Britain's Rolls-Royce issued its fourth profit warning in just over a year and said it may cut its dividend due to sharply weaker demand for spares and services for existing aero-engines.
The latest announcements show the scale of the challenge facing its new CEO.
Shares in the engine maker at one stage plunged over 20% in London trade today.
The slump came after the company forecast its profit next year would now be more than 30% below a current consensus estimate, which analysts had already slashed after a warning in July.
Rolls-Royce shocked investors in July when it said profits from its aero-engine business, its biggest unit which accounts for about half of profits and which it is counting on for future growth, would shrink in 2016.
The downgrade, plus news the board would put the company's shareholder payments policy under review, shows the extent of the challenge facing new CEO Warren East who started in July.
Releasing the findings of an operating review two weeks early, East said he had already highlighted a number of areas where Rolls-Royce could make "fundamental changes", as he launched a restructuring programme to save between £150-200m a year, streamline senior management and improve decision making.
But the company's fourth profit warning in just over a year and its second for 2016 results could intensify questions about the shape of the group itself, which supplies engines to aeroplanes, ships and for industrial use.
Before revealing the civil aero engine unit was suffering, Rolls had already been struggling with a drop in demand from energy customers for its marine equipment following a plunge in oil prices.
It said today that it now expected profit headwinds of £650m next year, up from the £300m drag identified in July.
Before today's downgrade, the consensus forecast for 2016 underlying pretax profit stood at £1.053 billion.
Rolls said operators of wide-bodied aircraft were taking delivery of new more fuel efficient planes and using older engines less, accounting for up to £150m worth of profit hit next year as it sells fewer spare parts and services for older engines.
The additional hit next year would come from weakness in demand for corporate and regional jet aftermarket services and the continued drag from lower demand from oil and gas customers.
