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Weir Group shares rise as engineer eyes oil and gas exit “at right time”

Weir reported a US$379mln loss amid a US$546mln impairment to its oil and gas division.

Weir Group - Weir Group shares rise as engineer eyes oil and gas exit “at right time”
North American shale business is no longer booming

Weir Group Plc (LON:WEIR) has written down its oil and gas business by more than half a billion dollars and revealed it will seek an exit from the business “at the right time”.

The division of the FTSE 350 natural resource engineering group is largely skewed towards US shale operations but it has been impacted by changing “market dynamics”.

Market conditions for North American shale are said to have deteriorated significantly through 2019, and, that has triggered a reassessment of the group’s strategy.

“While the long-term prospects for shale remain positive, current market dynamics mean it now has a very different investment case to our premium mining technology positions,” said chief executive Jon Stanton.

“We are therefore taking actions so that we can maximise value for shareholders whenever the right opportunity is identified.”

READ: Weir’s woes reflect the end of shale boom

Outside of oil and gas, the company boasted a “strong performance” and in Wednesday’s early deals Weir shares were on the front foot.

At group level orders increased by 8% for the year to £2.79bn (at constant currency) and the firm booked £2.66bn of revenue, up 7%.

For continuing operations, reported operating profit amounted to £352mln, up 1%, adjusted pre-tax profit was down 2% to £303mln.

A group pre-tax loss was reported at US$379mln after a £546mln impairment on the oil and gas business.

Weir’s mining division saw a 4% increase in revenue and its margins improved by 18%.

Group cash flow was described as strong, amounting to £408mln from operations. Net debt amounted to £1.15bn.

Summarising the financials, Stanton said: "2019 saw a strong performance from our mining businesses with margin expansion in both Minerals and ESCO. 

“Our innovative technologies are helping mining become more sustainable as shown by the record £100m Iron Bridge order for our energy-saving Enduron HPGR technology.

“We have a major role to play in enabling net zero in mining underpinned by our commitment to reduce our own environmental footprint including cutting our CO2 emissions by 50% by 2030.”

Quick facts: Weir Group

Price: 719.9 GBX

Market: LSE
Market Cap: £18.92 m

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