Weir Group Plc dropped the most in 21 months after the U.K.’s biggest supplier of pressure pumps reduced its 2013 sales forecast, citing mining industry delays and a slower-than-anticipated recovery in its energy business.
The shares fell as much as 8.5 percent, the biggest intraday decline since January 2012, and were down 7.5 percent at 2,086 pence at 10:30 a.m. in London, the lowest price in three months. The Glasgow, Scotland-based company’s stock was the biggest decliner today on the FTSE 100 index of Britain’s biggest companies.
“In terms of revenue, our previous guidance was for a modest single-digit increase and the reality is there were some caveats in that guidance,” Chief Executive Officer Keith Cochrane said today on a conference call. “The result of that is a flat revenue performance for the full year.”
Third-quarter sales and earnings were “slightly below” the company’s expectations due to delays in mining projects and a slow recovery in upstream oil and gas markets, Weir said today in a statement. Industrial unrest in South Africa will also crimp 2013 revenue, it said.
Full-year earnings before taxes, amortization and exceptional items will probably be 425 million pounds ($677 million) to 435 million pounds, on a constant currency basis, the Scottish manufacturer said. Weakness in the U.S. and Australian dollars, and most emerging-market currencies, may reduce earnings by as much as 12 million pounds, it said.
In the oil industry, “upstream markets expanded more gradually than anticipated, with U.S. rig count actually declining over the third quarter and the number of wells drilled and completed in line with the second quarter, despite oil prices remaining supportive of high activity levels,” Weir said. Low U.S. gas prices are restraining pressure-pumping orders, it said.
Analysts at Numis Securities Ltd. downgraded their rating for the company to add from buy following the revision, while analysts at Investec Plc placed their buy recommendation and price estimate of 2,255 pence under review.
“Revenues and profits are below expectations and this, compounded with currency headwinds, has prompted us to downgrade our 2013 earnings forecasts by 6 percent,” analysts at Numis said in a note. The investment bank now forecasts pretax profit of 420 million pounds in 2013 and 459 million pounds in 2014.
Weir follows other mining equipment makers in reporting slow growth in demand. Sandvik AB, the world’s biggest maker of metal-cutting tools, said last month that interest from the global mining industry is stabilizing at low levels. Caterpillar Inc., the biggest maker of construction and mining equipment, on Oct. 23 cut its 2013 sales and profit forecast and said revenue will be little changed next year after a slump in orders from commodity producers.
Weir shares have gained 14 percent in London trading in the past 12 months, valuing the company at 4.5 billion pounds, while the FTSE 100 index has gained 16 percent.