GLASGOW-based engineer Weir Group has projected "good" underlying growth in profits this year in mixed market conditions, a declaration that helped boost its stock market worth by nearly £360 million as its shares hit a record high.
Weir yesterday announced a 5% fall in underlying pre-tax profits to £418m in the 53 weeks to January 3, broadly in line with City expectations.
Asked about the likely reasons for the surge in Weir's share price yesterday, finance director Jon Stanton cited positive outlooks for the company's divisions, which serve the mining and oil and gas sectors.
He also highlighted the resilience of Weir's minerals division in the fourth quarter of last year, in the face of a reluctance by global mining companies to invest in new projects.
Mr Stanton said the "bear case" had been that Weir's minerals division might have had a "disappointing" fourth quarter of 2013, in line with its peer group.
But he declared that this division had in fact "proved resilient" in the fourth quarter, partly because of its focus on after-market activities, notably the provision of spare parts required by customers to operate the equipment made by Weir.
Shares in Weir, which traded below 300p in late 2008 at a time of grave concern over the global economic outlook, touched a record intra-day high of £25.46 after the results statement. They eased back later but still achieved a record closing high of £25.19, up by 167p or 7.1% on the day. Weir had a stock market worth of about £5.37 billion last night, up from £5.01bn at Tuesday's close.
The company declared a final dividend of 33.2p-a-share for the year to January 3. This takes the total dividend for the year to 42p, up 11% on the payout for the prior 12 months. Weir made revenues of £2.43bn in the year to January 3, down 4% on the previous 12 months. Revenues in emerging markets fell by 7%.
Original equipment orders fell by 13%. Weir attributed this decline to a double-digit-percentage reduction in "greenfield" mining orders and project delays.
Weir said: "Mining sector capital expenditure fell by an estimated 16% in 2013 as metals prices continued to decline from 2011 highs. Greenfield projects were hardest hit as mining companies switched their priorities from new projects to maximising returns from their current operations.
"This drive towards optimisation supported largely unchanged maintenance and brownfield capital expenditure. Some new projects experienced order delays as customers continued to adopt a cautious approach to large investments."
However, Weir's after-market orders surged by 16% in the year to January 3, boosted by a double-digit-percentage increase in the oil and gas division and "good" growth in the minerals unit.
In the oil and gas division, overall revenues fell as after-market growth was more than offset by a reduction in original equipment sales, which Weir said had been expected as a result of "frack fleet overcapacity". Weir is a major supplier of equipment for fracking in the North American oil and gas sector.
Keith Cochrane, chief executive of Weir, said: "2013 was a challenging year in many of our end markets but our relative out-performance demonstrated the strength of the group's strategy, the diversity of our portfolio and the resilience of our aftermarket-focused business model.
"This was supported by a robust performance from minerals and growing momentum in oil and gas as we saw a gradual recovery in upstream markets."
He added: "In 2014, we anticipate that the group will return to underlying growth despite mixed end market conditions. We expect good constant currency revenue and profit growth, with group margins broadly in line with 2013 levels, although our reported results are likely to be impacted by recent adverse foreign currency movements." Mr Stanton cited sterling's strength against the dollar and other currencies.