The Weir Group PLC

Keith Cochrane - Chief Executive Jon Stanton - Finance Director

Andrew Carter - RBC Capital Markets Alex Toms - Merrill Lynch International Robert Davies - Morgan Stanley Martin Wilkie - Deutsche Bank Jonathan Hurn - Credit Suisse Chris Dyett - Investec John Mounsey - Exane BNP Paribas Stephen Swanton - Redburn Partners

Good morning, ladies and gentlemen, and thank you joining us at today’s 2014 Annual Results Presentation. I’m joined on stage as usual by Jon Stanton.

I’m also pleased to say that in the audience we have our Chairman Charles Berry; and Paul Coppinger, our recently appointed Oil & Gas Divisional Managing Director. I’ll begin with a brief overview of the group’s strategic progress in 2014.

Following which Jon will take you through the financials. And before we open up for questions I’ll provide some more thoughts on our core end markets and outlook for 2015.

So let me start by acknowledging the hard work of our 16,000 people in delivering strong underlying growth in 2014, despite challenging and indeed fast changing market conditions. That performance was in line with the expectations we set out at the beginning of the year and included substantial strategic progress in leveraging our global leadership positions.

In oil and gas, sales of fluid ends almost doubled in 2014 with a strong contribution from the premium range partly developed at the Weir Advanced Research Centre in Glasgow. The group now has an estimated 27% of the North American fluid end market, up from 22% in 2012 and a strong market leading position as a result.

In minerals, orders for our comminution equipment for crushing, grinding and screening increased more than 60%, demonstrating the group’s ability to find new avenues of growth, even in challenging markets. That represents 50 million pounds of input which simply didn’t exist two years ago.

In fact, together these product lines contributed over 100 million pounds of input. We’re also focused on ensuring, we use the group’s global scale to make our own operations even leaner.

This time last year, I set a target to reduce procurement cost by 40 million pounds. We more than achieved that aim and those efforts have helped to underpin the financial performance reported today.

But rest assured, we’re not at the end of that journey yet. There are still opportunities for us to leverage our global position further.

And as many of you will be aware, the group seeks to accelerate its strategy through acquisition. In 2014, that included the purchase of the Chinese American equipment provider Trio Engineered Products and integration is progressing well.

We also extended our pressure control presence in Canadian oil and gas markets with the purchase of Metra Equipment, a small but leading regional provider of wellhead services. So whether it is through organic growth, self-help initiatives, or M&A, we continue to position this group for long term growth in what are still structurally strong end markets, even if they do test us during the economic cycle.

And indeed that’s what’s happening now. The last quarter of 2014 and the first couple of months of 2015 have been turbulent for every company operating in the energy and natural resources industries.

The type of steep declines in commodity prices we’ve seen mean that the period ahead will be challenging and we won’t be able to fully insulate ourselves from the effects of these market changes, but we do benefit from our business model which is both robust and agile. Robust in that it’s aftermarket focused which help support earnings as we’ve seen recently in mining markets, and agile in that we can react quickly to changing conditions.

In 2014, that included expanding our operations as North American oil markets grew strongly. And in recent weeks has made rapidly cutting cost to reflect the current downturn.

The group isn’t immune to wider market dynamics, but we have the tools and the experience to emerge stronger as a result. I say that because we’ve been here before and that means we have a clear understanding of the challenges of what we need to do to respond to them.

I’ll say more on our core market shortly but first I’d like to ask Jon to take you through the highlights of our financial performance in 2014. Jon?

Thanks, Keith, and good morning, ladies and gentlemen. As Keith said, we’ve delivered a good underlying performance in 2014 in line with our expectations despite what have been fast changing end markets.

Let me start by looking at the summary of the reported results. Please bear in mind that as usual all references to profit, margin and EPS are before exceptional items and intangibles amortization.

With regard to exceptionals, I’ll cover those in some detail on a subsequent slide. Given the significant impact of foreign currency translation, this slide shows growth against last year on both a constant currency and reported basis.

To give you the headline impact up front, the adverse FX translation effect seen in the year was £185 million at the revenue level and £37 million in operating profit. This is illustrated in the bridge charts for input revenue and EBITA in appendix 3 of the slides.

In terms of the headline results, order input increased 9% on a constant currency basis, with aftermarket orders up 14%, offsetting a marginal decline in original equipment orders. The usual detail on quarterly input trends is given in appendix 1 of the slide deck, with oil and gas orders, and minerals aftermarket clearly the highlights.

Revenue from continuing operations of £2.4 billion increased 9% in constant current terms, with operating profit up 5% to £450 million. Operating margins were slightly down on 2013 at 18.4% for reasons that I’ll come onto in the divisional discussions.

All divisions reported a sequential margin improvement in the second half of the year. Net finance costs were £41 million, down £7 million on last year, due to lower average levels of net debt and the impact in the prior year of refinancing costs.

Profit before tax of £409 million is up 7% year-on-year on a constant currency basis. Cash generated by operations decreased by 11% in 2014 to £421 million, driven by adverse foreign exchange impacts, and an absolute increase in working capital in oil and gas given the very strong revenue growth in that division.

The effective tax rate of 25.8% is in line with 2013, leading to a headline earnings per share of £1.413 per share, compared to £1.454 per share in 2013. Dividend per share increased by 5%, with a final dividend of £0.29 proposed.

This final dividend reflects the rephrasing between interim and final previously announced. Lastly, like-for-like return on capital employed has increased from 17.5% to 18.1%.

Let me now turn to a summary of the performance of each division over with the year, starting with minerals. Order input was down 4% with strong aftermarket growth more than offset by a material fall in original equipment orders.

This was against a backdrop of declining commodity prices, a reduction in mining sector capital expenditure, and a number of challenges in Africa, including the platinum workers’ strike in South Africa in the first-half, the metal workers union strike in July, and the Ebola outbreak in a number of West African countries. Original equipment orders were 22% lower year on year, driven by a reduction in the number of brownfield projects reaching the procurement stage and lower orders from non-mining markets.

Although down year-on-year, original equipment orders improved slightly through the year, with second-half input up 3% compared to the first half, despite the non-recurrence of a large HPGR order received in the first half. Aftermarket orders grew by 6% year on year, which was at the upper end of expectations.

This was supported by robust ore production and the benefits of a large and growing active installed base. Growth of more than 4% was achieved in three out of the four quarters, notwithstanding the African challenges mentioned earlier.

Aftermarket orders represented 69% of total input compared with 62% in the prior year. Revenue was 4% lower year on year, principally reflecting a £42 million impact felt in our African operations alongside subdued markets in Europe.

In the second half of the year, revenues improved, showing 6% sequential growth. Original equipment revenues were 17% lower, representing 33% of divisional revenues compared to 38% in the previous year.

Production-driven aftermarket revenues were up 4% on last year, with sequential growth in each quarter. Consistent with the prior year, the division’s book-to-bill ratio remained solid in the period at 1, reflecting the current short cycle aftermarket focus of the business.

Operating profit decreased 7% as a result of lower revenues and a fall in contribution from African operations. This led to margins declining 50 basis points to 20.1%, of which 30 basis points was due to the African issues.

The balance was a result of the mix of lower margin products and increased investment in the comminution platform, offset to a degree by the benefit of cost reduction and procurement initiatives. Moving on to oil and gas, input was up 34% on the prior year, with strong growth from each business in the division as we continued to gain market share in buoyant conditions.

