Earnings call transcript: Weir Group sees steady growth in Q1 2025

Weir Group PLC reported a positive start to 2025, with a notable increase in group orders and aftermarket sales. The company, which maintains a "GREAT" financial health score according to InvestingPro analysis, continues to advance its Performance Excellence Program, achieving significant cost savings. The company's strategic initiatives and market conditions have positioned it well for future growth, with analysts forecasting EPS of $1.76 for FY2025. The stock price showed a modest increase, reflecting investor confidence, and currently appears undervalued based on InvestingPro's Fair Value model.

Key Takeaways

• Group orders increased by 5% year-on-year.
• £35 million saved through the Performance Excellence Program.
• Strong demand in the mining sector supports growth.
• Weir Group targets £80 million in savings by 2026.
• Ongoing supply chain adjustments to mitigate tariff impacts.

Company Performance

Weir Group's performance in the first quarter of 2025 was marked by a 5% increase in group orders, driven by both original equipment and aftermarket sales. The company's minerals segment performed particularly well, with original equipment orders rising by 6% and aftermarket orders by 9%. This growth underscores Weir's resilience and adaptability in a competitive mining industry.

Financial Highlights

• Group orders: Up 5% year-on-year
• Original Equipment orders: Increased by 5%
• Aftermarket orders: Increased by 5%
• Cumulative savings from the Performance Excellence Program: £35 million

Outlook & Guidance

Looking ahead, Weir Group is optimistic about maintaining mid-single-digit growth in both original equipment and aftermarket sales. Analysts project 7% revenue growth for FY2025, with the company trading at an attractive PEG ratio of 0.51. The company also aims to expand its operating margin by 50 basis points and achieve a free operating cash conversion rate of 90-100%. The full-year 2025 guidance remains strong, supported by ongoing innovations and strategic initiatives, with a dividend growth rate of 7.82% reflecting management's confidence.

Access the comprehensive Pro Research Report and detailed financial analysis for Weir Group and 1,400+ other stocks through InvestingPro .

Executive Commentary

CEO John Staunton emphasized the company's resilience to commodity price fluctuations, stating, "We are a long way from where commodity prices would start to see any meaningful effect on our business." He also highlighted potential growth opportunities in the digital space, saying, "We continue to see opportunities probably smaller than MicroMine, further bolt-ons in the digital space." CFO Brian Puffer commented on the cost-saving initiatives, noting, "We are not stopping at £80 million. We believe as we've built this muscle, we will continue to generate those savings."

Risks and Challenges

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

• Supply Chain Adjustments: Continued tariff impacts require strategic supply chain realignment.
• Commodity Price Volatility: Although currently resilient, potential fluctuations could impact future performance.
• Market Saturation: The need to maintain growth in a competitive mining sector.
• Economic Conditions: Broader macroeconomic pressures could influence demand in non-mining sectors.
• Technological Advancements: Keeping pace with rapid technological changes in the industry.

The Weir Group's strategic focus on innovation and efficiency appears to be paying off, with strong market demand and effective cost management driving positive results. As the company navigates potential challenges, its leadership remains confident in achieving its long-term goals.

Full transcript - Weir Group PLC (WEIR) Q1 2025:

Harry, Call Coordinator/Operator: Good morning, and thank you for joining us today for the Weir Q1 Trading Update. My name is Harry, and I'll be coordinating your call today. I will now hand over to Weir Group CEO, John Staunton, to begin. Please go ahead.

John Staunton, CEO, Weir Group: Thank you, operator, and good morning, everyone, and thank you for joining us for our first quarter trading update. As usual, I'm joined by our CFO, Brian Puffer, and after a short overview from me, we'll be delighted to take your questions. Let me start with current trading, where we've had a great start to the year. Market conditions in mining remained strong with brownfield project activity, production growth and installed base expansion driving demand for Weir products. We began 2025 with a record pipeline, which is converting in line with our expectations as customers capitalize on supportive prices for the major commodities we help to produce.

