The Weir Group PLC

Keith Cochrane - Chief Executive Officer Jon Stanton - Group Finance Director

Andrew Carter - RBC Jonathan Hurn - Credit Suisse Mark Davies-Jones - Stifel Stephen Swanton - Redburn Sanjay Jha - Panmure Gordon Robert Davies - Morgan Stanley Glen Liddy - JPMorgan Cazenove Jonathan Hanks - Goldman Sachs David Larkam - Numis Andrew Douglas - Jefferies

Thank you, operator. Good morning and thank you for joining us for as for the operator said, our first quarter IMS update.

With me is Jon Stanton. And as is the norm, we will be pleased to take your questions following a brief review of trading.

As expected, the group’s end markets continued to be challenging during the period. Since we last reported, the North American rig count is down a further 20% to the lowest point since Baker Hughes started counting in 1940.

At the same time, miners continued to reduce capital expenditure. And in 2016, it will be comfortably less than half the peak levels of 2012.

So, how is Weir faring in that context? The group has maintained its focus on executing effectively, delivering strong cash generation and aggressively reducing costs, but also making strong strategic progress, particularly in extending our technology leadership.

The first quarter saw a slightly better than expected performance from minerals, while Oil & Gas was impacted by further activity declines, trends which have continued into April. As a result, looking forward, we now anticipate first half profits will be slightly ahead of market consensus.

Although with expectations of a slower recovery in oil and gas markets, our full year expectations remain unchanged. Let me now turn to each of our three divisions, beginning with minerals.

Order input for our biggest division was down 4% against the strong prior year comparator, but was up 15% sequentially on Q4 and slightly ahead of our previous expectations. As I flagged at our full year results presentation, miners shutdown operations early in December and restarted them later than usual in January.

That impacted aftermarket performance in the early part of the quarter, but there has since been a sequential improvement. February was up on January.

March was ahead of February, with total input in March equaling the highest monthly input we have seen in the last 15 months. An early indication suggests a robust input performance in April also.

Indeed, for the quarter, the division has the highest absolute aftermarket input since Q2 2015. And also bear in mind the Q1 2015 comparator was a record for the division as some customers placed one-off orders covering their demand for the whole year, which has been less of a feature this year.

In terms of original equipment, input was 15% higher than the same period last year as the division fully captured available opportunities, particularly piston diaphragm and centrifugal pumps. Customers are reviewing their processes to recover more end-product from their ore bodies and our service engineers are focused on developing solutions to meet their needs.

We have also seen an increase in inquiries from engineering houses, suggesting miners are in the process of considering additional brownfield investments, but these are early and uncertain indicators with bids focused around longer lead time products such as PD pumps and HPGRs. However, while some commodity prices increased in Q1, including copper, gold and iron ore, you will recall our biggest exposures, they remain below incentive levels and customers continue to focus on reducing operational expenditure and cost per ton.

Pricing pressure remains a constant feature, but didn’t show any signs of intensifying in the period. Markets in Europe and North America were relatively positive, with aftermarket performance in Canada, supported by increasing production in the oil sands.

Conditions in China, Asia-Pacific, Australia and Africa were more subdued, but project delays are featured. Conversely, markets in Latin America remain more supportive, and we continue to see growing orders in this region.

Despite these broadly challenging market conditions, divisional constant currency like-for-like revenues in the first quarter were in line with the prior year and slightly ahead of expectations, a good performance. The division’s order book also increased with a book-to-bill ratio of 1.06.

First quarter profits were ahead of prior expectations as a result of strong cost control, with the full year outlook underpinned by a further £10 million of incremental annualized cost savings, identified and actioned already. These involve the reduction of management layers across the division, while customer-facing roles were protected.

The downside divisional office will be moved to Texas as part of these plans. This takes the total value of cost actions in minerals to over £40 million in the last 18 months, with the group total now exceeding £160 million.

Full year constant currency revenues are now anticipated to be broadly flat on the prior year for the division, ahead of previous expectations of a slight decline in revenues for the year. Operating margins are expected to be broadly in line with 2015 in line with our previous guidance.

