Engineering group Weir rides upturn in oil and minerals

● Pre-tax profits jump 47% to £250m ● Dividend held and outlook positive

A rebound in the North American oil and gas upstream industry and “great momentum” in minerals helped power a 20 per cent surge in total orders at Glasgow-based engineering group Weir in 2017.

Weir, which makes machinery, pumps and valves for the energy and mining sectors, yesterday said orders from the North American exploration and production sector leapt 82 per cent last year, with wider oil and gas orders up 67 per cent and minerals ahead 11 per cent.

Flow control orders fell 6 per cent, with crucial “aftermarket” growth offset by “tough original equipment conditions”, Weir said.

However, group chief executive Jon Stanton said the flow control division had now “turned the corner after a challenging first half”. In results that were well received by the market, Weir saw annual pretax profits jump 47 per cent to £250 million from £170m in 2016, on strong revenues of £2.35 billion, up from £1.84bn last time.

Operating profit margins rose to 12.4 per cent from 11.6 per cent. Earnings per share lifted 42 per cent to 86.7p from 61.2p, while the total dividend is maintained at 44p.

Stanton said: “The group’s performance in 2017 reflects the strength of Weir’s leadership positions in our core markets. We worked closely with customers to identify opportunities to increase their productivity and invested early to take full advantage of improving conditions.

“That proactive approach saw Minerals deliver great order momentum, underlined by the consistent growth in its high margin, cash generative aftermarket and positioned it decisively for the anticipated upturn in the mining capital cycle.

“Oil & Gas took full advantage of improving markets in North America to deliver an outstanding operating performance.” Stanton said the US fracking industry had played a strong part in increased demand for Weir products in North American upstream, with the company also riding on the back of increased demand due to the stronger oil price.

He said: “More of our customers are getting back to work and being busy. There is 80 per cent utilisation in America.” The boss added that there had been a fiveyear downturn in supplying equipment to the minerals sector, and he was hoping to see a similar upturn.

He said it was a plus that Weir was particularly exposed to the copper sector, which comprises about 25 per cent of its business supplying the minerals sector and its aftermarket in repair and maintenance.

“The tailwinds are good for that business. It enjoys pretty robustnaturalgrowth,around the level of GDP growth. And copper will benefit from areas like the growth in electric vehicles, power transmission and renewables.”

Stanton also cited President Trump’s commitment to improving US infrastructure, such as road and rail.