Q3 Trading Update

RNS Number : 9948E

Weir Group PLC

02 November 2022

 

The Weir Group PLC trading update for the third quarter ended 30 September 2022¹

Significant growth in aftermarket orders and strong execution

Very strong demand for Weir mining equipment and spares

· Production trends and installed base expansion supporting Group AM order growth² +21%

· Integrated solutions and small brownfield activity driving Group OE order growth² +12%

Good operating momentum and pricing power

· Q3 revenues up strongly year-on-year

· Supply chain and logistics challenges easing

· Input cost inflation mitigated; gross margins maintained

Outlook: Full year guidance unchanged

· Strong growth in FY22 constant currency revenue and profit

· Operating margin expansion in line with prior guidance

· 80-90% free operating cash conversion

Jon Stanton, Chief Executive Officer, commented:

"The Group performed strongly in the third quarter, significantly increasing orders and delivering sequential revenue growth, while mitigating the impacts of inflation. Demand for our aftermarket spares was particularly strong, reflecting the highly resilient nature of our business, as miners continue to maximise ore production. We also made good progress on our strategic growth initiatives, with increasing customer demand for our digital offerings and solutions for more sustainable mining.

Moving into the fourth quarter, supply chain challenges are easing, we have strong operating momentum and a record order book. Our FY22 guidance for strong revenue and profit growth, operating margin expansion and 80-90% free operating cash conversion is unchanged."

Third quarter review

Group

Conditions in mining markets were highly supportive through the quarter, with commodity prices remaining well above miners' cost to produce and physical inventories tightening further. These factors caused our customers to maximise ore production driving very strong demand for mining spares and expendables. Demand was good across all regions, with particular strength in South America as miners maximised copper production, and also in North America as the re-shoring of production to the US and the recent resurgence in activity in Canadian oil sands continued.

Large mining expansion projects remained slow to convert with demand for OE driven by the growing focus on de-bottlenecking, small expansions and sustainability projects at existing mines.

Within infrastructure, demand in the US, which is by far our largest non-mining market, was stable at high levels, while demand in Europe continued to decline.

Group orders² in the quarter were +19%, with AM orders² +21% and OE orders² +12%.

The Group's book-to-bill was 1.02, reflecting growth in orders across both divisions and strong operational execution.

Minerals

· Orders ² +21%: AM orders ² +25%; OE orders ² +13%

· Revenues strongly ahead of prior year and sequentially higher than Q2

Demand for AM was exceptionally strong in the quarter, with underlying production activity complemented by orders for commissioning spares as a number of recent OE projects started operating, growing our installed base further. Sequential movement in orders reflects typical seasonal patterns, with a number of multi-period orders booked in Q2.

In OE, demand was primarily driven by orders to de-bottleneck or expand existing mines. This included £16m of orders for pumps for high-grade nickel applications in Indonesia, and a £12m order for pumps and cyclones for a copper concentrator in Uzbekistan. We also booked a £6m order for a Terra-flowing™ solution for a tailings plant in Mexico, which will increase water recovery and eradicate the need for a tailings dam.

ESCO

· Orders ² +13%

· Revenues strongly ahead of prior year and sequentially higher than Q2

Orders reflected strong demand from mining customers, with mining orders growing sequentially from Q2. Demand was particularly strong in South America, and also in Australia and Africa where the Division continues to gain market share. Orders include a good contribution from Motion Metrics and Carriere Industrial Supply, both of which continue to perform ahead of our initial expectations, and also reflect growing traction with our mining attachments proposition.

Outlook

Our FY22 guidance for strong constant currency revenue and profit growth, operating margin expansion and 80-90% free operating cash conversion is unchanged.

Looking further ahead, conditions in mining markets are strong and the long-term fundamentals are highly attractive. We are yet to see whether current macro-economic and geopolitical conditions will impact mining markets; in our base case scenario we are assuming conditions will be supportive, with AM growth rates consistent with our through-cycle targets and traction in small to medium sized OE projects continuing. In infrastructure markets, we expect activity in North America to remain stable, with weak demand continuing in Europe.

Net debt

Net debt increased in the quarter primarily reflecting translational foreign exchange on US$ denominated debt, while as expected, our leverage ratio remained in line with that reported at 30 June 2022.

Spotlight capital markets webinar: Sustainabilty and technology

We will be holding a virtual event on the afternoon of 30 November 2022 (UK time) highlighting our sustainability strategy and technology roadmap to deliver on our commitment to smart, efficient and sustainable mining.

Notes:

1.  Financial information is given for the three months ended 30 September 2022 and relates to continuing operations.

2.  Orders are reported on a constant currency basis at September 2022 average exchange rates.

Analyst and investor conference call

A conference call for analysts and investors will be held at 0800 GMT on Wednesday 2 November 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 Friday 2 December 2022.

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.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 operations¹ quarterly order trends

	Reported growth								Like-for-like growth2
Division	2021 Q1	2021 Q2	2021 Q3	2021 Q4	2022 Q1	2022 Q2	2022 Q3		2021 Q4	2022 Q1	2022 Q2	2022 Q3
Original Equipment	66%	50%	71%	9%	-18%	-3%	13%		9%	-18%	-3%	13%
Aftermarket	-1%	9%	16%	29%	23%	18%	25%		29%	23%	18%	25%
Minerals	15%	20%	30%	23%	9%	11%	21%		23%	9%	11%	21%
Original Equipment	76%	17%	65%	-9%	-17%	98%	-6%		-9%	-17%	98%	-6%
Aftermarket	-2%	31%	34%	40%	37%	19%	14%		39%	31%	9%	5%
ESCO	2%	30%	36%	37%	32%	23%	13%		36%	27%	13%	4%
Original Equipment	67%	48%	71%	8%	-17%	2%	12%		8%	-17%	2%	12%
Aftermarket	-2%	14%	21%	32%	28%	18%	21%		32%	26%	15%	18%
Continuing Ops	11%	22%	31%	26%	15%	14%	19%		26%	14%	12%	17%
Book-to-bill	1.22	1.20	1.14	1.01	1.22	1.13	1.02		1.01	1.21	1.14	1.02

	Quarterly orders3 £m								Like-for-like orders2,3
Division	2021 Q1	2021 Q2	2021 Q3	2021 Q4	2022 Q1	2022 Q2	2022 Q3		2021 Q4	2022 Q1	2022 Q2	2022 Q3
Original Equipment	136	156	131	123	113	151	149		123	113	151	149
Aftermarket	260	307	272	324	320	363	340		324	320	363	340
Minerals	396	463	403	447	433	514	489		447	433	514	489
Original Equipment	12	7	11	7	10	15	11		7	10	15	11
Aftermarket	128	135	140	155	175	160	159		154	168	146	146
ESCO	140	142	151	162	185	175	170		161	178	161	157
Original Equipment	148	163	142	130	123	166	160		130	123	166	160
Aftermarket	388	442	412	479	495	523	499		478	488	509	486
Continuing Ops	536	605	554	609	618	689	659		608	611	675	646

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 and Carriere Industrial Supply Limited acquired on 8 April 2022.

3.  Restated at September 2022 average exchange rates.

 

END

 

 

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