Reuters logo
UPDATE 2-Weir warns on profit as mining customers cut back
November 4, 2013 / 7:51 AM / 4 years ago

UPDATE 2-Weir warns on profit as mining customers cut back

* 2013 profit could be as low as 413 million pounds

* Oil and gas recovery slower than expected

* Shares down 7.9 percent (Adds CEO, analyst comments, detail, shares)

By Stephen Eisenhammer

LONDON, Nov 4 (Reuters) - British engineer Weir Group warned its full-year profit would be below analysts’ expectations, joining a host of mining equipment makers hit by cost cutting at mining companies.

Peers such as Caterpillar, Sandvik, and Atlas Copco have all seen order bookings fall this year as lower metal prices force miners to cut costs, often by delaying expansions and new projects.

Weir said on Monday its 2013 profit before tax, amortisation and one-off items could be as low as 413 million pounds ($658 million) if foreign exchange rates remain unfavourable, 7 percent below analysts’ average forecast of 446 million pounds.

Shares in Weir, which makes pumps and valves for the mining, oil and gas industries, had been up 20 percent so far this year, with the company’s strong position in the U.S. shale industry expected to shelter it from the fallout of weaker mining orders.

But a slower than expected recovery in the oil and gas industry, particularly U.S. shale, meant both revenue and profit would come in below forecasts, the company said.

Shares in Weir were down 7.9 percent to 2,078 pence at 0930 GMT, the biggest fall on the UK’s benchmark FTSE-100 index.

“The big challenge is around the timing of deliveries, the phasing of projects, particularly in the mining world,” Chief Executive Keith Cochrane told reporters on a conference call.

Weir said it expected full-year profit to be in a range of 425-435 million pounds. But the final figure could be around 8-12 million pounds lower than that due to a rise in the pound versus U.S., Australian and emerging market currencies.

Cochrane said full-year revenue would be broadly flat on the previous year, cutting the “single digit percentage rise” that had been anticipated a few months ago.

Orders in the oil and gas division were up 33 percent in the third quarter compared with last year, although the number of rigs in use in the U.S. industry declined in the period.

A relatively high oil price was expected to incentivise drilling in the United States, making up for a downturn in shale gas activity on the back of low natural gas prices. However, this transition has been slower than expected, Weir said.

“The disappointment is across all divisions really,” Thomas Rands, an analyst at Investec, said.

“We feel as if they’ve been riding the wave on their surfboard and they’ve been knocked off. They were trading very close to the edge and unfortunately the various markets have moved away from underneath them and they’ve fallen off,” he added.

$1 = 0.6281 British pounds Editing by Mark Potter

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below