Pressure pumping input grew by 50%, and pressure control also benefited from positive North American markets. Services and downstream grew strongly in Iraq and refining markets respectively.

Aftermarket input was up 30% year on year, driven by strong growth in pressure pumping, and accounted for 70% of total orders compared with 73% in the prior year. Original equipment orders were 47% higher than 2013, with strong growth seen across the division.

Total order input improved sequentially through the year until the final few weeks, when we began to see a softening in demand in North American upstream markets, reflecting the steep fall in oil prices. Revenues increased 32% for both original equipment and aftermarket, reflecting the strong order input trends across the business, with a book-to-bill of 1.04, ahead of 1.02 in 2013.

Aftermarket sales accounted for 72% of output, in line with 2013. And again, revenues increased sequentially each quarter, with record second-half divisional sales.

Operating profit was 32% higher year-on-year, reflecting the increase in revenue, and in particular the strong growth in pressure pumping. Margins remained unchanged on 2013 at 22.7%, with positive leverage in pressure pumping offset by increased bonus costs, lower margins in pressure control, and the slightly softer than expected end to the year.

Turning to power and industrial, input in the division was 4% down on the prior year, primarily due to a large £20 million one-off services order in 2013, which was not repeated. Excluding this order input was up 3%.

Strong growth in hydro orders was offset by tougher end-market conditions and project delays in other key markets. Full-year book-to-bill was marginally negative at 0.99 compared to 1.04 in the prior year.

Power markets represented 58% of orders, with oil and gas markets increasing to 14% from 12% in 2013, which reflects the division’s move into adjacent sectors. Revenues were marginally up year on year, with aftermarket growth of 3% and original equipment revenues broadly flat.

Valves’ revenues were slightly higher than the prior year, but were impacted in the fourth quarter by customers delaying shipments and the impact of industrial action at a major US facility towards the end of the year. Operating profits were down 37%, with margins down 360 basis points to 5.8%.

This reflects combination of disappointing operational performance and unfavorable product mix within valves and services as higher-margin nuclear revenues were replaced by lower-margin commercial valve opportunities. I’d now like to provide an overview of the two main areas where we’ve recognized exceptional items this year.

The first of these is the cost associated with the group-wide efficiency review which we announced in November. The purpose of this review was to identify opportunities to reduce costs, increase customer responsiveness and efficiency, while aligning resources globally to capture end-market opportunities.

Actions arising from the November review included the consolidation of five smaller manufacturing facilities into larger units, and a headcount reduction of 350 across all three divisions, targeting £35 million of annualized savings with £20 million to be realized by the end of 2015, which we are on track to achieve. In total the cost recognized in 2014 were £49 million, being £30 million pounds of restructuring charges and £19 million in asset impairments.

This is slightly higher than the £45 million anticipated back in November as we responded to deteriorating market conditions in the oil and gas division. This includes an additional headcount reduction of 550 in the North American workforce, in-sourcing production and cutting operating costs.

The second exceptional item is the goodwill impairment of a £160 million, which has been recognized against the pressure control Cash Generating Unit or CGU. The very significant decline in the oil price and rig count towards the end of 2014 and at the start of 2015 has had a substantial impact on the short to medium term forecasts for our upstream oil and gas businesses.

The impairment charge is being based on the assumption that we do not see any meaningful recovery in activity until 2017. The carrying value of the goodwill and the pressure controlled CGU included £60 million of contingent consideration on the Mathena acquisition, where no cash was ultimately paid.

Remember, we reversed the contingent consideration liability in 2013, but the accounting standards required us to leave the corresponding goodwill on the balance sheet. On a net basis, therefore, relative to what we actually paid, the impairment is £100 million, or 17% of total cash consideration.

We’ve also carried out severe stress test scenarios across all the acquisitions we made and are very comfortable that no other impairment exists. In particular, there remained significant headroom in pressure pumping, even assuming an extended downturn.

I’d now like to move on to the cash flow statement. Operating cash flows decreased by 11% to £421 million due to the impact of lower reported operating profits and a slightly higher working capital cash outflow which I’ll come back to shortly.

Net interest decreased as a result of lower average levels of debt during the year, while tax cash flows increased due to the phasing of payments in overseas jurisdictions. In terms of capital expenditure, we have continued to make strategic investments in production capacity in Malaysia and information systems across the group, as well as building new facilities for our Middle East services business and a new R&D facility at SPM.

For completeness the other cash flows are related to the settlement across currency swaps, additional pension contributions and dividends from joint ventures. Dividends paid of a £103 million reflect the one-off rephasing of the dividend during the year, with the interim award increasing to one-third of the total.

In total, free cash flow inflow reduced to £79 million with our EBITDA to cash conversion ratio at 82% for the year, compared to 90% in 2013. In terms of working capital, of the full year, cash outflow at £82 million, £79 million was in the first-half with the second-half broadly flat even though the oil and gas business continued to grow strongly.

Looking at debtors first, the strong trading in pressure pumping has resulted in a significant increase year-on-year flowing through from revenues. However, given the current environment we also saw an elevated level of delayed payments for many customers across the year-end, not just oil and gas, with debtor days deteriorating from standard terms of 60.

This reversed in January with excellent cash collections in the month and debtor days falling back to 63. With regard to inventory the strong growth in order input and revenue within the upstream oil and gas businesses up to the end of the year, did result in an increase in inventory as we aligned the supply chain with demand.

We have reacted quickly to ensure the business is not overstocked as we entered the current downturn with tight controls in place over input and forward purchase commitments. In addition, the business has reduced the core of all the inventory by 50% over the last 12 months with detailed action plans in place to reduce this further in 2015.

During 2015, we will see a significant cash inflow from working capital as the business adjust to current market conditions and we see the benefits from our value chain excellence initiatives flow through. Moving on net finance costs excluding the pension related costs of £3 million pounds have reduced by £6 million year-on-year, due to loan repayments and the write-off of unamortized fees in 2013 not recurring.

You can see from the slide that net debt has increased from £747 million at the end of 2013 to £861 million at the end of this year, driven by our investment in acquisitions and an adverse FX movement of £44 million. The net debt to EBITDA metric of 1.6 times on a lender covenant basis is well within the covenant level of 3.5 times.

In September, we extended our revolving credit facility and it now expires in July 2019. More than 85% of our debt maturities are in 2018 or beyond.

Briefly on pensions, the deficit on our defined benefit plans increased to £94 million from an opening position of £70 million, reflecting a fall in discount rates and RPI inflation over the prior year. And finally a few words on Trio, a business we acquired in October for an initial consideration of £138 million, with a further contingent consideration of £8 million, conditioned on the realization of certain working capital targets and achievement of agreed management goals.

The business contributed £9 million of revenues in the post-acquisition period with operating profit before integration costs of £1.5 million. Total integration costs are expected to be in the region of £5 million, of which £1 million was charged in 2014.

Before I hand over to Keith, I wanted to spend a couple of minutes giving some guidance on financial items for 2015. I expect net CapEx to fall to around £90 million in 2015, as we look to prioritize our investment, focusing on key strategic initiatives and health and safety requirements.

