Weir revenue plunges in oil and gas downturn

Glasgow-based engineering firm Weir Group said its revenue fell 21% to £1.9 billion and profit before tax fell 46% to £220 million in the year to January 1 as the decline in the North American oil and gas market took its toll.

Including “exceptional items and intangibles amortization,” Weir made a loss before tax of £200 million.

The company said it had £365 million of operating exceptional costs in 2015, including a £225 million oil & gas impairment.

Weir’s shares were trading down more than 4% at lunch time on Wednesday.

“As Weir has always done, we adapted quickly to market conditions — costs were aggressively reduced while the cash generative nature of the business supported continued investment in our strategic priorities,” said Keith Cochrane, Weir chief executive.

“Given ongoing market conditions, 2016 will be another challenging year.

“As a result, we are planning for a further reduction in constant currency group operating profits, driven primarily by lower activity levels in upstream oil and gas markets.

“We will continue to invest for the medium term supported by our aftermarket-focused business model, further cost reduction initiatives, non-core asset disposals and a clear focus on cash generation, to ensure we benefit fully and quickly when markets improve.”

At 44p per share, Weir’s dividend was the same as the previous year.

Weir said it made £110 million in savings, closing smaller manufacturing operations in the US, Australia and Europe and consolidating 12 oil & gas service centre facilities.

Its workforce was reduced by 1,600 in 2015 with the largest cuts made to its North American oil and gas headcount, which fell by more than 40%.

Weir said it will continue to reduce costs in 2106 with more consolidation of manufacturing and service facilities which will help will deliver savings of £40 million.

Weir also plans to realise up to £100 million from the disposal of non-core assets.