achieved significant milestones in its engine programs, including the successful testing of the Pearl 10X engine for the Falcon 10X aircraft.

The company’s Defence segment reportedly continues to benefit from strong demand, with progress made on key platforms such as the F130 engine for the B-52J Stratofortress and the FLRAA program for the U.S. Army.

Meanwhile, in the Power Systems segment, the company reported strong revenue growth driven by data centres and governmental markets. 

Rolls-Royce SMR also made progress in its small modular reactor program, securing a preferred supplier agreement with the Czech government.

However, the persistent supply chain challenges have cast a shadow over the company's outlook. 

Investors are concerned that the issues could impact the company's ability to meet its delivery targets and financial goals. Despite these challenges, Rolls-Royce said it remains committed to its transformation journey and is confident in its ability to deliver long-term value to its shareholders.