Rolls-Royce shares tumble on Russian sanctions warning

Rolls-Royce specialises in turbines for the aerospace and marine industries

Shares in engineering firm Rolls-Royce closed 11.5% down after the company warned of falling revenues as trade sanctions against Russia begin to bite.

Customers of its nuclear, energy and power systems businesses have delayed or cancelled orders, the company said.

As a result, group underlying revenue for 2014 would be 3.5%-to-4% lower than expected, it said.

But Rolls-Royce expected underlying profit to remain flat as cost savings counterbalanced the falling revenue.

"Since our interim results, the economic outlook for 2015 has become more challenging," the company said, with many of its customers experiencing "worsening market conditions" affecting their investment decisions.

Guidance on revenues for its civil aerospace, defence aerospace, marine and power systems divisions, remained unchanged, the company said.

But nuclear and energy revenue guidance would fall from 0%-to-5%, down from 5%-to-10%.

However, Rolls-Royce expected underlying profit in its civil aerospace division to be higher than previously thought.

"While the short term is clearly challenging, reflecting the economic environment, the prospects for the group remain strong, driven by the growing global requirement for cleaner, better power," said chief executive John Rishton.

Rolls-Royce, which has 12,000 employees in the East Midlands, said the sale of its gas turbine and compressor business to Siemens was likely to be concluded "by the year end".

The company would begin its planned £1bn share buy-back once the sale had been completed, the company said.