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.

Hey guys, good morning. Just three questions from me, if I may. Firstly, I just wanted you to sort of talk through the outlook that you're seeing for OE. I mean, if we look at that base order growth of 15%, it's pretty good, but do you think it can accelerate here? Do you think we need to get more exposure to gold? And also just in terms of large orders above 25 million, are there any sort of possibilities in the pipeline there? The second question was just on Mark Mine. And we break that down to 31% of the business is exposed to gold. Can you just sort of talk about the activity levels you're seeing coming in to market mind? And I think if we look at the historic growth rate for that business, it's been around about 25%. But because of this gold exposure, do you think going forward that growth rate can be exceeded? And then the third and final one was just on ESCO, just in terms of that APAC expansion. So strategically, it's pretty important. I think in some of those markets, you don't have good market share, maybe possibly in buckets. But what sort of strategy are you putting there and why is that starting to really come through now? I'll leave it there. There are three questions. Thank you.

Yeah, hi, Jonathan. Thanks very much for the questions. Good morning. Yeah, so I'll take you through those. So, I mean, starting with the outlook for OE, yeah, I mean, I think we're really pleased with our underlying 15% growth quarter on quarter. As I said on the call, it really demonstrates the very high levels of activity that we're seeing across existing mine sites, brownfield, deep bottlenecking, sustainability solutions, and with particular strength in gold, as you would imagine. So, with where commodity prices are at the moment for our main exposures, and if you think about it, you know, and gold and iron ore are circa 50% of our revenue, we're certainly seeing, you know, pretty strong and enduring demand drivers, you know, in that space. And even in commodities that have been, you know, somewhat under pressure, and I think nickel being a great example of that, you know, we have lost some work because of the closure and the mothballing of some of the high-cost nickel mines in Australia. But we've won just as much, if not more, in the expansion projects coming through in Indonesia, which I think demonstrates that sort of resilient and truly, truly global footprint that we have. So, you know, sometimes in some commodities, you get some puts and takes. But nickel, which I think is probably being tough for several of our peers, you know, we're pretty net neutral given the, you know, the wins that we've had, particularly in Indonesia. So, I think the underlying brownfield activity we feel really good about, pipeline is remaining very strong. And then, you know, the larger orders, you know, Len got my crystal ball with me at this point in time, but I do think the outlook, it's difficult to predict exactly when things will come through, but I think the outlook continues to mature, you know, in a positive manner. I think the intent is there across our customers in willing to deploy capital in the future facing and growth commodities. I think that's been bolstered by the sort of defense and national security issues coming out of the geopolitical situation at the moment. And I think as I talked a bit about on the first half call, the political intent that we're starting to see around the world, be that in the U.S., South America, You know, increasingly there is a real government focus on how we accelerate some of these mining projects. So I think, you know, difficult to predict when they will come through, but I think the outlook is maturing in a positive way. Turning to micromine, yeah, I mean, really, really pleased with the first period of ownership here with, you know, the orders and sales coming through, bang in line with where we expect it to be. Literally, we've just launched a half-year product upgrade. We have a momentum event each year when all of the upgrades come through in each of the software products, and that's landed incredibly well with our customers. So the pull for the software that we have, the breadth that we can bring at an enterprise level, we're really, really encouraged by. At the time of the acquisition, we said the business has grown at 25% historically. We think we can grow it by more than that. given the global distribution platform that we have, the fantastic site-level relationships we have with our large customers, but increasingly the enterprise-level relationships. We've already got a couple of really good examples of where those more senior enterprise-level relationships that we've had traditionally with Esco and Minerals have really unlocked the door for Micromind. So we'll give some quite exciting examples of that. There's a little taster for you for the Capital Markets event in early December. And then, Onesco, your final question. Yeah, I mean, really, really pleased with the progress that we've made in the Asia-Pacific region. It's probably a region where our market shares, you know, just in core GET, we have ambition to take higher, and the team is doing a great job of that. One of the key things that was a key part of the strategy there is that Australia is probably one of the more fragmented markets on capital buckets. where we see a big opportunity. And it can be a bit more lumpy, given the more expensive nature of those products relative to GT. But the team's built a great pipeline, and that pipeline really came through very strongly in the third quarter. So it's just a market where ESCO's got some great momentum at the moment. And in the round, it's probably one of the markets where the growth profile The market growth profile is generally a bit flatter than, say, the Americas. So to be winning share there is really great news. Teams are doing a fantastic job, and we expect that to continue. Brilliant. Thank you very much.