Let me turn now to the Oil & Gas division, where as I said earlier we are now experiencing historic rig count reductions and that’s reflected in the financial performance of the division in the first quarter. The divisional figures exclude our downstream pump business, Gabbioneta, which now sits in Flow Control following our recent restructure.

This means Oil & Gas is solely focused on upstream markets. Input fell 47% compared to the prior year period, although Q1 2015 was also last year’s highest quarterly input.

Original equipment fell 40% and aftermarket orders were 49% lower. Input fell 15% sequentially from the fourth quarter of last year, but better than rig count trends, including internationally, where rig count fell to 2009 lows.

Against this backdrop, pricing pressure remains intense and the business is maintaining its focus on cost reduction. We have completed the actions identified in February to deliver an additional £23 million of annualized savings.

In March, there was a weeklong furlough across our North American operations and a further 50 headcount reduction in Pressure Control has been actioned in April. Our strategy has been focused on maintaining share in these extremely competitive markets.

And in some segments such as fluid ends, pressure pumping has actually increased share. And the Q1 input for fluid ends was the highest since the same period last year and we continued to see customers standardize their fleet on our Duralast fluid end technology, a direct result of our R&D effort in prior years and recent sales focus.

More broadly, it’s now estimated 70% of the U.S. track fleet is idle with industry consolidation, including among our customers and competitors a recurring theme.

The business continues to make excellent progress of expanding its technology leadership. Just last week, it has launched its new generation of valve and fleet technology, which more than doubles the life of this key component.

In Pressure Control, the division has completed the combination of Mathena and Seaboard, with the consolidation of district service centers also underway. Staff are now undergoing training to sell the broader portfolio.

Let me give you a sense of the scale of market contraction we have seen. Mathena, which has also retained market share and equipment of more than 440 land rigs in the U.S.

in 2014, today, the entire market is 8% smaller than that. Outside North America, international markets became increasingly challenging with newbuild activity reduced and rising pricing sensitivity across the Middle East.

So, reflecting market conditions, Q1 divisional revenues were materially lower than the prior year on a constant currency basis and also fell sequentially. Operating margins fell slightly below the breakeven, reflecting ongoing pricing pressure and negative operating leverage from lower volumes partially offset by the incremental cost saving measures.

And as I said in February, we are currently running the Oil & Gas division for cash and it will remain cash positive in both H1 and H2. And our international operations continue to be profitable.

The continued declines in activity levels means that while visibility remains low and markets continue to be volatile, a slower than previously anticipated recovery through 2016 is now anticipated, with slightly lower full year constant currency revenue expectations as a result. Operating margins will also be further impacted by negative operating leverage, although we anticipate revenue and profitability of the division will still improve modestly in the second half.

Let me now turn to Flow Control, the successful division to Power & Industrial, which now includes the group’s process pump businesses, Gabbioneta and Floway. The refocusing of the division is progressing to plan and the teams are working on identifying new opportunities from the broader portfolio.

Order input for the first quarter was down 20% on the prior year period, as economic uncertainty led to continued customer caution and project delays across the division’s end markets. Original equipment orders were down 28% and aftermarket orders reduced by 10% against the prior year period.

Pump orders were lower, reflecting a strong prior year comparison and declines in mid and downstream oil and gas markets. Valve original equipment orders were also down, although aftermarket input was higher.

Divisional revenues on a constant currency basis were slightly lower than the prior year period as growth in pumps was more than offset by a decline in valves. So the full year divisional revenues on a constant currency basis are expected to be higher than the prior year, supported by the strong opening order book for original equipment pumps.

Operating margins are anticipated to be in line with the prior year as a result of pricing impacts and a higher original equipment product mix offsetting the full year benefit of restructuring actions taken in 2015 and early 2016. And reconciling this back to the old group structure, expectations are unchanged for both power and industrial and the pump operations we have transferred into the division.

