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October 5, 2015updated 10 Mar 2022 8:34am

Rolls-Royce to cut back costs for increased R&D activity in marine business

Rolls-Royce has unveiled plans to transform its marine business through investment in research, development and further efficiencies.

Rolls-Royce has unveiled plans to transform its marine business through investment in research, development and further efficiencies.

Built on a series of cost reduction initiatives carried out over the past two years, the programme will focus on improving competitiveness.

According to a statement released by the company, the programme will be funded by reducing the corporate as well as the administrative costs, with the earnings contributing to increased research and development activity.

“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 move follows the continuing impact of the sharp fall in oil prices leading to subsequent decline in orders in the marine business.

Rolls-Royce Marine president Mikael Makinen said: “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.

“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.

As a part of the cost reduction initiative, the company will reduce the number of employees by up to 400 worldwide by the end of 2016, in addition to the 600 jobs cuts announced previously in May.

The company expects to generate full year savings of £40m, with incremental benefits from 2016 onwards.

Makinen added: “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.”

Currently, the company employs around 5,800 people in 34 countries.

Profit and revenue guidance for the Marine business will remain unchanged with a further restructuring charge for the programme of nearly £30m, which will be charged as £20m in 2015 and £10m taken in 2016.

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