The Weir Group PLC

Good morning, everyone, and welcome to WEIR's 2025 half-year results presentation. Please note the usual cautionary notice on forward-looking statements. Today, I'm joined by our CFO, Brian Puffer, and after my introduction, Brian will lead the financial review, and then I'll cover strategic progress and outlook. After the presentation, we'll both be available for Q&A. So let me start with a reminder of our journey to deliver on WEIR's compelling long-term value creation opportunity. Having completed our portfolio transformation, we're now a focused mining technology leader with unique capabilities. With our leading brands, comprehensive service model and growing range of innovative end-to-end solutions, we're helping our customers boost productivity and sustainability. We're located close to every major mine around the world, deeply embedded in our customers' operations, keeping their mines running and helping to solve their biggest challenges. Our business model and its barriers to entry underpin the track record of consistent delivery that we're building. Through performance excellence, we're optimising our business, creating a leaner, more efficient and scalable WEA. We're well on track to deliver our cumulative savings target of £80 million in 2026, and we are then a business with operating margins sustainably above 20%, with a wonderful platform to deliver compounding growth. And now we're entering the growth acceleration phase of our strategy, underpinned by the energy transition and global demographic trends, the adoption of new digital and hardware technologies to deliver critical minerals in a more sustainable way, and our own specific strategic growth initiatives. Through capital allocation, we're already shifting gears, and later I'll talk through our progress this year with Micromine, Townley and CEDRA. Combined, these three key factors means we have complete conviction in making the following commitments to our stakeholders. First, growing faster than our markets, delivering compounding growth in mid to high single digits through the cycle. Second, delivering operating profit margins sustainably above 20% through our performance excellence program and operational leverage. Third, cleanly converting our earnings growth into cash and returns and deploying it in line with our capital allocation policy Fourth, remaining highly resilient, thanks to our differentiated aftermarket-focused business model. And lastly, delivering all the above in the right way, creating innovative mining technology solutions that accelerate sustainability in mining while doing the right thing by our people and the planet. In the first half of 2025, we saw high activity levels across existing mine sites with continued brownfield momentum as customers sought to drive production growth while delivering efficiency and sustainability improvements. We invested in our business through acquisitions, positioning ourselves to capitalize on this market opportunity as the mining industry invests in a step change in production volumes, and we successfully navigated impacts from US tariffs. We performed strongly against our commitments to stakeholders in the first half of the year. Our revenues grew by 4% on a constant currency basis, reflecting the strength of our business and markets, and our strong book-to-bill ratio points to continuing growth. We executed strongly on our performance excellence programme with the benefits from investments made last year in WIR business services, capacity optimisation and lean, supporting our operating margin expansion of 220 basis points to reach 19.8% and underpinning our upgraded full year guidance for circa 20% operating profit margins. We maintained a high level of free operating cash conversion of 62% and are in a strong position to end the year within our target range. We demonstrated resilience with growth in our constant currency operating profit of 17%, supporting another year of dividend growth. And we're again being recognised for doing the right thing for our people and the planet, including receiving a Tier 1 ranking in the 2025 CCLA Corporate Health Benchmark and maintaining an A-list score for leadership in corporate transparency and performance on climate change from CDP. Taken together, the power of our transformed platform was evident in our strong execution during the first half of 2025 and reflects the outstanding efforts of our teams across the globe, to whom I am extremely grateful. With that, I'll now hand you over to Brian to take you through our financial results in more detail.

