Rolls-Royce Holdings plc · LSE:RR.
Rolls-Royce — Investor Presentation (October 2014)
77 slides from Rolls-Royce's investor presentation, Oct 21, 2014
Slide 1: Introduction to Marine
STRICTLY PRIVATE & CONFIDENTIAL Introduction to Marine Mikael Mäkinen, President - Marine 21 October 2014 © 2014 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for whi
Slide 2: Introduction to Marine
Introduction to Marine Trusted to deliver excellence 2 Privileged and confidential - prepared at the request of outside counsel
Slide 3: Rolls-Royce Marine
Rolls-Royce Marine An important member of the family Aerospace Power Systems Marine Nuclear Trusted to deliver excellence 3 Privileged and confidential - prepared at the request of outside counsel
Slide 4: Marine industry
Marine industry A strong contributor to the global economy “Offshore exploration & production is expected to grow to 45% (from 35%) of exploration & production over the next decade.” Barclays “Over 90% of the world’s goods by weight and volume are transported by sea.” International Maritime Organiza
Slide 5: Major trends
Major trends A large business opportunity Environmental efficiency Ship intelligence is the new way to sell Fuel diversity will increase Towards electric ships and systems Markets continue shifting towards Asia Increasing activities in harsh environments Business models changing towards asset manage
Slide 6: Market segments
Market segments Every fifth ship has Rolls-Royce equipment Purpose Market segments Search for and extraction of Offshore Commercial natural resources. > 10,000 vessels Merchant Transportation of cargo and people. > 111,000 vessels1) Protection of Naval state interests. > 11,000 vessels2) 1) Includin
Slide 7: Offshore: vessel segments and ship types
Offshore Vessel segments and ship types Vessel segments Vessel types Seismic vessels Exploration & Drill ships & semi-subs Production Shuttle tankers Construction vessels Subsea & Subsea vessels Construction Cable layers Platform supply vessels Anchor handling Supply & Service vessels Safety standby
Slide 8: Offshore supply / demand balance
Offshore Supply / demand balance at a ship type / size level Cyclicality by ship type Source: Internal, vessel contracting Trusted to deliver excellence 8 Privileged and confidential - prepared at the request of outside counsel
Slide 9: Offshore: wide range of vessel types
Offshore Wide range of vessel types Seismic vessel Drill ship Drilling semi-submersible Construction vessel Platform supply vessel Anchor handling vessel Trusted to deliver excellence 9 Privileged and confidential - prepared at the request of outside counsel
Slide 10: Oil field life-cycle
Oil field life-cycle Rolls-Royce equipment used throughout Illustrative Seismic vessel Platform supply vessel Anchor handling vessel Drill ship / semi-sub Subsea construction vessel Pipe layer Production & storage vessel Shuttle tanker Well intervention vessel Inspection / maintenance vessel Decommi
Slide 11: Growing energy demand
Growing energy demand Source: International Energy Agency (IEA) - World Energy Outlook Trusted to deliver excellence 11 Privileged and confidential - prepared at the request of outside counsel
Slide 12: Oil & gas market
Oil & gas market Prospects for 2035 Sources: International Energy Agency (IEA) - World Energy Outlook and Rystad Trusted to deliver excellence 12 Privileged and confidential - prepared at the request of outside counsel
Slide 13: Global E&P capex spending growth
Global E&P capex spending growth Low-double digits with offshore c. 5 to 10% Actual Forecast 2014-17 $9.0 11% 45% 2009-13 Trillion 13% 35% $3.9 Trillion Sources: Barclays E&P Spending Update Trusted to deliver excellence 13 Privileged and confidential - prepared at the request of outside counsel
Slide 14: Proven offshore oil reserves beyond 400 ft
Proven offshore oil reserves beyond 400 ft With new discoveries increasingly in deep water Reserve Water Depth 400-1,000 1,000-5,000 5,000-7,500 7,500+ Source: Based on RS Platou data, water depth > 400 ft Trusted to deliver excellence 14 Privileged and confidential - prepared at the request of outs
Slide 15: Merchant: vessel segments and ship types
