Engineering news
Global engineering company Weir Group said it expects a stronger second half of the year after posting a large fall in profit for the six months ended 3 July 2015, as the downturn in the oil and gas market continued to take its toll.
The Glasgow-based company posted a 40% fall in pre-tax profit to £108 million for the six month period. Meanwhile, its first-half revenue declined by 13% to £1 billion.
The group said it has responded to market conditions and enhanced its cost competitiveness by “leveraging its best-cost manufacturing facilities and consolidating smaller manufacturing sites into larger, more efficient centres”. Three facilities have been closed in the first half of 2015 with an additional three expected to close in the second half.
Six Oil & Gas service centres have also been closed with additional cost reduction measures including furloughs at the division's Fort Worth, Texas, manufacturing facility for one week in May and another in July.
The company has also restructured its Power & Industrial division, while its Minerals business unit also benefited from cost reduction measures.
In total, across the group, actions have been taken to deliver annualised savings of £85 million by the year-end.
Keith Cochrane, chief executive, said: "This is the most severe downturn in oil and gas markets for nearly 30 years, and as a result North American upstream activity has reduced substantially. As we indicated through the first half, this has had a significant impact on the Group's interim financial performance. During this period, we have remained focused on responding to these conditions, executing effectively and generating cash. Reflecting our ongoing confidence in the long term structural growth prospects of our markets, we continue to invest in our strategy and extend our global leadership positions.
“Looking ahead, oil and gas will continue to be tough, with industry expectations of a modest improvement at best in North American activity levels towards the end of the year. However, with the normal seasonal bias of the Minerals and Power & Industrial divisions, increased restructuring benefits, further cost savings and a good contribution from recent acquisitions, we expect a meaningful sequential improvement in our financial performance in the second half of 2015, alongside continued strong cash generation."
The company said it had increased research and development (R&D) expenditure of £14 million in the first half of 2015 compared to £10 million in the same period of 2014 with a particular focus on new technologies.