TIDMWEIR
RNS Number : 0173E
Weir Group PLC
03 November 2020
The Weir Group PLC trading update for the third quarter ending
30 September 2020(1)
Underlying(2) Q3 activity robust
-- Continuing orders(3) down 11% excluding record Q3'19 Iron Bridge order
o Minerals AM orders down 5%; revenues stable
o ESCO orders down 24%; revenues more robust, down 14%, and
modestly up Q2 to Q3
-- Demand strengthened towards the end of the quarter
-- Longer-term bid activity improving, reflecting positive fundamentals for mining
-- Transforming Weir into a premium mining technology business
o As previously announced, proposed $405m sale of the Oil &
Gas division; Circular to be published
Jon Stanton, Chief Executive, commented:
"Our priority remains the health and well-being of our people
and communities while continuing to fully support our customers and
I am proud of the ongoing commitment of my colleagues around the
world. Mining markets remained relatively robust in the third
quarter and while Covid-19 continued to impact ore production
levels and customer decision making, there was a strengthening in
demand towards the end of the period.
The positive long-term fundamentals for our markets are
unchanged, including the key role of essential metals in building
the new economy and the need for mining operations to reduce their
environmental impact. This is reflected in our strengthening
project pipeline, particularly for our smarter, more efficient and
sustainable solutions.
We were delighted to agree the sale of the Oil & Gas
division, enabling the Group's transformation into a focused,
premium mining technology business. The transaction remains on
track for completion in 2020."
Analyst and investor conference call
A conference call for analysts and investors will be held at
0800 GMT on Tuesday 3 November 2020 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
Tuesday 17 November 2020.
Third quarter review - Continuing Operations
The Group continued to prioritise safety and well-being with all
facilities operational and able to support customers throughout the
period despite ongoing Covid-19 challenges. Demand in mining
markets remained broadly resilient, with demand strengthening
towards the end of the quarter helped by both the essential status
of the industry and supportive commodity prices. A small number of
mines remained closed and many are operating with skeleton crews
and limited third-party access due to Covid-19 restrictions. This
translated into overall ore production levels that remain below
pre-Covid volumes and slower customer decision making.
In total, the Group's third quarter orders were 11% lower on an
underlying(2) basis (-26% as reported). Underlying OE orders were
down 8% (-55% as reported) while AM orders were down 12%. The
Continuing Operations' book-to-bill ratio in the period was 0.82
reflecting the ongoing delivery of the Iron Bridge OE project and
destocking. The Group remains on track to deliver its previously
announced 2020 cost saving programme. Full year guidance remains
withdrawn due to ongoing Covid-19 uncertainty.
Divisional review
Minerals
Underlying(2) divisional orders were resilient, down 5%,
supported by robust mining demand. As reported orders were down
27%, reflecting the record c.GBP100m Iron Bridge order in the prior
year period. At a regional level demand was good in South America,
Russia and Central Asia but more subdued in Africa and Australia,
principally due to Covid-19 challenges. Underlying OE orders were
down 6% (-57% as reported) with good contract wins for the
division's crushers, pumps and tailings technology, more than
offset by reduced demand for integrated solutions that rely on mine
site access to complete plant productivity audits. More broadly,
the division's longer-term project pipeline strengthened further,
reflecting mining customers' confidence in their future prospects,
with the number of firm bids increasing towards the end of the
quarter. AM orders were down 5% driven by ore production trends,
some destocking and the deferral of non-essential maintenance, but
strengthened towards the end of the period. AM revenues were stable
year-on-year and modestly higher sequentially. The division
continued to execute on its GBP30m current year cost savings
programme, supporting operating leverage. Book-to-bill in the
period was 0.80 as a result of higher OE revenues as the division
delivers the Iron Bridge contract, and some destocking.
Assuming commodity prices remain supportive and we do not see a
significant increase in disruption to either Weir or our customers'
operations from Covid-19, we would expect activity levels to remain
robust for the remainder of 2020.
