Weir Group PLC (LON:WEIR) has provided its trading update for the third quarter ended 30 September 20241
Order pipeline converting as expected, 2024 full year guidance reiterated
Improving demand for expansion projects; Group OE order2 growth +15%
• Reko Diq and OCP large greenfield orders awarded: £51m booked in Q3
• Good momentum in OE orders on brownfield and sustainability projects
Mining aftermarket demand positive; Group AM orders2 +2%
• Minerals aftermarket +3% – favourable trends in hard rock mining
• ESCO aftermarket -2% – core GET growth (+4% YTD) offset by phasing of large orders
Delivering Performance Excellence benefits at pace
• Cumulative Performance Excellence savings to date of £19m
• 2026 target of £60m cumulative savings on track
FY outlook: 2024 guidance reiterated
• Growth in constant currency revenue and operating profit
• Operating margin of c.18%
• Free operating cash conversion of 90% to 100%
Jon Stanton, Weir Group Chief Executive Officer, commented:
“We are capitalising on growing interest for our sustainable solutions with major orders received for the Reko Diq project and the OCP expansion as well as good momentum on brownfield projects. These orders demonstrate Weir’s mining technology leadership and our unique opportunity to provide transformative solutions for sustainable mining as the energy transition gathers pace.
Aftermarket orders were in line with our expectations and reflect high levels of activity in core mining markets with the mine specific factors seen in H1 moderating.
Going into the fourth quarter we expect orders to continue to develop positively, and we reiterate our 2024 guidance of growth in constant currency revenue and operating profit, together with achievement of our margin and cash conversion targets.”
Third quarter review
Group
We have seen positive momentum from our customers on greenfield projects required to support the energy transition. In the quarter, we recognised £26m relating to orders of our ENDURON® high pressure grinding rolls (HPGR), part of our sustainable solution for the Reko Diq project in Pakistan, one of the largest undeveloped copper and gold mine sites in the world. In addition, we secured orders for £25m at OCP’s greenfield phosphate projects, an important mineral in fertilisers. These orders are an exciting demonstration of the opportunities which lie ahead as we support our customers in accelerating sustainable mining.
In addition to greenfield projects, our customers continue to maximise production from existing assets. Underlying demand for OE within brownfield projects continues at strong levels, with customers choosing Weir products as they debottleneck and expand.
During the quarter, Group OE orders2 increased +15%.
Increases in production and installed base expansion supported growth in Minerals AM orders2 (+3%). In ESCO, AM orders2 were slightly lower (-2%), with positive momentum for core GET in both mining and infrastructure markets offset by the timing of larger orders in dredge and the Canadian oil sands.
In total on a constant currency basis, year-on-year Group orders increased +5% in the third quarter and were stable for the nine months to 30 September 2024. Year to date book-to-bill increased to 1.03.
Projects across the functional transformation, capacity optimisation and lean processes pillars of our Performance Excellence programme are progressing at pace with £19m of cumulative savings now realised, leaving us firmly on track to deliver our 2026 target of £60m.
On technology, we are bringing innovative new solutions to market including NEXSYS®, our next generation GET solution, which delivers reduced downtime and increased wear life for our customers. In September we also launched NEXT intelligent solutions, our integrated digital offering for process optimisation and wear life monitoring.
Minerals
· OE orders2 +19%; reflecting large greenfield order wins and positive underlying momentum
· AM orders2 +3%; reflecting positive ore production trends and installed base expansion
In the quarter we recognised £51m of large OE orders for the Reko Diq and OCP projects. A further £27m relating to the Reko Diq project is expected to be booked over the course of Q4 2024 and Q1 2025.
We are growing our market share in key product categories and converted c.90% of our competitive field trials for large mill circuit pumps against a range of competitor solutions in the first nine months of the year.
AM demand was driven by ore production trends and installed base expansion. Sequential movement in AM orders reflects typical seasonal patterns. The level of mine specific factors seen in H1 moderated and AM trends are expected to continue to be positive in Q4 with the incremental £14m multi-period order booked in October.
ESCO
· OE orders2 down £2m; driven by timing of attachment orders with pipeline strong for Q4
· AM orders2 -2%; growth in core GET offset by timing of large orders
OE orders were slightly down in the quarter driven by phasing. We continue to gain market share in buckets, and have a good pipeline going forward as we execute on the mining attachments strategy.
In the aftermarket, growth in core GET was offset by the phasing of large dredge and oil sands orders versus the prior year. We saw good momentum in both mining and infrastructure GET, with year to date orders increasing 4%, and we continue to win market share with net 60 total competitive major digger conversions. Following its September launch we secured our first order for the new NEXSYS® GET solution, with more orders following in Q4.
Net debt
Free operating cash flow for the period was positive, underpinning our confidence in achieving our full year cash conversion target of 90% to 100%. Net debt was lower than that at 30 June 2024, partly due to favourable translational foreign exchange movements reflecting the strengthening of GBP.
Outlook
Going into the fourth quarter, we expect orders to continue to develop positively. For the full year, Weir Group reiterate our guidance for growth in constant currency revenue and operating profit, operating margins of c.18%, and delivery of free operating cash conversion of 90% to 100% in line with current market expectation.
Our Performance Excellence transformation programme continues at pace, and we are on track to deliver our 2026 operating profit margin target of 20% and sustainable cash conversion of 90% to 100%.
Looking forward the long-term fundamentals for mining and our business are highly attractive, underpinned by decarbonisation, GDP growth, and the transition to sustainable mining.
Notes:
1. Financial information is given for the three months ended 30 September 2024, unless stated otherwise.
2. Orders are reported on a constant currency basis at September 2024 average exchange rates.
Analyst and investor conference call
A conference call for analysts and investors will be held at 0800 GMT on Tuesday 5 November 2024 to discuss this statement. Participants can join the call by registering in advance by visiting www.global.weir/investors and following the link on the page. A recording of this conference call will be available until Tuesday 12 November 2024.
