Aero-engine maker Rolls-Royce has set its sights on becoming Britain’s largest company by market value, driven by its innovative small modular reactors (SMRs).
The engineering firm has signed deals to provide SMRs to the UK and Czech governments and chief executive Tufan Erginbilgic believes the technology will be transformational.
Rolls-Royce shares have risen tenfold since he took the helm at the Derby-based group in January 2023 and analysts believe they have further to go.
To achieve his goal, Mr Erginbilgic, would need to see Rolls-Royce nearly double its current £92 billion market capitalisation to overtake AstraZeneca, which is valued at about £172bn.
Much of this growth is expected to come from its nuclear capability.
“There is no private company in the world with the nuclear capability we have. If we are not market leader globally, we did something wrong,” he told the BBC.
Rolls-Royce already supplies the reactors that have powered dozens of nuclear submarines. SMRs will help meet growing electricity demand. They are not only smaller, but quicker to build than traditional nuclear plants, with costs likely to come down as units are rolled out.
He estimates that the world will need 400 SMRs by 2050. At a cost of up to $3bn (£2.2bn) each, that’s another trillion dollar-plus market that Rolls-Royce is determined to dominate.
The company has signed a deal to develop six SMRs for the Czech Republic and is developing three for the UK. The Scottish SNP government has ruled out allowing any to built north of the border, a decision which has been criticised by the energy industry and opposition parties.
However, it remains an unproven technology and Mr Erginbilgic conceded he could not currently point to a working SMR example. He said he was confident in its future potential.
Already dominant in supplying engines to wide-bodied aircraft like Boeing 787 and Airbus A350, Rolls-Royce plans to break into the next generation of narrow-bodied aircraft like the Boeing 737 and Airbus A320. This market is worth $1.6tn.
Mr Erginbilgic enraged the unions when in October 2023 he announced job cuts as he called the company a “burning platform” and embarked on a massive turnaround, a process that had begun under his predecessor Warren East.
Two and a half years into his tenure, the union’s admit a ‘grudging respect’ for the CEO as he oversees a company that expects to make a profit of over £3bn, its debt levels have fallen and its shares have risen over 1,000%, rising from 93p to the current 1082p.
He has signalled a loyalty to the London Stock Exchange by saying a listing in the US is “not in our plan. I don’t agree with the idea you can only perform in the US. That’s not true and hopefully we have demonstrated that.”
Asked if Rolls-Royce can become the most valuable company in the UK, he said: “We are now number five in the FTSE.
“I believe the growth potential we created in the company right now, in our existing business and our new businesses, actually yes – we have that potential.”
#RollsRoyce #aims #UKs #valuable #firm #Daily #Business