• Text size      
  • Send this article to a friend
  • Print this article

Weir 'may benefit from offloading division'

A CITY analyst has raised the prospect of Weir Group offloading its power and industrial division, claiming its disposal could boost the overall financial performance of the Glasgow-based engineering company.

The division, which supplies valves, pumps, turbines and engineering services for the power generation sector, employs 3200 staff and contributed £330 million in revenue for Weir in 2013.

It is one of three key divisions operating under the Weir umbrella, with the two others focused on the mining and oil and gas sectors.

Analyst Espirito Santo said it held a "positive meeting" with Weir finance director Jon Stanton and reported management confidence following strong results for 2013. But it noted that Mr Stanton had been "more candid" about its prospects for its power and industrial division, stating that it faced a "crucial year" in 2014.

The analyst said: "Group margins could increase up to 100bps (basis points) if sold and would leave a more focused business which would drive PE (price earnings) rating up.

"Equally, valves [are] likely to be an area for acquisitions. Our impression is either this division performs this year or it potentially gets sold."

More broadly, the analyst noted there was a "fair degree of certainty" that Weir would outperform its peers in growth and margins terms, in spite of the cyclical nature of its end markets.

It based this assessment on Weir's service and manufacturing footprint, noting it has the highest number of service centres around the world. It said no major mine is based more than 200km from one of these centres.

Espirito also highlighted the technology advantages Weir holds in wear properties for its mining and oil and gas products.

Elsewhere, it noted opportunities for Weir in the North America fracking sector.

Shares in Weir Group closed down 8p at 2504p.

Contextual targeting label: 

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.