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Capital Markets Day London, June 2013
Agenda
2
Introduction Keith Cochrane
Power & Industrial Kevin Spencer
Coffee Break
Value Chain Excellence Gavin Nicol
Conclusion Keith Cochrane
Questions & Answers
Disclaimer
This presentation contains certain forward-looking
statements. These forward-looking statements can
be identified by the fact that they do not relate only
to historical or current facts. In particular, all
statements that express forecasts, expectations and
projections with respect to future matters, including
trends in results of operations, margins, growth
rates, overall market trends, the impact of interest or
exchange rates, the availability of financing to the
Company, anticipated cost savings or synergies
and the completion of the Company's strategic
transactions, are forward-looking statements. By
their nature, these statements and forecasts involve
risk and uncertainty because they relate to events
and depend on circumstances that may or may not
occur in the future. There are a number of factors
that could cause actual results or developments to
differ materially from those expressed or implied by
these forward-looking statements and forecasts. The
forward-looking statements reflect the knowledge
and information available at the date of preparation
of this Capital Markets Day Presentation, and this
presentation will not be updated during the year.
Nothing in this Capital Markets Day Presentation
should be construed as a profit forecast.
3
Weir Group: Providing engineering solutions to the natural resources industries Keith Cochrane, Chief Executive
4
Delivering sustainable growth through the cycle
Divisions with shared characteristics
> Serving structural growth markets
> Highly engineered equipment
> Extreme and remote environments
> Intensive aftermarket demand
Portfolio benefit
> Complementary technologies and footprint
> Diversified end markets
> Exposure to different capex cycles
> Underpins earnings sustainability
5
Coherent and complementary Group focused on sustainable growth
Minerals
Oil & Gas Power & Industrial
Common growth drivers and strategy
5 Coherent and complementary Group focused on sustainable growth
Multiple levers to enhance competitive positioning
Unified approach across the value chain
> Customer intimacy
> Innovative engineering
> Supply chain excellence
> Strategic supplier partnerships
> Lean philosophy
> End to end planning & coordination
7
Coherent and complementary Group focused on sustainable growth
Planning
Customer
Operations / Logistics
Procurement Supply chain
Sales / engineering
Kevin Spencer, Divisional Managing Director
8
Weir Power & Industrial: Developing a platform for revenue and margin growth
Agenda
9
Divisional review Kevin Spencer
Weir valves overview John Heasley
Control valves case study Roger Griffin
Operational excellence & concluding remarks Kevin Spencer
Power & Industrial division overview
Provider of valves, pumps, turbines and engineering services
Serving global power generation, industrial and oil & gas sectors
Engineered valves business ca. 60% of divisional profit
10
Three distinct product pillars supported by extensive service capability
2012 input:
£361m
Valves (52% of input)
Pumps (7%)
Hydro (14%)
Services (27%)
Overview of P&I business: Financial performance
Strong performance over past 3-years
> Revenue increase of over 40%
> Steady performance through the cycle,
underpinned by valves and targeted M&A
Broadly stable EBITA margins
> Margin reflects high proportion of Services
work (c.8-10%)
> Re-aligning business after Fukushima
to expand in non-nuclear end markets
High organic returns on capital (30%+)
> Low level of invested capital in Services
Margin and return on funds employed uplift
expected as volumes and aftermarket mix
increase
11
Strong revenue growth and double-digit margins
Revenue (£m)
41% 45% 56% 53%
44% 47%
55% 59%
Book to bill 1.1 1.1 1.0 1.1
0%
4%
8%
12%
16%
0
5
10
15
20
25
30
35
2009 2010 2011 2012
EBITA
EBITA marginafter one offs
Operating profit (£m) and margin (%)
0
100
200
300
400
2009 2010 2011 2012
Aftermarket
Original equipment
Overview of P&I business: Product and market split
12
Balanced portfolio with growing emerging markets exposure
Increasing focus on core Weir Group markets
(input)
Growing the installed base (input)
49%
5% 11%
35%
52%
14%
7%
27%
Valves
Hydro
Pumps
Services businesses
Increasing product contribution (input)
Increasing emerging markets exposure
(input)
+8%
56%
11%
33%
60% 12%
28%
Power generation
Oil and gas
General industrial+5%
18%
9%
38%
35%
27%
7%
36%
30% Indo Pacific/ Asia
Other emerging
North America
UK and Europe+7%
43%
14%
43%
54%
11%
35% OE
Spares
Service
+11%
2009
2009
2009
2009
2012
2012
2012
2012
Developing global presence
13
A global business with ambitions to continue geographical expansion
Key
P&I valves manufacturing plant
P&I non-valves manufacturing plant
P&I sales / service facility
Divisional HQ
Salt Lake City, UT, USA
Montréal, Canada
East Kilbride
Ipswich, MA USA
Johannesburg, S. Africa
Suzhou, China
Seoul, S. Korea Beijing, China
Sharjah, UAE
Saint Victoret, France
Vendin Le Vieil, France
Singapore
York, PA, USA
Hubli, India
Madrid, Spain
Gosford, Australia
Ansan, S. Korea
Warwick
Teesside
Alloa
Elland
Barton on Humber
Bedford
Sao Paulo, Brazil
Manila, Philippines Bangalore, India
Product and market positioning (excluding valves)
14
Application-critical products and services
Industrial pumps (7% of 2012 input)
Hydro (14% of 2012 input)
Services (27% of 2012 input)
Services – overhaul, repair and upgrade of pumps, valves, turbomachinery and hydro/ wind turbines; outage management
Key end markets – nuclear and conventional power, renewables, O&G, general industrial
Key customers – EDF, SSE, Rolls Royce, Gamesa
Geographical strengths – UK & Ireland, Spain, South East Asia
Project lifecycle – delivery: 1 week to 18 months
Products – rehabilitation/ upgrade of medium to large hydro turbine runners; site services
Key end market – hydro rehabilitation
Key customers – Ameren, Seattle City Light, Rochester Gas & Electric
Geographical strengths – North America
Project lifecycle – delivery: 6 months to 3 years
Products – speciality pumps and pumping systems
Key end markets – municipal wastewater, O&G/ power, food & beverage, general industrial
Key customers – General Electric, Daelim, BOS
Geographical strengths – North America
Project lifecycle – delivery: 2 weeks to 6 months; time to spares: 2 to 4 years
Key end markets aligned to structural growth drivers
15
Mega trends
Increased demand for energy, power and efficiency
Addressable market growing at c.4%-5% p.a.
