Rolls-Royce has announced it is considering the sale of its loss-making commercial marine business, on the context of embarking on simplifying its complex business simplification of business. This may result in a reduction from five operating businesses to three core units based around Civil Aerospace, Defence and Power Systems.
As part of this exercise, the company plans to consolidate Naval Marine and Nuclear Submarines operations within the existing Defence business, and Civil Nuclear operations within the Power Systems business, to facilitate a more fundamental restructuring of support and management functions in particular.
“Building on our actions over the past two years, this further simplification of our business means Rolls-Royce 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,” said Chief Executive Warren East.
As explained, 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 to become an industry leader in 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 said it is now an appropriate time to conduct a strategic review of Commercial Marine. This review will be undertaken during 2018 and will update the market of the outcome at the appropriate time.
Regardless of the outcome of this strategic review, Rolls-Royce emphasised it 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 our Nuclear Submarines operation.
The company will also continue to have an engine business serving marine customers within Power Systems.