Weir hit by drop in orders as it sells off assets
Slide reflects difficulties following damaging slump in the oil price
WEIR Group has revealed a sharp downturn in orders in the five months to the end of May as it announced the sale of two renewables operations for a combined £34.4 million.
The 15 per cent order slide underlined the difficulties the Glasgow engineering giant is continuing to face in light of depressed activity in the global oil and gas industry, which led the group to axe 1,600 staff last year. The bulk of those cuts came in North America.
Weir had reported a 21 per cent downturn in first quarter order input in April, which came after it booked a 47 per cent slump in pre-tax profits to £220 million for 2015.
Weir, which has cut its workforce by 10 per cent to 14,700 since the oil price slump began to bite in the autumn of 2014, said yesterday orders and revenues in April and May were down slightly compared with the prior year. But it declared it remained on track to deliver first-half profits of £74 million – in line with previous guidance. It is due to report its interim results in July.
Weir has continued its bid to offload £100n of non-core assets by agreeing to sell renewables businesses American Hydro Corporation and Ynfiniti Engineering Services of Madrid, in deals which could ultimately be worth £36.7m. It had acquired Pennsylvania-based American Hydro and Ynfiniti in 2010.
Weir, which will book a loss of around £5m on the sale, unveiled the assets disposal programme in February. It restructured its power and industrial division as Weir Flow Control to move away from renewables and focus more on processing industries.
American Hydro and Ynfiniti had generated combined revenues of £38m and £1.4m of operating profit in 2015.
American Hydro, which employs 241 staff and booked net sales of $46m in 2015, has been acquired by Wartsila, a lifecycle solutions specialist for the marine and energy markets listed in Helsinki. Ynfiniti was sold to its management team.
Pierpaolo Barbone, president of Wartsila Services, said: “The acquisition supports our growth strategy and expansion in renewables, improving our offering and services towards our customers.”
Weir declined to comment beyond its statement to the Stock Exchange yesterday in which it said net debt at the end of June will be lower than previously guided thanks the disposal proceeds and the scrip dividend uptake.
Weir said: “The group notes that trading in April and May was consistent with the trends seen in Q1 and in-line with expectations. Orders for the five months to the end of May were 15 per cent below the prior year period (Q1: 21 per cent lower) with orders and revenues in April and May slightly lower than the prior year.
“As a result, the group remains on track to meet its prior year guidance for first half profits, ahead of current market expectations.”
Analyst Sanjay Jha at Panmure Gordon questioned the group’s continuing focus on mining and oil and gas. He suggested Weir should focus more on supplying water infrastructure projects.
Mr Jha said: “My personal view is that they should be more on the water side and less in mining and oil. They had to do something about the balance sheet so they are selling assets where they are not very strong. I think the future is not in oil and gas and mining – it is in water.”
Shares in Weir, which peaked at around £28 in September 2014 and dipped below £8 earlier this year, closed up 36p at 1,389p. RURAL Economy Secretary Fergus Ewing has announced the Scottish Government will consult on plans to apply for BSE negligible risk status – a move which could unlock new export opportunities for Scottish red meat and add value throughout the red meat supply chain.
Scotland has been BSE-free since 2009, has had no cases of BSE in animals born since 2005, and is now eligible to make an application for BSE Negligible Risk status as a region of the UK.
Speaking at the Royal Highland Show yesterday, the Cabinet Secretary said: “Our premium produce is world renowned but there are countries to which we are currently unable to export Scotch Beef and Scotch Lamb. Achieving BSE negligible risk status could help open up markets across the world for these premium products, and