Rolls-Royce Power Systems profitable despite COVID-19

First-half financial results at Rolls-Royce's Power Systems division have been significantly impacted by the global COVID-19 pandemic, with adjusted revenue down 11 per cent to £1.25 billion. The division remains in the black, having generated £22 million (down 79 per cent) 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.

“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,” says Andreas Schell, CEO of Rolls-Royce Power Systems. “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.”

With markets reacting differently to the pandemic, Power Systems’ diversified positioning has paid off. “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,” explains Louise Öfverström, chief financial officer of Rolls-Royce Power Systems. “Our diversified positioning across a range of applications covering 13 markets has once again proven to be the right one and has had a stabilising effect on our business.” 

While sales in the power generation market remained stable due to increased investments of data centre customers safeguarding their electrical power systems against unexpected outages, 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 per cent, as was expected.

Crisis management has kept production going. “In some areas, we have adjusted production to this lower demand scenario, using measures such as short-time work at German sites,” advises Schell. “However, at no point did operations have to come to a halt, despite challenges in our global supply chains. Thanks to intelligent crisis management and good relations with our supply partners, we've been able to deliver all orders despite the difficult environment. This too has helped reduce the consequences for our business.”

Power Systems wants to emerge from the crisis stronger, and is using this time to press ahead with new technology and innovation. “Even in these days of COVID-19, Power Systems is continuing to implement its PS 2030 corporate strategy: to become a provider of integrated, net-zero-carbon solutions, and to assist customers throughout the entire product lifecycle, aided by a strong core business. Electrification, digitalisation and decarbonisation are the key watchwords,” adds Schell.

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