I’m expecting to see substantial improvements in working capital such that we generate a meaningful increase in free cash flow next year. Special contributions to the UK defined benefit pension plans will remain broadly flat in 2015 at £10 million, in line with the schedule of contributions agreed with trustees.

In relation to tax, I expect the effect of tax rate on profits before exceptional items and intangibles amortization to be in the range of 24% to 25%, lower than 2014, given the reduced proportion of group taxable income expects to be generated in the U.S. With regard to further reorganization charges, at this stage, I’m expecting approximately £20 million for 2015, which is the remainder of the group-wide efficiency review plus additional actions in oil and gas.

And we may need to revisit this number depending on how our end markets develop in 2015. Finally on foreign exchange, remember our most significant translational currency is the U.S.

dollar and if current rates hold we would expect to see at least some reversal of the adverse impact we saw in 2014. Thank you.

And let me know hand over to Keith to take you through the business overview and outlook.

Okay. Thank you, Jon.

So before I look at the prospects for our markets in 2015 I would like to take you through some of the strategic progress the group has made in the last 12 months. By now, you will be familiar with the pillars that underpin our strategy, innovation, collaboration, value chain excellence and global capability.

And as an engineering company, designing and developing new products and services which help make our customers more efficient is a core strength. That’s why we continue to increase research and development investment which last year rose 15%.

With customer capital expenditure budgets under pressure, we’ve seen real benefit from our focus on improving industry efficiency. Our premium fluid ends for instance, can extend the wear life of this critical component up to five times.

Similarly, minerals have developed a new vertical slurry pump which allows existing customers to retrofit improvements, thereby saving upgrade costs. And power and industrial designed and installed turbine bypass valves for a customer in South Korea, giving the division a valuable reference site which can be used to drive further sales of this new product line.

By encouraging collaboration between colleagues, customers and suppliers, we can ensure we have the access to the best ideas. We’ve been successful in leveraging our lowest total cost of ownership model with mining companies, in particular, as demonstrated by our recent global framework agreement with Kinross Gold Corporation, which follows a similar arrangement with Anglo American.

It means Weir will become Kinross’ preferred supplier for a range of mining equipment. We also announced a partnership with Rolls-Royce subsidiary MTU to develop the first integrated frack power system, which we expect to be available to the market later this year.

And our cross-divisional forums continue to find ways of leveraging our materials expertise in one end market to develop new products in another. As we seek to make our customers more efficient, we’ve also been streamlining our own operations.

2014 saw £46 million in direct cost savings from taking advantage of the group’s global scale in procurement. This is an area where we made substantial progress in recent years, but there’s still so much more we can do.

And that’s why we’ve made value chain excellence central to our strategy as we concentrate in improving the capabilities of our people, tools and processes to deliver further benefits. And these tools and processes will also help us improve the performance of the power and industrial division.

2014 was a disappointing year but we’ve taken action to remedy that by restructuring it to improve profitability. And finally, the group continues to extend its global capability.

The acquisition of Trio gives us scale in Chinese domestic mining markets and access to growing global aggregates markets. Indeed, we’re already generating good opportunities by applying our global network to the extended product range.

The oil and gas division continues to make progress in internationalizing its offering. It opened the new API certified manufacturing facility in Dubai to broaden pressure controls exposure outside North America.

Minerals also increased its extensive service center network with new facilities in Mozambique, Colombia and Kazakhstan. So we made significant strategic progress in 2014 and we’ll maintain our focus on successfully executing our strategy as we go forward.

But let me now turn to the market challenges we face in 2015. The two graphs in the right which show the recent price performance of oil and copper, the group’s largest commodity exposures tell their own story.

And as you can see the most dramatic declines were in the final quarter of 2014, indeed, between the middle of last year and January, oil prices fell 57% and copper prices were down 23% with a limited bounce-back more recently. This reflects concern over the pace of global growth and therefore demand at a time when supply of both commodities was growing strongly.

It’s important to note though that demand for energy and ore in 2015 will continue to grow but at a slower pace than previously forecast. During 2014, U.S.

oil production growth was the largest in its history increasing by approximately 1.5 million barrels per day or 75% of global supply growth for global demand increased by less than a million barrels. Following the subsequent price decline oil producers have responded with announcements of significant project delays or cancellations across the world.

In the US, the number of drilling rigs targeting oil has fallen by almost 40% since October. This is a sharper decline than the industry anticipated and has helped place somewhat of a floor under the oil price in recent weeks.

Despite this, North American production is expected to continue to grow in the first-half of 2015, albeit at a slower pace before plateauing in the second-half. We can be relatively sure therefore that as a supply driven correction this downturn is likely to last longer than those experienced in 2009 and 2012.

2009 was primarily caused by falling demand following the global financial crisis. 2012 was the result of the build-up of excess gas supplies in North America, the impact of which was partly offset by the rapid switch to oil drilling.

Gas prices have remained at low level since with no signs yet of a pick-up. And in mining markets copper wasn’t the only commodity to experience substantial supply driven price reductions.

Iron ore fell by almost 50%, also as a result of strong supply growth, while coal prices reduced due to weakening emerging market growth. And while supply and demand balance varies by commodity prices for most remain below the level needed to support new investment as is the case for gold.

So let me now discuss some of these trends in more detail on how they impact Weir’s main end markets. The relatively good news is that the rate of decline in mining capital expenditure is expected to slow, albeit with the bottom of the market now expected to reached in 2016, rather than 2015 as forecast 12 months ago.

Maintenance CapEx is likely to be most resilient with green and brownfield reductions more pronounced. Our miners will continue to work their current assets harder, meaning global ore production will increase and support the group’s aftermarket focus business model.

We expect to see the full year benefit in 2015, of increased production from mines which started to ramp up their activities last year. While Toromocho in Peru began production in the first-half of 2014, Sierra Negra Norte and Sierra Gorda in Chile and Minas-Rio in Brazil started in the second-half; all are supplied by the Weir Group.

We also expect four new mines to start production later this year, Two in Mexico, OGP1 in Chile and the previously delayed Las Bambas in Peru, with the majority of these producing copper. This activity reflects in our view copper’s favorable supply-demand balance, which means that additional capacity will be required by 2017.

And in South America, we’ve seen early signs of regulatory and other issues being resolved with the potential for currently stalled projects to come online to help meet growing demand and replace depleted mines. This will further support South America’s position as the world’s largest and lowest cost copper production region.

However, we are monitoring the impact of a lower copper price in Africa, where some mine operators are now producing close to cash costs. The substantial decline in iron ore prices means, we’re experiencing delays to projects, and as a result, we expect to see an impact on a number of new HPGR opportunities in 2015.

And as we’ve expanded into comminution, our exposure to iron ore has increased, although the majority of our aftermarket exposure comes from low-cost producers in Australia and Brazil. Conversely, we’ve seen some higher-cost mines in North America and China, pulled back production in response to lower iron ore prices.

The recent acquisition of Trio also gives us access to growing aggregates markets to which we can then apply parts of our comminution and other product portfolio. Trio is particularly strong in North American aggregates, but we’re also winning orders in Africa and South America building on our global network.

This network, alongside our lowest total cost of ownership model will also enable us to continue to leverage the full product portfolio in our core mining markets. This builds on the success we saw in 2014 when, for example, valves and spools’ revenues increased 34%, and helped offset what continued to be competitive market conditions.

