Rolls-Royce Exposed All Its Failings To Shocked investors

Rolls-Royce Holdings Plc Chief Executive Officer Warren East exposed the full extent of the earnings losses facing Britain’s leading manufacturing company and said he’s uncovered issues with its organization and management that run deeper than was apparent when he took over five months ago.

Pretax profit will take a 650 million-pound ($990 million) hit from a slide in demand that Rolls is unable to mitigate because of an inflexible approach to costs, East said Thursday, ordering a review of dividend payments. The announcement extended a series of profit warnings that have battered the company for two years, sending the stock down the most since 2000.

East’s comments come as a further blow to a business that was regarded as Britain’s biggest industrial success story, recovering from bankruptcy to become a poster child of Margaret Thatcher’s privatization drive and take on the likes of General Electric Co. The CEO said he sees no quick fix, effectively writing off a recovery before 2017, when the results of a restructuring plan begin filtering through.

The revelations regarding Rolls-Royce’s organizational malaise suggest the company may be headed for a “classic aerospace and defense near-death experience” that could see its shares drop 80 percent from the peak, Agency Partners analyst Nick Cunningham said.

Rolls-Royceshares fell 147 pence to 520 pence, the biggest drop since Aug. 24, 2000,before trading 18 percent lower at 547.50 pence as of 9 a.m. in London. Thestock has slumped 36 percent this year following a decline of 32 percent in2014, reducing the company’s market value to 10 billion pounds.