The Weir Group PLC trading update for the first quarter ended 31 March 2022¹

Strong order momentum with robust operational execution

·      Record quarter with Group orders² +15% and +1% sequentially

o  Very strong demand for aftermarket; good progress on strategic growth initiatives

o  Aftermarket (AM) orders +28% and +3% sequentially

o  Original equipment (OE) orders -17%; or +8% excluding PY Ferrexpo OE order³

·      Robust execution in complex operating environment

o  Successfully managing impact of Covid-19 shutdowns, supply chain disruption and inflation

o  Order book delivery progressing well

o  Russia activities suspended; business to be wound down through 2022

·      Expect to deliver strong growth in constant currency revenue and profit in 2022

o  Operating margin and cash conversion targets on track

Jon Stanton, Chief Executive, commented:

"The Group has had an excellent start to the year, generating record orders and executing strongly in a complex global environment. Conditions in mining markets are highly favourable as high commodity prices ensure miners remain incentivised to maximise ore production, which is driving demand for recurring aftermarket and debottlenecking solutions. We continue to successfully manage the disruption in global supply chains from Covid-19 and the impact of inflation.

Looking ahead to the full year, we remain confident in the outlook and expect to deliver strong growth in constant currency revenue and profit in 2022 and anticipate progress towards our medium-term margin and cash targets."

First quarter review - Group

Favourable conditions in global mining markets drove increased demand for aftermarket and debottlenecking solutions. Activity and demand were positive across most regions, particularly in North America as miners looked to upgrade their assets, and in South America demand was also strong driven by an increase in small and medium sized brownfield activity. Globally, large expansion projects remained slow to convert.

Activity in infrastructure markets, particularly within North America and Europe, remained stable at strong levels.

Group orders in the quarter were up 15%, driven by significant growth in demand for spares with aftermarket orders up 28% year-on-year. Original equipment orders were 17% lower than in the same period last year where we booked a £34m order from Ferrexpo. Adjusting for that, growth in original equipment orders was 8% in Q1 2022.

The Group's book-to-bill was strong at 1.22, reflecting record order intake and good progress on order book execution.

Russia and Ukraine business update 

We strongly condemn the Russian military invasion of Ukraine. Our priority remains the welfare of our Ukraine-based colleagues and their families and we are keeping in close contact, supporting them in whatever ways we can. More widely, we are deeply saddened by the humanitarian crisis that continues to unfold and have pledged financial support to organisations working at the front line to help the people of Ukraine. Our thoughts are with all those whose lives are being affected by these events and join with others in hoping for a swift and peaceful end to the hostilities.

In Russia, the Group's business comprises a sales and service organisation employing 267 people, the majority of whom sit within the Minerals Division, and we remain focused on their welfare during this difficult time.   

In March the Group announced the full suspension of business and operations in Russia. Given the evolution of the situation in Ukraine and Russia, the Group has since taken the decision to wind down its Russian business during 2022.

The loss of sales in 2022 is expected to have an impact on Group underlying operating profit of up to £20m in the year. The Group's assets in Russia comprise primarily of inventory and receivables and represent c.2% of the Group's net assets. While a review of the recoverability remains ongoing, this could result in an exceptional write-off during 2022.

Strategy and outlook

We believe the long-term growth drivers for the Group remain firmly in place driven by decarbonisation and broader economic development, notwithstanding the Russian invasion of Ukraine. Indeed, the implications of recent events will likely see them accelerate. We continue to increase investment in technologies that will enable our customers to meet their sustainability commitments while delivering the natural resources essential for net zero. We will also continue to develop our regional vertically integrated supply chains which have been vital in delivering consistently for our customers throughout these challenging times.

Subject to ongoing geopolitical uncertainty, we expect to deliver strong constant currency revenue and profit growth in 2022, in line with our previous expectations adjusted for the impact of loss of sales in Russia. As previously indicated, first half margins will be lower than prior year, reflecting prior year one-off impacts and mix, with full year margins expected to show good progress towards our medium-term targets. Cash conversion targets remain on track, again with a slight weighting to the second half, given order book and working capital phasing.