ESCO
Divisional orders were down 24% year-on-year but showed
improvement sequentially from Q2 to Q3. This was in line with
mining machine utilisation levels that benefited from slightly
increased activity towards the end of the quarter, but overall
utilisation was on average c.12% below pre-Covid levels in the
period. North America was most significantly impacted, principally
as a result of lower coal and oil sands demand, and the gradual
return to operation of iron ore customers. Year-on-year performance
also reflected the impact of customers building stock levels in Q3
2019 as divisional foundry upgrades temporarily extended the
division's lead times. As expected, infrastructure markets remained
subdued, although sequential improvement was also seen in core
consumable products. Revenues, which were not impacted by
destocking and better reflect underyling activity, were down 14%,
more in line with machine utilisation trends and also showed a
modest improvement sequentially Q2 to Q3. ESCO's GBP9m 2020 cost
savings programme remains on track and the division also benefited
from operational efficiencies as a result of previous foundry
investment, both of which underpinned margins. Its book-to-bill was
0.88 and improved towards the end of the period.
The outlook for ESCO's mining end markets is consistent with
Minerals. While conditions in infrastructure markets have
stabilised recently, the pace of further recovery will be modest
and dependent on the level of future Covid-19 restrictions, which
remain uncertain.
Discontinued operations - Oil & Gas
As expected, the third quarter saw improved demand in North
America from the record lows of Q2. However, with North American
land rig count down c.70% year-on-year, activity levels remained
extremely low. Divisional orders fell 56% with OE down 45% and AM
down 60%.
An agreement to sell the Oil & Gas division to Caterpillar
Inc. for an enterprise value of $405m, subject to customary working
capital and debt-like adjustments, was announced on 5 October 2020.
Completion is expected by the end of 2020. A separate Circular
relating to the sale is being issued to shareholders today.
Net debt
Net debt at 30 September 2020 was higher than that reported at
30 June 2020 reflecting normal seasonal patterns.
Board Changes
As previously announced, Non-Executive Director Cal Collins
stepped down from the Board in September 2020. The Group has also
announced that Srinivasan Venkatakrishnan and Ben Magara will join
the Board as Non-Executive Directors with effect from 19 January
2021. Srinivasan, who is popularly known as Venkat, previously
served as CEO of both Vedanta Resources plc, the diversified global
natural resources company, and AngloGold Ashanti Limited, one of
the world's largest gold producers. Ben served as CEO of Lonmin
plc, the then third largest global platinum producer, having
previously held a number of senior mining executive roles for Anglo
American plc.
Notes:
1. Financial information is given for the three months ended 30
September 2020 and relates to continuing operations.
2. Adjusted to exclude the impact of the c.GBP100m Iron Bridge
original equipment order in Q3 2019
3. Orders are reported on a constant currency basis.
4. Continuing Operations excludes Oil & Gas which has been
classified as held for sale since 5 October 2020 and is reported in
Discontinued Operations.
Enquiries:
Investors: Stephen Christie +44 (0) 141 308 3707
Media: Raymond Buchanan +44 (0) 141 308 3781
Citigate Dewe Rogerson: Chris Barrie +44 (0) 207 638 9571
/ Kevin Smith Weir@citigatedewerogerson.com
-------------------------------
About The Weir Group PLC
Founded in 1871, The Weir Group PLC is a premium mining
technology business whose purpose is to make customers' operations
more sustainable and efficient. 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. Weir's highly
engineered technology enables these critical resources to be
produced using less energy, water and waste - reducing customers'
total cost of ownership. The Group has c.13,000 employees in over
50 countries.
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
(constant currency)
Reported growth Like-for-like growth(2)
2019 2019 2020 2020 2020 2019 2019 2020 2020 2020
Division Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q3
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Original Equipment 72% 20% -13% -9% -57% 72% 20% -13% -9% -57%
Aftermarket -5% 8% -1% -6% -5% -5% 8% -1% -6% -5%
Minerals 17% 12% -5% -7% -27% 17% 12% -5% -7% -27%
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Original Equipment 83% 54% 25% 16% -23% - - 25% 16% -23%
Aftermarket 22% -18% -8% -28% -24% - - -8% -28% -24%
ESCO 25% -16% -7% -26% -24% - - -7% -26% -24%
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Original Equipment 72% 21% -11% -8% -55% 72% 20% -11% -8% -55%
Aftermarket 3% -1% -4% -13% -12% -5% 8% -4% -13% -12%
Continuing Ops 19% 4% -5% -12% -26% 17% 12% -5% -12% -26%
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Book to Bill 1.12 0.98 1.10 1.03 0.82 1.17 1.03 1.10 1.03 0.82
-------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1. Continuing Operations excludes Oil & Gas which has been
classified as held for sale since 5 October 2020 and is reported in
Discontinued Operations.
2. Like-for-like excludes the impact of acquisitions. ESCO was
acquired on 12 July 2018 and excluded from 2018 and 2019.
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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