Weir says profits better than expected despite tough conditions

Engineering firm Weir Group reported trading that was “slightly ahead” of expectations in its first quarter on Thursday, saying cost reductions and a resilient performance from its minerals division underpinned that.

The FTSE 250 firm’s like-for-like order input during the quarter was down 22%, with a revenue decline broadly in line with order input.

Weir’s like-for-like revenues in its minerals division were stable, while input was down 5% - though original equipment input was better than expected.

There were significant declines in oil and gas activity, with the US land rig count down a further 40% in the year to date.

Weir Group managed to achieve £10m in incremental annualised cost savings, with the impact of actions taken in the last 18 months now over £160m.

The group’s disposal programme was now on track towards its £100m target, with balance sheet metrics in line with expectations.

"The group has maintained its focus on strong cash generation, aggressive cost reduction and developing the innovative solutions which have made Weir a global leader.,” said chief executive Keith Cochrane.

“This comes against the backdrop of ongoing challenges across our end markets.”

Cochrane said mining customers were continuing to prioritise cash, though there was a slight pickup in orders through the quarter, and minerals divisional revenues on a like-for-like basis were flat year-on-year.

He added that trading conditions in oil and gas markets reflected further reductions in activity levels in all regions, despite the limited improvement in oil prices in 2016.

Weir remained focused on cost reduction measures, Cochrane said, which have helped to deliver first quarter profits slightly ahead of expectations.

"As a result, we expect first half profits to be slightly ahead of market expectations.”

“Our full year expectations remain unchanged, reflecting the slower recovery now anticipated in oil and gas markets,” Cochrane explained.