Thank you. Our next question comes from Lashantan Mahendraja from JP Morgan. Give me answer question.

morning morning guys um i've got two questions if that's okay um the first is just done um let's go um aftermarket organically up nine i think you mentioned sort of motion metrics being a big contributor there can you sort of sort of tell us or give us a bit more color and so exactly what you're what you're seeing there will be some of the micro-minds going to do perhaps coming through just exactly what sort of driving that sort of pickup in growth. And then the second question is just on Q4 deliveries. Obviously a bit of a ramp up in Q4, lots of moving parts of sort of Rico D, Mike and I, Towley, et cetera. But could you just help us bridge that Q4 a little bit as well, please? Thank you.

Yeah, sure. Thanks, Lush. Good morning. So, yeah, on ESCO, I think where we are with integrating motion metrics into Micromine is that we're still in the planning phase for that at the moment. So we're working through that right now. And that's expected to go live, you know, in terms of full integration in Q1 of next year. You know, it's a relatively complex situation to put those two businesses together. But we're very, very excited by what that will deliver. So the great progress that Motion Metrics has actually made, particularly in this quarter, but has been making through 2025, is really nothing yet to do with micromine. So if you like, that benefit is still to come. So this is really the maturation of the building of their pipeline, We had some great wins across particularly shovel metrics and truck metrics as well, a big sort of more enterprise-wide win in Central Asia there. So, again, that team has been doing a fantastic job. I think, you know, when I look back over the first two or three years of that acquisition, then, you know, the growth rate there for different reasons, maybe not quite as strong as I wanted, but it's now really starting to come through very strongly. We're seeing that you've seen great performance coming out of motion metric this year And as we bring motion metrics into that micro mine model You know, I was sort of characterizing a characterizing the past, you know In my command is really a scale up and when we acquire motion metrics is more of a startup So different challenges, so I think plugging motion metrics next year is into that scale-up strategy and the capability that Micromine has to, you know, commercially to drive more success. I think it's just going to turbocharge the business. So we're really pleased with what Motion Metrics has done this year and very, very excited for next year as it comes into the Micromine portfolio. And then, yeah, from a Q4 delivery point of view, look, I mean, I feel really good about where we are, looking at what we needed to do in the fourth quarter. It's a big fourth quarter. We pulled that out in the press release. We've been very transparent about that. But if I break it down from an OE point of view, everything we need to deliver in Q4 is in the order book. So it's really just about execution. And as you can imagine, a lot of planning from a supply chain and manufacturing perspective has gone into how we deliver that. So we've got a fantastic plan to be able to deliver that. And some of that is the big projects, particularly Ricodeek. the HPGRs, which are going out in the fourth quarter, a bunch of geho pumps on large projects as well going out. So I think from an OE point of view, really just about delivery, I mean, we've got a great plan in place to be able to do that. Aftermarket, you know, we want to see the run rates continue in the fourth quarter, but I feel really good about that. And if I sort of contrast, maybe just to give you a bit of color on Q3, What we saw was, you know, an OK for average July in terms of spares, aftermarket run rates. August was quite soft, which I think was a bit of a mix of, you know, holidays in the Northern Hemisphere. Plus, I think it was peak uncertainty with tariffs and all of that shenanigans going on. But September bounced back really, really strongly in terms of the aftermarket run rate. So net-net, you know, that meant that aftermarket was okay for Q3 in terms of the orders we saw, but the exit rate was really strong. And every indication we're seeing at the moment is that that will continue. So I think we feel really good about, you know, Q4 execution. You know, we had a similar, you know, Q4 last year, but, you know, all the building blocks are in place to be able to deliver it.

So thank you very much. Thanks, Lush.

Thank you. Our next question comes from Edward Hussey from UBS. You may ask a question.

Hi, guys. Thanks for taking my questions. I mean, maybe just taking that aftermarket comment. I mean, you talked in H1 about mid-single-digit growth in H2. I'm just wondering, does this still apply given you delivered 5% in Q3, but have that order phasing impact in Q4?