And to help you rework your models to reflect the new structure, Appendix 2 of our press release restates the divisional results for both 2014 and 2015. So let me also say a few words on net debt, which at the end of March was higher than that reported at 1st of January, but very much in line with expectations and consistent with normal seasonal patterns.

As we have said previously, we remain confident of delivering strong cash generation in 2016 and in addition expect to realize up to £100 million from disposals of assets and non-core operations. And we will provide a fuller update on these with our first half results.

So let me finish with what I believe are the key takeaways from today’s update. Firstly, markets remain challenging, but we have benefited from our portfolio with the impact of further Oil & Gas activity declines, mitigated by a better than expected minerals performance, meaning full year expectations are unchanged.

Secondly, we continue to aggressively reduce costs and have now taken actions to deliver £160 million in the annualized savings since the start of the downturn. And finally, we will maintain our focus on strong cash generation and executing our strategy effectively to ensure we fully benefit when markets recover.

So that concludes my review of Q1 trading. But in terms of our next update, we will not be holding a Capital Markets Day in June, but we will be holding an event later in the year focused on Flow Control.

Jon and I will now be happy to take your questions. Operator?

Yes. Good morning Jon and Keith.

I guess I am just a little bit confused about the guidance that you have just given and I wonder if you could just help me understand this a little bit better. So if you are expecting the H1 to be a little bit better than sort of previous expectation, but the full year has been unchanged, that just seems slightly off to me, given the sort of phasing of the cost savings that are sort of coming through, so I presume we had still got some to come from the 2016 time that you have previously talked about.

And then you have also talked about the additional £10 million, why does that mean that we should be effectively lowering our second half number, what have I missed?

Well, I think the point you missed and I am sure you haven’t missed Andrew, is that rig count has declined and continued to decline over the course of Q1 over and beyond everyone’s expectation. So as I have said in the statement, we are anticipating a slower than anticipated pick-up in Oil & Gas through the second half.

So let me again just reemphasize the building blocks, in the full year essentially what we are seeing is we are expecting a stronger performance from minerals, which I think is evidenced by what we have actually delivered in the first half and our expectations – sorry, our first quarter. And our expectations for the first half, of course underpinned by further cost savings.

That will offset a reduction and reduced expectations for Oil & Gas because of what’s happened to rig count and the phasing of recovery. And equally more of that profit will be delivered in the first half and around because of the shape of deliveries and the shape of performance across the full year.

Okay, that’s helpful. Thanks very much Keith.

Could I just ask sort of one follow-on just to help me understand a little bit the sort of relative strength that you are seeing in minerals, is there something sort of changing sort of particularly in the market or is it – or is some of this to do with your positioning and obviously I guess market share?

I don’t think we can say it’s fundamentally changing the market. Let’s be clear, customers are continuing to be very focused on reducing costs, very focused on improving efficiency and are not spending very much at all in the way of CapEx.

So I think those overriding themes still continue to play out. What customers are doing and we have talked about this before and maybe we are just seeing it translate more into action now, is they are prepared to invest where they get good paybacks, where they see investment as part of efficiency improvements to improve the operation or actually to get more production out of an existing mine site.

And frankly, in terms of a return perspective, generate more cash for their overall operations and not particularly pleased, there are product portfolio in terms of pumps, the cyclones. We have seen some good examples recently where actually trials that we have been running against competitor pumps have now translated into real orders.

So there is also an element, I guess of market share gain. But I think in the round, it is more about customers are perhaps starting to think about some have been willing to contemplate some of the investments – some investment to deliver those efficiency moves.

And certainly, if we look at cores, we look at the underlying activity. And we need to be careful here not to get ahead of ourselves because OE input can be lumpy and we have said that many, many times over the last few years, they actually have a pretty good pipeline out there.

But we will just need to see how it plays through and indeed if it does play through over the course of the next quarter or two quarters.

Yes. And Andrew just the only sort of very short-term thing that’s changed in the market is clearly, the Q4 was very difficult with extended shutdowns, reduced order sizes, customers delaying maintenance, etcetera, pretty much all of which we knew was a one-off effect.

