IT wasn’t too long ago that the outlook for Weir Group appeared bleak. As the plunge in oil crude prices took hold in late 2014, the downturn in US shale gas activity forced it to dramatically cut costs, resulting in 2,000 jobs being culled from its workforce.
Now life is a lot rosier for chief executive Jon Stanton and co. Not only has shale activity rebounded across the Atlantic on the oil price revival, momentum is with Weir on its dominant minerals division, helped by firmer prices for global commodities and an uptick in mining activity.
As if to cement the recovery, Weir has announced a couple of moves which position it well for future growth. The $1.3 billion acquisition of ESCO strengthens its hand in its dominant minerals division with judicious timing, with both the US firm and Weir poised to take advantage of the cyclical upturn in the sector. ESCO is forecast to grow profits and revenue this year while the Glasgow firm saw a big rise in orders in the first quarter.
At the same time, Weir’s planned exit from its flow control business looks well timed, too.
The division, which supports the global energy sector, had a challenging year in 2017 and, on the basis of first quarter trading, is continuing to find growth harder to come by than other parts of the group.
That Weir will now be focusing its energies behind its two biggest markets, minerals and oil and gas, certainly looks to have won the approval of investors, who sent shares surging by more than six per cent yesterday. It underlined the sustained recovery in the stock since a five-year low in February 2016, when the crude price plunge took its toll.
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