Weir Group PLC · LSE:WEIR
Weir — The Weir Group — H1 2014 Earnings Presentation
34 slides from Weir's earnings presentation, Jul 31, 2014
Slide 1: 2014 Interim Results
2014 Interim Results Weir Oil & Gas, USA London, 31 July 2014
Slide 2: Highlights
Highlights Keith Cochrane Weir Minerals, Brasil
Slide 3: H1 in-line with expectations in mixed end markets
H1 in-line with expectations in mixed end markets 10% order growth year on year and 9% up on H2-13 Positive aftermarket momentum across the Group: 15% order input growth Strong growth in upstream Oil & Gas: divisional input up 40% year on year Adverse foreign currency exchange rate movements
Slide 4: Financial review
Financial review Jon Stanton Weir Power & Industrial, France
Slide 5: Good underlying performance
Good underlying performance Results summary1 Growth £m H1 2014 H1 2013 As Constant reported currency Input (constant currency) 1,240 1,130 +10% Revenue 1,144 1,198 -5% +6% Operating profit 201 217 -7% +4% Operating margin 17.6% 18.1% -50bps -40bps Net finance costs (19) (24) +19% +24% Profit before
Slide 6: Minerals: Strengthening aftermarket performance
Minerals: Strengthening aftermarket performance £m 2013 H11 2013 H21 2014 H1 +/- Input OE 235 210 171 -27% Input OE / Aftermarket (%) Input aftermarket 376 359 395 +5% Input Total 611 569 566 -7% 61 63 70 AM OE Revenue OE 219 226 181 -18% Revenue aftermarket 359 375 367 +2% 39 37 30 Revenue Total 57
Slide 7: Oil & Gas: Increasing momentum across division
Oil & Gas: Increasing momentum across division £m 2013 H11 2013 H21 2014 H1 +/- Input OE 97 112 160 +64% Input OE / Aftermarket (%) Input aftermarket 258 293 339 +32% Input Total 355 405 499 +40% 73 72 68 AM Revenue OE 103 109 123 +19% OE Revenue aftermarket 250 284 312 +25% 27 28 32 Revenue Total 3
Slide 8: Power & Industrial: Good order and revenue growth
Power & Industrial: Good order and revenue growth £m 2013 H11 2013 H21 2014 H1 +/- Input OE 82 85 87 +7% Input OE / Aftermarket (%) Input aftermarket 82 77 88 +7% Input Total 164 162 175 +7% 50 47 50 AM Revenue OE 78 93 90 +16% OE Revenue aftermarket 70 72 71 +2% 50 53 50 Revenue Total 148 165 161 +
Slide 9: Cash flow impacted by working capital investment
Cash flow impacted by working capital investment 2014 2013 H1 H1 £m £m Highlights Operating cash flows – pre working capital 229 246 Cash interest down; lower levels of average net debt and FX Working capital (79) (63) benefit on US$ borrowings Operating cash flows 150 183 Continued investment i
Slide 10: Underlying improvement in working capital management
Underlying improvement in working capital management Working capital as % of revenue1 Working capital metrics impacted by external market factors 30 25 20 Good progress in reducing underlying slow moving inventory: 15 24.6 26.2 22.4 > Masked in first half by absolute increase in Pressure 10 Pump
Slide 11: Finance costs and net debt
Finance costs and net debt Reduction in finance costs to £19m (2013: £24m) Movement in net debt £m > Repayment of amortising loan in 2013 Net debt at 3 January 2014 747 > Benefit from exchange on interest of US$ debt Free cash outflow 21 Acquisitions 5 Marginal movement in net debt since year en
Slide 12: Sterling strength impacts only partially felt in H1
Sterling strength impacts only partially felt in H1 £m Revenue Operating USD rate profit 2013 as reported 2,430 467 1.56 2013 average FX (171) (34) As presented February 2014 2,259 433 1.64 Jan-14 average FX (22) (5) Constant currency H1 2013 2,237 428 1.67 H1-14 average FX (20) (4) Current rate end
Slide 13: Business overview & outlook
Business overview & outlook Keith Cochrane Weir Power & Industrial, France
Slide 14: 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 Mine
Slide 15: Minerals: Resilient performance in challenging markets
Minerals: Resilient performance in challenging markets Commodity price rebased to 100 120 110 Difficult OE environment, good ore production growth 100 Copper $/ton 90 Gold $/oz > Absence of greenfield activity 80 Iron ore 62% Dry metric ton > Customer caution resulting in brownfield delays 70 60 >
Slide 16: Minerals: Impacts of South African industrial action
Minerals: Impacts of South African industrial action H1 revenues and profits impacted by platinum strikes > Association of Mineworkers & Construction Union (AMCU) > Longest mining strike in modern times (23 Jan to 24 Jun) > South African mining output down c.25% in H1-14 > Mines unlikely to ramp u
Slide 17: Minerals: Strategic progress
Minerals: Strategic progress Comminution strategy gaining traction > £34m orders in H1-14 Developing mining and oil and gas product portfolios > Range of swellable packers extended Extending > Development of cone-crusher on track product 2014 leadership Continuous improvement of core products
