TIDMWEIR
RNS Number : 9459R
Weir Group PLC
01 November 2023
The Weir Group PLC trading update for the third quarter ended 30
September 2023(1)
Mining markets strong; 2023 guidance underpinned
High levels of mining activity driving demand for spares and expendables
Minerals Q3 AM orders(2) +1%: volume growth in mining and price
-- realisation offset by oil sands
-- ESCO Q3 orders(2) -3%: as expected mining offset by infrastructure
Good momentum in demand for Weir mining equipment
Minerals Q3 OE orders stable sequentially; high levels of small
-- brownfield and sustainability projects
-- Installed base expansion; supporting future AM growth
Realising benefits of mining focused portfolio
-- Strong execution: Q3 revenues and operating margins up year-on-year
Iron Bridge: Weir's integrated solution performing well; service
-- contract due to commence in Q4
Performance Excellence: on track to deliver cost savings of
-- GBP6m in 2023
2023 Outlook: guidance reiterated
-- Strong growth in constant currency revenue and operating profit
-- On track to deliver operating margin target of 17%
-- Free operating cash conversion of 80% to 90%
Jon Stanton, Chief Executive Officer, commented:
"Our third quarter performance is in line with our expectations.
We capitalised on high levels of activity in our mining markets,
growing mining aftermarket orders, maintaining good momentum in
original equipment and expanding our installed base to support
future aftermarket growth. We also executed strongly, growing
revenue, expanding our operating margins and realising the initial
cost savings from our Performance Excellence transformation
programme.
Going into the fourth quarter, we have a strong order book and
operating momentum. These, coupled with high levels of activity in
our mining markets, give us significant confidence in reiterating
our 2023 guidance of strong growth in constant currency revenue and
operating profit, and in meeting our margin and cash conversion
targets."
Third quarter review
Group
During the quarter the Group made good progress as we continued
to build our track record of delivery as a focused mining
technology leader.
In our mining markets we capitalised on high levels of ore
production to deliver growth in Minerals AM orders and maintained
good momentum in the mining focused part of ESCO. We also executed
strongly on our record order book, delivering year-on-year growth
in revenue and expanding our margins.
Through the period, our mining customers remained focused on
growing ore production of critical energy transition metals, such
as copper. These production trends, coupled with growth in our
installed base from recent market share gains, supported demand for
our spares and expendables. We saw particular strength in South
America, given our significant installed base in copper mines in
the region, and also in Australasia, as production ramped-up at a
number of recently commissioned lithium mines. Demand for OE for
small brownfield projects continues at strong levels, with
customers ordering Weir solutions to debottleneck and expand
production from existing mines, and our good progress on mining
attachments in ESCO continued.
On a constant currency basis, Group orders in the quarter were
down 2%, and year-on-year are stable for the 9 months to 30
September.
AM orders(2) were down 1%, with growth in orders in hard rock
mining offset, as expected, by lower demand from the Canadian oil
sands and ESCO's infrastructure customers. In OE, we saw continued
momentum in demand for small brownfield solutions, though Q3
orders(2) were down 8% year-on-year against a strong comparator
which included GBP16m of orders for nickel expansion projects in
Indonesia. Our year to date book-to-bill is 1.
In the quarter we also made significant strides in our
Performance Excellence transformation programme, and we are on
track to deliver GBP6m of savings this year. As we progress through
the programme our enthusiasm for the operational and financial
benefits it will deliver to Weir continues to grow, and we look
forward to sharing a full Performance Excellence update at our
forthcoming capital markets event.
Minerals
AM orders(2) +1%; positive ore production trends and installed
-- base expansion
OE orders stable sequentially; -10% year-on-year relative
-- to a strong comparator
Demand for AM was driven by ore production trends and installed
base growth. Year-on-year growth reflects volume growth in hard
rock mining and a contribution from price, partially offset, as
expected, by a decline in orders from the Canadian oil sands.
Sequential movement in AM orders reflects typical seasonal
patterns.
In OE, we maintained good order momentum. Demand was driven by a
number of smaller orders for debottlenecking and efficiency
projects at existing mines as larger project activity remained
limited.
At the Iron Bridge magnetite mine in Western Australia, where
ore production is ramping up, Weir's integrated solution, which
includes our Enduron(R) High Pressure Grinding Rolls (HPGR), is
performing well. The GBP15m per annum HPGR service contract is due
to commence later in Q4, and we also expect orders for spares and
expendables for the other Weir equipment installed at the mine
.
In the period, the Division's Canadian subsidiary retained the
contract to manage Canada's Naval Engineering Test Establishment
(NETE). Weir has been involved in the management and operation of
NETE since 1953, and the 5-year framework contract, which commences
in April 2024, authorises a value of work up to CAD $560m.
ESCO
Orders (2) -3%; momentum in demand from mining markets, offset
-- by infrastructure
-- Further market share gains in mining attachments
In our mining markets, year-on-year orders were stable with good
momentum in demand for mining expendables. In addition, we saw
strong demand for mining attachments, as we continued to win market
share through our differentiated technology.
