REG-CORRECTION: Interim Management Statement <Origin Href="QuoteRef">WEIR.L</Origin>

WeirAnnouncement

28/04/2016 08:10

The Interim Management Statement released at 7:01 on 28 April 2016 stated
that a conference call for analysts and investors will be held at 0800 (GMT)
on Thursday 28 April to discuss the statement.  This should have stated
that a conference call for analysts and investors will be held at 0800 (BST)
on Thursday 28 April.  No other details of the announcement, produced in full
again below, have been changed. 
 


 
      
           
 
   
 
 The Weir Group PLC 
 
 Interim Management Statement for the period to 27 April 2016 1 
 
 Highlights: 
 
 * Q1 trading slightly ahead of expectations supported by cost reductions and
a resilient Minerals performance 
 * Full year expectations unchanged 
 * Q1 like for like order input 2 down 22%; revenue decline broadly in line
with order input 
 * Stable like for like Minerals revenues; input down 5%, original equipment
input better than expected 
 * Significant declines in Oil & Gas activity - US land rig count down a
further 40% in 2016 to date 
 * £10m incremental annualised cost savings, impact of actions taken in last
18 months now over £160m 3 
 * Disposal programme on track towards £100m target, balance sheet metrics in
line with expectations 
 
 
 Keith Cochrane, Chief Executive, commented: 
 
 "The Group has maintained its focus on strong cash generation, aggressive
cost reduction and developing the innovative solutions which have made Weir a
global leader. This comes against the backdrop of ongoing challenges across
our end markets. 
 
 "Mining customers continue to prioritise preserving cash, although there was
a slight pickup in orders through the quarter and Minerals divisional revenues
on a like for like basis were flat year on year.  Trading conditions in oil
and gas markets reflected further reductions in activity levels in all regions
despite the limited improvement in oil prices in 2016. The Group remains
focused on cost reduction measures which have helped to deliver first quarter
profits slightly ahead of our expectations. 
 
 "As a result, we expect first half profits to be slightly ahead of market
expectations.  Our full year expectations remain unchanged, reflecting the
slower recovery now anticipated in oil and gas markets." 
 
 First quarter review 
 
 First quarter input reduced 21% compared to the prior year period.  A
significant reduction in activity levels across the Oil & Gas division's
markets was the primary driver, with Minerals and Flow Control input also
reduced.  Original equipment orders were down 11% and aftermarket orders were
25% lower than the prior year period, but were both slightly up on a
sequential basis.  On a like for like basis 4 (excluding the acquisition of
Delta Valves), order input fell 22%, with original equipment down 13% and
aftermarket down 25%. 
 
 Revenues, on a constant currency basis, were in line with expectations and
lower than the first quarter of 2015, primarily as a result of reduced oil and
gas activity levels. The Group maintained a positive book to bill ratio of
1.02 over the 3 month period.  
 
 Group operating margins were lower than the prior year, principally due to
reduced Oil & Gas division margins, but slightly higher than prior
expectations as a result of strong cost control within the Minerals division.
 The Group's asset disposal programme is making good progress towards its
£100m target by year end. 
 
 Divisional review 5 
 
 Minerals 
 
 Order input for the first quarter was down 4% (down 5% like for like) against
a strong prior year comparator, but was up significantly on a sequential basis
and slightly ahead of prior expectations.  
 
 Original equipment input was 15% higher than the prior year period, supported
by a good contribution from Delta Valves, and up 11% on a like for like basis,
as the division fully captured available opportunities in what continue to be
challenging market conditions. 
 
 Aftermarket input was down 11% on both a reported and on a like for like
basis, compared to a strong prior year figure, which had included customers
placing one-off orders for the full year.  Q1-16 input was impacted by
extended year-end holiday shutdowns for much of January, with aftermarket
input increasing sequentially through the period as mines ramped back up to
full production.     
 
 While some commodity prices increased through the period, customers continue
to be focussed on reducing operational expenditure and cost per tonne. Despite
these market conditions, constant currency like for like revenues in the first
quarter were in line with the prior year, slightly ahead of prior
expectations.  In addition, the order book increased in the period, with a
book to bill ratio of 1.06. First quarter profits were ahead of prior
expectations as a result of strong cost control, with the full year outlook
underpinned by a further £10m of incremental annualised cost savings
identified and actioned in the second quarter. 
 