So turning to oil and gas. We all know the challenges the industry faces, as a result of the dramatic decrease in oil prices.

Oil and gas markets account for 47% of group revenues with all three divisions exposed to this end market to some extent. The majority of the group’s oil and gas presence is in North American unconventional markets with 24% of group revenues generated from North American tight oil where we’re seeing conditions change very quickly.

Our pressure pumping and pressure control businesses operate in drilling and completion markets, which we expect to face the biggest declines. We are planning on a 50% reduction in an oil rig count from peak to trough with gas markets remaining subdued.

We are already seeing pricing pressure with E&Ps and service companies asking for double-digit discounts, a higher level than was requested in 2012. But to be clear, what they ask for and what is finally agreed can be very different.

And where we do offer temporary price reductions, we are looking for increased volume in return, or ways that we can work more efficiently with customers to reduce our own operational costs to partly mitigate the impact on our business. And to give some added context to pricing, prices of legacy fluid ends increased 15% from their low point in 2012 to the end of 2014.

Looking specifically at pressure pumping, which accounted for 60% of oil and gas divisional revenues last year, we expect to see frack fleet utilization rates fall to the low 60s from an average in the high 80s in the second-half of 2014. As a result, we are likely to see some cannibalization of excess equipment and original equipment demand falling back to minimal levels.

However, unlike 2011, original equipment accounted for less than a quarter of revenues in 2014. Cannibalization will also impact aftermarket trends, and we’re likely to see a dip in demand,as customers reduce their inventory of spare parts to reflect materially lower activity levels.

But again, the impact of this will be shorter lived in comparison to 2012. Back then, it took two to three quarters to work through their excess inventory.

This time, we expect it to be closer to take one to two quarters, as customers don’t have the same level of excess inventory in the system. In oil sands, a key exposure for our minerals division, we expect to see a significant reduction in capital expenditure and a degree of pricing pressure.

The majority of the group’s exposure is aftermarket related and early indications are that customers will seek to maintain existing production levels. However, the commissioning of previously sanctioned expansions to which we have supplied products will be delayed.

The other key impact on minerals will be in relation to its recently developed swellable packer range, which gained good traction in 2014 in the Bakken Shale in North Dakota. As an oil-focused basin, demand for this product is expected to decline substantially.

International markets though are unlikely to be as significantly affected as North America. Our Middle East services markets are expected to be relatively resilient, although the North Sea and Caspian basins look more challenged.

Mid and downstream markets, which are served by all three divisions are likely to see a more modest impact, although with further project delays probable. So as I said at the very beginning, we are facing some significant challenges from our markets, but it’s also important to remember that unconventional oil and gas continues to reduce its costs with break-even prices estimated to have fallen between 20% and 30% just in the last two years.

This trend down the cost curve will only continue, as our own R&D efforts demonstrate. Indeed earlier this month, both BP and the IEA issued their medium and long-term energy market forecasts with both concluding the future for unconventional oil and gas is robust.

The IEA said the recent price correction may cause North American supply to pause, but it would not bring it to an end. In fact, they predict unconventional oil and gas will emerge from this downturn with an even larger share of the supply mix than earlier forecast.

They estimate US tight oil will grow to an average of 37% of total US liquids production in 2020, while approximately 70% of tight oil producers already have a break-even price of less than $60. So the North American unconventional industry may be at the brunt of this price decline, but it is also best placed to react quickly when demand returns, particularly when you consider E&Ps can increase unconventional production within six months of making the investment decision compared to the long lead times of large scale projects.

So that is the markets context we’re operating in. But as a group, we have significant experience in managing cyclical downturns.

Let me remind you of how we supported the group’s recent performance during the pressure pumping downturn of 2012 and the minerals downturn which began in 2013. As you can see, we take a methodical approach to managing costs supported by a flexible business model.

What we don’t do is stop investing in the drivers of future growth. During these periods, the group continued to support performance and advance our strategy.

This included the developing of our comminution platform and successfully commercializing R&D, both of which are now generating, as you heard earlier substantial orders. These strategic advantage not only help mitigate the impact of declining markets in the short term, but simultaneously strengthened the group’s long-term competitive position.

So how are we responding this time? Firstly, we’ll continue to focus on the long-term strategic direction of the group, but we have also taken early action on cost.

As John indicated in November, we outlined the details of our group-wide efficiency review across all divisions which included the planned consolidation of manufacturing in service facilities in Europe, the US, and Australia, as well as workforce reductions. This is in addition to our rolling program of supply chain efficiencies which has a 2015 target of £50 of savings by the end of this year.

And we’ll achieve this by further extending our strategic category management process, which has already helped reduce costs of forgings, castings and fabrications. We’re also deploying a suite of software tools, which better analyze our spending, assist in designing supplier contracts, and measure performance against those agreements.

Recently, for instance, this process has helped the group reduce the number of global freight suppliers from 50 to three, generating substantial savings, and there are still plenty of opportunities to improve our operations further. Our flexible business model means, we’ve been able to respond rapidly to the fast-changing market environment in oil and gas.

By the end of next month, the division will have reduced its North American upstream workforce by approximately 22%. In addition to the plans announced in November, both pressure pumping and pressure control plan to further consolidate their service networks.

Overall, the group has announced plans in the last 12 months which will reduce the workforce by approximately 1,200, or 8%. These are difficult decisions, but they are taken to ensure Weir continues to be closely aligned to its customers and its markets.

We’ll monitor the situation as the year goes on, and have additional flexibility if needed, but we won’t do anything which undermines the long- term potential of this business. Mathena, for example, employs contractors, and can swiftly adjust its headcount as rigs reduce.

Although clearly, as it operates as a rental model, these measures only partly protect margins. A pay freeze has been implemented across North American upstream businesses and we are substantially reducing overtime.

We’re also reducing shifts and significantly cutting operating costs. The division is in-sourcing manufacturing work and intensifying its procurement savings initiatives.

Lower raw material costs and the benefits of the group supply chain initiatives can be passed on to customers and clearly, in the oil and gas space, we’re also passing pricing pressure on to our own suppliers. These are all actions we successfully used to support performance in 2012, but this time, the scale of the downturn is larger.

Our workforce reductions are double those taken three years ago. However, plant utilization rates will still be down, and inevitably, we’ll see some impact from lower overhead recoveries.

But as I said earlier, we’ll also focus on executing our long-term strategy. We’re continuing to innovate and bundling our expanded product offering together, such as our integrated frack tree, zipper manifold and frack watch offering.

We’ll continue to collaborate on projects like the first truly integrated frack power system. Pressure control is working with customers to exchange price discounts for commitments to employ its full product range.

This increases volume and drives efficiency, as our engineers have a greater number of products per site, while supporting further market share gains. In addition, we’re streamlining our planning activities, and pressure control is offering in-field repairs which help reduce the down time of rental assets.

The division is also standardizing its valve types and developing product categories to achieve further internal efficiencies. We’ll leverage our global customer agreements to promote our lower total cost of ownership proposition, and continue to internationalize seeking new markets for our differentiated technology.

Our new manufacturing capability in Dubai will allow us, for example, to target the wellhead market in the Middle East. So we have the tools and we’re already deploying them to support performance in the short-term.

