Rolls-Royce underlying pre-tax up and backlog jumps

By Jason Neely, European Aerospace & Airlines Correspondent

LONDON (Reuters) - Strong demand for airliners helped engine maker Rolls-Royce (RR.L) post a 17 percent rise in underlying first-half pre-tax profit and fatten its order backlog to a record 35.1 billion pounds.

Underlying profit rose to 380 million pounds for the six months to June 30, the British company said on Thursday.

Rolls-Royce benefited from strong orders in civil aerospace, including a robust performance by customer Airbus (EAD.PA) in June, highlighted by a stack of orders signed at the Paris air show.

"Despite the challenges of increasing raw material costs and the effects of a weakening U.S. dollar, the group is well placed to deliver growth in underlying profit and, before pension scheme injections, a positive cash flow in 2007," Chief Executive John Rose said in a statement.

Regarding raw materials, Chief Operating Officer John Cheffins told a briefing for analysts that the company had secured extended supply deals for titanium, nickel and cobalt during the first half of the year.

On a net level, earnings fell to 303 million pounds from 617 million, hit by higher raw material costs, a weaker dollar, pension fund contributions and revaluation of the fair value of financial instruments.

Analyst Clive Forestier-Walker at Numis Securities said in a research note that the results were slightly ahead of consensus, noting Rolls had done well despite a 40 million pound impact from a weaker dollar and higher raw material costs. His target price is 629 pence.

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