Weir Group Leads FTSE 100 Higher As 2022 Profits Beat Forecasts

Engineering business Weir Group pulled the FTSE 100 index higher in midweek business following the release of better-than-expected full-year results.

Weir — which primarily manufactures hardware for commodities producers — was trading 7% higher on Wednesday at £20.35 per share.

The Glasgow business said that revenues rose 28% year-on-year, to £2.47 billion. Adjusted operating profits leapt 33% to £395 million. On a statutory basis pre-tax profits increased 24% to £260 million.

Weir’s bottom line was boosted by a 70-basis-point improvement in adjusted operating margin, to 16%. This reflected a shift in revenue mix at its mining division towards aftermarket sales, it said, as well as underlying operational efficiency and the successful mitigation of inflationary pressures.

Elsewhere, free operating cash conversion improved to 87% in 2022 from 63% a year earlier. However, net debt rose by £24 million year on year to £797 million.

Weir lifted the full-year dividend to 32.8p per share from 23.8p in 2021.

Record Orders

Weir enjoyed record orders last year as mining companies boosted investment in existing assets. Its order book jumped 14% in 2022 to an all-time high of £2.64 billion, with aftermarket (AM) and original equipment (OE) orders rising 17% and 3% respectively.

The business said that “conditions in mining markets were highly favourable” last year and that, across most commodity sectors, “market prices were significantly above miners’ cost to produce and end market demand was high.”

It noted that greenfield expansion projects were slow to produce, however, and so miners accelerated output from existing assets and developed harder and more complex ore deposits.

“This, coupled with a growing installed base and the effects of declining ore grades, drove record demand for our aftermarket spares and expendables,” Weir said.

Demand was strong across all its territories last year, it said, with high levels of activity in Canada’s oil sands industry and a robust rebound in Australia helping to drive trading.

Upbeat Forecasts

The company struck an upbeat tone for the current year, noting that “we begin 2023 with a record order book and positive conditions in mining markets, where high levels of activity, coupled with miners’ focus on sustainable operations, are driving demand for our AM spares and brownfield OE solutions.”

Weir expects revenues, profits and operating margins to grow again at constant currencies this year. Free operating cash conversion meanwhile is tipped to range between 80% and 90%.

Looking beyond 2023, the business said that “the long-term fundamentals for mining and our business are highly attractive, underpinned by decarbonisation, GDP growth and the transition to sustainable mining.”

It added that “we have a clear strategy to grow ahead of our markets, with specific growth initiatives underpinning our ambition to deliver through-cycle mid-to-high single digit percentage revenue growth.”