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INTERIM MANAGEMENT STATEMENT for the period 4 January 2014 to 30 April 20141
The Weir Group PLC announces that trading in the period has been in line with expectations. Guidance for the full year is unchanged. As set out in February, we expect good constant currency revenue and profit growth with margins broadly in line with 2013 levels, although reported results will be impacted by adverse foreign currency movements. We continue to anticipate that these currency headwinds will be greater in the first half, resulting in full year reported revenue and profit being weighted more towards the second half.
The Group's first quarter performance was supported by higher underlying activity levels as it entered 2014, particularly in the Oil & Gas and Power & Industrial divisions. First quarter input2 was 7% higher than the prior year comparator and 1% up on the fourth quarter of 2013. Original equipment orders were down 2% and aftermarket orders were up 13% against the prior year period.
There was good growth in first quarter revenues against the prior year period on a constant currency basis with strong underlying sales growth in Oil & Gas and Power & Industrial offset by adverse foreign currency movements on a reported basis. The order book increased in the period with a positive book to bill ratio of 1.07. Operating margins were broadly in line with the prior year period.
Order input for the 13 weeks was down 7% against the prior year comparator which contained a number of material brownfield orders. Original equipment input was 27% lower than the prior year period, reflecting ongoing weakness in mining end market conditions and the absence of any large orders in the first quarter. Aftermarket input was up 4% and at the lower end of expectations as South Africa was impacted by industrial unrest. On a sequential basis, input was 1% higher than the fourth quarter of 2013.
Mining capital expenditure continued to decline, as expected, with activity focused on smaller brownfield projects where there is a good level of quotation activity. Despite double-digit declines in copper and iron ore prices, global aftermarket activity benefited from underlying production volume growth and the commissioning of a small number of greenfield mines. Momentum was maintained in comminution with over £10m of orders in the first quarter. Non-mining end markets continued to represent around a quarter of divisional input with oil sands and industrial markets remaining resilient.
We continue to see a solid pipeline of brownfield opportunities in mining, although projects continue to progress at a slow pace as customers exercise caution. Customers remain committed to the commissioning of near complete greenfield projects, which will support ongoing aftermarket growth.
Full year divisional revenue and operating margin expectations remain unchanged.
OIL & GAS
Order input was slightly ahead of expectations, up 33% on the prior year period. Both original equipment and aftermarket orders were up 33% on the first quarter of 2013, which was the low point of the upstream cycle. On a sequential basis, input was 9% higher than the fourth quarter of 2013.
Upstream markets improved gradually through the period with average US rig count 2% higher than the fourth quarter of 2013 and drilling efficiencies supporting further well count growth. Oil focused drilling increased, supported by sustained commodity prices, and was offset by the ongoing decline in gas activity. We continue to expect mid-single digit full year growth in upstream North American and Middle East markets.
As anticipated, Pressure Pumping market conditions continued to improve in the first quarter alongside further market share gains in fluid end and flow control product categories. Original equipment orders were slightly ahead of expectations driven by increased frac and cement pump demand. Pressure Control input was also up on the prior year period, supported by a strong Canadian performance and good momentum from new product line introductions although we continue to invest in operational capabilities. Good input growth was also seen in Services and Downstream.
Full year divisional revenue and operating margin expectations remain unchanged.
POWER & INDUSTRIAL
Order input for the 13 weeks was up 5% on the prior year period. Original equipment input was 19% higher and offset by a 9% decline in aftermarket orders. On a sequential basis input was 16% lower than the fourth quarter of 2013, which included a large £20m Services contract win. Excluding this order, underlying input was 6% higher on a sequential basis.
Valves aftermarket orders grew strongly driven by good control and isolation valve input in the quarter and more generally we continue to see good opportunities in emerging markets. The improved Valves operational performance seen in the fourth quarter of 2013 continued into 2014. The first signs of recovery were seen in North American hydro markets with original equipment orders ahead of the prior year period. Services enjoyed good order growth supported by steam turbine orders.
Full year divisional revenue and operating margin expectations remains unchanged.
Net debt at 4 April 2014 was slightly higher than reported at 3 January 2013 reflecting usual seasonal patterns.
Analyst and investor conference call
A conference call for analysts and investors will be held at 8 a.m. (UK time) on Thursday 1 May to discuss this statement. Participants can join the call on +44 (0) 1452 567 058 using the conference ID 24465612. A recording of this conference call will be available until Wednesday 07 May on +44 (0) 1452 550 000 using the conference ID 24465612.
|The Weir Group PLC|
|Raymond Buchanan, Group Communications||Tel. +44 (0) 771 326 1447|
|Ross Easton, Communications Manager||Tel. +44 (0) 792 019 0994|
|Brunswick Group Patrick Handley/ Nina Coad||Tel. +44 (0) 207 404 5959|
1. Financial information is given for the 13 week quarter ended 4 April 2013.
2. Order input is reported on a constant currency basis.
APPENDIX - QUARTERLY INPUT TRENDS (Constant currency)
|Reported growth||Like for like growth|
|Oil & Gas||21%||33%||45%||33%||13%||24%||37%||33%|
|Power & Industrial||5%||-19%||22%||5%||5%||-19%||22%||5%|
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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