 Full year constant currency revenues are now anticipated to be broadly flat
on the prior year, slightly ahead of previous expectations.  Operating
margins are expected to be broadly in line with 2015, in line with previous
guidance. 
 
 Oil & Gas 
 
 Order input for the first quarter was down 47% on the prior year period,
which was the highest quarterly input in 2015, and slightly below prior
expectations.  Original equipment orders were down 40% and aftermarket orders
were 49% lower.  On a sequential basis input was lower than the fourth
quarter of 2015, reflecting the reduction in activity in North American and
International markets. 
 
 Oil and gas markets have continued to decline despite the limited improvement
in oil prices since February.  In North America, the division's biggest end
market, US land rig count has declined by nearly 20% in the past two months
and market expectations are for a 46% reduction in wells drilled in 2016. 
This further reduced demand for pressure pumping and pressure control
equipment, with approximately 70% of the North American frack fleet now idle.
As expected, international markets have also become increasingly challenging
with double-digit activity reductions as the rig count outside North America
fell by 10% to close to 2009 lows. 
 
 Reflecting these market conditions, divisional revenues were materially lower
than the prior year on a constant currency basis, consistent with input. 
Revenues also fell sequentially.  Operating margins fell slightly below
break-even reflecting on-going pricing pressure and negative operating
leverage from lower volumes, partially offset by incremental cost saving
measures. 
 
 The continued declines in activity levels mean that, while visibility remains
low, a slower than previously anticipated recovery through 2016 is now
anticipated with slightly lower full year constant currency revenue
expectations as a result.  Operating margins will be further impacted by
negative operational leverage, with an expectation that profitability of the
division will improve modestly in the second half.  The division is expected
to remain cash generative in both the first and second half of 2016. 
 
 Flow Control 
 
 Order input for the first quarter was down 20% on the prior year period, as
economic uncertainty led to continued customer caution and project delays
across the division's end markets. Original equipment orders were down 28% and
aftermarket orders reduced by 10% against the prior year period. 
 
 Pump orders were lower, reflecting a strong prior year comparator and
declines in mid and downstream oil and gas markets.  Valve original equipment
orders were also down on the prior year, although aftermarket input was higher
and supported by a greater exposure to power and industrial markets. 
 
 Divisional revenues, on a constant currency basis, were slightly lower than
the prior year period, as growth in pumps was more than offset by a decline in
valves.  
 
 Full year divisional revenues, on a constant currency basis, are expected to
be higher than the prior year and in line with prior guidance, supported by
the strong opening order book for original equipment pumps.  Operating
margins are anticipated to be in line with 2015 levels and prior guidance, as
a result of pricing impacts and a higher original equipment product mix
offsetting the full year benefit of previous restructuring actions.    
 
 Net debt 
 
 Net debt at 31 March 2016 was higher than that reported at 1 January 2016,
but in line with expectations and normal seasonal patterns.  The Group
remains confident of delivering strong cash generation in 2016. 
 
 Notes: 
 
 2 Financial information is given for the 3 months ended 31 March 2016. 4
Order input is reported on a constant currency basis. First quarter refers to
the financial period 3 months ended 31 March 2016. 6 £160m total consists of
£150m of annualised run rate cost savings announced at full year results on
February 24 2016 combined with £10m of measures to be taken in Q2 2016. 8
Where growth is provided on a like for like basis, like for like is defined as
the comparison of the 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. 10 As announced
in February the Group's former Power & Industrial division has been
restructured as Flow Control including the addition of all of the Group's
process pump operations.  The following commentary reflects this new
structure.  Appendix 2 contains restated historic divisional information on
this basis. 
 
 Analyst and investor conference call 
 
 A conference call for analysts and investors will be held at 0800 (BST) on
Thursday 28 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 11 May
on +44 (0) 1452 550 000 using the conference ID 83240126. 
 
