REG - Weir Group PLC - Q3 Trading Update

WeirAnnouncement

02/11/2022 07:00

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RNS Number : 9948E  Weir Group PLC  02 November 2022

The Weir Group PLC trading update for the third quarter ended 30 September
2022(1)

( )

Significant growth in aftermarket orders and strong execution

 

Very strong demand for Weir mining equipment and spares

·      Production trends and installed base expansion supporting Group
AM order growth(2) +21%

·      Integrated solutions and small brownfield activity driving Group
OE order growth(2) +12%

Good operating momentum and pricing power

·      Q3 revenues up strongly year-on-year

·      Supply chain and logistics challenges easing

·      Input cost inflation mitigated; gross margins maintained

Outlook: Full year guidance unchanged

·      Strong growth in FY22 constant currency revenue and profit

·      Operating margin expansion in line with prior guidance

·      80-90% free operating cash conversion

 

Jon Stanton, Chief Executive Officer, commented:

 

"The Group performed strongly in the third quarter, significantly increasing
orders and delivering sequential revenue growth, while mitigating the impacts
of inflation. Demand for our aftermarket spares was particularly strong,
reflecting the highly resilient nature of our business, as miners continue to
maximise ore production. We also made good progress on our strategic growth
initiatives, with increasing customer demand for our digital offerings and
solutions for more sustainable mining.

Moving into the fourth quarter, supply chain challenges are easing, we have
strong operating momentum and a record order book. Our FY22 guidance for
strong revenue and profit growth, operating margin expansion and 80-90% free
operating cash conversion is unchanged."

Third quarter review

 

Group

 

Conditions in mining markets were highly supportive through the quarter, with
commodity prices remaining well above miners' cost to produce and physical
inventories tightening further. These factors caused our customers to maximise
ore production driving very strong demand for mining spares and expendables.
Demand was good across all regions, with particular strength in South America
as miners maximised copper production, and also in North America as the
re-shoring of production to the US and the recent resurgence in activity in
Canadian oil sands continued.

 

Large mining expansion projects remained slow to convert with demand for OE
driven by the growing focus on de-bottlenecking, small expansions and
sustainability projects at existing mines.

 

Within infrastructure, demand in the US, which is by far our largest
non-mining market, was stable at high levels, while demand in Europe continued
to decline.

 

Group orders(2) in the quarter were +19%, with AM orders(2) +21% and OE
orders(2) +12%.

 

The Group's book-to-bill was 1.02, reflecting growth in orders across both
divisions and strong operational execution.

 

Minerals

 

·    Orders(2) +21%: AM orders(2) +25%; OE orders(2) +13%

·    Revenues strongly ahead of prior year and sequentially higher than Q2

 

Demand for AM was exceptionally strong in the quarter, with underlying
production activity complemented by orders for commissioning spares as a
number of recent OE projects started operating, growing our installed base
further. Sequential movement in orders reflects typical seasonal patterns,
with a number of multi-period orders booked in Q2.

 

In OE, demand was primarily driven by orders to de-bottleneck or expand
existing mines. This included £16m of orders for pumps for high-grade nickel
applications in Indonesia, and a £12m order for pumps and cyclones for a
copper concentrator in Uzbekistan. We also booked a £6m order for a
Terra-flowing™ solution for a tailings plant in Mexico, which will increase
water recovery and eradicate the need for a tailings dam.

 

ESCO

 

·      Orders(2) +13%

·      Revenues strongly ahead of prior year and sequentially higher
than Q2

 

Orders reflected strong demand from mining customers, with mining orders
growing sequentially from Q2. Demand was particularly strong in South America,
and also in Australia and Africa where the Division continues to gain market
share. Orders include a good contribution from Motion Metrics and Carriere
Industrial Supply, both of which continue to perform ahead of our initial
expectations, and also reflect growing traction with our mining attachments
proposition.

 

Outlook

 

Our FY22 guidance for strong constant currency revenue and profit growth,
operating margin expansion and 80-90% free operating cash conversion is
unchanged.

