Weir release 1Q21 update

Highlights

• Increase in group orders from continuing operations3 of 11%.
  • 67% increase in original equipment (OE) orders with project pipeline strength continuing.
  • Aftermarket (AM) orders down 2% reflecting residual COVID disruption to ore production.
    • Up 7% sequentially from 4Q20 as activity continued to normalise.
• Revenues stable reflecting highly resilient AM performance and OE project timing.
• Pipeline and bid conversion developing positively, particularly for sustainable solutions.
  • £36 million 1Q21 order for energy-saving high pressure grinding rolls (HPGRs) and screens.
  • £32 million April order for electric-powered mine de-watering pumps.
• 2021 Outlook: Growth in constant currency profits in line with current market expectations.

Jon Stanton, Chief Executive, commented: “The group has had a good start to the year against the backdrop of ongoing COVID challenges. As expected, conditions continued to improve in both mining and infrastructure markets reflecting increasing customer confidence in a broad-based economic recovery and near record prices for commodities essential to growth and carbon transition. This was reflected in continued positive development in our project pipeline and improving order conversion of our early cycle product lines and technologies that deliver significant sustainability benefits.

“Looking to the full year, we continue to expect to deliver growth in full year constant currency profits in line with current market expectations.”

1Q21 review – continuing operations

Conditions in mining markets continued to improve in 1Q21 supported by commodity prices that remained close to multi-year highs for the group’s largest exposures of copper, iron ore and gold. Customers focused on maximising production and as a result, ore production volumes and machine utilisation continued to normalise, although remained below pre-COVID levels in some regions where the ongoing pandemic is restricting customer staffing levels. Demand was strongest in North America, Central Asia and Africa, but more subdued in Asia-Pacific and South America, with Australia affected by adverse weather and Chile by the build-up of safety stocks in 1Q20 as the COVID-19 pandemic started to have an impact. Third-party access to sites improved overall, particularly in those regions with advanced COVID-19 vaccination programmes and low infections levels, but access remains an ongoing issue in some markets. Project quotation activity continued to be strong and while the rate of conversion remained slower than usual there was an acceleration in orders for the company’s longer-lead time and therefore earlier cycle technologies such as GEHO^® positive displacement pumps and Enduron^® HPGRs. This was principally focused on brownfield expansions across a range of commodities, with greenfield activity remaining more limited.

Infrastructure markets, particularly sand and aggregates in North America and Europe, began to recover strongly as economic confidence increased and this was reflected in higher activity levels and restocking in third party distribution channels.

Group orders in 1Q21 were up 11%, driven by OE which increased 67%, benefiting from a large order to supply energy-efficient HPGRs and screens to support the expansion of Ferrexpo’s iron ore operations in the Ukraine. As expected, AM demand was down slightly against the prior year period, reflecting residual COVID disruptions, although continued to increase sequentially, up 7% on 4Q20. The group’s book-to-bill was strong at 1.22, reflecting positive demand trends.

Operationally, the group continued to prioritise safety and well-being with ESCO making further meaningful progress in the first quarter. It has now completed plans for ESCO’s new China foundry which will break ground in 3Q21, while Minerals upgraded its Australian foundry as part of the global initiative to optimise production of the company’s largest castings. Weir’s focus on sustainable solutions continues and it is now developing its carbon dioxide product footprint tool for deployment later this year. There are now approximately 150 programmes underway across the group to reduce energy, water and waste as part of its 2024 sustainability commitments and it remains on track to complete the Scope 3 study and first evaluation of Science Based Targets and Net Zero pathways in 2021. The group is continuing the roll-out of its field-service technology to enhance delivery of on-site engineering and increase its installed base data. The company has also launched its new global learning system which will allow the accelerated deployment of training in areas such as safety, lean and sustainability.

Divisional review

Minerals

• Orders up 15%; revenues up modestly y/y.
• OE orders up 66% as bid pipeline conversions gather momentum.
• AM orders down 1% on 1Q20 but up 3% sequentially on 4Q20.

Divisional orders increased 15% y/y supported by strong demand for more sustainable and longer lead time solutions, particularly the Enduron range of HPGRs that reduce energy consumption in comminution (grinding and crushing) by up to 40%. Orders in the period included a large £36 million contract to supply HPGRs and screens to Ferrexpo which is expanding its capacity in the Ukraine from 32 m tpy of iron ore pellets to 80 million t. This supported a 66% increase in OE orders which also included good demand for GEHO piston diaphragm pumps and solutions that support debottlenecking as miners focused on productivity improvements. The gradual easing of mine access restrictions supported the division’s Integrated Solutions strategy which is focused on offering a range of technologies that increase mine capacity, particularly for smaller or brownfield projects. As expected, aftermarket demand was down slightly (-1%) y/y as a result of residual COVID challenges, including restricted mine-site access and some customers operating with skeleton crews. However, there was a continued improvement in AM trends with sequential orders up 3% from 4Q20 and the division’s book-to-bill increased to 1.27, with the growing order book reflecting increasing conversion of the project pipeline. This was also reflected in April where the division won a £32 million order in Asia-Pacific to replace a fleet of diesel-powered dewatering pumps with electric alternatives.

ESCO

• ESCO orders up 2%; revenues were down mid-single-digits y/y but up sequentially.
• AM down 2% y/y but up 16% sequentially.

Divisional orders increased 2% against the prior year but were up 19% sequentially, principally due to the strong recovery in infrastructure markets. Mining activity continued to gradually recover as customers progressively ramped up activity to rebuild stockpiles. Conversions to the division’s Nemisys^® ground engaging tools (G.E.T.) also continued to increase and there was good growth in demand for the division’s range of buckets, particularly in Africa, as it broadens its addressable markets. The division also leveraged Minerals global service network to expand into new territories, including securing market share gains in North Africa and Western Europe. Revenues were down mid-single-digits against a prior year when customers were forward-purchasing ahead of COVID-related lockdowns. The sequential order growth from 4Q20 was reflected in the division’s book-to-bill of 1.11, which was the highest since acquisition in 2018.

Read the article online at: https://www.globalminingreview.com/finance-business/30042021/weir-release-1q21-update/