Shares of Glasgow-based global engineering giant Weir Group rose 3.5% on Tuesday after it announced a £30 million cost reduction programme amid a 32% fall in oil and gas orders “as capital constraints intensified in North American markets.”
Weir said it will reduce its North American workforce by around 20% — 450 posts — resulting in an exceptional restructure charge of £20 million.
Weir employs about 15,000 people in more than 50 countries.
Weir Group CEO Jon Stanton said the group now expects 2019 full year operating profits in its Oil & Gas division to be below its previous range with guidance for both its Minerals and ESCO divisions unchanged.
In an interim management statement for the third quarter ending September 30, 2019, Weir said third quarter orders for the group were 4% higher than the prior year period and flat on a like-for-like basis.
“Original equipment orders increased 41% (up 40% on like-for-like basis) driven by the £100m Iron Bridge order in Minerals,” said Weir.
“Aftermarket orders fell 7% (down 15% on a like-for-like basis) principally as a result of the accelerated downturn in North American oil and gas markets.
“Oil & Gas revenues were impacted by these market conditions while Minerals and ESCO were in line with expectations …”
CEO Stanton added: “The highlight of the third quarter was the record £100m order for an industry-leading crushing solution for the Iron Bridge Magnetite Project in Australia.
“The innovative process design, which will reduce energy and water consumption by more than 30% compared with traditional mills, reflects our growing technology offering and focus on making mining smarter, more efficient and sustainable.
“It will be a major reference for the industry in accelerating the adoption of advanced high pressure grinding rolls (HPGR) technology.
“The growth delivered in Minerals and ESCO reflects our integrated solutions strategy and the continued strength of our aftermarket business model.
“Our project pipeline in mining remains encouraging but in the third quarter we saw some project approvals deferred due to negative macro sentiment.
“In North American oil and gas markets, demand was impacted by an intensified focus on cash preservation in the quarter.
“In response we have undertaken a c.£30m cost reduction programme in this division to support competitiveness in the short-term.
“Looking forward, we now expect 2019 full year operating profits in the Oil & Gas division to be below our previous range with guidance for both Minerals and ESCO divisions unchanged.”