Rolls-Royce plc outlined a new organization plan that “simplifies” five operating businesses into three and anticipates a sale or spin-off of the Commercial Marine business, which designs and manufactures engines, propellers, and power and deck equipment, mainly to ocean-going vessels. The group would retain its naval marine operations, including nuclear-powered submarines, as part of its Defence business unit.
“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,” stated CEO Warren East. “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 digitalization.”
In addition to Defence, Rolls would maintain business units for Civil Aerospace (comprising its turbofan engines for civilian and military aerospace) and Power Systems (consisting of civil nuclear power technologies and a variety of industrial power products and technologies.)
The group did not specify how or when the Commercial Marine business would be repositioned, only that it will evaluate “strategic options” for that line of operations.
The group noted that the current Marine business has struggled against weak demand for products and services since 2015, and previously divested non-core businesses, reduced its global footprint by 40%, and cut its workforce by 30%.
“This is the right time to be evaluating the strategic options for our Commercial Marine operation,” according to the CEO. “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.”
Rolls-Royce has been downsizing and reorganizing the overall enterprise for the past four years, but now it explained that the restructuring plan would “align our business more closely with our strategic vision to pioneer cutting-edge technologies that deliver vital power.” More particularly, it indicated the new organization would capitalize on relationships with defense customers and take advantage of the strong civilian aerospace sector, and strengthen its portfolio of products for power generation.
Rolls did not indicate the cost of restructuring, but promised to clarify such details in its 2017 financial report, due on March 7.
