Separately, Panmure Gordon has called on Weir Group to stop “wasting” money on acquisitions and focus on protecting shareholder value.
In a note Sanjay Jha from the broker warned the engineering company’s minerals profits are likely to dip sharply in the coming months, coming on the back of a pronounced fall in profit from oil and gas.
Mr Jha said: “Instead of wasting more good money at mining-related acquisitions to defend a fragile strategy, we believe the management should focus on minimising shareholder value destruction. You don’t need a crystal ball to predict that minerals’ profits will follow oil and gas into the abyss.”
Mr Jha, who has a sell rating on Weir’s stock and a target price of 1160p, went on to warn the minerals industry could remain depressed for many years.
He pointed to a four per cent input decline in the high margin aftermarket and servicing segment in Weir’s minerals division and added: “You definitely don’t want to be holding this stock when global ore production collapses under its own weight.”
And on oil and gas Mr Jha saw few comforting signs for Weir, which makes around three quarters of its profits from North America.
He said: “The highly indebted US shale oil industry has little cash left to maintain more than one quarter’s worth of [capital expenditure]. With hedges fading, many companies will simply go out of business.”
Weir, where Keith Cochrane is chief executive, reported a 40 per cent drop in half-year profits to £108.2m this week, mainly as a result of the falling activity in US onshore oil and gas.
Analysts from SocGen, HSBC, Citigroup and Goldman Sachs have also cut their target prices on Weir’s stock.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here