For Rolls- Royce's marine business, future growth will be driven by demand for specialist vessels in the merchant navy in North-east Asia.
Its president, John Paterson, who is in the process of relocating to Singapore as part of the shift in the global headquarters from London, told BT that the move was driven in large part by the need to get management to 'think Asia'.
He said that it helps from a management perspective that when people start their day, they look at things from a different part of the world in terms of time zones and the business at hand.
He revealed that due to the nature of the marine business, Rolls-Royce had never really had a global headquarters per se with all the key corporate functions properly centred in one location.
While there is a strong offshore cluster in Norway, more business is now moving to Asia. As such, there was a need to be closer to customers and Singapore is a good location to do it from, Mr Paterson said.
'While the offshore market is robust and we enjoy a good position within it, the opportunity for growth in the long term is on the merchant side.'
For example, in the merchant navy business which comprises cruise ships, passenger ferries, tug and workboats and other coastal craft, the balance is still about 60-40 in favour of Europe to Asia.
However, this may change in future where North-east Asia in particular and Asia in general are becoming more significant in the merchant market. 'As we look into the future, the importance of Asia as a region is growing and from that you can deduce that the ratio is going to change,' he said.
Along with that, there is also a need to develop a broader supply chain as more production moves to Asia. 'Predominantly, the businesses have been very European orientated in terms of where we manufacture and the supply chain has clustered around that. As we move forward in particularly addressing the merchant markets, we need to have a stronger focus in this part of the world.'
Mr Paterson sees North- east Asia growing in importance for the construction of the smaller specialised coastal commercial craft that Rolls-Royce has a good market niche in. South-east Asia, with Singapore as its centre, in contrast, will be more focused on the offshore sector.
The offshore segment accounted for more than 40 per cent of Rolls-Royce marine business' 2008 underlying revenue of £pounds;2.2 billion (S$5 billion) and together with the merchant navy side of the business accounted for around 60 per cent of underlying revenue. The navy and submarine businesses make up 20 per cent each.
'The market is demanding more complex vessels to support the industry in deeper waters and that requirement fits well into our capability which is in high-tech specialist type vessels,' said Mr Paterson.
There are now more than 650 Rolls-Royce UT-design vessels either in service or on order, he said. This has helped boost Rolls-Royce's strong order book which stands at £pounds;5.2 billion and extends out to 2011.
The 11 per cent and 47 per cent jumps in order book and underlying revenue respectively were attributed mainly to a big ramp-up in new lines of engines which Rolls-Royce put on the market.
Also, after the surge in orders from the offshore industry in the past few years, there is also tremendous potential for after market, through life support services down the track. This, in turn, requires good logistics capability near to customers.
Rolls-Royce added 40 per cent more capacity to its service centre in Tuas last year and it is 'right-sized' for now, said Mr Paterson. However, as the market expands, he does not preclude adding more capacity.