Globalisation Sustainability Resource
scarcity
Emerging
markets
growth
Urbanisation Climate
change Water security
Ageing
population
Market growth
Markets growing at or faster than GDP growth
0% 2% 4% 6% 8%
Services (incl.wind O&M)
Ind. pumps
Hydro
Valves
Addressable market CAGR 2012-17, %
(products and services)
0% 2% 4% 6% 8%
Industrial
O&G
Fossil
Nuclear
Addressable market CAGR 2012-17, %
(end markets)
Strategic framework underpins revenue growth
16
Strategic platform established to grow revenues faster than end-markets
End markets/ niches
Valves ~£5.6bn addressable
market
~4% market share
Niche leadership:
Nuclear safety valves (~40% share)
China coal-isolation valves (~10% share)
Hydro ~£0.3bn addressable
market
~13% market share
Niche leadership:
North America hydro turbine/ pump-turbine rehab (~26% share)
Industrial pumps ~£0.6bn addressable
market
~6% market share
Niche leadership:
North America specialty industrial pumps (~11% share)
Services ~£1.8bn addressable
market
~5% share
Niche leadership:
UK Services overhaul, repair and upgrade (~13% UK share)
Strategy to grow revenues faster than end-markets Expand in and beyond niches
Align with growth markets
Leverage global network
Capabilities & differentiators
Highly engineered products/ unique technology
Service presence
Global footprint
Aftermarket capability
Customer intimacy
Best-cost manufacturing
Cost-competitiveness
Operational excellence
Margin enhancement
Increased volumes
P&I strategy and priorities
17
Platform to sustain revenue growth and transform margins
Underpinned by operational excellence, customer intimacy, quality and safety
Product
development
Extend range of applications for Valves, Hydro and Industrial Pumps
Further develop hydro turbine runner technologies
Aftermarket
enhancement
Maximise return from installed base, leveraging Services and Weir Group footprint
Extend range and scope of Services and Hydro offering
Geographical
expansion
Extend product businesses globally
Expand Services presence in Asia and South America
Best-cost
sourcing
Expand Valves and Industrial pumps best-cost sourcing
Utilise Group wide procurement resources and expertise
Valves: Growth and profit engine of the division John Heasley, Valves Managing Director
18
Weir valves timeline
19
170 years history of established brands, supplemented by recent M&A
1989
Weir acquired
Hopkinsons
Sebim acquires
Sarasin
1990
Weir acquired
Atwood & Morrill
1995
Weir acquired
Tricentric
1996
Weir acquired
Batley Valve
1843
J Hopkinson began
manufacturing in
Huddersfield, England
1848
Defays & Sarasin
established in
Lille, France
1860
R & T Blakeborough
started manufacturing
valves in Brighouse,
England
1871
G & J Weir
established in
Glasgow, Scotland
1900
Atwood & Morrill
founded
1964
Batley Valve
established in
Batley, England
1975
Tricentric
designed by
Adams
1998
Weir opened
sales office in
China
Weir acquired
Sebim
2003
Sarasin-RSBD
product line
created
2006
Weir opened
manufacturing facility
in Suzhou, China
2008
Atwood & Morrill and
Tricentric
manufacturing moved to
Ipswich, USA
2010
Weir acquired BDK
Engineering Industries
Singapore office opened
2011
Weir acquired 60%
share in HIM Tech (now
Weir International South
Korea)
2012
Weir’s southern France
facility moved to new
custom-built premises
in Saint Victoret
1800 1900 1960 1980 2000 2010 1990
1966
Sebim
founded
1981
Sebim
acquired
RSBD
1988
Hopkinsons
acquired
Blakeborough
Valves business today
Provider of highly engineered valves to
a number of key market niches
> Specialist equipment targeting critical
& technically challenging applications
> Power and oil and gas end
market focus
Control, Isolation and Safety valves
> World renowned brands in critical
power applications
7 manufacturing plants worldwide
Integration and coordination of 3 product
lines to leverage global capability
0
50
100
150
200
2009 2010 2011 2012
Aftermarket
Original equipment
20
Significant opportunities for geographical and end market expansion
0%
4%
8%
12%
16%
0
5
10
15
20
2009 2010 2011 2012
EBITA
EBITA marginafter one offs
Input (£m) - Valves
Operating profit (£m) and margin (%)
69% 73% 72% 75%
31% 27%
28% 25%
Book to bill
1.1 1.2 1.1 1.2
Creating a global valves platform
21
Valves are the core of the division, providing a solid global platform for growth
Sales & service
facilities
>30% of 2012 total valve revenue sourced from best-
cost countries
Elland
Suzhou
Ansan, S. Korea
Hubli
Ipswich
Vendin Le Vieil
Western plants
Eastern plants
Key:
Group foundries Port Elizabeth
Kuala Lumpur
Product range Diverse
manufacturing base
Operational excellence
Integrated sales structure
Valves platform
Saint Victoret
Product line overview
22
Application-critical products with strong aftermarket potential
Safety valves (24% of 2012 input)
Control valves (28% of 2012 input)
Isolation valves (48% of 2012 input)
Application – stop flow of fluid for technical or safety reasons; ASME pressure class 150 to 4500; short reaction time; sizes 0.5” to 96”
Project lifecycle – delivery: 12 weeks (commercial) to 3 years (nuclear); aftermarket: from 2 to 4 years
Weir installed base – high, focused on Commonwealth countries
Spares potential – good
Service potential – medium/ high
Application – open in event of system overpressure; ASME pressure class 150 to 4500; sizes 0.5” to 24”
Project lifecycle – delivery: 12 weeks to 2 years; aftermarket: from 2 years (plant certification)
Weir installed base – medium
Spares potential – good
Service potential – medium
Application – control flow of gases or liquids in critical applications; ASME pressure class 150 to 4500; sizes 0.5” to 36”
Project lifecycle – delivery: 12 weeks to 5 years; aftermarket: from 6-24 months
Weir installed base – low
Spares potential – excellent
Service potential – medium/ high
Market positioning
23
Niche market positions in fragmented markets
Safety valves (24% of 2012 input)
