© Rolls-Royce plc 2008 Legal Information

Marine

Rolls-Royce provides a range of capabilities and expertise in the marine sector for naval surface ships, submarines, offshore and merchant vessels. The business has installed equipment on over 20,000 vessels, including those of 70 navies.

The marine business has enjoyed another successful year with a strong increase in sales and good order book growth. Key sectors of the business saw record order intakes, and we made progress on some important new marine programmes.

The offshore sector performed strongly during the year. In June 2007, we announced an £83 million contract to deliver designs and equipment for six new Rolls-Royce offshore service vessels to Nordcapital, which will be operated on their behalf by OSM Schiffahrt. This is the largest single marine offshore contract ever won by Rolls-Royce. In December 2007, a £72 million contract was signed with the same company covering a further four ships taking the total to £155 million.

Our merchant sector also contracted major new business. We signed our largest contract so far with Chinese shipbuilder Sinopacific, to provide steering gear and deck machinery worth US$42 million. The order marked a record year in China for the merchant sector with contracts for more than 700 ship sets of steering gear and 300 ship sets of deck machinery. China now presents the biggest single market opportunity for Rolls-Royce equipment in commercial merchant ships.

In the naval business, a major milestone was achieved when Rolls-Royce was selected to supply the US Navy's most advanced surface combatant ship with the world's most powerful marine gas turbine. Four MT30 gas turbine generator sets are being supplied to power two DDG-1000 Zumwalt Class destroyers, with deliveries to begin in 2009. Also in North America, the US naval architecture and engineering firm, Seaworthy Systems Inc, was acquired and added to the marine portfolio to boost support services. Its work is now part of a TotalCare service Rolls-Royce is developing for naval customers, offering long-term guaranteed power availability and complete propulsion plant support for ships.

An innovative 10-year contract with the UK MoD worth £1 billion was secured for Rolls-Royce to manage the support of the reactor powerplants of the Royal Navy's nuclear submarine fleet. Rolls-Royce and the UK MoD formed a joint team setting agreed service levels, and both parties are now sharing the savings made through improved business efficiency and effectiveness.

The business has been undertaking a review of the efficiency of our supply chain in 2007 in order to meet the challenge of higher levels of production activity.

Marine is creating a fully integrated global operations business which will help realise economies of scale, improve efficiency and thereby reduce the unit cost of production. This is being achieved through improvements in manufacturing plant and production facilities which are aimed at building capacity to respond to our existing workload and manage greater volumes in the future.

A good example is the £14 million investment in our diesels facility in Bergen, Norway, where we are installing state-of-the-art machining equipment which will significantly improve levels of production.

Our large base of installed equipment provides a platform from which to grow our services business. To meet this global opportunity we are upgrading our service facilities in places as diverse as Singapore, Rio de Janeiro, Mumbai, Galveston, Fort Lauderdale and Rotterdam and, at the same time, recruiting more service engineers to provide better customer service.

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