Weir Group Plc · LSE:WEIR
Weir — The Weir Group — H1 2023 Earnings Presentation
47 slides from Weir's earnings presentation, Aug 1, 2023
Slide 1: 2023 Half Year Results
2023 Half Year Results 1 August 2023
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS 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 PLC’s (“the Group”) financial position, business strategy, plans (in
Slide 3: Chief Executive Officer Jon Stanton
CHIEF EXECUTIVE OFFICER JON STANTON 3 Half Year Results 2023
Slide 4: Compelling Value Creation Opportunity
COMPELLING VALUE CREATION OPPORTUNITY Focused mining technology leader with unique capabilities and high barriers to entry Multi-decade market opportunity driven by demand for critical metals and adoption of new technologies to enable sustainable mining Investing for long-term growth and delivering
Slide 5: Committed to Excellent Outcomes
COMMITTED TO EXCELLENT OUTCOMES GROWTH MARGINS RETURNS RESILIENCE SUSTAINABILITY Growing Expanding margins Converting earnings Providing ongoing Delivering for faster than through Performance growth into cash resilience and people and planet our markets Excellence and returns predictability Zero Har
Slide 6: Continuing to Build Our Track Record
CONTINUING TO BUILD OUR TRACK RECORD GROWTH MARGINS RETURNS RESILIENCE SUSTAINABILITY Growing Expanding Converting earnings Providing ongoing Delivering for faster than operating margins2 growth into cash resilience and people and planet our markets and returns predictability 12% +80bps +22pp 22% SB
Slide 7: Chief Financial Officer John Heasley
CHIEF FINANCIAL OFFICER JOHN HEASLEY 7 Half Year Results 2023
Slide 8: Strong Financial Performance; Margin Expansion on Track
STRONG FINANCIAL PERFORMANCE; MARGIN EXPANSION ON TRACK Orders1 Revenue1 £1.3bn +2% £1.3bn +16% Operating profit1,2 Operating margin1,2 £212m +22% 16.3% +80bps Profit before tax2,5 Free operating cash conversion3 £188m +32% 51% +22pp Book-to-bill Statutory profit EPS2 ROCE5 Net debt: Interim after t
Slide 9: Minerals: Very Strong Execution, Positive Margin Expansion Despite Mix
MINERALS: VERY STRONG EXECUTION, POSITIVE MARGIN EXPANSION DESPITE MIX High levels of mining activity, installed base expansion Orders1 £m OE AM • Volume growth in hard rock mining 1,000 • Contribution from pricing £980m +4% 72% 73% 500 • Normalisation of orders from Canadian oil sands • OE+1% 28% 2
Slide 10: ESCO: Very Strong Execution, Share Gains in Attachments
ESCO: VERY STRONG EXECUTION, SHARE GAINS IN ATTACHMENTS Robust demand in mining Orders1 £m • High levels of mining activity and share gains in mining attachments 400 • Contribution from pricing £356m -3% 200 368 356 • Demand in infrastructure stable, but below PY peak; • Like-for-like3 -7% order tre
Slide 11: Group Operating Margin Expansion: +80bps
GROUP OPERATING MARGIN1 EXPANSION: +80BPS H2 and beyond Performance Excellence Operating leverage Pricing benefits +150bps Translational FX +20bps -90bps +20bps Operating leverage 16.3% 15.3% 15.5% Pricing System & process efficiencies 1. Continuing operations, profit figures before adjusting items.
