Weir is having a tough time at its oil & gas division and profits will be lower than expected this year. It has trimmed guidance as a result, but not by much and the worst looks to be over. With strong demand at the larger minerals business driving record half-year profits, the rally in the share price ahead of these results looks justified.
Of course, the fracking pumps business remains a worry. Excess capacity is still working through, and a 37 per cent slump in upstream order input during the period was at the thick end of estimates. Original equipment orders halved on a like-for-like basis and the anticipated recovery in demand for spares never came. Still, excess capacity is working through and management expects some kind of uptick in the second half. If it comes, group adjusted pre-tax profit could hit £460m this year. But Weir will make £440m even in a flat aftermarket, and activity outside North America is ramping up fast. It's a different story at the minerals unit where full-year profits should be better than expected. Both revenue and underlying operating profit leapt by a fifth or more in the first half and orders rose 11 per cent to £726m.
Numis Securities expects full-year adjusted pre-tax profit of £453m and adjusted EPS of 150.1p (up from £396m and 133.6p in 2011).
WEIR (WEIR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,652p | MARKET VALUE: | £3.51bn | |
| TOUCH: | 1,651-1,654p | 12-MONTH HIGH: | 2,243p | Low: 1,332p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 552p* | NET DEBT: | 72% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.03 | 167 | 56.3 | 7.2 |
| 2012 | 1.32 | 203 | 68.3 | 8.0 |
| % change | +29 | +22 | +21 | +11 |
Ex-div: 3 Oct Payment: 2 Nov *Includes intangible assets of £1.47bn, or 692p a share | ||||
