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
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).