The Weir Group Q4 2024 Earnings Call Transcript

There are 10 speakers on the call.

Operator

Good morning, everyone, and welcome to the call. I appreciate you all joining at short notice. As you've seen, we've announced a very exciting acquisition this morning and in conjunction decided that we should pull forward and deliver our 2024 full year results announcement at the same time. Please note the usual cautionary notice on forward looking statements. Today, I'm joined by our CFO, Brian Puffer, and after the presentation, we'll run an extended Q and A session.

Operator

The presentation will consist of an introduction from me, then Brian will take you through the detailed 2024 financial results. I'll then give a quick overview of our strategic progress in 2024 before covering the acquisition of Micromine in detail. Brian will discuss the financial effects of the deal before I wrap up. So let me start with a reminder of our transformation journey to deliver on Weir's compelling long term value creation opportunity. Firstly, through our portfolio transformation, we created a focused mining technology leader with unique capabilities.

Operator

Our world class engineering solutions combined with intensive global aftermarket support keep our customers' minds running and solve their biggest challenges. We are deeply embedded in their operations and have a large installed base of mission critical equipment with high barriers to entry. The combination of these elements have underpinned our track record of consistent delivery both financially and strategically. Secondly, through performance excellence, we have optimized our business, creating an ever leaner and more efficient Weir, reducing cost and complexity in our operations and driving margin expansion. We have now created the scalable platform that will deliver compounding growth in the future.

Operator

And we're currently ahead of plan on those ambitions and so in turn have upgraded our target for absolute cumulative savings in 2026 by another million to million in total. And thirdly, we're now moving into the growth acceleration phase of our strategy underpinned by: one, the energy transition and global demographic trends two, the adoption of new technologies to deliver critical minerals in a more sustainable way and three, our own strategic growth initiatives, which we are significantly embellishing today with the acquisition of Micromine. In 2024, we performed strongly against our commitments to shareholders. Despite several mine specific challenges in the first half of the year, conditions strengthened meaningfully in the second half as aftermarket demand accelerated, driven by good activity levels in mining markets and the commissioning of new installed base of original equipment. On revenue delivery, we accelerated growth in the second half along historic seasonal trends, though constant currency revenue decreased by 1% year on year principally driven by rephrasing of OE deliveries in the order book late in the year.

Operator

Over the past three years, our revenue growth has averaged above our through cycle target as the compounding benefits of our growing OE pipeline convert to an ever expanding install base of mission critical equipment. We executed very strongly on our Performance Excellence program with the acceleration of savings supporting our operating margin expansion of 170 basis points to reach 18.8% as we close in on our initial target of 20%. We grew free operating cash conversion to 102%, a 17 percentage point increase from last year and above our target range. We demonstrated resilience with growth in our constant currency operating profit of 9% supporting another year of dividend growth. And actions we've taken delivered further reductions in absolute CO2 emissions from our operations now at 27% lower than the 2019 baseline and getting close to our 02/1930 target of 30%.

Operator

Taken together, the power of our transform platform was evident in our strong execution in 2024 and reflects the outstanding efforts of our teams across the globe to whom I am extremely grateful. Now in MicroMine, we're making the next strategic leap for Weir with our vision to create a sector leading digital optimization platform for the mining industry. The acquisition draws us a step closer to unlocking the full potential for digital technology in the mining industry by connecting the full value chain from exploration to mine to mill under one digital umbrella, deepening valuable insights at all stages of the mining process. By combining Micromine with our world class ESCO and Minerals businesses, we are creating a global leader across engineered hardware and software demanded by the mining industry to address their most critical challenges optimizing for a smarter, more efficient and sustainable operation across the mining value chain through a suite of clearly differentiated and competitive solutions. And in Micromine, we've identified a truly unique high quality asset which is accretive to where its revenue growth, operating profit and earnings in the first full year of ownership.

Operator

Micromining today is a digital business at scale active on 3,000 sites with an impressive history of growth at sector leading margins well beyond those achieved within our core hardware businesses today. With that, I'll now hand you over to Brian to take you through the full year 2024 financials in more detail, after which I'll share more on our strategic progress and on the exciting Micromine opportunity.

Speaker 1

Thank you, John, and good morning, everyone. As John noted, we are very happy with our financial results in 2024, which which reflect the positive conditions in our mining markets combined with progress in delivering our performance excellence program ahead of schedule. In the following slides, I'll walk you through the highlights of our performance, noting that the appendix to this presentation contains more specific details on where we landed in 2024 as well as some additional data points on our 2025 expectations. Orders for the year were 2,500,000,000 an increase of 2%, supported by GBP 67,000,000 in relation to the large OE order received for the Ricoh Deeq and OCP expansion projects. Aftermarket orders grew by 4%, reflecting positive conditions in mining and the benefit of installed base expansion.

Speaker 1

Revenue decreased by 1% to GBP £2,500,000,000 reflecting OE delivery phasing and the non repeat of revenue from oil sands to stocking and the exit of our Russian operations. Operating profit was £472,000,000 an increase of 9% with a strong step up in operating margins of 170 basis points to 18.8%. Margin expansion was driven by incremental performance excellence savings as we delivered a cumulative GBP 29,000,000 of savings, GBP 14,000,000 ahead of plan, in addition to a benefit from minerals revenue mix shifting towards aftermarket and normal operational efficiencies. Profit before tax of GBP $428,000,000 was GBP 17,000,000 ahead of last year, despite an FX translation headwind of million. Our increased profitability delivered an increase of 4% in EPS at 120p per share.

Speaker 1

Free operating cash conversion was above our target range at 102%, reflecting the positive actions we have taken in improving working capital management. Our strong cash generation resulted in net debt to EBITDA decreasing to 0.7x. All of the above delivered an increase of 130 basis points and return on capital employed to 19.3%. Taken together, our strong financial performance in 2024 underpins our increased full year dividend of 0.4p per share. I will now provide some commentary on each of the divisions.

Speaker 1

Starting with Minerals, where we delivered a year of good strategic progress, including the award of two large orders for our market leading products and strong execution in the business, leading to record operating margin. Across our key commodities, market prices remain well above miner's cost to produce and we saw particularly strong demand in copper and gold markets. Ore production growth combined with installed base expansion drove increased demand for our spare parts, resulting in 5% growth in aftermarket orders. And OE orders decreased 3% year on year driven by delays during the fourth quarter in project awards as well as market conditions in certain commodity markets such as nickel and lithium. We saw continued momentum in demand for debottlenecking and small brownfield projects and we won further market share converting over 90% of our competitive field trials for large mill circuit pumps.

