first half results in line with expectations full year ... · source: rmg group, july 2013 source:...

2013 Interim Results

First half results in line with expectations Full year outlook unchanged

London, 30 July 2013

HighlightsLord Smith of Kelvin

H1 in line with expectations in challenging markets

� 13% sequential order growth

� Growing aftermarket revenues in each division

� Book to bill 1.05: >1.0 in each division

� Value chain excellence underway: over £15m in savings

� Good first contribution from Mathena

� Comminution platform established

2

Continuing operations

Earnings per Share

66.4pdown 13%

Revenue

£1,198mdown 10%

Profit before tax1

£193mdown 14%1 Profit before tax adjusted to

exclude exceptional items and intangibles amortisation

Cash2

£183mup 29%2 Cash = cash generated

from operations

Interim dividend

8.8pup 10%

Financial reviewJon Stanton

Results summary1

£m H1 2013 H1 2012 Variance +/- LfL Variance +/-

Input (constant currency) 1,258 1,328 -5% -7%

Revenue 1,198 1,325 -10% -12%

Operating profit3 217 247 -12% -20%

Operating margin 18.1% 18.7% -60bps -170bps

Net finance costs3 (24) (22) -6%

Profit before tax3 193 225 -14%

Profit for the period3 142 160

Effective tax rate 26.6% 28.8% -220bps

EPS3 66.4p 75.9p -13%

Dividend per share 8.8p 8.0p +10%

ROCE2 25.2% 30.5% -530bps

1 Continuing operations as reported excluding exceptional items and intangibles amortisation2 2013: Continuing operations EBIT before exceptional items (excluding Seaboard, Novatech, Wales and Mathena) divided by average net assets (excluding Seaboard, Novatech, Wales and Mathena)

excluding net debt and pension deficit (net of deferred tax)2012: Continuing operations EBIT before exceptional items (excluding Seaboard and Novatech) divided by average net assets (excluding Seaboard and Novatech) excluding net debt and pension deficit (net of deferred tax)

3 2012 restated following adoption of IAS19 “Retirement benefits” (Revised)

Performance in line with expectations4

� Input increased sequentially quarter on quarter

> LfL aftermarket growth benefiting from growing installed base

> Localised de-stocking in Q2 in some geographies

� Emerging markets accounted for 47% of total input (2012: 50%)

> Orders from Africa up 10%

� Strong operating margins

> Strengthening aftermarket mix

> Continued procurement savings and cost control

23

12

189

16

22

N.America

Europe & FSU

Australia

Asia Pacific

Mid East & Africa

S.America

Minerals: Strong profit and margin performance£m 2012 H11 2012 H21 2013 H1 +/- LfL +/-

Input OE 314 221 266 -15% -15%

Input aftermarket 417 388 434 +4% +2%

Input Total 731 609 700 -4% -6%

Revenue OE 261 287 245 -6% -6%

Revenue aftermarket 407 396 414 +1% -

Revenue Total 668 683 659 -1% -3%

EBITA2 121 140 130 +7% +5%

Operating margins2 18.2% 20.4% 19.8% +160bps +150bps12012 restated at 2013 average exchange rates 2Adjusted to exclude exceptional items and intangibles amortisation

Input OE / Aftermarket %

Revenue OE / Aftermarket %

Input by geography %

61 58 63 62

39 42 37 38

2012H1 2012H2 2013H1 2013LfL

OE

Aftermarket

Emerging markets

5

57 64 62 61

43 36 38 39

2012H1 2012H2 2013H1 2013LfL

OE

Aftermarket

71

8

5

1321

N.America

Europe & FSU

Asia Pacific

Mid East & Africa

S. America

Australia

Oil & Gas: Progressive first half improvement£m 2012 H11 2012 H21 2013 H1 +/- LfL +/-

