Record order intake for Rolls-Royce Power Systems

Fuel cell power unit.

Rolls-Royce Holdings has published its 2022 half-year results. Order intake of £2.1bn was 53 per cent higher than the prior period and included the highest quarter for order intake on record, with strongest growth in demand in power generation, governmental and industrial end markets.

It’s reported that demand for products and solutions of Rolls-Royce’s Power Systems business remains very strong and in some market segments, production capacities for 2023 are already fully utilised.

Rolls-Royce states global supply chain challenges have continued to impact the availability of key components, which is restricting the pace of revenue recovery. To maximise efficiency and productivity in manufacturing, the company increased the repair and reuse of spare parts in services and de-risking original equipment deliveries driving a temporary, albeit substantial, increase in inventory in the first half.

“The good news is that demand for our products and solutions is very strong. In order to be able to supply our customers reliably, we are already holding strategic talks with suppliers for next year. Our consistent crisis management is working,” says Andreas Schell, CEO of Rolls-Royce Power Systems.

Trading cash outflow was £76m (2021: £71m) with a negative cash conversion as inventory increased to meet growth demand and to manage the supply chain challenges. It also reflected the investment in a 54 per cent stake in electrolysis stack specialist Hoeller Electrolyzer.

In order to meet the increased demand for mtu engines, Power Systems is building up capacity. The business unit plans to hire up to around 450 additional employees over the next ten years, depending on the specific order situation. New machines are also to be procured and larger assembly lines built at the plants in Friedrichshafen.

Underlying operating profit was £119m (2021: £41m) giving an operating margin of 8.7 per cent. The 17 per cent increase in research and development costs reflects investment in new product development and transitioning products to sustainable fuel alternatives to help customers towards net-zero emissions.

As part of Rolls-Royce’s net zero strategy, Power Systems aims to achieve complete climate neutrality by 2050.

“With ambitious interim targets for 2030, we aim to be completely climate neutral by 2050 across all global sites and areas from production to supply chains to our product portfolio,” says Dr Otto Preiss, COO and chief technology officer. “The company’s own sustainable power generation is a key element in saving greenhouse gas emissions.”

“Power Systems expects good revenue growth in 2022 supported by record order intake, partly held back by the current global supply chain constraints,” continues Schell. “Operating margin is expected to be broadly flat with higher activity levels utilisation offset by continued inflationary pressures and increased research and development in net zero solutions. Cash conversion is expected to improve in the second half with some of the recent inventory build unwinding, but is still expected to be lower for the full year.”

More details on the half-year results can be found on the company’s website.

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