Keith Findlay, 13th August 2008
Scottish engineering firm Weir Group said yesterday it expected more progress this year as it announced a substantial increase in first-half profits.
Glasgow-based Weir added that its second-half performance was benefiting from a strong order book and contributions from recent acquisitions.
A sharper focus on the mining and energy industries helped Weir to 85% year-on-year growth in pre-tax profits during the six months to June 27, to £81.8million, on turnover that was up 46% at £632million.
The firm, which employs about 9,000 people in the manufacture and distribution of industrial pumps and valves, has restructured to ensure its resources are targeted at “higher-growth, longer- cycle” markets.
It also bolstered its African mineral business with the acquisition of Warman for £113.8million in March.
The first-time contribution from the new business gave an additional boost to revenue at a time of buoyant trading conditions.
More recent acquisitions have included, in the group’s oil and gas division, US-based pump and flow-equipment business Mesa for £20.3million and a 75% stake in Azerbaijani oil service firm Standard Oilfield Services for £8.07million.
Weir’s bottom-line result was affected by the sale of its Strachan and Henshaw subsidiary to engineering support-service company Babcock International in April for about £65million.
Group profits after tax were down to £108.5million from £117.9million a year earlier.
Weir chief executive Mark Selway said the group remained on track to meet full-year City forecasts for profits of about £165.4million before tax, goodwill and one-off items. He added that the group’s current balance sheet could support up to £300million of acquisitions, even after the recent deals.
Weir believes its mineral division will benefit from continued strong market conditions and the addition of Warman, while similar conditions should buoy the oil and gas business.
The group also anticipates improved margins at its power and industrial arm, because of stronger power markets and an earlier restructuring.
Weir organised its activities into three operating divisions earlier this year in an attempt to improve its product offering to customers and make the most of its geographical spread.
Analysts at Dresdner Kleinwort said the group’s latest figures made positive reading, adding: “Recent acquisitions are integrating well. The company retains a strong balance sheet and has good cash-flow prospects, giving opportunities for further accretive deals.”