Speaker 1

Revenue decreased by 2% driven by phasing of OE deliveries at the end of the year combined with prior year comparables including restocking in the Canadian oil sands and the final revenue recognized from our exited Russian operations. Despite these headwinds, strong underlying mining markets and the annualized benefit of price increase drove aftermarket growth of 3%. There was particularly strong growth in both South America and Australasia, reflecting the benefits of installed base growth in these regions. Product mix moved towards aftermarket, which represented 75% of revenue, up from 71% last year. Operating profit increased in kind by 9% on a constant currency basis to million and margins increased by 200 basis points to 21.1%.

Speaker 1

This was underpinned by incremental performance excellence savings, a shift in revenue mix towards aftermarket and operational efficiencies. Moving on to ESCO, where similar to Minerals, we saw the benefit of positive underlying mining conditions with good progress in our strategic growth initiatives. This included the commercial launch of our next generation lip and GET system, Nexus and the opening of our new foundry in Zuzhou, China. Orders decreased by 1% in the year with strong demand for our core GET products and dredging solutions, offset by a reduction in mining attachment orders against a strong prior year comparator. Turning to revenue, which grew by 1% to GBP $688,000,000 reflecting growth in core GET mining and dredge solutions with strong regional growth in The Middle East and APAC from our increased strategic focus in these regions.

Speaker 1

Operating profit at million was 9% higher than last year on a constant currency basis. Operating margins increased by 140 basis points to 18.8% driven by incremental performance excellence savings, our foundry optimization program and operational efficiencies. Now bringing things together to look at the group operating margins, we're on a constant currency basis year on year margins increased by 170 basis points to 18.8%. The main drivers of underlying margin growth in the year were as follows: Firstly, Minerals revenue mix shifted four percentage points from OE to aftermarket, resulting in an 80 basis points increase on margins. Performance excellence contributed an additional 80 basis points having delivered the incremental savings during the year of £23,000,000 well ahead of plan and highlighting momentum in the program across the group.

Speaker 1

As 2024 illustrates and as we expect in future benefits from our improved operating model will more than offset fluctuations in our aftermarket mix as we approach our 20% operating profit target. As expected, operational efficiencies, including cost discipline and pricing contributed an additional 10 basis points to our margin. Now briefly touching on adjusting items, which in total amount to a credit of GBP 6,000,000, largely driven by GBP 69,000,000 of previously unrecognized deferred tax assets arising from the disposal of the Oil and Gas division in 2021. Exceptional items were GBP 55,000,000, GBP 30 6 million of which was associated with our Performance Excellence program with a related cash outflow of GBP 28,000,000 being below our full year guidance due to phasing of spend. Other exceptional items including GBP 19,000,000 relating to the impairment of intangible assets due to phasing out of some brands as part of our alignment of comminution products.

Speaker 1

Other adjusting items reflect the normal amortization of intangibles, which is broadly in line with last year and charges relating to our asbestos provisions, which has significantly decreased compared to the prior year. Turning to cash flow and returns, well, we delivered another year's performance in line with our track record of strong cash conversion. Cash generated from operations was up 12% to GBP $591,000,000, driven by increased profitability and improvements in working capital efficiency. Working capital cash flows improved mainly through process optimization and phasing of payables and receivables and as a percentage of sales improved to 20.7%. CapEx was lower than last year at 1.1 times depreciation, the reduction driven by lower spend following the opening of our new Esko foundry in China.

Speaker 1

Our strong execution resulted in an increase of free operating cash flows of GBP484 million, a GBP92 million increase over last year and 42% increase since 2022. Taken together, free operating cash conversion was above our target range at 102%, an increase of 17 percentage points year on year. Our net free cash flow of GBP $328,000,000 compares to GBP $238,000,000 last year with the increase mainly driven by the favorable free operating cash flow just described and the non repeat of special pension contributions. This funded our increased dividend and further deleveraging, leaving net debt to EBITDA at 0.7 times on a lender covenant basis. While new debt relating to the Micromine acquisition will raise our leverage later this year, given our strong track record of execution, we anticipate deleveraging of this additional debt at pace, in total reducing below our 1.5 times covenant range by December 2026.

Speaker 1

I'll now summarize the key messages from this section of the presentation. Conditions in our mining markets are strong. Through our strategic growth initiatives and our customer focus on improving efficiency and sustainability of their existing operations, we are seeing high levels of activity driving ever resilient aftermarket demand. We are seeing continued momentum in demand for our brownfield OE solutions and our pipeline of large greenfield sustainable solutions is growing. In 2024, we executed strongly against the group delivering performance excellence savings well ahead of plan, growing profit and achieving a significant step toward our 2026 target of operating margin sustainably beyond 20%.

Speaker 1

We achieved our highest level of cash conversion at 102 percent beyond our target range. We continue to deliver on our track record of growing returns, deleveraging our balance sheet, growing ROCE and increasing our full year dividend. Looking ahead, we have great momentum across the group and are confident in delivering another year of financial performance in line with our shareholder commitments. We expect another year of margin growth supported by additional savings through our Performance Excellent program and cash conversion within our medium target range of between 90100%. And finally, our performance will allow us to delever acquisition debt related to the Micromine acquisition at pace falling below 1.5 times by year end 2026.

Speaker 1

Thank you. And I will now hand back to John. Thank you, Brian.

Operator

In this next section, I'll share more details on our strategic progress in 2024 and set out our view of market conditions and the outlook for 2025. Our strategy as set out in the We Are We framework is clear and enduring. It's fully embedded through the organization. We have top to bottom alignment on our priorities and strong engagement across our global team. Its familiar pillars of people, customer, technology and performance continue to guide our decisions and position us strongly to take advantage of the opportunities which lie ahead.

Operator

Our refreshed sustainability strategy lies at the core of our framework and focuses on what we can do internally to deliver sustainable weir and externally to accelerate sustainable mining. So So let me take you through our progress in 2024. So looking first at our people initiatives, the health, safety and well-being of colleagues remains our top priority and we've taken steps to reinforce and reinvigorate our zero harm culture, particularly following the tragic fatal incident suffered by one of our colleagues in April. Since then, we've held safety stand downs across our businesses to discuss the learnings and reemphasize that safety must always come first. Overall in 2024, both our lost time accident numbers and our total incident rate were flat year on year.

Operator

Across the group, we continue to prioritize well-being and talk openly about mental health. We were very pleased to be recognized by CCLA as a top improver for mental health in an assessment of The UK's largest custom companies. Our employee Net Promoter Score of 47 remains in the top quartile of manufacturing companies, while our refreshed ID and E steering committee made up of representatives from our senior leadership team is supporting our efforts to accelerate the benefits that come with having a vibrant purpose driven culture. We've continued to invest in our people with a focus on talent and succession planning, for example, through a new global mentoring program launched during the year. And we continue to invest in future talent too through programs around the world that encourage careers in STEM and the mining industry.

