TIDMWEIR
RNS Number : 4749D
Weir Group PLC
27 April 2017
The Weir Group PLC Interim Management Statement for the period
to 26 April 2017(1)
On track for strong recovery in 2017
-- Full-year profits anticipated to be in line with current market expectations
-- First quarter order input(2) grew 15%
-- Minerals aftermarket orders increased 13%; original equipment was up 4%
-- Oil & Gas orders rose 50% driven by significant growth in North America
-- Flow Control orders fell 11%; downstream and power markets continued to be challenging
-- Continued strong cash generation in 2017
Jon Stanton, Chief Executive, commented:
"Mining and oil and gas markets continued to grow in the first
quarter, supporting the view that we are at the beginning of a
cyclical upturn in our main markets and I'm confident the Group is
well positioned to benefit.
Demand for the group's mission-critical technology was supported
by miners investing in productivity gains and a significant
increase in North American onshore oil and gas activity, although
pricing in this market remained at low levels. Power, mid and
downstream markets, which are later cycle, continued to be
challenging and will take longer to recover.
Assuming commodity prices remain supportive, we continue to
anticipate good growth in constant currency revenues and strong
cash generation, with full year profits anticipated to be in line
with current market expectations and weighted towards the second
half. The Minerals division is expected to perform as anticipated
with more challenging conditions in Flow Control partially
offsetting additional momentum in Oil & Gas."
First quarter review
First quarter input was 15% higher than the prior year period
with good sequential growth primarily driven by increased activity
levels in North American Oil & Gas and strong aftermarket
orders in Minerals. Group-wide aftermarket orders were 21% higher
than the prior year period with original equipment orders up
5%.
Revenues, on a constant currency basis, were in line with
expectations and slightly higher than the first quarter of 2016.
The Group generated a positive book to bill ratio of 1.14 over the
three-month period supporting the sequential growth expected during
the balance of the year. As previously stated, full year profit
growth will be supported by foreign currency translation benefits,
partly offset by continued incremental investments in people and
technology.
Divisional review
Minerals
Order input for the first quarter was up 10%, driven by a 13%
increase in aftermarket input compared to a weak prior year
comparator, which included the impact from the extended mining
industry shut-down at the start of 2016. Original equipment input
was up 4% against a strong prior year comparator, as customer
demand continued to reflect increased investment in sustaining
capital expenditure to support plant optimisation and maintenance.
On a sequential basis, both aftermarket and original equipment
input were higher. The division's order book increased in the
quarter with a book to bill ratio of 1.19.
Full year divisional revenue and operating margin expectations
are unchanged, with constant currency revenues anticipated to be
moderately higher and operating margins expected to be broadly
stable compared to the prior year. Operating profit and margins are
expected to be more second half weighted than last year, reflecting
the additional investments in growth announced in February and the
timing of project revenues in Geho, the division's longest
lead-time business.
Oil & Gas
Order input for the first quarter was 50% higher than the prior
year period. This was slightly ahead of prior expectations and
reflected increased activity levels in North America. Original
equipment orders increased 56% and aftermarket orders were 48%
higher. On a sequential basis, input also increased significantly
as customers accelerated the refurbishment of their frack fleets,
with March and April orders well above prior expectations. Pricing
levels remain depressed, with only slight improvements achieved in
certain minor product lines. Progress in North America was
partially offset by a slight decline in the Middle East where
customers continued to reduce activity and postpone orders and
maintenance. The division's book to bill ratio in the first quarter
was 1.15.
Assuming oil and gas prices remain at or above current levels,
we expect a strong increase in constant currency divisional
revenues slightly ahead of prior guidance, driven by growth in
North America and early signs of stabilisation in International
markets. Divisional margins are expected to be slightly higher than
previous guidance, primarily reflecting additional operating
leverage.
Flow Control
Order input for the first quarter was down 11% on the prior year
period as trading conditions remained challenging, with customers
cautious and delaying projects across the division's end markets,
particularly downstream oil and gas. Power markets also remained
tough with low wholesale electricity prices driving customers to
defer all but essential investment and minimise operating costs.
Markets remained highly competitive with ongoing pricing pressure.
Original equipment orders were down 18% and aftermarket orders
reduced by 3% against the prior year period as customers delayed
maintenance schedules.
Full year revenue expectations remain unchanged, but will be
second half weighted as a result of project delivery delays. As a
result of market conditions and legacy contract delivery challenges
in the Gabbioneta business, full year divisional operating margins
will be lower than previously anticipated and significantly second
half weighted.
Net debt
Net debt at 31 March 2017 was higher than that reported at 31
December 2016, but in line with expectations and normal seasonal
patterns. The group remains confident of delivering strong
underlying cash generation in 2017, which like profits will be
second half weighted.
Notes:
1. Financial information is given for the three months ended 31
March 2017 and relates to continuing operations and excludes
exceptional items.
2. Order input is reported on a constant currency basis. First
quarter refers to the financial period three months ended 31 March
2017.
Analyst and investor conference call
A conference call for analysts and investors will be held at
0800 (BST) on Thursday 27 April 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
Wednesday 10 May on +44 (0) 1452 550 000 using the conference ID
97017930.
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 input trends (constant currency)
Reported growth Like for like(2) growth
2016 2016 2016 2016 2017 2016 2016 2016 2016 2017
Division Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Original Equipment 15% 13% -28% 34% 4% 11% 9% -28% 36% 4%
Aftermarket -11% 0% 4% 19% 13% -11% 0% 4% 19% 13%
Minerals -4% 4% -7% 23% 10% -5% 2% -7% 23% 10%
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Original Equipment -40% -37% -24% 13% 56% -40% -37% -24% 13% 56%
Aftermarket -49% -37% -6% 0% 48% -49% -37% -6% 0% 48%
Oil & Gas -47% -37% -10% 2% 50% -47% -37% -10% 2% 50%
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Original Equipment -32% 10% 0% -17% -18% -32% 10% 0% -17% -18%
Aftermarket -17% -16% -10% -8% -3% -17% -16% -10% -8% -3%
Flow Control -26% -4% -4% -14% -11% -26% -4% -4% -14% -11%
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Original Equipment -12% 3% -20% 11% 5% -14% 1% -20% 11% 5%
Aftermarket -26% -14% -1% 10% 21% -26% -14% -1% 10% 21%
Continuing Ops(1) -22% -9% -7% 10% 15% -23% -9% -7% 10% 15%
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Book to Bill 1.02 0.99 1.02 0.99 1.14 1.02 0.99 1.02 0.99 1.14
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(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 2015 and
2016.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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