Weir positive of 2017 outlook despite a fall in revenues
Scottish pump and valve manufacturer Weir expects its sales to pick up in 2017, despite reporting lower revenues from last year due to the low crude oil prices.
Weir’s annual revenue fell 11% to £1.58 billion (€1.86bn), with profits clocking in at £170 million, nearly a third lower than last year.
The company’s oil and gas operations bore the brunt of the losses, recording revenue of £401 million, down 34%, and operating profits of -£9 million, marking a 115% decrease from last year.
But Weir CEO Jon Stanton, in a statement, said the company returned to growth in fourth quarter of 2016, following a “challenging and prolonged” downturn.
“Our main markets showed signs of improvement and we benefited from our on-going investment in new technology and long-term customer relationships,” Stanton said.
“Minerals increased revenues from both original equipment and aftermarket. Oil and gas extended its technology leadership amidst difficult end markets and flow control benefited from its recent restructuring which supported margins in challenging downstream energy markets. Our record of excellent cash generation continued.”
He added the company expects to deliver “strong cash generation” in 2017 and “good growth” in constant currency revenues.
“Profit growth will be further supported by foreign currency translation benefits, partly offset by incremental investments in people and technology,” Stanton concluded.
Wasi Rizvi, analyst at RBC Capital Markets, told the Financial Times that the upturn in profits in the final quarter of 2016 was “encouraging”, but the comments that the prices for the company’s services would remain challenging were a potential cause for concern.
“Oil and gas remains the big unknown, and we see little in [the revenue] release to meaningfully move the view,” Rizvi told Financial Times.
Weir has been forces to take difficult cost-cutting methods, including reducing workforce and closing plants.
Among the cuts was Weir’s subsidiary Delta Industrial Valves, whose plant in Michigan, US, employing 60 people, will be closed down by mid-2017.
This article was written by Ilari Kauppila, editor at Fluid Handling International