Operator

Turning next to our customers where we are shaping innovation that will enable the mining industry to scale up and clean up. During the year, we secured a £53,000,000 order to supply an industry leading fine grinding solution to Barrick Gold's Ricoh Deac copper gold projects in Pakistan, capitalizing on growing industry acceptance of our redefined mill circuit and supporting our customers' need to use less energy and water at this remote mine site. We also secured a million order to supply an energy efficient separation solution to OCP's bengorrhea and luteur phosphate projects in Morocco, leveraging our market leading Warman Pump and KVEX hydrocyclone brands. In Minerals, we won 92% of our head to head mill circuit pump trials and in ESCO, we won 118 net major digger conversions as we continue to drive strategic growth initiatives. We've continued to work in partnership with customers to accelerate sustainable mining.

Operator

In January of this year in Saudi Arabia, we agreed an MOU to form a joint venture with Olean Saudi Holding Company, which will extend our sustainable mining technology solutions to this exciting growth region. Now the progress we've made with our redefined mill circuit is one of the highlights of the year and particularly the Ricoh Deeq contract win. This project is located in one of the hardest to reach locations in the world, making energy a premium on-site. Our redefined Mill Circuit solution requires up to 40% less energy than other alternative methods of crushing and grinding and so is especially suited to this project. Ricoh Deac is another real world reference of the power of this solution and illustrates its versatility across geographies from magnetite at Ironbridge to copper gold at Ricoh Deac.

Operator

Turning next to technology where we introduced both our next generation Nexus GET technology and our Enduron Elite screens to the market at Minexpo in September. The Nexus system increases tooth and adapt to wear life by 15% compared to our previous system, in turn leading to less plant downtime and we've already received multiple orders for this next generation technology across four continents. In Minerals, we launched our new digital brand, Next, integrating our existing digital offerings such as Syntyrex and Sentient AI to offer customers an integrated platform to help their operations run safer and more efficiently. And we now have over 100 sites utilizing our digital platform. We also launched our latest MotionMetrics ShovelMetrics payload monitoring solution, which provides optimized truck loading and improved haulage efficiency for customers.

Operator

Both systems provide valuable insights to our customers on how their equipment is operating and how best to optimize those assets in the field. So together with the acquisition of Micromine, Weir is really accelerating how these insights can be combined with essential information from upstream in the mining value chain moving closer to solving that critical missing link between mining operations and the process plant, so further enhancing productivity and sustainability for our customers. Let me expand now on the ESCO Nexus GET system. This is our latest technology advancement and case studies continue to come in from the field as the solution is now sold across all four major mining regions. Results from the studies all support our original data collected during the initial trial over thousands of hours.

Operator

Critically, the Nexus system reduces the overall lit maintenance time by 40% over a five year projected period and this in turn leads to less plant downtime, thanks to reduced adapter failures and is unmatched by any competitive solution. Finally, turning to performance where progress within our Performance Excellence program continues at pace and is ahead of our targets for cumulative absolute savings. During the year, we opened our new Esko foundry in Xuzhou, China giving us more capacity from the most efficient in the Esko network and therefore supporting gross margin progression in future years. In Minerals, we consolidated several sites in The U. S, LatAm and APAC bringing us closer to customers and driving fulfillment efficiencies.

Operator

We also completed the establishment of Weir business services and are embedding new ways of working through transformation across our finance, HR and IS and T functions, the benefits which will be reflected in the years to come. Completion of our journey to implement SAP across the Minerals division now provides truly global capacity management and inventory optimization capability. And adoption of our RefreshLean program in Minerals contributed to the largest amount of savings during the year, driving a reduction in overall material cost as well as quality improvements. With these examples, the Performance Excellence program is already running well ahead of plan and therefore we've upgraded our total savings target to million in 2026 with a further incremental million expected in 2025. This is supported by additional capacity optimization and lean process opportunities that have been identified as we progress with the program.

Operator

Now we anticipate additional exceptional one off costs of million to complete these projects, taking the total expected program costs to million or 1.5x expected annual savings. The savings will help us to deliver operating margins sustainably above 20% in 2026 and beyond. Turning to outlook, where we have a growing pipeline of opportunities on high levels of activity in our mining markets as customers look to invest in projects that address structural critical metal demand. Supported by favorable commodity prices, customers continue to prioritize maximizing ore production and improving the efficiency of the existing mine sites, which together with ongoing installed base expansion provides a strong underpin for demand for our aftermarket solutions. This continued favorable backdrop in mining underlies our strong opening OE order book and demand growth expectation for aftermarket.

Operator

Combined with execution of performance excellence, we entered 2025 with great momentum and confidence for delivering another year of growth in constant currency revenue, operating profit and operating margin in line with current market expectations driven by mid single digit revenue growth and around 50 basis points of further operating margin expansion. We expect free operating cash conversion of between 90100% in line with our medium term guidance as CapEx continues to settle in line with depreciation and our lean operating model delivers further working capital efficiency. Okay. I'll now talk more about our other announcement today, the agreement to acquire MicroMine, which presents a unique and really exciting opportunity to create a sector leading digital optimization platform for the mining industry. As mentioned earlier, this acquisition is a significant step in accelerating our strategy to enable smart, efficient and sustainable mining.

Operator

By combining Weir's deep customer insights and domain knowledge in extraction and processing with Micromine's leading mining software solutions and upstream data, we can unlock the potential for digital technology to deliver end to end productivity and sustainability solutions in mining for our customers. It will position Weir as a global leader in engineered hardware and software solutions for the whole mining industry, enhancing our existing market leading solutions across extraction, comminution, processing and tailings with insights from mine development and planning, insights that are essential to make decisions better, faster and safer for our customers from extraction to mine to mill. Uniquely, Micromine offers Weir shareholders a compelling value creation opportunity to acquire a top tier digital business of scale that is highly accretive to our already leading aftermarket focused business model. As a global leader in mining software solutions, Micromine's products compete directly in a growing addressable market of around billion, which is inelastic to the mining CapEx cycle. This additional market expands Weir's existing opportunity creating a total combined and more resilient addressable market of billion.

Operator

Micromine has four decades of experience solving customers' critical challenges. This gives its software solutions a strong competitive advantage as its deep library of proprietary plug ins and functions help customers quickly and confidently turn their data into valuable insights. Like our market leading ESCO GET solutions, Micromine software is hardware agnostic, meaning that regardless of the exploration drill blast or haul equipment, the Micromine suite of solutions will bring efficiency and add value to our customers' operations. Through the acquisition, we'll benefit from Micromine's highly talented specialist software sales engineers, deep product knowledge and an established track record of driving growth in sales at sector leading profit. Micromine's revenue is heavily biased towards future facing commodities such as copper, gold, iron ore and the battery metals.

