Weir on track despite weak third quarter

Engineering giant Weir Group said that it is set to deliver double-digit profit growth this year despite weak order inputs and a slowdown in growth in the third quarter.

Weir, which designs and manufactures products and engineering services for the minerals, oil and gas, and power and industrial markets, said on Monday morning that both revenue and profit growth had slowed in the third quarter due to a lower opening order book and reduced activity at its upstream divisions, SPM and Mesa. The firm said this was expected.

Group revenue and profits were both ahead of the third quarter in 2011, helped by the impact of prior-year acquisitions which are said to be performing "satisfactorily". Operating margins were flat.

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Group order input fell 8% year-on-year (y/y) in the three-month period, down 15% on a like-for-like (LFL) basis, meaning that year-to-date (YTD) order input growth slowed from 8% at the interim stage to just 2%. YTD LFL order inputs were down 6%, compared to the 1% decline in the first half.

In the Minerals unit, order input in the third quarter was in line with revenues and rose 2% y/y, meaning that YTD input growth slowed from 11% at the half to 8%. As such, the company said that third-quarter input trends now mean that full-year divisional revenues are now expected to be slightly below its July expectations.

In Oil & Gas, the YTD decline in LFL upstream input worsened from 37% at the half to 45% in the 39 weeks to November 2nd. 2012 divisional revenue forecasts remain unchanged.

In spite of the slowdown, Weir said: "The group's global presence and diverse end market exposure, together with targeted cost reductions, ensure it is on track to deliver full-year 2012 profit before tax, amortisation and exceptional items in the range of £440-£450m, within the range of our expectations in July and in line with current market consensus."

However, it did admit that conditions across its end markets are being affected by "increasing global macro-economic uncertainty and resultant declines in certain commodity prices".

Net debt at the end of September was unchanged from that reported in the first half. "In line with seasonal trends the group is expected to be cash generative in the fourth quarter, such that we expect a reduction in year end net debt in line with previous expectations," the firm added.