The Weir Group PLC

Good morning. Thank you for attending today's Wear Group PLC Quarter 3 IMS Quarterly Update. My name is Sarah, and I'll be your moderator today. All lines will be muted during the presentation portion of the call, but an opportunity for questions and answers at the end. If you'd like to ask a question, press star 1 on your telephone keypad. I would like to pass the conference over to our host, Shauna Stanton, Chief Executive Officer. Please go ahead.

Thank you, Operator, and good morning, everyone, and thank you for joining us today for our third quarter trading update. As usual, I'm joined by our CFO, Brian Puffer, and after a brief overview from me, we'll be happy to take your questions. So starting with current trading, where, encouragingly, our core markets of copper, gold, and iron ore are strong, and this reflects our customers' drive to maximize production, capitalizing on supportive commodity prices and structural demand, and is reflected in both positive original equipment and aftermarket activity levels. Demand in the quarter was impacted marginally by the effects of certain well-publicized copper mine disruptions, as well as a softening in demand for diamonds, platinum group metals, and mineral sands. And while we expect these effects to continue in the short term, overall activity levels in global mining markets remain positive, and the diversified and resilient nature of our business is continuing to deliver growth. The performance of our minerals and ESCO divisions in the quarter reflects this positive underlying demand accelerated by strong execution against our strategic growth initiatives. In minerals, we maintained our win rate of over 90% in competitive large mill circuit pump trials and capitalized on aftermarket demand from our growing install base of HPGRs. In ESCO, customers chose to adopt our Motion Metrics SaaS platform and access our unique features to drive productivity in their extraction operations. ESCO also realized several large bucket wins in APAC, compounding success in this key region for geographic expansion. During the quarter, we announced the acquisition of FasterMine and completed the Townley transaction. Both of these acquisitions enhance our market presence and broaden our product offering. We're making strong progress with both Townley and Micromine against our deal model assumptions and I'm pleased to report that both are delivering as expected. And turning to orders, where on a constant currency basis, group orders were up 2% year-on-year. Group original equipment orders grew 15% year-on-year after normalising for an exceptionally strong prior year comparative, which included £48 million of large orders on the OCP and Reconveet projects. This underlying trend reflects strong demand from brownfield and de-bottlenecking projects during the period. Similarly, aftermarket orders grew 10% year-on-year on a constant currency basis, driven by strong demand for our mission-critical spare parts and expendables. Underlying organic growth of 5% was complemented by a further 5% contribution from the recent acquisitions of Townley and Micromine. Overall, we've developed a very healthy order book across both divisions, which were focused on executing against during the fourth quarter. Now, turning to divisional performance, where in minerals, original equipment orders increased 13% year-on-year, excluding the large Ricodec and OCP Greenfield project wins just discussed. This underlying growth was supported by continued momentum in brownfield and the bottlenecking solutions as customers seek to maximize production and productivity. In aftermarket, orders grew 5% year on year, primarily driven by the expansion of our installed base of equipment, particularly in pumps and HPGR solutions. Having completed in the quarter, the newly acquired Townley contributed an additional £6 million to orders, which is in line with our expectations. In ESCO, original equipment orders grew by 36%, reflecting continued market share gains in mining buckets and geographic expansion, across the strategically significant APAC region. Aftermarket performance was similarly strong, with orders rising by 21% year-on-year, driven by our market-leading technology, customer intimacy, and a strong contribution from Micromine. In the quarter, market share was enhanced with another 49 net sticker conversions, and we're seeing excellent strategic momentum within motion metrics, where we continue to expand the installed base, and accelerate adoption of our solutions as a SaaS offering. MicroMind is performing well against our pre-dealed expectations, contributing £17 million in orders for the quarter, in line with the plan. We are delighted with the progress to date, and our near-term focus remains on accelerating growth through our global distribution platform and the strength of our relationships with our customers, both at local site and enterprise levels. Turning to execution, where our performance excellence program continues at pace. During the quarter, we made further progress in our capacity optimization and lean process work streams, as our EMEA and APAC regions continue to streamline their operations. Strong execution across the business