Operator

These positions will complement Weir's existing exposure adding to our multi decade opportunity to enable a sustainable future for our planet. In terms of reach, Micromine Solutions are already present on every continent across over 90 countries and 3,000 sites with significant opportunity to grow outside of its home market of Australia, including the copper and gold rich regions of North And South America where Weir is particularly strong. Combining forces with Micromine will position us to create a leading digital platform of scale from exploration to mine to mill. Its suite of software solutions are highly complementary to Weir's existing digital architecture adding strength in data integration from one phase of planning to the next and updating forecasts real time to optimize mining operations. Starting at the mine exploration stage, Micromine's Geobank and Origin software solutions are used daily by thousands of geologists to manage and define their resource models for future investment and construction decisions.

Operator

Customers with existing mines or sites under construction rely on Micomine's beyond software to develop life of mine models and infrastructure plans using the resource shape already developed in the Geobank and Origin software. They use these life of mine models as the basis for investment and financial planning. Moving downstream, Alastri, Spry and Advance are Micromine's planning tools. Customers use them to manage their medium and short term plans, an intelligent and insightful replacement for offline tools such as spreadsheets. And as we get to the pit and underground, Micromine's software solutions start to overlap with Weir's motion metrics offerings.

Operator

Pit Ram, Micromine's software solutions for minerals extraction operations takes data from the various mine and geology plans to optimize fleet management and mine control. In time, through the integration of Weir's MotionMetrics and Next Intelligence Solutions, we will be able to bundle solutions and pursue our vision of creating the critical missing link between mining operations and the process plant offering real time optimization based on live data, enhancing productivity and sustainability for our customers. Micromine's deep customer value propositions and established global footprint means it is a top tier software player. And as I said before, it's a unique asset and was clearly the best option to enable the pursuit of our strategic vision. It has industry leading financial performance with a track record of high growth underpinned by sector leading Software as a Service recurring subscription revenue.

Operator

Over the past three years, Micromind has consistently grown at a rate of approximately 25% per year, of which circa 90% is recurring subscription revenue. But not only has Micromine grown, it's growing profitability with sector leading margins. Its subscriptions are largely paid upfront, meaning that cash conversion aligns to Weir's own 90% to 100% range and working capital is low. Ongoing software upgrades provide upsell and pricing opportunity, while customers are sticky. Over the past several years, Micromind has retained over 95 of its customers from one subscription renewal to the next.

Operator

So it's a great business today and by leveraging Weir's direct global distribution channels in mining, we expect to further accelerate the growth of the current MicroMine business. From day one under Weir, MicroMine will have access to our existing network of service centers, which are located within 200 kilometers of every major mine on the planet. Through Weir's boots on the ground model, MicroMine's specialized software sales team will have access to relationships and decision makers across our combined billion addressable market. So you can see that armed with deeper customer insights and expanded domain knowledge afforded by MicroMine, Weir has a tremendous opportunity to enable smart, efficient and sustainable mining. This acquisition will be terrific for our combined customer base too.

Operator

Putting Micromine's software suite together with Weir's MotionMetrics and Next Intelligent Solutions to create a digital optimization platform will enable them to make better, faster and safer decisions about the performance of their operations. This starts with real time insights that help miners determine what to mine, where to mine and when to mine. This is used to support decisions about their short and long term planning and helps them build a detailed understanding of how their geology and how to maximize the value from it. Making smarter choices upstream and in the pit can deliver compounding benefits through the processing plant, potentially leading to 10 times the savings and using less energy, water and waste. But it works both ways.

Operator

Insights from the process plant can be used to optimize upstream operations in the mine as well. And that's why we're extremely excited by the potential of a digital optimization to transform productivity and sustainability across the whole mine. Brian is now going to take us through some of the key details of the transaction.

Speaker 1

Thank you, John. As John has already mentioned, the acquisition of Micromine is a unique opportunity to acquire a proven top tier digital business at scale, complementary to our highly resilient aftermarket focused business model. Micromine is a high growth, highly profitable business with an attractive valuation. We plan to acquire Micromine at an enterprise value of million. Given the quality of its revenue growth and the composition, the acquisition enterprise value EBITDA multiple is around 20 times, excluding synergy, making it extremely attractive.

Speaker 1

In line with our capital allocation policy, the transaction will be EPS accretive in 2026 with ROIC beating WACC in 2028. The deal will be materially additive to the group's revenue growth and margin profile. The transaction will be financed with a combination of existing cash and new acquisition debt, which will be refinanced in due course. Post acquisition, net debt to EBITDA is expected to be below two times at December 2025 and below 1.5 times by year end 2026, again in line with our capital allocation policy. We estimate the transaction will close in Q2 this year, subject to clearance by the Australian Foreign Investment Review Board.

Speaker 1

And with that, I will hand back to John for his closing remarks.

Operator

Thank you, Brian. So as Brian just highlighted, the acquisition of Micromine is additive both strategically and financially to our existing franchise, and it will only enhance our proven track record of delivering against our commitments to stakeholders. Micromine's strong growth will be immediately accretive to Weir's business performance. Its complementary addressable market and geographic expansion opportunities underpin our confidence in accelerating this growth as a combined company. Likewise, Micromine's sector leading margins will also be immediately accretive to Weir and it becomes a critical foundation for the acceleration of Weir's digital strategy and platform for transformational future revenue models that leverage Weir's market leading hardware solutions.

Operator

As I mentioned earlier, Micromine's subscription based revenue model means that cash conversion is well within Weir's own range and our financial discipline exercised in negotiating this deal will see ROCE ahead of WACC by year three in line with our well established capital allocation policy. Micromine's subscription based revenue is complementary to Weir's own aftermarket focused business model enhancing our resilience and providing returns that are inelastic to mining CapEx cycles. Finally, Micromine and its software solutions align strongly with our own core mission to enable sustainable and efficient delivery of the natural resources essential to create a better future for the planet. Its solutions help miners move less rock, use less energy, use water wisely and create less waste, all enabled by world class software engineering expertise. So bringing all of this together, the long term opportunity for Weir is tremendously exciting.

Operator

As a mining focused business, we are building an impressive track record of consistent delivery underpinned by attractive markets and growing demand for our differentiated mission critical hardware and software solutions. We're executing strongly against our performance excellence agenda, raising our ambition for absolute savings and moving our operating margins sustainably beyond 20% in 2026. And with our strong operating platform, we're well positioned to deliver compounding financial benefits while remaining resilient and doing the right thing for our people and the planet. And that starts with our positive outlook for 2025. And finally, bringing Micromine into Weir will accelerate our strategy to create a sector leading digital and hardware solutions provider that is uniquely positioned to deliver compelling value creation to our stakeholders.

Operator

Thank you very much for listening. And Brian and I will now be pleased to take any questions you have.

Speaker 2

Our first question is from Lush Mayandarajah from JPMorgan. Your line is now open. Please go ahead.

Speaker 3

Can you hear me?

