REG - Weir Group PLC - Q1 Trading Update

WeirAnnouncement

25/04/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240425:nRSY9375La&default-theme=true

RNS Number : 9375L  Weir Group PLC  25 April 2024

 The Weir Group PLC trading update for the first quarter ended 31 March
2024(1)

Order progression in line with expectation and 2024 guidance on track

 

 

 Customer focus on increasing minerals production supporting AM orders(2) +4%
 •    Minerals AM orders(2) +4%; installed base and production volume growth
 •    ESCO AM orders(2) +5%; strong mining markets; infrastructure normalised
 Brownfield optimisation projects continue; increased intent to accelerate
 expansion projects
 •    OE orders stable sequentially and in line with anticipated 2024 run rate
 •    Strong project pipeline supports FY OE expectations at historic levels; prior
      year OE orders +22%
 Performance Excellence programme on track
 •    ESCO China foundry commissioned in March on time and below budget
 •    Functional and operational efficiency activity progressing well supporting
      margin expectations
 Outlook: Trading in line with expectations
 •    Strong order book, installed base expansion and positive production trends in
      mining markets
 •    Growth in constant currency revenue, operating profit and operating margin
 •    Free operating cash conversion of 90% to 100%

 

Jon Stanton, Chief Executive Officer, commented:

"I'm pleased with the strength of our performance in the first quarter. We are
delivering the technology to enable our customers to address both the demand
for critical metals and the transition to more sustainable mining. Our
aftermarket growth algorithm delivered as expected, with our significant
installed base and diversification across commodities and geographies
resilient against mixed commodity prices and increasing geo-political
tensions. With further progress in our Performance Excellence programme, we
are on track to deliver our 2024 guidance of growth in revenues, profits and
operating margins.  Further ahead the opportunity for Weir to continue to
deliver compounding growth and margin expansion is compelling."

 

First quarter review

 

Group

Our performance in 2023 laid solid foundations on which to build toward our
2026 growth and margin commitments.  We ended the year with a strong order
book and good operating momentum, a position our teams are now capitalising on
to drive aftermarket growth.

During the first quarter of 2024 we made great progress building on these
foundations as we grew aftermarket orders and continued to execute on our
Performance Excellence agenda. In both Minerals and ESCO, we continue to win
in the market through successful competitive conversions underpinned by our
differentiated technology and service proposition.

Commodity prices were mixed in the quarter but were very positive in the case
of our largest exposures including copper and gold, remaining well above
miners' cost to produce, and stimulating demand to accelerate production from
existing assets.  The diversification Weir has across commodities and
geographies meant that issues such as nickel over supply and the mothballing
of the Cobre Panama copper mine were more than offset by positives elsewhere.

This translated into strong overall demand for our mining spares and
expendables through the quarter with order growth in our aftermarket business
of 4%, again demonstrating our inherent resilience through the mining cycles.

Current trends in original equipment continue to be dominated by high levels
of activity in small brownfield projects to drive optimisation and tackle
sustainability challenges on existing mines.  As expected, this translated
into original equipment orders that were stable sequentially on Q4 2023 and
down against a strong prior year comparative (+22%), but at historically high
levels on an annualised basis.

Our pipeline of opportunities underpin our guidance of flat OE orders year on
year. While there is a clear thrust in certain commodities to try and
accelerate new project approvals, this remains as upside when they move ahead.
We are supporting this with innovative new flowsheet technologies which will
put us in a strong position to capture an historically larger portion of these
opportunities once they materialise.

Group orders(2) in the quarter were +1%, in line with our expectations and
seasonal trends.

In the quarter we completed key milestones in our Performance Excellence
programme which support future margin expansion and growth in cash conversion.
These included the official opening of our new ESCO foundry in Xuzhou,
integration of the Weir Integrating Network System (WINS) at several of our
manufacturing sites across Minerals and launching Weir Business Services (WBS)
across our North American business, with all regions expected to be
transitioned by the end of 2024.

Minerals

 

 •    AM orders(2) +4%; total orders(2) flat YoY
 •    Mining markets positive; significant wins in growing markets

 

Demand for AM was driven by growth in mining production and conversion from
our growing installed base. Year-on-year growth reflects the impact of price
increases and volume growth in hard rock mining, partially offset by mine
closures in Panama and Australia. AM orders were sequentially stable
reflecting typical seasonal patterns.

 

In OE, demand was primarily driven by debottlenecking, brownfield expansion
and sustainability projects at existing mines. This included a £7m HPGR order
in an Australian gold mine as well as three large mill circuit pump wins in
the Central African copper belt, a result of our strategic geographic
expansion initiatives combined with our market leading products.