And we have seen the unwind of that as we have gone through the first quarter, such that the aftermarket and spares run rates are moving back up to the sort of more normal levels that we would see, which is why we have been saying consistently don’t get hung up on quarterly aftermarket input percentage changes, because over the year from a revenue perspective, it has to kind of revert to normal and we are seeing that.

Thank you.

Hi guys and good morning. Just a few questions for me, I think the first question was just in terms of that sort of aftermarket strength coming through, I wonder if you could just give us a little bit more color on where that’s coming from?

Was that for slurry pump orders for example? And also is it – do you think that can continue or do you think that starts to level off?

That was the first question. The second one was just on aggregates.

It’s obviously about 6% of your group sales. Can you just give us a feel for what you are seeing in that market?

And I think lastly was just on Oil & Gas, can I just clarify that, that second half improved performance, does that mean that you are actually going to turn profitable in Oil & Gas in H2 or is it a smaller loss? Thanks.

Okay. Good morning, Jonathan.

Some good questions there. In terms of aftermarket, as I said, we saw after a very weak start, which if you recall, I did quite fairly explicitly in the February results presentation.

We saw a pickup in aftermarket activity in February, a further pickup in March. As Jon says, I think the way to think about it is – and the question in our mind frankly has been is this just catch-up or are we starting to see a bit more normalized activity level?

There has been a small amount of catch-up. But as I look at April and we don’t have – obviously, we haven’t finished April yet, but we do have our sort of flash numbers starting to come in, it looks as if we are seeing similar trends in April.

So, it does feel as if we are getting our sales back to a more normalized level of aftermarket activity. I think we all recognize and again, it’s something we have talked about before.

Customers can push the boundaries and indeed have pushed the boundaries to save money, but equally, there does come a point where that can’t continue. And if they want to keep producing, they have got to start spending money again.

So, I guess we are seeing that in terms of getting back to that more normalized level. And yes, at this time, it’s the slurry pump portfolio, which continues to be probably our most robust aftermarket both input and revenue stream.

Aggregates, I think aggregates, we are making progress in terms of developing our reach to market for the TRIO products, some really good progress in North America. China was a bit quiet in the first quarter.

We are now starting to see obviously some of the infrastructure spend that’s been reported on the press to ripple through the system and translate certainly into bids and to prospects. So, in a sense, after a very quiet first quarter in China, we are now seeing a bit of a pickup in momentum activity and we are hopeful that, that starts to translate into orders and certainly into revenues as we look forward to later in the year.

And in Oil & Gas, Jon?

Yes, on the Oil & Gas question, Jonathan, yes, we are expecting that the division will become – flip from modestly loss-making to modestly profitable in the second half of the year, not really assuming any uptick in overall activity levels in the market in that rather just the phasing, if you like of the cannibalization and destocking effects that we are talking about. Although that is now not going to be as strong as previously thought just given where the rig count has gotten to and the overall activity levels are in the market.

But I think just building on that destocking cannibalization, the fact as I mentioned, the fluid end input is as strong as it was in Q1 last year. Despite the market effect, the market has come off fairly significantly, just maybe starts to suggest that some of our customers are reaching the end of the roads in terms of the de-stocking fees.

Having said that, the piece that’s out there that’s probably going to take longer to work its way through in terms of destocking is the flow of iron, because of course, every pump that is laid out has a string of iron attached to it. And customers are very much working through that to avoid having to purchase the fluid end input and revenues are holding our own, albeit pricing is very aggressive, but very much holding our own in market share terms, but that’s being offset in other parts of the business.

Right. That’s very helpful.

Thanks.

Thank you. It’s really a continuation of the last question on the Oil & Gas side.

If we see rig counts finally bottoming albeit at a spectacularly low level this quarter, I was just thinking about the lags in terms of when you might see any benefits either on the aftermarket or the OE side. It’s obviously something that Schlumberger had been talking about in the last few days in terms of how much excess capacity needs to be worked through before we see any pickup in activity.

But would the aftermarket business at least start to see some benefit back end of the current year if that is the sort of curve that we are looking at?

