The Weir Group PLC ($WEIR)

Hello, everyone, and thank you for joining us today, the Weir Group PLC Q1 IMS. My name is Sammy, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Jon Stanton, Chief Executive Officer, to begin. Please go ahead, Jon.

Thanks, Sammy, and good morning, everyone, and thank you for joining us today for our first quarter 2026 trading update. As usual, I'm joined by our CFO, Brian Puffer, and after my remarks, we'll be pleased to take your questions. First, I'll talk about the Q1 statement and then come back to today's other news at the end. So starting with the external environment, demand fundamentals in mining remain positive, underpinned by structural growth in critical metals such as copper, iron ore and gold. Our customers continue to prioritize productivity, debottlenecking, and expansion projects at existing sites alongside investment in technologies that improve sustainability and reduce total cost of ownership. Demand for large equipment projects is picking up pace. In the quarter, we picked a GBP 20 million order for GEHO pumps in India, further evidence of our market-leading slurry transportation solutions and the pipeline of larger expansion opportunities is really encouraging. Adding to our larger wins, we booked a number of smaller strategic orders in the quarter. We continue to see market share gains in our core WARMAN pump and ESCO GET brands and the pipeline of opportunities for our newer technologies is very encouraging. Excitingly, in Software Solutions, Micromine is starting to see incremental growth generated by leads from the broader Weir network with a license sale of a major Tier 1 customer. And we saw the first international orders for Fast2Mine resulting from our initiatives to grow outside of Brazil. Our business is executing well with the integration and performance of recent acquisitions all well on track. And against the backdrop of growing geopolitical tensions, particularly in the Middle East, our strong operational platform is delivering for our customers with limited impact to our global supply chains. Turning to results for the group, where we have good visibility on the order book and are on track to meet our full year guidance. In the quarter, overall orders increased by 4% year-on-year on a constant currency basis. This reflects good momentum in underlying trading and contributions from recent acquisitions, offset by phasing of orders compared to last year and some temporary mine disruptions, all of which we expect to reverse over the balance of the year. Group original equipment orders grew by 1% year-on-year, and this included very strong demand for ESCO's highly engineered mining attachments and several nice medium-sized order wins in minerals, but no larger orders over GBP 25 million this quarter. Group aftermarket orders grew by 4% year-on-year, supported by positive activity levels in copper, gold and iron ore within minerals, strong levels of demand in ESCO across both mining and infrastructure GET, and good growth in Micromine and Fast2Mine. Overall, our book-to-bill ratio increased to 1.14 in the quarter, following normal seasonality. Turning to Minerals, where original equipment orders declined by 3% year-on-year on a constant currency basis. Underlying demand for debottlenecking and brownfield expansion projects remains positive, and the larger expansion project pipeline is developing strongly, especially for copper in South America. We therefore expect to see strong OE growth for the full year, with Q1 trends really just driven by phasing and timing of orders. We continue to gain market share through our technology leadership. During the quarter, we completed four mill pump circuit trials, three of which were successfully converted to WARMAN pumps. And this reinforces our strong competitive position and the value our customers place on performance, reliability and total cost of ownership. In aftermarket, Minerals orders increased by 1% year-on-year. Growth was supported by solid ore production levels in copper and gold, as well as the ongoing integration of Townley, with the sales team now fully aligned to the broader Minerals organization. This momentum was partially offset by a number of temporary mine site disruptions in APAC and Africa, as well as the booking of several larger HPGR spare orders for newly installed machines in Q1 2025, which typically are more lumpy as wear rates diverge. Overall, we remain encouraged by the underlying trends in Minerals, particularly the long-term opportunity driven by our growing installed base and continued focus on productivity enhancing technologies. Turning to ESCO, performance in the quarter was strong. Original equipment orders increased by 49% year-on-year, reflecting exceptional demand for mining buckets across strategic mining regions globally, including North America, South America and Africa. In Australia, we received our first orders for the innovative Production Master, which we presented at the Capital Markets event last December. In aftermarket, orders increased by 11% year-on-year. This was driven by continued momentum in mining and infrastructure