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Weir Group PLC (WEIR)

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Monday 04 November, 2013

Weir Group PLC

Interim Management Statement

Interim Management Statement

4 November 2013

 

THE WEIR GROUP PLC

INTERIM MANAGEMENT STATEMENT for the period to 3 November 20131

 

 

THIRD QUARTER REVIEW

 

The Weir Group PLC announces the continuation of positive order input trends in the third quarter of 2013, with the diversity of the Weir portfolio and execution of our strategic priorities continuing to mitigate against on-going end market challenges. 

 

Third quarter2 input was 5% higher than the prior year comparator on a like for like3 basis, with good underlying growth and a positive book to bill ratio in both the Minerals and Oil & Gas divisions.  On a reported basis order input4 was 7% higher than the third quarter of 2012.  Original equipment orders, 37% of order input, were down 4% (down 1% like for like) while aftermarket orders, 63% of order input, were up 15% (up 10% like for like).

 

Third quarter revenues and profits were slightly below expectations due to further project delivery delays in Minerals and a more gradual than anticipated recovery in upstream Oil & Gas markets. 

 

 

FULL-YEAR OUTLOOK

 

As a result, on an H1-2013 constant currency basis, full year profits before tax, amortisation and exceptional items are expected to be in the range of £425m-£435m with margins broadly in line with the prior year.  In addition, based on current estimates of average full-year exchange rates, reported profits are expected to be a further £8m-£12m lower due to the translation impact of recent weakness in the US and Australian dollar and most emerging market currencies. 

 

 

DIVISIONAL REVIEW

 

Minerals

 

Order input for the third quarter was up 4% (up 3% like for like) against the prior year period.  Original equipment input was flat on a reported and like for like basis during the quarter, while aftermarket orders were 7% higher (5% higher like for like).  Order input for the 39 weeks on a reported basis was 2% lower (H15: 4% lower) and 3% lower on a like for like basis (H1: 6% lower).  Original equipment orders for the 39 weeks were down 11% (H1: down 15%) on both a reported and like for like basis while aftermarket orders on a reported basis were 5% higher (H1: 4% higher) and 3% higher on a like for like basis (H1: 2% higher).

 

Mining end markets remained challenging, with commodity prices broadly flat over the period. Greenfield activity remained at a low level, with new projects experiencing order delays as customers continue to adopt a cautious approach to large investments.  This has, however, been offset by a steady pipeline of brownfield and non-mining end market opportunities.  Aftermarket input was supported by growing ore production volumes and the division's diverse global presence, offsetting the limited destocking seen in the period.

 

Full year revenues are now expected to be broadly flat year on year, and slightly lower than our expectations in July, due to further project delivery delays and industrial unrest in South Africa.  Having upgraded our full year margin expectations in July we continue to expect second half margins to be in line with the strong performance of the first half.

 

Oil & Gas

 

Order input for the third quarter was up 33% (up 24% like for like) against the prior year period, sequentially higher than the second quarter but slightly below expectations.  Original equipment input was up 11% on a reported and like for like basis; representing the highest order intake since the second quarter of 2012.  Aftermarket orders were 45% higher (up 32% like for like).  Order input for the 39 weeks was 10% higher (H1: 1% higher) and up 3% on a like for like basis (H1: down 6%).  Original equipment orders for the 39 weeks were down 23% (H1: down 35%) on both a reported and like for like basis while aftermarket orders on a reported basis were 33% higher (H1: 27% higher) and 20% higher on a like for like basis (H1: 15% higher).

 

Upstream markets expanded more gradually than anticipated, with US rig count actually declining over the third quarter and the number of wells drilled and completed in line with the second quarter despite oil prices remaining supportive of high activity levels.  US gas prices remained below incentive levels.  This impacted Pressure Pumping and Pressure Control orders, although Novatech continued to benefit from the Pressure Pumping bundling strategy.  A higher mix of lower margin OE frac pump and legacy fluid ends also impacted Pressure Pumping profitability.  Services and Downstream operations performed in line with expectations.

 

Full year revenues are now expected to be somewhat lower than 2012 and slightly lower than our expectations in July.   Despite improving sequentially, operating margins in the second half will also be slightly below our previous expectations and slightly lower than the second half of 2012.

