Interim Management Statement

RNS Number : 0197V
Weir Group PLC
31 October 2017
 



 

 

 

The Weir Group PLC Interim Management Statement for the period to 30 September 20171

 

Strong order growth continued in third quarter

 

 

·      Third quarter group orders increased 21% driven by customer and technology focus in improving markets

 

·      Oil & Gas orders increased 59% leveraging the division's market leading pressure pumping position

 

·      Minerals orders rose 12% with increased focus on customer production and efficiency improvements

 

·      Flow Control orders fell 2% reflecting bottoming of later-cycle markets, with aftermarket up 7%

 

·      Operating profits expected to be slightly lower than previously indicated as a result of Minerals project phasing, investment in growth and one-off plant reconfiguration costs

 

 

Jon Stanton, Chief Executive, commented:

 

"In 2017 we continue to build on our leadership positions in rapidly improving main markets whilst investing to maximise the significant opportunities ahead of us.

As the North American onshore oil and gas industry continues to demonstrate its increased relevance as a source of global supply, our Oil & Gas business is fully leveraging its market leadership position in support of higher activity levels among customers. While international markets remained challenging the division has accelerated in 2017 as we expected and is well placed to continue to fully capture future opportunities.

In Minerals our brownfield solutions delivered good order growth with an increasing pipeline of future opportunities. Profits will be slightly lower than previously indicated due to project phasing, incremental investment in growth and one-off plant reconfiguration as we ensure the business is well set to benefit from increased momentum in 2018 and beyond.

 

At a group level, we anticipate strong growth in full year constant currency revenues and profits.  Minerals profits are expected to be slightly lower than previously indicated while expectations for Oil & Gas and Flow Control are unchanged."

 

Third quarter review

 

Third quarter orders were 21% higher than the prior year period.  Group-wide aftermarket orders increased 22% with original equipment up 21%.  These trends reflected increased activity levels in North American onshore oil and gas markets and demand from miners for solutions that delivers productivity gains.  Revenues, on a constant currency basis, were significantly ahead of the prior year, albeit Minerals and Flow Control saw some project work being re-phased into the fourth quarter and early 2018.  Group operating margins were higher than the prior year principally driven by increased activity levels within the Oil & Gas division.

 

Divisional review

 

Minerals

Global mining markets benefited from supportive commodity prices with the industry focused on optimising the production and efficiency of current mining operations.  To help customers achieve their objectives the division continued to invest in extending its on-the-ground engineering and service support capabilities; building on its unrivalled global service centre network.  Orders for the third quarter were up 12% compared to the prior year with original equipment orders 19% higher and aftermarket orders up 9%.  On a sequential basis, aftermarket orders were stable but original equipment lower, reflecting delays by some customers in making final investment decisions on longer lead time project activity.

 

Full year divisional revenues, on a constant currency basis, are expected to show good growth.  While product gross margins remain stable, operating margins are now expected to be only slightly ahead of the first half.  This reflects additional incremental investment, further costs associated with reconfiguring operational capacity as volumes increase and some project phasing delays.  The division's order book, together with an increasing pipeline of future opportunities, supports its positive long term outlook.

 

Oil & Gas

Strong activity levels in North American onshore oil and gas markets supported pricing improvements as the division underlined its position as the equipment supplier of choice to the major shale pressure pumpers.  The division leveraged its advanced technology and market-leading service network to fully support customers as refurbishment activity started to be overtaken by normalised spares and services demand.  International markets were more challenging with reduced project activity and competitive pricing.  Overall, divisional orders for the third quarter were 59% higher than the prior year period and 56% higher on a like for like3 basis.  As reported, original equipment orders increased 92% and aftermarket orders were 52% higher.  On a sequential basis orders were stable reflecting tough conditions in international markets and a flattening of rig count in North America.

 

Looking to the full year and asssuming oil and gas prices remain at or above current levels, we continue to expect a material increase in constant currency divisional revenues driven by activity growth in North America, with low double-digit operating margins.  

 

Flow Control

Conditions in later-cycle power, industrial and downstream oil and gas markets continued to be challenging.  While there are early signs of these markets stabilising, they remained highly competitive and subject to project delays.  Divisional orders for the third quarter was down 2% on the prior year period.  Original equipment orders were down 8% but aftermarket orders increased 7%.  

