Interim Management Statement

The Weir Group PLC

Interim Management Statement for the period to 27 April 2016 1


  • Q1 trading slightly ahead of expectations supported by cost reductions and a resilient Minerals performance
  • Full year expectations unchanged
  • Q1 like for like order input 2 down 22%; revenue decline broadly in line with order input
  • Stable like for like Minerals revenues; input down 5%, original equipment input better than expected
  • Significant declines in Oil & Gas activity - US land rig count down a further 40% in 2016 to date
  • £10m incremental annualised cost savings, impact of actions taken in last 18 months now over £160m 3
  • Disposal programme on track towards £100m target, balance sheet metrics in line with expectations

Keith Cochrane, Chief Executive, commented:

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

"Mining customers continue to prioritise preserving cash, although 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.  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. The Group remains focused on cost reduction measures which have helped to deliver first quarter profits slightly ahead of our 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."

First quarter review

First quarter input reduced 21% compared to the prior year period.  A significant reduction in activity levels across the Oil & Gas division's markets was the primary driver, with Minerals and Flow Control input also reduced.  Original equipment orders were down 11% and aftermarket orders were 25% lower than the prior year period, but were both slightly up on a sequential basis.  On a like for like basis 4 (excluding the acquisition of Delta Valves), order input fell 22%, with original equipment down 13% and aftermarket down 25%.

Revenues, on a constant currency basis, were in line with expectations and lower than the first quarter of 2015, primarily as a result of reduced oil and gas activity levels. The Group maintained a positive book to bill ratio of 1.02 over the 3 month period. 

Group operating margins were lower than the prior year, principally due to reduced Oil & Gas division margins, but slightly higher than prior expectations as a result of strong cost control within the Minerals division.  The Group's asset disposal programme is making good progress towards its £100m target by year end.

Divisional review 5


Order input for the first quarter was down 4% (down 5% like for like) against a strong prior year comparator, but was up significantly on a sequential basis and slightly ahead of prior expectations. 

Original equipment input was 15% higher than the prior year period, supported by a good contribution from Delta Valves, and up 11% on a like for like basis, as the division fully captured available opportunities in what continue to be challenging market conditions.

Aftermarket input was down 11% on both a reported and on a like for like basis, compared to a strong prior year figure, which had included customers placing one-off orders for the full year.  Q1-16 input was impacted by extended year-end holiday shutdowns for much of January, with aftermarket input increasing sequentially through the period as mines ramped back up to full production.    

While some commodity prices increased through the period, customers continue to be focussed on reducing operational expenditure and cost per tonne. Despite these market conditions, constant currency like for like revenues in the first quarter were in line with the prior year, slightly ahead of prior expectations.  In addition, the order book increased in the period, with a book to bill ratio of 1.06. First quarter profits were ahead of prior expectations as a result of strong cost control, with the full year outlook underpinned by a further £10m of incremental annualised cost savings identified and actioned in the second quarter.

Full year constant currency revenues are now anticipated to be broadly flat on the prior year, slightly ahead of previous expectations.  Operating margins are expected to be broadly in line with 2015, in line with previous guidance.

Oil & Gas

Order input for the first quarter was down 47% on the prior year period, which was the highest quarterly input in 2015, and slightly below prior expectations.  Original equipment orders were down 40% and aftermarket orders were 49% lower.  On a sequential basis input was lower than the fourth quarter of 2015, reflecting the reduction in activity in North American and International markets.

Oil and gas markets have continued to decline despite the limited improvement in oil prices since February.  In North America, the division's biggest end market, US land rig count has declined by nearly 20% in the past two months and market expectations are for a 46% reduction in wells drilled in 2016.  This further reduced demand for pressure pumping and pressure control equipment, with approximately 70% of the North American frack fleet now idle. As expected, international markets have also become increasingly challenging with double-digit activity reductions as the rig count outside North America fell by 10% to close to 2009 lows.

Reflecting these market conditions, divisional revenues were materially lower than the prior year on a constant currency basis, consistent with input.  Revenues also fell sequentially.  Operating margins fell slightly below break-even reflecting on-going pricing pressure and negative operating leverage from lower volumes, partially offset by incremental cost saving measures.

The continued declines in activity levels mean that, while visibility remains low, a slower than previously anticipated recovery through 2016 is now anticipated with slightly lower full year constant currency revenue expectations as a result.  Operating margins will be further impacted by negative operational leverage, with an expectation that profitability of the division will improve modestly in the second half.  The division is expected to remain cash generative in both the first and second half of 2016.

Flow Control

Order input for the first quarter was down 20% on the prior year period, as economic uncertainty led to continued customer caution and project delays across the division's end markets. Original equipment orders were down 28% and aftermarket orders reduced by 10% against the prior year period.

Pump orders were lower, reflecting a strong prior year comparator and declines in mid and downstream oil and gas markets.  Valve original equipment orders were also down on the prior year, although aftermarket input was higher and supported by a greater exposure to power and industrial markets.

Divisional revenues, on a constant currency basis, were slightly lower than the prior year period, as growth in pumps was more than offset by a decline in valves. 