In infrastructure, in our largest market of North America, order
trends continued to be impacted by dealer destocking, and while end
market activity levels were broadly stable, they remain well below
the peak of 2022. In Europe, macroeconomic factors meant underlying
demand continued to be supressed.
Outlook
We are reiterating our 2023 guidance for strong growth in
constant currency revenue and operating profit, operating margins
of 17%, and 80% to 90% free operating cash conversion.
Looking further ahead, while there are complexities in the
macroeconomic and geopolitical environment, ore production trends
in mining continue to be strong and our aftermarket has embedded
resilience. Therefore, in our base case scenario for our mining
focused business we assume production trends, together with the
impacts of declining grades and installed base expansion, will
support AM growth rates consistent with our through-cycle targets,
and continued momentum in small and medium sized OE projects.
We are also taking action through Performance Excellence to
optimise our operations, which will drive margin expansion beyond
17%, and further improve cash conversion to 90% to 100%.
Net debt
Free operating cash flow for the period was positive,
underpinning our confidence in achieving our full year cash
conversion target. Net debt was marginally higher than that at 30
June 2023, primarily driven by the impact of translational foreign
exchange on US$ denominated debt.
Spotlight capital markets event
We will be holding a spotlight capital markets event on the
afternoon of 6 December 2023 (UK time) in which we will highlight
our growth prospects from smart, efficient and sustainable mining,
and the compounding benefits of our Performance Excellence
transformation programme. Interested parties can register at
www.global.weir/investors .
Notes:
1. Financial information is given for the three months ended 30
September 2023, unless stated otherwise.
2. Orders are reported on a constant currency basis at September
2023 average exchange rates.
Analyst and investor conference call
A conference call for analysts and investors will be held at
0800 GMT on Wednesday 1 November 2023 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 8 November 2023.
Enquiries:
Investors: Edward Pears +44 (0) 141 308 3725
Media: Sally Jones +44 (0) 141 308 3666
Citigate Dewe Rogerson: +44 (0) 207 638 9571
Kevin Smith Weir@citigatedewerogerson.com
-------------------------------
About The Weir Group PLC
Founded in 1871, The Weir Group PLC is one of the world's
leading engineering businesses with a purpose to make its mining
and infrastructure customers' operations more sustainable and
efficient. Weir's highly engineered technology enables critical
resources to be produced using less energy, water and waste while
reducing customers' total cost of ownership. The Group is ideally
positioned to benefit from structural trends that support long-term
demand for its technology including the need for more essential
metals to support economic development and carbon transition. The
Group has c.12,000 employees operating in over 60 countries with a
presence in every major mining region of the world. Find out more
at www.global.weir .
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 - Continuing operations(1) quarterly order trends
Reported growth
-------------------- ---------------------------------------- -----
2022 2022 2022 2022 2023 2023 2023
Division Q1 Q2 Q3 Q4 Q1 Q2 Q3
-------------------- ----- ----- ----- ----- ----- ----- -----
Original Equipment -18% -3% 13% 19% 20% -12% -10%
Aftermarket 23% 18% 25% 6% 5% 5% 1%
Minerals 9% 11% 21% 10% 9% 0% -2%
-------------------- ----- ----- ----- ----- ----- ----- -----
Original Equipment -17% 98% -6% 14% 39% 40% 21%
Aftermarket 37% 19% 14% 1% -9% -4% -5%
ESCO 32% 23% 13% 2% -6% 0% -3%
-------------------- ----- ----- ----- ----- ----- ----- -----
Original Equipment -17% 2% 12% 19% 22% -8% -8%
Aftermarket 28% 18% 21% 5% 0% 2% -1%
Continuing Ops 15% 14% 19% 8% 4% 0% -2%
-------------------- ----- ----- ----- ----- ----- ----- -----
Book-to-bill 1.22 1.13 1.02 0.95 1.04 1.01 0.94
-------------------- ----- ----- ----- ----- ----- ----- -----
Quarterly orders(2) GBPm
-------------------- ---------------------------------------- -----
2022 2022 2022 2022 2023 2023 2023
Division Q1 Q2 Q3 Q4 Q1 Q2 Q3
-------------------- ----- ----- ----- ----- ----- ----- -----
Original Equipment 111 148 145 145 133 130 130
Aftermarket 315 357 334 339 331 374 339
Minerals 426 505 479 484 464 504 469
-------------------- ----- ----- ----- ----- ----- ----- -----
Original Equipment 10 15 11 8 14 21 13
Aftermarket 178 162 161 159 162 155 154
ESCO 188 177 172 167 176 176 167
-------------------- ----- ----- ----- ----- ----- ----- -----
Original Equipment 121 163 156 153 147 151 143
Aftermarket 493 519 495 498 493 529 493
Continuing Ops 614 682 651 651 640 680 636
-------------------- ----- ----- ----- ----- ----- ----- -----
1. Continuing operations excludes the Oil & Gas Division,
which was sold to Caterpillar Inc. in February 2021 and the
Saudi-Arabian joint venture which was sold in June 2021.
2. Restated at September 2023 average exchange rates.
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