The Weir Group (LSE:WEIR), the mining equipment and technology group, reported orders up 8% year on year in constant currency for the six months to 30 June, with revenue rising 5% on the same basis.
Adjusted operating profit margin came in at 18.8%, down 100 basis points against a strong prior-year comparator, reflecting short-term product mix and phasing of production transfers between manufacturing sites.
Free operating cash conversion stood at 41%, against 62% a year earlier, which Weir attributed to working capital build and phasing of share purchases for long-term incentive awards.
Net debt to EBITDA rose to 2.2 times, partly due to the acquisition of the remaining 50% of Chilean joint venture ESCO Elecmetal Fundición Limitada, with the company expecting a return toward 1.5 times by year end.
"Our financial performance for the first half is in line with our expectations and reflects an acceleration in Q2 supported by market share gains in new bids, competitive trials and demand for innovative new solutions," said chief executive Jon Stanton.
Original equipment orders grew 10%, while aftermarket orders rose 8%, with strong demand in copper, gold, iron ore and oil sands. Return on capital employed fell to 15.2% from 17.7%, reflecting the enlarged asset base from acquisitions.
Weir reiterated full-year guidance for constant currency growth in revenue, operating profit and margins, targeting cumulative Performance Excellence savings of £90m and free operating cash conversion of 90% to 100%.
News Intelligence what this means for the company
Weir Group reported first-half orders up 8% and revenue up 5% in constant currency, with adjusted operating margin at 18.8% (down 100 basis points year-on-year). The company reiterated full-year guidance for constant currency growth in revenue, operating profit and margins, signalling confidence in momentum, but free operating cash conversion fell sharply to 41% from 62% a year earlier, and net debt to EBITDA rose to 2.2x following the acquisition of the remaining 50% of Chilean joint venture ESCO Elecmetal Fundición Limitada.
The order growth and guidance reiteration confirm Weir's exposure to strong mining demand (copper, gold, iron ore, oil sands) is intact, but the sharp decline in cash conversion and elevated leverage (2.2x net debt/EBITDA) reflect near-term working capital headwinds and acquisition integration costs that will need to reverse toward the company's 1.5x target by year end for the investment case to remain on track.
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