Rolls-Royce announced plans today to continue what it calls the transformation of its marine business through a program of increased investment in research and development and further efficiencies, as it positions the business for the future, following the continuing impact of the sharp fall in oil prices.
The company said that today’s proposals will build on a series of cost reduction initiatives carried out over the past two years, and focus on improving competitiveness by reducing corporate and administrative costs with most of the early savings being reinvested in increased R&D activity. Profit and revenue guidance for the Marine business, as set out in July, remains unchanged.
The number of employees will be reduced by up to 400 worldwide by the end of next year, in addition to the reduction of 600 employees previously announced in May, which was also driven by the impact of the low price of oil and subsequent fall in orders.
Mikael Makinen, Rolls-Royce, president – Marine, said: “After many years of strong performance through to 2013, led by good growth in the oil and gas sector, our orderbook and profitability have been adversely impacted by the sharp and subsequently prolonged drop in the price of oil.
“This is a fundamentally strong business, but we have to take decisive action to position it for future growth, with a structure that is simple, efficient and effective. At the same time we will sharpen our focus on the marine technologies of tomorrow by significantly increasing our current rate of investment in research and development.
“Reducing our workforce is never an easy decision, but the continued weak oil price, and the need to become more competitive, means it is necessary, if we are to build a strong base from which we can successfully grow this business in the future.”
Rolls-Royce’s Marine business employs around 5,800 people in 34 countries, and supplies a range of technology and services to customers operating naval, merchant and offshore vessels.
It is expected that the proposals will generate full year savings of £40m, with incremental benefits from 2016 onwards; most of the early savings will be invested in increased R&D activity. The cost of the program was anticipated in the guidance provided in July, in which a further restructuring charge of up to £30m would be taken in the second half of the year. Due to the timing of actions being taken, this will now see £20m charged in 2015 and £10m taken in 2016.