Fitch Ratings has affirmed Rolls-Royce’s Long-term Issuer Default Rating (IDR) and senior unsecured rating at 'A'. The outlook on the long-term IDR is negative.
The negative outlook reflects the challenges to cash generation the company is facing as a result of new programmes and weakness in some key end-markets, with key financial metrics, such as free cash flow (FCF) and gross leverage, unlikely to be commensurate with the current ratings in the short term.
Fitch believes that Rolls' financial profile is likely to recover in the medium to long term due to restructuring measures improving the group's cost structure, stabilisation in some key end-markets and programme execution. However, should the recovery stall or take longer than expected, leading to a prolonged period of weak cash generation, a downgrade is likely.