Operator

Hi, Lush. Yes, we can hear you.

Speaker 3

Hello. Oh, sorry. Just three questions on my end. Firstly, on Micronline, can you talk a bit about what the sort of competitor landscape is this kind of business, who's out there? Is anyone else really doing this?

Speaker 3

I guess what's the sort of the mode and sort of what's differentiating about that micro micro micro micro micro

Speaker 4

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Speaker 3

micro micro micro micro micro micro micro your comment on sort of multiple pre synergies. I guess, what sort of and it sounds like a more like revenue synergies than cost synergies. I guess, is your base case sort of a continuation of that sort of 25% growth that the business has done or do you have that accelerating? And then thirdly, just on performance excellence, obviously, you know, increased the total to 80% of savings that have gone up as well. Is that just sort of there's more to go forward than you thought or the benefits sort of higher than you thought?

Speaker 3

And I guess, is it something we should expect sort of just ongoing sort of incremental sort of upside there just in terms of finding more and more as you go through this process?

Operator

Yes. Thanks very much, Lush. So I'll hand over to Brian to come back to the performance excellence question, but let me take your first two questions on Micromine. So I think first of all, to say the reason that this business was so attractive to us is that it is absolutely a top tier player in the mining software space. And we think competitively, it has the broadest range of individual solutions across the mining value chain.

Operator

So in terms of support for our vision of creating an end to end digital optimization, if you take the breadth of what MicroMine does today, we put that together with our existing motion metrics capability in the mine and then the next intelligent solutions capability that we've organically built together with Sentient AI in the Minerals division. You create a really, really unique platform of software solutions that will enable digital optimization for our customers and we think create the kind of missing link that really exists today in the mining industry between the mining operations themselves and then what happens in the process plant. So we will be bringing together domain knowledge from both of those areas that will allow value creating feedback, data and insights to flow each way from the mine into how to optimize the process plant and from the process plant back into how you then optimize mining operations. So we think that's a really, really exciting and unique proposition. And the breadth of the competitive position that Micromine has means that it was absolutely the best asset for us to bring in the port into the portfolio to enable that technology.

Operator

Now there are other competing point offers out there across the mining space. I won't get into the detail of all of them. But I think end to end, Micromine has a much broader offering, deeper in certain spaces compared to some of the competition. And as we said in the presentation, comes with sector leading revenue growth, a sector leading margin profile, a sector leading proportion of annual recurring revenues through subscription. So it's an amazing asset and I'm really, really excited to be bringing it into the Weir portfolio.

Operator

From a synergy point of view, this is all about growth. It's not about cost synergies. In fact, we're going to have to add cost into the business to accelerate the growth, albeit that cost will be in line with the revenue growth. So we'll see the margins kind of maintained where they are. As you said, it's a business that's grown at 25% CAGR over the last few years.

Operator

We think we can at least deliver that going forward as we plug the business into our global distribution channels. And remember, we're is within 200 kilometers of every mine on the planet. We are particularly strong in The Americas, which we see as one of the most critical growth areas for MicroMine. So it's really all about protecting the strong capability that exists in the business today, building on that foundation and then really driving the revenue growth. And I think, as we said in the announcement, that will really deliver some very, very compelling financials and deal metrics, which are very, very accretive to both our revenue growth and our margin profile at the Weir Group level.

Operator

With that, Brian, on the Performance Excellence update.

Speaker 1

Thanks, John, and thanks Les for your question. When we announced the Performance Excellence back in December '3, we had good insight of how we were going to deliver the $60,000,000 of savings. And as we've gone through the progress or project, we've identified additional savings that will come out of it. And that it's great from a project standpoint. But you always hear me talk about is this is not a a one and done.

Speaker 1

When we complete this project, it doesn't mean we're done in this area. What we've created is the muscle and the mindset of constantly thinking about lean manufacturing, looking at our capacity optimization. So we built this mindset that's gonna be enduring. So while the project will end in 2026 and we see clear sight for that 80,000,000, this is something that's gonna continue on as just business as usual. So we're very excited.

Speaker 1

Big thanks to the teams because they put a lot of work into this, and we're very confident in the number and, you know, look forward to continue to build on it, after 2026.

Speaker 2

Our next question is from Jonathan Han from Barclays. Your line is now open. Please go ahead.

Speaker 5

Hey guys, good morning. Just three questions from me as well. The first question actually was just on mix. So if you look at 2024, you had a positive mix in the margin bridge. If we looked at 2025, you're calling out that mix to turn negative and to be a headwind.

Speaker 5

The question I have is that in terms of that sort of OE aftermarket sort of mix, is that sort of negativity just centered on '25 or do we expect that sort of headwind to the margin bridge from mix continuing in '26? That was the first one. The second question was just on gold. Obviously, favorable dynamics in gold mining right now. You called out strength coming through in order for that.

Speaker 5

Just wondering if you could sort of drill down a bit and give us a little bit more color in terms of what you're seeing from gold customers, the rate of growth and how you see that developing through FY 2025? And then the third and final question was just on MicroMine. I assume in terms of the revenue, there's both a sale of sort of the original software package and alongside that probably software upgrades at some point. I wonder if you could just sort of split out that revenue and the mix between sort of original software sales and essentially software upgrades. Thank you.

Operator

Thanks very much, Jonathan. I'll take those. So yes, on mix, clearly, we had a very positive experience in 2024, albeit that was partly enhanced given a couple of shipments, although we slipped into 2025 as you'll have seen from the press release. So it was really an incredibly strong year in 2024 in terms of aftermarket revenues, a proportion of mix, which was really beneficial from a margin perspective. Based on what we expect to be shipping in 2025 from an OE perspective, most of which is in the order book, and obviously, the stuff that slipped from last year is already out the door.

Operator

So we have a very, very clear line of sight of where we expect to be in terms of the mix in 'twenty five, which is a modest headwind. But as you've seen in terms of our overall operating profit margin, we expect to see another 8,100 basis points of benefit from performance excellence savings coming through and pricing and other efficiencies. And that being sort of 50% of that being offset by the mix headwind that we, as I say, we've got a really clear line of sight for in 2025. Difficult to predict '26 at the moment. We need to see what comes through in terms of the OE orders through the course of 2025.

Operator

But rest assured, we are really, really clear that in 2026, we will be above 20% group operating margins. We believe that is sustainable and we have built into that sufficient capacity to deal with further mix headwinds should they come through. So I feel really, really good about being able to deliver a step up in 25% and a further step up in 26%, taking us beyond 20%. And of course, as I said earlier, Micromine is going to be accretive to those margins at a group level as well. On gold, look, our gold customers are the happiest they have ever been in my time of year.