Input OE 162 113 106 -35% -35%

Input aftermarket 220 202 278 +27% +15%

Input Total 382 315 384 +1% -6%

Revenue OE 259 136 111 -57% -57%

Revenue aftermarket 244 228 270 +10% -

Revenue Total 503 364 381 -24% -29%

EBITA2 126 91 83 -34% -46%

Operating margins2 25.0% 25.0% 21.8% -320bps -590bps12012 restated at 2013 average exchange rates 2Adjusted to exclude exceptional items and intangibles amortisation



57 64 73 71

43 36 27 29

2012H1 2012H2 2013H1 2013LfL

OE

Aftermarket

4963 71 69

5137 29 31

2012H1 2012H2 2013H1 2013 LfL

OE

Aftermarket

Emerging markets


6

� Input +1% year on year (LfL -6%) due to combination of

> Lower OE pressure pumping sales

> Positive first contribution from Mathena

> Progressive improvement in aftermarket activity

� Margins impacted by lower activity levels and higher one-off costs

> Some pricing pressure on legacy fluid ends and OE pumps

> Pressure pumping margins otherwise in line with expectations

31

33

26

8 2N.America

Europe & FSU

Asia Pacific

Mid East & Africa

S. America

Power & Industrial: Building for second half growth

£m 2012 H11 2012 H21 2013 H1 +/-

Input OE 101 97 87 -14%

Input aftermarket 98 72 87 -11%

Input Total 199 169 174 -13%

Revenue OE 88 87 84 -4%

Revenue aftermarket 69 86 74 +8%

Revenue Total 157 173 158 +1%

EBITA2 12 20 12 -1%

Operating margins2 7.6% 11.8% 7.5% -10bps

12012 restated at 2013 average exchange rates 2Adjusted to exclude exceptional items and intangibles amortisation



49 43 50

51 57 50

2012H1 2012H2 2013H1

OE

Aftermarket

44 50 47

56 50 53

2012H1 2012H2 2013H1

OE

Aftermarket


7

Emerging markets

� Input down 13% year on year

> H1 2012 inc. one-off nuclear valves & hydro refurb contracts

> Underlying valves input broadly flat year on year

� Broadly flat operating profit and margin

> Investment in operational capability to support H2 revenue growth

> Offsetting insurance proceeds on settlement of prior claim

Cash flow

Free cash inflow of £8m in the period

2013 H1£m

2012H1£m

Operating cash flows – pre working capital 246 268

Working capital (63) (127)

Operating cash flows 183 141

Net interest (21) (8)

Tax (38) (66)

Net capex (40) (53)

Other cash flows (12) 1

Free cash flow pre dividends 72 15

Dividends paid (64) (55)

Free cash inflow/(outflow) 8 (40)

8

� Interest cash flow impacted by timing of payments on Private Placement debt (H2 2012 outflow £20m)

� Capex related to investment in further capacity in Minerals and spend in Oil & Gas to enable consolidation of operations into Fort Worth

� Other cashflows include settlement of derivative financial instruments of £10m

3.3 3.1 2.8

0

1

2

3

4

2012H1 2012H2 2013H1

� Working capital increased from £519m to £605m over H1> £9m from FX / other> £14m from acquisitions> £63m cash outflow

� Debtors: cash outflow of £18m in H1 2013> Cash collection impacted by period end pre month end> OE shipment delays in Minerals

� Inventory: cash outflow of £4m in H1 2013 > Absolute reduction achieved in Pressure Pumping> Investment in P&I to support increased revenue in H2> OE shipment delays in Minerals

� Payables: cash outflow of £41m in H1 2013> Creditor days broadly consistent across all periods> Project shifts in Minerals impacting purchasing levels> Reduced levels of advance payments

Working capital

Expecting strong cash inflow in second half

Working capital as % of revenue1

Debtor days1

Inventory turns1

19.0 20.624.6

10

15

20

25

2012H1 2012H2 2013H1

58 59 66

0

15

30

45

60

75

2012H1 2012H2 2013H1

9

1 2013 excluding Mathena & Wales, H1 2012 excluding Seaboard & Novatech; 2012 restated at 2013 exchange rates