Control valves (28% of 2012 input)
Isolation valves (48% of 2012 input)
Key customers – Westinghouse, China Nuclear Energy, Dongfang
Geographical strengths – North America, China, Europe, India
Key end markets – O&G, nuclear, coal, CCGT, general industrial
Addressable market share – ~5%
Key customers – EDF, China Nuclear Energy, Technip, Air Liquide
Geographical strengths – Europe, China
Key end markets – O&G, nuclear, coal, general industrial
Addressable market share – ~6%
Key customers – KHNP, China Nuclear Energy, Samsung Heavy Industries, Alstom, SBM
Geographical strengths – China, rest of Asia, Europe
Key end markets – O&G, nuclear, coal, general industrial
Addressable market share – ~4%
Pentair/ Tyco
Flowserve
Velan
Crane
Weir
Others
Pentair/ Tyco
GE/ Dresser
Curtiss Wright/ Farris
Leser
Bopp & Reuther
Weir
Others
Emerson Fisher
GE/ Dresser
Flowserve
IMI
Weir
Others
£3-4bn addressable
market
<£1bn addressable
market
Total global market: ~£17bn Total global market: ~£2.5bn Total global market: ~£3bn
<£1bn addressable
market
Source: Weir estimates Source: Weir estimates Source: Weir estimates
Geographic and end market analysis
End market
& growth
OE trend AM trend
Nuclear
(3%-4% p.a)
Subdued
post-Fukushima
Demand increasing
driven by safety
regulations and
plant life extensions
Coal
(4%-5% p.a.)
Strong demand
from India and China
Annual operational
spend remains robust;
plant life extensions
prolonging AM
CCGT
(5%-6% p.a.)
Strong US demand
driven by low gas prices;
China and Middle East
growing fast
Plant life extensions
in US/ Europe present
upgrade opportunities
O&G
(7%-8% p.a.)
Emerging market focus
for refining and
petrochemical, esp.
Middle East & BRICS
Increased operating
pressures/ severe
applications driving
demand
Industrial
(c.4% p.a.)
Sluggish in North
America and Europe;
stronger in developing
markets
Stable, driven by
critical need for
routine maintenance
and repairs
34%
9% 28%
29%
44%
12%
20%
24%
Indo Pacific/ Asia
Other emerging
North America
UK and Europe
24
Significant emerging markets and selected end market opportunities
Increasing emerging markets focus (input)
2009
+13%
2012
Increasing non-nuclear contribution (input)
20%
14%
13%
53%
31%
16% 22%
31% Power gen. - fossil
Oil & Gas
General Industrial
Power gen. - nuclear
2009 2012
+22%
Valves: Strategic priorities
25
Positioned to continue to grow faster than end-markets
Underpinned by operational excellence, customer intimacy, quality and safety
Product
development
Explore new markets/ applications for existing products
Enhance super/ ultra-critical and packaging capability
Aftermarket
enhancement
Maximise return from existing valves installed base, leveraging Services business expertise
Execute plans to rapidly grow installed base to deliver future aftermarket revenue streams
Geographical
expansion
Establish presence in Russia and North/ Eastern Europe
Drive sales through hubs; leverage Korean platform
Best-cost
sourcing
Complete product transfer programmes to best-cost countries
Utilise Group wide procurement resources and expertise
Control valves case study: Delivering rapid growth Roger Griffin, Managing Director, Control & Choke Valve products
26
Delivering rapid growth from low base
0
10
20
30
40
50
60
2009 2010 2011 2012
Order input Revenue
£m
27
Strategic focus leveraging common capabilities
Key aspects of the control valves rapid growth plan:
> Development of existing but underweight product line
> Develop new product lines
> Enter new geographies
> Utilise best-cost sourcing capability
> Provide installed base for future aftermarket opportunities
Input up 7x
since 2009
Revenue up
3x since 2009
Product
development
Geographic
expansion
Best cost sourcing
Aftermarket
enhancement
Product development and patented technology
X-Stream™ trim designs
> Used in control and choke
valve product line
> Provide greater control of
pressure drops whilst reducing
noise and erosion
> Application in high value, high
end technical performance
control valve market
Feature Benefit
Minimises areas for re-circulating flow Reduced cavitation and clogging
Velocity controlled and limited at all points
within trim Reduced potential for erosion
Maximises control of flow passage diameters Reduced noise
Up to 30 stages of pressure reduction Prevents excessive vibration
Smooth/ streamlined flow path without
limiting capacity Larger capacities than competitors
28
Tungsten Carbide X-Stream™ Disc
Rendered Stack Sand passes around smooth corners with less impact erosion
Animation
Ansan facility
Geographic expansion
Weir International South Korea (WISK)
Acquisition in H1-2011
> Majority owned with option for full ownership
> Returns beat cost of capital in first full year
> On track to double revenue in 2013
Control valves for general and severe service
> O&G, power and petrochemical applications
Providing access to new markets and customers
> South Korean and adjacent markets
> Access to internationally influential Korean
EPCs
2012 highlights:
> Input significantly ahead of original target
> Seoul sales office opened
29
Acquisition delivering strong returns and strategic benefits
0
5
10
15
20
25
2009 2010 2011 2012
WISK third party input (£m)
Input up > 7x
since 2010
Best cost sourcing - Leveraging global presence
Diaphragm actuators from India
Piston actuators from Korea
Complete valves from China
Shin Ulchin and Braka nuclear orders
> First nuclear control valve orders
> Leveraging UK/ Korean capabilities
Strong progress in O&G and new
geographies
> FPSO for BG Norge North Sea
Joint UK/ Korea effort
> FPSO for Petrobras Brasil
Joint UK/ China capabilities
> FPSO Sulphate Removal Systems Brasil and Angola
30
Leveraging global platform to accelerate growth and support margins
Best-cost sourcing Leveraging presence & capabilities
Growing control valves installed base will
drive increased AM mix
> ~2.5x increase in control valves AM