In the quarter, we received several large OE orders, including £18,000,000 in nickel expansion projects for our market leading Geehoe pumps. In addition to new opportunities, we're winning market share through our strategic growth initiatives across the group. In minerals, we successfully converted three trial sites to Warman Mill Circuit pumps so far this year. And in ESCO, we booked 34 net digger conversions, double compared to the same time last year. Across our businesses, we see positive demand for aftermarket spares and expendables as customers maximize production at their existing sites and newly installed equipment is commissioned.

In particular, demand for HPGR tires increased in the quarter as our customers ramp up recent greenfield projects in high grade iron, copper and gold. We continue to deliver our performance excellence program, building on our strong momentum from last year. To date, we've delivered 35,000,000 pounds of absolute cumulative savings against our 80,000,000 targets due to be achieved in 2026. Turning to orders, where we received high levels of interest for our technology as we support customers in accelerating productivity and sustainability in the mining sector. Demand for critical metals and their prices remain positive, and our customers continue to choose weir products as they debottleneck and expand their existing sites.

During the quarter, we saw a pickup in original equipment orders growing 5% year on year on a constant currency basis. Spend on mission critical spare parts that are essential to keep mines running contributed to growth in aftermarket orders, up 5% as newly installed equipment was commissioned and mine specific issues receded compared to the same time last year. Taken together, group orders were up 5% year on year. Let me now give a little bit more detail on the performance of each of the divisions, starting with Minerals. Here in Original Equipment, orders grew by 6%, driven by demand for debottlenecking and brownfield expansion projects.

Timing of large projects continues to be dynamic with opportunities shifting between quarters, though our overall pipeline of opportunity continues to convert broadly as expected. In aftermarket, year on year orders were up 9% and demand for aftermarket was really strong, driven by overall positive oil production trends as well as a sequence of commissioning of new installed base. Moving on to ESCO, where we continue to see positive demand for our market leading products across our mining markets. In original equipment, orders were stable as we see good levels of demand for our mining buckets and first fit lip systems. In aftermarket, we secured an additional five orders in the quarter for our next generation GET system NEXUS.

NEXUS reduces downtime and increases wear life for our customers compared to competitive systems in the market. And adoption of the Nexus system will augment the great position we already have in GET. Year to date, orders for GET have grown by 4% across both mining and infrastructure, although offsetting this momentum in the quarter was phasing of large orders in dredge and oil sands versus the prior year, with total aftermarket orders down 2%. Now some brief comments on our Performance Excellence Program and progress in closing the MicroMine acquisition. In the quarter, savings arising from the former Texas program reflected realized benefits from our lean and functional transformation initiatives.

This included benefits from the wind's operating system in minerals and streamlined HR function rolled out in 2024. In total, we realized an additional £6,000,000 of absolute savings in the quarter, bringing our total cumulative savings to date to £35,000,000 And we remain firmly on track to achieve our upgraded target of GBP 80,000,000 of savings in 2026. As I discussed when we announced the acquisition, MicroMine is a digital business at scale, active on 3,000 sites with an impressive history of growth at sector leading margins. Work to complete the acquisition is progressing as expected, and we now expect to close next week. I look forward to welcoming the MicroMine team to Weir and accelerating our strategy to create a sector leading digital and hardware solutions provider that is uniquely positioned to deliver compelling value creation to all our stakeholders.

Turning to net debt, where as expected, we remain on track to deliver strong cash generation this year with net debt levels following seasonal patterns. While new debt relating to the MicroMine acquisition will raise our leverage later this year, given our strong track record of execution, we anticipate deleveraging of this additional debt at pace, reducing below our 1.5 times net debt to EBITDA covenant range by December 2026. Now on to the outlook. We had a strong start to the year. The business is executing well, and current conditions in our mining markets are positive.

In response to the current tariff environment, we have taken steps to adjust our global supply chain, including redirecting U. S. Originated orders to our manufacturing sites in country and proactively addressing pricing with our customers. We believe these actions combined will mitigate the known potential impacts of increasing global tariffs. We are therefore on track to deliver our guidance for 2025, expecting to deliver growth in constant currency revenue, operating profit and margin together with free operating cash conversion of between 90100%, albeit the broader economic impact of U.

