Weir Group prepares exit from struggling oil and gas business

Weir Group has prepared the ground for a sale of its struggling oil and gas division after a £546m writedown knocked the mining and energy equipment maker into an annual loss.

The group said its focus is “now on becoming a mining technology pure play” and will be looking for opportunities to “maximise value” from the oil and gas business at the right time.

Weir reported a £372m pre-tax loss in the year to the end of December, down from an £86m profit in the previous year. Revenues rose 7 per cent on a constant currency basis to £2.66bn.

The supplier of heavy duty equipment has suffered from a softening of demand for its pumping equipment in North America, as its customers in the shale industry tighten their belts and minimise their capital expenditure. The oil and gas business took a £546m impairment charge last year, while its revenues fell 25 per cent.

“Market dynamics have changed with shorter cycles and higher levels of volatility leading to a very different financial profile to our mining businesses,” chief executive Jon Stanton said.

“Whenever we identify a clear solution to drive value for our shareholders, we will be ready and able to capitalise,” Mr Stanton said. For now, Weir will continue to invest in the business, given the current tough market conditions.

Analysts at Stifel said Wednesday’s update to investors is the “clearest statement yet that this business is now considered non-core” and that the impairment charge is intended as the first steps towards an exit once conditions are more supportive.

In the mining division, revenues and margins rose in both the minerals business and at mining tools maker Esco, which Weir acquired in 2018. Stifel’s analysts said the strong performance in this business left the overall 2019 numbers “a solid performance.”

Source: Financial Times