ENGINEERING giant Weir Group saw its income and profits slump in the first half of the year as declining commodity prices hit the development of new mining and gas “fracking” operations.
But the Glasgow-based firm said that the 14 per cent fall in pre-tax profits from £225 million to £193m was in line with expectations. In addition, it pointed to an increase in orders in the second half of the year as well as “notable” new contracts, particularly a coal bed methane extraction project in Australia and the expansion of a oil sand scheme in Canada, which will offset the downturn to meet its full-year targets.
Keith Cochrane, chief executive, said there was “no question” that the first six months of the year were “challenging”.
He continued: “Clearly, mining markets are challenging and we haven’t shied away from that. We see some project movement in around both the first half, second half and beyond and that will have some impact.”
He said it was “encouraging” that orders in second quarter of the half year were up on the first quarter, while new orders in the first half of the year exceeded the firm’s turnover of £1.2 billion in the same period, albeit this was down 10 per cent.
Cochrane said: “The miners certainly aren’t keen on big greenfield projects, but they are willing to invest in small, quick-return plant optimisation efficiency projects and we have seen some good wins there, and our after-market business remains very resilient.”
After-market sales in all three of the firm’s divisions, including mining, oil & gas and power & industrial, rose to 63 per cent of total revenues, while margins increased “ahead of expectations” in its mining division from 18.2 per cent to
19.8 per cent, albeit overall this was down due to lower margins in the other divisions, particularly oil & gas which was again hit by lower gas prices in the United States.
Weir has renegotiated an $800m (£524.8m) revolving credit facility with a consortium of 12 banks extending to 2018, replacing one that was due to expire in 2014.
Shares in Weir closed at 2,164p, up 87p or 4.2 per cent.