Weir Group, Scotland�s largest engineering company, yesterday raised its pre-tax profit forecast for 2008 after a solid performance in the final quarter of last year and the positive impact of the weak pound against the dollar.
Weir Group, Scotland's largest engineering company, yesterday raised its pre-tax profit forecast for 2008 after a solid performance in the final quarter of last year and the positive impact of the weak pound against the dollar.
The Glasgow-based group, which makes pumps and valves for moving minerals, oil and seawater, also said it had entered 2009 in a good position and said it was well-prepared to react to the "market challenges as they develop during the year".
The optimism of Weir's update is notable because it comes in the face of a weakening outlook for the mining and commodities sectors, from which Weir derives a sizeable chunk of its business.
At the same time, the company, which raised its full-year profit estimate 2.8% to around £170m in October, yesterday went a step further.
In its trading update for the 52 weeks to December 26, 2008, Weir raised its forecast for profit from continuing operations before tax, intangibles, amortisation and exceptional items to about £174m - well up from its 2007 pre-tax profit of £120.2m, after stripping out exceptionals such as the sale of Weir Pumps.
Shares in Weir yesterday ended the trading session up 0.6%, or 2.5p, at 397.5p - continuing to regain ground after tumbling to the recent nadir of 310p it hit on the final day's trading of 2008.
Nonetheless, the stock remains a long way from its peak of 969p last June, having tripled in five years. That left it on the cusp of admission to the FTSE-100 until worries about demand for commodities, particularly from Asia, attacked sentiment towards the sector.
Earlier this week, broker Numis repeated its "buy"
rating ahead of the pumps and valves manufacturer's trading update.
The broker said it remained positive on Weir, in spite of the sector's dramatically shifting outlook, particularly in the wake of announcements of significant capital expenditure cut-backs by the major miners, notably Rio Tinto and Anglo American.
"Weir has good visibility and even allowing for the deferral/cancellation of some orders we would expect the company to show some resilience in 2009 with greater uncertainty looking ahead to 2010," Numis said in a note.
Thee company yesterday also said that the effects of a positive foreign currency translation in the final quarter, mainly from the strengthening of the US dollar against sterling, had a positive impact on its results.
Last year marked a sea-change for the 133-year old Scottish company. It was Weir's first full year without the Cathcart-based pumps business.
In 2007, Mark Selway, the company's Australia-born chief executive, sent shockwaves through the Scottish engineering sector after announcing plans to sell the Weir Pumps business to Swiss rival Sulzer.
However, that job-slashing deal collapsed, and the business was rescued by entrepreneur Jim McColl, whose acquisition saved 600 skilled jobs.
Last year also saw the company dispose of the Weir Materials & Foundries operation in Manchester for around £10m barely a month after selling its Canadian distribution business for £13.2m. It also last year bought a 75% stake in Azerbaijan-based Standard Oilfield Services for £8m.
Weir yesterday also said it expected net debt at December 31 to be less than the six-month figure of £261.7m, and that operating cashflow generation and the proceeds from the sale of Materials & Foundries were partially offset by an adverse foreign currency translation effect.
The company added that an aggregate of £625m committed revolving credit facilities, which will expire in 2011, was also in place.