Slide 18: Oil & Gas: Increasing momentum across division
Oil & Gas: Increasing momentum across division US rig count and wells drilled Strengthening upstream market conditions 2,000 10,000 1,900 > Oil prices supporting growth, particularly in Permian 9,000 Wells 1,800 drilled > Pressure pumping aftermarket driven by 24/7 operations 1,700 8,000 Rig count
Slide 19: Oil & Gas: Strategic progress
Oil & Gas: Strategic progress Uptake of new product and services accelerating > Premium fluid ends c.40% of category input > Positive uptake of flowback and zipper in Bakken Services expansion on track > LUKOIL start up in Iraq under way Capturing > Services expanding into Oman broader end 2014
Slide 20: Power & Industrial: Revenue growth offset by margin mix
Power & Industrial: Revenue growth offset by margin mix Global manufacturing purchasing managers index trend Power and oil & gas projects subject to delays 57 Global > Customer caution impacting project timetables US 55 > Nuclear new build activity picking up for 2015 procurement Euro 53 Zone > No
Slide 21: Power & Industrial: Strategic progress
Power & Industrial: Strategic progress Expanding mid/downstream oil and gas presence > Success in LNG safety valve market > Oil & gas end markets input up 69% Maximising aftermarket opportunities Driving > Valves aftermarket orders up 22% 2014 sustainable progress growth Increasing best-cost s
Slide 22: 2014 Group outlook unchanged
2014 Group outlook unchanged Minerals1 Oil & Gas1 Power & Industrial1 No further disruption in Strong opening order Strong opening order mining markets book book First half OE orders Continuation of current Strong full year constant impacting H2 revenues upstream conditions currency reve
Slide 23: 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 Specialis
Slide 24: Differentiated technology
Differentiated technology Structural growth Minerals > Enhanced vertical slurry pump, markets designed for retrofit > Ceramic lined cyclones providing Process critical materially extended life products Oil & > Automated relief valve control Increasing Gas system increasing efficiency market shar
Slide 25: Questions
Questions Weir Minerals, South Africa
Slide 26: Appendices
Appendices Weir Oil & Gas, USA
Slide 27: Appendix 1: Quarterly input growth
Appendix 1: Quarterly input growth Reported growth Like for like growth1 Division Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2013 2014 2014 2013 2013 2014 2014 OE 0% 19% -27% -28% 0% 19% -27% -28% AM 7% 7% 4% 6% 5% 5% 4% 6% Minerals Total 4% 11% -7% -8% 3% 9% -7% -8% OE 11% 2% 33% 99% 11% 2% 33% 99% AM 45% 69% 33
Slide 28: Appendix 2: Order input by end market
Appendix 2: Order input by end market Divisions Power & 2014 20131 End Markets Minerals Oil & Gas Industrial Total Total Minerals 77% - 1% 35% 39% Oil & Gas 9% 99% 16% 46% 38% Power 3% - 57% 10% 11% General Industrial 9% 1% 13% 6% 8% Other 2% - 13% 3% 4% Total 100% 100% 100% 100% 100% 1 2013 restate
Slide 29: Appendix 3: Bridge graphs
Appendix 3: Bridge graphs Order input1 Revenue 1,400 1,400 1,300 1,300 144 11 40% 7% 1,240 1,198 (119) 1,200 1,200 13 (45) 82 -7% 23% 9% 1,144 1,130 (30) 1,100 1,100 -5% £m 1,000 1,000 2013 Minerals O&G P&I 2014 £m 2013 FX Minerals O&G P&I 2014 £m constant published currency Operating profit2 217 (2
Slide 30: Appendix 4: Foreign exchange by currency
Appendix 4: Foreign exchange by currency 2013 Revenue 2013 Operating Profit At 2013 At 2014 At 2013 At 2014 rates FX 1 rates rates2 FX rates2 £m £m £m £m £m £m US$ 506 (39) 467 120 (10) 110 Australian $ 129 (22) 107 25 (4) 21 Euro € 124 (5) 119 22 (1) 21 Canadian $ 100 (14) 86 18 (2) 16 Chilean Peso
Slide 31: Appendix 5: Foreign exchange by division
Appendix 5: Foreign exchange by division 2013 Revenue 2013 Operating Profit1 Published FX FX Restated Published FX FX Restated £m £m % £m £m £m % £m Minerals 659 (81) (12%) 578 130 (16) (12%) 114 Oil & Gas 381 (28) (7%) 353 83 (6) (7%) 77 Power & Industrial 158 (10) (6%) 148 12 (1) (8%) 11 Central C
Slide 32: Appendix 6: Income statement FX rates
Appendix 6: Income statement FX rates 2014 H1 2013 FY 2013 H1 Average Average Average US$ 1.67 1.56 1.54 Australian $ 1.82 1.61 1.51 Euro € 1.22 1.18 1.18 Canadian $ 1.83 1.61 1.57 Chilean Peso 924.75 771.29 736.46 South African Rand 17.88 15.01 14.17 Brazilian Real 3.83 3.36 3.13 31
Slide 33: 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 34: Head office 20 Waterloo Street Glasgow G2 6DB
Head office 20 Waterloo Street Glasgow G2 6DB weir.co.uk App Twitter Download the Weir Follow news from the Group IR and Media app Weir Group on Twitter for iOS and Android @WeirGroup devices on the App Store or Google Play