Third quarter review

Group

During the quarter the Group made good progress as we continued to build our track record of delivery as a focused mining technology leader.

In our mining markets we capitalised on high levels of ore production to deliver growth in Minerals AM orders and maintained good momentum in the mining focused part of ESCO. We also executed strongly on our record order book, delivering year-on-year growth in revenue and expanding our margins.

Through the period, our mining customers remained focused on growing ore production of critical energy transition metals, such as copper. These production trends, coupled with growth in our installed base from recent market share gains, supported demand for our spares and expendables. We saw particular strength in South America, given our significant installed base in copper mines in the region, and also in Australasia, as production ramped-up at a number of recently commissioned lithium mines. Demand for OE for small brownfield projects continues at strong levels, with customers ordering Weir solutions to debottleneck and expand production from existing mines, and our good progress on mining attachments in ESCO continued.

On a constant currency basis, Group orders in the quarter were down 2%, and year-on-year are stable for the 9 months to 30 September.

AM orders²were down 1%, with growth in orders in hard rock mining offset, as expected, by lower demand from the Canadian oil sands and ESCO’s infrastructure customers. In OE, we saw continued momentum in demand for small brownfield solutions, though Q3 orders² were down 8% year-on-year against a strong comparator which included £16m of orders for nickel expansion projects in Indonesia. Our year to date book-to-bill is 1.

In the quarter we also made significant strides in our Performance Excellence transformation programme, and we are on track to deliver £6m of savings this year. As we progress through the programme our enthusiasm for the operational and financial benefits it will deliver to Weir continues to grow, and we look forward to sharing a full Performance Excellence update at our forthcoming capital markets event.

Minerals

AM orders² +1%; positive ore production trends and installed base expansion
OE orders stable sequentially; -10% year-on-year relative to a strong comparator

Demand for AM was driven by ore production trends and installed base growth. Year-on-year growth reflects volume growth in hard rock mining and a contribution from price, partially offset, as expected, by a decline in orders from the Canadian oil sands. Sequential movement in AM orders reflects typical seasonal patterns.

In OE, we maintained good order momentum. Demand was driven by a number of smaller orders for debottlenecking and efficiency projects at existing mines as larger project activity remained limited.

At the Iron Bridge magnetite mine in Western Australia, where ore production is ramping up, Weir’s integrated solution, which includes our Enduron® High Pressure Grinding Rolls (HPGR), is performing well. The £15m per annum HPGR service contract is due to commence later in Q4, and we also expect orders for spares and expendables for the other Weir equipment installed at the mine.

In the period, the Division’s Canadian subsidiary retained the contract to manage Canada’s Naval Engineering Test Establishment (NETE). Weir has been involved in the management and operation of NETE since 1953, and the 5-year framework contract, which commences in April 2024, authorises a value of work up to CAD $560m.

ESCO

Orders² -3%; momentum in demand from mining markets, offset by infrastructure
Further market share gains in mining attachments

In our mining markets, year-on-year orders were stable with good momentum in demand for mining expendables. In addition, we saw strong demand for mining attachments, as we continued to win market share through our differentiated technology.

In infrastructure, in our largest market of North America, order trends continued to be impacted by dealer destocking, and while end market activity levels were broadly stable, they remain well below the peak of 2022. In Europe, macroeconomic factors meant underlying demand continued to be supressed.

Outlook

We are reiterating our 2023 guidance for strong growth in constant currency revenue and operating profit, operating margins of 17%, and 80% to 90% free operating cash conversion.

Looking further ahead, while there are complexities in the macroeconomic and geopolitical environment, ore production trends in mining continue to be strong and our aftermarket has embedded resilience. Therefore, in our base case scenario for our mining focused business we assume production trends, together with the impacts of declining grades and installed base expansion, will support AM growth rates consistent with our through-cycle targets, and continued momentum in small and medium sized OE projects.

We are also taking action through Performance Excellence to optimise our operations, which will drive margin expansion beyond 17%, and further improve cash conversion to 90% to 100%.

Net debt

Free operating cash flow for the period was positive, underpinning our confidence in achieving our full year cash conversion target. Net debt was marginally higher than that at 30 June 2023, primarily driven by the impact of translational foreign exchange on US$ denominated debt.

Spotlight capital markets event

We will be holding a spotlight capital markets event on the afternoon of 6 December 2023 (UK time) in which we will highlight our growth prospects from smart, efficient and sustainable mining, and the compounding benefits of our Performance Excellence transformation programme. Interested parties can register at www.global.weir/investors.

_Notes:

_{1. Financial information is given for the three months ended 30 September 2023, unless stated otherwise.}

_{2. Orders are reported on a constant currency basis at September 2023 average exchange rates.}