revenue since 2009
Global installed base being harvested for
all valve types
> Canada valves aftermarket hub
>£7m revenues since 2009 start-up
> Providing rapid turnaround solutions
Replicating Canadian aftermarket
structure in UK and Australia
> Further opportunities in US and
Commonwealth countries
31
Capturing the aftermarket potential across the valve portfolio
35
40
45
50
2009 2010 2011 2012
Valves aftermarket input (£m)
AM input up 24%
for all valves
since 2009
Aftermarket enhancement: Leveraging installed base
Operational excellence and concluding remarks Kevin Spencer, Divisional Managing Director
32
Operational excellence
Performance in line with valves peers > But not as strong as Weir
Minerals
Opportunity for differentiation
Cultural change required
> Strong growth requiring new approach
Employ Weir best practice to enhance plant performance
Backlog and lead-time reductions
Leverage best-cost supply chain
33
Setting a new standard to create competitive advantage and grow margins
Restructured valves businesses to drive operational focus
Plant managing directors complementing successful product line leaders
Example: Lens conventional safety valves plant
> Up to 40% lead time reductions since Nov-12
> ~20% inventory reduction since Nov-12
> ~20% revenue improvement Q1 2013 versus 2012 average
> Improved customer OTD
Position Actions and impact Priorities
Positioned for sustainable, profitable growth
34
Design and manufacture of valves, hydro turbines and specialist pumps
Full-scope specialist support through service centres and hubs Process critical
products
Structural growth
markets
Growing global demand for energy products and services
Diversified end market exposure (power, O&G, and industrial)
Increasing
market share
Global manufacturing and sales footprint – support customers globally
Broad valves portfolio generates cross-selling opportunities
Differentiated
technology
Hydro turbine runners, X-StreamTM trim and Sebim nuclear safety valves
Replacing ageing infrastructure with market-leading technology
Leveraging the
platform
Best-cost manufacturing, sourcing and supply chain initiatives
Bolt-on and step change acquisitions supporting growth
Medium term goals: Sustained high single digit revenue growth;
Increase operating margins to 13-14%
Value Chain Excellence Gavin Nicol
35
Agenda
36
Value Chain Excellence Gavin Nicol
Extending the lean journey - Pressure Pumping Paul Coppinger
Developing the Weir Procurement System Trevor Latham
Strategic supply chain development - Minerals Africa Dave Athey
Competitive advantage through technology Chris Poole
Weir’s operational excellence journey
Long established culture of operational
excellence
> Lean manufacturing principles introduced
> Continuous improvement culture embedded
Remit broadened over past 4 years
> Commercial, engineering, procurement
Next phase of journey focused on
integrating interdependent functions
> Value Chain Excellence
37
Established culture of operational excellence underpins performance
Weir Production
System (WPS)
Weir Commercial
System/ Net
Promoter Score
Weir
Procurement
System
Engineering
Excellence
Committee
2005
2009
2011
2010
Weir operational excellence timeline
Excellence committees operating independently
Value Chain Excellence
Recognises need to exploit
interdependent clusters
Links clusters to optimise both customer
and shareholder value
Positions Weir as partner
> Not just a supplier
Requires customer and supplier intimacy
Order generation and order
fulfilment processes closely aligned
38
Value Chain Excellence: Next chapter of operational excellence
Planning
Customer
Operations / Logistics
Procurement Supply chain
Sales / Engineering
Paul Coppinger, Pressure Pumping Managing Director, Weir Oil & Gas Extending the lean journey – Pressure Pumping
39
Overview of Pressure Pumping lean journey
Run rate nearly trebled in 18-months to Dec-11
> Supply chain and operations stretched
> Outsourced activities
> Operational focus on enabling
capacity expansion
Lean journey extended in H2-11
> Providing flexibility to cope with rapid
demand changes
Run rate nearly halved in 12 months
to Dec-12
> Delivered cost, efficiency, lead time &
inventory benefits
> 75 full week Kaizen events (>350 staff involved)
Supporting broadly flat margins through 2011-12
0
100
200
300
400
500
600
10-H1 10-H2 11-H1 11-H2 12-H1 12-H2
40
Lean activities supporting stable margins in dynamic environment
LFL upstream revenue ($m)
Oil & Gas divisional margins (%)
0%
5%
10%
15%
20%
25%
30%
10-H1 10-H2 11-H1 11-H2 12-H1 12-H2
Redesigning the value chain
41
Aligning business to key value streams
Flow
Swivel
Valve
Integral
Integral
22% of part #’s = 84% volume = 62% of sales
Valve
31% of part #’s = 95% volume = 91% of sales
Swivel
27% of part #’s = 88% volume = 92% of sales
MTS – Make to Stock ATO – Assemble to Order MTO – Make to Order
MTS – Make to Stock ATO – Assemble to Order MTO – Make to Order
MTS – Make to Stock ATO – Assemble to Order MTO – Make to Order
Product line
Value Streams Product Categories
Understanding the customer requirements
High Movers - Make to Stock (MTS)
6 sigma model created Demand segmentation executed to understand customers’ demand
0
100
200
300
400
500
600
0 2 4 6 8
Me
an
Statistics
High Movers -
base (MTS) Define Strategy:
ATO or
(MTS/MTO)
Make-to-Order
(MTO)
Finished goods demand
Value stream mapping – plug valve production
> Long lead time:
23 weeks
> Low OTD: 30%
> Safety hazards:
High TIR
> Excess inventory
42
Production: 24 valves per shift
Batch process of 8
Push system
Takt time: 17 min
No supermarket, Kanban or signals
Higher lead times for customer
30 Valves per shift (25% improvement)
Creation of one-piece flow, WIP eliminated
Takt time: 14 min (18% improvement)
Supermarket, Kanban, signals developed
Reduced customer lead time
Better designed assembly operation
Before After
Current State Future State