Thank you, John, and good morning, everyone. We are delighted with our financial results in the first half, which reflect positive demand in our mining markets, strong aftermarket growth, and the benefits of our strong execution across the group. Orders in the first half totaled $1.3 billion, an increase of 8%, driven by high levels of brownfield activity across our markets. Original equipment orders grew by 7%, supported in part by the $40 million Telabre order received in the second quarter. Aftermarket orders grew by 8%, reflecting high levels of mining activity, particularly in copper and gold. Revenue increased by 4% to £1.2 billion, again reflecting high levels of demand for our aftermarket spares and expendables. Over the first half, aftermarket revenue increased by 7%, while OE revenue declined as expected due to the phasing of the order book ahead of the delivery of the equipment for Rico Deke project in the second half of the year. Operating profit of 237 million pounds was an increase of 17%, with a strong step-up in our operating margins of 220 basis points to 19.8%. Profit before tax of 213 million pounds was 20 million pounds ahead of last year, despite an FX translation headwind of 12 million pounds. With our strong execution in delivering this step-up in profit, we saw a 10% increase in EPS to 58.7 pence per share. Free operating cash conversion at 62% reflects normal working capital seasonality, and we are on track to deliver our full-year guidance of 90% to 100%. Following the completion of the Micromine acquisition, net debt to EBITDA increased to two times as expected. Return on capital employed decreased marginally by 20 basis points to 17.7%, reflecting growth of our business offset by balance sheet effects post-micromine. We continue to remain well ahead of our cost of capital. Now turning to some commentary on each of the divisions. Starting with minerals, where we made great progress in the first half, securing a $40 million order for a sustainable tailings solution in Chile. Additionally, we made further progress in key performance excellent projects within the division, which are building a leaner, customer-focused business, and in turn, delivered strong margin growth in the first half. Across our key commodity exposures, market prices remain well above miners' costs to produce, and with the strength of gold and copper prices, we saw particularly strong demand in these markets. And original equipment orders increased 9% year-on-year, reflecting high levels of activity in brownfield projects and the previously mentioned large order in Chile. Aftermarket orders grew by 10%, driven by volume growth and a minor contribution from pricing. This was also supported by the full-year recognition of the large multi-period order in North America, excluding this impact of this order, underlying aftermarket orders grew by 7%. Revenue increased by 4% on strong aftermarket deliveries in the first half, offset by phasing within the OE order book. As a result, product mix moved more towards aftermarket, which represented 78% of revenue, up from 75% last year. Geographically, there was particularly strong regional growth in both South America and North America, reflecting increased levels of mining activity in these regions. Operating profit increased by 18% on a constant currency basis to 188 million pounds, and margins increased by 250 basis points to 21.8%. This was underpinned by incremental performance excellence savings, as well as the previously mentioned shift in revenue mix towards aftermarket and operational efficiencies. Moving on now to ESCO, where similar to minerals, we saw the benefits of positive mining conditions and delivered good progress in our strategic growth initiatives, gaining market share in mining GET and further growing margins. We welcomed our micromine colleagues to Weir following the completion of the acquisition in April with the results post-completion included within the ESCO division. On a like-for-like basis, orders were stable with positive underlying demand for GET in mining and construction markets. This was offset by the phasing of dredge orders with the disruption to barge activity in the Middle East owing to ongoing conflicts in the region. Total orders grew by 4%, reflecting 12 million pounds of orders from micromine in the period post-completion, turning to revenue, which was also stable on a like-for-like basis. During the first half of the year, we saw growth in mining and infrastructure G.E.T. offset by the phasing of large mining bucket deliveries. Including the 11 million revenue from micromine, combined revenue grew by 2%. Operating profit at 68 million pounds was 8% higher than last year on a constant currency basis. Operating margins increased by 110 basis points to 20.5%, driven by incremental performance excellence savings and a contribution from Micromine of 60 basis points. Now looking at group operating margins, where on a constant currency basis, year-on-year margins increased by 220 basis points to 19.8%. This was delivered despite a 20 basis point headwind from translational effects, mainly relating to deflation of the U.S. and Australian dollar, which we continue to expect for the full year. In terms of the main drivers of underlying margin growth in the year, these were, firstly, minerals revenue mix shifted three percentage points from OE to aftermarket, resulting in a 90 basis point tailwind to margins. Incremental performance excellence savings delivered 90 basis points with cumulative savings now 40 million pounds, highlighting how strongly we are executing on the program across