Weir Group warns over oil and gas profits after orders decline in third quarter
Scottish engineers Weir Group today announced a 32 per cent decline in orders for its oil and gas division in the third quarter among challenging market conditions in North America.
In response, the company announced that they had undertaken a £30m cost reduction programme in the division, including reducing its North American workforce by around 450 posts.
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As a result in the decline in volumes, the sector only reported moderate profits for the third quarter. Weir warned that these were expected to be lower in the fourth quarter.
However, a record £100m Australian mining contract helped offset the decline. The Iron Bridge magnetite project pushed original equipment orders up 72 per cent, with total mineral orders up 17 per cent.
Commenting on the results, chief executive Jon Stanton said:
“The highlight of the third quarter was the record £100m order for an industry-leading crushing solution for the Iron Bridge Magnetite Project in Australia. The innovative process design, which will reduce energy and water consumption by more than 30% compared with traditional mills, reflects our growing technology offering and focus on making mining smarter, more efficient and sustainable.”
Expectations for the division are unchanged, with minerals anticipated to deliver solid growth in revenues and profits.
Orders at ESCO, the Oregon-based equipment manufacturer that Weir Group acquired in 2018, were up nine per cent in the quarter, driven by market share gains from new technologies.
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Stanton said: “The growth delivered in Minerals and ESCO reflects our integrated solutions strategy and the continued strength of our aftermarket business model. Looking forward, we now expect 2019 full year operating profits in the Oil & Gas division to be below our previous range with guidance for both Minerals and ESCO divisions unchanged.”
Shares in Weir were up more than three per cent today, to 1480p.
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