Slide 12: Working Capital & Cash Conversion Normalised
WORKING CAPITAL & CASH CONVERSION NORMALISED Operating cash flow £173m, +73% £m H1 2023 H1 2022 • Strong profit performance and improved working capital flows Operating cash flow pre working capital 261 212 Working capital efficiency; 24.3% of sales Working capital cash flows (88) (112) • Reflects e
Slide 13: Strong Balance Sheet
STRONG BALANCE SHEET Free cash inflow of £24m Free Cash Flow £m H1 2023 H1 2022 • Net debt increased by £45m; positive free cash inflow offset Free operating cash flow 108 49 by 2022 final dividend payment Net interest (24) (26) • Net debt to EBITDA 1.5x on a lender covenant basis Tax (51) (40) Addi
Slide 14: 2023 Full Year Financial Guidance
2023 FULL YEAR FINANCIAL GUIDANCE Based on July FX rates expected full Capex and lease spend c.£120m year operating profit impact of nil Corporate costs broadly in line with 2022 Free operating cash conversion 80-90% Exceptional cash outflow c.£15m to support Interest costs marginally higher than 20
Slide 15: Key Financial Messages
KEY FINANCIAL MESSAGES • High levels of activity in mining markets ONE • Strategy and technology driving market shares gains • Positive book-to-bill • Very strong execution; revenue and profit growth TWO • Margin1,2 expansion +80bps, despite mix headwind • Cash conversion and working capital normali
Slide 16: Chief Executive Officer Jon Stanton
CHIEF EXECUTIVE OFFICER JON STANTON 16 Half Year Results 2023
Slide 17: Compelling Value Creation Opportunity
COMPELLING VALUE CREATION OPPORTUNITY Performance Excellence Sustainability and technology focused growth initiatives Market growth COMPOUNDING GROWTH AND MARGIN EXPANSION 17 Half Year Results 2023
Slide 18: Strong Structural Dynamics in Mining
Market Growth Performance growth initiatives Excellence STRONG STRUCTURAL DYNAMICS IN MINING More metals needed for Growth through brownfield and / Net Zero Focus on technology Miners pursuing growth; significant or greenfield benefits Weir led productivity supply gaps after initiatives c.10 years u
Slide 19: Positive Near Term Outlook
Market Growth Performance growth initiatives Excellence POSITIVE NEAR TERM OUTLOOK MINERS INCENTIVISED TO MAXIMISE ORE PRODUCTION; LEGISLATION UNDERPINS US DRIVES DEMAND FOR WEIR AFTERMARKET INFRASTRUCTURE MARKET Copper prices well above cost of production Infrastructure investment 6 Copper price**
Slide 20: Highly Resilient Through the Cycle
Market Growth Performance growth initiatives Excellence HIGHLY RESILIENT THROUGH THE CYCLE >7% MINERALS AM REVENUE CAGR 2011 – 2023 Aftermarket revenue (£m) How we grow our installed base Minerals AM ESCO through the cycle 1200 7% GROUP AM REVENUE CAGR 2018 TO 2023* Maintenance capex 1000 Production
Slide 21: Minerals: Outgrowing Our Markets – 2023 H1 Progress
Market Growth Performance growth initiatives Excellence MINERALS: OUTGROWING OUR MARKETS – 2023 H1 PROGRESS Comminution Production commenced at Iron Bridge Year-on-year growth in comminution orders Synertrex®: launched proprietary digital intelli-solutions for pumps, cyclones and HPGR Digital soluti
Slide 22: Minerals: Delivering for Our Customers
Market Growth Performance growth initiatives Excellence MINERALS: DELIVERING FOR OUR CUSTOMERS DIGITALLY-ENABLED ENGINEERING TECHNOLOGY DRIVES GROWTH CHALLENGE SOLUTION OUTCOMES • Major iron ore • New Cavex® cyclone • Customer: >400,000 tpa increase company in Brazil technology enabled in ore recove
Slide 23: ESCO: Outgrowing Our Markets – 2023 H1 Progress
Market Growth Performance growth initiatives Excellence ESCO: OUTGROWING OUR MARKETS – 2023 H1 PROGRESS Digital solutions Completed successful field trials of ore characterisation technology Won key orders for Motion MetricsTM technology Surface mining buckets Strong market share gains in mining att