the group. We saw the initial benefits to margins for Micromind, which delivered 20 basis points towards margins with a further 20 basis points contribution from operational efficiencies. Together, this delivered margins at 19.8%, and with a contribution from Micromine, we now expect to achieve margins of circa 20% in 2025, despite mixed headwinds materializing in the second half and further FX translational headwinds. Now briefly touching on adjusting items, which in total amounted to a charge of 47 million pounds. Exceptional items were 31 million pounds, 20 million of which was split across the three pillars of our Performance Excellence Program. Additionally, we incurred 11 million pounds of costs associated with the acquisition and integration of Micromine. Other adjusting items reflected normal amortization of acquisition-related intangibles, which decreased versus last year, and charges relating to our asbestos provisions. Turning to cash flow and returns, where we delivered another strong performance. Adjusted operating cash flow was 192 million pounds with increased profitability offset by a larger working capital outflow supporting the large OE order book build in the second half of the year. Working capital as a percentage of sales was 22.9%, this being 140 basis point improvement versus the same period in the prior year. CapEx was marginally higher than last year at 1.1 times depreciation compared to one times in the previous year. Our strong execution left free operating cash flow in line with the prior year at 146 million pounds, resulting in free operating cash conversion at 62%, reflecting normal season pattern. Turning to the next slide, where free cash flow of 43 million pounds is down marginally versus last year. with the decrease mainly driven by higher tax payments, reflecting higher profit levels and outflows from the settlement of financial derivatives relating to our refinancing activities. Following the completion of the acquisition of Micromine and our strategic investment in Cydia, at the end of June, net debt to EBITDA was two times on a lender covenant basis, which is in line with our capital allocation policy following acquisitions. Building on the previous slide, with our existing debt profile and strong M&A pipeline, we have taken a number of refinancing actions in the first half. With our $800 million USD bond due to mature within the next 12 months, we issued a new $950 million USD bond, using a portion of these proceeds to buy back $667 million and 150 million pounds of our existing U.S. and sterling bonds, respectively. We expect our net interest will reduce by 3 million pounds from the refinancing, which will partially offset the 25 million pounds in interest we previously guided to arising from the acquisitions in this year. Overall, this refinancing leaves us with a very attractive debt profile with long-dated maturities. We have recently announced our intentions to acquire Townley, a U.S.-based manufacturing company. And once this transaction completes, we expect net debt to EBITDA to be below two times at the end of 2025. And all things being equal, de-lever at a rate of half a turn per year, thanks to our strong cash flow delivery. So combined with our extended debt maturities, our balance sheet is in a very good place. Later in the presentation, John will provide further detail on our outlook for the full year, with us expecting a year of revenue and profit growth with further margin expansion. This slide supplements that, setting out some financial modeling guidance with some specific points to highlight. Firstly, based on current FX rates, we would see a $22 million full-year operating profit translation headwind, mainly driven by the strengthening of the pound against both the Australian and the U.S. dollar. We expect capex and lease spend of around 110 million pounds and free operating cash conversion of between 90 and 100%. We anticipate an exceptional cash outflow of around 40 million pounds in the year relating to performance excellence and costs relating to the acquisition and integration of Micromine. And finally, as John mentioned, we are upgrading our guidance for full-year operating profit margin from 19.5% to circa 20%, including contributions from Micromine. I'll now summarize the key messages from this section of the presentation. Conditions in our mining markets continue to be positive. We are seeing high levels of activity in our markets, and we are delivering on our strategic growth initiatives. Our customers are continuing to maximize ore production and improving the efficiency of existing mine sites, which together with ongoing installed base expansion, provide strong demand for our aftermarket products. In the first half of 2025, we executed strongly across the group, delivering growth in orders and revenue, completed the acquisition of MicroVine, delivered further performance excellence savings, which all combined enabled us to deliver a significant step up in margins. On returns, our cash conversion was in line with normal seasonality, and we delivered further growth in the interim dividend. With the completion of the Micromine transaction, complemented by the announcements of the Townley acquisition and Cedra investment, we are building a very strong platform for further growth and margin expansion into the future. Overall, we delivered a strong financial performance in the half, and as we move through the rest of 2025, we have great momentum across the group and are confident in delivering a year of revenue growth and margins of circa 20%. Thank you, and I will now hand back to John.

