Weir Group counts cost of weaker energy sector

ENGINEERING group Weir is braced for further order weakness in its oil and gas business after reporting a decline that was not as bad as some in the City had feared.

Shares in the Glasgow-headquartered firm lifted 5.6 per cent to 1,836p as it also flagged a further £10 million of cost cutting at its oil and gas operations, which have been impacted by “challenging” markets.

In a trading update for its first quarter, the group noted a “significant” decline in the upstream oil and gas segment with order input down 23 per cent and a further slide expected in the second quarter.

Weir, which makes valves and pumps for the energy and mining industries, plans to cut a further 125 jobs, mostly in its North American oil and gas business, and consolidate its service centres in the region.

The firm said it had made good operational progress in its power and industrial division with margins up as cost actions take effect.

Chief executive Keith Cochrane said: “While mining markets remained subdued, the performance of the minerals division once again demonstrated its resilience.

“Oil and gas activity levels are still falling and we expect a further decline in divisional revenues in the second quarter. In response the group is taking further actions to support profitability.”

Brewin Dolphin analyst Nicla Di Palma described the latest numbers as “mixed”, adding: “The better-than-expected performance in minerals, the largest division, is a relief.

“Furthermore, whilst visibility is low in oil and gas, we see the first half of this year as the trough for divisional revenue and operating profit and we expect a recovery in the second half.”