First quarter review - Divisions

Minerals

·      Orders +9%; revenues strongly ahead of prior year

·    AM orders +23%; OE orders -18%, or +11% after adjusting for Ferrexpo in 2021³

Divisional orders increased 9% against a strong prior year comparator, while sequentially, aftermarket orders remained close to all-time highs.

Global demand for aftermarket spares remained strong, supported by a general trend towards lower ore grades and increased equipment utilisation. Demand was particularly strong within the oil sands market in Canada, supported by high oil prices through the period. In response to concerns around global supply chain challenges, some customers also built safety stocks by forward purchasing.

Demand for original equipment continued to be supported by a high volume of smaller orders for equipment for the debottlenecking of existing assets, and for small brownfield expansions.  

While supply chains continued to be disrupted by Covid-19, our vertically integrated regional model meant the division continued to execute well.

The division's book-to-bill ratio for the quarter was 1.21.

ESCO

·      ESCO orders +32% at all-time high; revenues strongly ahead of prior year

Divisional orders increased 32% against the prior year and 15% sequentially. Adjusting for the impact of the acquisition of Motion Metrics, on a like-for-like basis orders increased 27% against the prior year and 11% sequentially. High levels of mining activity, combined with some forward purchasing by customers to ensure security of supply, drove strong demand for mining expendables. The division also secured market share gains for its Nemisys^® ground engaging tools (G.E.T.), demonstrating its market leading technology and total cost of ownership benefits to customers. Demand from infrastructure applications was also strong, due to the usual Q1 seasonality, with activity stable at high levels.

Through the period, mandatory Covid-related shutdowns forced the temporary closure of the division's foundry in Xuzhou, China. The foundry has now reopened, and while the Covid situation continues to evolve, we currently expect to manage the impact of this through the rest of the year.

The division's book-to-bill for the quarter of 1.23 is the highest since its acquisition in 2018.

The integration of Motion Metrics into the division has progressed well and the functional integration phase is now complete. The initial market response has been positive with customer interest and volume of enquiries exceeding our expectations.

Net debt

Net debt at 31 March 2022 was higher than that reported at 31 December 2021, reflecting the impact of translational foreign exchange and normal seasonal patterns.

Chair succession

As previously announced, later today, at the close of our 2022 AGM, Charles Berry, Chairman of the Group for eight years will step down and will be succeeded by Barbara Jeremiah, currently Chair Designate and Senior Independent Director. On behalf of the rest of the Board and colleagues at Weir, we thank Charles for his exemplary leadership and wish him well in his retirement. We welcome Barbara as Chair and look forward to working with her as we continue to pursue the multi-decade growth opportunities ahead.

Notes:

1.             Financial information is given for the three months ended 31 March 2022 and relates to continuing operations.

2.             Orders are reported on a constant currency basis at March 2022 average exchange rates.

3.             £34m OE order for Ferrexpo booked in the first quarter of 2021 (total order, including AM, was £36m).

Analyst and investor conference call

A conference call for analysts and investors will be held at 0800 BST on Thursday 28 April 2022 to discuss this statement. Participants can join the call by registering in advance by visiting www.global.weir/investors and following the link on the page. A recording of this conference call will be available until Thursday 26 May 2022.

About The Weir Group PLC

Founded in 1871, The Weir Group PLC is one of the world's leading engineering businesses with a purpose to make its mining and infrastructure customers' operations more sustainable and efficient. Weir's highly engineered technology enables critical resources to be produced using less energy, water and waste while reducing customers' total cost of ownership. The Group is ideally positioned to benefit from structural trends that support long-term demand for its technology including the need for more essential metals to support economic development and carbon transition. The Group has c.11,000 employees operating in over 60 countries with a presence in every major mining region of the world. Find out more at www.global.weir.

Weir's ordinary shares trade on the London Stock Exchange (ticker: WEIR LN) and its American Depositary Receipts trade over-the-counter in the USA (ticker: WEGRY). 

Appendix 1 - Continuing operations¹ quarterly order trends

1.     Continuing operations excludes the Oil & Gas Division, which was sold to Caterpillar Inc. in February 2021 and the Saudi-Arabian joint venture which was sold in June 2021.

2.     Like-for-like excludes the impact of Motion Metrics acquired on 30 November 2021.

3.     Restated at March 2022 average exchange rates.