Weir share price: Q3 orders down 29 percent

Weir share price: Q3 orders down 29 percent

Weir Group Plc (LON:WEIR) today issued a trading statement for the period to November 2. Following are the highlights from the firm’s report.

**Highlights from Weir’s statement:**
Highlights:
Full year earnings expectations broadly in line with current market consensus2
£25m incremental cost savings, bringing annualised impact of actions taken in last year to over £110m3
Q3 Group order input4 down 29% year-on-year and 8% compared to Q2 2015
Minerals orders resilient in increasingly challenging markets
Further declines in Oil & Gas activity – US oil rig count down 14% in the past two months
Operational progress in Power & Industrial; margins increased
Weir Technology Advisory Board established; High-horsepower crusher launched
Keith Cochrane, Chief Executive, commented:
“The challenges in our end markets intensified during September and October. Mining customers took measures to preserve cash by delaying investments, reducing purchases of consumables and mothballing or curtailing production volumes at higher cost mines. Trading conditions in oil and gas markets were impacted by a double-digit decline in North American rig count as WTI oil prices fell below $50. In response to these market-issues, the Group has taken further action to support profitability. These measures will generate an additional £25m in annualised cost savings and include additional workforce reductions and service centre consolidations. We continue to invest in technology to further extend our global leadership positions, ensuring the Group is positioned to fully benefit from the good long-term structural growth prospects of our end markets.
Looking ahead, 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 consensus2.”
Third quarter review
Third quarter5 input was 29% lower than the prior year period and 8% lower than the second quarter of 2015, primarily driven by a significant drop in activity levels across oil, gas, power and industrial markets. Original equipment orders were down 20% and aftermarket orders 33% lower than the prior year period. On a like for like basis6 (excluding the acquisitions of Trio and Delta Valves), order input fell 31%, with original equipment down 25% and aftermarket down 33%. Order input for the 39 weeks was 22% lower (H1: 18% lower) with aftermarket orders down 20% (H1: 13% lower) and original equipment orders down 26% (H1: 29% lower).
Revenues, on a constant currency basis, were down compared to the third quarter of 2014 chiefly due to reduced North American oil and gas activity levels, but in line with the second quarter. The Group maintained a positive book to bill ratio of 1.01 over the 39 week period. Group operating margins were lower than the prior year, primarily due to the decline in margins of the Oil & Gas division. As a result of cost reduction measures taken in the third quarter the Group’s workforce will reduce by a further 400 posts.
Recognising the long-term potential of its markets and business model, the Group continued to prioritise investment in products and technology. A new range of high-horsepower crushers was launched by Minerals and positive test results gathered from new frack-pump valve designs in Oil & Gas. The Group-wide IoT (Internet of Things) programme, which aims to use big data analytics to monitor, improve and control performance, progressed well with the Group close to finalising strategic partnerships with global technology leaders. The Weir Technology Advisory Board was launched in the period and will ensure the Group has access to leading technologists from a range of industries.
As of 07:07 GMT, Tuesday, 03 November, The Weir Group PLC share price is 1,075.00p.

By Veselin Valchev
Veselin is a data scientist with extensive experience in commodities and natural resources within the FTSE 100. His data analysis skills ensure he reports without missing the fine details.
Invezz uses cookies to provide you with a great user experience. By using Invezz, you accept our privacy policy.