Shares of Weir Group, the Glasgow-based global mining and engineering FTSE 100 firm, rose as much as 3% after it said its full-year operating margins are expected to be about 18%, ahead of its previous guidance.
In its results for the six months ended June 30, 2024, Weir said first-half revenue from continuing operations fell 7% to £1.207 billion but adjusted profit before tax rose 3% to £193 million and dividend per share rose 1% to 17.9p.
In its outlook, Weir said its full year operating profit and cash conversion guidance are on track.
“Activity levels in our mining markets are positive,” said Weir. “Customers are focused on maximising ore production and on improving the efficiency and sustainability of existing operations, which will continue to drive demand for our AM spares and expendables and brownfield OE solutions.
“In aftermarket we are expecting to see a step up in growth rates for orders in the second half driven by the commissioning of new installed base, the re-phasing of the Q2 multi-period order, and normalised comparatives for oil sands.
“We now see OE demand being supplemented by conversions in greenfield expansion projects in the second half with a £53m contract award already received in July and others potentially to follow. These orders will convert to revenue in 2025 and beyond and underpin our through-cycle growth ambitions.
“Overall we are reiterating our full year guidance for constant currency growth in operating profit. Revenue is now expected to be at the lower end of the range of current analyst estimates. Operating margins are expected to be c.18%, ahead of our previous guidance and supported by further progress on Performance Excellence, with some of the mix and pricing benefits seen in the first half expected to moderate.
“We expect free operating cash conversion of between 90% and 100%, in line with previous guidance with capex moving more in line with depreciation and further improvements in working capital.
“Further out, the fundamentals for our business are highly attractive. The world is looking to our customers to provide the natural resources needed to support the transition to a net zero economy. This in turn presents us an opportunity to deliver innovative mining technology solutions necessary to meet this challenge, underpinning our ambition to deliver through-cycle mid to high single digit percentage revenue growth.
“Our commitment to continuous improvement, embodied by the Performance Excellence programme, is well on track to deliver compounding benefits and support margin expansion to 20% in 2026 and beyond. Our strong cash generation and balance sheet give us future optionality to allocate capital to prioritise growth in total shareholder returns.”
A Weir-compiled consensus expects full-year group revenue in the range of £2.596 billion to £2.758 billion.