By Scott Wright

SHARES in Weir Group soared five per cent after the engineering giant upped its profit guidance on the back of a strong first half performance, driven by growing orders from miners in key markets across the world.

The Glasgow-based company declared operating profit for the full-year would now be at the upper end of analysts’ forecasts, and further cheered investors with plans to deliver £30 million in annualised savings by 2025.

Weir, now focused exclusively on supplying parts and solutions to the mining industry, made a pre-tax profit of £126 million for the first half, up 26 per cent. That came as it grew revenue grew by 22% to £1.09 billion, helped by record after-market orders and growth in original equipment sales, as miners looked to capitalise on strong commodity prices in Weir’s main copper, gold and iron ore markets.

The prices being fetched for commodities mean there continue to be strong incentives for miners to step up operations, which in turn boosts Weir as miners run their equipment harder. Weir said there has been some “recent softening” on prices, but noted they remain “all above incentive levels.”

Chief executive Jon Stanton told The Herald: “I’m really delighted with the performance in the first half. The world is not straightforward at the moment, but we are seeing really high activity levels across all of the regions that we operate in, across all of the customers and commodities we serve, so it’s a universally positive environment for us at the moment. That played through into a 23% increase in after-market orders year-on-year, which is phenomenal for a business that normally grows a mid to single digit.”

Weir acknowledged the cost pressures being brought by global inflationary trends, which Mr Stanton noted is being felt when the company buys raw materials for its foundries, such as iron and steel, and in its energy and wage bills. But he said the company had been able to push through price increases to customers to ensure margins are maintained.

He said: “If you look at our brands, we are the market leader. We tend to lead our peer group on pricing, and our competitors follow, so we have done that. At the end of the day our customers are producing commodities, so they understand the input costs that we are seeing. As a result of that, we have been able to have some pretty sensible conversations.”

Noting that Weir had also managed to deal with complexities arising from Covid disruptions, including recent lockdowns in China, and bottlenecks in global supply chains, Mr Stanton added: “I really feel that momentum has built operationally as we have gone through the second quarter. That is reflected in the results and it means we go into the second half of the year with some really nice momentum, a full order book and markets which for now look really strong.”

Weir has upgraded its forecasts for the full year following its first-half showing, with earnings now expected at the upper end of analysts’ forecasts. A company compiled consensus published in June expected Weir to post operating profit in the region of £320m to £386m.

Mr Stanton said: “We go into the second half of the year with a really good order book, so a lot of it now is really around execution, delivering on that order book. We had real operational momentum through May and June. That will continue through the third quarter. Our performance in the first half was slightly ahead of consensus expectations [and] we expect that to flow through into the second half of the year.”

On new plans to achieve annual savings of £30m by 2025, Mr Stanton said the strategy is partly about ensuring Weir is “trim and lean” as it faces “whatever is around the corner” in the context of continuing global instability.

Separately, Mr Stanton expressed frustration, in a personal capacity, that greater focus was not being placed on driving production volumes globally of commodities such as copper, nickel and lithium, which are needed for people to make the transition to electric cars and heat pumps as part of the drive to net zero.

Mr Stanton, who regularly highlights the role Weir plays in developing engineering solutions that reduce water and energy usage, said. “We are a long way short of the copper and nickel and lithium that we are going to need to have to do that, and I don’t think anyone is facing into that at the moment.

“We need to see more supply coming online, we need to see more rapid expansions from a production point of view to meet the demand, [but] it is not coming through quickly enough at the moment.”

He added: “If you put it into the context of energy security, I think there will be a metal security issue evolving if we don’t tackle it.”

Shares closed up 74.81p at 1,562.31p.