Weir Group reports 47% drop in oil and gas orders
Engineering equipment firm Weir Group has said it expects first-half profits to be slightly ahead of market expectations, despite being hit by a steep fall in oil and gas activity.
Weir said its first-quarter performance was supported by cost-cutting and a "resilient" minerals division.
The Glasgow-based firm reported a 47% year-on-year drop in orders for its oil and gas division.
Original equipment orders were down 40% and aftermarket orders were 49% lower.
In an interim management statement Weir, which is a leading manufacturer of hydraulic fracturing pumps, said: "Oil and gas markets have continued to decline despite the limited improvement in oil prices since February.
"In North America, the division's biggest end market, US land rig count has declined by nearly 20% in the past two months and market expectations are for a 46% reduction in wells drilled in 2016.
"This further reduced demand for pressure pumping and pressure control equipment, with approximately 70% of the North American frack fleet now idle.
"As expected, international markets have also become increasingly challenging with double-digit activity reductions as the rig count outside North America fell by 10% to close to 2009 lows."
In Weir's flow control division, orders in the first quarter were down by 20% on a year ago.
The company said economic uncertainty had led to "continued customer caution and project delays across the division's end markets".
There was better news from its minerals division, with "stable" like-for-like revenues and better-than-expected orders for original equipment.
Chief executive Keith Cochrane said: "The group has maintained its focus on strong cash generation, aggressive cost reduction and developing the innovative solutions which have made Weir a global leader.
"This comes against the backdrop of ongoing challenges across our end markets.
"Mining customers continue to prioritise preserving cash, although there was a slight pick-up in orders through the quarter and minerals divisional revenues on a like-for-like basis were flat year-on-year.
"Trading conditions in oil and gas markets reflected further reductions in activity levels in all regions despite the limited improvement in oil prices in 2016.
"The group remains focused on cost reduction measures which have helped to deliver first-quarter profits slightly ahead of our expectations.
"As a result, we expect first-half profits to be slightly ahead of market expectations."
He added: "Our full-year expectations remain unchanged, reflecting the slower recovery now anticipated in oil and gas markets."