Yeah, yes, it does. So, no, the outlook is the Q3 was net of quite a soft August in terms of aftermarket run rates for various reasons. But, you know, as I said, September's really, really strong. We're seeing that in October. That's what we expect to – see through the balance of the year. And, you know, we can see that in the pipeline that's coming. So we feel good about being able to deliver that.

Okay, thanks. And then just on these copper projects, we talked about disruptions and mine closures. I mean, I'm assuming this is in the minerals aftermarket side where this is the biggest impact. Do you have any sort of quantification in terms of how large this impact is?

No, I mean, we're just calling it out because it's probably, you know, in the round, it's probably a percentage or two on aftermarket for the division in Q3. I don't know the exact number, but it'll be that order of magnitude. So not massive, but enough just to sort of slightly tinge the orders. And it's, you know, obviously, you know, you've seen some of the copper mine disruptions, Grasberg, Gibraltar Blanca, some others in Latin America. And then in Africa, diamonds and PGMs week, and in Europe, mineral sands, which is, you know, that's a bigger part of business in Europe. And we're driven by, despite everything China's been saying about export control, they've actually been dumping certain commodities into Europe, which has now stopped. So it's a temporary effect. But we saw a bit of that coming through in the order trends in Q3. So, you know, they will fade away. But we're just calling it out to be transparent in terms of the things that we're seeing across the world at the moment.

Okay, that's really helpful, thanks. And then maybe just a final question. I know it's an all this cool rather than a, but just wanted to talk about the sort of profit bridge for four years. So first of all, I mean, guidance for 10 million in performance accidents. I mean, it sounded like on the last call that this was, you know, there's no real risk to the downside on this 10 million. If anything, there's risk to the upside. Is that still what you're seeing in terms of delivery of performance accidents?

Brian, do you want to come in and offer your opportunity? Yeah, can you hear me okay? Okay, Brian, come on in.

Yeah, in terms of performance excellence, it's actually over $20 million we're going to deliver for the year. So we are on track. We're continuing to drive everything we said we would be doing in performance excellence, There's no change in guidance for this year. There's no change in guidance for the $80 million we expect to deliver in 2026. And like I said, we're seeing some real progress in this area, and we'll continue to do so, which is helping the margins get to that circa 20% we were guiding towards for the end of this year. So, yeah, I think for H2, you're saying $10 million. It's not just as radical like that. But, yeah, we will deliver at least the $20 million, and we will exceed that $10 million. I think what you're referring to is the second-half performance. So, you know, things are going as planned.

Okay, thanks. And then sorry for holding the mic, but final question just on – on the mix impact for full year. I mean, again, you talked about NH1 having a neutral impact for full year. Is this still the case in terms of the OEAM mix, or is there, or should we maybe think about, you know, a shift in one direction or the other?

You want me to take that, John? Yeah, no, we will. So, yeah, what...

Yeah, with the mix, you know, we had a strong aftermarket performance in H1 with OE. But as John previously mentioned, we've got in the order book a lot of large orders from the Rico Deke and other projects we announced last year going out. So that mix will – come back more into the norm. So we are seeing that mix having a negative headwind in the second half of the year. But as John also said, we're having strong aftermarket performance. So we expect to get back more to what we've seen maybe in the year or year before in terms of overall split for the year. Okay, brilliant. That's very helpful. Thank you.

Thank you. Our next question comes from Christian Henderaker from Goldman Sachs. He may ask a question.

Morning, John. Morning, Brian. Thanks for the time. I want to just start with a basic question, just a reminder of any inherent seasonality in each of the two businesses, particularly in terms of orders. I know Q4 is obviously key for outbound shipments, but just a reminder there would be helpful.

Hi, Christian. Good morning. I think nothing really to call out. I mean, you know, as I said to a degree in my earlier comments, you know, original equipment can bounce around a little bit depending on the order profile of larger orders. But, you know, the delivery is all about shipments of what's in the order book. So I feel good about that. And then, you know, minerals aftermarket can tend to be, you know, slightly positive order mix first half and then more weighted to revenue mix in the second half. So I think you'll probably sort of see that coming through, as Brian just described, but nothing really else to call out, you know, as we sit here today. So we're not seeing anything that could surprise us in any way.

Thanks, John. You mentioned also in the release that you fully mitigated the trade tariffs so far. I appreciate it's a fluid scenario. Can you just talk a little bit about that in terms of is that price? Obviously, maybe not everybody's had that level of success, so any color there would be helpful.

