capital markets day - mcilvaine company€¦ · market positioning 23 niche market positions in...

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


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


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


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


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%


35

Agenda

36


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


Swivel


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


EMEA


Asia Pac


£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


South America


EMEA


Asia Pac


£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


Best-cost sourcing, operational excellence


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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