 

ESCO

 

 •    AM orders(2) +5%; total YoY orders2 +3%
 •    Mine production growth continuing; infrastructure stocking returned to
      normalised levels

 

Demand from our mining customers was strong, with quarterly mining orders
ahead of Q4 2023. Demand was high for mining expendables, reflecting ore
production trends and recent market share gains including 17 competitive
digger net conversions.

 

In infrastructure, we returned to through cycle order levels as expected.

 

Net debt

As expected we remain on track to further de-lever the balance sheet over the
full year given anticipated strong cash generation.  During the quarter
S&P upgraded their outlook on Weir from stable to positive.

 

Outlook

The business is executing well and conditions in our mining markets are
positive. Robust demand for our AM spares and brownfield OE solutions give us
confidence in full year trading in line with expectations for growth in
constant currency revenue, profit and operating margin. We expect free
operating cash conversion of between 90% and 100%.

 

Phasing of operating profit in 2024 is expected to be in line with typical
seasonal patterns and operating margins are expected to increase year on year
and sequentially through the year in line with historical norms and as further
Performance Excellence benefits are realised.

 

Further out, the long-term fundamentals for mining and our business are highly
attractive, underpinned by decarbonisation and the energy transition, GDP
growth, and the transition to sustainable mining. We have a clear strategy to
grow ahead of our markets, with specific initiatives underpinning our ambition
to deliver through-cycle mid-to-high single digit percentage revenue growth at
sustainably higher margins.

 

 

Notes:

1.             Financial information is given for the three months
ended 31 March 2024.

2.             Orders are reported on a constant currency basis at
March 2024 average exchange rates.

 

 

 

Analyst and investor conference call

 

A conference call for analysts and investors will be held at 0800 BST on
Thursday 25 April 2024 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 Thursday 2 May 2024.

 Enquiries:
 Investors: Phil Carlisle              +44 (0) 141 308 3617

 Media: Sally Jones                    +44 (0) 141 308 3666

 Citigate Dewe Rogerson: Kevin Smith   +44 (0) 207 638 9571

                                       Weir@citigatedewerogerson.com (mailto: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 50 countries with a presence in every major mining region of
the world. Find out more at www.global.weir (http://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 - Group quarterly order trends

                     Reported growth
 Division            2023 Q1                         2023 Q2                     2023 Q3                     2023 Q4                      2024 Q1
 Original Equipment  20%                             -12%                        -10%                        -15%                         -9%
 Aftermarket                     5%                              5%                          1%                          2%                           4%
 Minerals                        9%                              0%                          -2%                         -3%                          0%

 Original Equipment              39%                             40%                         21%                         69%                          -16%
 Aftermarket                     -9%                             -4%                         -5%                         -2%                          5%
 ESCO                            -6%                             0%                          -3%                         2%                           3%

 Original Equipment              22%                             -8%                         -8%                         -10%                         -9%
 Aftermarket                     0%                              2%                          -1%                         1%                           4%
 Group                           4%                              0%                          -2%                         -2%                          1%
 Book-to-bill        1.04                            1.01                        0.94                        0.94                         1.11
                                     Quarterly orders(2) ( )£m
 Division            2023 Q1                         2023 Q2                     2023 Q3                     2023 Q4                      2024 Q1
 Original Equipment  129                             126                         126                         118                          118
 Aftermarket         316                             357                         321                         330                          328
 Minerals            445                             483                         447                         448                          446

 Original Equipment  14                              20                          13                          14                           12
 Aftermarket         159                             153                         151                         153                          167
 ESCO                173                             173                         164                         167                          179

 Original Equipment  143                             146                         139                         132                          130
 Aftermarket         475                             510                         472                         483                          495
 Group               618                             656                         611                         615                          625

 

Appendix 2 - 2024 Q1 order bridges (as reported)

                        Minerals                                                                             ESCO                                                                                 Group
 Orders (£m)            OE                           AM                          Total                       OE                           AM                          Total                       OE                           AM                          Total
 2023 Q1 - as reported  137                          340                         477                         14                           166                         180                         151                          506                         657
 Organic                            -9%              4%                          0%                                      -16%             5%                                      3%                          -9%              4%                                      1%
 Structure              0%                           0%                          0%                          0%                           0%                          0%                          0%                           0%                          0%
 Currency               -5%                                      -8%             -7%                                     -3%                          -4%                         -4%                         -5%                          -6%                         -6%
 Total                              -14%                         -4%                         -7%                         -19%                         1%                          -1%                         -14%                         -2%                         -5%
 2024 Q1 - as reported  118                          328                         446                         12                           167                         179                         130                          495                         625

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTUSRKRSUUSUAR