Fitch Ratings has upgraded UK engine maker Rolls-Royce Holdings to ‘A-’ from ‘BBB+’, citing a stronger financial profile, improved margins and sustained cash generation, with the outlook set at stable.
The agency said the upgrade reflects significant improvements in profitability and balance sheet strength, including a Fitch-calculated EBITDA margin of 20% and a free cash flow margin of about 11% in 2025. Rolls-Royce also reported gross leverage below 1x and a net cash position, which Fitch expects to be maintained.
Fitch forecasts EBITDA margins will exceed 20% in 2026, supported by demand for commercial aerospace engines, growth in maintenance services and expansion in defence and power systems. The agency also expects double-digit free cash flow margins to continue in the medium term.
Rolls-Royce’s financial policy includes a share buyback programme of up to £9bn and a dividend pay-out of 30%-40% of net profit, which Fitch said are sustainable given expected cash flow generation.
The group’s outlook is supported by a strong order backlog across its businesses. In civil aerospace, Rolls-Royce secured 638 large engine orders in 2025, with a book-to-bill ratio of 2.5x. The total backlog stands at £17.4bn, equivalent to more than three years of revenue, while defence and power systems divisions also reported solid order intake.
Fitch said Rolls-Royce’s financial metrics are now broadly in line with strong investment-grade peers including GE Aerospace, Airbus and BAE Systems. However, it warned that a prolonged Middle East conflict could disrupt supply chains, reduce flight hours and weaken cash generation.