GET up 7% and good growth in our newly acquired software businesses. This was partially offset by the phasing of dredge orders, which were exceptionally high in Q1 last year and have been disproportionately impacted by events in the Middle East. We continue to gain market share, achieving 19 net major digger conversions in the quarter as we execute on our strategy for growth in lower share geographic markets. Turning to strategic progress, where in the quarter, we announced the completion of our acquisition of the remaining share in ESCO's Chilean joint venture, ESEL, strengthening ESCO's ability to serve customers across South America and bringing more foundry capacity in-house. Integration of ESEL is progressing well, with key customers transitioned and orders up year-on-year as we deliver on the go-direct strategy. And we remain very excited about the potential to significantly grow market share in Chile. We're also making good progress integrating our other 2025 acquisitions, and all businesses are performing in line with our expectations or better. 2026 is a year in which we will deliver the full run rate savings for Performance Excellence. And in the first quarter, we began to realize savings from capacity optimization projects completed in 2025, bringing cumulative savings to GBP 66 million. Further savings from LEAN and WBS activities put us firmly on track to deliver our upgraded target of GBP 90 million of cumulative savings in 2026. Turning to net debt, where our refinancing and acquisition activities in 2025 leave us with a very attractive debt profile with long-dated maturities. We're on track to return toward our normal operating range of 0.5x to 1.5x net debt to EBITDA by the end of 2026, in line with our capital allocation policy. For the full year, we expect net interest expense of GBP 90 million, which through 2028 we expect to reduce towards GBP 70 million given our strong cash generative business model. Turning to outlook, where we see customers increasingly investing in expansion and debottlenecking projects as supply deficits in critical metals emerge. Overall market activity levels remain very positive, and activity around larger projects is also picking up pace. As I mentioned earlier, we are encouraged by the visibility in the order book and the pipeline of opportunities. Over the year, we expect to see good growth in organic orders and a strong contribution from last year's acquisitions. For the full year, we reiterate our guidance for growth in constant currency revenue and operating profit, operating margin expansion of 50 basis points, and delivery of free operating cash conversion of between 90% and 100%. As in 2025, we expect a weighting in revenue and profit to the second half. We expect cash conversion to follow normal seasonal patterns with a steady build in inventory through the first half, followed by collections towards the end of the year. We remain focused on disciplined execution despite several challenges facing the mining industry, not least rising uncertainty as to potential impacts from the conflict in the Middle East, which we continue to watch closely. So summarizing the key takeaways from today, we made good strategic progress in the first quarter, closing ESEL and integrating Micromine, Fast2Mine and Townley at pace. We expect good growth in orders over the full year, assuming broader contagion from the Middle East is limited. And given all of the above, we remain on track to deliver our full year 2026 guidance for growth in revenue, profit and margin. Now, before we move on to questions, I'd just like to say a few words on the announcement today that after 16 years at Weir and nearly a decade as CEO, I'll be stepping down on the 1st of August, and Andrew Neilson, President of Minerals, will succeed me as the new CEO. It has been an absolute honor to lead this remarkable company. A decade ago, Weir was an industrial pumps conglomerate with businesses of different qualities and characteristics prone to industry cycles and limited in its capacity to weather external events. With thoughtful portfolio transformation, focus on building a resilient balance sheet, delivering best-in-class margins, and investing in world-class Software Solutions, we're clearly positioned to benefit from the transformational technological change as our customers scale up and clean up their operations. With our strong platform across engineered hardware and Software Solutions in place, it's time for both Weir and me to begin our next chapters. Andrew and I both joined Weir in 2010, about a month or so apart. So he's been on the journey all the way, and I am delighted that he is to be my successor. Having led both ESCO and Minerals, Andrew is an experienced and hugely talented leader, and I'm confident that he will continue to take Weir from strength to strength. He and I will work closely together over the coming months to ensure a smooth transition, and I'll see you at the end of July when I will present our half year results. That concludes my remarks, and Brian and I will be happy to take your questions you may have. So back to you, operator.

