British car maker giant Rolls Royce shares dramatically went down by 16 percent after its announcement on Friday that sluggish economy in Britain would mean a stunted profit growth next year.
The world's second largest aircraft engine manufacturer suffered a huge blow with a 2 billion euro decrease in stock market value when its shares closed at 832p. To make things worse, the day they made the announcement, it went down even more to 787p, a 154p fall, considered as the biggest tumble on the FTSE Index.
Although the UK defense and aerospace company predicted that there would be an increase in demand for its main aircraft engines, different businesses in several industries like oil, gas, mining, and construction, industrial and agricultural businesses were said to be either delaying or cancelling their orders.
"The economic environment has deteriorated, and it has deteriorated quite quickly, impacting our revenue, especially in oil and gas and mining and construction which are important markets for our land and seas businesses," Chief Executive Josh Riston said in a statement.
"In the short term, it is going to be bumpier than we expected. We can't control what is going on in the external environment," Riston added.
Riston further stressed the unfavourable conditions brought about by the falling oil prices, slowdown in China and South America as well as the creeping growth in the Eurozone area.
However, back in 2013, the company made a pre-tax profit of 1.7 billion euros and revenues of 15.5 billion euros-with 600 to 700 billion of that coming from civil craft engine orders.
Rolls Royce said that they estimated flat profits before the year ends, and expect that the decline will continue until 2015.
The car maker said that profits would be at its lowest this year-3 percent.
The company admitted that if the trend of declining profits continue, they might have to lay-off workers. As of now, Rolls Royce is reportedly shutting down old facilities and looking for low-cost sourcing.