60% 80%
Realigning supply base
> Components for MTS products identified
> Rationalisation of inventory requirements
> Supported 10% inventory reduction in quarter
43
Inventory optimisation by linking products,
components and suppliers
> Identify key suppliers by volume and value
> Deeper engagement initiated
> Conducted Kaizen events with key suppliers
Plug valve example
Number of MTS products
Total parts needed
Suppliers
Swivel 26 52 12
Valves 60 274 53
Integrals 173 215 43
80 suppliers out of 450 in total
Top 10
Valve types 22
Number of components 117
Suppliers 25
Total components Total cost
4” Plug Valve
Realigning distribution channels
44
Optimised distribution centre to Fort Worth operations channel
FT. Worth Service
Centre
Distribution
Centre Valve
Swivel/Integral
Each site operates
own truck to transfer
material
Before After
> Trips between distribution centre on demand, not systematic > Manufacturing disruption due to non availability of parts > Excess material across manufacturing site
Before
FT. Worth Service
Centre
Valve
Single truck makes “milk
round” covering all sites
with higher frequency
> Frequent and systemic trips covering all sites during each trip
After
Pump
Distribution
Centre
Swivel Integral Pump
Optimised distribution centre to service centres
Service centre journeys reduced over 60%
> 1,650 reduction in miles driven/week
Hub strategy for service centre clusters
> Materially reducing inventory requirements
Product and inventory movement to service
centres optimised
71%
81%
Q1 2012 Q4 2012
Swivel – 10% Improvement
73%
82%
Q1 2012 Q4 2012
Valve - 9% Improvement
36%
67%
Q1 2012 Q4 2012
Integral – 31% Improvement
Results of lean improvement
Footprint and cost savings
Fort Worth main – 71k sq.ft. footprint saving
Pump assembly: 8,400 sq.ft.
Integrals 11,000 sq.ft.
> Transfer from Washington to Ft.Worth
Plungers/cement pumps 21,400 sq.ft.
> Transfer from Odessa to Ft. Worth
Distribution centre: 27,500 sq.ft.
Cost savings
Distribution
> Fort Worth savings: $500k p.a.
> Distribution centre savings: $200k p.a.
Manufacturing
> Closure of Washington & Odessa facilities
> Fixed cost saving of $7m p.a.
> No reduction in effective capacity
45
Overall Labour Efficiency % (Labour Utilisation % x Production Efficiency %)
21
8
14
4
23
32
27
8
3
0
0
0
0
0
0
0
0 5 10 15 20 25 30 35
2" PUP JOINT
3" CROSS
4" 15K CROSSOVER
4" 15K LAT.CROSSOVER
4" 15K PLUG VALVE
4" 15K SWIVELS
4" 15K TEE
3" WYE
Q1 2013 Q4 2011
Lead time and efficiency
Lead time eliminated for high movers Quoted lead time (weeks)
Developing the Weir Procurement System
46
Trevor Latham, Head of Procurement
Procurement: Identifying the global opportunity
Weir procurement in 2010:
£825m total spend
77% OTD from supply base
Fragmented spend
Tactical purchasing activity
Low levels of best-cost country
sourcing (BCC)
Limited standardisation
No key supplier management
>20% spend under contract or
long term agreement
47
Goal established to develop a best in class procurement organisation
North America
44% of direct spend 9% from BCC
South America
10% of direct spend 18% from BCC
EMEA
35% of direct spend 11% from BCC
Asia Pac
11% of direct spend 19% from BCC
£165m Indirect Spend
£660m Direct Spend
Creating best in class framework and processes
Introduced Weir
Procurement System
> Standardised Group-wide
process
> Web based eProcurement
tools
Rolled out category
management
> Structured approach
to procurement and supplier
management
> Increases supply
chain value
> Value driven – not cost
> Make vs buy strategies
> Customer centric approach
48
Introduced processes to leverage ‘whole of Group’ buying power
Supplier approval, performance and development
Data management, reporting and compliance
Strategic sourcing, negotiation and contracting
Quality and on-time delivery
Working capital,
price, lead time, cost to
procure
Value
equation
Delivering change – key activities
Centre of Excellence teams established
> Strategic direction on key spend categories
> Initial focus – quick wins & critical categories
> Leverages Group scale in spend allocation
Global supplier performance scorecard
> Defined KPIs – quality, delivery, cost and service
> Tracks performance by business and region
> Applies to all Centre of Excellence suppliers
> Outcomes used to dictate future sourcing decisions
49
Delivering immediate benefits and embedding cultural change
Categories
1. Machining
2. Castings
3. Forgings
4. Steel
5. Motors
6. Mechanical Seals
7. Fabrications
8. Foundry Materials
9. Powertrain
10. Rubber/Latex
11. Valves
12. Pumps & Spares
13. Bearings
High
Low
Expected Benefit
Difficulty / Complexity
High Low
2
1
8
10
13 12
11
9
3 7
4 6
5
Phase 1 (2012)
Phase 2 (2013)
2012 spend of £1,400m
Improvements in procurement performance
50
Demonstrable benefits from early initiatives
North America
49% of direct spend 15% from BCC
South America
10% of direct spend 41% from BCC
EMEA
28% of direct spend 14% from BCC
Asia Pac
13% of direct spend 42% from BCC
£300m Indirect Spend
£1,100m Direct Spend
Metric 2010 2012
(% inc) 2013
target
Supplier on time
delivery
77% 91% 95%
14%
Supplier quality levels
‘first pass yield’
97% 99% 99.5%
2%
Best cost sourcing 12% 30% 40%
18%
Suppliers under
contract/ long term
agreement
18% 40% 60%
22%
Spend managed by
procurement
80% 85% 90%
5%
£28m annualised procurement savings in 2012
27%
24% 13%
14%
12%
10%
Proprietary Products Forgings & Castings
Freight Steel & Fabrications
Powertrain Components Other
51
2012 activity a building block for continued results in 2013
% of total savings 2012
2013-2014 objectives
Improve operational performance
> Robust planning processes
> Better quality data
Increase supplier intimacy
> Support working capital reduction
> Involvement in new product introduction process
Improve overall capability of suppliers
> Consolidating spend on high performers
> Eliminating consistently poor performers
