By Scott Wright

WEIR Group will cut its global headcount by more than 800 this year as it responds to the plunge in oil prices and weaker demand in certain markets arising from the coronavirus pandemic.

The cuts come as the Glasgow engineering giant takes further steps to preserve cash amid the crisis, which it expects to have a greater impact on business in the second quarter. While Weir warned the future impact of Covid-19 is still uncertain, investors responded favourably to the update, sending shares up 4.5 per cent.

Weir reported a 13 per cent drop in orders for the first quarter, dragged lower as conditions continued to be weak in oil and gas.

However, it hailed the resilience of its dominant minerals business, which supplies tools and solutions to the mining industry. The division, which generates around 80% of Weir revenues, has seen only a limited impact from Covid-19 so far, with the majority of mines continuing to operate. Weir reported a 1% fall in minerals orders in the first quarter against a tough comparison with last year, when orders rose by 9%.

READ MORE: Weir swings axe again in the US as oil price plunge and virus bite

Chief executive Jon Stanton said the firm will reduce its oil and gas workforce by a further 350 as it targets an extra £12 million of cost savings from the division, which reported a 34% fall in orders in the first quarter amid the steep fall in activity in the US shale sector. That comes after it slashed 600 jobs across its oil and gas division last year.

Commenting on the oil and gas sector, Mr Stanton told The Herald: “It was not a great market coming into this year, [it was] very subdued. Then of course [in] the last few weeks the effect of Covid-19 on demand with the OPEC+ price war has been quite unhelpful.

“The market in North America is very, very quiet, customers are really pulling back on their spend, so we are feeling that and, as ever, having to respond in terms of further restructuring and headcount reductions, unfortunately, to try and keep the business protected and balanced relative to where the market is. But it is going to be a very weak few months.”

Weir’s ongoing challenges in the US come as the company continues to work on exiting its oil and gas business, which it announced earlier this year. Asked if the Covid-19 pandemic had put the exit plans on hold, or led to a rethink, Mr Stanton replied: “The strategy has definitely not changed. We are very clear that our long-term objective is to become a mining technology pure-play. That is where we are strongest.”

READ MORE: Scott Wright: Covid crisis will deny shareholders chance to put bosses on the spot

He added that the company is continuing to engage prospective buyers. “While it may be difficult to transact at the moment, [we have to] make sure that whenever a good window to do so emerges, we are ready to take advantage,” he said.

Weir, which has a global workforce of around 15,000 in 50 countries, will also trim roles in its mining and ESCO divisions this year in response to weaker economic activity stemming from Covid-19. The cuts will reflect reduced demand for tools supplied by ESCO amid forecasts of weaker construction and infrastructure activity in Europe and North America, and from iron ore miners in the US, which supply steel to the automotive sector.Weaker demand is also anticipated in South Africa, where strict Covid-19 measures are in place.

Mr Stanton said: “The other headcount reduction restructuring that we have down outside oil and gas has really been on a regional basis, in those markets where demand has been a bit softer. Many of our core markets are remaining very resilient, and we continue to see strong demand in Australia, Chile and Brazil.”

As part of moves to preserve £140 million of cash in the first half, Weir has cut its final dividend for 2019, and suspended its bonus schemes for 2020. Inflationary board and group executive pay increases have been withdrawn. Weir’s annual meeting took place with the minimum quorum required at its head office in Glasgow yesterday. The resolutions all passed, though there was a minor revolt on executive pay, with 12.07% of voted shares going against approval of the directors’ remuneration report.

Shares closed up 39p at 907.6p.