Finance costs & net debt

Flexible funding structure in place

� Finance costs of £24m (2012: £22m)

> Reflects increased net debt

� Refinanced RCF (US$800m) in July; initial drawdown 25 July

> New 5 year facility

> Additional fee amortisation on existing facility of £1.6m in H2

� Range of short, medium and long-term financing in place

> Attractive rates

> Diverse lending base

£m

Net debt at 28 December 2012 689

Free cash inflow (8)

Acquisitions 214

FX 55

Net debt at 28 June 2013 950

10

1 Including full year pro forma for acquisitions2 Including Mathena pro forma ratio of 1.5

Key debt metrics

2012H1

2012H2

2013H1

Net debt / EBITDA1 1.6 1.32 1.8

Interest cover 16.5 11.8 11.1

Covenant 3.5 3.5 3.5

2010

PP 5 Yr

2010

PP 8yr

NEW

RCF

2012

PP 7yr

PP

10 yr

2012

PP 11 yr

-

100

200

300

400

500

600

Jan-15 Jan-18 Jul-18 Feb-19 Feb-22 Feb-23

Maturity

£'m

Other matters

11

Acquisitions & intangibles amortisation

� Mathena acquired 31 Dec 12

> Upfront consideration $247m (£153m)

> Maximum future payment $145m

> Contingent consideration liability assumes maximum payout

� Others – total consideration £55m

> R Wales, Canada

> Cheong foundry, Malaysia

> Xmeco foundry, South Africa

> Aspir, Australia

� Intangibles amortisation increased by £4m to £22m

Exceptional items

� Full £5.8m relates to unwind of discount on contingent consideration

> Weir International £1.2m

> Mathena £4.6m

Pensions

� Deficit reflects current market conditions

� Reduction due to increase in gilt yields

10490

69

0

25

50

75

100

2012H1 2012H2 2013H1

Pension deficit

Contingent consideration $120m

Management remuneration $25m

Total maximum earnout $145m

Business overview & outlookKeith Cochrane

Coherent and complementary Group

� Divisions with shared characteristics

> Serving structural growth markets

> Highly engineered equipment

> Extreme and remote environments

> Intensive aftermarket demand

� Portfolio benefit

> Complementary technologies and footprint

> Diversified end markets

> Exposure to different capex cycles

> Underpins earnings sustainability

13

Delivering sustainable growth through the cycle

Minerals

Oil & GasPower & Industrial

Minerals: Strong performance

� Challenging OE environment, aftermarket growth

> Continuing switch from greenfield to brownfield

> Miners cautious on projects – some delays

> Ore production volumes growing

> Oil & Gas opportunities supporting division

> Africa (ex-S.Africa) remains strong

> Greenfield activity down in Australia & S. America

� Medium term growth drivers remain intact

> Structural demand drivers unchanged

> Supply constraints require continued investment

> Capex to remain above 2010 levels

> Brownfield and plant optimisation spend to grow

> c.3% p.a. growth in ore production forecast

> Greenfield aftermarket benefit spread over extended period

14

Commodity spot prices rebased to Jan 2012

Mining capex forecasts ($m)

Mined ore production (Million tonnes)

Source: RMG Group, July 2013

Source: Bloomberg, July 2013

0

5,000

10,000

15,000

20,000

25,000

2010 2011 2012 2013f 2014f 2015f 2016f

Thermal coal Metallurgical coal Iron Ore Copper Gold Others

60

80

100

120

Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13

Iron Ore Copper Gold

Source: RMG Group, July 2013

0

50,000

100,000

150,000

200,000

250,000

2010 2011 2012 2013f 2014f 2015f 2016f

Minerals: Strategic progress

15

Extending product

leadership and market

reach

2013 progress

� Comminution platform established, extending reach

> c. £3bn market

� Increasing market share for ancillary product range

> Screens, dewatering pumps

� Capacity extended to meet future aftermarket demand

> Foundry acquisitions

� Leveraging Minerals technology in oil & gas markets

Oil & Gas: Encouraging aftermarket trends

� Sequential improvement in upstream markets

> Strong oil prices, US gas price below incentive levels

> Extended Canadian spring break; floods impact

> Frac fleet overcapacity continues

> Aftermarket growing as inventories normalise

> Strong international markets (including Saudi, Iraq)

