Rolls-Royce announces strategic review of Commercial Marine operation
Rolls-Royce announces that it is embarking on a further simplification of the business, including the evaluation of strategic options for its Commercial Marine operation and a reduction from five operating businesses to three core units based around Civil Aerospace, Defence and Power Systems. As part of this exercise, Rolls-Royce plans to consolidate its Naval Marine and Nuclear Submarines operations within existing Defence business, and Civil Nuclear operations within Power Systems business. This will facilitate a more fundamental restructuring of support and management functions in particular, the company said in its press release.
Since 2015 Rolls-Royce 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, it is now an appropriate time to conduct a strategic review of Commercial Marine. This review will be undertaken during 2018 and Rolls-Royce will update the market of the outcome at the appropriate time.
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. Rolls-Royce will also continue to have a successful engine business serving marine customers within Power Systems.
In 2016, Marine contributed £1,114m revenue and generated a loss of £27m. 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 off-shore oil and gas market.