By Scott Wright

WEIR Group has revealed it will take a profits hit of up to £20 million after announcing it will wind down its operation in Russia this year, amid the country’s continuing assault on Ukraine.

The Glasgow-based engineering company declared that it is “deeply saddened by the humanitarian crisis that continues to unfold in Ukraine” as it emphasised its priority remains the welfare of its employees in the country and in Russia.

Weir had suspended operations in both countries shortly after the invasion began on February 24, with chief executive Jon Stanton telling The Herald at the time that it had taken action to move its 30 employees in Ukraine to safety following the outbreak of hostilities.

It said then that the invasion had brought “significant uncertainty” to the future of its operations in both countries.

Weir, which employs 267 people at its sales and service division in Russia, said the move to exit the country would result in an “exceptional write-off” in its results for this year.

The company, which employs about 11,000 people around the world, had been engaged in supporting the iron ore mining industries in Ukraine and Russia, as well as in copper, gold and diamond mining in Siberia.

Shares in Weir initially dropped more than 5% yesterday morning, before staging a partial recovery, closing the day down 3.8% at 1,549.68p.

Weir told the stock market that it “strongly” condemns the Russian invasion.

“Our priority remains the welfare of our Ukraine-based colleagues and their families and we are keeping in close contact, supporting them in whatever ways we can,” the company said.

“More widely, we are deeply saddened by the humanitarian crisis that continues to unfold and have pledged financial support to organisations working at the front line to help the people of Ukraine. Our thoughts are with all those whose lives are being affected by these events and join with others in hoping for a swift and peaceful end to the hostilities.”

The company added: “In March the group announced the full suspension of business and operations in Russia. Given the evolution of the situation in Ukraine and Russia, the group has since taken the decision to wind down its Russian business during 2022. The loss of sales in 2022 is expected to have an impact on Group underlying operating profit of up to £20m in the year.

“The group’s assets in Russia comprise primarily of inventory and receivables and represent c.2% of the group’s net assets. While a review of the recoverability remains ongoing, this could result in an exceptional write-off during 2022.”

Weir’s decision to wind down its operation in Russia was announced alongside an otherwise encouraging trading update from the company for the first quarter of the year.

The company said “highly favourable” conditions in global mining markets, supported by high commodity prices, had driven increased demand for aftermarket and de-bottlenecking solutions. Group orders in the first quarter increased by 15%, driven by a 28% rise in aftermarket orders. However, orders for original equipment were down 17% versus the same period last year, when Weir booked a £34m order from Ferrexo.

Weir noted that activity and demand were positive across most regions, highlighting particular strength in North America as miners upgraded assets, and in South America amid an increase in small and medium-sized brownfield activity.

The period saw the temporary closure of the company’s foundry in Xuzhou, China, following a mandatory Covid-related shutdown. The facility has now reopened.

Mulling the outlook, the company said it expects to deliver “strong” constant currency revenue and profit growth this year, subject to ongoing geopolitical uncertainty.

Mr Stanton said: “The group has had an excellent start to the year, generating record orders and executing strongly in a complex global environment. Conditions in mining markets are highly favourable as high commodity prices ensure miners remain incentivised to maximise ore production, which is driving demand for recurring aftermarket and de-bottlenecking solutions. We continue to successfully manage the disruption in global supply chains from Covid-19 and the impact of inflation.”

Weir held its annual meeting in Glasgow yesterday, at which all resolutions were passed.