© Rolls-Royce Group plc 2004
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   Highlights of the year
We have a global business with our main manufacturing operations in North America, the UK and Scandinavia. We also have subsidiary operations close to our customers and low cost manufacturing operations in Poland, Korea and China. The business is balanced between naval and commercial markets with aftermarket sales representing 35 per cent of total sales. As with our other businesses, a portfolio approach reduces volatility. The support and services sector of the offshore oil and gas market has been the main driver of growth over the last few years. This market is now slowing down, but naval shipbuilding is increasing. The fall in marine sales in 2003 was largely attributable to the slow down in the offshore market. This also impacted profit before interest, along with additional costs incurred in respect of the introduction of new products into service. There is a continuous drive for more complex, higher technology propulsion systems as pressure for lower cost of operation, greater reliability, better manoeuvrability and safety places higher demands on the propulsion system and its design. In some sectors this is leading to a growing demand for fully integrated system provision and for electrical drives instead of mechanical drives. We have responded to this market need by establishing a Marine Electrical Systems division and we further extended our capability with the acquisition of VT Controls in 2003. Market developments are leading to an increased demand for gas turbine propulsion, with its reliable, compact power and smooth, quiet operation. Our product portfolio comprises world famous product names, such as Kamewa, the acknowledged leader in high-performance propulsion technology; UT-Design, the leader in offshore supply and support vessels; Bird Johnson, the exclusive supplier of propellers to the US Navy for 20 years; and Brown Brothers, the leading supplier of stabilisers and steering gear. We are establishing a range of gas turbines from 3MW to almost 40MW. This includes mature programmes such as the Spey and new products, such as the advanced WR-21, which offers unrivalled performance for high power applications and has been selected for the Royal Navy’s Type 45 destroyer programme. Our new products are developing strong positions in the US and Europe – particularly in naval applications. The MT30 is the most powerful marine gas turbine in the world, at over 36MW, and has 80 per cent commonality with the successful Trent 800 aero engine. It has been nominated for the UK Future Carrier and has recently made a significant break-through into the US Navy, with its selection for the DD(X) demonstrator programme. We also expect it to be very competitive in the commercial market in sectors such as fast passenger, cargo and Liquefied Natural Gas (LNG) carriers. Our smaller engines, the MT5 and AG 9140/50 are derived from our smaller industrial gas turbines and offer auxiliary power at sea. In 2003, we supplied the largest water jets ever built to power a Japanese super-ferry. Our water jets were also selected for the US Navy’s X-Craft, an excellent example of the same technology being supplied into both the commercial and naval sectors. We have a strong presence in the offshore oil and gas sector where we design vessels incorporating our own products. The highly successful UT offshore support vessel continued to attract steady orders for design and equipment packages and over 450 are now delivered or are on order with customers since the design’s inception in the mid-1970s. We have a unique position as design authority for the propulsion systems for the UK’s nuclear submarine fleet, where we have secured long-term contracts to build and maintain the steam-raising plant and related propulsion system equipment. As in all our businesses, the longevity of our equipment creates a substantial aftermarket opportunity. As systems become more sophisticated, customers have a greater requirement for value-added aftermarket services, resulting in a growing demand for Long-Term Service Agreements. These provide long and reliable engine life for the customer and an incremental revenue opportunity for Our priorities are to focus investment on bringing new products to market in sectors where we are establishing product leadership, particularly in large marine gas turbines where we are benefiting from our market leading products in civil aerospace. We are continuously striving for operational excellence, greater levels of productivity and lower costs. We are capturing the opportunity offered by the aftermarket and, as technology and product solutions become more sophisticated, we are benefiting from the service capabilities being developed in other parts of the Group. |
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Integrated system solutions |
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