TIDMWEIR
RNS Number : 6071X
Weir Group PLC
27 April 2023
The Weir Group PLC trading update for the first quarter ended 31
March 2023(1)
Order growth and strong execution; margin expansion on track
Strong demand for Weir mining equipment
-- Brownfield activity and sustainability projects driving Group OE order growth(2) +22%
-- Growing pipeline for sustainable technology solutions, including redefined mill circuit
Group AM orders (2) flat; in line with expectations
-- Minerals AM orders(2) +5%: positive mining production trends and installed base growth
-- ESCO total orders(2) -6%: reflecting infrastructure markets and Q1 2022 pre-buy
Demonstrating strength of focused platform
-- Q1 revenues and operating margins up year-on-year
-- Performance Excellence programme on track
-- Full investment grade credit rating achieved
Outlook: Positive conditions in mining markets; 2023 guidance
reiterated
-- Growth in constant currency revenue, profit and operating margins
-- On track to deliver target of 17% operating margin in 2023
-- Free operating cash conversion of 80% to 90%
Jon Stanton, Chief Executive Officer, commented:
"The value creation opportunity for Weir is compelling. The
mining industry needs to produce more critical metals to support
the transition to Net Zero, and must extract these in a more
sustainable way. Our leading global brands, engineering capability
and technology-led strategy means we are well placed to capitalise.
This opportunity, together with our Performance Excellence
programme, underpins our growth, margin expansion and cash
conversion targets.
Our strong execution and order book growth in the first quarter
reinforces our confidence in achieving our 2023 guidance. We are on
track to deliver another year of growth in revenues and our
operating margin target of 17%."
First quarter review
Group
In 2022 we set out our through-cycle commitments to outgrow our
markets, expand our margins and convert our earnings to cash, while
remaining resilient and doing the right thing for our people and
the planet.
During the quarter we made good progress as we grew orders,
revenue and margins. We continued to increase market share with our
differentiated technology while also benefiting from the long-term
structural tailwinds which underpin our mining markets.
Commodity prices are well above miners' cost to produce, and
ongoing tightness in physical inventories and strong end market
demand are incentivising our customers to maximise ore production.
Miners are responding by accelerating production from existing
assets, as large projects remain slow to convert.
These factors, together with the ongoing effect of declining
grades and more complex ore bodies, drove demand for our mining
spares and expendables. Demand was strong across most hard rock
mining territories, and in particular in Asia Pacific and South
America where recent market share gains and installed based growth
drove incremental demand. The growth in our mining aftermarket
business again demonstrates our inherent resilience driven by
non-discretionary spend on spare parts.
Market trends and share gains are also driving OE demand.
Customers are ordering Weir solutions to debottleneck, expand and
improve the sustainability of existing mines, while also
increasingly engaging on new sustainability driven technologies,
such as our redefined mill circuit and the Motion Metrics digital
offering.
Group orders (2) in the quarter were +4%, with OE orders (2)
+22%, and AM orders (2) flat against a prior year comparator which
was a peak quarter for infrastructure and included a contribution
from pre-buy in ESCO and orders from Russia.
In the quarter we initiated key projects in our Performance
Excellence programme which will support future margin expansion and
cash conversion. These included consolidation of our North American
facilities in Minerals to improve customer proximity, projects to
implement lean enterprise principles across our global value
streams and resourcing the Weir Business Services (WBS) programme
transformation team.
The robustness of our more ambitious scope 1,2 & 3 emissions
reduction targets announced in July 2022 was validated in the
quarter with formal approval by the Science Based Targets
initiative (SBTi).
Minerals
-- Orders (2) +9%: AM orders (2) +5%; OE orders (2) +20%
-- AM growth driven by price and volume
Demand for AM was driven by mining production trends and
installed base growth. Year-on-year growth reflects the impact of
price increases and volume growth in hard rock mining, offset by
the loss of orders from Russia. Excluding Russia from the PY
comparator, AM orders (2) were +7%. Sequential movement in AM
orders reflects typical seasonal patterns.
In OE, demand was primarily driven by debottlenecking, expansion
and sustainability projects at existing mines. This included GBP12m
of orders for our GEHO pump solutions for a high-grade nickel
expansion project in Indonesia, as we further built our leadership
position in this high-growth attractive niche.
ESCO
-- YoY orders (2) -6%; sequential orders (2) +5%
-- Mining markets positive; as expected infrastructure markets
below peak but improving sequentially
Demand from our mining customers was strong, with quarterly
mining orders ahead of Q4 2022. Demand was high for mining
expendables, reflecting ore production trends and recent market
share gains, and also for attachments as we gained further traction
with our differentiated tech-enabled mining bucket, which is
underpinned by Motion Metrics' leading AI and rugged 3D camera
technology.