Embed effective risk management of key suppliers
> Ensure sustainability and business continuity
52
Targeting £30m+ cost reduction in 2013: 2.5%-3.0% of Group spend
Dave Athey, Regional Managing Director Africa, Weir Minerals Strategic supply chain development
53
Strategic suppliers cover range of categories:
> Machine shops
> Foundries
> Fabricators
Importance of supply chain to Minerals Africa
20
770
Strategic
Non Strategic
54
3rd party suppliers account for 70% of cost of goods sold
Number of suppliers
Challenging regional environment
> Transport infrastructure
> Border restrictions
> Political/social instability
80
20
Strategic
Non Strategic
Supplier spend (% of total)
Minerals Africa supplier performance 2010
Poor on time delivery performance
> Impacting customer on time delivery
> Buffer stock increasing inventory levels
Ineffective pull system
> Long lead time
> Covering limited proportion of demand
> Low inventory turns
Supply chain unable to support growth expectations
> Low volume of parts shipped
> Product portfolio expanding
55
Transactional relationships resulted in poor supplier performance
On time delivery
66%
Pull system lead times
28 days
Pull system - % of inventory
5%
Inventory turns
1.5
Parts shipped daily volume
2,500
Number of line items
150
Strategic approach taken to supplier development
Supplier development audits
> Lean principles
> 5S
> Flow & process improvements
Training of Suppliers
> Pull system methodology –
simulation model
Front end levelling tool
e-Procurement
Implementation of JIT (Just In Time) supply
Developed web based barcode capability
56
Developing supplier capabilities through partnerships
Improving supplier performance
Benefits including:
Lead time reductions
Integration into Weir pull
system supply chain
Improved supplier
output & profitability
Improved supplier
reliability (safety, quality,
OTD etc)
57
Delivering tangible benefits for the supplier, Weir and the customer
Su
pp
lie
r A
S
up
pli
er
B
Initial findings:
Little or no:
> Flow, FIFO, 5S,
lean principles
Lower regard for safety
Poor reliability
After Before
Minerals Africa supplier performance 2012
Materially improved overall supplier performance
> On time delivery materially increased
> Inventory turns materially increased
Pull system reset and expanded
> Pull system inventory turns doubled
> Step change in proportion of inventory covered
Supply chain supporting materially increased demand
> Daily volume trebled
> Growing supply chain complexity
58
Enhanced supply chain performance during period of rapid growth
On time delivery
92%
Pull System lead times
7 days
Pull System - % of inventory
43%
Inventory turns
3.1
Parts shipped daily volume
8,000
Number of line items
2,399
up 40%
75% lower
up 760%
up 100%
up 220%
up 1500%
Piloting consignment stock holding
Roll-out of JIT part supply
Focus on supplier capacity
management to enable growth
Further developing maturity of pull
system part supply
Distribution network: best practice
roll out
Next phase of supply chain development
59
Creating competitive advantage through supplier partnerships
Service Centre distribution model
Competitive advantage through technology
60
Chris Poole, Engineering Excellence Committee Chairman
The environment in which we operate
Natural resources more difficult to access
> Strain on existing technologies
Customers demanding more innovation
and faster-to-market execution
> Traditional product development
processes unable to meet expectations
Enhanced environmental awareness
drives need for smaller carbon footprints
> Pushes boundaries
of product efficiencies
New technologies opening up new
opportunities
61
Opportunity to differentiate through new innovative solutions
Increasing investment in innovative technology
2010 – Launched innovation as strategic pillar
Since 2009, doubled investment in research & development
> c.1% of sales in 2012
Nearly doubled R&D engineers to over 1,100
Embedded innovation process to drive new product & technology development
Between 2008 and 2012, threefold increase in number of patents filed
62
Targeting increase in R&D spend to 1.5%-2% of sales within 3-5 years
Weir Group’s approach to technology development
63
Structured approach focused in four areas of technology leadership
9
8
7
6
5
4
3
2
1
Product launch
Product qualification
Detailed design
Fundamental research
Applied research
Technology assessment
Technology centres
Technology
platforms
Design centres of origin
New product
development
Fundamental
research
Pump tech centre
Mat’ls tech centre
Weir Advanced
Research Centre
32 global
product
DCOs
Weir Advanced
Research Centre
Other universities
Technology readiness level (TRL)
Time horizon
Common core competencies > Materials science
> Wear mechanism
understanding
> Hydraulics design
> Fluid dynamics
Common processes > CAD/design
> Integrated systems
> Virtual product development
> Engineering best practice
Engineering systems
Product design
Process technology
Innovation systems
Case studies
Minerals
WBH® range of slurry pumps
Establishment of screens design centre
> Development of range of screen machines for mining applications
Development of wear resistant alloys for oil sands applications
Introduction of “smart products”
> Control systems for optimising cyclone performance
> Wear indicators for hoses
Oil & Gas
New range of high pressure pumps for hydraulic fracturing (Destiny™)
Introduction of advanced fluid end technology (Duralast™)
Launch of a new range of centrifugal Gladiator™ water and slurry pumps
Extension of the range of flowline safety restraints for high pressure systems
> Up to 30k psi applications
64
Destiny™ quintuplex frack pump WBH® slurry pump Cavex® cyclone Gladiator™ slurry pump
Case studies
Power & industrial
Introduction of X-stream™ trim for severe
service control valves
Extension of isolation and control valve range
for critical nuclear applications
