Weir Group shares surge as it signals further cost-cutting

That added more than £132 million to Weir’s market capitalisation, taking it to around £2.43bn.

The engineering company said it had now trimmed a net 1500 jobs over the past 12 months, equivalent to almost 10 per cent of its global workforce.

Of the jobs going in the third quarter 140 were in oil and gas in North America meaning that division has 37 per cent less staff than one year ago.

There were 225 cut in the African and Australian minerals arms as well as 40 from operations in China.

Weir said the latest reductions, along with ongoing consolidation of its service centres around the world, would lead to an additional £25m in annualised cost savings, taking the total impact of the actions implemented since last year to £110m.

That came as Weir reported a 29 per cent drop in order input year-on-year for the three months to the end of September.

There was an eight per cent decline when compared to the second quarter of this year as conditions in the oil and gas, power and minerals markets showed few signs of improvement.

On a like-for-like basis original equipment orders were down 25 per cent with aftermarket sales and servicing falling 33 per cent.

Minerals was the strongest division in terms of orders with a one per cent dip, followed by power and industrial falling 15 per cent and oil and gas 58 per cent behind the same period in 2014.

Strategy and corporate affairs director Andrew Neilson warned further job cuts and cost reductions could not be ruled out.

He said: “We recognise we are getting to the point where we are cutting into the bone.

“I think we still believe, and the general consensus is, these markets will come back.

“Shale is increasingly well positioned on the cost curve and can come back very quickly. We know we need to retain the key capabilities and skills that will let us serve that bounce back when it comes.”

In oil and gas activity levels in North America declined again while there was also a drop in Canada and signs of a slowing of construction activity in the Middle East.

Mr Neilson said: “The oil and gas decline is affecting the industry globally regardless of where you are in the value chain or where you are geographically.”

The mining arm said its customers were closing mines, postponing maintenance checks and cutting stock levels in response to the drops in commodity prices.

That wider economic uncertainty also hit the timing of projects in the power and industrial arm while the closure programmes for UK coal fired power stations also had an impact.

Mr Neilson said: “People in the current environment are just that bit more reticent to commit to these big projects. The more positive side for us is our efforts to restructure and improve profitability in that division continue to bear fruit.”

Chief executive Keith Cochrane said trading was expected to remain challenging for the remainder of this year with the company anticipating further dips in upstream oil and gas activity.

He said: “We will focus on delivering further cost and procurement savings, alongside strong cash generation.”

Mr Neilson believes it is too early to start to predict how global markets might react next year.

He said: “It is too early for us to call 2016 and when exactly the markets will [hit] bottom and turn north.”

According to Mr Neilson Weir continues to look at acquisition opportunities and is also making progressive on a number of strategic alliances.

The engineer is said to be in advanced talks with two global technology companies as it looks at using advanced analytics to monitor, improve and control performance of its components.

Mr Neilson also cited ongoing research and development spending as well as new products, such as a high horsepower rock crusher and new frack pump launched in the quarter, as ways Weir is looking to expand into new market areas.