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Incoming chief executive Tufan Erginbilgic has several tasks on his hands, mainly to find a way to stem its haemorrhaging share price
Rolls-Royce Holdings PLC (LSE:RR.)‘s new boss Tufan Erginbilgic has a challenging task ahead after the British car company’s stock lost nearly a third of its value this year. 
The former CEO of Erginbilgic, BP PLC (LSE:BP.)’s downstream business, is due to take up the mantle at the engineering staple next January.  
He will assume the role of chief executive and executive director, taking the place of Warren East who announced he would step down in February.  
Rolls-Royce has structured his pay package so its share price is integral to his earnings.  
The incoming chief executive will have a personal incentive to improve Rolls-Royce’s profitability, as nearly a third (30%) of his £1.25mln salary will be paid as shares (deferred for two years), the company said.  
As compensation for giving up his role as partner at private-equity firm Global Infrastructure Partners, he will pocket two additional portions of shares, each worth £3.75mln, which will be paid out five years from now and in 2028.  
In a departure from Rolls-Royce’s previous share policy, Erginbilgic will be required to have a minimum shareholding equal to four times his salary, nearly double the prior 2.5x requirement for chief executives. 
Erginbilgic brings a track record of turning around businesses to the engineering behemoth. While he was chief executive of lubricants, BP and Castrol for a year from 2006, he “quadrupled” its profits, according to a statement.  
“He has a strong track record for execution, delivery and the creation of significant value,” said Anita Frew, chair of Rolls-Royce.  
He spent more than two decades at BP, most recently leading its downstream business in charge of oil refining, petrochemicals, service stations, lubricants and jet fuel operations.   
The downstream segment he managed delivered over US$5bn in underlying annual earnings growth under his stewardship as well as expanding into fast-growing markets, BP said in February.  
The incoming boss of Rolls-Royce said in a statement he was joining the engineering company at a time of “significant commercial opportunity”, and “strategic evolution” as companies navigate the energy transition. 
However, it is also a time of considerable uncertainty, both at the engineering behemoth and in the wider economy.  
Rolls-Royce’s long history once gave it a reputation as the gold standard of share investing. 
But its share price hit turbulence when Covid-19 struck in 2020, amid concerns over its ability to withstand headwinds affecting the flight industry, given its core business making aerospace engines for Airbus and Boeing.  
Civil aerospace flying hours had improved in the first few months of the year, but still hadn’t recovered to pre-pandemic levels. 
Earlier this month, investment bank UBS reduced its mid-term forecasts for Rolls-Royce “to reflect slower than expected flying hours recovery in 1H22, particularly in the APAC”.  
The bank cut its price target for the engineering company from 144.5p to 102p, and rated the stock “neutral”. Analyst Kseniia Maslova said it was “adjusting for slower WB recovery and inflation risks”. 
Three in four analysts expect Rolls-Royce to underperform the market, according to SharePad data.  
The engineering group is widely expected to post lower profit and earnings for the year, as it grapples with high levels of debt. Net debt is estimated to hit £3.88bn this year, nearly a quarter less than a year ago, as it embarked on a plan to reduce its debt through asset disposals. 
Despite market headwinds, the market consensus is currently to hold shares in Rolls-Royce, with the potential promise of a pandemic recovery further down the road. 
The engineering group is forecast to boost turnover by about 3.55% in 2022, to about £11.62bn up from £10.95bn in 2021, despite the anticipated slide in earnings.  
Its share price was briefly buoyed this March amid rumours of a possible takeover bid from an undisclosed suitor, though this was expected to be ruled out because of the government’s ‘golden share’ stake-hold.  
Rising labour and materials costs have hampered the engineering firm for most of the year.  
It said in May that its sourcing agreements and hedging policies gave it “some near-term protection” from inflation in the price of raw materials and that it had increased inventory to try and mitigate further price increases.  
Victoria Scholar, head of investment at interactive investor, said: “Long-term investors in Rolls Royce have had a tough time with the engine maker, which is down over 25% year-to-date and down more than 70% over five years. East helped to navigate Rolls-Royce through the challenges of the pandemic but covid lockdowns in China, inflation costs and concerns about an economic slowdown are weighing on the business.” 
Erginbilgic, who decided to leave BP at the end of March 2020 after being a member of its executive team since 2014, holds several non-executive director positions that he will need to review as he takes up the post at Rolls-Royce.
He first joined Mobil in 1990 and transferred to BP in 1997, and served as a non-executive director at aerospace technology group GKN Aerospace from 2012 to 2018.
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