Full year divisional revenues, on a constant currency basis, are expected to be higher than the prior year and in line with prior guidance, supported by the strong opening order book for original equipment pumps.  Operating margins are anticipated to be in line with 2015 levels and prior guidance, as a result of pricing impacts and a higher original equipment product mix offsetting the full year benefit of previous restructuring actions.   

Net debt

Net debt at 31 March 2016 was higher than that reported at 1 January 2016, but in line with expectations and normal seasonal patterns.  The Group remains confident of delivering strong cash generation in 2016.


  1. Financial information is given for the 3 months ended 31 March 2016.
  2. Order input is reported on a constant currency basis. First quarter refers to the financial period 3 months ended 31 March 2016.
  3. £160m total consists of £150m of annualised run rate cost savings announced at full year results on February 24 2016 combined with £10m of measures to be taken in Q2 2016.
  4. Where growth is provided on a like for like basis, like for like is defined as the comparison of the current year results to the equivalent prior year period for those businesses that have been part of the Group throughout the current and prior year reporting period, on a constant currency basis.
  5. As announced in February the Group's former Power & Industrial division has been restructured as Flow Control including the addition of all of the Group's process pump operations.  The following commentary reflects this new structure.  Appendix 2 contains restated historic divisional information on this basis.

Analyst and investor conference call

A conference call for analysts and investors will be held at 0800 (GMT) on Thursday 28 April to discuss this statement.  Participants can join the call by registering in advance by visiting and following the link on the page.

A recording of this conference call will be available until Wednesday 11 May on +44 (0) 1452 550 000 using the conference ID 83240126.

Investors: Stephen Christie+44 (0) 141 637 7111 / (0) 7795 110456
Media: Raymond Buchanan+44 (0) 141 637 7111 / (0) 7713 261447 
Brunswick: Patrick Handley / Nina Coad +44 (0) 20 7404 5959


Appendix 1 - quarterly input trends (constant currency)

  Reported growth   Like for like growth 1
Division 2015
OE-5%-13%24%-33%15% -26%-27%11%-44%11%
Aftermarket5%-2%-9%-8%-11% 2%-4%-11%-8%-11%
Minerals 3% -5% 1% -16% -4%   -6% -11% -4% -20% -5%
OE-56%-70%-68%-77%-40% -56%-70%-68%-77%-40%
Aftermarket-15%-48%-59%-53%-49% -15%-48%-59%-53%-49%
Oil & Gas -27% -54% -61% -59% -47%   -27% -54% -61% -59% -47%
OE-3%-20%-19%3%-28% -3%-20%-19%3%-28%
Aftermarket13%3%-4%-8%-10% 13%3%-4%-8%-10%
Flow Control 3% -10% -13% -1% -20%   3% -10% -13% -1% -20%
OE-22%-35%-21%-38%-11% -30%-40%-25%-42%-13%
Aftermarket-3%-23%-33%-30%-25% -5%-24%-34%-30%-25%
Continuing Ops -9% -27% -29% -32% -21%   -13% -29% -31% -34% -22%
Book to bill 1.05 1.03 0.95 0.88 1.02   1.03 1.03 0.95 0.89 1.02


  1. Like for like excludes the impact of acquisitions (Trio excluded for 2015 and Delta excluded for 2015 and 2016).

Appendix 2 - restated financials to reflect new divisional structure


Constant currency £m H1 1 H2 2015 2014 1 Growth
Input OE139149288313-8%
Input aftermarket380335715738-3%
Input Total 519 484 1,003 1,051 -5%
Revenue OE123154277325-15%
Revenue aftermarket368356724716+1%
Revenue Total 491 510 1,001 1,041 -4%
Operating profit 2 89 103 192 212 -9%
Operating margin 2 18.1%20.3%19.2%20.4%-120bps

Oil & Gas

Constant currency £m H1 1 H2 2015 2014 1 Growth
Input OE523789277-68%
Input aftermarket244176420764-45%
Input Total 296 213 509 1,041 -51%
Revenue OE6143104262-60%
Revenue aftermarket258179437752-42%
Revenue Total 319 222 541 1,014 -47%
Operating profit 2 36 16 52 235 -78%
Operating margin 2 11.4%7.0%9.6%23.2% -1360bps


Flow Control

Constant currency £m H1 1 H2 2015 2014 1 Growth
Input OE10696202226-11%
Input aftermarket9766163160+2%
Input Total 203 162 365 386 -5%
Revenue OE93124217234-7%
Revenue aftermarket77821591553%
Revenue Total 170 206 376 389 -3%
Operating profit 2 13 21 34 29 17%
Operating margin 2 6.9%10.7%8.9%7.5% 140bps




1 2014 and H1 restated at 2015 average exchange rates.
2 Adjusted to exclude exceptional items and intangibles amortisation.


This information includes 'forward-looking statements'.  All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding The Weir Group PLC's ("the Company") financial position, business strategy, plans (including development plans and objectives relating to the Company's products and services) and objectives of management for future operations, are forward-looking statements.  These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning.  Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.  Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future.  These forward-looking statements speak only as at the date of this document.  The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.  Past business and financial performance cannot be relied on as an indication of future performance.  

This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: The Weir Group PLC via GlobeNewswire