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Weir Group, the industrial valve and pumpmaker, suffered another tumble in revenues last year as it struggled against the fallout of low crude prices, but said it expected sales to increase in 2017.
The Scotland-based engineering group, which provides heavy-duty equipment to the hydrocarbon and mining industries, posted an 11 per cent fall in revenue to £1.85bn on a constant currency basis.
Although it swung into a pre-tax profit of £43m in 2016 following lower one-off charges compared to the year before, the underlying figure fell by almost one-third to £170m after adjusting for currency fluctuations.
Weir thrived on the back of the boom in global energy and mining production, but it was hit by the commodities slump as cash-strapped customers slashed investments.
The downturn has been most severely felt at its oil and gas division, which is focused on supplying the North American shale extraction industry.
However, the FTSE 250 group said the unit broke even in the last three months of last year and would make a “modest return to profitability” in 2017, as the entire group booked a 10 per cent order increase in the quarter.
Jon Stanton, chief executive, gave a positive assessment of Weir’s prospects:
In recent months I have been encouraged by macro commodity trends and the signs in our mining and oil and gas markets that point to a cyclical upturn.
Our new strategic priorities will strengthen our capabilities and enable us to fully capture opportunities presented by improving markets, although there is a range of views about the precise shape of the recovery in 2017. At a Group level, we expect to deliver strong cash generation and good growth in constant currency revenues.
Profit growth will be further supported by foreign currency translation benefits, partly offset by incremental investments in people and technology.
In the teeth of the oil price rout Weir’s management was forced into harsh cost-cutting, including a workforce reduction of more than 10 per cent and plant closures.
Among its clients are oilfield services companies, including some US groups that recently have offered more optimistic outlooks.
Halliburton last month said that while the international energy market would not meet an “inflection” point until the middle of this year, the oil and gas industry in North America had “rounded the corner” and gone into an upswing, while Baker Hughes said it expected an increase in onshore revenues in the region.
Investors will be listening out for any clues as to the shape of Weir’s strategy under Mr Stanton, who took over the reins in October having served six years as group finance director.
Shares in Weir have gained 7 per cent so far in 2017, valuing the company at £4.4bn.