Thank you very much. [Operator Instructions] Our first question comes from Jonathan Hurn from Barclays.

Just two questions from me, please. The first question was just on organic orders, and obviously, they were down in the first quarter. Look, you've given reasons for that, and obviously, you said that they're going to improve. I'm just wondering if you could talk a little bit about the shape of the recovery of those orders as we progress through FY '26, particularly aftermarket Minerals. And also just in terms of what level of organic order growth we can expect for OE and AM in 2026? And then the second question was just on revenue. So if we back out sort of Q1 revenue, it looked to be broadly flat year-on-year. But obviously, there's some M&A contribution within that, so organically, it was down. Can you just talk us through why organically it was down? Was that just down to obviously maybe the sort of the weak or weaker Minerals AM orders? And how do we think about that going forward? And then just in terms of the H1, H2 revenue split as well, that'd be helpful. They're my two questions.

Yeah. Thanks, Jonathan. Appreciate the question. So yeah, on the organic orders, look, a lot of moving parts obviously in Q1, which we have explained. But as we sit here today, we have a strong order book. We have really good visibility of the pipeline. We have really good visibility of the customers' production plans. And yes, there were a few moving parts in Q1, but we definitely see those being temporary. And occasionally, you get a quarter like this where you do see some disruptions and it knocks you a little bit off. But as we see every year, the aftermarket orders will always revert to mean. And that means for both Minerals and ESCO, we will see that mid- to high single-digit aftermarket growth over the full year, and we have strong visibility into that. We're expecting a good recovery in the second quarter. We have visibility on a couple of large-ish aftermarket orders, which are coming through on top of the normal sort of run rates. So we feel really good that we're going to see the bounce back from where we are at Q1. And if you look at ESCO, in particular, just to give you an example, if you look at mining and infrastructure GET, the core aftermarket in ESCO, that's up 7% year-on-year. So that's sort of the underlying -- and ESCO didn't see some of the mine disruptions that Minerals saw because they weren't in those regions -- they didn't have the presence in those regions that Minerals saw those disruptions. So that's where the -- if you look at that as a key indicator of where the underlying activity levels there are, that's what we should be achieving through the aftermarket through the year for both ESCO and for Minerals. So that's where we fundamentally expect it to revert to that mid- to high single-digit growth over the course of the full year. And the comps are cleaner as we go through the balance of the year relative to some of the things that we saw in the first quarter. So that's aftermarket -- from an OE point of view, again, we expect to see growth over the balance of the year. We've always said OE is lumpy. You can never look at one quarter and say that's a trend. We didn't have any larger orders, particularly in the first quarter. We had the GBP 20 million order we talked about in the speech, but we had a similar size order last year. So it's really just phasing of when orders get placed that we're seeing there. And with the strong pipeline that we have and good visibility on that. And again, we booked a couple of nice orders already in April in OE. So really good confidence that we're going to see good growth coming through on the OE. On the revenue side, the way you backfilled that, Jonathan, yes, it is correct. But again, that's really just phasing of deliveries in the order book. If you look -- we had a massive December a lot of stuff got shipped in December. So that just created a little air pocket in terms of order book going out in Q1. But as I say, with the book-to-bill we've had in the first quarter, the order book is higher now than it was at the end of December. And we've got good visibility and plans on how that's gonna play out over the balance of the year, which is why when you boil it all down, we remain very confident on reiterating guidance, because we can see where it's coming from.

Our next question comes from Andrew Douglas from Jefferies.

Just a couple of questions from me, please. And good luck, Jon, on your next endeavors. Can you just talk about that in a little bit of detail? Clearly, an interesting time to be doing it. You've just spent a lot of money on software, big strategic change at Weir. Just kind of what's behind the timing of that seems a bit odd to me, to be honest. I mean I know you do out to the U.S., but I thought you might be around for a little bit longer. And secondly, on the supply chains, raw material inflation, cost inflation, energy availability, I guess, particularly in the foundries, how are you managing that? Any particular challenges that we should be cognizant of going into second and maybe third quarters?