 

Power & Industrial

 

Order input for the third quarter was down 19% on the prior year quarter, on both a reported and like for like basis, with challenging conditions in hydro end markets of particular note.  Original equipment orders were down 17% and aftermarket orders down 23% (reported and like for like basis) as a result of power plant outage deferrals.  Order input for the 39 weeks was 15% lower (H1: down 13%) with original equipment orders down 15% (H1: down 14%) and aftermarket orders 14% lower (H1: 11% lower). 

 

We continue to expect good full year revenue growth, although second half sales are now expected to be slightly lower than prior guidance.  Additional investment in improving operational capabilities will result in full year margins slightly lower than 2012, although this will benefit the longer term.

 

 

NET DEBT

 

Net debt at 27 September 2013 was lower than that reported at 28 June 2013 with positive cash generation in the third quarter supported by the foreign exchange translation benefit of US$ denominated debt.  The Group is expected to continue to be cash generative in the fourth quarter, such that we expect a further reduction in year-end net debt in line with previous expectations.

 

 

FINANCIAL CALENDAR

 

Results for the 53 week period ending 3 January 2014 will be announced on 26 February 2014.

 

 

ANALYST AND INVESTOR CONFERENCE CALL

 

A conference call for analysts and investors will be held at 8 a.m. (UK time) on Monday 4th November to discuss this statement.  

 

Participants can join the call on +44 (0) 1452 555 566 using the conference ID 86304087.

 

A recording of this conference call will be available until Monday 11 November on +44 (0) 1452 550 000 using the conference ID 86304087.

 

 

Notes:

 1.    Financial information is given for the 39 weeks ended 27 September 2013.

 2.    Third quarter refers to the financial period 13 weeks ended 27 September 2013.

 3.    Where growth is provided on a like for like basis, like for like is defined as the comparison of current year results to the equivalent prior year period for those businesses that have been part of the Group throughout the current and prior year reporting period, on a constant currency basis.

 4.    Order input is reported on a constant currency basis.

 5.    H1 refers to the financial period 26 weeks ended 28 June 2013.

 

 

Contact details:

 
 
The Weir Group PLC  
Andrew Neilson, Head of Corporate Affairs and Strategy Tel. 0141 308 3750
Raymond Buchanan, Communications Manager Tel. 0141 308 3781

(Mobile: 07713 261447)
Brunswick Group Tel. 020 7404 5959
Patrick Handley/ Nina Coad  

 

 

 

2013 CONTINUING OPERATIONS INPUT GROWTH (constant currency)

 

 Reported growth Like for Like growth
  Q1Q2Q3Q1-Q3   Q1Q2Q3Q1-Q3
          
Minerals       
OE -23% -8% 0% -11%  -23% -8% 0% -11%
AM 6% 2% 7% 5%  5% -2% 5% 3%
Total-6%-2%4%-2% -7%-4%3%-3%
          
Oil & Gas       
OE -42% -25% 11% -23%  -42% -25% 11% -23%
AM 7% 51% 45% 33%  -4% 38% 32% 20%
Total-15%21%33%10% -21%13%24%3%
          
Power & Industrial       
OE -30% 9% -17% -15%  -30% 9% -17% -15%
AM -23% 3% -23% -14%  -23% 3% -23% -14%
Total-27%5%-19%-15% -27%5%-19%-15%
          
Continuing Operations       
OE -33% -11% -4% -17%  -30% -9% -1% -15%
AM 2% 16% 15% 11%  -1% 10% 10% 6%
Total-14%5%7%-1% -14%2%5%-3%
                   

 

 

2013 EXCHANGE RATES

 

  H1Q3Q1-Q3October% of 2012
Currencyaverageaverageaverageaverageoperating profit
      
US $ 1.54 1.55 1.54 1.61 62%
Australian $ 1.51 1.69 1.57 1.69 12%
Canadian $ 1.57 1.61 1.58 1.67 7%
Euro € 1.18 1.17 1.17 1.18 7%
Chilean Peso 736 785 751 807 6%
S. African Rand 14.2 15.5 14.6 16.0 2%
Brazilian Real 3.13 3.54 3.25 3.52 2%
Other n/a n/a n/a n/a 2%
      

 

 

This information includes 'forward-looking statements'.  All statements other than statements of historical fact included in this release, including, without limitation, those regarding the Weir Group's 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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Source: The Weir Group PLC via Thomson Reuters ONE

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