LONDON (ShareCast) - (Sharecast News) - Weir Group is to offload its battling oil and gas business after an impairment charge pushed the mining and energy equipment specialist into the red.
Group revenues from continuing operations rose 9% to ?2.66bn in the year to 31 December, or by 7% on a constant currency basis. Operating profits nudged ahead 1% to ?352m, slightly ahead of forecasts.

But the reported loss came in at ?372m, compared to a profit of ?86m a year earlier, after the oil and gas business took a ?546m impairment charge. Net debt was ?972m.

"North American oil and gas market conditions deteriorated significantly through the year, and we undertook a major cost reduction programme in response," said chief executive Jon Stanton.

"While the long-term prospects for shale remain positive, current market dynamics mean it now has a very different investment case to our premium mining technology positions. We are therefore taking actions so that we can maximise value for shareholders whenever the right opportunity is identified."

Stanton called the current market backdrop "challenging", and said Weir would continue to manage the business "with a long-term perspective" as a consequence.

But he reiterated that Weir was laying the groundwork "so that whenever we identify a clear solution to drive value for our shareholders, we will be ready and able to capitalise."

Overall, Weir said that 2019 had been a year of "significant progress", with revenues in the minerals business rising to ?1.48bn from ?1.42bn. Operating profits improved to ?270m from ?250m.

Surface mining tools specialist ESCO - which Weir acquired in 2018 - saw revenues surge to ?572m from ?252m. But they fell in oil and gas to ?612m from ?781m.

Looking ahead, Stanton said: "There is uncertainty about the impact of coronavirus on the global economy and demand for natural resources. Assuming underlying demand does not change, we expect further good constant currency growth in our mining-focused businesses to be offset by the continued challenges in North American oil and gas markets."

Harry Philips, analyst at Peel Hunt, said: "The company is set on becoming a pure mining play, recognising that this part of the portfolio has a very different investment case to oil and gas. In this context, the company is taking a ?546m impairment charge on oil and gas. We entirely agree with the proposed exit, but the debate is going to focus on how to realise value in a very difficult end market."

Shares in Weir jumped following the results, and were trading nearly 7% higher by 1030 GMT at 1,334p.

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