Wärtsilä Interested In Rolls-Royce’s Marine Business

BY JACK BURKE

Wärtsilä may be interested in adding Rolls-Royce’s marine business, which the British company is reviewing for possible sale.

“If we see any interesting player in the market who would fit well to our strategy and improve that one, we would definitely look at it,” Wärtsilä Chief Executive Jaakko Eskola remarked during a conference call. “So we need to look at what’s available there and what is going to be their final plan.”

Rolls-Royce announced earlier in January that it is embarking on a “further simplification” of its business, including the evaluation of strategic options for its commercial marine operation. The company will also reduce its five operating businesses to three core units based around Civil Aerospace, Defense and Power Systems.

As part of this exercise, Rolls-Royce plans to consolidate our Naval Marine and Nuclear Submarines operations within its existing Defense business, and Civil Nuclear operations within its Power Systems business, the company said. The move, Rolls-Royce said, will facilitate a more fundamental restructuring of support and management functions in particular.

“These actions are designed to align our business more closely with our strategic vision to pioneer cutting-edge technologies that deliver vital power,” the company said in a news release. “It will allow us to better capitalize on our relationships with Defence customers and our market leading widebody position within Civil Aerospace, while strengthening our technology capabilities across a broad range of power generation applications. We would expect the subsequent restructuring to deliver an additional reduction in costs and assist us in improving performance from our core businesses and the whole Group. We are in the process of defining this restructuring and further details will be given at the time of our 2017 financial results on 7 March 2018 and a fuller discussion at a Capital Markets event later this year.”

During his press conference, Eskola noted that Wärtsilä’s order intake increased 15% from 2016 to 2017 and net sales were up 3% year-over-year.

The demand for Wärtsilä’s services and solutions in 2018 is expected to improve somewhat from the previous year. Demand by business area is anticipated to be as follows:

• Good in Services, thanks to growth opportunities in selected regions and segments.
• Good in Energy Solutions. The global shift towards renewable energy sources and increasing electricity demand in the emerging markets support the need for distributed and flexible power capacity, including gas-fired generation, energy storage, and smart integration technology.
• Solid in Marine Solutions. Despite improving sentiment, the marine market environment remains challenging due to overcapacity and lack of financing.

“Looking ahead, I believe that developing smart technology and integrating new business models into our offering will be at the core of our long-term value creation, both for our shareholders and society at large,” Eskola said. “In terms of 2018, our demand outlook has improved somewhat. We continue to see growth opportunities in our service business, based on our portfolio of long-term agreements and the increasing technological sophistication of our installed base. The demand for our energy solutions is anticipated to be at a good level, supported by a healthy project pipeline and favorable market trends. Market conditions are expected to improve in the marine industry, thus supporting a solid demand outlook.”