Rolls-Royce has announced plans to consolidate its operating businesses into three core units, down from five and based around Civil Aerospace, Defence and Power Systems. The consolidation means that the commercial marine operation could be sold.
The company said that a decision on the sale of the marine unit would be made following a strategic review, which will be conducted some time in 2018. The statement came amid weak demand products and services for the offshore oil and gas market since 2015.
Rolls-Royce said that the actions were designed to align its business more closely with its strategic vision to pioneer cutting-edge technologies that deliver vital power.
Rolls-Royce said the profitability of its Marine business had been significantly impacted since 2015 due to the downturn in the offshore oil and gas market. The company has already divested non-core businesses and reduced the number of sites by 40% from 27 to 15. Its workforce has been reduced 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 we will update the market of the outcome at the appropriate time,” the company said.
CEO Warren East said that it was “the right time to be evaluating the strategic options for our Commercial Marine operation. The team there 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.
In 2016 RR’s Marine contributed £1.11bn in revenue and but made a loss of £27m. Commercial Marine made up 75% of revenues, but all of the loss. The Naval operations accounted for 25% and achieved a small profit.