Weir to cut more jobs as weaker oil price takes its toll

Weir Group said it expects full-year earnings to be broadly in line with current market consensus as it announced further job losses as part of its cost-cutting plans.

The engineering group said third-quarter order input was down 29% year-on-year and 8% lower compared to the second quarter, mainly due to a significant drop in activity levels across oil, gas, power and industrial markets.

Revenues on a constant currency basis were down compared to the same period last year on the back of reduced North American oil and gas activity levels, but in line with the second quarter.

Group operating margins were lower than the prior year, namely because of declines in margins in the oil and gas division.

The company said challenges in its end markets intensified during September and October. It said mining customers took measures to preserve cash by delaying investments, reducing purchases of consumables and mothballing or curtailing production volumes at higher cost mines.

Meanwhile, trading conditions in oil and gas markets were hit by a double-digit decline in North American rig count as West Texas Intermediate oil prices fell below $50 a barrel.

Weir said it has taken further steps to support profitability in light of these market issues, which will generate an additional £25m in annualised cost savings and include additional workforce reductions and service centre consolidations.

The company said it will reduce its workforce by a further 400 posts.

Chief executive Keith Cochrane said: “We expect trading conditions to remain challenging through the fourth quarter with further declines in upstream oil and gas activity.

“We will focus on delivering further cost and procurement savings, alongside strong cash generation. We continue to expect a sequential improvement in our second half performance with our full year earnings expectations broadly in line with market consensus.”

At 0914 GMT, Weir shares were up 5.7% at 1,136p.