 

The division is expected to deliver modest full year constant currency revenue growth.  Operating margins are expected to return to mid-single digit levels in the second half of the year after first half profits were impacted by one-off charges in respect of previously announced legacy contract delivery challenges in the Gabbioneta downstream business.

 

Net debt

 

Net debt at 30 September 2017 was higher than that reported at 30 June 2017 but in line with normal seasonal patterns.  The group remains confident of continuing to delever through the final quarter.

 

Notes:

1.Financial information is given for the three months ended 30 September 2017 and relates to continuing operations and excludes exceptional items.

2.Orders are reported on a constant currency basis. Third quarter refers to the financial period for the three months ended 30 September 2017.

3.Like-for-like excludes the impact of acquisitions. Delta Valves was acquired on 8 July 2015 and excluded for 2016. KOP was acquired on 27 July 2017 and excluded for 2017.

 

Analyst and investor conference call

 

A conference call for analysts and investors will be held at 0800 GMT on Tuesday 31 October 2017 to discuss this statement.  Participants can join the call by registering in advance by visiting www.global.weir/investors and following the link on the page.

 

A recording of this conference call will be available until Monday 13 November 2017 on +44 (0) 1452 550 000 using the conference ID 98433347.

 

 

Enquiries:


Investors: Stephen Christie

+44 (0) 141 637 7111 / (0) 7795 110456

Media: Raymond Buchanan

+44 (0) 141 637 7111 / (0) 7713 261447                

Brunswick: Patrick Handley / Diana Vaughton

+44 (0) 20 7404 5959

 

 

About The Weir Group PLC

Founded in 1871, Weir is one of the world's leading engineering businesses providing mission-critical equipment and aftermarket solutions to energy and natural resources customers in more than 70 countries. The group, which employs around 14,000 people, comprises three divisions: Minerals; Oil & Gas; and Flow Control, and is headquartered in Glasgow, Scotland, UK. 

 

Weir's ordinary shares trade on the London Stock Exchange (ticker: WEIR LN) and its American Depositary Receipts trade over-the-counter in the USA (ticker: WEGRY).

 

Appendix 1 - quarterly order trends (constant currency)

 


 Reported growth



 Like for like2 growth

Division

2016
Q4

2017
Q1

2017
Q2

2017 Q3


2016
Q4

2017
Q1

2017
Q2

2017 Q3

Original Equipment

34%

4%

25%

19%


36%

4%

25%

19%

Aftermarket

19%

13%

7%

9%


19%

13%

7%

9%

Minerals

23%

10%

12%

12%


23%

10%

12%

12%











Original Equipment

13%

56%

143%

92%


13%

56%

143%

82%

Aftermarket

0%

48%

98%

52%


0%

48%

98%

50%

Oil & Gas

2%

50%

106%

59%


2%

50%

106%

56%











Original Equipment

-17%

-18%

-33%

-8%


-17%

-18%

-33%

-8%

Aftermarket

-8%

-3%

6%

7%


-8%

-3%

6%

7%

Flow Control

-14%

-11%

-15%

-2%


-14%

-11%

-15%

-2%











Original Equipment

11%

5%

19%

21%


11%

5%

19%

20%

Aftermarket

10%

21%

27%

22%


10%

21%

27%

21%

Continuing Ops1

10%

15%

24%

21%


10%

15%

24%

21%

Book to Bill

0.99

1.14

1.06

0.95


0.99

1.14

1.06

0.95

1 Continuing operations (excludes American Hydro Corporation and YES which were disposed of in Q2 2016).

2 Like-for-like excludes the impact of acquisitions. Delta Valves was acquired on 8 July 2015 and excluded for 2016. KOP was acquired on 27 July 2017 and excluded for 2017.

 

 

 

This information includes 'forward-looking statements'.  All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding The Weir Group PLC's ("the Company") financial position, business strategy, plans (including development plans and objectives relating to the Company's products and services) and objectives of management for future operations, are forward-looking statements.  These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning.  Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.  Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future.  These forward-looking statements speak only as at the date of this document.  The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.  Past business and financial performance cannot be relied on as an indication of future performance. 


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