Rolls-Royce, the renowned engineering company, is positioning itself to become the UK’s most valuable firm by harnessing the power of artificial intelligence (AI) in conjunction with its advanced nuclear reactor technology. Since CEO Tufan Erginbilgic took over late last year, Rolls-Royce has doubled its stock price. The company’s global headcount has increased, and its share price has soared a thousand per cent since January 2023. The firm is now the fifth ranked firm in the FTSE. Furthermore, it is laying the initial groundwork for the future market for Small Modular Reactors (SMRs), which would help entrench its position as a global leader in nuclear technology.
From the start of this year to creating this post Rolls-Royce has grown its employment from 43,000 to 45,000 employees. This 20% leap speaks to the company’s robust commitment of resources toward corporate innovation and growth. To address this, they are honing in on their core products, mainly their Trent series of aircraft engines, that helped forge their competitive advantage.
Up until now, Tufan Erginbilgic’s period in charge has been defined by record financial results. He’s directly responsible for a ten-fold increase in Rolls-Royce’s share price. This impressive reversal has attracted the admiration of investors and industry-watchers alike. The business is expecting to now post a profit of more than £3 billion, an outcome of the major strategic decisions that were implemented under his rule.
“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,” – Tufan Erginbilgic
Despite these successes, Erginbilgic faced criticism after announcing job cuts in October 2023. Sharon Graham, the new leader of the Unite union, emphasized that these cuts would have a devastating impact on workers. She underscored the challenges that workers are experiencing as this transition continues to evolve.
Alongside its traditional aviation manufacturing bases, the company has been pursuing breakthroughs in nuclear technology as well. The company has recently signed an agreement to build six small modular reactors (SMRs) in the Czech Republic. During that same time period, they’ve been working on three UK reactors. Erginbilgic imagines a world in which 400 small modular reactors (SMRs) will be required by 2050. These developments are critical in moving that vision from aspiration to reality. Each reactor potentially worth up to $3bn (£2.2bn), placing Rolls-Royce at the cutting edge of a new market.
“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,” – Tufan Erginbilgic
In addition, Rolls-Royce is already deeply complicit in supplying reactor cores that power up to 65% of the UK’s current fleet of nuclear submarines. The company sees an unusual opportunity to apply its nuclear technology experience. That would fuel AI development and further strengthen its competitive advantage. What Rolls-Royce seems more interested in doing is shoring up its competitive advantage. Simultaneously, the firm seeks to fuel new innovation on the cusp of creating today’s game changing technology.
Erginbilgic remains confident about Rolls-Royce’s future. He’s rejected critics who say that success is only possible with a laser-focus on the US market.
“I don’t agree with the idea you can only perform in the US. That’s not true and hopefully we have demonstrated that,” – Tufan Erginbilgic
Half of Rolls-Royce’s shareholders and customers are based in the United States. This deep-rooted connection has the company balancing a formidable international presence with significant local progress. Erginbilgic jettisoned any ambitions to float shares in New York. He highlighted the company’s focus, or maybe insistence, on serving their existing markets.
During his visit, Erginbilgic spoke candidly about the company’s history of financial distress. As he said, “Our cost of capital was 12%, and our return was 4%. Each time we made an investment, we were destroying value. The recent financial turnaround has allowed Rolls-Royce to significantly reduce its debt levels while achieving over 1,000% growth in share value.
Rolls-Royce can tout an increasingly impressive workforce and cutting-edge nuclear solutions. With a new-found focus on profitability, the company is establishing itself as a major transformer of both the aerospace and the energy industries. Through smart investments and by harnessing innovation and new technologies, it’s well positioned to stay out front in a rapidly evolving, cutthroat global climate.