REG - Weir Group PLC - Q3 Trading Update

WeirAnnouncement

05/11/2024 07:00

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RNS Number : 8947K  Weir Group PLC  05 November 2024

5 November 2024

 

The Weir Group PLC trading update for the third quarter ended 30 September
2024(1)

Order pipeline converting as expected

2024 full year guidance reiterated

 

Improving demand for expansion projects; Group OE order(2) growth +15%

•     Reko Diq and OCP large greenfield orders awarded: £51m booked in
Q3

•     Good momentum in OE orders on brownfield and sustainability
projects

Mining aftermarket demand positive; Group AM orders(2) +2%

•     Minerals aftermarket +3% - favourable trends in hard rock mining

•     ESCO aftermarket -2% - core GET growth (+4% YTD) offset by phasing
of large orders

Delivering Performance Excellence benefits at pace

•     Cumulative Performance Excellence savings to date of £19m

•     2026 target of £60m cumulative savings on track

FY outlook: 2024 guidance reiterated

•     Growth in constant currency revenue and operating profit

•     Operating margin of c.18%

•     Free operating cash conversion of 90% to 100%

Jon Stanton, Chief Executive Officer, commented:

"We are capitalising on growing interest for our sustainable solutions with
major orders received for the Reko Diq project and the OCP expansion as well
as good momentum on brownfield projects. These orders demonstrate Weir's
mining technology leadership and our unique opportunity to provide
transformative solutions for sustainable mining as the energy transition
gathers pace.

Aftermarket orders were in line with our expectations and reflect high levels
of activity in core mining markets with the mine specific factors seen in H1
moderating.

Going into the fourth quarter we expect orders to continue to develop
positively, and we reiterate our 2024 guidance of growth in constant currency
revenue and operating profit, together with achievement of our margin and cash
conversion targets."

 

Third quarter review

Group

We have seen positive momentum from our customers on greenfield projects
required to support the energy transition. In the quarter, we recognised £26m
relating to orders of our ENDURON(®) high pressure grinding rolls (HPGR),
part of our sustainable solution for the Reko Diq project in Pakistan, one of
the largest undeveloped copper and gold mine sites in the world. In addition,
we secured orders for £25m at OCP's greenfield phosphate projects, an
important mineral in fertilisers. These orders are an exciting demonstration
of the opportunities which lie ahead as we support our customers in
accelerating sustainable mining.

In addition to greenfield projects, our customers continue to maximise
production from existing assets. Underlying demand for OE within brownfield
projects continues at strong levels, with customers choosing Weir products as
they debottleneck and expand.

During the quarter, Group OE orders(2) increased +15%.

Increases in production and installed base expansion supported growth in
Minerals AM orders(2) (+3%). In ESCO, AM orders(2) were slightly lower (-2%),
with positive momentum for core GET in both mining and infrastructure markets
offset by the timing of larger orders in dredge and the Canadian oil sands.

In total on a constant currency basis, year-on-year Group orders increased +5%
in the third quarter and were stable for the nine months to 30 September 2024.
Year to date book-to-bill increased to 1.03.

Projects across the functional transformation, capacity optimisation and lean
processes pillars of our Performance Excellence programme are progressing at
pace with £19m of cumulative savings now realised, leaving us firmly on track
to deliver our 2026 target of £60m.

On technology, we are bringing innovative new solutions to market including
NEXSYS(®), our next generation GET solution, which delivers reduced downtime
and increased wear life for our customers. In September we also launched NEXT
intelligent solutions, our integrated digital offering for process
optimisation and wear life monitoring.

 

Minerals

 

·      OE orders(2) +19%; reflecting large greenfield order wins and
positive underlying momentum

·      AM orders(2) +3%; reflecting positive ore production trends and
installed base expansion

In the quarter we recognised £51m of large OE orders for the Reko Diq and OCP
projects. A further £27m relating to the Reko Diq project is expected to be
booked over the course of Q4 2024 and Q1 2025.

We are growing our market share in key product categories and converted c.90%
of our competitive field trials for large mill circuit pumps against a range
of competitor solutions in the first nine months of the year.

AM demand was driven by ore production trends and installed base expansion.
Sequential movement in AM orders reflects typical seasonal patterns. The level
of mine specific factors seen in H1 moderated and AM trends are expected to
continue to be positive in Q4 with the incremental £14m multi-period order
booked in October.

