Rolls-Royce to sell marine unit
london — Rolls-Royce Holdings said it would sell its loss-making commercial marine business to Norway’s Kongsberg Gruppen for £500 million ($661 million), in the latest reshaping of the engineering company by CEO Warren East.
Since taking charge in 2015, East has led a turnaround of Rolls, which suffered years of falling profits and multiple profit warnings due to a weak oil and gas market and declines in some of its older aeroengine programmes.
The company said in January it was considering selling its commercial marine business which has been most impacted by the weaker oil price as it supplies oil and gas companies with equipment.
The disposal will leave Rolls focused on providing engines for civil aircraft, military planes and ships, and engines for ships, yachts, trains, trucks, mining, and nuclear power stations.
“This transaction builds on the actions we have taken over the last two years to simplify our business,” East said in a statement on Friday.
While Rolls’ structure is now to East’s liking, Britain’s best-known
engineering company remains under pressure from airline customers due to ongoing issues with parts not lasting as long as expected on the Trent 1000 which powers the Boeing 787. The sale of the business, which has about 3,600 employees, mostly based in the Nordic region, will generate net proceeds of around £350 million to £400 million, Rolls-Royce said.
Rolls plans to use the proceeds to strengthen its balance sheet and provide capacity to pursue opportunities that will drive greater returns. The deal is expected to close in the first quarter of 2019, subject
to regulatory clearance. Shares in Rolls-Royce traded down 0.6 per cent to 979 pence at 0751GMT.
The stock has had a strong month, up 17.8 per cent compared to Britain’s blue-chip index which is down 1.2 per cent, after it hit four-year highs on June 15, when the company said it would exceed its 2020 guidance.
Jefferies analyst Sandy Morris said that the sale proceeds looked satisfactory, adding that the insight provided by Rolls on commercial marine’s revenue and operating loss, showed that other parts of the business were doing well.