British luxury car maker Rolls-Royce on Tuesday reported a record loss of 4.6 billion pounds ($5.7 billion), the biggest in the company’s history.
The loss included a 4.4 billion pounds write down on the value of financial hedges that Rolls-Royce uses to protect itself against currency fluctuations and a 671 million pounds charge for the penalties the company has agreed to pay to settle bribery and corruption charges with the Serious Fraud Office, the US Department of Justice, and Brazilian authorities.
However, Warren East, Chief Executive of Rolls-Royce, insisted the loss did not reflect the underlying health of the business.
“This has no impact on what is really going on in the business and cash, it is just an accounting measure,” he said of the biggest loss for the company since its co-founder Henry Royce established an electrical and mechanical business in 1884.
The penalties relate to charges that Rolls-Royce bribed middlemen around the world between 1989 and 2013 to win contracts. The company will make the payments over five years with 293 million pounds expected to be paid in the first year.
Excluding the bribery penalties and the impact of currency fluctuations, Rolls-Royce reported that underlying revenues fell 2 per cent in 2016 and that underlying pre-tax profits fell 49 per cent.