Operator

Our conversations with our gold customers all over the world are very, very positive. It's one of the real kind of hotspots in the business at the moment. We've got a range of conversations going on with our customers all over the world in terms of how we can help them produce more, accelerate production given where the commodity price is today. So I would say it's a very, very strong space for the group at the moment, well, among others, of course. But we've got a lot of very active conversations at the moment and quite a lot of the OE pipeline is around debottlenecking and small brownfield expansion projects, plus big greenfields, as in the case of the Ricoh deep project that we're supporting Barrick on.

Operator

And then in terms of your final question on the Micromine revenue, I think I would say that the vast majority of the growth is going to come from new sales. And that's a combination of going into new territories or accelerating revenue growth in existing territories Micromine is already in, but Weir has a stronger presence leveraging our platform. As I said earlier, a much smaller proportion will come from upgrades and pricing. But obviously, as I said, we said, the revenue of this business is very, very sticky and pricing will be an element of the revenue growth. But probably more than 50% is going to come from new sales, leaning into that, what we think is a billion addressable market.

Operator

So a really, really big area of growth to lean into as we bring the business into the Weir Group.

Speaker 5

Perfect, guys. Thank you very much for your clip.

Operator

Thanks, Jonathan.

Speaker 2

Thank you. Our next question is from Ben Heelan from Bank of America. Your line is now open. Please go ahead.

Speaker 6

Yes, good morning guys. I had a quick question on the deal. So just looking at your transaction summary and the kind of 10 times EV sales and 20 times EV EBITDA kind of getting the impression it's roughly 50% EBITDA margin business. Can you help us understand where you expect the business to be around EBIT? And I think you kind of answered it, but your twenty twenty six comments about being above 20% margins, that is excluding MicroMine, so MicroMine would come on top of that.

Speaker 6

Just a quick clarification there. And then a kind of second question around, Esco, just what can you talk a little bit about the trends you're seeing? Obviously, destocking has been a big component of the last couple of years. Where do you think you are on that? And geographically, what are the trends that you're seeing?

Speaker 6

Thank you.

Operator

Yes. Well, let me deal with the ESCO question and then Brian, if you want to pick up on the margins. Look, I think we're seeing good momentum in ESCO, particularly in the core Ground Engaging Tools business. Although the orders were sort of flattish year on year for ESCO, we saw really, really good growth in the core mining GET, and we've got strong momentum there. And you see that in the net digger conversions, I think, 118 that we won in 2024.

Operator

So good momentum in that part of the business, partly offset by a decline in Oil Sands and some other of the more lumpy elements of the business. And I think those kind of headwinds that we saw during 2024 fall away as we come into 2025, and we're already seeing that as we begin the year in terms of the order profile that we're seeing. So I think good trends on the mining side and actually infrastructure. And as I've said before, among our peer group, different people have different kinds of infrastructure exposure. We actually saw very modest sort of low single digit growth in that in 2024 in the ESCO business.

Operator

And actually, the outlook is probably looking a little bit more positive there as well given the what the Trump administration is talking about in terms of boosting The U. S. Economy more broadly, but also I think what's going to happen in the mining and infrastructure industries. So I think we feel positive about the trends that we're seeing in ESCO. And even though we saw a bit more momentum in the Minerals business coming out of the fourth quarter and into January, I think in terms of the growth rates that we expect to see across both divisions in the aftermarket, they'll probably end up being broadly consistent as we go through 2025.

Speaker 1

Ben, thanks for for your question. I think there's one thing we really want to be very clear on, the 20% operating margin target. We do not need this transaction. We have not factored in that transaction. We are extremely comfortable that we're going to deliver beyond that 20% by 2026 on a standalone basis.

Speaker 1

The great thing with MicroMine is that as John said in his presentation, it's immediately accretive to our margins and the margins are quite good in this. A simple calculation got you to 50%. I think there's more complexities in there, but we're not given the actual margin number, but it is significantly higher than Weir's existing margins. And it's a growth business. And that's why we're very excited because we're growing our revenue, we're growing our margins.

Speaker 1

It's accretive in the first full year of operation on an EPS basis. And one of the things we always told the market is that we're going to cover our WACC within three years, and this transaction does that. So we're very excited and looking forward to welcome our Mike and Mein colleagues into Weir.

Speaker 2

Thank you. Our next question is from Edward Hussey from UBS. Your line is now open. Please go ahead.

Speaker 7

Hi. Thanks for taking my question. I guess, just first one, in terms of the 25% growth that you talked about for the acquisition, is that sort of representative of software growth in mining in general or has the company been taking market share? And then just secondly on revenue growth, Seems like it's a little bit lower than expected in Q4. I'm just wondering, is this going to be a phasing issue?

Speaker 7

And are we going to see the revenue potentially come through in Q1 that was expected? And then maybe do you mind just giving me a bit more color in terms of the really strong aftermarket growth you had in Q4 in Minerals and essentially what's driving that? Thank you.

Operator

Yes. Thanks very much for the questions, Edward. So I think on the revenue growth question for Micromine, as we've been through the commercial diligence on this, we think that is sector leading growth. I mean, mining software generally as a category in mining is growing strongly, but we think Micromine leads the pack in terms of the revenue growth that it's delivered over the last few years and has been taking market share across several of its solutions. And for very good reason in terms of the capability of the software, the user friendliness of the software, the thoughtful pricing of the software.

Operator

So we think it's leading the pack, and I think we can only enhance that by bringing it into the Weir family as we move forward. In terms of Q4, I mean, we had a really, really strong quarter in terms of revenue growth. It was always going to be a big one. As you saw, we didn't quite just get to where we wanted to be, but that was very simply down to a couple of large OE shipments that literally got stuck on the dock and not on the boat. And therefore, we didn't meet the Incoterms to be able to recognize the revenue.

Operator

And as I said, those things have now gone out of the door, so that revenue is coming through in 2025 very, very early on. So we've had a really, really strong January reflecting that and reflecting the more broader momentum that we've seen in the business, which gets to your aftermarket question. I think it was the growth that we saw in Minerals, in particular, in the fourth quarter was phenomenal, 15% growth in the fourth quarter, '4 percent or 5% of that obviously coming from the second piece of that multi period order. But even without that double digit growth in the aftermarket, driven by very high levels of activity, particularly in copper and gold and even iron ore where the price has stayed above $100 which is kind of a psychological level for the industry. So very supportive trends there.

Operator

The other facts to call out was that we said in the first half of the year, we had an elevated level of mine specific challenges, which was holding us back. And several of those challenges fell away as we went through the second half of the year. And then the final point I would make is that we've been talking about the fact that our OE order levels, even though it jumps around from quarter to quarter, historically is at relatively elevated levels compared to historic trends. And that means the new installed base that we've got coming through being commissioned, kicking off that in terms of aftermarket opportunity, really accelerated through the second half of the year. So that was another big factor in the momentum we're seeing.

