Rolls-Royce Posts Huge COVID-19-Related Losses
By Ian Cameron27 August 2020
Rolls-Royce has reported a post-tax loss of £5.4 billion for the first half of 2020 having been battered by the COVID-19 pandemic with the Power Systems business, which includes the MTU products, also severely impacted.
The company said first-half financial results at Rolls-Royce’s Power Systems division have been significantly hit with adjusted revenue down 11% to £1.25 billion (Euros 1.43 billion). It added that the division “remains in the black” having generated £22 million (Euros 25 million) down 79% of underlying profit. At the same time, Power Systems has been continuing to work hard on reinventing itself as a provider of sustainable, integrated total solutions for drive-power and energy needs, and is increasingly developing net-zero-carbon products, the company said.
“Despite the unprecedented scenario in which the global economy finds itself due to COVID-19, we have actively managed the economic impact on Power Systems in the first six months of 2020. We identified this problem at an early stage and took a number of countermeasures. The challenge of focusing effort on shielding our employees from infection while continuing to serve customers to the best of our abilities has been met despite the prevailing headwinds,” said Andreas Schell, chief executive officer Rolls-Royce Power Systems.
Louise Öfverström, chief financial officer of Rolls-Royce Power Systems, said: “The drop in revenue is due to noticeable reluctance on the part of customers to invest in new equipment, although the falls varied from application to application. Our diversified positioning across a range of applications covering 13 markets has once again proven to be the right one and has had a stabilizing effect on our business.”
The company said sales in the power generation market remained stable due to increased investments of data center customers safeguarding their electrical power systems against unexpected outages. “The lockdowns have made us all keenly aware of the primary importance of keeping data flowing. Our systems help secure power supplies to many safety-critical facilities such as data centers, server parks, and hospitals too,” said Schell.
Equipment destined for the oil and gas sector, industrial powertrains and propulsion systems for passenger ships and yachts were all hit by declining sales. As a great many vehicles, machines and systems were halted during lockdown, service revenues fell by around 12%, as was expected, said Rolls-Royce.
The company claimed there are signs of recovery emerging in some applications and markets, for example in China. “State rescue programs and the easing of COVID restrictions, where feasible, will help bring about recovery. That said whether and to what extent a recovery will occur also depends on what happens to the infection rate, and how that impacts the economy,” said Schell. From today’s perspective, Power Systems’ end markets are expected to return to pre-COVID levels by the end of 2021, the company said.
Schell added: “The announcement of our collaboration with Daimler and its partner Volvo in using commercial vehicle fuel cells in distributed power supply systems has made our customers and the industry sit up and take notice. Work is already underway on a demo system due to go into operation in early 2021. This will be a real alternative for many, especially if the fuel cells run on green hydrogen produced from renewable energy sources.
Power Systems said it is also reinforcing its core business with the addition of Belgian company Kinolt, a specialist in uninterruptible power supplies, which was acquired in July. This move sees Power Systems grow its line-up of integrated total solutions for emergency power supplies used in safety-critical environments such as data centers and industrial facilities housing sensitive production processes, it said. The company, with almost 300 employees in Liège (Belgium), Willich (Germany) and other locations across the world, is to be merged fully into the business unit, with its products joining the MTU product range.