Q3 Trading Update

Weir Group PLC

01 November 2023

 

The Weir Group PLC trading update for the third quarter ended 30 September 2023¹

Mining markets strong; 2023 guidance underpinned

High levels of mining activity driving demand for spares and expendables
•	Minerals Q3 AM orders2 +1%: volume growth in mining and price realisation offset by oil sands
•	ESCO Q3 orders2 -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 orders² 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 orders² 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 orders2 +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

•	Orders2 -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. 

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 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 Media: Sally Jones Citigate Dewe Rogerson: Kevin Smith	[phone] [phone] [phone] [e-mail]

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 operations¹ 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 orders2 £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.

 

END