Weir Group ((WEGRY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Weir Group’s latest earnings call struck an upbeat note as management highlighted solid revenue gains, double‑digit profit growth, and early delivery of its 20% margin target. While higher debt, working capital and legacy asbestos issues weighed on some metrics, the tone was confident that these are manageable and that the group is well placed for further profitable growth.
Revenue and Orders Growth
Revenue climbed 6% in constant currency to £2.6bn, underpinned by healthy demand across the portfolio. Total orders matched that level at £2.6bn, up 7%, with aftermarket strength and contributions from recent acquisitions offsetting flat original equipment bookings.
Aftermarket Strength
Aftermarket remained the engine of the business, with orders and revenue both rising 8% as mining activity stayed high. Strong demand for wear parts and expendables supported stable utilisation rates, reinforcing the resilience and visibility of Weir’s cash‑generating installed base.
Operating Profit and Margin Expansion
Operating profit increased 15% year on year to £518m, showing strong operational leverage. The operating margin widened by 150 basis points to 20.2%, allowing Weir to hit its 20% margin goal a full year earlier than planned.
Cash Conversion and Dividend
Free operating cash conversion reached 92%, comfortably within the 90%–100% target range and underscoring the quality of earnings. The board signalled confidence with a 4% increase in the full‑year dividend to 41.7p per share, balancing shareholder returns with balance‑sheet discipline.
Emissions and Sustainability Progress
Weir reported notable progress on its environmental agenda, cutting absolute Scope 1 and 2 emissions by 31% versus a 2019 baseline. This performance already surpasses the company’s original 2030 science‑based target of a 30% reduction, suggesting sustainability is becoming a competitive strength.
Divisional Performance — Minerals
In the Minerals division, orders grew 5%, or 7% when stripping out large projects, reflecting solid underlying demand. Revenue advanced 6% while operating profit rose 11% to £406m, lifting the division’s margin to 21.9%, up 100 basis points.
Divisional Performance — ESCO and Software
ESCO delivered 11% order growth, or 4% on a like‑for‑like basis excluding Micromine, and a 22% jump in operating profit to £152m as margins reached 21.4%. Micromine’s software metrics impressed, with 94% customer retention, about 88% recurring revenue and annualised recurring revenue up 24%, reinforcing Weir’s pivot toward digital.
Performance Excellence and Efficiency Gains
The Performance Excellence programme continued to drive efficiencies, with cumulative in‑year savings rising to £59m. Management has now lifted the final savings target to £90m, with the initiative running under budget and total programme costs held to £113m.
Strategic M&A and Product Expansion
Weir accelerated its strategic transformation through self‑funded deals such as Micromine, Townley and Fast2Mine, alongside investments like CiDRA and an ESCO Chile joint venture. New product launches including the ENDURON VSM, crushers and mill pumps, plus the first VSM order, broaden the company’s technology and geographic reach.
Capital Structure and Deleveraging Plan
Net debt to EBITDA rose to 1.9 times after the acquisition spree, close to the top of the target corridor. Management reiterated its plan to delever back to 0.5–1.5 times by the end of 2026, relying on strong cash conversion and disciplined capital allocation.
Higher Net Debt Post‑Acquisitions
The higher leverage reflects the scale of transactions completed in the year rather than underlying business weakness. Nonetheless, it creates a clear near‑term focus on deleveraging, which investors will watch closely as integration benefits flow through.
Working Capital and Inventory Build
Working capital intensity increased, with working capital rising to 22.4% of sales, 170 basis points higher. The company attributed this to inventory builds linked to Performance Excellence actions and U.S. tariffs, and guided toward a return to roughly 20% by 2026.
Return on Capital Employed Decline
Return on capital employed slipped 140 basis points to 17.9%, reflecting the large capital deployed into acquisitions. Management framed this as a temporary dilution, expecting ROCE to improve as synergies, growth and margin gains from recent deals are realised.
Free Cash Flow and Liquidity Headwinds
Free cash flow declined to £267m as higher tax outflows, increased finance costs and derivative settlements weighed on reported numbers. Adjusted operating cash flow eased by £25m to £566m, though the overall liquidity position remains comfortable.
Adjusting Items and Exceptional Costs
Adjusting items totalled £73m, including £47m of exceptional costs tied mainly to acquisitions and transformation. Acquisition and integration charges came to £22m, while Performance Excellence spending contributed to the overall £113m programme cost.
Asbestos‑Related U.S. Entity and Chapter 11
A U.S. subsidiary holding asbestos claims entered Chapter 11 and was deconsolidated from the group accounts, simplifying ongoing exposure. Management said the remaining provision should cover residual liabilities, but acknowledged this legacy issue remains a risk factor.
Safety Performance Shortfall
On safety, Weir fell short of its ‘zero harm’ ambition as the total incident rate worsened year on year. The company noted that recordable incidents improved in the second half and stressed that leadership is taking corrective actions to reinforce safety culture.
Original Equipment Orders Flat
Original equipment orders were flat, with OE revenue up only 2% as large greenfield projects tapered off. The business is therefore leaning more heavily on aftermarket and brownfield work for near‑term growth while waiting for the next wave of major projects.
Translational FX and Tariff Headwinds
Currency movements shaved £22m off profit and clipped margins by about 10 basis points, illustrating the drag from translational FX. U.S. tariffs also complicated operations and contributed to higher year‑end inventory balances, though these issues are considered manageable.
Planned Near‑Term Investments Partly Offset Margins
Weir plans to reinvest part of its efficiency gains into R&D and a global ERP rollout based on SAP S/4, building future capabilities. These outlays are expected to create an approximately 80 basis point margin headwind in 2026, even as the group still targets overall margin expansion of about 50 basis points.
Guidance and Outlook
For 2026, management guided to another year of revenue and operating profit growth, with a 50 basis point uplift in operating margin to around 20.7%. They also forecast mid‑single‑digit aftermarket revenue growth, continued strong software momentum, cash conversion between 90% and 100%, net interest costs near £90m, and working capital trending back toward 20% of sales as leverage returns to 0.5–1.5 times EBITDA.
Weir’s earnings call painted a picture of a business balancing robust operational momentum with a handful of manageable headwinds. With margins already above 20%, a growing software and aftermarket mix, and a clear plan to delever and invest for efficiency, the company appears positioned for steady value creation, provided execution on integration, safety and working‑capital discipline stays on track.