Okay. Thanks, Andy. Yes, so the announcement today on CEO succession is the result of long-term board succession planning. I've been on the board for 16 years, 10 years as CEO. I feel I can move on having left a fantastic legacy with the company in great shape. Specifically, the acquisitions from last year and software deals, they're integrated, they're performing exactly as we expected. So a lot of the heavy lift is done there. We expect them to deliver exactly what we wanted in terms of revenue this year, and Andrew is clearly fully behind the strategy in terms of delivering that. You know Andrew, he's been around for a long time, done multiple roles and been building up to this point over his sort of 16 years as Weir having run both ESCO, and Minerals. And he's ready to sort of pick up from me at this point in time. So it ended up being a very natural point from an overall succession planning point of view to make the call. And the fact that I moved to the U.S. last year has absolutely nothing to do with it whatsoever. So rest assured, I'm going to hang on for quite a while just to make sure that everything goes smoothly and it's a seamless transition as you would expect. So I'm not looking for anything else just yet. On the supply chain, look, we're watching it really closely, but nothing really to see yet. Obviously, our customers are feeling the pinch a little bit on oil prices. But given where commodity prices are, they're still -- we're not seeing anything approaching any sort of challenges in terms of slowdown. There are a couple of other derivatives effects potentially in terms of sulfur and sulfuric acid and urea or all of which are feedstocks into various minerals. So again, watching that, but no impact just yet. So obviously, the sooner the situation in the Middle East gets resolved, the better. We're watching it closely, but no impact as we sit here today.

And Jon, just a quick follow-up. What is your main energy source within your internal foundries? Is that LNG or oil?

Well, no, I mean, it's electricity, obviously. The foundry is powered by electricity and natural gas. You know, distribution to local markets, Andy. So a lot of our electricity there is actually renewable if you think about where we operate in Chile and places like that. So we're in okay shape in terms of those sort of costs.

Speaker 0 Our next question comes from Christian Hinderaker from Goldman Sachs.

Firstly, congratulations, Jon, on what's been a big portfolio and margin journey for the business and also to Andrew on his new role. I wanna start, if I can, on orders in Minerals OE. You had two press releases in the quarter, one for HPGRs in the DRC and another for modular crushing in Namibia. I appreciate you might not be able to disclose absolute figures, but how should we frame the scale of those? You've called out that GBP 20 million order in India for GEHO pumps. And I know you've got the GBP 25 million number for large orders, but how do we think about those in sort of magnitude?

Yes. I mean the two you mentioned weren't RNS, or they were just like trade press releases because they're relatively small orders in the scheme of things, so a few million each. So they would be in the normal kind of small brownfield expansion and deep bottlenecking kind of category. The GEHO order for GBP 20 million we called out in the speech 'cause that was a really important win. It's a big iron ore pipeline win in India. [Audio Gap] Dramatically's an important place to be, but there was a similar size order last year as well for that product. So net-net, that didn't impact the comps. So yes, there's really -- as I said in the answer to Jonathan's question, you can't read anything into one quarter of OE. Over the course of the year, the pipeline for us is really encouraging. We expect it to convert into growth in OE orders over the course of the year. The big question remains, do we see some of the bigger projects coming through? But there's a lot of activity to advance those, particularly in South America. We were in Chile a couple of weeks ago for CESCO Week, a sort of global copper conference and very, very bullish mood down there around what's gonna happen in Chile, with some of the projects there expected to be the first cabs off the rank, in terms of larger expansion projects, if I could put it that way.

Thanks, Jon. And you touched on iron ore. I know you've called out copper gold in the statement. But just broadly speaking, what are you seeing on iron ore? Maybe ex the GEHO order?

Yes. No, I think -- look, I mean, our iron ore exposure is principally in the very high-grade locations around the world. The iron ore price is pretty robust still. There's a lot of activity in India because India is trying to domesticate or domesticize steel -- iron ore production to feed its steel industry rather than bring it in. But the grades in India are quite cheap, so there's a lot of beneficiation-type projects going on in India at the moment. So we expect that to be a good market for now. But other than that, the market is pretty robust, in terms of the underlying aftermarket, except for those -- a couple of those weather sort of related disruptions that we talked about in APAC, where iron ore mines that were hit by cyclones or whatever and knocked out for a few weeks. And obviously, that hits our aftermarket when something like that happens. But on an underlying basis, very robust.

Fair enough. And maybe a quick final one, if I may. Can you just remind us on oil sands and dredging, the scale of those? I know you've got the comp for dredging, but just how we think about it on a sort of yearly basis.

