Rolls-Royce (RR) announces that it is embarking on a further simplification of the business, including the evaluation of strategic options for its Commercial Marine operation. Selling the division is considered an option.
The company will also reduce its five operating businesses to three core units based around Civil Aerospace, Defence and Power Systems. The Naval Marine and Nuclear Submarines operations are to be consolidated within the existing Defence business, the Civil Nuclear operations within the Power Systems business. This will facilitate a more fundamental restructuring of support and management functions in particular.
RR expects the subsequent restructuring to reduce costs and to assist in improving performance from the core businesses and the whole Group. The restructuring is to take shape in March.
Innovating in Core Technologies
Chief Executive Warren East said: 'Building on our actions over the past two years, this further simplification of our business means RR will be tightly focused into three operating businesses, enabling us to act with much greater pace in meeting the vital power needs of our customers. It will create a Defence operation with greater scale in the market, enabling us to offer our customers a more integrated range of products and services. It will also strengthen our ability to innovate in core technologies and enable us to take advantage of future opportunities in areas such as electrification and digitalisation.'
Strategic Review of Commercial Marine Business
Since 2015, RR's Marine business has responded to weak demand for products and services for the offshore oil and gas market, which significantly impacted its profitability. It has divested non-core businesses and reduced the number of sites from 27 to 15 – an overall reduction in footprint of 40%. It has managed a reduction in its workforce by 30% to 4,200, with the majority now based in the Nordic region.
At the same time, the business has been investing in new facilities and new technologies and become an industry leader in the fields of ship intelligence and autonomous vessels, culminating in June 2017 with the successful demonstration, in Copenhagen harbour, of the world's first remotely operated commercial vessel. Given the progress the business has already made, RR feels now is an appropriate time to conduct a strategic review of Commercial Marine. This review will be undertaken during 2018.
East: 'The team has responded admirably to a significant downturn in the offshore oil and gas market to reduce its cost base. At the same time, we have carved out an industry-leading position in ship intelligence and autonomous shipping and it is only right that we consider whether its future may be better served under new ownership.'
Regardless of the outcome of this strategic review, Rolls-Royce will retain the Marine operations which supply complex power and propulsion systems to Naval customers, including the Royal Navy and US Navy. During the first quarter of 2018, these Naval operations will become part of an enlarged Defence business named Rolls-Royce Defence, comprising the current Defence Aerospace business and Nuclear Submarines operation. The engine business will continue to serve marine customers within Power Systems.
Marine Revenue
In 2016, Marine contributed £ 1,114 m revenue and generated a loss of £ 27 m. Within this, the Commercial Marine business, which supplies equipment and vessel design across the oil and gas, merchant and other commercial markets, accounted for 75% of revenues while the Naval operations accounted for 25% and achieved a small profit. Marine continues to be impacted by weak demand for products and services for the offshore oil and gas market and is said to continue to pursue cost reduction opportunities.
Picture: RR has become an industry leader in the fields of ship intelligence and autonomous vessels (by RR).
