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The Weir Group PLC
1 May 2013
THE WEIR GROUP PLC
INTERIM MANAGEMENT STATEMENT for the period 29 December 2012 to 30 April 20131
The Weir Group PLC announces that trading in the period has been resilient and in line with expectations. Guidance for the full year is unchanged. Weir continues to expect low single digit revenue growth and broadly stable margins, with lower first half revenues and margins offset by growth in the second half, supported by continued gradual economic and end market improvement.
The Group's first quarter performance was impacted by a lower opening orderbook, particularly in the Oil & Gas division, partially offset by a positive first contribution from recent acquisitions, most notably Mathena.
As expected, on a like for like2 basis, first quarter input was 14% lower than the prior year comparator but 14% higher than the fourth quarter of 2012, with good underlying sequential growth in the Minerals and Oil & Gas divisions.
On a reported basis, order input3 was down 14% against the prior year period. Original equipment orders were down 32% on a reported basis (30% lower like for like) while aftermarket orders were up 2% (1% lower like for like).
First quarter revenues were lower than the prior year, primarily due to materially lower Oil & Gas original equipment sales. Consequently operating profits were down on the prior year period with margins also impacted by one-off costs in relation to the continued restructuring of the pressure pumping operations.
Order input for the 13 weeks was down 6% against the prior year period and in line with our expectations. Original equipment input was 23% lower than the prior year period, when a number of large project orders were received, while aftermarket input was up 6%. On a sequential basis, like for like input was 20% higher than the fourth quarter of 2012, supported by a number of original equipment orders which had been delayed pre year-end and which were subsequently received in the first quarter of 2013, and good aftermarket growth.
Strong activity levels continue to be seen in Africa and South America, with both regions recording year on year input growth in the first quarter. Project activity in Australia remains at low levels, impacted by conditions in the coal and iron ore markets. Global aftermarket activity benefited from the growing installed base and strong production volumes with spares volumes increasing through the period.
We continue to see a solid pipeline of future opportunities with a clear switch towards smaller brownfield projects. In general, projects are progressing at a slower pace than in prior years resulting in delivery dates for a number of projects in the order book being delayed until the second half of the year.
Our guidance for full year divisional revenues and margins remains unchanged.
OIL & GAS
Reported order input was in line with our expectations, down 15% on the prior year period and 21% on a like for like basis. Original equipment input was 42% lower on both a reported and like for like basis. Aftermarket input was up 7% against the prior year period (down 4% on a like for like basis). On a sequential basis, like for like input was 11% higher than the fourth quarter of 2012. Input from Mathena was in line with expectations and integration is progressing as planned.
Upstream markets remained challenging with average US rig count 12% lower year on year and remaining around 2012 year-end levels. As anticipated, Pressure Pumping market conditions improved slightly in the first quarter with input levels increasing through the quarter as customers aftermarket inventory levels continued to normalise. First half Pressure Pumping operating margins will be impacted by up to $10m of one-off costs in relation to the closure of two small manufacturing facilities, with the resultant operating efficiencies from centralising activities in Fort Worth, Texas, supporting higher second half margins. First half Pressure Pumping margins will also be impacted by the sale of the remaining stock of legacy fluid ends and lower margins on new frac pump orders. Margins on all other product categories continue to be in line or ahead of expectations.
Like for like Pressure Control (Seaboard) input was down on the prior year period, but up on the last quarter of 2012, reflecting lower end market activity levels and slight delays to the roll out of new product initiatives. Services and Downstream operations each recorded positive input growth in the period.
Full year divisional revenue and underlying operating margin expectations remain unchanged.
POWER & INDUSTRIAL
Order input for the 13 weeks was down 27% on the prior year period, which included substantial nuclear valve and hydro refurbishment orders. Excluding this nuclear contract, underlying valve orders increased by 8% on the prior year period with strong emerging market growth. Input was slightly lower than expected due to a number of project delays, which are now expected to be delivered in the second half of the year. Original equipment input was 30% lower and aftermarket orders 23% lower on the prior year period, impacted by the timing of service contract awards. We continue to see good opportunities in emerging markets with good underlying order growth in control and isolation valves.
Our guidance for full year divisional revenues and operating margins remains unchanged.
Net debt at 29 March 2013 was higher than that reported at 28 December 2012, primarily reflecting completion of the acquisition of Mathena, Inc and the R Wales group of companies and the translation of US dollar denominated debt.
Financial information is given for the 13 week quarter ended 29 March 2013
Where growth is provided on a like for like basis, like for like is defined as comparison of 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.
Order input is reported on a constant currency basis
A conference call for analysts and investors will be held at 8 a.m. (UK time) on Wednesday 1 May to discuss this statement. Participants can join the call on +44 (0) 1452 555 566 using the conference ID 59146028. A recording of this conference call will be available until Wednesday 07 May on +44 (0) 1452 550 000 using the conference ID 59146028#.
|The Weir Group PLC|
|Andrew Neilson, Head of Strategy and Corporate Affairs||Tel. 0141 308 3750|
|Jonathan Milne, Group Communications||Tel. 0141 308 3781 (Mobile: 07713 789536)|
|Brunswick Group||Tel. 020 7404 5959|
This information includes 'forward-looking statements'. All statements other than statements of historical fact included in this release, including, without limitation, those regarding the Weir Group's 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.
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