Weir Group lowers full-year expectations on soft energy market

Weir Group posted its interim management statement for the third quarter to 31 October on Tuesday, with aftermarket orders stable during the period, though overall order input was down 7%.

The FTSE 250 firm said full year profits were now anticipated to be slightly lower than current market expectations, although continued strong cash generation was still expected in 2016.

It said its disposal programme was on track to deliver up to £100m by year-end, with £79m achieved by end of October.

Weir’s board said aftermarket orders for its minerals division grew 4%, although original equipment fell against a strong prior year period, and in oil and gas there was sequential quarterly input growth in North America but further declines in the Middle East.

In flow control the company claimed continued operational progress, although mid and downstream oil and gas remained more challenging.

“There are signs in the group's third quarter performance that our core markets have started to improve,” said chief executive John Standon.

“Minerals aftermarket orders returned to growth and North American oil and gas customers started planning for higher activity levels next year.

“The group's trading results reflected the low point in the North American oil and gas market and tougher conditions in the Middle East.”

Stanton said assuming commodity prices remained supportive, the board anticipated further sequential growth for the oil and gas division in the fourth quarter but little improvement in the pricing environment.

“Given conditions in the Middle East as well, we now expect the division to be around break even in the fourth quarter and slightly loss making for the full year.

“The combined outlook for minerals and flow control is unchanged,” he explained, adding: “therefore, including a small further foreign exchange benefit, the group's full year 2016 profits are expected to be slightly lower than current market expectations.”

Stanton did say that Weir was well placed to benefit as markets recover.

“The strength of the team together with our global leadership positions in mining and oil and gas, deep customer relationships and investment in innovative technology, give the group a robust platform for long term growth.”