Merchant Vessel segments and ship types Vessel segments Vessel types Tankers Cargo vessels Bulk carriers Container vessels Cruise ships Passenger Ferries vessels Yachts Tugs & workboats Others Fishing vessels Dredgers Trusted to deliver excellence 15 Privileged and confidential - prepared at the req
Slide 16: Merchant supply / demand balance
Merchant Supply / demand balance at a ship type / size level Cyclicality by ship type Source: Internal, vessel contracting Trusted to deliver excellence 16 Privileged and confidential - prepared at the request of outside counsel
Slide 17: Merchant: wide range of vessel types
Merchant Wide range of vessel types Tanker (medium) Tanker (large) Container vessel Bulk carrier Ferry Tug Trusted to deliver excellence 17 Privileged and confidential - prepared at the request of outside counsel
Slide 18: GDP and seaborne trade growth relationship
GDP and seaborne trade growth relationship Sources: IHS World Industry and DnV Shipping 2020 Trusted to deliver excellence 18 Privileged and confidential - prepared at the request of outside counsel
Slide 19: World fleet
World fleet Number of vessels contracted and scrapped Sources: IHS Fairplay and Internal 1) Including all commercial & naval vessels > 100 gross tonnes, excluding tugs, yachts and inland waterway vessels Trusted to deliver excellence 19 Privileged and confidential - prepared at the request of outsid
Slide 20: Naval: vessel segments and ship types
Naval Vessel segments and ship types Vessel segments Vessel types Combatants Navy Offshore patrol vessels vessels Amphibious vessels Auxiliaries Patrol vessels Coast guard Search & rescue vessels vessels Tugs & tenders Constabulary Police vessels vessels Customs vessels Trusted to deliver excellence
Slide 21: Naval: wide range of vessel types
Naval Wide range of vessel types Fast attack craft Coast guard vessel Frigate Littoral combat ship Aircraft carrier Replenishment vessel Trusted to deliver excellence 21 Privileged and confidential - prepared at the request of outside counsel
Slide 22: Global military ship market
Global military ship market Source: IHS Jane’s Defence Budgets Trusted to deliver excellence 22 Privileged and confidential - prepared at the request of outside counsel
Slide 23: Large number of market players
Large number of market players Ship owners Oil companies Ship operators Subsea construction companies Shipyards Ship managers Charterers Navies Cargo owners Government agencies Governments Equipment & system suppliers Trusted to deliver excellence 23 Privileged and confidential - prepared at the req
Slide 24: Marine video
MARINE VIDEO Trusted to deliver excellence 24 Privileged and confidential - prepared at the request of outside counsel
Slide 25: Rolls-Royce Marine key facts
Rolls-Royce Marine Key facts Land & Sea - Revenue 2013 Rolls-Royce Marine - Revenue 2013 Total: £5.5bn Total: £2.0bn Rolls-Royce Marine - Global footprint 75% 12% 13% ̴ 6,500 employees Trusted to deliver excellence 25 Privileged and confidential - prepared at the request of outside counsel
Slide 26: Top offshore countries
Top 10 offshore countries Shipyard countries - Offshore Ship owner countries - Offshore China 29% USA 18% South Korea 19% Norway 13% Singapore 8% Singapore 9% Norway 6% Malaysia 6% USA 6% Brazil 6% Brazil 4% China 5% Netherlands 4% France 5% Japan 3% United Arab Emirates 4% Malaysia 3% Bermuda 3% In
Slide 27: Top merchant countries
Top 10 merchant countries Shipyard countries - Merchant Ship owner countries - Merchant China 34% Japan 14% South Korea 32% China 11% Japan 18% Greece 10% Philippines 2% Singapore 6% Netherlands 2% Germany 6% Taiwan 2% United Kingdom 4% Malaysia 1% South Korea 4% Indonesia 1% Denmark 4% Vietnam 1% H
Slide 28: Major trends
Major trends A large business opportunity Rolls-Royce strength Environmental efficiency Ship intelligence is the new way to sell Fuel diversity will increase Towards electric ships and systems Markets continue shifting towards Asia Increasing activities in harsh environments Business models
Slide 29: Concentration
Concentration Choices have been made Market and vessel segments Equipment & systems Geographical presence Trusted to deliver excellence 29 Privileged and confidential - prepared at the request of outside counsel