� Medium term unconventional outlook positive

> Drilling efficiencies lowering breakeven costs

> Gas demand growth in N. America

> Strong international growth

16

Drilling and completion expenditure(US$ billion, exc. China, Russia & Cent Asia)

US Rig count estimates vs wells drilled

0

100

200

300

400

500

2011 2012 2013F 2014F 2015F 2016F

US Canada & International

0

10

20

30

40

2011 2012 2013F 2014F 2015F 2016F

N.America International

Source: PacWest, May 2013

Source: Spears, June 2013

Global frac fleet (MM HHP)

Source: PacWest

5500

6000

6500

7000

1500

1600

1700

1800

1900

2000

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Wells drilled Rig count

Oil & Gas: Strategic progress

17

Capitalising on broader end market

opportunities

2013 progress

� New products and product lines launched

> Frac flow back, zipper manifold

� New product pipeline progressing

� Leveraging broader pressure pumping portfolio

� Capturing international growth opportunities

> International wellhead expansion

� Mathena integration progressing well

Power & Industrial: Positive book to bill performance

18

0%

2%

4%

6%

8%

Services(incl. wind

O&M)

Ind. pumps Hydro Valves

-

5 000

10 000

15 000

20 000

25 000

30 000

1990 2010 2015 2020

Coal Oil Gas Nuclear

Hydro Bioenergy Wind Geothermal

Solar PV CSP Marine

Total Electricity Generation (Twh)

Industrial Production Forecast

Addressable Market (CAGR 2012-2017)

