Weir Group PLC has announced its interim results for the six months ended 30 June 2024, highlighting continued strength in its aftermarket (AM) business and an improving project outlook. The company reiterated its full-year operating profit and cash conversion guidance.
Robust Aftermarket Performance Fuels Growth
The first half saw high levels of activity in the hard rock mining sector, driving a 2% increase in group AM orders. This growth was fuelled by the strength of the copper and gold markets, which more than offset mine-specific headwinds.
A notable £31 million AM order, split between Q2 and Q4 due to a multi-year contract retention, was booked in Q2 (compared to the full amount being booked in the same period last year). This highlights the resilience of Weir's AM-biased business model, which continues to perform well amidst challenging conditions.
Performance Excellence Drives Improved Margins and Cash Conversion
Weir's commitment to operational excellence delivered tangible results. The group achieved an adjusted operating margin of 17.8%, an impressive 180 basis point increase year-on-year. The company has already realised £13 million in cumulative Performance Excellence savings, remaining on track to deliver its full-year benefit.
Free operating cash conversion reached 68%, a significant 17 percentage point improvement from the previous year. This strong performance was driven by effective working capital management and reduced capital expenditure.
Encouraging Project Pipeline Fuels Optimism for the Second Half
Despite a challenging macroeconomic environment, Weir's pipeline of greenfield expansion projects is growing. In July, the company secured a £53 million contract for an HPGR-led project. This, along with other projects nearing approval, is expected to drive revenue growth in the second half and beyond.
The company expects revenue for the full year to be toward the lower end of current analyst estimates. However, with an anticipated operating margin of around 18%, Weir is outperforming its previous guidance. This positive outlook is underpinned by the continued success of its Performance Excellence programme and the growing greenfield project pipeline.
Strong Cash Conversion and Future Growth Potential
Weir's strong cash conversion, expected to reach 90-100% for the full year, will further de-lever its balance sheet. This robust financial position allows the company to prioritize growth initiatives and deliver increased returns to shareholders.
The company remains committed to delivering through-cycle mid to high single-digit percentage revenue growth, driven by its innovative mining technology solutions and its focus on operational excellence. Weir's ambition to achieve an operating margin of 20% by 2026 and beyond is supported by its Performance Excellence programme and strong cash generation capabilities.
Jon Stanton, Weir Group's Chief Executive Officer, stated:
"Our performance in the first half of the year is another testament to our commitment to deliver market-leading through-cycle growth at sustainably higher margins. The resilience of our aftermarket-biased business model and strong delivery of Performance Excellence benefits demonstrate the significant upside potential in our equity case. Looking toward the full year, industry acceptance of our Redefined Mill Circuit is building momentum, and our pipeline of greenfield expansion projects is encouraging. Together with continued execution of our Performance Excellence programme, we remain on track to deliver our full-year guidance for operating profit and cash conversion."
Webcast details:
A webcast of the management presentation will begin at 08:00 (BST) on 30 July 2024 at www.investors.weir. A recording of the webcast will also be available on the same website.