S. Trade policy does remain uncertain. The building blocks of revenue growth and margin expansion are consistent with those we outlined in our full year results a few weeks ago. On revenue, we expect mid single digit growth in OE as customers look to invest in projects that improve the efficiency of existing mine sites and address structural critical metal demand. We also expect mid single digit growth in aftermarket as customers continue to prioritize maximizing ore production together with ongoing installed base expansion.

On operating margins, we expect to deliver 50 basis points of expansion in the year, supported by incremental performance excellence savings, through cycle pricing and operating leverage, which will more than offset a Minerals mix headwind and increased R and D investment. Before closing, I'd just like to say a few words on our performance in the context of our broader equity story. WIA has a compelling value creation opportunity as a sustainable technology leader in mining, and we are committed to delivering excellent outcomes for all of our stakeholders. Our strong momentum in OE orders for brownfield and sustainability projects are testament to our resilient business model, focused on mining technology leadership and our differentiated capabilities. While we grow our large installed base of equipment, we create aftermarket demand that's largely inelastic to CapEx cycles and day to day commodity price fluctuations, as demonstrated by the strong growth in minerals aftermarket orders this quarter.

Taken together, we're confident in meeting our longer term guidance to outgrow our markets, expand our margins and convert our earnings to cash while remaining resilient and doing the right thing for our people and the planet. So to close, let me summarize the key takeaways. We began the year with a record pipeline, which is converting in line with our expectations as customers capitalize on supportive prices for commodities, enabling the energy transition. We're on track to deliver our full year 2025 guidance for growth in constant currency revenue, operating profit and operating margins, alongside delivery of our free operating cash conversion target. And finally, over the longer term, have a compelling value creation opportunity.

We're operating in highly attractive markets with a clear strategy to grow ahead of our competition at sustainably higher margins. So thank you very much for listening. Brian and I will now be delighted to take any questions you have. If I could pass back to you, operator, to take us through Q and A. Thank you.

Harry, Call Coordinator/Operator: Thank you, John. Our first question today will be from the line of Lashant Dan Mahendraja with JPMorgan. I

Lars, Analyst, JPMorgan: hope you can hear me, and thanks for the call. It's Lars from Jason to Ruben. I've got a couple of questions, please. The first is just on a comparison to get a bit of color there and you're saying, I think, a direct impact within your guidance and overall not material. Can you sort of remind us exactly where the exposure is, I guess, more escalate?

And I guess, what you can do exactly, particularly around supply chain logistics to sort of mitigate that impact. That's question one. And the second is on performance excellence. Obviously, I think at the start of the year, the guidance this year is sort of incremental €20,000,000 Obviously, you started the quarter with six. I appreciate these things aren't linear, but are you sort of running ahead of that run rate?

Or were some of the savings a bit more sort of H1 weighted? And then just lastly on sort of large orders, obviously, you called out the €80,000,000 I'm sort of there. But what did sort of what were large orders in the quarter? And I guess what's that pipeline looking like now? You.

John Staunton, CEO, Weir Group: Hi, Josh. Thanks for the question. You were breaking up a little bit on the first one, but I think it was about broadly about giving more color on tariffs. So let me take that one, and I'll take this one and ask Brian to just cover performance excellence. So, you know, look, on tariffs, you know, as we sit here today, we've you know, we will see it's been a a moving target over the course of the last few weeks.

So it's been quite a dynamic situation, but we continue to run the model and we're very clear that we are able to mitigate the effects of the tariffs that are already in place in some cases and those that we expect to come. That's through a combination of shifts that we can make in our supply chain, and remember, we have a regional, gritty integrated manufacturing model so that we have quite significant flexibility within our own internal manufacturing. So and if you take the two businesses, ESCO has more exposure because it produces more in China than minerals. So if I take the China Foundry for ESCO, we're doing a couple of things. We'll basically import less into The U.

S. And move more of that product into other markets such as Australia and Africa, and increased production in our U. S. Foundries for ESCO. And then the second thing that we're doing is just simply redirecting some trade routes.