Thank you, Brian. In this next section, I'll share more details on our strategic progress in the first half of 2025, our view of market conditions, and set out the outlook for the remainder of the year. Our strategy sets out to deliver excellent outcomes for our people, our customers and our investors. It's fully embedded throughout the organisation and its four pillars of people, customer, technology and performance continue to guide our decisions and position us strongly to take advantage of the opportunities which lie ahead. Central to the framework is our purpose to enable the sustainable and efficient delivery of the natural resources essential to create a better future for the world. In the first half of 2025, we've made significant progress towards these aims. In addition to our successful organic strategy, we've now created the flexibility to allocate capital to compound our growth. We have clear acquisition criteria and our focus is in three areas. Digital solutions, encompassing software and AI, product extensions and geographic expansion. We've remained disciplined in our approach to M&A, ensuring we meet both our strategic and financial criteria. And after a quiet a couple of years, I'm pleased that we've been able to make great progress so far in 2025 with deals announced across each of our focus areas. In digital, the acquisition of Micromine is a leap for WEA toward our vision to create a sector-leading digital optimisation platform for the mining industry. The acquisition draws us a step closer to unlocking the full potential for digital technology to connect the full value chain from exploration to mine to mill, deepening valuable insights at all stages of the mining and processing of ore. Micromine is a software business at scale with an impressive history of recurring revenue growth at sector-leading margins. I'm delighted at the speed at which this acquisition has closed and the level of collaboration with our new colleagues since then. I personally attended our integration workshop in Perth, Australia, where along with leaders from across our businesses, we set in motion our plan to accelerate the growth of Micromine, developing opportunities to expand the business into North and South America. We've now put in place the process, systems and incentives and are building up the sales force in these key growth regions to deliver our growth objectives. After just two months of ownership, we're in a great position and I'm particularly pleased with the cultural alignment and positive customer feedback. With full access to the business, we've confirmed our key deal assumptions and the underlying growth and quality of the business is right in line with our expectations. Following Micromine, we announced our strategic equity investment into Sidra, a minerals processing company known principally through its flow measurement technology. Through our partnership, we've now accessed Cedra's P29 transformational separation technology, complementing our partnership with IRIES and adding flexibility to our range of separation solutions. We're particularly interested in P29 and coarse particle separation because as the ores and ore grades change over time at our customers' mine sites, the processes we utilise to extract the valuable minerals must also adapt. P29 technology is named after the atomic number for copper, as this was Cedra's initial focus for this new technology. And it's an alternative to conventional flotation that's proven that grinding at a larger particle size can increase the throughput of an existing grinding circuit by over 40%. The goal of this new agreement between WEIR and Cedra is to leverage this new technology through our transformative flow sheet solutions to help mining companies meet the challenges of reduced head grades, water restrictions, reduced carbon emissions and tailings impact safety. We're delighted to begin work immediately with our partners at Cedra and Arias to integrate these novel separation technologies into our redefined flow sheet solutions. Finally, in June, we announced a binding agreement to acquire U.S.-based business Townley, a leading manufacturer of high-quality engineered products for minerals processing based in north central Florida. The acquisition will strengthen WEIR's presence in North America, including in the attractive phosphate market, a key mineral in modern fertilizers essential for global food security and accessibility. Serenity's U.S. foundry and manufacturing capabilities will enable WEA to drive further localization and lead time reduction within North America, aligning strongly with customer needs and completing Minerals' global casting capacity needs. The transaction is expected to complete in Q3 2025, subject to the customary U.S. antitrust approvals. Post-completion, the business will be integrated into the North American region of our Minerals division. And similar to Micromine and Cedra, the investment is well matched to our established capital allocation policy, with all of the deals expected to be EPS accretive in the first full year of ownership and ROIC expected to exceed WAC in 2028. In addition to our acquisition activity, we continue to invest to develop the differentiated mission-critical hardware and software solutions our customers demand. And we saw some notable successes in the first half. Both Minerals and ESCO continue to grow market share in their core offerings, converting a number of field trials for large mill circuit pumps and GET against a range of competitor solutions. We're further investing in our transformational solutions, broadening the portfolio of ESCO's Nexus Next Generation GET solution and securing a key contract for our Minerals Next intelligent solution in Saudi Arabia. Success with Next was due to our unique combination of AI-powered digital technologies and deep product domain expertise, a model we will accelerate with Micromine, and reinforces our position as a trusted partner in digital transformation for the mining industry. In addition to Next, investments in R&D across the group are converting into commercial successes, and I wanted to share a couple of case studies on how we're putting our strategy to work. In minerals, we announced a £40 million brownfield expansion order for sustainable tailing solutions at the Cadelco Talabre facility in Chile. The project will combine the thickened tailing streams from three major mines in the Atacama region and handle a slurry thickened to circa 70% solid