Excelent update this morning and ahead of expectations.

Dollar boosts Weir expectations

MoneyAM

Weir Group says in a trading update it continued to perform well in the final quarter and expects pre-tax profit to increase to 174 million for 2008.

Previous guidance at October was for 170m. Weir made 114m PTP in 2007.

The engineering group says it benefitted particularly from strengthening of the US dollar against sterling in the quarter.

'The group has continued to perform well, growing input, revenue and profit on a constant currency basis compared to the equivalent prior year period.'

Net debt at 31 December is expected to be lower than the half-year figure of 261.7m.

Weir says it 'enters 2009 in a good position and is ready to respond to the market challenges as they develop during the year'.

StockMarketWire.com
Weir Group said its H1 pretax profit has tapered to £82m, from £108m, with interim dividend at 15p a share, unchanged on the year.

Revenue was £866m, from £981m.

It also said CEO Keith Cochrane will step down, being succeeded by Jon Stanton as CEO-designate from Oct. 1, 2016.

CEO Keith Cochrane commented:
"Our first half performance was ahead of market expectations and demonstrated the Group's fundamental strength and resilience.

"While markets remained challenging, the Minerals division fully captured available opportunities, Flow Control improved margins and Oil & Gas grew market share in important product categories.

"As a whole, the Group continued to be highly cash generative and aggressively reduce costs, while also extending its technology leadership in products and services which are vital to our customers' operations.

"Our full year guidance for a reduction in constant currency Group operating profits is unchanged.

"Our reported numbers will benefit from a positive currency effect in the second half if current rates prevail.

"While there have been early signs of stability in oil and gas markets, activity remains at very low levels with only a modest improvement expected in late 2016.

"Conversely, there are signs of mining markets normalising, supported by commodity prices and an improving pipeline of brownfield opportunities.

"Looking ahead, we will continue to prioritise strong cash generation and invest in the strategic priorities which will ensure the Group is positioned to benefit fully as markets recover."

StockMarketWire.com
Weir Group has turned in a FY pretax profit of £170m, down from £219m a year earlier and impacted by the severe oil and gas market downturn, as it reported a return to growth in Q4.

Dividend per share was steady at 44p, with EPS at 61.2p, from 78.0p.

"Following a challenging and prolonged downturn, the group returned to growth in the fourth quarter of 2016 as our main markets showed signs of improvement and we benefited from our on-going investment in new technology and long-term customer relationships," said CEO Jon Stanton.

He said Minerals increased revenues from both original equipment and aftermarket.

Oil & Gas extended its technology leadership amidst difficult end markets and Flow Control benefited from its recent restructuring which supported margins in challenging downstream energy markets.

"Our record of excellent cash generation continued," said Stanton.

Looking ahead, Stanton added that Weir expected to deliver strong cash generation and good growth in constant currency revenues.

"Profit growth will be further supported by foreign currency translation benefits, partly offset by incremental investments in people and technology."

Separately, the company said it has appointed Geetha Dabir as its Chief Technology Officer.

StockMarketWire.com
Weir said in recent weeks, upstream North American markets recovered more strongly than formerly anticipated.

Higher levels of frack fleet utilisation and significant tightening of industry capacity are both benefiting the group's oil and gas division.

As a result, it saw increased volumes, stronger operating leverage and modest pricing recovery ahead of prior expectations, and delivered low double-digit operating margins in the first half.

Assuming supportive market conditions continue, the division is expected to deliver low-teens operating margins through the second half with full year revenues and operating profits that are above the upper end of analysts' estimates.

This growth will be partially offset by one-off charges to operating profit of £13m related to previously announced legacy contract delivery challenges in the Gabbioneta business, part of the group's flow control division. Expectations for the minerals division remain unchanged.

The updated outlook for the Group's full year performance is now for strong constant currency revenue and profit growth. As previously indicated, profits will be weighted to the second half of the year.

StockMarketWire.com
Services company Weir Group posted a 47% jump in annual profit after a recovery in commodity prices triggered an increase in construction activity.

Pre-tax profit rose to £250m, as revenue gained 28% to £2.36bn.

The company left its dividend unchanged at 44.0p per share. Net debt during the year was cut by £8m to £843m.

'Looking to 2018, assuming market conditions remain supportive and despite anticipated foreign exchange headwinds, we expect to deliver strong revenue and profit growth and further balance sheet deleveraging,' chief executive Jon Stanton said.

StockMarketWire.com
Weir has entered into a binding agreement to acquire ESCO Corporation, a US company based in Portland, Oregon, for an equity value of US$1,051m and an estimated enterprise value of US$1,285m.

ESCO specialises in highly engineered GET for surface mining and construction. Its equipment is used in highly abrasive applications such as hard rock mining and it shares Weir's 'razor/razor blade' aftermarket-focused business model.

In 2017 ESCO delivered revenues of US$632m and pro forma adjusted EBITA of US$68m. Strong growth in 2018 is expected to deliver full year revenues of around US$675m and pro-forma adjusted EBITA of approximately US$80m.

An estimated ESCO enterprise value of around US$1,285m equates to a 12.6x 2018 pro forma adjusted EV/EBITDA multiple, or approximately 10x including full run-rate synergies.

The acquisition is expected to be EPS accretive in the first full year post completion and ROCE is expected to exceed the group's WACC by year three. The transaction is expected to complete in early Q3, and at year-end 2018 pro forma leverage is anticipated to be around 2.0x net debt / EBITDA, prior to any impact from a Flow Control disposal.

The Weir strategy is to prioritise opportunities for growth in minerals and oil & gas.

Consistent with this prioritisation the board of Weir will initiate a process to sell the Flow Control division. This process will focus on maximising value for shareholders, with all options to be considered and no fixed timetable. Proceeds will be used to further reduce leverage and to fund future investment in growth in core platforms.

Weir has also issued a trading update on its performance in the first quarter 2018. First quarter group orders were up 22% with minerals orders up 13%, oil & gas orders up 50% and flow control orders up 2%. Full year constant currency revenue and profit expectations are unchanged.

Weir Group CEO Jon Stanton said: "With ESCO we'll be joined by a world-class team and add another leading global brand. Together, Weir Minerals and ESCO will create a unique customer proposition as the premium provider of mission critical surface mining solutions from extraction to concentration, built on proprietary technology, superior wear life and supported by an unrivalled service network.

"The acquisition meets our near-term financial criteria before we pursue the revenue opportunities from bringing ESCO products into new markets through our global network. We are acquiring a high quality business at the right time, with the market in the early stages of its recovery, providing opportunities for long-term growth. We intend to initiate a process to sell Flow Control to reallocate capital to build further on our core platforms.

"Weir will be a focused premium brand business with leading technology, increased scale, an improved mix of mining and oil and gas markets, higher aftermarket sales and the financial strength to invest in growth."

Peel Hunt today reaffirms its buy investment rating on Weir Group PLC (LON:WEIR) and raised its price target to 2450p (from 2350p).

Barclays Capital today reaffirms its overweight investment rating on Weir Group PLC (LON:WEIR) and raised its price target to 2600p (from 2350p).