Interim Management Statement

The Weir Group PLC today issues its Interim Management Statement for the period to 29 October 2010.  Financial information is given for the 39 weeks ended 1 October 2010.

During the third quarter, the Group has continued to perform well. Improving order trends were evident across the Minerals and Oil & Gas divisions reflecting a greater demand for original equipment and stronger than expected aftermarket activity.  These positive trends and some further foreign exchange translation benefit means we now expect that profits for 2010 will be slightly ahead of our previous expectations and are now targeting profit before tax and intangibles amortisation for the second half of 2010 to be broadly in line with the first half.

Strong order input over the first half of 2010 resulted in third quarter revenues for each division being higher than the prior year period in constant currency terms.  This, together with continued aftermarket strength meant third quarter operating profits and margins also increased relative to the prior year period.

Order input¹ for the 39 weeks was up 32% (H1²: 24%) against the prior year period with original equipment orders up 44% (H1: 28%) and aftermarket orders up 23% (H1: 22%). 

Minerals

Order input for the 39 weeks was up 24% (H1: 21%) with original equipment orders up 33% (H1: 29%) reflecting a pick up in general activity levels, particularly in South America and Australia.  In addition, major new project enquiry levels remain strong.  Aftermarket orders were up 19% (H1: 16%), and this will have a positive impact on 2010 full year operating profits and margins relative to our previous expectations.

Oil & Gas

Order input for the 39 weeks was up 91% (H1: 47%), with upstream input up 232% (H1: 166%).   During the third quarter, there was a further increase in the North American horizontal drilling rig count largely due to the growing development of oil and liquid rich shale formations.  The increased rig count, along with a surge in forward pump orders and weak prior year comparatives, has resulted in an exceptional third quarter spike in SPM order input.  Given order lead times, this will have only a limited positive impact on 2010 revenues relative to our previous expectations but will ensure we enter 2011 with a strong opening order book.  As expected, downstream input continues to be lower year on year and this market is subject to ongoing pricing pressures.

Power & Industrial

Order input for the 39 weeks was down 7% (H1: down 1%) reflecting phasing of major nuclear orders and continued weakness in industrial markets, especially Canada, where the restructuring of our service operations is ongoing.  We continue to expect to see full year margin progression although full year revenues will now be broadly in line with 2009 in constant currency terms.

Material events

On 17 September 2010, the Group completed the acquisition of the Linatex group of companies based in Kuala Lumpur ("Linatex"), a global provider of wear-resistant products to the mining and sand & aggregates industries for a cash consideration of US$200m (£138m). Integration is progressing well.

On 22 September 2010, the Group secured a new 4 year US$800m multi currency revolving credit facility with a syndicate of twelve banks.  This facility replaces the £625m bilateral facilities which were due to mature in the third quarter of 2011.

On 11 October 2010, the Group completed the acquisition of the valves business of BDK Engineering Industries Limited, based in Hubli, Karnataka, India.  The business generated sales of £20.9m (INR 1.52bn) in the year to 31 March 2010.  Integration work is now underway.

Financial Position

Net debt at 1 October 2010 was higher than that reported at 2 July 2010 primarily due to the acquisition of Linatex and an increased investment in working capital to support business growth.

Notes

¹ Order input is reported in constant currency terms

² H1 refers to the 26 weeks ended 2 July 2010

A replay of the conference call for analysts and investors is available until Sunday 7 November 2010

Encore Replay Access Number: 19177978#