TIDMWEIR
RNS Number : 6099J
Weir Group PLC
28 April 2022
The Weir Group PLC trading update for the first quarter ended 31
March 2022(1)
Strong order momentum with robust operational execution
-- Record quarter with Group orders(2) +15% and +1% sequentially
o Very strong demand for aftermarket; good progress on strategic
growth initiatives
o Aftermarket (AM) orders +28% and +3% sequentially
o Original equipment (OE) orders -17%; or +8% excluding PY
Ferrexpo OE order(3)
-- Robust execution in complex operating environment
o Successfully managing impact of Covid-19 shutdowns, supply
chain disruption and inflation
o Order book delivery progressing well
o Russia activities suspended; business to be wound down through
2022
-- Expect to deliver strong growth in constant currency revenue and profit in 2022
o Operating margin and cash conversion targets on track
Jon Stanton, Chief Executive, commented:
"The Group has had an excellent start to the year, generating
record orders and executing strongly in a complex global
environment. Conditions in mining markets are highly favourable as
high commodity prices ensure miners remain incentivised to maximise
ore production, which is driving demand for recurring aftermarket
and debottlenecking solutions. We continue to successfully manage
the disruption in global supply chains from Covid-19 and the impact
of inflation.
Looking ahead to the full year, we remain confident in the
outlook and expect to deliver strong growth in constant currency
revenue and profit in 2022 and anticipate progress towards our
medium-term margin and cash targets."
First quarter review - Group
Favourable conditions in global mining markets drove increased
demand for aftermarket and debottlenecking solutions. Activity and
demand were positive across most regions, particularly in North
America as miners looked to upgrade their assets, and in South
America demand was also strong driven by an increase in small and
medium sized brownfield activity. Globally, large expansion
projects remained slow to convert.
Activity in infrastructure markets, particularly within North
America and Europe, remained stable at strong levels.
Group orders in the quarter were up 15%, driven by significant
growth in demand for spares with aftermarket orders up 28%
year-on-year. Original equipment orders were 17% lower than in the
same period last year where we booked a GBP34m order from Ferrexpo.
Adjusting for that, growth in original equipment orders was 8% in
Q1 2022.
The Group's book-to-bill was strong at 1.22, reflecting record
order intake and good progress on order book execution.
Russia and Ukraine business update
We strongly condemn the Russian military invasion of Ukraine.
Our priority remains the welfare of our Ukraine-based colleagues
and their families and we are keeping in close contact, supporting
them in whatever ways we can. More widely, we are deeply saddened
by the humanitarian crisis that continues to unfold and have
pledged financial support to organisations working at the front
line to help the people of Ukraine. Our thoughts are with all those
whose lives are being affected by these events and join with others
in hoping for a swift and peaceful end to the hostilities.
In Russia, the Group's business comprises a sales and service
organisation employing 267 people, the majority of whom sit within
the Minerals Division, and we remain focused on their welfare
during this difficult time.
In March the Group announced the full suspension of business and
operations in Russia. Given the evolution of the situation in
Ukraine and Russia, the Group has since taken the decision to wind
down its Russian business during 2022.
The loss of sales in 2022 is expected to have an impact on Group
underlying operating profit of up to GBP20m in the year. The
Group's assets in Russia comprise primarily of inventory and
receivables and represent c.2% of the Group's net assets. While a
review of the recoverability remains ongoing, this could result in
an exceptional write-off during 2022.
Strategy and outlook
We believe the long-term growth drivers for the Group remain
firmly in place driven by decarbonisation and broader economic
development, notwithstanding the Russian invasion of Ukraine.
Indeed, the implications of recent events will likely see them
accelerate. We continue to increase investment in technologies that
will enable our customers to meet their sustainability commitments
while delivering the natural resources essential for net zero. We
will also continue to develop our regional vertically integrated
supply chains which have been vital in delivering consistently for
our customers throughout these challenging times.
Subject to ongoing geopolitical uncertainty, we expect to
deliver strong constant currency revenue and profit growth in 2022,
in line with our previous expectations adjusted for the impact of
loss of sales in Russia. As previously indicated, first half
margins will be lower than prior year, reflecting prior year
one-off impacts and mix, with full year margins expected to show
good progress towards our medium-term targets. Cash conversion
targets remain on track, again with a slight weighting to the
second half, given order book and working capital phasing.
First quarter review - Divisions
Minerals
-- Orders +9%; revenues strongly ahead of prior year
-- AM orders +23%; OE orders -18%, or +11% after adjusting for Ferrexpo in 2021(3)
Divisional orders increased 9% against a strong prior year
comparator, while sequentially, aftermarket orders remained close
to all-time highs.
Global demand for aftermarket spares remained strong, supported
by a general trend towards lower ore grades and increased equipment
utilisation. Demand was particularly strong within the oil sands
market in Canada, supported by high oil prices through the period.
In response to concerns around global supply chain challenges, some
customers also built safety stocks by forward purchasing.
