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Tough conditions for engineer

Weir warns on profits after oil slump

weirScottish engineering company Weir Group today issued a profits warning as a result of lower activity in the oil sector.

The Glasgow-based firm said it had been hit in particular by tougher conditions in the Middle East and the oil and gas division will make a loss for the year.

Jon Stanton, chief executive, said there were some positive signs and he anticipates growth in the division.

In an interim management statement, he said: “There are signs in the group’s third quarter performance that our core markets have started to improve.

“Minerals aftermarket orders returned to growth and North American oil and gas customers started planning for higher activity levels next year.  The group’s trading results reflected the low point in the North American oil and gas market and tougher conditions in the Middle East.

“Assuming commodity prices remain supportive, we anticipate further sequential growth for the oil & gas division in the fourth quarter but little improvement in the pricing environment.

“Given conditions in the Middle East as well, we now expect the division to be around breakeven in the fourth quarter and slightly lossmaking for the full year.

“The combined outlook for minerals and flow control is unchanged.  Therefore, including a small further foreign exchange benefit, the group’s full year 2016 profits are expected to be slightly lower than current market expectations.

“Weir is well placed to benefit as markets recover.  The strength of the team together with our global leadership positions in mining and oil and gas, deep customer relationships and investment in innovative technology, give the group a robust platform for long term growth.”

Highlights:

  • Third quarter aftermarket orders stable with overall order input down 7%
  • Minerals – Aftermarket orders grew 4%; original equipment fell against a strong prior year period
  • Oil & Gas – Sequential quarterly input growth in North America; further declines in the Middle East
  • Flow Control – Continued operational progress; mid and downstream oil and gas more challenging
  • Disposal programme on track to deliver up to £100m by year end; £79m achieved by end of October
  • Full year profits anticipated to be slightly lower than current market expectations
  • Continued strong cash generation expected in 2016
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