So for example, when I think about North America, we basically import everything into distribution centers in The U. S. Today and then that goes off into Canada or Mexico, but we'll just now move those shipments direct. We'll have a lot going into the oil sands, example, so that will just now go into Vancouver rather than LA, so we kind of avoid the impact of U. S.

Tariffs in that way. And minerals, it's a much smaller sort of magnitude in terms of what we need to deal with. And then to the extent we've already got we're unable to mitigate through those supply chain actions, then we have price increases which we've been rolling out over the last few weeks already, and we expect to land what we'd need to be what we've been commanded in relation to those. Then on the large orders, I mean, the sense that we would pre announce orders that are over £25,000,000 such as we did last year for the OCP and the Ricoh Deak orders. We didn't have any of that magnitude obviously in the first quarter.

We had a couple of Giho orders for £9,000,000 each on the nickel expansion projects in Indonesia. Those are the two largest orders we had, but some of the other orders that we had seen delayed from Q4 were also recorded in the first quarter as well. So there's a little bit of a catch up, but I think the key thing on OE was that there was no big orders over £25,000,000 You know, we're hoping that we'll have at least one or two of that magnitude as we go through the year. And then, know, with the underlying momentum OE on the brownfield debottlenecking, sustainability related projects, tailings remains really robust and we're just seeing a good run rate of those kind of projects coming through, which is really nice to see. So then Brian, just on the Performance Excellence progress.

Yes, Lars, thanks

Brian Puffer, CFO, Weir Group: for the question. We continue to make great progress on Performance Excellence, another $6,000,000 of savings. You're right, it's not linear, but a lot of that is run rate. We're not going to update our guidance for what we're going to deliver this year, but we've made very confident in the $80,000,000 we're going to deliver by 2026. A lot of the savings are coming, like I said, from the run rate of the work and moves we made last year in terms of transitioning work from higher cost locations to our WBS center in Bangalore, which is, like I said, we're getting those recurring benefits.

And we continue to see benefits from our lean manufacturing approach. So we're off to a great start, and we're very confident in meeting the targets we set for this year and the $80,000,000 in 2026.

Harry, Call Coordinator/Operator: Our next question today will be from the line of Christian Hinderaker with Goldman Sachs. Please go ahead. Your line is now open.

Christian, Analyst, Goldman Sachs: Good morning, John. Good morning, Brian. Thanks for the time. I want to start maybe just sort of theoretically or behaviorally how we think about, obviously,

Lars, Analyst, JPMorgan: we're in

Christian, Analyst, Goldman Sachs: a volatile macro environment in historical cycles, if we see a sort of softening of broad demand. We've obviously had the permit situation improve year to date, but maybe broad demand expectations soften and commodity prices ex gold come down. How do you expect OE decision making and sort of project approvals to progress in that backdrop as we sort of move through 2025? That's the first one.

John Staunton, CEO, Weir Group: Good morning Christian, thanks for that. So yeah, I think you would need, from where we are today, you would need to see a sequence of quite significant events to sort of change the current dynamics that we're seeing in the market. And as you say, it's volatile and quite uncertain at the moment. But in the round, commodity prices are still historically at very strong levels, and we would need to see those commodity prices I think come down very significantly from where they are today for our customers to start to get significantly more cautious on cash and therefore pull back on their CapEx plans. So I think you would need to start to see recession coming in, GDP growth, you'd need to start to see quite a significant impact on commodity prices, and then that would then bleed through probably into customer decision making and a pullback on CapEx, and obviously any marginal mines would then potentially think about mothballing.

But the key point in all of this is that you you understand our business model, we are having because 80% of our revenues are aftermarket, we are going to be incredibly resilient you know, whatever happens through this next stage of the cycle. We demonstrated it through COVID, we demonstrated it through the last mining downturn, and so you know I'm not complacent of being overconfident. It is volatile, but I think you know, the inherent resilience in our business means we have the ability to ride through whatever's coming, and I think you know, as again as I sit here today, we're a long long way in terms of where commodity prices are just now before we would start to see any kind of meaningful effect on our business from that.