But at the same time, we’re also using this as an opportunity to strengthen customer relationships with lasting long-term benefits. So let me turn now to the outlook for 2015.

And let me be clear from the start, I’ll be giving no specific group guidance, given the lack of visibility and upstream oil and gas end markets. Where I can be more specific is in minerals.

Our total mining capital expenditure is predicted to reduce for the third-year in succession. The impact on mining and oil sands’ original equipment revenues is expected to be largely offset by a strengthened comminution presence, particularly in the growing aggregates end markets, and including a full-year contribution from Trio.

Aftermarket revenues are anticipated to benefit from our growing active installed base as ore production volumes increase, although there may be delays in commissioning of some expansion projects. In addition, profits will be supported by the first benefits from the previously announced efficiency review, and a more normalized operating environment in South Africa.

Operating margins though are expected to be slightly lower year-on-year as a result of reduced profitability in volumes in oil and gas markets. In power and industrial, power end markets are predicted to continue to be subdued in 2015 with expenditure in Europe impacted by low economic growth rates with the majority of product activity continuing to be located in the emerging markets.

Supported by the opening order book and good aftermarket opportunities, the division is targeting constant currency revenue growth, and is expected to benefit from measures taken at the end of 2014 to improve the profitability of the business. In oil and gas, customers continue to adjust their operations in light of market conditions, although a significant fall in activity levels is underway, with resulting pricing pressure.

Conditions are also expected to be more challenging in international and mid and downstream markets, although the impacts will be less pronounced. And as you have heard, the division has already acted to reduce costs and increase efficiency and we’ll continue to monitor the need for further actions to support operational performance.

However, these measures will not fully offset market impacts, with a substantial reduction in divisional revenues and lower operating margins anticipated. But despite these headwinds, we’ll maintain our operational focus by delivering the benefits of our group-wide efficiency review and the integration of Trio improving the performance in power and industrial following restructuring, and staying agile and continuing to respond to changes in oil and gas markets.

And the group will continue to advance our strategy by accelerating the pace of technology development across the group and reducing lead times and working capital through value chain excellence initiatives. And we’ll report progress against these objectives in our interim results in the summer.

So let me finish by summarizing some of the key messages I hope you take away from today’s presentation. Firstly, it looks as if we’re in for a more sustained downturn in oil and gas than we’ve seen in some time, but we shouldn’t forget that this market, along with minerals and power have good long-term prospects.

Secondly, the group has a clear strategy and a good record of executing that strategy across the economic cycle. This has delivered a resilient performance in mining markets, and helped grow market share in oil and gas.

And we will continue to invest through the current cycle to extend our global leadership positions further. We’ve also shown our ability to act quickly in response to fast changing markets and have options to go further as conditions evolve.

So in 2015, we’re planning for a significant reduction in constant currency revenues and lower operating margins. However, we will continue to invest in extending our global leadership positions and increasing market share, supported by a strong balance sheet and the cash-generative nature of the group.

So thank you. And Jon and I would be happy to answer any questions you may have, so please wait for the microphone, state your name and company and then we’ll take questions.

Thank you.

Okay, Nick Wilson?

I have a little go on guidance with apologies, and guy with his folded arms, I can understand it’s quite hard. I’ve dusted off my corporate finance handbook.

So first of all, definition of substantial potentially greater than 15%, so I don’t know even if you are going to comment on that. And then in terms of just the kind of margin thoughts within the Group, I know you’re working hard to try and mitigate this.

But from your general update on the market, it did sound like it could see lower margins than 2012 if it’s proving to be more sustained in terms of that. And then an easier question on the free cash flow.

How much of the £90 million decline that we saw this year in terms of free cash flow do you think should be claw-backable in 2015?

Okay. Well, maybe if I can take the margin and the guidance point, and I’ll let Jon talk about cash flows.

Firstly, in terms - and I think you are referring to oil and gas margins, just to be very, very clear for everyone. I think it will be a real challenge to sustain margins in 2013, if you think of the low point in the cycle - that particular downturn cycle, just reflecting the challenges.

And the guidance point, I would refer you to some of the reference points because, frankly, we can’t give guidance. There is very limited visibility.

Customers are not even working quarter to quarter. They’re working literally week-to-week in some of the markets that we’re operating in.

So it’s very, very challenging. The reference points I would give you though, and these are just reference points, let me reiterate these are not - this is not guidance under another guise, we are planning for a 50% reduction in our focused rig count.

The workforce reductions we’ve made are double those that we made a couple of years ago. We’re having to give more pricing concessions.

So I think you can pick up some themes from those and form your own view, as to the direction of travel and probably give some color to my earlier comment around the margins. Albeit, clearly, we are very focused on taking whatever action we can.

Self-help has a long proud tradition at the Weir Group, and that continues to be the case in the actions that we’ve taken. I know Paul Coppinger and his team are doing everything they can, not just in terms of taking cost out, being creative in terms of revenue opportunities, which I think was the other underlying message.

And undoubtedly, there are opportunities still out there to be had. So we’re looking at it in almost a - a pretty multi-faceted way cash flow.

Yes. And in terms of the working capital, Nick, I think the outflow that we saw in 2014, as a minimum, we’re seeking to see a full reversal of that and we’re shooting for more.

Next question, Andrew Carter here.

Yes, morning, it’s Andrew from RBC. Could you talk a little bit more about, I guess, customer behavior and also competitive behavior, and I guess a little bit on pricing?

I guess, the things I’d be interested in, it’s obviously quite early that you’ve had these letters from your customers starting to talk about pricing, and yet you flagged it quite a lot today. Does that mean that you actually think that pricing is going to be quite a lot worse than it was in 2012 and 2013?

And can you reference sort of what you actually saw then, just so that we have some benchmark there? And in terms of customer behavior, do you see sort of anything changing about how they use equipment, or the particular equipment that they might be looking to buy further down the line.

And then I guess on competitors as well, what happens with pricing will depend a little bit on what some of your competitors do. And I guess one of the ones that we - is a bit new to the market would be somebody like Caterpillar.

And have you seen any sort of change in the competitive landscape compared against maybe that 2012 that you referenced?

Well, there is quite a few points there. Just on your last point in terms Caterpillar, we haven’t seen Caterpillar in the aftermarket because they don’t have an installed base.

Where there was a competitive dynamic with Caterpillar was in relation to the original equipment marketplace. And I think I was pretty clear, we are not expecting much in the way of our original equipment certainly in 2015.

So frankly, the Caterpillar angle really doesn’t have any impact. In terms more generally of the competitive dynamic, competitors are being aggressive.

Our customer base is being aggressive, you say you are surprised with letters. The letters are going to literally every provider of products right across the oil and gas industry.

We’ve even seen letters in the Middle East coming from customers. So the customers are reacting very, very aggressively in a way that probably we haven’t seen for an extended period of time.

Now some of it is perhaps taking advantage whatever. And as I very clearly said, what they ask for is potentially very different from where we finally settle.

But we should be clear, pricing concessions are having to be given because of the nature of the environment. It is a tougher environment than we saw in 2012/2013 right across the board, and that’s not just unique to us.

This is really an industry-wide phenomenon and I’ve seen many pieces of research saying, talking about 20%, 30% costs coming out the industry from a variety of sources. I hasten to add, that’s not necessarily what I’m saying in terms of our own space, but just sort of generally.

