Rolls-Royce To Explore Sale Of Commercial Marine Unit

Sweptail is a one-off inspired by the coachbuilt cars of the 1920s and 1930s

Sweptail is a one-off inspired by the coachbuilt cars of the 1920s and 1930s

Shares in Rolls-Royce rose today after the engineering giant said it was considering selling its commercial marine business as part of a wider restructuring.

The blue-chip engineer is now split into civil aerospace, defence aerospace, power systems, nuclear and marine divisions.

As a result, the engine maker plans to consolidate its Naval Marine and Nuclear Submarines operations within its existing Defence business, and Civil Nuclear operations within the Power Systems unit.

The news sent shares in the company surging, rising 7pc to 916p in the wake of the announcement, which also confirmed the business was on track to meet annual expectations.

Rolls-Royce expects the restructuring to deliver "an additional reduction in costs", which it said it would quantify at its full year results on 7 March, and will assist in "improving performance from core businesses and the whole group".

While East said the marine business had responded "admirably" to the downturn in the offshore oil and gas market which followed the steep drop in oil prices in 2014, it was hit by weak demand, which significantly impacted its profitability.

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. "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", East said. During Q1 2018, naval operations will become part of an enlarged defence business named Rolls-Royce Defence.

Nonetheless, the marine unit generated a loss of 27 million pounds on sales of 1.1 billion pounds in 2016, with the bulk of the business supplying equipment and vessel design across the oil and gas, merchant and other commercial markets.

Rolls-Royce said it also will restructure its support and management functions and remove duplication of management roles. "Costs and complexity within our business remain too high, despite the delivery of the transformation activities announced in November 2015 which will achieve the committed fixed-cost reduction rate of over GBP200 million from the end of 2017", said Chief Financial Officer Stephen Daintith.

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