Operator

And of course, that continues into the beginning of twenty twenty four. So I think when you look at the pattern over the course of the year, it was a bit of a tougher first half, but it really accelerated through the second half of the year driven by those trends. And we expect that to to, by and large, continue as we move through 2025, which underpins our positive outlook for further revenue growth and operating profit growth and further progress on margins.

Speaker 7

Brilliant. Thank you very much.

Operator

Thanks, Edward.

Speaker 2

Thank you. Our next question is from Harry Phillips from Peel Hunt. Your line is now open. Please go ahead.

Speaker 8

Yes. Good morning, everyone. Just a couple of questions on Micromine, please. And it's trying to just understand how you get Micromine sort of across the broader Wear group. I mean, in essence, you're creating a software business within Broadaware and that's part of your portfolio?

Speaker 8

Or do you does Micromine get sort of tucked into the operating businesses and their roots to into the customers? And I'm just trying to work out how does the software subscription business, and this is my ignorance, fit into a sort of global product business like yourselves. And then secondly, is this sort of with MicroMetrix, MicroMine, all these double M's, are you setting out ultimately create a sort of software platform family within where as a sort of you've got sort of ESCO, you've got minerals and now you have sort of years to come a software platform to boot as well, so customers can sort of take across the piece?

Operator

Yes. Hi, Harry. Thanks for those questions. Really good questions. Maybe I'll just kind of explain the overall thinking and hopefully that will answer the two aspects of where you're coming from.

Operator

So I think firstly, stepping back, as a traditional engineering capital goods company and provider of hardware, my view has always been that we need to embrace software, digital, AI as we move forward, not only to accelerate the growth in our business, but to continue to protect the core and add to the barriers to entry that we have in our existing businesses. So digital has always been a core piece of our strategy. With Micromine, we are taking a huge leap forward in accelerating that strategy in terms of what we're going to create here. And the value creation that should come from that is really, really exciting to us as a team. How we're thinking about the integration is that for the first six months, we are really just going to leave MicroMine standalone.

Operator

We want to do the core basic governance integrations from a cybersecurity point of view, a finance and internal control point of view, just to make sure we've got all the core bits and pieces right. But in terms of the business, we're not going to do any integration beyond that other than the key first step is to plug it in to the Weir global distribution channels in ESCO and Minerals to help accelerate sales. So as you know, we have a pretty unique platform around the world in terms of key account managers, service engineers, relationships at all level across all the mines that we operate on around the world. And we're going to use that platform to open doors and make warm introductions for the software salespeople of Micromine. Our pump engineers are not going to be able to sell software, but those people who sit in the ESCO Minerals division will help open doors and accelerate opportunities into the Micromine sales pipeline.

Operator

So that's how we're thinking about it initially. Then over that first six months, we're going to be working on how to bring Micromine and MotionMetrics together because we see that as the sort of first phase in having an integrated solution, taking the vision recognition technology that comes with MotionMetrics and adding that, Metrics and adding that to the MicroMine capability in planning and particularly scheduling and operations in and around the mine. So that's the sort of first phase. And then slightly longer term is how you then bring the whole thing together with next Intelligent Solutions in the Minerals division to create that end to end optimization platform. And I think once we get there, we will have a separate business.

Operator

It will probably be an externally reported division of Weir, Weir Digital, or Weir Software, which will be providing not only the point software solutions, but end to end optimization opportunities, which we'll be building organically and potentially through other smaller bolt ons into that digital platform as well. So in the first phase of that integration, and we've thought very carefully about this, the numbers the MicroMine numbers are just going to report through ESCO. Then we'll do that work in the background to very thoughtfully build the two phases of that integration and then create that end to end business that will probably be reported externally. So, yes, so back to where I started, I think for a business like Weir, leaning into the opportunity that exists in mining, digital and software capability is going to be a huge growth driver for us as we move forward. But not only offensive, it's also a defensive player as well in terms of strengthening the barriers to entry that we have already around existing platform, but accelerating growth with digital solutions.

Operator

So that's how I'm thinking about it, Harry. I think that covered both of your questions, but if you want to just shout if you want a bit more clarification anywhere.

Speaker 8

That's great. That's really helpful and many thanks for the clarity.

Operator

Thanks, Harry.

Speaker 2

Thank you. Our next question is from Christian Hinderhacker from Goldman Sachs. Your line is now open. Please go ahead.

Speaker 3

Yes. Good morning John. Good morning Brent. Maybe just to change attack from my side, I just want to ask a question on pricing. One of your peers recently talked about pricing pressure in heavy equipment categories, particularly where there's steel castings.

Speaker 3

I wonder if you've seen that in your business? And secondly, how do we think about your pricing dynamics as we enter 2025? Thank you.

Operator

Good morning, Christian. Yes, pricing, as we said before, we had a couple of fantastic years from a pricing perspective post COVID as the industry scrambled to deal with inflation and get back to normalized operating levels, inventory levels and lead times and so on. That's really moderated as we expected. Obviously, inflationary pressure across the board for us has really gone down very, very significantly. So we are back to more normal through level through cycle levels of pricing at the moment in the sort of low single digit sort of category, which is from my perspective in terms of our thinking into how we protect gross margins.

Operator

That level of pricing is perfectly sufficient to keep us where we are on gross margins. That's what we're expecting for the current year for 2025. And a lot of those price increases have already been pushed out and agreed with customers. So I'm feeling pretty good about where we are on pricing. Obviously, the thing that we're watching and remodeling almost every other day is the impact of tariffs coming from the new administration in The U.

Operator

S. Wherever that ends up, we expect to be able to mitigate that in the round as we did with the previous Trump administration through a combination of moving imports and exports throughout our network of foundries around the world. Remember, we have that very diversified platform of manufacturing facilities that means we can shift production around to avoid tariffs. And to the extent we can't do that, then we will be adding price increases where we need to. But I expect us to be in the pack on that and many other industries will be in exactly the same place.

Operator

So in summary, feel very good about what we can achieve from a pricing point of view this year to protect margins. And I think whatever happens and it will be different next week than it was this week, I expect we'll be able to manage any tariff inflationary pressures.

Speaker 2

Thank you. Our next question is from William Mackey from Kepler. Your line is now open. Please go ahead.

Speaker 9

Yes. Thank you for squeezing me in and good morning, John, Brian. Two question areas, one on Micromine actually. Can we could you provide a little more color around your comments about investment needs in the business? And when I ask that I'm sort of thinking, do you need to expand the software portfolio to reach the full $2,000,000,000 addressable market that you're talking about?

Speaker 9

Or do you see more investments required around the sales channels?

Operator

Yes. Thanks for the question, William. Yes. So I think I was principally talking about the sales channels. And what I'd like to clarify there is that Micromine has an extremely professional and capable sales team around the world and a very established model whereby they bring in talented people, those people are trained up, they work alongside existing sales professionals, and then they're sort of released into the market as it were.