Demand for original equipment continued to be supported by a
high volume of smaller orders for equipment for the debottlenecking
of existing assets, and for small brownfield expansions.
While supply chains continued to be disrupted by Covid-19, our
vertically integrated regional model meant the division continued
to execute well.
The division's book-to-bill ratio for the quarter was 1.21.
ESCO
-- ESCO orders +32% at all-time high; revenues strongly ahead of prior year
Divisional orders increased 32% against the prior year and 15%
sequentially. Adjusting for the impact of the acquisition of Motion
Metrics, on a like-for-like basis orders increased 27% against the
prior year and 11% sequentially. High levels of mining activity,
combined with some forward purchasing by customers to ensure
security of supply, drove strong demand for mining expendables. The
division also secured market share gains for its Nemisys(R) ground
engaging tools (G.E.T.), demonstrating its market leading
technology and total cost of ownership benefits to customers.
Demand from infrastructure applications was also strong, due to the
usual Q1 seasonality, with activity stable at high levels.
Through the period, mandatory Covid-related shutdowns forced the
temporary closure of the division's foundry in Xuzhou, China. The
foundry has now reopened, and while the Covid situation continues
to evolve, we currently expect to manage the impact of this through
the rest of the year.
The division's book-to-bill for the quarter of 1.23 is the
highest since its acquisition in 2018.
The integration of Motion Metrics into the division has
progressed well and the functional integration phase is now
complete. The initial market response has been positive with
customer interest and volume of enquiries exceeding our
expectations.
Net debt
Net debt at 31 March 2022 was higher than that reported at 31
December 2021, reflecting the impact of translational foreign
exchange and normal seasonal patterns.
Chair succession
As previously announced, later today, at the close of our 2022
AGM, Charles Berry, Chairman of the Group for eight years will step
down and will be succeeded by Barbara Jeremiah, currently Chair
Designate and Senior Independent Director. On behalf of the rest of
the Board and colleagues at Weir, we thank Charles for his
exemplary leadership and wish him well in his retirement. We
welcome Barbara as Chair and look forward to working with her as we
continue to pursue the multi-decade growth opportunities ahead.
Notes:
1. Financial information is given for the three months ended 31
March 2022 and relates to continuing operations.
2. Orders are reported on a constant currency basis at March
2022 average exchange rates.
3. GBP34m OE order for Ferrexpo booked in the first quarter of
2021 (total order, including AM, was GBP36m).
Analyst and investor conference call
A conference call for analysts and investors will be held at
0800 BST on Thursday 28 April 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
Thursday 26 May 2022.
Enquiries:
Investors: Edward Pears +44 (0) 141 308 3725
Media: Citigate Dewe Rogerson: +44 (0) 207 638 9571
Kevin Smith 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.
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
Like-for-like
Reported growth growth(2)
--------------------------------- ----------------
2021 2021 2021 2021 2022 2021 2022
Division Q1 Q2 Q3 Q4 Q1 Q4 Q1
-------------------- ----- ----- ----- ----- ----- ------- -------
Original Equipment 66% 50% 71% 9% -18% 9% -18%
Aftermarket -1% 9% 16% 29% 23% 29% 23%
Minerals 15% 20% 30% 23% 9% 23% 9%
-------------------- ----- ----- ----- ----- ----- ======= =======
Original Equipment 76% 17% 65% -9% -17% -9% -17%
Aftermarket -2% 31% 34% 40% 37% 39% 31%
ESCO 2% 30% 36% 37% 32% 36% 27%
-------------------- ----- ----- ----- ----- ----- ------- -------
Original Equipment 67% 48% 71% 8% -17% 8% -17%
Aftermarket -2% 14% 21% 32% 28% 32% 26%
Continuing Ops 11% 22% 31% 26% 15% 26% 14%
-------------------- ----- ----- ----- ----- ----- ------- -------
Book-to-bill 1.22 1.20 1.14 1.01 1.22 1.01 1.21
-------------------- ----- ----- ----- ----- ----- ------- -------
Like-for-like
Quarterly orders(3) GBPm orders(2,3)
-------------------- --------------------------------- ----------------
2021 2021 2021 2021 2022 2021 2022
Division Q1 Q2 Q3 Q4 Q1 Q4 Q1
-------------------- ----- ----- ----- ----- ----- ------- -------
Original Equipment 132 151 128 120 109 120 109
Aftermarket 250 295 262 312 307 312 307
Minerals 382 446 390 432 416 432 416
-------------------- ----- ----- ----- ----- ----- ------- -------
Original Equipment 12 7 10 7 10 7 10
Aftermarket 120 127 131 145 164 144 158
ESCO 132 134 141 152 174 151 168
-------------------- ----- ----- ----- ----- ----- ------- -------
Original Equipment 144 158 138 127 119 127 119
Aftermarket 370 422 393 457 471 456 465
Continuing Ops 514 580 531 584 590 583 584
-------------------- ----- ----- ----- ----- ----- ------- -------
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.
3. Restated at March 2022 average exchange rates.
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