Yeah, so big picture, it's been a combination of both price increases where we had no other alternative, but in most cases trying to support our customers by moving production around our global footprint from a manufacturing and supply chain point of view so that we could limit the effect of tariffs on imports, particularly into the U.S. and those countries that... you know, are also playing that game. So I think, you know, the business did a great job of mitigating what we could mitigate without price. There's, you know, frankly, a bigger issue for ESCO than minerals, given the scale of production for ESCO that we have in China. But, you know, the team did a great job of mitigating through supply chain and there. And then when we were in the unfortunate position that we had to some residual price increases onto customers. We've done that, and we've done that in a way that's in the round protected our overall gross margins. So we feel we're good about that. And then obviously we're waiting to see what might happen with the latest discussions, call it that, between the U.S. and China, which were looking, you know, a month ago as if it could be challenging, but that now seems to have moderated following the Trump-Xi meeting. Last week, we'll see, you know, we still have to see the final detail, but hopefully that will land in line with the noises that were coming out of that meeting, which should mean that from here, hopefully, we're in a more stable environment. So, as I say, we've fully mitigated, you know, and it has not just been, you know, tariffs, it's also been supply chain disruption a little bit through the third quarter, just with all of the uncertainty that was, you know, being created in the second week. derivative of those tariff discussions and the ongoing sort of geopolitical uncertainty. But I think, you know, I hope we see the end of that as well as we move into the fourth quarter.

Thank you.

Thank you. Our last question comes from Tor Fungman from Bank of America. He may ask a question.

Thank you for taking my question. Good morning, John. Good morning, Brian. Yeah, just one more to ask. Just to follow up here on the activity in the aftermarket. Understood that the activity has accelerated into September and also now into October. Just from your view, very top down, there is an expectation in the market for aftermarket to be able to grow mid to high single digit across mining equipment peers. What would need to happen from your perspective viewpoint for this to actually happen for the next, let's say, one, two, three years? Do we need a recovery in nickel or in PGMs, basically, or is there something else that needs to happen? Thank you.

Yeah, hi, great question. So, yeah, look, I think we look back at the history of minerals over 15 years, and we look at the history of ESCO, since that's been in the weir portfolio, and we've delivered 7% CAGR on aftermarket through the cycle. So that is broadly where we would expect to be over a period of time. For next year, we haven't given guidance yet, but we'll obviously do that when we give our guidance in February, beginning of March, following the full year results for 2025. and that's where we'd be more specific about the growth rates that we expect to see in 2026. But certainly we would expect it to be in that mid to high single-digit range, exactly where it will be in that range. We'll see as we pull our budgets together over the course of the next few weeks and be in a position to provide that guidance. But structurally, I don't see anything. When you look through the cycle, it means we shouldn't be able to deliver that kind of growth rate In fact, we definitely should, and it's down to us to be able to do that. I think when you look at where we are today, the combination of our technology, the customer intimacy we have, the increased customer relevance that we now have because of our digital and software solutions, which is having a real impact in the market and helping to open doors in different ways as well, I think is all for the good. And I think when you look at the the broader political environment in terms of support for increased mining and commodity production, particularly for copper and the future-facing metals, where gold is today. I don't think anybody's really seen gold come back significantly from where it is, which is going to be positive for that part of the world. So you're always going to get a bit of warp and weft across commodities. But, again, it just comes back to the nature of the WEIR business, our fantastic global footprint. We're in every mining corner of the world, wherever you want to be. WEIR is there. So we're diversified. We're resilient. And we've got those fantastic competitive advantages and attributes to our product portfolio, which, as you know, should set us up for enduring success. So, yeah, I feel good about that. Thanks for the question. It's a good one to end on.

Thank you, John.

Cheers, thank you.

Thank you. There are no questions waiting at this time, so I'll turn the conference back over to John Stanton for any further remarks.

Thanks, operator. Just to say thanks again for your participation this morning. We appreciate that. And for the questions, if there are any follow-ups, obviously the IR team will be available through the day to be able to help you. And we are seriously looking forward to seeing as many of you as possible at our forthcoming Capital Markets event and demonstrating exactly the exciting future that we have for WEA as a hardware and software provider to the mining sector. Thanks again. Take care.

That concludes our PLC Quarter 3 IMS Quarterly Update. Thank you for your participation. You may now disconnect.