New Rolls Royce chief executive off to tough start as engines maker issues its third profit warning in just over a year   

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After less than a week in the job, new Rolls Royce boss Warren East has been forced to issue a profit warning, the engine maker's third in just over a year.

The engineering giant has again downgraded its forecasts for this year and next, citing the impact of falling commodity prices on its marine division, while demand for some of its aero engine programmes has also tailed off.

The warning comes just four days after East took over as Rolls-Royce's chief executive, The engineer announced in April that the former head of chip designer ARM Holdings would replace John Rishton who had had four years at the helm.

Tough times: Rolls Royce has issued its third profit warning in just over a year

East said: 'I have joined Rolls-Royce because I recognise the fundamental strength of the business and the scale of the opportunities available to it. This is a company with exceptional technology and outstanding long-term prospects.

'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.'

Rolls-Royce shares on the FTSE 100 index dropped 9 per cent, or 74p at 782.5p in mid-morning trade.

The engineer said its underlying profit before tax for 2015 will now be between £1.33billion and £1.47billion, compared to previous guidance of £1.4billion to £1.55billion. 

Rolls-Royce said lower demand and pricing for its Trent 700 engines and reduced demand for its business jet engines would hit profits by £300million. 

The group's civil aviation division will also take a hit, as it phases out the Trent 700 engine in favour of its next-generation Trent 7000. 

East said: 'In the near term we have to manage the important transition from the Trent 700 to the new Trent 7000 and build our capacity to service the Trent 1000 and XWB programmes. 

'In addition, our Marine business needs to overcome its offshore market headwinds and rebuild a consistent trend of improving revenues and margins.' 

Rolls-Royce added that continuing weakness in offshore markets would lower profit at its marine division by around £85million in both 2015 and 2016. 

Plans to cut costs and restructure the division would result in an exceptional charge of £70million to £100million.

Revenue for 2015 would be unchanged, Rolls-Royce added. 

It has also suspended its current £1billion share buyback programme.  

Mike van Dulken, head of research at Accendo Markets, said: 'Rolls Royce shareholders are delivering a 'no vote' of their own this morning, declaring lack of confidence in the company following its second profits warning in 6 months and third in just under 18. 

'While 2015 revenues guidance is unchanged this offers little solace when profits and cash flow expectations are cut, the outlook for demand and pricing for Trent 700 engines and reduced demand for private jet engines is seen denting results for the next three years and the company's first ever share buyback programme has already been abandoned after just a year and having achieved only half its £1billion goal.' 

In February, Rolls-Royce reported its first drop in revenues in a decade. Underlying revenue fell 6 per cent to £14.58billion and underlying profit before tax slid 8 per cent to £1.62billion. 

Last month the group said it would cut a tenth of its 6,000 strong marine workers, adding to plans unveiled last November to reduce its overall workforce by almost 5 per cent through the removal of 2,600 roles.

Throttling back: Rolls-Royce said lower demand and pricing for its Trent 700 engines and reduced demand for its business jet engines would hit profits by £300million

But in some better news, around the same time as Warren East's appointment was unveiled in April, Rolls Royce announced it had agreed its biggest ever order with the Dubai-based Emirates airline.

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

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers said: 'The downgrading of profit expectations is highly disappointing. The group’s Marine business continues to provide challenges, with exposure to the oil industry unlikely to be helping, whilst a transition to its new Trent 7000 aircraft engine is weighing on management’s 2016 expectations.'

 He added: 'In all, the company’s prior push to reduce earnings volatility and surprises looks to have been completely unwound, with investors today suffering another shock. Some kitchen sinking by the newly appointed Chief Executive may underlie today’s announcement, with the former ARM CEO determined to clear the decks going forward.

'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.'