Operator

So it has a very, very established process for building out sales capability, which has supported the 25% revenue CAGR that we talked about earlier. So what we need to do is to continue with that model. And that means to the extent that we have ambitions for higher revenue growth, we need to just accelerate the investment in that established process of building sales capability. So that's what we need to do. But that obviously, that sales expense will grow in line with the revenue growth and we'll obviously work hard not to get ahead of ourselves in doing that and just kind of balance the investment with the growth that is coming through.

Operator

So that's what I meant in terms of investing in the business. But so it's to support the growth and not dilute the margins. The broader sort of step back question in terms of capital allocation is that yes, that is also going to be something that we will be thinking about. So as I said earlier, with MicroMine, you've got a very broad suite of software solutions today. It doesn't do everything everywhere across the mining value chain and it has had itself an M and A strategy, which would be to bring in other smaller software plays into its portfolio.

Operator

And as we've got to know the business and talk with the team, actually, our views are quite aligned on what those might be, which is quite interesting. So that is definitely going to be a feature. Obviously, the scale of this acquisition is pretty unique given its top tier status. So we would expect potentially smaller software bolt ins to broaden that portfolio as we move forward. But alongside the organic development that we will be doing around the end to end optimization.

Operator

So we will be putting together teams of people out of Micromine, MotionMetrics and the next Intelligent Solutions piece in minerals to start to envision how you get those data flows to work back and forth between the mine and the process plant to real time optimize operations in both arenas. So that will be an organic development, which we'll need to invest some R and D in that. But again, it's not going to be something that's dilutive to our overall expectations for accretion.

Speaker 9

Thank you very much for the color. The second area was related to your comments on tariffs and perhaps broadening it into critical minerals strategies on a national basis. You mentioned Americas being a positive area, but maybe could you flesh out any thoughts you have from your customer feedback about where you might expect localization or accelerated investment in brownfield or even greenfield through permitting and licensing that would open up more opportunities across the minerals business?

Operator

Yes, absolutely. That's a great question. And I think as I sit here today, I feel much more positive about the evolution of the answer to that question compared to what I did twelve months ago. So if you sort of dot around the world a little bit, for sure, The U. S.

Operator

Drill Baby Drill applies to mining as well, and we're already starting to see some project awards coming through in The U. S. Off the back of that. So I think we're going to see a loosening of the some of the restrictions that have been politically put in place in relation to permits and licenses. That's already happening in The U.

Operator

S. And so I expect that part of the world to be positive. If I go to South America, which for the last two or three years has been a bit more challenged in terms of the relationships between our large customers and local governments, given the sort of the political sort of sway that we've seen there in certain countries, I think that's changing. I think that's loosening up as well. So we're starting to see much more positive conversations about investment in Latin America now.

Operator

I think China is doing what China is doing in various regions around the world. Nickel in Indonesia, for example, even though the nickel prices sort of come down, China is still supporting further expansion in nickel in Indonesia. So that's a little bit of a hotspot. And then this broad super region, the Saudi Arabians are calling the super region with the Middle East and Saudi at the core of it through North Africa, up into Central Asia, Pakistan, we see that as an area where there's going to be a lot of investment as well. There already is a lot of investment.

Operator

Our Ricoh Deeek order win with Barrick in that Northwestern Pakistan region of Balakistan is a great example of that. And we see we expect to see acceleration of Saudi investment mining industry. We've got a lot of great stuff going on in phosphate across Morocco and North Africa. And then in Central Asia, lots of activity on expanding copper production there as well. Australia has been an area of really, really strong growth over the last few years with nickel and lithium coming off a little bit.

Operator

That's probably plateauing a little bit. And Europe is weak and continue has been for a while and continues to be. The only other final thing I'd say is that the governments are really sort of getting it now in terms of critical minerals. And it's really encouraging to see several policies now being published and announced. There's more to happen in terms of how those policies are enacted and enabled.

Operator

But I feel that when you take everything I've just said there, it's a more positive environment than it has been for a while in terms of the industry now starting to lean into more investment and more expansion of critical minerals and the energy transition materials.

Speaker 9

That's great. Congratulations. Thanks.

Operator

Thanks, William.

Speaker 2

We have a question from Michael Harlow from Morgan Stanley. Michael, your line is now open. If you are ready.

Speaker 5

Thank you very much. Thank you for the presentation. Thank you for taking questions and thank you for squeezing me in. Just one more on the cost cutting and the margins. You were very clear before on the fact that 20% was not going to be the end of it.

Speaker 5

From a conceptual point of view, is it fair for us to say that as far as Weir is concerned, we are seeing a convergence of margins between the midstream and the upstream? And then on the Micromine deal, obviously, what comes to mind is the ESCO acquisition. You've done a fantastic job with this one. So if you could tell us what you've learned and what you can apply to the MicroMine deal in terms of how you reintegrate these assets. Obviously, I'm referring to the fact that this time around, it's not a cost cutting story.

Speaker 5

Thank you.

Operator

Yes. I think the answer to the first question is probably quite simple. Yes. That was the plan and we're getting there and we will get there. But on Micromine, I think the reflection I would say two things.

Operator

I've talked about how this is just a top tier asset. It is highly professional, established, very, very capable business. And all we want to do is enhance that. One of the things that's been sort of really striking as we have got to know the business better and worked with the team, with the owners and the management of the business is there is fantastic cultural alignment between the Micromine team and the Weir team. And I've learned in my M and A experience over the years that is absolutely the most important thing if you can find a quality business that has got cultural alignment as well, that makes it a hell of a lot easier.

Operator

And we find the MicroMind people to have really similar values to Weir folks, really innovative mindset, great customer focus and intensity, and that's exactly what we need to work together to be able to create the vision that we've been describing today and why I'm super excited about it. And that sort of cultural and values based alignment, I would say, has a great parallel with the way that the ESCO acquisition was brought into Weir. And you just look at how successful that has been in terms of delivery of the synergies, the integration, where the margins of that business is today compared to 11% operating margins when we bought it. I mean, that's been perfect execution from beginning to end, not that we're at the end. And I think MicroMine is going to be exactly the same.

Speaker 5

Thank you. That's very helpful. Okay.

Operator

Thanks very much, Michael. Okay. So thanks, everybody, for the questions. And I really appreciate you scrambling to join the call this morning given this was a little bit of a surprise announcement relative to when you were expecting to hear from us. So I really appreciate everybody making the time to be able to join us.

Operator

If there are any further questions through the day, please get in touch with our IR team. We'd be happy to help and support that. Once again, thank you very much for your interest and questions today. And look forward to speaking to everybody over the course of the next week or so. Take care.

Earnings Conference Call
The Weir Group Q4 2024
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