Hedge clipping Currency markets hit aerospace giant
Almost half of Rolls’s reported loss stemmed from a £2.6bn hit from a re-evaluation of its hedging contracts.
Rolls uses its hedge book to protect itself against currency fluctuations in the aerospace industry, where deals are done in US dollars.
It cut its hedge book against its dollar-based income by $10.3bn to $26.2bn over the next seven years “to reflect the deterioration outlook caused by Covid-19”.
This resulted in a £1.46bn underlying hit for the half-year.
Rolls warned there might be more to come, if there is “further market deterioration compared to our recovery expectations”.