Last checked at 19 Apr 2018 07:00
The Weir Group PLC Interim Management Statement for the period to 31 March 20181
Strong order2 momentum continued in the first quarter
· First quarter orders +22%; all divisions ahead of the prior year
· Minerals orders +13% with strong demand for both original equipment and aftermarket
· Oil & Gas orders +50% driven by pressure pumping demand in North American shale
· Flow Control orders +2% with encouraging growth trends
· Full-year constant currency expectations unchanged
· US$1,285m acquisition of ESCO Corporation, 7.4% placing and intended disposal of Flow Control announced separately
Jon Stanton, Chief Executive, commented:
"The Group performed strongly in the first quarter, outperforming its main markets through an intense focus on helping its customers meet their operating goals in improving conditions.
In mining, our largest market, our 2017 investment in sales and engineering capability enabled us to provide more solutions to miners focused on increasing productivity from their current assets. In Oil & Gas, shale continued to demonstrate its increased relevance with record North American production supported by our leading technology pressure pumping products and services. Flow Control benefited from operational improvements and encouraging momentum in its main markets.
Our good start to the year reflects our anticipated progress at this stage of 2018 and our full year outlook of strong constant currency revenue and profit growth remains unchanged."
First quarter review
First quarter orders were 22% higher than the prior year period. Group-wide aftermarket orders increased 19% with original equipment up 27%. Revenues, on a constant currency basis, were in line with expectations and ahead of the prior year. The Group generated a positive book to bill ratio of 1.14 over the three-month period supporting the growth expected during the balance of the year.
Divisional review
Minerals
Global mining markets continued to benefit from supportive commodity prices with the industry remaining focused on optimising the production and efficiency of current mining operations. The division took full advantage of its previous investments in extending its on-the-ground engineering and sales capabilities, and built on its unrivalled global service centre network. Orders for the first quarter were up 13% compared to the prior year with original equipment 19% higher, supported by a number of small expansion and brownfield projects, while aftermarket orders increased 11%. On a sequential basis, both aftermarket and original equipment orders both grew. The division's order book increased in the quarter with a book to bill ratio of 1.16.
Full year divisional expectations are unchanged, with the division anticipated to deliver moderately higher constant currency revenues and slightly higher full year operating margins.
Oil & Gas
Strong drilling and completion activity levels continued in North American onshore oil and gas markets as the division reinforced its position as the preferred provider of equipment and services to major shale pressure pumpers. International markets remained challenging with competitive pricing although there was an increase in project activity. Overall, divisional orders for the first quarter were 50% higher than the prior year period and 47% higher on a like for like3 basis. As reported, original equipment orders increased 91%, from a relatively low base, driven by good demand for pumps and power ends as customers prepared their frack fleets for the year ahead. Aftermarket orders were 40% higher. On a sequential basis orders were also higher reflecting the increased rig count and activity levels in North America and modestly improving conditions in international markets. US frack fleet utilisation remained high with modest pricing gains in some product lines as expected. The division's book to bill ratio in the first quarter was 1.13.
Assuming market conditions remain supportive at or around current levels, we continue to expect a strong increase in constant currency divisional revenues and profits, delivering mid-teens operating margins.
Flow Control
The division's main markets continued to show early signs of recovery with increased quotation activity, particularly in Liquified Natural Gas and downstream. As a result, divisional orders for the first quarter were up 2% on the prior year period. Original equipment orders were down 3%, including the impact of project delays, while aftermarket orders increased 6% - the fourth consecutive quarter of aftermarket growth.
The division is still expected to deliver broadly stable full year constant currency revenues. Operating profit and margin expectations are also unchanged, with the divison expected to deliver mid-single digit operating margins for the full year.
Foreign Exchange and Net debt
Based on quarter one average foreign exchange rates (GBP/USD$1.39), we expect to see a full year £18m translational foreign exchange headwind at operating profit level compared to the prior year. This is consistent with our previous expectation. Net debt at 31 March 2018 was higher than that reported at 31 December 2017 but in line with normal seasonal patterns. The group remains confident of delivering strong cash generation and further balance sheet deleveraging in 2018.
Notes:
1. Financial information is given for the three months ended 31 March 2018 and relates to continuing operations and excludes exceptional items.
2. Orders are reported on a constant currency basis. First quarter refers to the financial period for the three months ended 31 March 2018.
3. Like-for-like excludes the impact of acquisitions. KOP was acquired on 27 July 2017 and excluded for 2017.
Analyst and investor conference call
A conference call for analysts and investors will be held at 0815 BST on Thursday 19 April 2017 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 Tuesday 1 May 2018.
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 / Nick Cosgrove | +44 (0) 20 7404 5959
|
About The Weir Group PLC
Founded in 1871, Weir is one of the world's leading engineering businesses providing mission-critical equipment and aftermarket solutions to energy and natural resources customers in more than 70 countries. The group, which employs around 15,000 people, comprises three divisions: Minerals; Oil & Gas; and Flow Control, and is headquartered in Glasgow, Scotland, UK.
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 - quarterly order trends (constant currency)
Reported growth1 | Like for like growth1, 2 | ||||||||||||
Division | 2017Q1 | 2017Q2 | 2017 Q3 | 2017 Q4 | 2018 Q1 | 2017Q1 | 2017Q2 | 2017 Q3 | 2017 Q4 | 2018 Q1 | |||
Original Equipment | 4% | 25% | 19% | 10% | 19% | 4% | 25% | 19% | 10% | 19% | |||
Aftermarket | 13% | 7% | 9% | 8% | 11% | 13% | 7% | 9% | 8% | 11% | |||
Minerals | 10% | 12% | 12% | 9% | 13% | 10% | 12% | 12% | 9% | 13% | |||
Original Equipment | 56% | 143% | 92% | 130% | 91% | 56% | 143% | 82% | 97% | 84% | |||
Aftermarket | 48% | 98% | 52% | 46% | 40% | 48% | 98% | 50% | 43% | 38% | |||
Oil & Gas | 50% | 106% | 59% | 60% | 50% | 50% | 106% | 56% | 52% | 47% | |||
Original Equipment | -18% | -33% | -8% | -1% | -3% | -18% | -33% | -8% | -1% | -3% | |||
Aftermarket | -3% | 6% | 7% | 17% | 6% | -3% | 6% | 7% | 17% | 6% | |||
Flow Control | -11% | -15% | -2% | 6% | 2% | -11% | -15% | -2% | 6% | 2% | |||
Original Equipment | 5% | 19% | 21% | 23% | 27% | 5% | 19% | 20% | 18% | 26% | |||
Aftermarket | 21% | 27% | 22% | 20% | 19% | 21% | 27% | 21% | 19% | 19% | |||
Continuing Ops1 | 15% | 24% | 21% | 21% | 22% | 15% | 24% | 21% | 19% | 21% | |||
Book to Bill | 1.14 | 1.06 | 0.95 | 0.94 | 1.14 | 1.14 | 1.06 | 0.95 | 0.94 | 1.14 | |||
1 Continuing operations (excludes American Hydro Corporation and Ynfiniti Engineering Services which were disposed of in Q2 2016).
2 Like-for-like excludes the impact of acquisitions. KOP was acquired on 27 July 2017 and excluded for 2017.
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.