The Weir Group PLC is accelerating the announcement of its 3Q21 trading update whilst updating the market on its management of a recent cybersecurity incident.
- Strong order trends continued in 3Q21; 31% increase in continuing operations.
- Minerals orders +30% .
- Original equipment (OE) +71% driven by brownfield expansion, share gains and sustainable solutions.
- Aftermarket (AM) +16% reflecting miners’ maximising production.
- ESCO orders +36% supported by strong mining and infrastructure demand.
- At the end of the quarter, Weir was subjected to an attempted ransom-ware attack.
- No impact on 3Q21 orders; all facilities are operational with customer impact being mitigated.
- Business continuity plans and cyber counter-measures working well.
- 3Q21 profitability impacted with revenue deferrals on shipment delays and under-recoveries.
- Capabilities being progressively restored but operational inefficiencies expected into 4Q21.
- Group liaising with regulators and relevant intelligence services.
- Full year PBTA now expected to be in the range of £230 – £245 million.
Jon Stanton, Chief Executive, commented: “We responded quickly and comprehensively to what was a sophisticated external attack on our business. The robust action to protect our infrastructure and data has led to significant temporary disruption but our teams have responded magnificently to this challenge and have managed to minimise the impact on our customers. We will continue to focus on the safe restoration of all our systems whilst strengthening our future resilience even further.
“More broadly, the continued strong demand across our markets in 3Q21, particularly for our more sustainable solutions, reinforces our view that Weir is ideally placed to benefit from a multi-decade growth opportunity, as the mining industry invests in expanding capacity while reducing its environmental impact.
“We remain on track to deliver our recently announced three-year performance goals that will see us increase revenues, expand margins and significantly reduce our environmental footprint.”
3Q21 Group order trends remain strong
- Continuing operations orders up 31%.
- Minerals orders up 30%; OE +71% and AM +16%.
- ESCO orders +36%; OE +65% and AM +34%.
- Strong project pipeline reflecting positive outlook for mining and infrastructure markets.
Mining market demand was strong throughout 3Q21 as customers continued to maximise production to benefit from positive commodity prices, particularly for the Group’s largest exposures of copper, iron ore and gold. Demand was strong across all regions. Infrastructure markets also continued at a high level with growth moderating reflecting the impact of global supply chain issues on construction markets. Overall, Group orders increased by 31%, with original equipment orders up 71% and aftermarket up 21%, reflecting the benefits of the Group’s differentiated technology and positive market conditions. The Group’s book-to-bill for the quarter was 1.14.
The Minerals division delivered order growth of 30% with original equipment up 71%. OE growth was supported by a very active market for small brownfield and integrated solutions rather than any specific large projects. The division also continued to make market share gains with its energy and water saving high pressure grinding rolls (HPGR) technology reflecting increased demand for more sustainable mining solutions. Demand for its mill circuit product range was also strong as customers increased maintenance and replacement activity. Aftermarket demand was also strong, with orders up 16% despite ongoing restrictions on site access, travel and customers’ logistics as miners continued to focus on maximising ore production. Divisional revenues were impacted by the cybersecurity incident towards the end of September.
ESCO orders increased 36%, delivering a fifth straight quarter of order growth. Original equipment orders increased 65% as the division benefited from its focus on expanding its product portfolio, particularly growth in large mining buckets. Aftermarket orders increased 34% as mining machine utilisation fully recovered and infrastructure demand remained strong. The division delivered further strong sequential and y/y revenue growth as its order book from the first half converted.
Managing the cybersecurity incident
The Group is currently managing the consequences of a sophisticated attempted ransomware attack that occurred in the second half of September. Weir’s cybersecurity systems and controls responded quickly to the threat and took robust action. This included isolating and shutting down IT systems including core Enterprise Resource Planning (ERP) and engineering applications. These applications are now restored on a partial basis, and other applications are being brought back online in a progressive manner in order of business priority. The above actions have led to a number of ongoing but temporary disruptions including engineering, manufacturing and shipment rephasing, which has resulted in revenue deferrals and overhead under-recoveries. Effective capabilities are being progressively restored in the coming weeks but the consequences of the operational disruption and associated inefficiencies are expected to continue into 4Q21.
The forensic investigation of the incident is continuing and so far, there is no evidence that any personal or other sensitive data has been exfiltrated or encrypted. The Group are continuing to liaise with regulators and relevant intelligence services. Weir confirms that neither it, nor anyone associated with Weir, have been in contact with the?persons responsible for the?cyber-attack.?
Impact on 2021 full year guidance
There has been no negative impact on orders in 3Q21 and Weir continues to expect to deliver full year order growth in line with its expectations, resulting in a strong order book as it heads into 2022. As a result of the re-phasing of shipments caused by the cybersecurity incident, the Group experienced revenue deferrals of approximately £50 million in September alongside overhead under-recoveries in manufacturing and engineering. While the bulk of the missed September revenue is expected to be shipped in 4Q21 it is likely that the temporary disruption to the end-to-end value chain will cause some slippage of 4Q11 revenues into 2022 together with some overhead under-recovery.
Read the article online at: https://www.globalminingreview.com/finance-business/08102021/weir-group-provide-3q21-trading-update/
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