Source: IEA

Source: GS, April 2013 -5%

0%

5%

2011 2012 2013 2014

Euro area USA World

Source: Weir

� Mixed end market conditions

> Low gas price impacting N. American power markets

> New build nuclear activity picking up in India & China

> Subdued industrial activity in developed markets

> Emerging markets offering best opportunities

� Strong medium term opportunities

> Increasing demand for energy, power and efficiency

> New build power opportunities in emerging markets

> Gas driven power generation taking share

> Good mid/downstream oil & gas opportunities

Power & Industrial: Strategic progress

19

Delivering sustainable

growth

2013 progress

� Operational capability enhanced

� 24% growth in emerging markets

� Successfully targeting valve aftermarket opportunities

� Geographic expansion continued

2013 Group outlook unchanged

Minerals Oil & Gas Power & Industrial

� Project activity continuing at H1 levels

� No further project slippages assumed

� Sequential growth in both OE and AM sales

� Revenues lower than prior guidance

� Margin ahead - in line with first half

� Profit expectations unchanged

� Modest sequential well count growth

� Continued recovery in upstream markets

� Higher Press. Pumping revenue expectations

� Sequential margin improvement

� Full year margin slightly lower than 2012


� Strong opening order book

� Market conditions to remain mixed

� Emerging market project opportunities

� Strong sequential sales & margin growth

� Full year revenues in line with prior guidance


Low single digit revenue growth and broadly stable margins in 201320

Structural growth markets

� Emerging market growth and urbanisation

� Resource scarcity, and industrialisation

� Aligned to higher growth commodities

Process critical products

� Technological leadership

� Exposed to high wear, high temperature, and abrasion

� Specialist service requirements

Increasing market share

� Leading global service network, growing installed base

� Expanding into adjacent markets

� Cross-selling opportunities

Differentiated technology

� Unique materials and flow control expertise

� Growing investment in R & D and engineering

� Robust technology development organisation

Leveraging the platform

� Cost reduction and best-cost sourcing

� Value Chain Excellence

� Strategic acquisitions

A platform for profitable growth

21

Leveraging the platform – strategic progress

22

LEVERAGING THE PLATFORM

� >£15m procurement savings

� M&A activity establishing comminutionplatform

� Mathena leveraging O&G service network

� P&I leveraging Group presence in South Africa and Australia

� Cross-divisional technology transfers






A platform for profitable growth

23

Positioned to continue to deliver superior returns across the cycle

THE WEIR GROUP MODEL

� 5%-10% organic revenue growth over the cycle> Growing faster than our end markets (4%-7%)

� Top-quartile margins and returns> Sustainable competitive advantage, value

chain excellence> Large aftermarket provides sustainable platform

� Continued investment to support growth> Capacity, technology

� Leveraging returns through acquisitions> Track record of value enhancing acquisitions

� Strong dividend growth> 30-year track record






A sustained period of growth

24

Revenue£0.7bn

Revenue£2.5bn

EPS22.6p

EPS150.1p

FY dividend12p

FY dividend38p

Market cap£0.6bn1

Market cap£4.6bn2

2002 2012

+979%

+581%

+117%

Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13

Weir FTSE 350 FTSE 350 Ind Engineers

Total shareholder return

1 As at 1st July 20022 As at 1st July 2013

Appendices

800

900

1,000

1,100

1,200

1,300

1,400

2012 (constantcurrency)

Minerals P&I O&G AcquisitionsDisposals

2013

Appendix 1: Order input1


55 60 64

45 40 36

2012H1 2012H2 2013H1

OE

Aftermarket

39 39

14 1410 1012 10

11 14

14 13

2012 2013

S. America

Mid East & Africa

Asia Pacific

Australia

Europe & FSU

N. America

1 2012 restated at 2013 average exchange rates

1,328(40)-6% (25)

-13% (25)-6% 20 1,258

Like for Like

Emergingmarkets

£m

26

43 40

34 37

11 118 8

2012 2013

Other

Industrial

Power

Oil & Gas

Minerals

4 4

Input by sector %


Appendix 2: Revenue


Revenue by sector %

800

900

1,000

1,100

1,200

1,300

1,400

2012 Published FX Minerals P&I O&G AcquisitionsDisposals

2013

1,325 16(17)-3%

1+1%

(148)-29%

21 1,198

Like for Like

54 57 63

46 43 37

2012H1 2012H2 2013H1

OE

Aftermarket

46 39

1114

10 10

9 9

12 14

12 14

2012 2013

S. America

Mid East & Africa

Asia Pacific

Australia

Europe & FSU

N. America

Emergingmarkets

£m

39 43

41 38

10 97 7

2012 2013

Other

Industrial

Power

Oil & Gas

Minerals

Revenue by geography %

3 3

27

1 Excludes exceptional items and intangibles amortisation2 Continuing operations EBIT before exceptional items (excluding Seaboard, Novatech, Wales and Mathena) divided by average net

assets (excluding Seaboard, Novatech, Wales and Mathena) excluding net debt and pension deficit (net of deferred tax)3 Includes FX of £5m and movement in unallocated expenses of (£1m); summation impacted by roundings

30.5 29.1 25.2

0

5

10

15

20

25

30

35

2012H1 2012H2 2013H1

0

50

100

150

200

250

2012 Published FX/Other Minerals P&I O&G AcquisitionsDisposals

2013

247

0-1%

Appendix 3: Operating profit1

Like for Like

Operating profit1

Operating margin%

LfL ROCE%2

247 238 217

0

100

200

300

2012H1 2012H2 2013H1

18.7 19.6 18.1

0

5

10

15

20

2012H1 2012H2 2013H1

£m

28

5

7+5%

(59)-46%

17 217

3

29

Total Like for Like2

2013£m

20121

£mVariance

+/-2013

£m20121

£mVariance

+/-

Minerals 700 731 -4% 691 731 -6%

Oil & Gas 384 382 1% 357 382 -6%

Power & Industrial 174 199 -13% 174 199 -13%

Group Companies - 16 -100% - - -

Order Input 1,258 1,328 -5% 1,222 1,3113 -7%

1 2012 restated at 2013 average exchange rates2 Excludes Mathena, Wales, LGE3 Summation impacted by roundings