I think it is a possibility. I wouldn’t put it any higher than the possibility.

The way I see it sort of playing out, Mark, is clearly, if customers who – our customers are particularly the pressure pumpers will want to get on sales position for a pickup in rig count, because the reality is with all these fleets laid up, they are now in a condition that they can be brought into the field overnight quite apart from all the people issues in terms of ramping up activity. So, it’s going to take a bit of time to ramp up activity.

But you are going to have to get your fleet into a condition that it becomes operable again. So, my – now having – and if we – if the world starts to think the rig count picks up in the early part of ‘17, then I would guess and it is only a guess because I am not sitting in the customers’ shoes that they will want to position themselves, so they are ready to take advantage of that, because if they don’t get ready, they are going to lose market share against those guys that have got ready.

So, my expectation is if that is the outlook and let me emphasize it’s still to my mind a bit of a hypothetical question, I think you start to see some refurbishment work happening on our kit and on our fleets that are out there in advance of actually rig count picking up, because that has to if customers want to get themselves ready for the market. But of course, the other piece that’s at work is the drilled, but uncompleted wells.

It’s guesstimated there is something like over 3,000 of those. Again, customers may start to drill and to – sorry, well, they have drilled them already, so customers may start to complete to frack those wells, which in turn of course sees a bit of a pickup in activity and a bit of a pickup in aftermarket.

So, I think you are right in terms of aftermarket components and the like. I don’t think we will see much in the way of original equipment, but with the caveat and this gets back to the joint venture we established with Rolls-Royce, the very attractive operating characteristics of the new pump that we have introduced, I think we are getting close to 25% efficiency improvement.

There is an argument and we will need to see how this plays out with those sort of improvements do customers actually – or can they justify spending money on the old units versus saying, right, well, we are going to scrap those and we probably impaired them already plus getting new ones which are far more efficient and far more attractive to us in terms of performance. And actually, that creates an OE cycle, but that’s just – again, it’s just a question in my mind.

We are selling or banking on that and you need to have that sort of thought process before it crystallizes.

Okay. Can I ask a quick follow-up, which is that if we are looking at a sort of ‘17 pickup in activity, are you very comfortable across the board that you retain or expand your capacity position in that recovery scenario?

I am just thinking again of the big boys, the Schlumbergers in the last few days talking about they have whole new integrated systems that they are rolling out in ‘17. Is there any competitive threat to your participation in that recovery?

Well, I think going back to what we are seeing, something we have been very focused on right during the downturn is continuing to move forward our technology, the customer proposition that we are able to provide, the joint venture with Rolls-Royce in terms of engine transmission and pump very much does that in terms of the pressure pumping perspective. Mathena has now got sort of electronic equipment in the field, which very much differentiates itself from some of the other players in terms of its marketplace.

So listen, I am not going to say it’s not a risk, Mark, it is a risk. But I think, just given the scale of infrastructure across the industry, the technology position and investment that we have undertaken over the last year or two, we are in a really good place to continue to maintain our market leadership position and that’s what we are and the team over in the U.S.

is very focused on ensuring they do it.

Thanks very much.

Good morning. I wasn’t sure in your prepared remarks if you said anything about pricing in Oil & Gas.

I mean, given on upstream your loss-making from what I can tell your competitors are, is there – is the pricing still deteriorating there, that’s question number one. And then you also – I mean, what you did reference was kind further cost cuts, I think in March within Oil & Gas, but you are at a stage now, given there is a bit more talk about things maybe stabilizing later in the year, that you are kind of unwilling to make – or kind of are you unwilling to make further big changes to your cost base in Oil & Gas now, given we have kind of reached this point.

And final question is just on the disposal process and whether you have actually disposed anything as of yet and when can we see kind of other things coming through?

Well, let me comment on Oil & Gas and I will let Jon talk about where we are on the disposal processes. Oil & Gas pricing, it’s actually quite difficult to say is it deteriorating or not.

Frankly, our focus is on market share. It’s very consistent with some messages that Schlumberger was giving a few days ago.