Slide 30: Ship systems
Ship systems Large number of different systems Ventilation Air Conditioning Elevators Food stores Lightning Laundry Life saving equipment Outdoor deck systems Exhaust gas treatment Electric distribution Ramps Communication Cargo deck Navigation Bridge automation Propulsors Deck equipment Steering ge
Slide 31: Our market approach
Our market approach Trusted to deliver excellence 31 Privileged and confidential - prepared at the request of outside counsel
Slide 32: Offshore market positioning
Offshore market positioning Illustrative operational functionality electrical, automation & control propulsion & engines Trusted to deliver excellence 32 Privileged and confidential - prepared at the request of outside counsel
Slide 33: A sizeable market opportunity
A sizeable market opportunity 250 Market opportunity [ £bn ] Services opportunity 200 Equipment and systems opportunity 111 Equipment and systems adjacency* 150 100 108 94 50 14 18 0 2004 - 2013 2014 - 2023 Source: Internal data based on 2014 market pricing with no adjustment for inflation, vessel c
Slide 34: Our integrated strategy
Our integrated strategy Customer Innovation Fully understand our customers’ Create a winning offering for requirements to create future customer needs compelling offerings Profitable growth Continuously improve our operational efficiency Grow our aftersales support business Grow into attractive mark
Slide 35: Customer
STRICTLY PRIVATE & CONFIDENTIAL Customer John Knudsen, President - Commercial Marine 21 October 2014 © 2014 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it
Slide 36: Customer
Customer Trusted to deliver excellence 36 Privileged and confidential - prepared at the request of outside counsel
Slide 37: Large number of market players
Large number of market players Ship owners Oil companies Ship operators Subsea construction companies Shipyards Ship managers Charterers Navies Cargo owners Government agencies Governments Equipment & system suppliers Trusted to deliver excellence 37 Privileged and confidential - prepared at the req
Slide 38: Top offshore companies
Top 10 offshore companies Shipyards - Offshore Ship owners - Offshore Samsung Heavy Industries Co 9% Bourbon SA 4% Daewoo Shipbuilding & Marine 6% Seadrill Ltd 2% Zhejiang Shipbuilding Co Ltd 4% Tidewater Inc 2% Fujian Southeast Shipyard 4% ENSCO International Inc 2% Hyundai Heavy Industries Co 3% E
Slide 39: Top merchant companies
Top 10 merchant companies Shipyards - Merchant Ship owners - Merchant Hyundai Heavy Industries Co 8% COSCO 5% Daewoo Shipbuilding & Marine 6% Moller-Maersk A/S 3% Samsung Heavy Industries Co 5% Seaspan ULC 2% Hyundai Samho Heavy Industries 3% Mitsui OSK Lines Ltd 2% STX Shipbuilding Co Ltd 3% Evergr
Slide 40: Customer requirements
Customer requirements Diverse, with common themes Matched to mission: Value for money: Technical performance Capital expenditure Through-life Operational expenditure Systems: Installation availability: Quality and reliability of Seamless interfaces and equipment & systems functional integrity Qualit
Slide 41: Value proposition
Value proposition Creating high barriers to entry System integration Innovative Product quality products and and reliability technology Domain knowledge Responsive Training, incl. global aftersales simulation support In-service upgrades Trusted to deliver excellence 41 Privileged and confidential -
Slide 42: Value proposition: domain knowledge
Value proposition Domain knowledge System integration Innovative Product quality products and and reliability technology Domain knowledge Responsive Training, incl. global aftersales simulation support “UT 731 CD has proven to be very efficient in daily operations, In-service reducing fuel consumpti
Slide 43: Value proposition: innovative products and technology
Value proposition Innovative products and technology System integration Innovative Product quality products and and reliability technology Domain knowledge “With the number of LNG-fuelled ferries operating in Norway and the years of Training, experience, the Rolls-Royce Solution wasResponsive incl.