 

Looking further ahead, conditions in mining markets are strong and the
long-term fundamentals are highly attractive. We are yet to see whether
current macro-economic and geopolitical conditions will impact mining markets;
in our base case scenario we are assuming conditions will be supportive, with
AM growth rates consistent with our through-cycle targets and traction in
small to medium sized OE projects continuing. In infrastructure markets, we
expect activity in North America to remain stable, with weak demand continuing
in Europe.

 

Net debt

 

Net debt increased in the quarter primarily reflecting translational foreign
exchange on US$ denominated debt, while as expected, our leverage ratio
remained in line with that reported at 30 June 2022.

 

Spotlight capital markets webinar: Sustainabilty and technology

 

We will be holding a virtual event on the afternoon of 30 November 2022 (UK
time) highlighting our sustainability strategy and technology roadmap to
deliver on our commitment to smart, efficient and sustainable mining.

 

Notes:

1.             Financial information is given for the three months
ended 30 September 2022 and relates to continuing operations.

2.             Orders are reported on a constant currency basis at
September 2022 average exchange rates.

 

Analyst and investor conference call

 

A conference call for analysts and investors will be held at 0800 GMT on
Wednesday 2 November 2022 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 Friday 2 December 2022.

 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 (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.11,000 employees
operating in over 60 countries with a presence in every major mining region of
the world. Find out more at www.global.weir (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 - Continuing operations(1) quarterly order trends

 

                     Reported growth                                                    Like-for-like growth(2)
 Division            2021 Q1  2021 Q2  2021 Q3  2021 Q4  2022 Q1  2022 Q2  2022 Q3      2021 Q4  2022 Q1  2022 Q2  2022 Q3
 Original Equipment  66%      50%      71%      9%       -18%     -3%      13%          9%       -18%     -3%      13%
 Aftermarket         -1%      9%       16%      29%      23%      18%      25%          29%      23%      18%      25%
 Minerals            15%      20%      30%      23%      9%       11%      21%          23%      9%       11%      21%

 Original Equipment  76%      17%      65%      -9%      -17%     98%      -6%          -9%      -17%     98%      -6%
 Aftermarket         -2%      31%      34%      40%      37%      19%      14%          39%      31%      9%       5%
 ESCO                2%       30%      36%      37%      32%      23%      13%          36%      27%      13%      4%

 Original Equipment  67%      48%      71%      8%       -17%     2%       12%          8%       -17%     2%       12%
 Aftermarket         -2%      14%      21%      32%      28%      18%      21%          32%      26%      15%      18%
 Continuing Ops      11%      22%      31%      26%      15%      14%      19%          26%      14%      12%      17%
 Book-to-bill        1.22     1.20     1.14     1.01     1.22     1.13     1.02         1.01     1.21     1.14     1.02

 

 

                     Quarterly orders(3) £m                                             Like-for-like orders(2,3)
 Division            2021 Q1  2021 Q2  2021 Q3  2021 Q4  2022 Q1  2022 Q2  2022 Q3      2021 Q4  2022 Q1  2022 Q2  2022 Q3
 Original Equipment  136      156      131      123      113      151      149          123      113      151      149
 Aftermarket         260      307      272      324      320      363      340          324      320      363      340
 Minerals            396      463      403      447      433      514      489          447      433      514      489

 Original Equipment  12       7        11       7        10       15       11           7        10       15       11
 Aftermarket         128      135      140      155      175      160      159          154      168      146      146
 ESCO                140      142      151      162      185      175      170          161      178      161      157

 Original Equipment  148      163      142      130      123      166      160          130      123      166      160
 Aftermarket         388      442      412      479      495      523      499          478      488      509      486
 Continuing Ops      536      605      554      609      618      689      659          608      611      675      646

 

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.     Like-for-like excludes the impact of Motion Metrics acquired on 30
November 2021 and Carriere Industrial Supply Limited acquired on 8 April 2022.

3.     Restated at September 2022 average exchange rates.

 

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