26th Feb 2020 08:45
(Alliance News) - Weir Group PLC on Wednesday reported a sharp swing to an annual loss due to a non-cash impairment from its Oil & Gas North American assets, despite growth in revenue and orders.
Shares in Weir were up 6.8% at 1,335.50 pence on Wednesday morning in London.
For 2019, the Glasgow-based engineering firm posted a reported pretax loss of GBP372 million, compared to a profit of GBP86 million the year before, due to an impairment charge of GBP546 million recognised in the Oil & Gas North American cash generating unit.
Weir said that challenging market conditions and uncertainty about the timing of market recovery led to estimates of future cash flows featuring lower revenue and margin assumptions, leading to a review of specific assets considered to be at risk.
This led to an impairment charge of GBP288 million against goodwill, while the remaining GBP258 million charge is from impairments on brand names, customer relationships and inventory.
On an adjusted basis, pretax profit was down 2% at GBP303 million from GBP310 million.
Revenue meanwhile, increased by 9% to GBP2.66 billion from GBP2.45 billion the prior year. On a constant currency, revenue grew by 8%, but declined by 4% on a like-for-like basis.
Segmentally, Weir's Minerals division reported 4% growth in revenue to GBP1.48 billion, supported by strong commodity prices in copper, gold and iron ore, as well as final approval being granted to several greenfield developments.
In addition, ESCO revenue more than doubled to GBP572 million, as the segment benefited from the same macro mining trends as Minerals, including increased ore production, and a focus by mining customers on improved productivity.
Total orders increased by 8% on a constant currency basis to GBP2.79 billion.
Weir declared a final dividend of 30.45 pence per share, bringing the total payout to 46.95p, up 2% from 46.20p the prior year.
Looking ahead, Weir expects good growth in constant currency revenue from Minerals and ESCO, although it has noted the uncertainty over the global economy due to the coronavirus outbreak, even as mining markets remain positive.
"2019 saw a strong performance from our mining businesses with margin expansion in both Minerals and ESCO. Our innovative technologies are helping mining become more sustainable as shown by the record GBP100 million Iron Bridge order for our energy-saving Enduron HPGR technology," said Chief Executive Officer John Stanton.
"Looking to the year ahead, there is uncertainty over the impact of coronavirus on the global economy and demand for natural resources. Assuming underlying demand does not change, we expect further good constant currency growth in our mining-focused businesses to be offset by the continued challenges in North American oil and gas markets," Stanton added.
By Dayo Laniyan; [email protected]
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