WEIR Group has reiterated its appetite for acquisitions even as it upped its annualised savings target to £85 million and saw half-year profits plunge 40 per cent as a result of difficult oil and gas markets.

The engineering company saw revenue in the first six months of the year slip 13 per cent from £1.14 billion to just short of £1bn.

Within that oil and gas showed the most marked fall, down 30 per cent on a constant currency basis from £435m to £328m.

Minerals was down from £548m to £522m while industrial and power went from £161m to £150m with the low oil price also filtering through to customers in those sectors.

Order input was down 18 per cent in constant currency from almost £1.27m to £1.04bn.

Glasgow based Weir saw underlying pre-tax profit drop from £181.8 million to £108.2m.

In response to the fall in oil prices Weir announced in November last year it was targeting £35m of annual savings through job cuts and site closures along with procurement improvements. Additional measures and job cuts were unveiled in February and April.

The company said it is now is on course to trim costs by around £85m on an annualised run-rate with around £60m to be realised in the current financial year.

The bulk of job cuts have been in its oil and gas business in the United States, where it has large exposure to onshore shale. Three sites were closed in the first part of the year with three more scheduled to shut between now and December.

Weir has also changed shift patterns in the US and implemented furloughs, where workers take unpaid holidays, in two separate weeks so far.

More than 900 people have left its North American oil and gas business, equivalent to 32 per cent of the total workforce there, with a number of smaller service centres also closing.

Andrew Neilson, director of strategy and corporate affairs, said: “We have rightsized oil and gas to where the oil and gas market is right now and across other parts we continue to look at ways to make the business more efficient.

“We have been very careful in all the moves we have made that we don’t lose the core skills and capabilities for the capacity we think we will need.

“All the moves we have made we have done them with that in mind as it will come back and North America has a history of coming back fast. We have kept the business very responsive.”

Weir booked £33m of asset impairments in the period related to writing down of stock and the value of some of its US sites. It also noted £47m of restructuring costs.

Mr Neilson said the Trio rock crushing business bought last year for £138m has performed well and the more recent acquisition of valve maker Delta showed Weir remains in the market for deals.

He said: “Merger and acquisition is part of our strategy and we continue to look for things. We would certainly hope there will be some opportunities for us over the coming months and years. It is very hard to predict.

“We need somebody to have the right price of something we would be prepared to buy and we are very selective in what we look at. We look at things that would be core to our strategy.

“If something we want does become available at the right price and we can generate the right returns then we would absolutely look at it.”

Chief executive Keith Cochrane warned oil and gas markets are likely to remain depressed but is confident in Weir’s long-term prospects.

He said: "During this period, we have remained focused on responding to these conditions, executing effectively and generating cash. Reflecting our ongoing confidence in the long term structural growth prospects of our markets, we continue to invest in our strategy and extend our global leadership positions.”

Mr Neilson pointed out the company has increased its spending in research and development with new product launches along with academic partnerships with Imperial College in London and the recently opened technology and innovation centre at Strathclyde University.

He said: “A big theme of the group is to continue to increase R&D in spite of what is happening in markets.”

Weir said Gavin Nicol, director of operations, support and development, plans to retire at the end of the year.

Along with that change Dean Jenkins, managing director of the minerals division, is to join the board in the newly created position of chief operating officer from January next year.

The company held its interim dividend at 15p.

Source: www.heraldscotland.com

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