content, a feat that could only be achieved using our Ghiho pumps. The project is expected to have a total productive life of 20 years. creating the opportunity to reuse process water and increasing the safety and stability of the storage facility for its useful life. The Telabre project is key to creating the conditions for further capacity improvements within the process plants, a prime example of how de-bottlenecking projects stack up to unlock the full potential of our customers' resources. We have a strong partnership with Codelco across their mining operations and look forward to working with them as they further maximise the productivity of their assets. In ESCO, we received a significant order at Barrick's Lemwana copper mine in Zambia after several years of close partnership and on-site support. The Lemwana mine is critical to the global supply of copper, enjoying one of the largest deposits in the world. Current expansion work, including this order, looked to extend the mine life by another 20 years. The order simultaneously delivered on ESCO's three strategic growth initiatives of extending vertically through the value chain through mining attachment sales, Protecting our core by expanding the use of our GTT solutions and growing the installed base of motion metrics AI enabled vision technology. These are truly great wins and I'd like to congratulate our teams at ESCO and Minerals for their great work. Now turning to our performance excellence program, which continues at pace and is on track to deliver annual cumulative savings of £50 million in 2025 and £80 million in 2026. On capacity optimization, our final facility moves across the EMEA and APAC regions were launched and progressing well. Continuous improvement has materialized into significant operational savings, particularly from our new configure to order product selection process and minerals, driving down scrap rates and warranty costs, while improving on-time delivery and lead times. During the first half of the year, we recognised the largest benefits from projects executed in 2024, including transformation of our IT and HR functions as part of WEIR business services. The WBS transformation phase is now complete and we move into a period of ongoing optimisation. Now, moving on to market commentary and starting with original equipment. As I mentioned earlier, despite broader trade uncertainty, we saw high activity levels in our mining markets, with customers increasing CapEx plans after a long period of underinvestment and early signs of an acceleration in project permitting, particularly in North and Latin America, enabled by government policy responses. The US government's FAST41 project list includes several sites under accelerated permitting schedules, including the long-delayed Resolution Copper Project, which is forecast to produce 25% of the US domestic copper demand if constructed. The Chilean government has likewise announced accelerated permitting reviews for a list of projects totalling £45 billion, required to maintain the country's position as the world's largest copper producer. In the immediate term, analysis by several banks suggests mining capex spend among listed miners is expected to grow mid to high single digits through 2026 as expansion of existing mines bridge the gap to future sources of supply. On the aftermarket side, commodity prices remain favourable, especially for gold and copper. Stockpiling of those metals and a recognised supply shortage of copper in particular have incentivised customers to prioritise maximising ore production and improving the efficiency of existing mine sites. Consensus forecasts support low- to mid-single-digit production growth through 2026 for WEIR's key commodity exposures, including copper, gold and iron ore, in line with their long-run average. The aftermarket outlook also continues to be supported by our growing installed base and declining ore grades. So, turning to the full-year outlook where we expect order and revenue growth to continue in the second half, supported by a strong pipeline of brownfield optimisation projects. Portions of our large order received for Ricodeak last year are planned to ship in the fourth quarter, so in the second half we'll see a large shift in mix towards original equipment, which of course is the foundation for our future aftermarket opportunity. With strong execution of performance excellence and contributions from Micromine, we upgrade our full-year operating profit margin guidance to circa 20%, with second-half margins absorbing the shift in revenue mix just mentioned. Absolute operating profit guidance reflects a £10 million underlying improvement in constant currency, offset by greater translational FX headwinds if current rates endure through the second half of the year. We expect free operating cash conversion of between 90% and 100%, in line with our medium-term guidance, as our lean operating model continues to deliver working capital efficiency. So, bringing all this together, the long-term opportunity for WEIR is tremendously exciting. As a mining-focused business, we are best positioned to capitalise on demand for metals and minerals, essential for the transition to a net-zero economy. Our vast installed base of mission-critical equipment and mines throughout the world provides a resilient platform for growth through market cycles. We're executing really well against our performance excellence agenda and on track to deliver our commitment of operating profit margins sustainably beyond 20% from 2026. With our strong operating platform, we're cleanly converting our earnings growth into cash and returns. And finally, we're entering the growth acceleration phase of our strategy, where supported by acquisitions, we're delivering innovative mining hardware and digital solutions to enable our customers to scale up and clean up as the world demands ever more metals and minerals for the energy transition. So our future is bright, and the best is still yet to come from Weir. Thank you for listening. Before we head to Q&A, I wanted to announce that we will be hosting a Capital Markets event in London on December 3rd. The event will spotlight our digital and software strategy, and those who can attend in person will have an opportunity to interact with our digital products in addition to the webcast presentation, so I would encourage you all to attend. And with that, Brian and I will now be pleased to take any questions that you have. Over to you, Operator.