Shares in Weir Group, the Glasgow-based engineering giant, fell in early trading after the firm warned profits at its oil and gas business would fall below City expectations.
The stock edged lower despite the group posting a 27 per cent jump in pre-tax profits to £226 million for the first half of the year, triggering an 11 per cent rise in the interim dividend to 8p.
The rise came on the back of “strong trading” at Weir’s minerals and power and industrial divisions, which off set “challenging” conditions for its oil and gas arm.
For the full-year, the firm expects profits from the oil and gas business to be below the City’s expectations because of a glut of equipment in the sector, but that profits from the minerals division will balance out the shortfall.
Chief executive Keith Cochrane said: “In the second half we anticipate a strong performance from the minerals and power and industrial divisions and some improvement in oil and gas upstream pressure pumping aftermarket demand relative to the second quarter, although the timing of any improvement remains uncertain.
“Assuming no significant change in macro economic conditions, full year profit before tax, amortisation and exceptional items is expected to be between £440m-£460m with the low end of the range reflecting no improvement on the second quarter in upstream oil and gas.”
Scott Cagehin, an analyst at Numis Securities, upgraded his recommendation on Weir from “add” to “buy”.
He added: “We continue to view Weir as a high-quality business with leading market positions, excellent margins and strong cash generation. The current modest valuation premium is justified given both strong near and long-term growth opportunities.”