Weir (was) a resource-related riser
Ken Odeluga February 24, 2016 3:41 PM
<p> The Scottish engineering mid-cap with significant mining and crude oil production exposure shone a rare light in the gloom on Wednesday, even though its profit […]</p>
The Scottish engineering mid-cap with significant mining and crude oil production exposure shone a rare light in the gloom on Wednesday, even though its profit fell 50% last year.
It said a reorganisation of US, Australia and Europe manufacturing operations and roll-out of more efficient energy and mining gear, boosted power and industrial profits.
Stable aftermarket flow helped, but was no offset for group pre-tax profit crashing 46% to £220m and sales sliding 21% to £1.92bn.
Weir clipped net debt by 4% to £825m, but its leverage was still pretty much the highest among comparable peers.
Return on Capital, operating margin, order input, and operating cash were all more fairly described as dwindling than steady; ahead of what will be “another challenging year”, to quote CEO Keith Cochrane.
Essentially then, it appears Weir wants investors to look through the oil/resources slump and focus on potential growth from attractive new Oil & Gas and Mining gear.
Holding the full-year pay-out at 44p—for a reassuring yield of 4.8%—was some encouragement.
Firmer H2 operating performance in Minerals (but not Oil & Gas) was more.
There isn’t much margin for error though.
Power & Industrials might even be just a sideshow, given the division contributes just 13% of total revenues.
Hollow prospects help explain why the stock’s 8% early rise was nixed by mid-morning.
Technically, the break-out style spike after an indecisive bear flag has been followed by a fearsome inverse hammer, having failed at the channel top.
The 21-day exponential moving average might provide a cushion.
But if sharply declining stochastic momentum is accurate, sellers are in control, ultimately steering the price back to lows.
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