Appendix 4: Order input by division

30

End Markets Minerals Oil & GasPower &

Industrial2013Total

20121

Total

Minerals 72% - 1% 40% 43%

Oil & Gas 10% 99% 10% 37% 34%

Power 5% - 55% 11% 11%

General Industrial 9% 1% 18% 8% 8%

Other 4% - 16% 4% 4%

Total 100% 100% 100% 100% 100%

Divisions

1 2012 restated at 2013 average exchange rates

Appendix 5: 2013 order input by end market

31


2013£m

20121

£mVariance

+/-2013

£m20121

£mVariance

+/-

Minerals 659 668 -1% 651 668 -3%

Oil & Gas 381 503 -24% 355 503 -29%

Power & Industrial 158 157 1% 158 157 1%

Group Companies - 13 -100% - - -

1,198 1,341 -11% 1,164 1,328 -12%

Foreign Exchange - (16) - - (16) -

1,198 1,325 -10% 1,164 1,312 -11%

1 2012 restated at 2013 average exchange rates2 Excludes Mathena, Wales, LGE

Appendix 6: Revenue by division

32


2013£m

20122

£m2013

£m20122

£m

Minerals 130 121 128 121

Oil & Gas3 83 126 70 129

Power & Industrial 12 12 12 12

Group Companies - 1 - -

Central Costs (8) (9) (8) (9)

217 2525 202 2545

Foreign Exchange - (5) - (5)

Operating profits 217 247 202 249

Operating Margin

Minerals 19.8% 18.2% 19.7% 18.2%

Oil & Gas3 21.8% 25.0% 19.7% 25.6%

Power & Industrial 7.5% 7.6% 7.5% 7.6%

Group3 18.1% 18.8% 17.4% 19.1%

1 Continuing operations adjusted to exclude exceptional items and intangibles amortisation2 2012 restated at 2013 average exchange rates and to reflect acquisition fair value accounting3 Including share of results of joint ventures4 Like for like excludes the impact of acquisitions and disposals and related transaction and integration costs5 Summation impacted by roundings

Appendix 7: Operating profit1 by division

33

2012 Revenue 2012 Operating Profit1

Published£m

FX£m

Restated£m

Published£m

FX£m

Restated£m

Minerals 665 3 668 120 1 121

Oil & Gas 492 11 503 123 3 126

Power & Industrial 155 2 157 12 - 12

Group Companies 13 - 13 1 - 1

Central Costs - - - (9) - (9)

1,325 16 1,341 247 52 2522

1 Adjusted to exclude exceptional items and intangibles amortisation

2 Summation impacted by roundings

Appendix 8: Foreign exchange by division

34

2012 Revenue 2012 Operating Profit1

At 2012 rates

£m

FX£m

At 2013 rates

£m

At 2012 rates

£m

FX£m

At 2013 rates

£m

US$ 595 14 609 166 4 170

Canadian $ 104 1 105 18 - 18

Australian $ 160 1 161 31 - 31

Euro € 126 4 130 16 1 17

Brazilian Real 34 (2) 32 4 - 4

Chilean Peso 72 4 76 16 1 17

South African Rand 58 (6) 52 5 (1) 4

Other 176 - 176 (9) - (9)

1,325 16 1,341 247 5 252

1 Adjusted to exclude exceptional items and intangibles amortisation and to reflect acquisition fair value accounting

Appendix 9: Foreign exchange by currency

first half results in line with expectations full year ... · source: rmg group, july 2013 source:...

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