Weir cuts oil and gas forecast amid US market slowdown

Weir Group has cautioned that oil and gas earnings for 2019 will be at the lower end of previous guidance as it unveiled first-half results.

Weir Group reported a 7 per centdrop in like-for-like total orders in the six months to June. Picture: John Devlin
Weir Group reported a 7 per centdrop in like-for-like total orders in the six months to June. Picture: John Devlin

The Glasgow-headquartered engineering group warned that its full-year oil and gas operating profit is now expected to be toward the lower end of a previously forecast £55 million to £95m range, amid “challenging” conditions and slowing orders in North America.

Overall, Weir reported a 7 per cent drop in like-for-like total orders to £1.4 billion in the six months to 30 June, with oil and gas orders sliding 27 per cent.

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The FTSE 250-listed company attributed the latter to tough comparables, with an activity surge in 2018 leading to oversupply in pressure pumping markets.

The group unveiled a 22 per cent fall in like-for-like operating profits, at £172m, although this marked a 2 per cent increase on a constant currency basis. Revenues stood at £1.3 billion for the half year, marking a 4 per cent like-for-like drop or 22 per cent jump on a constant currency basis.

Weir hailed “good constant currency revenue and profit growth” and rising demand for its own innovations. The engineer highlighted “encouraging” signs in the recovery of international markets, as drilling activity picks up and the group’s wellhead growth strategy begins to gain traction.

The group’s two mining-focused divisions, Minerals and Esco, now represent around 75 per cent of overall revenues. Weir also pointed to the “successful execution” of its portfolio restructure, completing the sale of its Flow Control division for £275m.

The board approved an interim dividend of 16.5p per share, up from 15.75p 12 months previously.

Chief executive Jon Stanton said: “We are making good progress in our mining equipment businesses benefiting from our focus on aftermarket-intensive applications, particularly for battery metals including copper, lithium, nickel and cobalt supported by our extensive installed base and global service network.

“Our pipeline of firm [original equipment] quotes has grown significantly year on year with encouraging demand for our technology that reduces water and energy consumption.

“While oil and gas markets in North America continued to be challenging compared to the same period last year we saw good demand for our latest innovations. As we look to the rest of 2019, we continue to anticipate another year of good constant currency revenue and profit growth.”