Glasgow-based engineering firm Weir Group said on Thursday its strong cost reduction measures helped it deliver first quarter profits slightly ahead of expectations, despite a significant reduction in activity at the firm’s oil and gas division.
Weir’s shares rose more than 10%.
Keith Cochrane, Weir chief executive, said: “The group has maintained its focus on strong cash generation, aggressive cost reduction and developing the innovative solutions which have made Weir a global leader.
“This comes against the backdrop of ongoing challenges across our end markets.
“Mining customers continue to prioritise preserving cash, although there was a slight pickup in orders through the quarter and minerals divisional revenues on a like for like basis were flat year on year.
“Trading conditions in oil and gas markets reflected further reductions in activity levels in all regions despite the limited improvement in oil prices in 2016.
“The group remains focused on cost reduction measures which have helped to deliver first quarter profits slightly ahead of our expectations.
“As a result, we expect first half profits to be slightly ahead of market expectations. Our full year expectations remain unchanged, reflecting the slower recovery now anticipated in oil and gas markets.”
In its first quarter review, Weir said input reduced 21% compared to the prior year period.
“A significant reduction in activity levels across the oil & gas division’s markets was the primary driver, with minerals and flow control input also reduced,” the review said.
“Original equipment orders were down 11% and aftermarket orders were 25% lower than the prior year period, but were both slightly up on a sequential basis.”
Weir said group operating margins were lower than the prior year, principally due to reduced oil & gas division margins, but slightly higher than prior expectations as a result of strong cost control within the minerals division.
Weir’s asset disposal programme “is making good progress towards its £100 million target by year end.”
Full Weir statement here: https://otp.tools.investis.com/clients/uk/weir_group_plc/rns/regulatory-story.aspx?cid=847&newsid=710718