So I think we need to be realistic. But to your point about what happened, I gave the example of fluid ends.

Between the low point in 2012, and if you remember we had rather a large number of fluid ends floating about the system and we didn’t have the differentiated product that we have now, we’ve been able to increase pricing by some 15% between then and the peak of the market. So think about it in that context that actually we moved pricing up as the market recovered in that sort of region.

So you can sort of triangulate that back to what that meant for our business back in 2012. I think the difference this time is that whereas 2012 was essentially a pressure pumping issue, this is a far broader issue.

Clearly, more pronounced than North America, but it’s a pressure pumping and a pressure control issue and even in 2012/2013, we still had a pretty good order intake of cement pumps which are used globally for cementing. The reality is given the global nature of the market downturn we’re seeing, when I talk about original equipment orders being minimal, I mean original equipment orders will be minimal.

And that’s because you’re not going to get the cement pump orders that people were ordering for jobs in Asia Pacific, in Europe, in Africa, people are just being very canny and very careful. Now it will turn.

I think everyone recognizes we’re in a sort of fairly unique dynamic right now. I think the challenge is none of us know when it’s going to turn and, therefore, can’t predict at what point does one market stabilize, and two, start to recover.

But will we recover? Yes.

I think, as I said in my comments in the presentation, US shale’s going to emerge stronger. It will become the swing producer.

There is no question. It will respond faster.

As more and more of these big mega projects get delayed, it just strengthens the hand and the opportunity for US shale to form a meaningful part of the oil mix going forward. And let’s not forget gas opportunities as well.

So, sorry, I went slightly beyond your question, but hopefully, that was useful.

It’s very helpful. Could you help us with how big the price fall was in those legacy fluid ends?

I assume that it fell more than the 15% that it subsequently rose.

Not really, no. Essentially, we dropped price and then we got it back up to where we were before.

That’s how these markets work. Alex Toms?

Good morning, everyone. It’s Alex from Merrill Lynch.

Three questions from me. First of all, obviously, your outlook is kind of downbeat on markets for 2015 and 2016, just given what’s going on with commodities?

But I’m slightly surprised the CapEx guidance is high as it is kind of 1.5 times depreciation. Can you maybe just give a feel about what you are spending the money on, because it can’t be capacity, I wouldn’t have thought.

And I guess relates to that, obviously, markets have come down along way, what’s the prospect for M&A over the next 12 months to 18 months. And then just kind of second part, in terms of pricing, so obviously, customers are coming to you with double-digit price demands.

How can you offset that? What are you saying to them?

What are you trying to sell them? Are you trying to bundle more products to them?

What’s the offset there? Thanks.

Keith, do you want to take that? From a CapEx perspective, year on year, the reduction doesn’t look huge.

But relative to what we were originally budgeting, we’re down almost 40%, 50%. What we are trying to do is, we’re building on Keith’s comment earlier, the markets will recover, we want to be in a position where we emerge strongly and are in a position to take advantage of our markets when they recover.

So we need to continue to invest in some of the foundational things that we’re doing around IT, and it is capacity in certain instances, Alex. For example, we are building a - or have built and are just about moving into a new facility in the Middle East and that market has remained pretty buoyant.

So that supports the future growth that we will see there. So we could cut further, but it’s about emerging more strongly from the recovery and being in a position to take advantage of that.

And I think linked to the M&A question, we’re alive to the thought that opportunities may come out of the current, let’s say, market dislocation. So that’s something we are mindful of and something we will keep under review on an ongoing basis.

But to be clear, M&A still remains part of the strategy and the group, but alongside that maintaining a strong balance sheet remains part of the strategy of the group going forward as well. So there is a balancing act, but it’s something we will pursue.

And then the bundling - your bundling question is a really good one. Just take the example of Seaboard.

Seaboard will provide some customers with wellheads that they will rent, frack trees to other customers. They can provide zipper manifolds to others.

So as customers approach us, we’ve gone back to them and said, right, well, if you give us all three of those pieces of work, we can do this at this price and give you a discount in terms of the overall package. So if you think back to 2012/2013, one of the real successes was the bundling of pressure pumping consumables.

And you see that in the underlying resilience that we’ve seen in the aftermarket and pressure pumping consumables, and it gave us a fantastic platform from which then to build into 2014, and indeed, gives us a platform from which to use as a basis from moving forward. So very much we’re able to do the same there, the same with Mathena, and clearly, at SPM in pressure pumping, where we can do it, we will do so.

So there are things we can do, and I wouldn’t want people thinking that it’s all just about pricing concession. It’s absolutely right that I highlight those, because it is meaningful and it’s what we’re seeing in the market.

But against that, clearly, Paul and his team are cutting the operating base. We’re going back to our own suppliers looking for pricing concessions as well.

There is a ripple effect right through the system, there’s the bundling opportunity. So absolutely, we shouldn’t expect to see the full effect of that pricing concession flow to the bottom line.

I guess, we’re just saying there’s going to be some effect, and it’s appropriate when we do a presentation like this to sort of really lay it on the table as to how we see the market playing out. We can’t predict exactly how it will play out, clearly, because it is pretty much a moving feast, but these are the sort of issues, we are having to deal with.

And therefore the market, our shareholders, investors, should be at least aware of them at this time. Yes.

Good morning. It’s Robert David from Morgan Stanley.

Just a question on the aftermarket business in your oil and gas versus mining. Perhaps you could tell me a little bit in terms of the aftermarket and makeup between parts and service.

Are those two businesses quite different in terms of the relative balance between parts and service?

Yes. In mining, it’s about an 85% parts business, 15% service business, whereas in oil and gas, it’s probably more like 65%-75% parts business, 30%-35% service business, because we’ve got a fairly substantial refurbishment business, refurbishment of frack pumps, and the like, in terms of sitting in our service centers in North America, the service components, particularly to the Seaboard business, as you go out to rigs and you rig up and you rig down.

So they’re slightly different models.

And just on power and industrial, obviously, it’s going through a fairly tough time at the moment. What are your sort of main priorities with power and industrial?

Would you consider getting rid of that business?

It’s something that we keep under regular review and it’s something that we’ve talked about here and prior years. The reality is, at this point, there’s a lot of self-help that we can do, and by simplifying and slimming down the divisional structure and the management structure, those are hard costs that have come out of the business.

And indeed, I can assure you, I checked when I saw the January numbers to make sure they were out the business, and, yes, they were out the business. So there are hard savings coming through that we would expect to translate into a meaningful improvement in profitability relative to what we did last year.

That is the key for us right now to focus on self-help, to focus on improving the underlying profitability, because we know we can do it, and that’s where all eyes are focused.

And just the last one on the outlook for the aftermarket sort of mining business. Given commodity prices are down, do you see any risk to sort of underlying OpEx budgets, or is it just the CapEx that you’re obviously putting the radar on?

Listen. The pressure on OpEx budgets is customers are trying to get more efficient, they’re trying to get more out of the products.

But listen, that’s been nothing for the last three or four years, so it’s not - there’s nothing new in that sense. So I think our overall guidance when we take it, there’s going to be some moving parts in terms of oil sands, maybe some of these higher cost mines they’ll get closed down.