Christian, Analyst, Goldman Sachs: Thanks, John. Maybe just clarify then a point on the oil sands weakness and the strong dredge comp for Q1 in ESCO. And then are there any considerations to be mindful of in terms of the Q2 comps for either segment?

John Staunton, CEO, Weir Group: No, I think look for ESCO, if you look at Q1 last year, it was obviously the strongest quarter. We probably had GBP 8,000,000 to 10,000,000 of oil sands and dredge orders that were kind of annual orders that were pulled forward and recognized in Q1 last year. So if you strip that back, you've got sort of 4% or 5% underlying growth in the aftermarket. And as we called out in the press release, that kind of is what's happening in the core GET. Interestingly both in mining and infrastructure, they're both up by a similar amount sort of year on year.

So, expect sort of dredge and oil sands just to be more normalized this year rather than the lumpiness that we saw last year. So actually when you take that out last year, ESCOs had a really strong quarter from an underlying point of view and we expect through the balance of this year that the sort of mid single digit expectation on aftermarket is where we'll get to. In minerals, obviously an even stronger start with 9% aftermarket growth, and there I think you can expect more mean reversion over the balance of the year, I. E. I think it was quite, you know, we've had an exceptional couple of quarters in minerals aftermarket, largely driven by significant sequence of commissioning of new installed base, and that will probably moderate a bit as we go through the year.

So we'll get back more to the sort of mid single digit growth that you would normally expect through cycle. But you know stepping back, I'm really pleased actually with the strength that we're seeing in the aftermarket in the first quarter in both businesses.

Lars, Analyst, JPMorgan: Thanks, John. I'll happy to pass it on.

John Staunton, CEO, Weir Group: Thanks, Christian.

Harry, Call Coordinator/Operator: The next question today will be from the line of Michael Harlow with Morgan Stanley. Please go ahead. Your line is open.

Michael, Analyst, Morgan Stanley: Thank you very much for taking our questions. So at the time of the acquisition of MicroMine, you mentioned the potential for further bolt on deals. If you could update us on that? And then if I may ask an adjacent question, your deleveraging is obviously happening really quickly. So I would like to know if bolt ons are still the priority or if you could consider in the future other forms of shareholder returns?

Thank you.

John Staunton, CEO, Weir Group: Okay, yes. So I think we as I said, we're going to close the MicroMine acquisition next week. So we got the Foreign Investment Review Board approvals in Australia, actually probably slightly earlier than we were expecting given the elections being caught in Australia. That's great news. It means that we can crack on with the integration right away.

Not much to add other than on the bolt ons other than to say from a capital allocation point of view, after organic growth it remains our number one priority. We see opportunities probably smaller than MicroMine, further bolt ons in the digital space as well as in the more traditional products and geographic infill space. So we continue to work on that, you know that's the strategy that will continue. And yeah, we will deleverage rapidly given the cash generation execution that you've seen which will continue. But as I sit here today and I've been consistent on this for quite a while, the preference is clearly, we're in a very attractive position, we think we can compound the organic growth with M and A, so that certainly remains plan A in terms of capital allocation.

And then to the extent we're not able to execute on M and A, we would consider returns to shareholders, but that's not where we are at this point in time. Thank you. That was very helpful.

Harry, Call Coordinator/Operator: The next question today will be from the line of Edward Hussey with UBS. Please go ahead. Your line is open.

Edward, Analyst, UBS: Good morning, John and Brian. Thanks for taking my questions. I might just focus on margins. So the first question is, in the release, you mentioned additional lean and capacity optimization projects. Does this imply that there is upside to targeted savings in lean services and capacity optimization?

Brian Puffer, CFO, Weir Group: So we are doing more in terms of the capacity optimization. You would have seen our announcement earlier this year with the closure of the Todd Morton foundry. We will be getting that should be completed. We've gone through consultation now, and

Edward, Analyst, UBS: that should be completed by the end

Brian Puffer, CFO, Weir Group: of the year, and that will deliver more savings. We've also consolidated some of our operations in Australia, where they were more than what we required. And so we've consolidated those, and so we've seen some more benefits coming from that. And that's what's helping us to give confidence in the $80,000,000 of savings we're going to deliver by 2026. And like I said, we're not stopping at $80,000,000 We believe as we've built this muscle, we will continue to generate those savings, and this becomes something as business as usual once we reach that point.

