Weir Group PLC · LSE:WEIR
Weir — The Weir Group — FY2013 Earnings Presentation
41 slides from Weir's earnings presentation, Feb 26, 2014
Slide 1: 2013 results
2013 results A resilient performance in challenging end markets London, 26 February 2014 Weir Seaboard, Texas
Slide 2: Highlights
Highlights Keith Cochrane Weir Minerals, Alrode, South Africa
Slide 3: Resilient performance in challenging end markets
Resilient performance in challenging end markets Growing order momentum – 12% LFL growth in H2 Robust aftermarket trends supporting performance – 16% input growth Record operating margins maintained Value Chain Excellence delivering results – £40m direct cost savings Mining and Oil & Gas product off
Slide 4: Consistent delivery of shareholder returns
Consistent delivery of shareholder returns 42.0 38.0 33.0 27.0 21.0 18.5 16.5 2007 2008 2009 2010 2011 2012 2013 DPS (p) as reported 3
Slide 5: Financial review
Financial review Jon Stanton Weir Power & Industrial, Ardnacrusha Power Plant, Ireland
Slide 6: Robust performance in line with expectations
Robust performance in line with expectations Results summary1 £m 2013 2012 Variance +/- Input (constant currency) 2,462 2,384 +3% Revenue 2,430 2,538 -4% Operating profit2 467 485 -4% Operating margin2 19.2% 19.1% +10bps Net finance costs2 (48) (45) -7% Profit before tax2,3 418 440 -5% Profit for th
Slide 7: Minerals: Robust profit and margin growth
Minerals: Robust profit and margin growth £m H11 H2 2013 20121 +/- LfL +/- Input OE 258 233 491 520 -6% -6% Input: OE vs. Aftermarket (%) Input aftermarket 419 401 820 776 6% 3% Aftermarket 58 60 63 Input Total 677 634 1,311 1,296 1% 0% Revenue OE 239 248 487 533 -9% -9% Original Equipment 42 40 37
Slide 8: Oil & Gas: Strong sequential aftermarket growth
Oil & Gas: Strong sequential aftermarket growth £m H11 H2 2013 20121 +/- LfL +/- Input OE 104 119 223 272 -18% -18% Input: OE vs. Aftermarket (%) Input aftermarket 275 313 588 416 41% 29% 45 Aftermarket Input Total 379 432 811 688 18% 10% 60 72 Revenue OE 110 116 226 390 -42% -42% Original 55 Equipm
Slide 9: Power & Industrial: Building a platform for growth
Power & Industrial: Building a platform for growth £m H11 H2 2013 20121 +/- Input OE 86 89 175 194 -10% Input: OE vs. Aftermarket (%) Input aftermarket 86 79 165 169 -2% 48 46 49 Aftermarket Input Total 172 168 340 363 -6% Revenue OE 82 99 181 172 5% Original 52 54 51 Equipment Revenue aftermarket 7
Slide 10: Strong free cash flow performance
Strong free cash flow performance Highlights Cash flow statement 2013 2012 90% EBITDA cash conversion £m £m (2012: 75%) Operating cash flows – pre working capital 515 516 £22m working capital cash Working capital (41) (117) inflow in H2 Operating cash flows 474 399 Net interest cash flow impacted Ne
Slide 11: Improved working capital performance in H2
Improved working capital performance in H2 Working capital as % of revenue1 Strong cash collection of receivables 30.0 > Absolute receivables up due to strong Q4 revenue growth 15.0 24.6 22.4 19.0 20.4 Marked improvement in working capital metrics in H2 2013 0.0 2012 H1 2012 H2 2013 H1 2013 H2 Debto
Slide 12: Strong balance sheet maintained
Strong balance sheet maintained Movement in net debt £m Net finance costs (excluding IAS19) of £45m (2012: £41m) Net debt at 28 December 2012 689 > Increased net debt throughout year Free cash inflow (168) Acquisitions (inc. JVs) 216 Refinanced RCF (US$800m) in July; new five year facility FX 10 Net
Slide 13: Acquisitions performing well
Acquisitions performing well Mathena acquired 31 Dec 12 (FY 2013) > Consideration $247m (£153m) > Integration completed successfully > Year-1 returns greater than cost of capital > £68m release of contingent consideration liability recognised as exceptional item Other acquisitions – cash considerati
Slide 14: Sterling strength impacts only partially felt in 2013
Sterling strength impacts only partially felt in 2013 2013 Revenue £’m 2013 Operating profit £’m Currency At At At H1 At 2013 January At H1 At 2013 January FX FX FX FX rates FY rates 2014 rates FY rates 2014 average average US $ 1,042 (14) 1,028 (51) 977 245 (4) 241 (12) 229 Australian $ 279 (17) 26