 

ESCO

·      OE orders(2) down £2m; driven by timing of attachment orders
with pipeline strong for Q4

·      AM orders(2) -2%; growth in core GET offset by timing of large
orders

 

OE orders were slightly down in the quarter driven by phasing. We continue to
gain market share in buckets, and have a good pipeline going forward as we
execute on the mining attachments strategy.

In the aftermarket, growth in core GET was offset by the phasing of large
dredge and oil sands orders versus the prior year. We saw good momentum in
both mining and infrastructure GET, with year to date orders increasing 4%,
and we continue to win market share with net 60 total competitive major digger
conversions. Following its September launch we secured our first order for the
new NEXSYS(®) GET solution, with more orders following in Q4.

 

Net debt

Free operating cash flow for the period was positive, underpinning our
confidence in achieving our full year cash conversion target of 90% to 100%.
Net debt was lower than that at 30 June 2024, partly due to favourable
translational foreign exchange movements reflecting the strengthening of GBP.

 

Outlook

Going into the fourth quarter, we expect orders to continue to develop
positively. For the full year, we reiterate our guidance for growth in
constant currency revenue and operating profit, operating margins of c.18%,
and delivery of free operating cash conversion of 90% to 100% in line with
current market expectation.

Our Performance Excellence transformation programme continues at pace, and we
are on track to deliver our 2026 operating profit margin target of 20% and
sustainable cash conversion of 90% to 100%.

Looking forward the long-term fundamentals for mining and our business are
highly attractive, underpinned by decarbonisation, GDP growth, and the
transition to sustainable mining.

 

Notes:

1.             Financial information is given for the three months
ended 30 September 2024, unless stated otherwise.

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

 

 

Analyst and investor conference call

 

A conference call for analysts and investors will be held at 0800 GMT on
Tuesday 5 November 2024 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 Tuesday 12 November
2024.

( )

 Enquiries:
 Investors: Philip 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

 

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 organic growth
 Division            2023 Q1                     2023 Q2                      2023 Q3                      2023 Q4                      2024 Q1                      2024 Q2                      2024 Q3
 Original Equipment              20%                         -12%                         -10%                         -15%                         -9%                          -15%             19%
 Aftermarket                     5%                          5%                           1%                           2%                           4%                           -1%              3%
 Minerals                        9%                          0%                           -2%                          -3%                          0%                           -5%                          8%

 Original Equipment              39%                         40%                          21%                          69%                          -16%                         -23%             -18%
 Aftermarket                     -9%                         -4%                          -5%                          -2%                          5%                           -1%                          -2%
 ESCO                            -6%                         0%                           -3%                          2%                           3%                           -4%                          -3%

 Original Equipment              22%                         -8%                          -8%                          -10%                         -9%                          -16%                         15%
 Aftermarket                     0%                          2%                           -1%                          1%                           4%                           -1%                          2%
 Group                           4%                          0%                           -2%                          -2%                          1%                           -4%                          5%
 Book-to-bill        1.04                        1.01                         0.94                         0.94                         1.11                         0.97                         1.01

 

                     Quarterly orders(2) £m
 Division            2023 Q1  2023 Q2  2023 Q3  2023 Q4  2024 Q1  2024 Q2  2024 Q3
 Original Equipment  128      125      125      118      117      107      148
 Aftermarket         315      354      320      328      327      351      331
 Minerals            443      479      445      446      444      458      479

 Original Equipment  14       20       12       14       12       15       10
 Aftermarket         157      152      150      152      165      150      147
 ESCO                171      172      162      166      177      165      157

 Original Equipment  142      145      137      132      129      122      158
 Aftermarket         472      506      470      480      492      501      478
 Group               614      651      607      612      621      623      636

 

 

Appendix 2 - 2024 Q3 order bridges (as reported)

 

                        Minerals                                                                            ESCO                                                                                Group
 Group orders           OE                          AM                          Total                       OE                          AM                          Total                       OE                          AM                          Total

 (£m)
 2023 Q3 - as reported  127                         330                         457                         13                          150                         163                         140                         480                         620
 Organic                            19%             3%                          8%                          -18%                        -2%                         -3%                                     15%             2%                          5%
 Structure                          0%                          0%                          0%                          0%                          0%                          0%                          0%                          0%                          0%
 Currency               -3%                                     -4%                         -4%                         -2%                         -3%                         -3%                         -2%                         -4%                         -4%
 Total                  16%                                     -1%             4%                          -20%                                    -5%                         -6%             13%                                     -2%             1%
 2024 Q3 - as reported  147                         325                         472                         10                          144                         154                         157                         469                         626

 

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