We are pricing to ensure we maintain market share. We are also pricing to make sure we are cash positive at the top line, because clearly volume activity positioning in the market, to my mind is very important for the point at which the market starts to turn.

So it is very, very aggressive out there. And we are doing what we need to do frankly to achieve the sales that we are achieving.

But as I have said, we continued to be cash positive through H1 and H2, so I believe that is the right strategy. In terms of cost reductions, there are a few consolidations that still have got to happen across the piece that frankly, we have an early lead.

I think we are pretty much getting to the point now Stephen, that I would be reluctant to take much more out from Oil & Gas and just need to sort of tough it out over the next few quarters on the expectation that at some point, the market does turn. And Jon, in terms of disposals?

Yes. Hi Stephen, on the disposal process, everything is going according to plan thus far and therefore confident that we will deliver the £100 million that we announced by the end of the year.

Clearly, we are not yet in a position to announce anything in terms of deals done and adjusted but hopeful that we will be able to give a statement on meaningful progress. It’s going to be at the interims in July.

And indeed, if anything happens before then that’s material, clearly we will announce that as and when.

Thank you.

Good morning gentlemen. I have got a couple of questions, can you help me get my head around the Flow Control, because obviously, you moved some businesses on minerals and Oil & Gas to Flow Control, to what extent the 20% decline in order book is because of that?

Sorry, can you just repeat the last part of the question?

I mean I am just – I am guessing the Flow Control business that took some of the businesses that were previously minerals and Oil & Gas.

Yes.

To what extent the 20% decline is because of the impact from the things that moved from Oil & Gas or mining?

Right. I got it, okay.

So yes, we moved Gabbioneta out of Oil & Gas to midstream/downstream business and Floway out of minerals. Gabbioneta moved into the division with a very strong opening order book.

So we expect it to perform well this year. But clearly, it operates in by and large, those downstream oil and gas markets and therefore, that business is seeing some of the headwinds that you would expect it to be seeing consistent with its peers.

The reality is that the power market is a bit better, but still pretty challenged as well. And therefore, I think the trends that you are seeing in the input – across the division are very broadly reflective of the markets in which it operates, actually if not slightly better than you might see from some of the peers across that broader Flow Control space in terms of performance.

But yes, that’s the driver.

But you are saying sales will be up this year, am I right for Flow Control?

No.

No, it’s okay. So I am just trying to – okay.

My second question was, I think Keith you talked a lot about...

Sorry Sanjay, just to correct myself, yes we are saying that revenues will be higher. I think that is driven by principally, by that strong opening order book, sorry.

Basically Sanjay, Gabbioneta’s order book is full for this year in terms of original equipment.

Good. Okay, so…

And it’s all about – for Gabbioneta this year, it is all about delivery. The input is obviously reflected in the broader market trends.

If you strip it back, valves’ input performance is actually probably a bit better than what you re seeing across the sector. It is still down.

But because we have more advice towards power rather than oil and gas, that – and indeed, we are very focused on the aftermarket opportunities in valves. We are being able to mitigate some of that impact, so hopefully that helps.

And can I – my second question is, I think Keith, you talked about $45 being like a solid number at which you feel some of U.S. customers may – is that still your view that it’s the point at which you expect some of the uncompleted wells to turn on?

And certainly, that’s what we are hearing now. I think the other thing, I didn’t just say $45 in isolation, I think you need to see it for a sustainable period, for a couple of months, because I think there is a real nervousness out there that the minute someone dips their toe in the water and puts a rig to work, the price falls back again.

So I – and we are pretty close to $45 in terms of WTI right now. I don’t think anybody is going to be rushing back in for a few months.

I think they need to see a sustained – we probably need to see a bit more decline. But my sense, the way I think about that is, we are now seeing meaningful declines in U.S.

oil production, which very much says that we are on a path to balance. When exactly that balance is realized, who knows, there are a number of different schools of thought around that.

But we are on a path and obviously that over time starts to give confidence in terms of the price and we will start to give the E&P players, certainly in North America, the opportunity to switch back on because again, switching back on given the scale of the cuts that everybody has made is not something you can do easily. It is going to take a few months.

