Weir reveals US job cuts as it warns over oil and gas profits
The group has axed around 450 US jobs under plans to slash annual costs by £30 million amid tough trading in America.
Engineer Weir has warned over profits in its oil and gas division and revealed a fifth of its US workforce has been axed as it battles against tough trading in America.
The Glasgow-based group said it had cut around 450 US jobs under plans to slash annual costs by £30 million across the oil and gas division.
It suffered a 32% plunge in gas and oil orders year-on-year in the third quarter after US customers cut back operations and ordered less machinery.
The story for Weir continues to be about lessening its reliance on a volatile oil and gas market Alasdair Ronald, Brewin Dolphin
This left the division only “moderately profitable” in the three months to September 30 and Weir said the fourth quarter would be “sequentially lower”.
It cautioned that full-year profits in the arm will now be below previous expectations.
The alert comes after it had previously guided to the bottom of its original £55 million to £95 million range for oil and gas profits in 2019.
But overall orders in the third quarter rose 4% and were flat year-on-year as its recent record £100 million Australian mining contract helped offset the oil and gas woes.
Orders in its minerals division lifted 17% in the quarter and orders for equipment jumped 72% thanks largely to the Iron Bridge Magnetite Project.
With this mammoth contract stripped out, minerals equipment orders were around £20 million or 22% lower as it said some projects were held back due to worries over the outlook for the global economy.
Jon Stanton, chief executive of Weir, said: “In North American oil and gas markets, demand was impacted by an intensified focus on cash preservation in the quarter.
“In response, we have undertaken a circa £30 million cost reduction programme in this division to support competitiveness in the short term.”
The group kept its outlook unchanged for the minerals and for the ESCO mining business, which was bought in July last year.
Alasdair Ronald, of wealth management firm Brewin Dolphin, said: “Weir Group has continued to face numerous challenges in its oil and gas division, with overall activity levels well down on the comparable period in 2018.
“This business is primarily based in North America where there have been significant cuts to capital spending.”
But he added Weir stands to benefit from better growth opportunities in its minerals and ESCO business.
“The story for Weir continues to be about lessening its reliance on a volatile oil and gas market,” he said.