Slide 24: ESCO: Delivering for Our Customers
Market Growth Performance growth initiatives Excellence ESCO: DELIVERING FOR OUR CUSTOMERS SUPERIOR MINING ATTACHMENTS DRIVING GROWTH CHALLENGE SOLUTION OUTCOMES • Major US copper • Customised and • Customer: High miner (ESCO G.E.T. optimised cable performance product with customer) required shovel
Slide 25: Technology Investment Supporting Growth
Market Growth Performance growth initiatives Excellence TECHNOLOGY INVESTMENT SUPPORTING GROWTH R&D FRAMEWORK AND MINE OF THE FUTURE: TECHNOLOGY STRATEGY SUSTAINABLE SOLUTIONS Protecting Addressing customers’ TerraflowingTM and tailings solutions the core biggest challenges Move less rock Metallurgy
Slide 26: Redefined Mill Circuit: Addressing Miners' Sustainability Challenges
Market Growth Performance growth initiatives Excellence REDEFINED MILL CIRCUIT: ADDRESSING MINERS’ SUSTAINABILITY CHALLENGES STRONG Increasing throughput and using c.40% less energy PROGRESS IN THE FIRST HALF Growth in Cone crusher HPGR Screens Stirred mill Slurry Cyclones Coarse comminution orders
Slide 27: Performance Excellence on Track
Market Growth Performance growth initiatives Excellence PERFORMANCE EXCELLENCE ON TRACK PERFORMANCE EXCELLENCE: H1 UPDATE Optimising service centres and facilities Consolidated NAM Minerals manufacturing Optimised Australia service centre network Construction of new ESCO foundry on track Driving Lea
Slide 28: Weir Is on a Journey to Sustainably Higher Margins
Market Growth Performance growth initiatives Excellence WEIR IS ON A JOURNEY TO SUSTAINABLY HIGHER MARGINS PERFORMANCE EXCELLENCE: CAPITALISING ON THE BENEFITS OF A FOCUSED PORTFOLIO Operating margins Performance Excellence – Not to scale 2026+ cumulative phasing of benefits Performance Excellence £
Slide 29: A Safe Workplace and Purpose-Driven Culture
A SAFE WORKPLACE AND PURPOSE-DRIVEN CULTURE Safety is always our number 1 priority Creating a culture for success Focus on inclusion, diversity & equity TIR1 improved and remains world-class Introduced new leadership development resources Percentage female representation increased in our sector Reco
Slide 30: Integrated Sustainability Strategy
INTEGRATED SUSTAINABILITY STRATEGY 2020 2022 2023 2030 2050 Launch roadmap, Achieved emissions reductions, SBTi-approved 30% absolute Net Zero including scope while growing our business reduction in scope 1 & 21 CO2e; and scope 1 & 2 1 & 2 targets CDP A-List recognition 15% absolute reduction in sco
Slide 31: Upgrade to 2023 Revenue and Profit Guidance
UPGRADE TO 2023 REVENUE AND PROFIT GUIDANCE 2023 FULL YEAR GUIDANCE Now expect strong growth in revenue and operating profit Operating profit towards the upper end of the current range of analysts’ expectations On track to deliver operating margin target of 17% Free operating cash conversion of 80%
Slide 32: Building Our Track Record in the First Half
BUILDING OUR TRACK RECORD IN THE FIRST HALF ONE Strong execution TWO Delivering on our commitments THREE Excellent strategic progress FOUR Doing the right thing for our people and the planet FIVE Upgraded full year guidance 32 Half Year Results 2023
Slide 33: Compelling Value Creation Opportunity
COMPELLING VALUE CREATION OPPORTUNITY Focused mining technology leader with unique capabilities and high barriers to entry Multi-decade market opportunity driven by demand for critical metals and adoption of new technologies to enable sustainable mining Investing for long-term growth and delivering
Slide 34: Q&A
Q&A 34 Half Year Results 2023
Slide 35: Appendix
APPENDIX 35 Half Year Results 2023
Slide 36: Continuing Operations
