Rolls-Royce Holdings PLC said it will cut another 400 jobs at its marine-engines arm as the oil-price decline continues to weigh on demand for the specialist offshore vessels that the business helps power.
The cutbacks will save ￡40 million (US$61 million) a year, with incremental benefits from next year onwards, the London-based company said in a statement yesterday.
Most of the early savings will be invested in increased research and development, the company said.
Profit and revenue guidance for the marine unit remains unchanged, according to Rolls-Royce, which is cutting more than 3,000 jobs across its entire business.
The cuts announced yesterday follow the elimination of 600 factory posts at the division announced in May, which were mostly focused on Norway, where Rolls-Royce’s marine manufacturing operations are based.
Rolls-Royce is slimming down the marine unit from a workforce of 5,800 as chief executive officer Warren East undertakes a review of the group’s operations after taking over in July.
Some investors have urged it to focus solely on the aerospace business, where it has a stronger market position.
“After many years of strong performance through to 2013, led by good growth in the oil and gas sector, our order book and profitability have been adversely impacted by the sharp and subsequently prolonged drop in the price of oil,” Rolls-Royce Marine president Mikael Makinen said in the statement. “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.”
The marine arm includes ship design, propulsion systems and other sub-systems for the ship industry.
Rolls suffered a setback in expanding the unit when plans to merge it with Finland’s Waertsilae Oyj fell through last year.
Underlying revenue at the division last year was about ￡1.7 billion, 59 percent connected with offshore oil and gas, according to the company.
Shipbuilders linked to the sector, including Norway’s Vard Holdings Ltd and Ulstein Holding AS, have reported sharply declining demand.
Rolls stock has fallen 18 percent this year through Friday last week, giving the company a market value of ￡12.9 billion.
The cost of the job cuts was anticipated in the financial guidance that Rolls provided in July, which included a restructuring charge of as much as ￡30 million. Of that, ￡20 million will be charged this year and the rest next year, the company said yesterday.
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