Weir Group bolstered by mining industry demand with City analysts upbeat about engineering firm’s long-term prospects
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Weir Group has bolstered its bottom line amid strong demand from the mining sector for equipment and spares.
The FTSE 250-listed engineering group said ‘highly supportive’ conditions in the mining industry helped lift its order numbers in the latest quarter by 19 per cent, with after-market orders up 21 per cent.
The company maintained its full-year revenue, profit and operating margin guidance.
In demand: Weir Group has bolstered its bottom line amid strong demand from the mining sector
Weir Group said demand was strong across all regions, particularly in South America, where miners maximised copper production, and North America, where the re-shoring of production to the US and the recent resurgence in activity in Canadian oil sands continued.
The group experienced ‘good operating momentum’ and pricing power during the period, pushing third-quarter revenues higher year-on-year as supply chain and logistics challenges waned, and input cost inflation was mitigated.
Weir Group shares rose today and were up 1.98 per cent or 31.50p to 1,623.50p this afternoon. The company’s share price had fallen by around 5 per cent in the last year.
Jon Stanton, the group’s boss, said: ‘The Group performed strongly in the third quarter, significantly increasing orders and delivering sequential revenue growth, while mitigating the impacts of inflation.
‘Demand for our aftermarket spares was particularly strong, reflecting the highly resilient nature of our business, as miners continue to maximise ore production. We also made good progress on our strategic growth initiatives, with increasing customer demand for our digital offerings and solutions for more sustainable mining.
‘Moving into the fourth quarter, supply chain challenges are easing, we have strong operating momentum and a record order book. Our FY22 guidance for strong revenue and profit growth, operating margin expansion and 80-90 per cent free operating cash conversion is unchanged.’
Looking ahead, Weir Group said conditions in mining markets looked set to remain strong, with highly attractive.
It added: ‘We are yet to see whether current macro-economic and geopolitical conditions will impact mining markets; in our base case scenario we are assuming conditions will be supportive, with AM growth rates consistent with our through-cycle targets and traction in small to medium sized OE projects continuing.
‘In infrastructure markets, we expect activity in North America to remain stable, with weak demand continuing in Europe.’
Guillermo Peigneux Lojo, an analyst at UBS, said: ‘While the near-term outlook for mining capex is clouded by the macro environment, current conditions remain supportive for Weir, with no changes seen in customer behaviour and attractive long-term fundamentals.
‘We expect AM to remain resilient through-cycle, and OE activity to continue to focus on de-bottlenecking, small expansions and improving sustainability. Consensus may nudge up slightly helped by FX.’
Analysts at Peel Hunt, said: ‘Weir issued a strong third-quarter update, which is encouraging but not a surprise given the commentary in the last week from Epiroc, CAT, Terex, Metso and others.’
Peel Hunt’s analysts added: ‘Great end markets, great fundamentals, great market positions – very much a Buy and we maintain our 1,950p price target.’