Slide 15: 2014 guidance on financial items
2014 guidance on financial items Increasing currency markets volatility > US $ ready-reckoner: 1c move in average rate = £2m EBITA over full year Net capex c.£120m, driven by investment in our Malaysian foundry and IT infrastructure Working capital improvement as a result of traction in supply chain
Slide 16: Business overview & outlook
Business overview & outlook Keith Cochrane Weir Minerals, High Pressure Grinding Roll
Slide 17: Coherent and complementary Group
Coherent and complementary Group Divisions with shared characteristics > Serving structural growth markets > Highly engineered equipment > Extreme and remote environments Power & > Intensive aftermarket demand Oil & Gas Industrial Portfolio benefit > Complementary technologies and footprint Minerals
Slide 18: Aftermarket delivering sustainable growth
Aftermarket delivering sustainable growth 1,600 18.9% 19.1% 19.2% 20% 18.0% 14.7% 1,200 15% 13.7% EBITA margin Revenue (£m) 11.6% 800 10% 63% 55% 52% 58% 400 5% 50% 54% 46% 0 0% 2007 2008 2009 2010 2011 2012 2013 As reported Aftermarket and % of total revenue EBITA margin Aftermarket revenue growth
Slide 19: Minerals: Strong performance in challenging markets
Minerals: Strong performance in challenging markets Commodity spot prices rebased to Jan 2013 Source: Bloomberg, Jan 2014 16% decline in capex, stable production growth 120 > Greenfield expenditure materially lower 100 80 > Miners focused on brownfield opportunities 60 > Project delivery and commiss
Slide 20: Minerals: delivering strategic priorities
Minerals: delivering strategic priorities Comminution platform established & delivering results > Addressable market >£1bn > First HPGR orders received Increased market share Extending > 12% growth in wear-resistant mill liners product 2013 leadership progress Manufacturing and service capacity expa
Slide 21: Oil & Gas: Strengthening aftermarket trends
Oil & Gas: Strengthening aftermarket trends North America markets subdued, international growth US well count & drilling efficiency Source: Baker Hughes, Jan 2014 10 5.5 > Declining well count; efficiencies reducing cost per well Number of wells drilled (k) Wells drilled per rig 8 > Excess pressure
Slide 22: Oil & Gas: delivering strategic priorities
Oil & Gas: delivering strategic priorities Extending product range > Mathena successfully integrated > Entered flowback and zipper manifold markets Product ‘bundling’ strategy delivering Capturing > Leveraging market-leading service network broader end 2013 > Strong growth in valves, fluid ends & fl
Slide 23: Power & Industrial: Valves platform strengthened
Power & Industrial: Valves platform strengthened Industrial production forecast Mixed end market conditions Source: Goldman Sachs, Feb 2014 10% > Low gas price impacting North American hydro markets 5% > Delays to scheduled power plant maintenance 0% > Emerging markets driving power and oil and gas
Slide 24: Power & Industrial: delivering strategic priorities
Power & Industrial: delivering strategic priorities Expanding emerging markets presence > Strong valves growth in South Korea > Product transfers to emerging markets > Contract wins in Libya and Brazil Building a platform for 2013 Operational capability strengthened sustainable progress growth > Val
Slide 25: Minerals: Medium-term outlook
Minerals: Medium-term outlook Capex to decline in 2014; ore production growing Mining capex forecasts Source: SNL, Feb 2014 ($b) 200 > Miners to continue focus on capex and opex reductions 150 > New greenfield activity falling, brownfield more resilient 100 > Strong ore production growth in iron ore
Slide 26: Oil & Gas: Medium-term outlook
Oil & Gas: Medium-term outlook North American market returning to growth in 2014 Global upstream oil & gas spend forecast Source: Morgan Stanley, Jan 2014 > North American gas activity to remain subdued 16% 12% > Mid-single digit E&P expenditure growth in North America 8% > Continued drilling effici
Slide 27: 2014 Group outlook
