ENGINEERING giant Weir is hoping fairer conditions will favour its dominant mining division in the second half of this year after what has proven to be a difficult first six months.
The Glasgow-based group – which makes pumps and valves for the mining, oil and gas industries – saw overall orders increase by 10 per cent to £1.24 billion during the period to 4 July. However, strong growth in oil and gas failed to overcome the weakness in mining markets hit by disruptions in Africa.
As a result, group operating profits slid by 7 per cent to £201m, while earnings fell by 8 per cent to 61.4p per share.
Chief executive Keith Cochrane pointed out that all of these figures were worse than would have otherwise been the case if the value of the pound had not strengthened significantly during the period. Weir employs about 600 of its 15,000 global workers in Scotland, and generates the majority of its revenues from outside the UK.
Underlying performance was “in line with expectations”, he added. “We anticipate strong revenue and profit growth in the second half of 2014, assuming no further deterioration in mining end-markets.”
Growth in that sector has been hit by the metalworkers strike in South Africa, which closed Weir’s manufacturing operations and resulted in an estimated £3m loss in July. Production in West Africa was impacted by the Ebola outbreak and depressed gold prices.
Amid these difficulties, equipment orders in the minerals division fell by 27 per cent. Revenues dropped by 17 per cent to £548 million.
The picture was brighter in the oil and gas division, with revenues 14 per cent higher at £435m and operating profits up 18 per cent at £98m.
The figures were driven by an accelerating recovery in North America, where Weir has a strong position in the US shale market.
Growth was focused on unconventional shale oil production, also known as fracking.
Operating profits in the group’s smallest division, power and industrial, fell by 22 per cent to £9m as customers delayed development of new power production plants. However, there are signs of activity building in nuclear in hydro.
Cochrane said the underlying performance proved the strength of the group’s business as a whole.
“The benefits of our diverse portfolio were evident,” he said. “Double-digit growth in oil and gas was partially offset by challenging mining end-market conditions and the impacts of prolonged industrial action in South Africa.”
Weir has increased its interim dividend by 70 per cent to 15p per share. This “rephrased” payment, to be made on 7 November, is expected to represent about one-third of the total dividend for 2014.