Rolls-Royce has come good on Monday on its comments made in January that it plans to reduce and consolidate its business, particularly the units based around Civil Aerospace, Defence and Power Systems.
The British engineering firm decided to sell its L’Orange business, part of its Power Systemsunit to Colorado-based aerospace supplier Woodward. The deal worth €700m helped Rolls Royce shares rise 2% Monday although they later declined slightly to trade at 883p, up 1.75%.
L’Orange is the first step, expect further decisions
The market welcomed the move which is part of the bigger restructuring project that will eventually lead to a consolidation of the Naval Marine and Nuclear Submarines operations into its Defence business and Civil Nuclear operations into the Power Systems business.
With the news on Monday Rolls-Royce’s shares are trading 11% higher on the year. The L’Orange deal is likely to be followed by other strategic decisions that will eventually lead to a simplification of the business and cost reductions.
L’Orange, which operates mainly from Germany but also from the US and China, produces fuel injection systems for diesel engines for other Rolls-Royce subsidiaries and for outside companies like the Finnish manufacturer of marine engines Wartsila.
Despite the sale L’Orange will continue supplying Rolls-Royce in accordance with a 15-year contract which is expected to be extended.
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