CONTINUING OPERATIONS £m H1 2023 H1 20221 Growth H2 20221 OE orders 301 287 5% 312 AM orders 1,035 1,024 1% 1,006 Total orders 1,336 1,311 2% 1,318 OE revenue 290 215 34% 282 AM revenue 1,010 906 12% 1,057 Total revenue 1,300 1,121 16% 1,339 Book-to-bill 1.03 1.17 0.98 Adjusted operating profit2 212
Slide 37: Minerals
MINERALS £m H1 2023 H1 20221 Growth H2 20221 OE orders 266 262 1% 293 AM orders 714 681 5% 683 Total orders 980 943 4% 976 OE revenue 262 198 32% 256 AM revenue 688 592 16% 719 Total revenue 950 790 20% 975 Book-to-bill 1.03 1.19 1.00 Adjusted operating profit2 173 138 25% 186 Adjusted operating mar
Slide 38: ESCO
ESCO £m H1 2023 H1 20221 Growth H2 20221 OE orders 35 25 40% 19 AM orders 321 343 -6% 323 Total orders 356 368 -3% 342 OE revenue 28 17 60% 26 AM revenue 322 314 3% 338 Total revenue 350 331 6% 364 Book-to-bill 1.02 1.11 0.94 Adjusted operating profit2 59 53 10% 57 Adjusted operating margin2% 16.7%
Slide 39: Quarterly Order Trends – Continuing Operations
QUARTERLY ORDER TRENDS – CONTINUING OPERATIONS Reported growth Like-for-like growth1 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q1 2023 Q2 Original Equipment -18% -3% 13% 19% 20% -12% 20% -12% Aftermarket 23% 18% 25% 6% 5% 5% 5% 5% Minerals 9% 11% 21% 10% 9% 0% 9% 0% Original Equipment -17
Slide 40: Quarterly Order Trends – Continuing Operations
QUARTERLY ORDER TRENDS – CONTINUING OPERATIONS Quarterly orders1 £m Like-for-like orders1,2 £m 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q1 2023 Q2 Original Equipment 112 150 147 146 134 132 134 132 Aftermarket 319 362 339 344 335 379 335 379 Minerals 431 512 486 490 469 511 469 511 Origi
Slide 41: Orders by End Market and Geography – Continuing Operations
ORDERS BY END MARKET AND GEOGRAPHY – CONTINUING OPERATIONS Orders by end market Minerals ESCO H1 2023 Total H1 20221 Total Mining 747 218 965 908 Oil & Gas 59 44 103 110 Infrastructure 20 82 102 128 General Industrial 106 12 118 121 Other 48 - 48 44 Continuing Operations 980 356 1,336 1,311 Orders b
Slide 42: Working Capital
WORKING CAPITAL INVENTORY TRADE RECEIVABLES 800 3 450 80 2.5 71 700 2.3 2.4 400 62 60 2.0 2 53 350 600 1.5 Continuing 40 Continuing £m £m 1 Operations 300 Operations 500 20 0.5 250 Inventory Turns Debtor Days 400 0 200 0 H1 2022 H2 2022 H1 2023 H1 2022 H2 2022 H1 2023 WORKING CAPITAL TRADE PAYABLES
Slide 43: Foreign Exchange by Currency
FOREIGN EXCHANGE BY CURRENCY H1 2022 Revenue £m H1 2022 Adjusted operating profit1 £m Currency At 2022 rates FX At 2023 rates At 2022 rates FX At 2023 rates US Dollar 488 27 515 81 5 86 Australian Dollar 162 (1) 161 23 — 23 Canadian Dollar 99 — 99 24 — 24 Euro 34 2 36 10 — 10 Chilean Peso 86 7 93 23
Slide 44: Foreign Exchange by Division
FOREIGN EXCHANGE BY DIVISION H1 2022 Revenue £m H1 2022 Adjusted operating profit1 £m Division At 2022 rates FX At 2023 rates At 2022 rates FX At 2023 rates Minerals 782 8 790 135 3 138 ESCO 314 17 331 51 2 53 Corporate costs — — — (18) — (18) Continuing operations 1,096 25 1,121 168 5 173 1. Profit
Slide 45: Foreign Exchange Headwind in 2023 at Current Rates
FOREIGN EXCHANGE HEADWIND IN 2023 AT CURRENT RATES FY 2022 Revenue £m FY 2022 Adjusted operating profit1 £m Currency At 2022 rates FX At 2023 rates At 2022 rates FX At 2023 rates US Dollar 1,087 3 1,090 193 — 193 Australian Dollar 374 (9) 365 55 (1) 54 Canadian Dollar 240 (8) 232 63 (2) 61 Euro 79 2
Slide 46: Exchange Rates
EXCHANGE RATES The principal exchange rates applied in the preparation of the financial statements were as follows: H1 2022 H1 2023 H1 2022 H1 2023 Currency Average FX rate Average FX rate Balance sheet rate Balance sheet rate US Dollar 1.30 1.23 1.22 1.27 Australian Dollar 1.81 1.82 1.76 1.91 Canad
Slide 47: Find Out More at global.weir
FIND OUT MORE AT GLOBAL.WEIR 47 Half Year Results 2023