Yeah. I mean if you think about dredge, which is the sort of -- these are the ESCO cutter heads and tips that go on dredge boats, which where most of the activity is in the Middle East, unfortunately. To scale it, last -- Q1 last year, we had about $10 million of orders, which was exceptionally high, as I said in the speech, for dredge points, and that was zero this year. So a big reason of the -- for the moving parts on the ESCO organic. But over the balance of the year, dredge overall last year was lower than the previous year. We had that big order in Q1 and then very little over the balance of the year. So there's nothing kind of dredge-related in the comps as we go through the next quarters, which will pull the ESCO numbers back, which means that the underlying growth in the mining GET will shine through over the balance of the year, as I said earlier. And then on the oil sands, look pretty active up there, obviously, with the oil price. So the outlook there is good for the balance of the year. And so we feel good about that.

Our next question comes from Alex O'Hanlon from Panmure Liberum.

Well done. Just one quick question for me. I mean, it sounds like there's been further good progress in Software Solutions in the quarter. Can you just give us those normal Micromine KPIs, which you've listed out at the results and at the CMD, just to give us a flavor for how that business is tracking?

Yes. Yeah. No, look, I mean, over the balance of the year, we expect Micromine to hit the annual recurring revenue growth target that we set at the time of the acquisition. So that's our plan, and it's on track to deliver that. So we're not going to give that number every quarter, but we'll give it at the 6-month and 12-month points. But we're absolutely on track to deliver the acquisition plan in terms of that growth level. It's going great. We had that big win that I mentioned in the speech with a Tier 1 customer, which Micromine has been trying to get into for years and Minerals and ESCO were able to open the door in a way which allowed them to secure the order. So that's how those -- that revenue growth acceleration initiative is going to work. It's a great example. And Fast2Mine, it's much smaller, but it's going like a train. I mean, we're really, really excited about what that can do and how it fits into the broader product portfolio. We're in lots of -- until now, it has been just Brazil domestic. We now got the team in lots of countries around the world pushing it out and getting a lot of traction, which is great to see.

Our next question comes from John Kim from Deutsche Bank.

One thing, wanted to see if you could comment on kind of competitive dynamics right now. I think the team previously mentioned that there might be a bit more competition on pumps and pricing. And if we kind of extend that question, if we think about knock-on effects from the conflicts and higher oil prices, how should we think about price-cost dynamics, particularly in the second half for the business?

Yeah. Look, I think we're very comfortable with our competitive position from pumps point of view, as I said in the speech. We can -- our acid test is always those mill circuit pump trials, of which there were four in the first quarter. We won three of them. One is ongoing. So I'm very happy that whenever competitively, we put ourselves up against all of our competitors that we can demonstrate the lowest total cost of ownership and better performance from our product. So that model is completely intact, and we feel good about that. Our competitors are pushing hard on pumps. We know that. We see it. We're defending it strongly for all the great reasons that we can in terms of our technology and our service capability. And so yes, from a pricing point of view, the margins remain good, and so we're very happy there. In terms of the impact from the conflict, as I said earlier, we're not seeing any significant impact at the moment. We don't expect a big impact on our supply chain. We know that potentially, if it goes on for a long time that you might see oil shortages in some parts of the world. But I think we're quite a long way away from that as we see it, and my CFO as a former BP man has a pretty good view on that. So he's watching that closely for us. So yes, I think as we see it today, we're quite a long way away from any broader contagion, but it is a crazy world. And so we are remaining alert. And as ever, plan for the worst and hope for the best.

A quick follow-up, if I may. When we think about those temporary mine closures, is there any steer you can give us on cadence here on how that might come right?

Yeah. A lot of them were either weather-related because of cyclones in Southeast Asia. So they're now back up and running, and we're starting to see orders come through. We've seen some on -- ongoing effects of geological challenges in some parts of the world. But again, customers ramping back up and working through that. So there's very little that we saw in those disruptions in the first quarter that we see as permanent. And we plan our year, we plan our aftermarket demand bottom up in terms of customers' production plans. And in pretty much all the cases where we saw the disruptions in the first quarter, those production plans are now normalizing, and that means that the aftermarket will normalize.

In the interest of time, we currently have no further questions. So I'd like to hand back to Jon for some closing remarks.

Thank you very much. So thanks for participating in the call today and for listening to our speech and Q&A. We appreciate that. If you have any follow-on calls through the course of the day, and please get in touch with our IR team and we'd be very happy to help. But in the meantime, I look forward to catching up with all of you in person before too long. Thank you very much. Speaker 0 This concludes today's call. We thank everyone for joining. You may now disconnect your lines.