Slide 44: Value proposition: product quality and reliability
Value proposition Product quality and reliability System integration Innovative Product quality products and and reliability technology Domain knowledge “Far Seeker 5 years of operation with only 9 hoursResponsive off hire” Training, incl. global Captain aftersales Svein-Åge Vadset simulation suppor
Slide 45: Value proposition: system integration
Value proposition System integration System integration Innovative Product quality products and and reliability technology Domain Long experience in system integration and ship design; knowledge 40th anniversary of UT ship design Responsive Training, incl. global aftersales simulation support In-ser
Slide 46: Value proposition: responsive global aftersales support
Value proposition Responsive global aftersales support System integration Innovative Product quality products and network with more than 1,000 well-trained service Global service and reliability technology engineers in 54 service centres in 32 countries Domain knowledge Responsive Training, incl. gl
Slide 47: Value proposition: training, incl. simulation
Value proposition Training, incl. simulation System integration Innovative Latest: Product quality products and and marine services company C-MAR Group Offshore and reliability technology has installed our Icon dynamic positioning simulators at its dynamic positioning training centres in London and
Slide 48: Value proposition: in-service upgrades
Value proposition In-service upgrades System integration Innovative Product quality products and and reliability technology Domain Ships have a 25 - 30 year lifecycle knowledge Responsive Training, incl. global aftersales simulation support In-service upgrades Trusted to deliver excellence 48 Privil
Slide 49: Two of our latest achievements
Two of our latest achievements Based on true domain knowledge and customer intimacy UT 777 top hole drilling, light well-intervention Unified bridge and subsea construction vessel Award winning World class operability Trusted to deliver excellence 49 Privileged and confidential - prepared at the req
Slide 50: Examples
Examples Offshore Offshore UT design anchor handling vessel Drilling semi-submersible Merchant Naval 1,600 passenger LNG-powered ferry Frigate Trusted to deliver excellence 50 Privileged and confidential - prepared at the request of outside counsel
Slide 51: Example for the offshore market: anchor handling vessel
Example for the offshore market Large anchor handling vessel 100% Value of vessel (c. £77m) Automation & Control Deck Machinery 42% Maximum R-R value Engines Other equipment (6%) High- and medium-speed Electrical System Deck machinery (16%) Lifetime support: Propulsion • 24/7 technical support • Ene
Slide 52: Example for the offshore market: drilling semi-submersible
Example for the offshore market Drilling semi-submersible Deck machinery 100% Value of vessel (c. £370m) Engines medium-speed Propulsion equipment; 3-6 months drilling campaigns: dynamic positioning longer drilling campaigns: mooring Lifetime support: • 24/7 technical support • Energy monitoring 7%
Slide 53: Troll A gravity based production platform
“Troll A” gravity based production platform The largest structure ever moved on earth All ten vessels featuring Rolls-Royce deck machinery winches Trusted to deliver excellence 53 Privileged and confidential - prepared at the request of outside counsel
Slide 54: Deep water mooring
Deep water mooring From 200 to 3,000 metres Trusted to deliver excellence 54 Privileged and confidential - prepared at the request of outside counsel
Slide 55: Mooring of an FPSO
Mooring of an FPSO Floating Production Storage & Offloading Trusted to deliver excellence 55 Privileged and confidential - prepared at the request of outside counsel
Slide 56: Example for the merchant market
Example for the merchant market 1,500 passenger / 600 car LNG-powered ferry Gas tanks 100% Value of vessel (c. £80m) Gas engine medium-speed Rudder Reduction gear Propeller 20% Maximum R-R value Lifetime support: Other equipment (0.4%) Propulsion equipment (4%) • 24/7 technical support • Energy moni
Slide 57: Example for the naval market
Example for the naval market Frigate 100% Value of vessel (c. £300m) Power Electrics Handling systems Engines gas turbine and high-speed reciprocating Propulsion equipment Lifetime support: 10% Maximum R-R value • 24/7 technical support • Energy monitoring • Field service • Equipment health Handling
Slide 58: Competition
Competition Fragmented and diverse landscape Global competitors aiming for systems capability Global competitors Regional competitors aiming for technology aiming for cost / product leadership leadership Trusted to deliver excellence 58 Privileged and confidential - prepared at the request of outsid
Slide 59: Going forward
Going forward In parallel Raise quantity of business: Raise quality of business: Grow with addressable market Continuous improvement of our Grow share in addressable strong value proposition market Relentless focus on cost and Expand addressable market operational efficiency Trusted to deliver excel
Slide 60: Innovation
