Glasgow-based global mining, oil and engineering giant Weir Group said on Tuesday its first quarter orders were 13% lower than the prior year “principally reflecting significantly weaker oil and gas market conditions.”
Original equipment (OE) orders fell 22% with aftermarket (AM) down 10%.
Weir said the longer-term impact of Covid-19 on its markets is as yet uncertain and therefore the group is “taking a prudent approach to reduce costs and conserve cash” including “cash preservation actions of £140m.”
Weir’s measure will include workforce reductions of 350 (4%) in its minerals division, 130 (5%) at its Esco subsidiary, and another 150 in its oil and gas business meaning this division has reduced its workforce by 350 in 2020 and by a total of 1,000 (c.30%) since the start of 2019.
Weir employs about 15,000 people in more than 50 countries.
Weir Group said chairman Charles Berry has resumed his duties after his recent medical leave.
In February, Weir Group CEO Jon Stanton told investors the group plans to become “a mining technology pure play” and plans to sell its oil and gas businesses “at the right time.”
On Tuesday, Weir Group said in an interim management statement for the first quarter ending 31 March 2020 that it has been designated as an “essential business” in most jurisdictions.
Weir said it is benefiting from the resilience of “aftermarket-focused mining businesses” which are now 80% of total group orders.
Oil and gas first-quarter orders were down 34% with North American capex now expected to be down 50% in 2020.
Weir said it has £500 million immediately available through committed facilities and cash balances and the firm is approved for £300 million under the UK Government’s CCFF.
Weir said: “The longer-term impact of Covid-19 on macro-economic conditions and our markets is as yet uncertain and therefore the group is taking a prudent approach to reduce costs and conserve cash.
“In addition to the operational actions detailed in the divisional reviews, the group has also undertaken a number of corporate measures.
“These include: withdrawing the recommendation to pay the 2019 final dividend; curtailing capital expenditure; managing working capital to minimise normal seasonal outflow in the first half; rightsizing group functions; and, restricting all discretionary spending.
“In addition, all 2020 executive and management annual bonus schemes have been suspended and inflationary increases in board and group executive fees and salaries withdrawn.
“The group expects to realise c.£75m of cost mitigation savings in 2020 which include workforce reductions, reduced travel and discretionary spending.
“We expect to incur exceptional cash costs of c.£25m in the year.
“Through the first half of the year, cash preservation actions of £140m include withdrawal of the final 2019 dividend, minimising non-committed and non-safety related capex and rephasing of tax payments.”
In its outlook, Weir said: “After a resilient first quarter, we expect Covid-19 to have a greater impact in the second quarter, and as outlined above, a first round of mitigations has already been actioned which will help underpin first half profitability.
“Given the uncertain environment no specific guidance is provided for the remainder of the year, although we will update as and when visibility improves.”
CEO Stanton said: “I am very proud of the way the global Weir family has responded to the Covid-19 pandemic.
“This is a unique time and a unique challenge, and we have been led by our values, with our incredibly strong culture shining through.
“Our priorities remain safeguarding the health and well-being of our people and communities.
“This has included adapting our working practices to promote social distancing in our facilities, donating PPE and oxygen supplies to local health authorities, utilising our 3D printing capability to manufacture face mask components, and providing financial support to local organisations in countries where there is limited social support.
“At the same time, we have continued to fully and safely support our customers.
“This was demonstrated in the first quarter where our mining-focused businesses delivered a very resilient performance, underpinned by the critical nature of our technology to miners’ ongoing operations.
“In Oil & Gas, we have once again acted quickly to protect the business as it navigates the steep downturn in market conditions.
“While there remains a high degree of uncertainty over the full impact of Covid-19, we are taking a prudent approach to managing costs and conserving cash and are ready with a range of further actions should market conditions require them.
“More broadly, our recent portfolio changes have positioned Weir to benefit from long-term structural trends, including carbon transition, as a key technology provider making mining smarter, more efficient and sustainable.”