So my sense is we are – even if we are at $45 today, you are a few – a number of months away before you start to see that translate into a market improvement.

Okay. Can I just quickly ask one more, on the – you said that you are in line, so you are ahead of expect – market expectations, am I guessing this is the consensus that was sent by Lianne [ph] yesterday?

For the first half?

Yes.

Yes, it is.

Not the one that was sent on 11th of April, because I was slightly confused, there was $0.01 on the 11th and there was $0.01 yesterday, so I just wanted to...?

It’s the one that – it’s on the one that was published on the website earlier, Sanjay.

Yes. Clearly, it’s the most recent one because clearly, I was sort of updating and we are faithfully trying to keep up the speed with those updates.

But it’s always against the most recent.

Alright. Thank you very much.

Thank you. Next question, operator.

Good morning. It’s actually Robert from Morgan Stanley on the line.

Just a few questions [Technical Difficulty]

Hello.

Hello, can you hear me?

Robert, yes. I think you got cut off there.

Sorry, a technical glitch, I think. Yes.

Just a couple of questions from me, first one was just around the impact of rising commodity prices, I guess the second half of last year, we saw a number of mine closures, I wonder since iron ore prices, etcetera have gone up, have you seen sort of rate of mine closures slowing on the back of that, i.e. are things going to settle down there for you, that was question number one.

Just secondly, around the sort of midstream and downstream trends, I wonder if you could just sort of flesh that out a bit more, I would be kind of interested in what you are sort of seeing, what your customers are seeing there in terms of sort of change of behavior patterns in that sort of midstream and downstream in particular. And then just final one was just around the continuous duty cycle pump that you brought out to the market, I guess how are customers thinking about pumps in general, there is obviously a lot of sort of stacked equipment in the field, how is that sort of balance working in terms of their level of caution about using some of that stacked equipment versus the sort of better efficiency on some of those new pumps, what are customers saying to you?

Thanks.

Okay. Well, let’s just take those.

In terms of mining, I think it’s probably – I was just trying to think, have I heard about a meaningful mine closure that impacts the minerals division in the last month or two. And actually, I haven’t.

So, I guess in that sense, your information that perhaps things are stabilizing because of the pricing, what’s happened to pricing is a fair point in terms of we saw a bit certainly towards the back end of the year. Indeed, I am aware of one in North America that we thought was going to get closed, which now isn’t going to get closed in terms of the latest views.

So yes, that is certainly less of an issue. Mid and downstream, our principal focus in mid and downstream is through Gabbioneta and they have clearly higher buys towards the Middle East marketplace.

There is clearly a lot of investment still going on into the Middle East. And but just as I mentioned about the upstream piece of our Oil & Gas business and the Middle East getting more competitive and more price-sensitive, that continues to – that is playing out in the mid and downstream piece as well.

So yes, more aggressive pricing, project delays, it’s taking longer to get things over the line. Is there still a fair amount of projects and a good pipeline?

Yes, it’s just it’s becoming everybody is sort of going after that business. And not surprisingly, the customers are being pretty smart about how they play that to their own best effect.

And then in terms of continuous duty, I think the point you make is exactly the one I made earlier. And frankly, it’s LED, because they are – most customers are still, this is about survival, guys, so they really haven’t yet turned their mind to thinking about the sunny outline and how the deal works a market that is starting to recover.

My hope is that rather the ones they loop to bring fleets back into service. If you recall in February, I said the refurbishment could be up to $300,000 a shot.

If it’s at that end of the spectrum, I would hope given particularly since the chances are they have all of the assets in the balance sheet, they will say, right, we are not going to spend that money. Let’s get this new pump that’s 25% more efficient.

It can reduce our operating cost with the new environment. Now, we will need to wait and see, but that’s got to be the proposition that we are putting forward, because certainly, over the next short-term that’s probably the only way you are going to see OE orders come through given the glut of excess equipment that exists in the broader marketplace.