Innovation 21 October 2014 Sauli Eloranta, EVP - Marine Engineering & Technology © 2014 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it is supplied without
Slide 61: Marine trends
Marine trends Trusted to deliver excellence 61 Privileged and confidential - prepared at the request of outside counsel
Slide 62: Well positioned to meet these challenges
Well positioned to meet these challenges Power Systems LNG & Hybrids Azimuth Permanent Magnet Thrusters Thrusters Prize winning ship designs Special Winches & Automation & Control 2008, 2009, 2012, 2013 Safer deck equipment & Data Integration Trusted to deliver excellence 62 Privileged and confident
Slide 63: Future innovations
Future innovations Efficiency Leader Ship Intelligence BETTER POWER FOR A CHANGING WORLD DISRUPTIVE CHANGE Trusted to deliver excellence 63 Privileged and confidential - prepared at the request of outside counsel
Slide 64: The best way to predict the future is to create the future
The best way to predict the future is to create the future Trend from Wide product portfolio and Long tradition of products to integrated systems are key collaboration with technology enablers for the next step leading ship-owners Trusted to deliver excellence 64 Privileged and confidential - prepar
Slide 65: Profitable Growth
Profitable Growth Mark Alflatt, Finance Director - Marine 21 October 2014 © 2014 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it is supplied without the ex
Slide 66: Profitable growth
Profitable growth Grow market share + installed fleet Competitive portfolio – products & services Focus on Cost & Cash Trusted to deliver excellence ”Trusted to deliver excellence” Privileged and confidential - prepared at the request of outside counsel 66
Slide 67: Growth and capital allocation
Growth and capital allocation Building on our strengths Building on opportunities with Strong positions Land & Sea Improving on key products Competitive and Sectors Positioning Delivering Growth and Value Creation Innovation – key Rationalise technologies Product Portfolio Grow Services Trusted to d
Slide 68: Balanced business model
Balanced business model 68 A comparison with Aerospace • Barriers to entry: innovation, systems, long service lives • Fragmented industry – suppliers, customers, regulators • Modest investment and short time-to-market • Short cycle for new OE, aftermarket primarily Time & Materials • Stron
Slide 69: A decade of growth
A decade of growth A track record of success Revenue (£bn) – 8% CAGR UPBFCT (£m) – 13% CAGR OE Services 1.0 233 2.0 78 2004 2013 2004 2013 RoS (%) – +330bps ROCE (%) 11.4% 32% 8.1% 6% 2004 2013 2004 2013 Trusted to deliver excellence 69 Privileged and confidential - prepared at the request of outsid
Slide 70: Focus on the 4C's
Focus on the 4C’s 70 Bedrock that drives profitable growth Customer Concentration Cost Cash • Transformation programmes underway • Product portfolio • Business processes and systems • Footprint and supply chain consolidation • Lower cost sourcing and engineering Trusted to deliver excellence ”Truste
Slide 71: Todays Marine cost base
Todays Marine cost base Significant opportunity to drive competitive positioning £1.8bn cost by region: £1.8bn cost by type: Other op Asia costs 9% 15% Americas 12% Material Headcount 50% 25% Europe 79% Indirect spend 10% • Over 90% of our cost/supply chain and headcount in High Cost Countries • Ma
Slide 72: Transforming footprint and supply chain
Transforming footprint and supply chain Dispersed services network Regional Service Location Product Centre Training Centre Trusted to deliver excellence 72 Privileged and confidential - prepared at the request of outside counsel
Slide 73: Transforming footprint and supply chain
Transforming footprint and supply chain 6,500 employees, 70 locations, 30 countries 75% 13% 12% Regional Service Location Product Centre Training Centre Percentage of headcount Trusted to deliver excellence 73 Privileged and confidential - prepared at the request of outside counsel
Slide 74: Low cost sourcing and engineering
Low cost sourcing and engineering A significant opportunity Material cost: £0.9bn Engineering resources: Headcount No LCC Asia Americas options today Addressable 6% 10% 12% 44% Partners / Naval / Nordics / Services Europe 44% 84% • Re-sourcing key commodity groups to LCC • 1,600 engineers globally -
Slide 75: Summary
Summary 75 • Strong track record of growth – doubled revenue over the last decade • Strong positions in growth markets • Opportunities to improve cost and competitive position • Strong growth potential in the next decade Trusted to deliver excellence ”Trusted to deliver excellence” Privileged and co
Slide 76: Summary
STRICTLY PRIVATE & CONFIDENTIAL Summary Mikael Mäkinen, President - Marine 21 October 2014 © 2014 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it is suppli
Slide 77: Our integrated strategy
Our integrated strategy Customer Innovation Fully understand our customers’ requirements to create Create a winning offering for compelling offerings future customer needs Profitable growth Continuously improve our operational efficiency Grow our aftersales support business Grow into attractive mark
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