By Sarah Young and Paul Sandle
LONDON (Reuters) -British engine maker Rolls-Royce (OTC:RYCEY) said the new CEO's plan to boost the company's profitability was moving "at pace", and it was on track to meet 2023 forecasts, buoyed by cost savings and the ongoing travel recovery.
But shares in the company, which has been one of the top risers on the FTSE 100 index over the year to date with a 64% gain, were down 2% in early deals which one analyst said was due to disappointment over the lack of an upgrade to the outlook.
Tufan Erginbilgic, who took over as chief executive in January, has said Rolls, which provides engines for Airbus A350 and Boeing (NYSE:BA) 787 planes, is a "burning platform" which needs to improve its cash generation, cut debt and invest for the future.
A strategic review he initiated is due to report in the second half of 2023, he confirmed on Thursday.
What the company called its "transformation" was already keeping costs down and finding savings, it said, highlighting the closure of its R2 Factory venture, an artificial intelligence start-up, as an example.
A further boost from savings is expected as the year goes on, it said. It was also seeing improved pricing in its power systems business, whose equipment is used in ships, mining and heavy industry.
In its civil aerospace unit, the biggest part of the business, Rolls-Royce said flying hours reached 83% of pre-pandemic levels in the four months to April 30, meaning rising revenues from more air travel as airlines pay it on an hours flown basis.
"If current trends continue, we believe the group could point to the higher-end of the range with first-half results," said Jefferies analysts.
Rolls's current guidance for 2023 is for operating profit of between 800 million pounds ($1.01 billion) and 1 billion pounds and free cash flow of between 600 million pounds and 800 million pounds.
($1 = 0.7923 pounds)