But on the other hand, you’ve got some of the big South American mines coming on stream, or you’re going to get the full-year effects of those big - So net-net, we still - aftermarket will grow next year, is our current assessment, broadly in line with the manner it’s grown over the last three or four years. And of course, something like Trio is a great opportunity, because they frankly ignored the aftermarket.

They very much focused on selling the original equipment. So we’ve now got the data around our entire installed base.

Get out there, find out where these plants are, and are going after the aftermarket. So great opportunity, so I’m still feeling pretty good about the aftermarket business in minerals.

There’s probably just one or two more moving parts. But in the round, it’s a good business, it’s growing.

Clearly, very resilient, and we’ll continue to move forward into 2015.

Great, thanks.

Any question? Now, Martin.

Thanks. It’s Martin Wilkie from Deutsche Bank.

Just a question coming back to the aftermarket. I understand, obviously, the comments on OE, but if we think about how quickly the aftermarket declines in oil and gas, given that, as you mentioned 65% parts has a risk of cannibalization, should we expect the aftermarket to decline sort of as quickly as the rest of the markets, or is there something of a lag that means that it comes through later in the year?

And in particular, obviously, the results you just posted didn’t really reflect too much in the way of activity or a declining. Given what’s happened since the beginning of the year, could you comment have you already seen that effect in January and February?

We’re seeing the effect it’s pretty real time. I think in terms of the aftermarket, there’s an interesting dynamic here.

If anything, the toughest period is probably going to be Q1-Q2. And the reason I say that is because if you think about it, customers are laying up fleets, and if they then start stripping pieces off those units, and this has happened before so we know it happens, that depresses demand for products because they’re taken off.

Of course when the markets pick up and they need to bring those fleets back into the market, as inevitably they will, that creates a huge opportunity for us. The second factor is, obviously, customers were holding inventory levels expecting 85% of their fleets to be operating.

And they weren’t excess inventory levels, because I think everybody had learnt their lesson from 2012, but they become excess inventory levels when actually you’ve only got 60% of your fleet operating. So there’s a bit of inventory to go through the system.

But my comments earlier referred - it took us two or three quarters to digest the overhang that we had then. There isn’t as much of an overhang.

So we think it’s a sort of one-to-two quarter thing, and then you get back to a normalized level of aftermarket activity reflecting the realities of what’s happening on the ground. So a bit like last time, you see almost the initial disproportionate impact in terms of aftermarket demand.

It then comes back on a sequential basis, probably still down year-on-year as you get into - you get that overhang out of the system. And then it will be driven by production.

And just a follow-up on the margin question, and I appreciate you might not want to give an answer to this. You talk about how things could be worse than they were back in 2012 and 2013.

You have talked in the past about oil and gas being a 20% to 25% margin kind of business. Given the volumes, given the pricing, is it a sort of modest downside to that, or is it substantial?

I’m not going to go there, Martin. I’m surprised no one else has tried before now.

But all I’ll say is, if you look at the margins in 2013, I think they were just above 20%. It will be a real challenge to hold onto those margins in 2015.

I’ll let each of you get your calculators and work out what you think it means.

Thank you.

Okay, Jonathan?

Good morning, guys. It’s Jonathan Hurn from Credit Suisse.

Just a few questions from me. Firstly, just coming back to this power and industrial, can you just give us a little bit of guidance for where you think the margin will come out for this year?

Do you think we’ll get back to sort of around about the 10% level we saw in 2013?

Yes. We’re not giving specific margin guidance, to reiterate, I think the focus, as Keith said, is on driving the benefits of the reorganization we announced in November.

We’re delivering that, and we will see an improvement in margin if we execute against that.

The second question was just on mix. Obviously, adverse mix at minerals, there’s been a headwind there.

Do you think that can potentially unwind in 2015? And also, just in oil and gas mix there, I mean have you seen some demand probably for the lower-end or lower-value fluid end products relative to maybe the Duralast?

Have you seen any changes in dynamics there?

No change in dynamics in terms of fluid ends. What we’ve found, and indeed last year, if you think about it last quarter 2013, we were reporting to the market that 10%-15% of fluid ends were of the premium category, let’s say.

For the whole of last year, the average was 40%. So we’ve made a real step change and the market has appreciated the wear life improvements associated with that.

Of course, once the market has made that adjustment, and indeed, there are still some customers Paul and his team are talking to that will come into it - I think the challenge we’re seeing more generally in the market is, and particularly for some of the smaller players, cash cost becomes critical. Wear life’s really nice, but if I can get something, a legacy fluid in for substantially less from a cash cost point of view, okay, maybe it doesn’t wear as much, but equally, well, I’m as sure as hell all my fleet’s going to be in service before I’ve got to lay it up.

I’ll go with the cash cost option. So there is a wee bit of focusing on almost the bottom line of, right, what it’s costing, and let’s go for the cheap and cheerful solution rather than the lowest total cost of ownership.

I’m not saying everybody’s like that, but there is an element in terms of that dynamic. To be honest, in terms of how that plays through the margins in a mix, it’s pretty marginal, Jonathan.

I don’t see it being a big deal. I think there’s far bigger themes out there in terms of pricing, in terms of overall volumes of activity, and indeed, the efficiencies that we can then undertake to offset against that.

So that’s just, it’s probably just a little bit of noise at the margin.

From a minerals perspective, I know we’re not expecting any significant change in the mix relative to what we saw in the aftermarket last year, but one thing that we have flagged is that we are exposed obviously to oil and gas markets, to a degree in the minerals division, so we expect to see a little bit of pricing pressure there in the same way as we do in the oil and gas division. So that’s why we’re guiding to slightly lower margins in the minerals business.

And the last one, just to come back to the margins, so I know no guidance, but in terms of pressure control versus pressure pumping, where is the biggest risk in your eyes in terms of the downside?

Well, listen, from a scale point of view, clearly, pressure pumping is a far larger business and is operating at a far higher average margin. So in absolute terms, pressure pumping, clearly has the biggest individual impact.

Pressure control, Seaboard, as we’ve talked about previously, the margins weren’t where we wanted them to be. So if anything, the risk is a lot lower at Seaboard because, actually, the structuring actions which are starting to deliver will pretty much underpin the margins at Seaboard, and then it becomes a volume issue.

Mathena, it’s more of a rental model, and let’s be honest, rental models are challenged in this marketplace, because even as the team are doing, you take heads out, you cut costs, because it’s a rent-per-day type model, if you lose that, while you make cuts, it doesn’t sort of matter what you do to the cost piece if it has an impact on the bottom line. So that maybe gives you a flavor in terms of impact.

Okay, Chris Dyett?

Good morning. Chris from Investec.

A couple of questions please. Firstly, we’ve obviously spent a lot of time talking about pricing pressure within oil and gas, but actually kind of more intrigued about minerals.

I read a lot of the mining companies talking about extracting pain upon their supply chain. You obviously don’t reference it in your statements.

I’m wondering, particularly around copper given the very significant fall we’ve seen, whether you have seen customers come to you and say, look, we’re going to have to have a discussion here, you’re going to have to give us something.

Not really, Chris, to be honest. I think it’s pretty much business as usual.

We’re into the third year of almost the new world in mining. Yes, customers come and ask, but equally, as we’ve done before, we are able to demonstrate through wear life improvements or energy efficiency improvements some of our upgraded products are able to deliver.