That’s great. And just sort of one follow-up question just on, I guess, mining aftermarket trends, are you seeing any differences in I guess product categories in terms of the bits of kits that our people are getting for sort of wear and tear in service, i.e., is there sort of particular parts to your portfolio that are holding up better than other parts?

I would be interested if there is any differences there? Thanks.

That was right. I think as I said, the slurry pumps spare parts is probably the most stable, the most consistent piece of the aftermarket and that just reflects its position in the processing circuit that is very much driven by activity.

So, the other aftermarket components, I wouldn’t say they are discretionary in the sense they still wear out, but there is better flags when customers can decide to replace stock. So, those components tend to sort of ebb and flow slightly a bit more, which is why you see it in some of the input numbers, whereas you don’t see it in the revenue.

And of course as we said, like revenues are flat quarter-on-quarter – against the backdrop of what’s happening in the minerals marketplace, I am really pleased with our performance. The guys have done a great job.

Okay, that’s great. Thanks very much.

Good morning, guys. You have been clear that you are on track with your disposal program for £100 million by the end of the year, is your interim dividend contingent upon you being unchanged, contingent upon you making any disposals and the cash in by the time you pay the dividend?

It is not, no.

So, completely independent?

Completely independent, completely built into our guidance in terms of where the balance sheet metrics will be.

Okay. And in terms of your cash generation during the first half of the year, will we see net debt to EBITDA rise relative to last year or stable?

No, we will see it do what we said in our previous guidance, Glen, i.e., it will rise at the end of June up to 2.93x compared to 2.5x at the end of the year and then will come down over the balance of the year. But that midyear point, again, does not assume any disposal proceeds or indeed any take-up on the scrip offer on the dividend, which is clearly out there as well.

And I know the scrip dividend is still subject to shareholder approval, but do you have an indication of what the take-up is yet?

No, we don’t.

Okay, then, thank you very much.

Hi, Keith. Hi, Jon.

I just wanted to clarify, I think you have already answered this, but just wanted to clarify, you talked a lot about destocking in the mining aftermarket last quarter. It sounds like you think that’s now ended and you are now kind of on an upward trend to normalization.

Is that true? Do you think kind of inventory levels at the customer site have reached a low?

Yes, I think it is. Listen, customers are certainly not rebuilding inventory, Jonathan.

But – and I think as we all know these things, there is a natural cycle to these things. And then inevitably, they are forced to purchase again if they are continuing to operate the kit and that is what I think is happening.

Okay, brilliant. And then just maybe on the aftermarket, presumably the kind of the story comes with spares being more stable.

Does that have a positive mix impact on the mining aftermarket margin?

Yes, slightly aftermarket spares tend to be one of our higher gross margin products, it’s fair to say.

Okay, great. Thanks.

Good morning, guys. Can you talk a bit about input costs?

Obviously, steel prices seem to be on the up now. So, are you able to pass those through given the sort of price competitiveness in the end markets or what impact is that having?

We are not really seeing any impact of input costs. Don’t forget, particularly on the minerals side of the business, we have our own foundries.

Those foundries are mainly supported by the melting of scrap metal, which we have under arrangements with some of our major customers in those marketplaces. So frankly, the input cost effect is pretty, pretty small in any world and particularly sold just now.

Okay, thanks.

Okay. And I think operator this we go – time for one final question.

Hi, good morning guys. Just a quick question on the dollar, I appreciate it’s all going to change on the June 23, but can you just confirm what you are assuming for your dollar guidance within the income statement?

That will be very helpful. Thank you.

Well, I mean, all the guidance is given on a constant-currency basis, Andy, so...

Okay, but you are guiding to unchanged EPS of 61p?

Correct.

I am just wondering, is that assuming 1.42 on the dollar?

It’s based on what the average has been so far year-to-date, essentially.

Okay, fine. That’s it.

Thank you very much.

So, if I can just round up by thanking everyone for joining us. As always, Andrew and Stephen will be available for any specific questions that anyone has in terms of follow-up, but thank you for joining us and we will see you all very soon.

Thank you.