But once we've completed those, we are we will never stop looking at our overall capacity of what we have, but we'll be feeling like we're in a very good place, and we can reap then the benefits of that going forward.

Edward, Analyst, UBS: Okay. And then just on the comment, you mentioned increasing production in your U. S. Foundries in ESCO. I guess part of the savings are going to come from shifting the mix towards China, which is the lowest cost producer.

Could this potentially be a headwind to the Formatexins program?

John Staunton, CEO, Weir Group: No, we're just going to be shifting gross margins around. So we're not going to be producing less in China. It's just that that stuff is going to be exported to different markets than The U. S. So where The U.

S. Is the beneficiary of that low cost at the moment, then other markets are going to have that benefit. And some of that's kind of been driven historically by things like tax and because you do have the ability to move profits around between countries to a degree. So the only you might get a bit of an adverse tax benefit here and there, but in terms of the gross margins and the production coming out of China, that's not going to go backwards. And so, yeah, so said earlier in the round, we feel really good about our ability to mitigate what we're expecting coming in tariffs.

Yeah, and

Brian Puffer, CFO, Weir Group: in terms on the tax side, any sort of tax impacts are de minimis and don't really change our effective tax rate, so there's nothing to really change there in terms of the overall forecasting.

Edward, Analyst, UBS: Okay, great. And then just finally, on the 50 basis points of margin improvement in the year, which I guess is performance excellence and as you mentioned, with an offset from mix and minerals and increased R and D spend. Do mind just breaking down what this is magnitude for each of those three drivers in the year?

John Staunton, CEO, Weir Group: Yes, I think the positives in terms of performance excellence, operational leverage, other efficiencies is going to drive 100 basis points, and the headwind between the minerals mix and R and D is 50, which gets you to net 50 up.

Edward, Analyst, UBS: Brilliant. Thanks so much. That's very helpful.

Harry, Call Coordinator/Operator: The next question today will be from the line of Thor Fangmann with Bank of America.

Thor, Analyst, Bank of America: Only one here from my side, and this would be,

Harry, Call Coordinator/Operator: could

Thor, Analyst, Bank of America: you give us a bit more color, especially on your nonmining exposure throughout Q1 twenty five? And is there any phasing you can see, especially in the nonmining part, with maybe a weaker March than January and February have been? Thank you.

John Staunton, CEO, Weir Group: Yes. No, as I said earlier, Thor, thanks for the question. If I think about the non mining part, if I think about infrastructure and construction within ESCO, which is 30% of our business, only 7% or 8% of total group revenues, but that's had a pretty strong couple of quarters actually. So as I said, the underlying GET growth in infrastructure was 4% in the first quarter, consistent with what we've seen in mining. And to give a bit more color, we had our and you know we use distribution, third party distribution in infrastructure in North America and Europe.

In North America, we had our dealer council meeting,

Harry, Call Coordinator/Operator: that's

John Staunton, CEO, Weir Group: a top twenty twenty five deal a couple of weeks ago. And the mood there remains, you know, notwithstanding everything that's going on, does remain cautiously optimistic. So they've seen pretty good activity. There's no kind of stocking, destocking going on either way, pretty stable. And cautiously optimistic comes from, they've had a good couple of quarters, they see that there are sort of have been significant investment plans announced domestically within The U.

S, so there is clearly growth potential coming from that. On the flip side, you've just got this big question about a broader contingent on the macro and do we see a recessionary phase, which you know is the unknown. But I would say was quite pleased by what we were hearing from the dealers a couple of weeks ago in terms of how they're feeling about the world at the moment.

Thor, Analyst, Bank of America: Perfect, thank you.

Harry, Call Coordinator/Operator: Thank you, everyone. This will conclude the Q and A and the rest of the Weir Q1 trading update for today. Thank you all for joining and for your participation. You may now disconnect your lines.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.