  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 / Nina Coad    +44 (0) 20 7404 5959                      
 
 Appendix 1 - quarterly input trends (constant currency) 
 
                                          Reported growth                                                 Like for like growth 1                    
  Division           2015  Q1    2015  Q2    2015  Q3    2015  Q4    2016  Q1              2015  Q1    2015  Q2    2015  Q3    2015  Q4    2016  Q1  
  OE                      -5%        -13%         24%        -33%         15%                  -26%        -27%         11%        -44%         11%  
  Aftermarket              5%         -2%         -9%         -8%        -11%                    2%         -4%        -11%         -8%        -11%  
  Minerals                 3%         -5%          1%        -16%         -4%                   -6%        -11%         -4%        -20%         -5%  
                                                                                                                                          
  OE                     -56%        -70%        -68%        -77%        -40%                  -56%        -70%        -68%        -77%        -40%  
  Aftermarket            -15%        -48%        -59%        -53%        -49%                  -15%        -48%        -59%        -53%        -49%  
  Oil & Gas              -27%        -54%        -61%        -59%        -47%                  -27%        -54%        -61%        -59%        -47%  
                                                                                                                                          
  OE                      -3%        -20%        -19%          3%        -28%                   -3%        -20%        -19%          3%        -28%  
  Aftermarket             13%          3%         -4%         -8%        -10%                   13%          3%         -4%         -8%        -10%  
  Flow Control             3%        -10%        -13%         -1%        -20%                    3%        -10%        -13%         -1%        -20%  
                                                                                                                                          
  OE                     -22%        -35%        -21%        -38%        -11%                  -30%        -40%        -25%        -42%        -13%  
  Aftermarket             -3%        -23%        -33%        -30%        -25%                   -5%        -24%        -34%        -30%        -25%  
  Continuing Ops          -9%        -27%        -29%        -32%        -21%                  -13%        -29%        -31%        -34%        -22%  
                                                                                                                                          
  Book to bill           1.05        1.03        0.95        0.88        1.02                  1.03        1.03        0.95        0.89        1.02  
 
 Notes: 
 
 2 Like for like excludes the impact of acquisitions (Trio excluded for 2015
and Delta excluded for 2015 and 2016). 
 

 
 
 Appendix 2 - restated financials to reflect new divisional structure 
 
 Minerals 
 
  Constant currency £m      H1 1       H2     2015    2014 1     Growth  
  Input OE                    139      149      288       313        -8%  
  Input aftermarket           380      335      715       738        -3%  
  Input Total                 519      484    1,003     1,051        -5%  
  Revenue OE                  123      154      277       325       -15%  
  Revenue aftermarket         368      356      724       716        +1%  
  Revenue Total               491      510    1,001     1,041        -4%  
  Operating profit 2           89      103      192       212        -9%  
  Operating margin 2        18.1%    20.3%    19.2%     20.4%    -120bps  
  Book-to-bill               1.06     0.95     1.00      1.01            
 
 Oil & Gas 
 
  Constant currency £m      H1 1      H2    2015    2014 1         Growth  
  Input OE                     52      37      89       277           -68%  
  Input aftermarket           244     176     420       764           -45%  
  Input Total                 296     213     509     1,041           -51%  
  Revenue OE                   61      43     104       262           -60%  
  Revenue aftermarket         258     179     437       752           -42%  
  Revenue Total               319     222     541     1,014           -47%  
  Operating profit 2           36      16      52       235           -78%  
  Operating margin 2        11.4%    7.0%    9.6%     23.2%    -1360bps    
  Book-to-bill               0.93    0.96    0.94      1.03                
 
 Flow Control 
 
  Constant currency £m     H1 1       H2    2015    2014 1       Growth  
  Input OE                   106       96     202       226         -11%  
  Input aftermarket           97       66     163       160          +2%  
  Input Total                203      162     365       386          -5%  
  Revenue OE                  93      124     217       234          -7%  
  Revenue aftermarket         77       82     159       155           3%  
  Revenue Total              170      206     376       389          -3%  
  Operating profit 2          13       21      34        29          17%  
  Operating margin 2        6.9%    10.7%    8.9%      7.5%    140bps    
  Book-to-bill              1.20     0.78    0.97      0.99              
 
 
    Notes: 1 2014 and H1 restated at 2015 average exchange rates.           
  2 Adjusted to exclude exceptional items and intangibles amortisation.     
 
   
 
 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 announcement is distributed by NASDAQ OMX Corporate Solutions on behalf
of NASDAQ OMX Corporate Solutions clients. 
 The issuer of this announcement warrants that they are solely responsible for
the content, accuracy and originality of the information contained therein. 
 Source: The Weir Group PLC via Globenewswire 
 HUG#2007709