2014 Group outlook Minerals Oil & Gas Power & Industrial Double-digit mining capex Mid single digit growth in Record opening order market declines North American markets book Original equipment Normalisation of Pressure Hydro markets to remain revenues to decline Pumping AM demand subdued Good after
Slide 28: A platform for profitable growth
A platform for profitable growth Structural Emerging market growth and urbanisation growth Resource scarcity and industrialisation markets Aligned to higher growth commodities Process Technological leadership critical Exposed to high wear, high temperature and abrasion products Specialist service re
Slide 29: Increasing market share
Increasing market share Structural growth INCREASING MARKET SHARE markets Minerals > Comminution orders Process critical nearly doubled products > Leading position secured in coal-seam applications INCREASING Oil & > >15% growth in flow control and MARKET SHARE Gas fluid end orders > >40% growth in
Slide 30: 2014 priorities
2014 priorities Structural growth Capturing mining aftermarket opportunities markets Accelerate progress in comminution Process critical Drive growth in frack rentals and flowback products International expansion of Oil & Gas Increasing Accelerate Valves growth market share Increasing technical diff
Slide 31: Questions
Questions Weir Minerals South Africa, Isando
Slide 32: Appendices
Appendices WE
Slide 33: Appendix 1: Quarterly input growth
Appendix 1: Quarterly input growth Reported growth Like for like growth Division Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY OE -23% -8% 0% 19% -6% -23% -8% 0% 19% -6% AM 7% 2% 7% 7% 6% 6% -2% 5% 5% 3% Minerals Total -6% -2% 4% 11% 1% -7% -4% 3% 9% 0% OE -42% -25% 11% 2% -18% -42% -25% 11% 2% -18% AM 7% 51% 45% 6
Slide 34: Appendix 2: Order input by end market
Appendix 2: Order input by end market Divisions Power & 2013 20121 End Markets Minerals Oil & Gas Industrial Total Total Minerals 75% - 1% 40% 44% Oil & Gas 10% 99% 11% 40% 34% Power 5% - 60% 11% 12% General Industrial 8% 1% 15% 7% 6% Other 2% - 13% 2% 4% Total 100% 100% 100% 100% 100% 1 2012 restat
Slide 35: Appendix 3: Bridge graphs
Appendix 3: Bridge graphs Order input1 Revenue 71 (23) (21) 2,462 (113) 2,600 (3) 10% -6% 33 2,538 (11) -2% 2,600 -13% 2,384 0% 2,500 4 33 2,500 2,430 1% 2,400 2,400 2,300 2,300 2,200 2,200 2,100 2,100 Like for Like Like for Like 2,000 2,000 2012 (constant Minerals O&G P&I Acquisitions/ 2013 2012 FX
Slide 36: Appendix 4: Foreign exchange by currency
Appendix 4: Foreign exchange by currency 2012 Revenue 2012 Operating Profit At 2012 At 2013 At 2012 At 2013 rates FX rates rates FX rates £m £m £m £m £m £m US$ 1,079 15 1,094 296 4 301 Australian $ 301 (14) 287 57 (3) 54 Euro € 239 11 250 36 2 38 Canadian $ 210 (3) 207 41 - 41 Chilean Peso 134 - 134
Slide 37: Appendix 5: Foreign exchange by division
Appendix 5: Foreign exchange by division 2012 Revenue 2012 Operating Profit1 Published FX Restated Published FX Restated £m £m £m £m £m £m Minerals 1,334 (27) 1,307 256 (3) 253 Oil & Gas 844 13 857 211 3 214 Power & Industrial 323 3 326 31 1 32 Group Companies 37 - 37 3 - 3 Central Costs - - - (16)
Slide 38: Appendix 6: Income statement FX rates
Appendix 6: Income statement FX rates 2013 H1 2013 FY January Average Average 2014 Average US$ 1.54 1.56 1.64 Australian $ 1.51 1.61 1.86 Euro € 1.18 1.18 1.21 Canadian $ 1.57 1.61 1.80 Chilean Peso 736.46 771.29 892.05 South African Rand 14.17 15.01 18.00 Brazilian Real 3.13 3.36 3.93 37
Slide 39: Appendix 7: One-off costs
Appendix 7: One-off costs Power & 2013 2012 Minerals Oil & Gas Industrial Total Total Acquisition transaction and integration 1.9 0.8 - 2.7 4.0 costs excluded in like for like Restructuring and other one-off costs - 5.3 - 5.3 5.3 Total one-off costs 1.9 6.1 - 8.0 9.3 38
Slide 40: Disclaimer
Disclaimer This information includes ‘forward-looking statements’. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding The Weir Group’s (“the Company”) financial position, business strategy, plans (including developmen
Slide 41: Head office, 20 Waterloo Street, Glasgow
Head office 20 Waterloo Street Glasgow G2 6DB weir.co.uk @WeirGroup