The Weir Group paved the way for the sale of its troubled oil and gas division after a £ 546 million devaluation which caused an annual loss for the mining and energy equipment manufacturer.
The group said its goal is “now to become a pure technological game in the mining sector” and will be looking for opportunities to “maximize the value” of the oil and gas business at the right time.
Weir reported a pre-tax loss of £ 372 million in the year through the end of December, down from a profit of £ 86 million in the previous year. Revenue increased 7% on a constant currency basis to £ 2.66 billion.
The heavy equipment supplier suffered from weakening demand for its pumping equipment in North America as its shale customers tighten their belts and minimize capital expenditure. The oil and gas business underwent a write-down of £ 546 million last year, while its revenues decreased by 25%.
“Market dynamics have changed with shorter cycles and higher volatility levels, leading to a very different financial profile from our mining activities,” said managing director Jon Stanton.
“Whenever we find a clear solution to stimulate value for our shareholders, we will be ready and able to capitalize,” said Stanton. For now, Weir will continue to invest in the business, given the current difficult market conditions.
Stifel analysts said Wednesday’s update to investors is the “clearest statement, however, that this business is now considered non-essential” and that the impairment charge is intended as the first steps towards a exit when conditions are more favorable.
In the mining division, revenues and margins increased both in the mining sector and in the mining tool maker Esco, which Weir acquired in 2018. Stifel analysts said that strong performance in this sector has left the overall numbers of 2019 ” solid performance. ”
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