Third quarter aftermarket orders stable with overall order input² down 7%
Minerals - Aftermarket orders grew 4%; original equipment fell against a strong prior year period
Oil & Gas - Sequential quarterly input growth in North America; further declines in the Middle East
Flow Control - Continued operational progress; mid and downstream oil and gas more challenging
Disposal programme on track to deliver up to £100m by year end; £79m achieved by end of October
Full year profits anticipated to be slightly lower than current market expectations
Continued strong cash generation expected in 2016

Jon Stanton, Chief Executive, commented:

“There are signs in the Group’s third quarter performance that our core markets have started to improve. Minerals aftermarket orders returned to growth and North American Oil and Gas customers started planning for higher activity levels next year. The Group’s trading results reflected the low point in the North American oil and gas market and tougher conditions in the Middle East.

“Assuming commodity prices remain supportive, we anticipate further sequential growth for the Oil & Gas division in the fourth quarter but little improvement in the pricing environment. Given conditions in the Middle East as well, we now expect the division to be around breakeven in the fourth quarter and slightly lossmaking for the full year. The combined outlook for Minerals and Flow Control is unchanged. Therefore, including a small further foreign exchange benefit, the Group’s full year 2016 profits are expected to be slightly lower than current market expectations.

“Weir is well placed to benefit as markets recover. The strength of the team together with our global leadership positions in mining and oil and gas, deep customer relationships and investment in innovative technology, give the Group a robust platform for long term growth.”

Third quarter review

Third quarter input reduced 7% compared to the prior year period, primarily driven by a reduction in activity levels across Oil & Gas and lower original equipment orders in Minerals. Aftermarket orders were resilient and only 1% lower than the prior year period with original equipment input down 20%.

Revenues, on a constant currency basis, were in line with expectations. The Group maintained a positive book to bill ratio of 1.02 over the 3 month period. Operating margins were lower than the prior year, principally due to losses in Oil & Gas, and broadly in line with first half levels. The Group remains on track to deliver cumulative annualised cost reductions of £160m since Q4-2014, including £50m of savings actioned in the current year. Agreements for a further £33m of property disposals were signed in the period.

The Group continued to make good progress with its technology agenda which positions it to take full advantage as markets recover. Oil & Gas received its first order for its next generation frac pump with a number of other customer trials ongoing and the EPIX joint venture is now preparing to start trading. Minerals launched a new high-horsepower cone crusher while trials of the Group’s Synertrex IoT solutions continue across a number of products, working closely with Microsoft and Dell.

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Notes:

² Order input is reported on a constant currency basis. Third quarter refers to the financial period 3 months ended 30 September 2016.