Rolls-Royce stock price tumbles 9% after posting a record loss

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on Aug 27, 2020
  • Rolls-Royce, which produces engines for jets, announced a pre-tax loss of £5.4 billion in H1 2020
  • Operating loss came in at £1.7 billion as flying hours crashed 70-75% in May, June, and July
  • Rolls-Royce stock price plunged almost 10% to trade below 230p once again

Shares of Rolls-Royce Holdings PLC (LON: RR.) tumbled almost 10% early this morning after the British firm reported a record loss for the first half of the year. 

Fundamental analysis: Demand slumps

Rolls-Royce, which produces engines for jets, announced a pre-tax loss of £5.4 billion for the first half of this year. The operating loss was reported at £1.7 billion in the first half of the year as flying hours crashed 70-75% in May, June and July.

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“In light of ongoing uncertainty in the civil aviation sector, we are continuing to assess additional options to strengthen our balance sheet to enable us to emerge from the pandemic well placed to capitalise on the long-term opportunities in all our markets,” the firm said in a statement

“Demand for our civil aerospace products and services has fallen significantly and we’ve had to take difficult but necessary decisions to position ourselves for the future”.

As a consequence, Rolls-Royce says it will explore options to sell ITP Aero, its Spanish business, in order to raise at least £2 billion and improve its balance sheet. In the meantime, a cost-slashing campaign has continued with around 4,000 people out of their jobs. 

The company previously announced that as many as 9,000 people may lose their jobs. This is nearly 20% of the total workforce.

Moreover, the engine-maker confirmed plans to close factories in Nottinghamshire and Lancashire. Additional funds will be saved by merging two factories in Barnoldswick, Lancashire, while some operations will be moved to Singapore.

“Today we have told our employees that we are proposing to close some of our sites, and some will see significant reductions in workload,” the firm’s spokesperson said.

Technical analysis: Shares tumble

Rolls-Royce stock price plunged almost 10% to trade below 230p once again. Sellers are now approaching the 16-year low at 212p, set earlier this month. The zone between 270p and 290p hosts strong resistance, should the price action turn higher from current levels. 

Rolls Royce stock price (TradingView)

Still, sellers are in full control of the price action given the recent developments surrounding the engineering giant. On the downside, their first target is 212p, which is the lowest price action traded since 2004. If broken, the support line near 170p comes next. 

Summary

Rolls-Royce Holdings stock price plunged again today after the producer of engines for jets posted a record loss for the first half of the year. 

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