30th Jul 2015 11:46
LONDON (Alliance News) - The Weir Group PLC Thursday said it expects a much stronger second half of the year after reporting a large fall in profit in the first half as the oil price collapse continues to impact on activity in the oil and gas sector.
The engineering services company reported a pretax profit of GBP38.7 million in the first half of 2015, substantially down from the GBP157.7 million profit made a year earlier as revenue dropped to GBP999.7 million from GBP1.14 billion.
Pretax profit before exceptional items and amortisation came in at GBP108 million, also significantly down from GBP182 million. Operating profit fell to USD129 million from GBP201 million after its margin was squeezed to 12.9% from 17.6%.
Despite the fall in profit, Weir maintained its interim dividend of 15.0 pence per share from last year and said its results were in line with its trading update in June.
Exceptional restructuring costs totalled GBP47 million in the period, including GBP33 million of asset impairments.
"This is the most severe downturn in oil and gas markets for nearly thirty years, and as a result North American upstream activity has reduced substantially. As we indicated through the first half, this has had a significant impact on the group's interim financial performance," said Chief Executive Keith Cochrane.
Reflecting the downturn in the oil and gas sector, Weir said the rig count in North America had fallen 55% year-on-year and, in response, Weir's workforce in North America has fallen 32% since November 2014.
The amount of orders it secured was down 39% in the period, but on the other hand, it said the mining sector provided a "resilient performance" whilst the power and industrial segments had improved efficiencies which had improved its margins.
Weir also began taking further measures across the whole of its business in June and July, and said all of its actions will result in GBP85 million in annual savings by the end of 2015.
"The group is responding to market conditions and enhancing its cost competitiveness by leveraging its best-cost manufacturing facilities and consolidating smaller manufacturing sites into larger, more efficient centres," said the company.
Weir is also prioritising investment in research and development, focusing specifically on new products and technology. R&D expenditure increased to GBP14 million in the first half from GBP10 million a year earlier.
Cochrane said the company is expecting a "meaningful sequential improvement" in its financial performance in the second half of 2015.
Weir Group shares were trading flat at 1,532.00 pence per share on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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