underpins our confidence in achieving £80 million of absolute cumulative savings in 2026. We made significant strategic progress in accelerating our growth through acquisitions. In August, we completed the acquisition of Townley, enhancing our exposure to the attractive phosphate market. The acquisition also provides a strategically important foundry in North America, bolstering our minerals division and improving proximity to key customers in the region. The Minerals North America team is on the ground in Florida. Right now, working with our new Townley colleagues, and they're making good progress across our integration work streams. In September, we announced agreement to acquire FasterMine, a Brazil-based mining software provider offering a contemporary open-pit mine management solution. FasterMine software fills a gap in the MicroMine portfolio and is highly complementary to the Elastri open-pit mine planning and Pitram underground mine management solutions. The acquisition will accelerate our expansion into the South American mining software market, providing a strong and immediate presence in Brazil, home to some of the world's largest mineral deposits, and also offers a significant international growth opportunity. We're looking forward to welcoming FasterMine to WEA and are excited by the opportunity to further accelerate our vision for digitally-enabled mine optimization. The acquisition is expected to close in the fourth quarter, but will have no impact on our financial guidance for 2025. On net debt, given our recent acquisition activity, our net debt to EBITDA ratio is expected to sit just below two times by the end of 2025. We expect strong cash generation from our aftermarket-focused business model and performance excellence investments to underpin a strong deleveraging trajectory back to our normal debt to EBITDA range of below 1.5 times by the end of 2026. During the quarter, we completed a $400 million Australian bond issuance, our first debt raise in that country. Proceeds from the bond will be used to partially refinance our existing bridging loan from the acquisition of Micromine at a more attractive interest rate and highlights our commitment to maintain a robust and flexible balance sheet. Looking to the fourth quarter and the outlook, despite a number of uncertainties facing the mining industry, not least the outcome of ongoing tariff negotiations between the US and China, we remain focused on disciplined execution against our strong order book. We continue to execute well and have remained proactive in managing our global supply chain and customer pricing strategies to mitigate the full impact of existing tariffs and other supply chain disruptions. For the full year, we reiterate our guidance for growth in constant currency revenue and operating profit, operating margins of circa 20%, and delivery of free operating cash conversion of between 90 and 100%. We continue to expect headwinds from translational foreign exchange, which we currently estimate to be 105 million pounds and 25 million pounds on our prior year comparative for revenue and operating profit, respectively. Looking forward, WEIR represents a compelling value creation opportunity as a mining technology leader. We remain committed to delivering our longer-term guidance to outgrow our markets, expand margins, and cleanly convert earnings into cash while remaining resilient and committed to doing the right thing for our people and the planet. Our capital markets event on December the 3rd will further illustrate how we intend to deliver these excellent outcomes for our stakeholders. The event will cover our full business, but with a particular spotlight on how our software strategy enhances our customer proposition and value creation opportunities. An extended event landing page with details on agenda and logistics is now live via our investor relations website. And if you have any questions about the event, please reach out to the IR team for more information. So in conclusion and summarizing the key takeaways from today's call, our markets are positive, and we are well positioned as our customers look to address their critical operational and sustainability challenges. We're executing well against our strategic initiatives, remaining on track to deliver £80 million of cumulative performance excellence savings in 2026 and realizing value from our recent M&A activities. We remain on track to deliver our full year 2025 guidance, including growth in constant currency revenue and operating profit, alongside our targets for operating margins and free operating cash conversion. And finally, over the longer term, WEA offers a compelling value creation opportunity. We operate in highly attractive markets. We have a clear strategy to grow ahead of our peers and at sustainably high margins, and we are delivering on that ambition. Thank you very much for listening, and Brian and I will now be pleased to take any questions you may have. So if we can hand back to you, please operate.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. To remove your question, press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. Our first question comes from Jonathan Hearn from Barclays. Please go ahead.