3rd Nov 2020 10:21
(Alliance News) - Weir Group PLC on Tuesday reported a double-digit fall in orders for the third quarter of its financial year, as mines were either closed or operating at a limited capacity, leading to ore production levels below pre-Covid levels and slower customer decision making.
The FTSE 250 engineering group that serves the mining industry said orders from continuing operations for the three months to the end of September dropped by 26%, both on a reported and like-for-like basis.
On an underlying basis - which excludes the effect of the GBP100 million Iron Bridge project's original equipment order in the third quarter of 2019 - orders dropped by 11%.
Total orders in the Minerals division were down 27%. As well as the Iron Bridge order boosting the prior-year period, demand demand in the recent three months was subdued in Africa and Australia due to Covid-19 challenges.
On an underlying basis, orders were down by 5%, despite continued mining demand.
Looking ahead, Weir expects robust activity levels for the rest of 2020 should commodity prices remain supportive and there is no further virus-related distruption.
In ESCO, the subsidiary reported a 24% fall in orders year-on-year, with its performance in North America affected by lower coal and oil sands demand, as well as the gradual return to operation by iron ore customers. Overall average utilisation for the period was 12% below pre-Covid levels.
Despite the weaker performance, Weir noted that ESCO's overall third-quarter performance was an improvement from the second.
Looking ahead, Weir has a similar outlook for ESCO as it has for Minerals, with the pace of further recovery to be modest and dependent level of future restrictions.
"The positive long-term fundamentals for our markets are unchanged, including the key role of essential metals in building the new economy and the need for mining operations to reduce their environmental impact. This is reflected in our strengthening project pipeline, particularly for our smarter, more efficient and sustainable solutions. We were delighted to agree the sale of the Oil & Gas division, enabling the group's transformation into a focused, premium mining technology business. The transaction remains on track for completion in 2020," said Chief Executive Jon Stanton.
In early October, Weir agreed to sell its entire Oil & Gas division to US-based engineering company Caterpillar Inc for a USD405 million enterprise value.
Shares in Weir Group were up 2.5% at 1,494.50 pence on Tuesday in London.
By Dayo Laniyan; [email protected]
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