There are other ways you can deliver the savings the customers are looking for, actually more meaningful ways they get bigger numbers out of it than just the price cut. Even in a worst case scenario where we do see pressure to reduce price and we’re willing to concede something, which is very, very rare, we then have the flexibility, and we have done this, we move the casting of those parts and machining of those parts from the likes of Australia to Malaysia.

Malaysia is 40% cheaper than Australia as a manufacturing location. So in the minerals world, there are a number of levers to pull such that, frankly, it’s not top of my concerns.

And a couple of questions on oil and gas. Obviously, you’re seeing quite a lot of pricing pressure.

Are you a market-share man, or are you a - are you going to - because obviously, it depends on how much you concede. When in previous periods you’ve obviously grown your market share in kind of weaker times, are you of the same type of thought process.

I think that there are real opportunities. It depends where - sort of the answer is it depends, and it depends where you sit in…

Depends on who’s listening, or?

Yes. No.

It depends on where your products sit in terms of market leadership position. So for example, Seaboard, which has a market share of 7% or 8%, I was just saying to Paul last night, this is a fantastic opportunity for Seaboard to get out there to aggressively quote other potential customers that they haven’t dealt with because they have such a low market share and are perceived as being a lower-priced competitor in that marketplace.

So in that context, there probably is a market share gain because, given where we’re starting from, it’s a real upside opportunity. In the context of SPM, it perhaps slightly different, and it depends again the specifics on the products and the specifics of the relationship.

There are some customers that we will consider to be strategic customers that we want to maintain a relationship with, and in the interests of that long-term relationship, we will concede price. There are others that, frankly, we’ll say, no, and look for alternative sources.

But again, in many of our products we’ve talked about, we’ve still only got 27% fluid end-market share. Yes, it’s gone up from where we were, but it still means there’s 73% to go after in terms of being aggressive.

And the scale of the manufacturing facilities that I know some of you visited in December gives you a sense of our ability to produce very cost effectively product to get out into the market. So I think it’s a bit of both.

One final question. I think, I mean all credit to you, you’ve done a great job in terms of improving the quality of the assets within oil and gas in terms of the operation efficiency, but in some ways, that’s a negative now because you can’t do it again.

So is it a fair statement to think that, actually, some of the margin you’re talking about is that you can obviously flex the headcount, but in terms of in-sourcing, in terms of going after procurement savings, quite a bit of that is already done and can’t be done again?

No. I think in terms of the in-sourcing, I wouldn’t agree with you, because the reality is we’ve outsourced everything we’d in-sourced during the ramp-up last year, because the volumes have picked up again, so we just in-sourced it again, so that can definitely happen.

In terms of the procurement savings, if there’s one saving grace from sort of the oil price decline, it is that everyone knows about it. And when you have a conversation with your suppliers, quite apart from any sort of leverage for global scale and the like, there’s a very simple conversation, you are part of the oil and gas industry, we’re all sharing this, we’re all in this together, everybody’s got to share the pain.

Irrespective of global leverage, of volumes and the like, it’s a really simple discussion. Just as we’re getting letters from our customers, they’re getting them from the E&P players.

It’s - everything is going downhill. Obviously, positive, the raw material prices moving down.

In a sense the starting point is a positive. So there are raw material pricing, savings anyway that are starting to come through the system.

So I’m trying to - it’s important I’m trying to present a realistic balance. On the one hand, I don’t want to be perceived as too negative in terms of the perspective, but equally, we’ve got to recognize there are challenges out there.

But I think our experience, and what we’ve done before should give everyone comfort that, we will do everything that we can to mitigate that effect, to minimize the impact on the bottom line. But equally, it is realistic to assume it’s going to be a tougher environment than we saw in sort of 2012-2013.

Yes, and we got time - we’ll take these three, then that I think probably we’ll do us…

I’ll limit to just one. John Mounsey, Exane.

So you’re thinking about a rig count decline of about 50%. Great.

In terms of your own customer base, I think you’ve always in the past talked about being maybe longer the independence, I mean, how was to sort of guess who was likely to take the most pain in a rig-count-down-50% scenario, it would be those. So do you think your customers may actually see their total rig count fall more than that 50%?

Well, remember. Our customers in the pressure pumping world are not the independent E&P players.

They’re the oilfield service companies. And the oilfield service companies will deal with any size.

So you could have a Schlumberger dealing with an independent E&P player just as much as you could have one of the smaller oilfield service players, the Calfrac, the Tricans, the Sanjels of this world, dealing with a substantial E&P player. So it’s a bit difficult to simplify.

Where we have seen the effect is - the interesting thing is the guys that have only got one or two rigs, they’ve got to keep going to generate cash. Because if you stop, and with the depletion rates you see in shale wells, so the music stops in nine or 12 months’ time.

So there’s an interesting dynamic that you’re right, and there’s a financial element here in terms of about financing arrangement. So I think what I’m saying it’s really difficult to generalize because there are a number of different sort of influences and moving parts.

You’ll be right in some instances, but you’re probably wrong in other instances with that so, okay, Mark and then finish up with Stephen.

Sorry. Just a further question around oil and gas margins, I suppose there’s been a lot of discussion of 2013 as a reference point.

I mean, how do we think about margins more in the context of, the sort of bigger decline on leverage that you saw back in 2009 and how does that provide a sort of reference point or us and could it be worse than that?

I think that’s maybe - you’re trying to get us to be too precise in how we think about margins. I think suffice to say, a couple of things.

One, the - and this is really, really important, the SPM business even in our worst case scenario is still substantially bigger than it was in 2009. And those of you that have good long memories will remember what SPM was doing in 2009.

I certainly do. It was an interesting time.

Secondly, the division has extended itself significantly, so you got Novatech, you got Mathena, you got Seaboard. So you got to be a wee bit careful in making too many analogies, albeit those acquisitions are sort of different margin profiles.

I’ll just stick with what I said before in terms of direction of travel and margins, leave you guys to do the work. Stephen?

Good morning, Stephen Swanton at Redburn. I have two questions.

There is a quick one on minerals business. Why was the high pressure grinding roll cancelled in Q4?

And also on oil and gas but in the international markets, what’s happening in kind of Australia with or China or South America in terms of people’s tendency to…?

The order - and let’s just replace the dynamic of what’s happened with oil and gas placed in Q2 - the order was placed in Q3 and it was by one of the world’s top five mining houses. So they placed the order, they committed at a project and then with the fall off in commodity prices, particularly iron ore, they cancelled the project in Q4, simple as that.

But it just shows you that we’re just all in this together in terms of taking long term decisions and then price is moving and changing the dynamic. In terms of international shale, I’ll be on this stuff.

China, I think it’s somewhat insulated, so I think China will continue to move forward and there seems to be new determination to drive China forward. The other one from a shale point of view is essentially obviously Saudi Arabia, because they are driving forward and actually getting some good results in terms of their initial exploratory wells for unconventional gas.

Australia, I think to be honest is going to more challenged. It’s at the higher end of the cost curve.

It was just getting going and as people retrench, unless the projects have gone beyond a certain point, I think people are going to sort of pause and wait for better markets before pursuing them.

Thank you.

Okay. Well, thanks, everyone for joining us.

Obviously, Jon and I are here if there’s any follow up individual questions. Thank you.