Quarterly news update from Rolls-Royce: first quarter review, 2007

Wednesday, 4 April 2007

Rolls-Royce, a world-leading provider of power systems and services, has made strong progress in the first quarter of 2007, securing new engine business and continuing to grow its services revenues.

The Group announced its Preliminary Results for 2006 in February with underlying sales growth of 14 per cent and an increase in underlying profit before tax of 19 per cent to £705 million (2005 £593 million). The Group’s ability to win business in growing and global markets resulted in an increase in the order book to £26.1 billion (2005 £24.4 billion).

Finnair became the first customer for the Trent XWB, the engine being developed for the Airbus A350 XWB airliner. The Finnish flag carrier will use the sixth and latest member of the Trent family to power 11 of the new twinjets on firm order, with options for four more aircraft.

British Airways selected the Trent 800 to power up to eight additional Boeing 777-200 twinjets. The deal is potentially worth $320 million to Rolls-Royce at list prices. Engine maintenance will be covered by an extension of the airline’s existing TotalCare® agreement. British Airways already operates 16 Trent powered 777 aircraft.

Rolls-Royce announced its newest helicopter engine, the RR300, for the new R66 helicopter from launch customer, Robinson Helicopter Company, the world’s leading manufacturer of civil helicopters. Discussions are also taking place with Enstrom Helicopters, MD Helicopters and Schweizer Aircraft over future applications of the RR300.

A decision of major strategic importance for the Group’s marine business was the US Navy’s selection of four MT30 gas turbine generator sets for the first two ships in a new class of advanced surface combatant ship, the DDG-1000 Zumwalt Class destroyer. This is the second U.S. Navy programme to feature the MT30 as it has already been selected to power the first two Lockheed Martin Littoral Combat Ships.

Both the civil and defence aerospace businesses announced significant new services activities.

A Memorandum of Understanding (MoU) was signed with BAE Systems to work together to improve support to the UK Ministry of Defence (MoD) and other worldwide customers, by building on two successful availability contracts for the UK’s RB199-powered Tornado fleet.

Long-term service agreements were signed in Asia and the US. A TotalCare® agreement with Singapore Airlines covers the Trent 800 engines powering its fleet of 58 Boeing 777s. The contract is in addition to a similar maintenance deal for Trent 500 engines on the airline’s A340-500 aircraft.

Rolls-Royce now has aftermarket agreements in place with all branches of the US military, including the Coast Guard, following the signing of two contracts, worth up to $235 million over five years, with the US Air Force for propulsion aftermarket services and spares for C-130J military transport aircraft.

In the energy sector, the Group's fuel cell business acquired the assets of US-based SOFCo-EFS Holdings LLC from McDermott International Inc.. SOFCo-EFS has proven expertise in fuel processing technologies and undertakes advanced research and development in solid oxide fuel cell stacks and system integration.

Other business highlights include:

Civil Aerospace

• Florida-based Spirit Airlines selected V2500 engines for 30 Airbus A319 twinjets, providing Rolls-Royce with a $200 million share of the order. The V2500 is produced by the International Aero Engines consortium, in which Rolls-Royce is a senior partner.
• Rolls-Royce and Brazil’s Embraer celebrated the delivery of the 2,000th AE3007 engine, which for a decade has powered the ERJ family of regional jets, and the Legacy Business Jet. In Canada, Rolls-Royce marked the delivery of the 500th BR710 engine, to Bombardier. BR710s power Global 5000 and Global Express XRS business jets.
• As flight testing and route proving of the Trent 900-powered Airbus A380 continues, the A380 has added the United States and Hong Kong to its list of destinations. An A380 also flew over the Rolls-Royce site in Derby, UK as a “thank you” to employees before flying to Bristol for a similar fly past at Airbus and Rolls-Royce facilities.

Defence

• The Australian Department of Defence selected the Rolls-Royce Turbomeca RTM322 to power another 34 MRH90 Multi-Role Helicopters, bringing the total number of RTM322 engines ordered by Australia to 92. Over 90 per cent of NH90 operators have selected the RTM322 engine.
• The annual Rolls-Royce 10-year helicopter industry forecast predicted a rise in turbine-powered helicopter deliveries to around 15,000 helicopters, worth around $144 billion, over the 2007-2016 period. The value of total engine business for these helicopters is forecast at around $15 billion. The increase is due to a significant number of new military requirements together with increased opportunities in emerging markets such as India, Russia and China.

Marine

• Rolls-Royce strengthened its position in South America as a supplier of ship designs and equipment packages for offshore vessels with contracts for six platform supply vessels worth around £45 million. The contracts included the first offshore orders from Chile.
• A new coastguard vessel for the Icelandic government will be designed by Rolls-Royce and will include a full equipment package.
• The first of two coastal protection vessels designed and equipped by Rolls-Royce was handed over to Spain's maritime safety authority (SASEMAR).

Energy

• Three RB211 gas turbine packages will power a new Mediterranean sub-sea pipeline to transport natural gas from Algeria to Spain under a $58 million contract with MEDGAZ. The gas line, scheduled for completion in 2009, will carry gas for 200 kilometres on the seabed from the coastal city of Beni Saf in Algeria to the Spanish province of Almeria.

Operations and technology

• Rolls-Royce supported the launch of a new National Skills Academy for Manufacturing. The ‘virtual’ academy, one of a network of academies aimed at improving productivity and tackling skills shortages in key sectors of the UK economy, will deliver quality-assured courses, qualifications and providers wherever training and development are needed. Improved skills levels should contribute to the creation of more high value-added manufacturing jobs.
• Two strategic technology partnerships have been established with the University of Birmingham - in casting technology and process modelling.
  The new partnerships build on an existing Rolls-Royce funded University Technology Centre (UTC) in Materials, based in Birmingham since 1991.