Refinancing and Trading Update
New RCF and Term Loan agreed; Mining technology businesses continue to show resilience
The Weir Group PLC confirms the completion of the ordinary course refinancing of its main banking facilities. The Group is also providing an update on Covid-19 and current trading that shows the continued resilience of its mining businesses.
· Refinancing of US$950m RCF and £200m Term Loan, extending maturities to 2023 and 2022 respectively
· Minerals orders stable sequentially in Q2 to date despite Covid-19 restrictions; margins in normal range
· ESCO margins remain robust despite disruption to its infrastructure markets
· O&G still expected to be cash generative for the full year; continuing to explore exit options
New US$950m RCF and £200m Term Loan agreed
The Group has completed the refinancing of its main banking facilities, with a syndicate of 12 global banks. These facilities comprise a new US$950m Revolving Credit Facility (RCF) which will mature in June 2023 with the option to extend for up to a further two years and a new £200m Term Loan which will mature in March 2022. The margin on the new facilities is slightly higher than current levels reflecting market conditions but remains highly competitive and significantly lower than the Group's existing long-term bonds. Covenant terms remain unchanged. Both the RCF and Term Loan replace existing facilities which were due to mature on or before September 2021.
The Group continues to be highly cash generative and its strong liquidity position includes c.£500m of immediately available committed facilities and cash balances, now with an extended maturity profile. In addition, it is approved to access up to £300m as part of the UK Government's CCFF programme, which remains unutilised, and has a further c.£80m in uncommitted facilities.
Covid-19 and Current Trading
The safety of our people, their families and wider communities remains the Group's number one priority and this focus has allowed us to continue to fully serve our customers through this period. Our mining markets have remained robust during Q2 with some disruptions to mining production levels in April and May, although these appear to be easing through June.
Minerals has continued to show its resilience throughout the pandemic period. Aftermarket orders in Q2 have been similar to Q1 in absolute terms despite the impact of Covid-19 restrictions. Year-on-year comparisons will be impacted by a particularly strong Q2 in 2019 which was an all-time record. Original equipment orders have also continued at Q1 levels in absolute terms, with a number of larger gold project orders offsetting general delays across other commodities. Divisional margins have remained within their normal 17%-20% range supported by cost mitigation actions.
Demand for ESCO's core mining GET has also been resilient, although it has seen a greater impact from some customers running down ore stockpiles and reduced activity in North American iron ore. The division's infrastructure markets, which represent around a third of divisional orders, have been more significantly disrupted as a result of the shutdown in large parts of construction activity in North America and Europe, which have now started to recover gradually. Divisional margins have remained robust supported by delivery of the final acquisition cost synergies and previously announced cost mitigation actions.
In Oil & Gas, as expected, we have experienced a significant step-down in North American activity levels in Q2. Cost mitigation actions have been successfully executed and we continue to expect the division to be cash generative for the full year. The Group is continuing to explore options to maximise value from the division at the right time.
As announced on 26 March 2020, the Group has withdrawn its full year guidance due to the ongoing uncertainty as a result of Covid-19. The Board will reinstate guidance when it has sufficient confidence on the outlook for the rest of the year. We will publish our interim results, for the six months to 30 June 2020, on 29 July 2020.
About The Weir Group PLC
As one of the world's leading engineering businesses we work in partnership with our customers to solve their toughest challenges, making operations smarter, more efficient and sustainable. We provide original equipment and aftermarket services to mining, infrastructure and upstream oil and gas markets, supporting the essential resources needed by a growing world.
Weir's ordinary shares trade on the London Stock Exchange (ticker: WEIR LN) and its American Depositary Receipts trade over-the-counter in the USA (ticker: WEGRY).
Investors: Stephen Christie
+44 (0) 141 637 7111
Media: Raymond Buchanan
+44 (0) 141 637 7111 / +44 (0) 771 326 1447
Brunswick: Carole Cable / Charles Pretzlik
+44 (0) 20 7404 5959
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