REG - Weir Group PLC - Q3 Trading Update

WeirAnnouncement

01/11/2023 07:15

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231101:nRSA9459Ra&default-theme=true

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 £6m 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 £16m 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 £6m 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(®) High
Pressure Grinding Rolls (HPGR), is performing well.  The £15m 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 (http://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
(https://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 (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 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
 Division            2022 Q1     2022 Q2  2022 Q3  2022 Q4  2023 Q1  2023 Q2  2023

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) £m
 Division            2022 Q1  2022 Q2  2022 Q3  2022 Q4  2023 Q1  2023 Q2  2023

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.

 

 

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  TSTNKDBDKBDBOKN