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Weir Group bolstered by mining industry demand with City analysts optimistic about engineering firm’s long-term prospects
- Demand from the global mining sector helped drive the Weir Group’s order levels
- Peel Hunt analysts say Weil has ‘great fundamentals, great market positions’
Weir Group has strengthened its profit margin amid strong demand from the mining sector for equipment and spare parts.
The FTSE 250-listed engineering group said “very supportive” mining conditions contributed to a 19 percent increase in last-quarter orders and 21 percent after-market orders.
The company maintained its expectations for revenue, profit and operating margin for the full year.
In the question: Weir Group has strengthened its profits amid strong demand from the mining sector
Weir Group said demand was strong in all regions, especially in South America, where miners maximized copper production, and North America, where the relocation of production to the US and the recent revival in Canadian oil sands activity continued. .
The group experienced ‘good operational momentum’ and pricing power over the period, driving third quarter revenue higher year on year as supply chain and logistical challenges eased and input cost inflation moderated.
Weir Group shares rose today and rose 1.98 percent or 31.50p to 1623.50p this afternoon. The company’s share price had fallen by about 5 percent in the past year.
Jon Stanton, the group’s chief executive, said: ‘The Group delivered a strong performance in the third quarter, with significant order growth and sequential sales growth, while mitigating the effects of inflation.
“Demand for our aftermarket spare parts has been particularly strong, reflecting the highly resilient nature of our business as miners continue to maximize ore production. We also made good progress on our strategic growth initiatives, with increasing customer demand for our digital offerings and solutions for more sustainable mining.
“Going into the fourth quarter, supply chain challenges are easing, we have strong operational momentum and a record order book. Our FY22 outlook for strong revenue and earnings growth, operating margin expansion and 80-90 percent free operating cash conversion is unchanged.”
Looking ahead, Weir Group said conditions in the mining markets appear to remain strong, with very attractive.
It added: ‘We have yet to see whether the current macroeconomic and geopolitical conditions will affect mining markets; in our base case, we assume conditions will be supportive, with AM growth rates consistent with our full cycle targets and continued traction in small to mid-sized OE projects.
“In the infrastructure markets, we expect activity in North America to remain stable, with continued weak demand in Europe.”
Guillermo Peigneux Lojo, analyst at UBS, said: “While the near-term outlook for mining has been clouded by the macro environment, current conditions remain favorable for Weir, with no changes in customer behavior and attractive long-term fundamentals. .
“We expect AM to remain resilient throughout the cycle and OE activity to continue to focus on removing bottlenecks, small expansions and improving sustainability. Consensus could get a boost, helped by FX.”
Peel Hunt analysts said: “Weir released a strong third quarter update, which is encouraging, but not a surprise given the commentary from Epiroc, CAT, Terex, Metso and others in the past week.”
Peel Hunt analysts added: ‘Great end markets, great fundamentals, great market positions – a real buy and we are maintaining our price target of 1,950 pence.’