WEIR Group’s acquisition of ESCO, the Oregon-based tool supplier to the surface mining and construction sectors, is looking increasingly like an astute play.
While the company has again been buffeted by volatility in the US shale gas market in the first quarter, the value of ESCO, which was acquired from $1.3 billion last year, is already abundantly clear. Taking into account the contribution of ESCO, which has benefited from positive conditions in the mining and construction sectors in North America, Weir said orders increased by 18% in the opening three months of the year. It helped the firm offset a 23% fall in orders in the US oil and gas market, where Weir was beset by capital and pipeline constraints, leading to cautious behaviour by E&P (exploration and production) operators – despite improving oil prices.
What is more, the arrival of ESCO has coincided with a strong period for Weir’s operations in the global mining sector, which saw good momentum in the opening quarter. Mining, Weir’s biggest generator of revenue, benefited in the opening quarter from the strength of the project pipeline. While some mining customers were exerting caution on investment decisions, some major copper and iron ore projects were approved over the period, Weir said.
Given the fluctuations which have characterised the US shale market in recent years, it is to Weir’s great advantage that it has decided to up the ante on its mining operations. That the firm will soon dispose of its Flow Control operation will also be a boon to management.
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