New Starsteam® safety valve for ASME 1
boiler & pressure vessel applications
Implementation of leading edge analytical
techniques to enhance hydro and power
product performance
Weir Advanced Research Centre
Advancing surface treatment technology
> Reducing erosion and corrosion in high
wear environments
Improving algorithms modeling behaviour of
abrasive flow through centrifugal slurry pumps
Optimisation of service life for forgings
operating in a high load, fatigue environment
65
Control valve with X-stream™ trim Starsteam® safety valve Finite element analysis forging model
Future technology development strategy
Common need for technology enhancements
across the Group:
> Application of mechatronics
Integration of sensing, data acquisition
& interrogation, communications
infrastructure, electronic control
> Advanced manufacturing and process
technologies
> Leading edge research into new even
higher strength, wear resistant materials
66
Co-ordinated research expanding pipeline of next generation technology
Conclusion Keith Cochrane, Chief Executive
67
Key takeaways
Power & Industrial
Strong underlying performance
Robust global platform established
Range of growth opportunities
Scope for margin enhancement
Value Chain Excellence
Substantial opportunity for
operational improvements
Lean expanded across value chain
Leveraging value from functional
interdependencies
Extending technical differentiation
68
Clear priorities to drive and support profitable growth
Minerals Oil & Gas Power & Industrial
Process critical
products
Leadership in core mill circuit technologies
Exposed to high wear and abrasion
Leading upstream surface equipment & service provider
Exposed to high temperatures, pressures and abrasion
Niche provider of engineered valves, turbines and pumps
Specialist service requirements
Structural
growth markets
Emerging market growth, urbanisation and industrialisation
Aligned to higher growth commodities (e.g. copper)
Growth in unconventional drilling and well complexity
Growth in shale oil & gas in the US and internationally
Growing global energy demand
Strong emerging markets exposure
Increasing
market share
Leading global service network. Growing installed base
Comminution platform established (c.£1bn market)
Expanding into adjacent Pressure Control markets (e.g. flow back)
Increasing international market share (Middle East, Asia)
Expanding geographic sales coverage across global platform
Valves portfolio provides cross-selling opportunities
Differentiated
technology
Unique materials and flow design technologies
Acquisition of innovative HPGR & centrifuge technologies
Developing differentiated product offering
Developing innovative pressure pumping technologies
Patented and proprietary valve and hydro technologies
Upgrading ageing infrastructure
Leveraging the
platform
Cost reduction and best-cost sourcing
Strategic acquisitions
Cost reduction and best-cost sourcing
Strategic acquisitions
Best-cost sourcing, operational excellence
Strategic acquisitions
Positioned for sustainable profitable growth
69
Delivering growth through the cycle Operating Profit¹ (£m)
70
Business model underpinning strong, consistent performance
0
100
200
300
400
500
600
2007 2008 2009 2010 2011 2012 2013
Power & Industrial
Oil & Gas
Minerals
5-Year CAGR: 33%²
1 Excluding Group companies and unallocated costs 2 Reported operating profit, including Group companies and unallocated costs 3 Consensus expectations (Vuma 17 June 2013)*
3
* The consensus numbers are a collection of analysts own projections and the circulation of the consensus
does not provide or imply any check on, or endorsement of, these numbers by Weir Group PLC
Delivering returns through the cycle
71
2013: 30th year of dividend growth and 8th year of double digit growth
Dividend (pence)
0
5
10
15
20
25
30
35
40
45
2007 2008 2009 2010 2011 2012 2013
5-Year CAGR: 18%
Delivering profitable growth in the future
72
Positioned to continue to deliver superior returns across the cycle
THE WEIR GROUP MODEL
5%-10% organic revenue growth over the cycle > Growing faster than our end markets (4%-7%)
Top-quartile margins and returns > Sustainable competitive advantage, value
chain excellence > Large aftermarket provides sustainable platform
Continued investment to support growth > Capacity, technology
Leveraging returns through acquisitions > Track record of value enhancing acquisitions
Strong dividend growth > 30-year track record
Process critical
products
Structural growth
markets
Increasing
market share
Differentiated
technology
Leveraging the
platform
Questions & Answers
73
Attendees: Weir Group PLC
74
Joined the Board in April 2010 from Ernst & Young London where he led the audit of several FTSE100 companies. Jon was with Ernst & Young since 1988, becoming a partner in 2001 after extensive international experience including two-years in Detroit.
JON STANTON Finance Director
Gavin joined the Group Executive in July 2011 following two years as President of Weir SPM, part of the Weir Oil & Gas Division. He initially joined Weir in 2005 and was MD of the Weir Pumps business prior to its sale in 2007. Gavin previously worked for a number of multinationals including the Terex Corporation, PWC and Coats Viyella.
GAVIN NICOL Director of Operations Support and Development
Appointed Chief Executive in November 2009, having been Finance Director since 2006. A qualified accountant, Keith joined Stagecoach Group in 1993, becoming Chief Executive in 2000. He joined Scottish Power PLC in 2003 where he became director of group finance.
KEITH COCHRANE Chief Executive
Joined Weir in 2010 from HBOS, where he managed private equity investments. A graduate engineer and qualified accountant, Andrew has a background in strategy, mergers & acquisitions. He was an investment banker with HSBC before joining Scottish Power PLC as Corporate Strategy Manager.
