FTSE 100 firm Rolls-Royce (LSE:RR) is a major name in more than one industry. It manufactures a range of products including jet engines and power systems. Recently, it has also expanded into nuclear technology and electric aircraft. Currently trading at 81p, the Rolls-Royce share price is down 44% in the past six months and has visibly suffered throughout the pandemic.
However, does a recent trading update indicate that things are about to improve for this storied company? Let’s take a closer look.
Recent trading update
Rolls recently released a trading update for the four months to 30 April. The takeaway message was that the firm is trading in line with expectations. Furthermore, it maintained its full-year guidance for 2022.
As a current shareholder, I was pleased to read that the business is taking action to mitigate the impact of supply chain issues in the aftermath of the pandemic. For example, it has been working on agreements with suppliers to ensure the steady flow of raw materials used in products like titanium.
The firm has already bounced back from a 2020 operating loss of around £2bn to an operating profit of £513m in 2021.
The business is also close to completing the sale of its engine and turbine manufacturing subsidiary, ITP Aero. Its sale could be worth £2bn to Rolls-Royce. The company announced last week that it would be using the proceeds to pay down its not insignificant debt pile of nearly £8bn.
Healthy civil and defence aerospace segments
The trading update also went into detail on the outlook for its civil aerospace and defence segments. It reported that flying hours were up 42% year-on-year. This refers to airlines using Rolls-Royce engines.
This improvement is very good news for the business, because Rolls-Royce is paid by the flying hour by airlines using its engines. This could greatly boost company revenue.
I suspect that increased international air travel could lead to a further boost in civil aerospace revenue in the months and years ahead. However, future pandemic variants could halt this progress if fewer planes are flying.
The firm also discussed its defence segment. It has a large degree of confidence in this area of the business, given the order backlog created by the pandemic.
At the end of 2021, Rolls-Royce won the contract to service the engines on the US Air Force B-52 programme. This is potentially worth $2.6bn. The company is also awaiting the outcome of its bid to gain a long-term contract for the US Air Force’s Future Long-Range Assault Aircraft (FLRAA).
Overall, I think things are starting to change for the better for the Rolls-Royce share price and it could be on the verge of recovery. Although results are improving, I’m currently satisfied with my exposure to the business.
That said, I won’t rule out purchasing more shares for my portfolio when air travel has recovered further.