In infrastructure, as expected, in our largest market of North
America orders grew sequentially, though demand remained well below
the Q1 2022 peak. Demand in European infrastructure markets
remained suppressed.
Outlook
The business is executing well and conditions in our mining
markets are positive. High levels of activity and demand for our AM
spares and brownfield OE solutions are driving order book
growth.
Our guidance for 2023 is reiterated and we expect to deliver
growth in constant currency revenue, profit and operating margin.
We are on track to deliver our target of 17% operating margin in
2023, supported by operational efficiencies and early benefits from
Performance Excellence. We expect free operating cash conversion of
between 80% and 90%.
Phasing of operating profit is expected to follow typical
seasonal patterns and operating margins are expected to expand
sequentially through the year as initial Performance Excellence
benefits are realised.
Further out, the long-term fundamentals for mining and our
business are highly attractive, underpinned by decarbonisation, GDP
growth and the transition to sustainable mining. We have a clear
strategy to grow ahead of our markets, with specific growth
initiatives underpinning our ambition to deliver through-cycle
mid-to-high single digit percentage revenue growth.
Net debt
As expected, net debt increased in the quarter reflecting
typical seasonal patterns.
During the quarter S&P upgraded their credit rating on Weir
from BB+ to BBB- which, coupled with the Baa3 rating we already
have with Moody's, means we now have a full investment grade credit
rating.
New corporate broker appointments
Barclays and JP Morgan Cazenove have been appointed as our new
joint corporate brokers.
Notes:
1. Financial information is given for the three months ended 31 March 2023.
2. Orders are reported on a constant currency basis at March
2023 average exchange rates.
Analyst and investor conference call
A conference call for analysts and investors will be held at
0800 BST on Thursday 27 April 2023 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 4 May 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
-------------------------------
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 .
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)
-------------------- --------------------------------- --------------------------------
2022 2022 2022 2022 2023 2022 2022 2022 2023
Division Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-------------------- ----- ----- ----- ----- ----- ------ ------ ------ ------
Original Equipment -18% -3% 13% 19% 20% -3% 13% 19% 20%
Aftermarket 23% 18% 25% 6% 5% 18% 25% 6% 5%
Minerals 9% 11% 21% 10% 9% 11% 21% 10% 9%
-------------------- ----- ----- ----- ----- ----- ------ ------ ------ ------
Original Equipment -17% 98% -6% 14% 39% 98% -6% 14% 38%
Aftermarket 37% 19% 14% 1% -9% 12% 7% -7% -15%
ESCO 32% 23% 13% 2% -6% 16% 6% -6% -12%
-------------------- ----- ----- ----- ----- ----- ------ ------ ------ ------
Original Equipment -17% 2% 12% 19% 22% 2% 11% 20% 22%
Aftermarket 28% 18% 21% 5% 0% 17% 19% 2% -2%
Continuing Ops 15% 14% 19% 8% 4% 13% 17% 6% 3%
-------------------- ----- ----- ----- ----- ----- ------ ------ ------ ------
Book-to-bill 1.22 1.13 1.02 0.95 1.04 1.13 1.02 0.94 1.04
-------------------- ----- ----- ----- ----- ----- ------ ------ ------ ------
Quarterly orders(3) GBPm Like-for-like orders(2,3)
-------------------- --------------------------------- --------------------------------
2022 2022 2022 2022 2023 2022 2022 2022 2023
Division Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-------------------- ----- ----- ----- ----- ----- ------- ------- ------ ------
Original Equipment 114 152 149 148 137 152 149 148 137
Aftermarket 324 367 345 350 340 367 345 350 340
Minerals 438 519 494 498 477 519 494 498 477
-------------------- ----- ----- ----- ----- ----- ------- ------- ------ ------
Original Equipment 11 15 11 8 14 15 11 8 14
Aftermarket 182 166 165 163 166 157 155 150 156
ESCO 193 181 176 171 180 172 166 158 170
-------------------- ----- ----- ----- ----- ----- ------- ------- ------ ------
Original Equipment 125 167 160 156 151 167 160 156 151
Aftermarket 506 533 510 513 506 524 500 500 496
Continuing Ops 631 700 670 669 657 691 660 656 647
-------------------- ----- ----- ----- ----- ----- ------- ------- ------ ------
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 Carriere Industrial
Supply Limited acquired on 8 April 2022.
3. Restated at March 2023 average exchange rates.
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END
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