ANDREW NEILSON Group Head of Corporate Affairs & Strategy
Joined Weir in January 2011 as Weir’s first Group Head of Procurement. Trevor has held several senior supply chain and procurement transformation roles including 12 years at Federal Mogul Corporation and 4 years as Group Head of Procurement at JCB Excavators
TREVOR LATHAM Group Head of Procurement
Joined Weir in 2011 from the Institute of Chartered Accountants of Scotland, where he was Director of Communications. He previously worked at the BBC as a television news editor and producer of current affairs programmes.
JONATHAN MILNE Group Communications
Attendees: Weir Power & Industrial Division
75
Joined Weir in 2008 as Group Financial Controller. He was Strategic Development Director for the Power & Industrial Division for 18 months prior to his current role. He is a chartered accountant who has worked in a number of commercial and financial roles, including 7 years experience at Scottish Power PLC and a number of years with PwC and Arthur Andersen.
JOHN HEASLEY Valves Managing Director
Joined Weir in 2008. He was Head of Internal Audit at Group for 2 1/2 years before becoming the Divisional Finance Director of Power & Industrial in 2011. A qualified accountant who has previously held senior finance roles at FirstGroup PLC and LASMO and a number of years at KPMG in various roles.
PHILIP CROOKES Divisional Finance Director
Joined Weir Minerals in 2005 from Joy Global, where he held several senior positions. He became Weir Power & Industrial Divisional MD in 2012 after 3 years as European Regional MD for the Minerals Division. Graduate mechanical engineer who worked in the mining industry for 17 years, before moving into the mining supply industry.
KEVIN SPENCER Divisional Managing Director
Joined Weir in 2011. He is responsible for the development of the Division’s Engineering and Technology capability. He has 23 years experience in the aerospace sector with Rolls-Royce PLC. He has held a range of senior roles including Research & Development Programme Management, Head of Development Engineering and Chief Engineer.
LUKE LOGAN Divisional Engineering Director
Joined Weir Group’s Corporate Development team in 2008 before moving to the Power & Industrial division in April 2011. Prior to joining Weir, he spent 8 years in PwC’s Transaction Services team. He is a chartered accountant with a background in mergers & acquisitions, strategy and due diligence.
GRAHAM STEWART Divisional Strategy Manager
Joined Weir in 2008 to lead the marketing function for the Power & Industrial Division. Background in strategic industrial marketing, as well as marketing communications. Has extensive experience in the power sector, including Alstom and RWE.
SUZANNE HOUSTON Divisional Marketing Manager
Attendees: Weir Power & Industrial Division
76
Joined Weir in 1995 from Dresser Valves & Controls to establish a Valve Sales Operation in the Middle East. Spent 16 years in the Middle East covering product sales and aftermarket support. He has been UK based for the past 15 years in senior roles and actively involved in the development of our global sales and manufacturing footprint.
ROGER GRIFFIN Managing Director Control & Choke Valve Products
Joined Weir in 2012. Piero has nearly 11 years’ experience with CCI, part of IMI plc, where he was VP Global Sales and MD EAMEI for the Aftermarket Division. He has extensive international commercial experience.
PIERO RICOTTI Managing Director Isolation Valves Products
Joined Weir Minerals Africa in 2009 as General Manager Operations before moving to the Power & Industrial Division as MD of the valve facility in Elland in the UK. He previously worked in the automotive industry for 14 years and is a graduate engineer.
PIETER SCHOEMAN Managing Director Valves & Controls UK
Joined Weir Power & Industrial France in 2010 as Finance Director and appointed MD of the French business in 2013. Previous experience includes 20 years in the automotive and boating industry most of which was in the USA. He holds dual US / French citizenship and graduated with an MBA from HEC in Paris.
YANNICK MADIOT Managing Director Power & Industrial France
Attendees: Weir Minerals Division
77
Joined Weir in 2010. Previously held General Manager position at De Beers for 7 years. Prior to joining De Beers worked as a Management Consultant with a leading Management Consulting concern for 4 years. Completed engineer in training with Impala Platinum and is a graduate engineer and MBA.
WIM VAN VLIET Supply Chain Director, Africa
Joined Weir in 2008. Previously held Managing Director positions in Murray & Roberts Engineering Solutions and Ingersol Rand Africa, as well as serving AECI / ICI in numerous managerial positions for 7 years. Completed Engineer in Training with Gold Fields. He is a graduate engineer and an MBA.
DAVE ATHEY Regional Managing Director: Africa
Attendees: Weir Oil & Gas Division
78
Joined Weir in 2007 as President of Weir SPM before he became Divisional Managing Director of the Oil & Gas Division in early 2009. Prior to Weir, he held the position of President Schefenacker Vision Systems, NA and has previously worked with James Hardie Industries and The Toro Company. He is an MBA, CPA
STEVE NOON Divisional Managing Director
Joined Weir in June 2011 as the President of Weir SPM, assuming the role of President, Pressure Pumping in August 2012. Between 2001-2011 he was Circor International’s Group President in charge of the energy segment. Prior to this, he spent 13 years with Baker Hughes. He holds a Bachelor of Science Degree in Petroleum Engineering from Texas Tech University.
PAUL COPPINGER President, Pressure Pumping
Joined Weir in September 2011 as Executive VP of Operations for Pressure Pumping and more recently becoming the Divisional Value Chain Champion. Prior to joining Weir he worked for Circor Oil & Gas as Divisional Lean Director. He spent almost 20 years working for Dana Corporation where he was resident at Toyota Motor Company. He also worked for Ford Motor Company, Volkswagen, Scania and Saab in the US, Sweden and Brasil.
ROBERTO KUAHARA Executive VP of Operations for Pressure Pumping
Joined Weir in 2007 after working in the automotive industry. He is the Chairman of Weir’s Engineering Excellence Committee and sits on the board of the Weir Advanced Research Centre. Previously, he led SPM’s product engineering team in Fort Worth, Texas. He is a qualified engineer with an MBA from Cranfield University.
CHRIS POOLE Divisional Vice President, Engineering
Head office
Clydesdale Bank Exchange
20 Waterloo Street
Glasgow G2 6DB
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