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By Bloomberg

Rolls-Royce Holdings Plc said annual earnings dropped 8 percent on weaker defense sales and forecast a further decline this year as the plunge in crude prices undermines orders from the offshore oil and gas industry.

Pretax profit before currency hedging and one-time items fell to 1.62 billion pounds ($2.5 billion) as sales slid 6 percent to 13.7 billion pounds in what was Rolls’s first revenue drop in a decade, the London-based company said today. For 2015, pretax profit will reach 1.4 billion pounds to 1.55 billion pounds, with sales of 14.4 billion pounds at best.

A steep decline in oil prices was a key factor in driving the company to broaden the band for revenue expectations amid growing uncertainty, it said. Cheaper oil is a threat to short- term earnings, particularly on the marine side of the business, as customers cut back on capital expenditure.

“In a complex and highly-regulated business, we recognise that it will take some time for the full benefit of our cost programs to feed through,” Chief Executive Officer John Rishton said in the release. “There are also a number of headwinds in our civil aerospace business associated with our future growth.”

Rolls-Royce fell as much as 32 pence, or 3.5 percent, to 873 pence, and traded at 895 pence as of 8:08 a.m. in London. The stock has lost 14 percent in six months.

Even as the fundamentals of the long-term business remain solid, the company was hurt by slower growth than expected in China and in Europe, and also by a three year delay in production of Boeing Co.’s 787 Dreamliner, Rishton said on a call with reporters.

Analysts had predicted an annual profit of 1.6 billion pounds, according to estimates compiled by Bloomberg.

Rishton cut earnings guidance twice in 2014 and said he’d eliminate 2,600 jobs as revenue ebbed. The company said today earnings will fall again this year and that sales may also drop as it absorbs restructuring costs and the bulk of orders come in the second half.

The company today said it expects to pay a dividend of 23.1 pence per share.