The Weir Group PLC

Okay. Well, good morning, ladies and gentlemen, and welcome to Weir's 2018 Full Year Results Presentation.

As usual, I'm joined by our CFO, John Heasley, for the formal presentation, and then we'll take Q&A with help from our divisional presidents, Ricardo Garib from Minerals; Paul Coppinger from Oil & Gas; and Jon Owens, from ESCO. I'm also delighted to say that our Chairman, Charles Berry; and Senior Independent Director, Rick Menell, are in the audience.

Today, I'm going to start with a run-through of the 2018 highlights for the group before John takes you through the financial performance in more detail. I'll then return to discuss where we focused the business in the past year and how we'll benefit from our closed alignment with the powerful trends that are driving our markets, including Weir's part in developing new technologies that will help shape both the mine and the frac site of the future.

Finally, we'll update you with our outlook for 2019. But first, a couple of notices.

As usual, we are recording this meeting. And so if you would switch any mobile phones to silent, that would be much appreciated.

And then it's important start meetings with a safety moment. So let me tell you that we aren't expecting any fire drills in the next hour.

That means if you hear an alarm, please make your way to the exits, which are clearly marked by the green running man here in the auditorium. Continuing on the safety theme, I'd like to update you on the group's progress on safety performance in 2018.

Our absolute goal is to become a 0 harm workplace, and we continue to move towards that ambition. Our total incident rate on a like-for-like basis reduced to 0.45 in 2018, almost 50% lower than 5 years ago.

Last year, we also saw a significant reduction in the severity of incidents across our businesses with the numbers of days lost to incident falling by almost half. I'll talk a lot more about the group's priorities this morning but none is more important than keeping our people safe.

For me, it's the fundamental indicator of organizational health and effectiveness. It makes us an attractive employer and is increasingly vital when winning new work.

I'd like to thank our colleagues around the world for their hard work in 2018, but particularly for all they do to take care of each other. Let me now turn to some of the other highlights from a year that saw strong execution across our business, the largest portfolio transformation in Weir's recent history and significant progress on our organic growth initiatives.

So looking first at our performance highlights. Operating profit from continuing operations increased by 13% or 22%, including ESCO.

Minerals orders increased 14%, with OE momentum continuing and delivering fourth quarter growth of 30% and aftermarket orders reaching £1 million -- sorry, £1 billion for the first time. Divisional margins were at 17.7%, exactly where we expect them to be at this growth stage in the mining cycle.

Oil & Gas delivered an operating profit of £96 million, in line with our Q3 guidance despite the challenging fourth quarter as North American markets had breaks. There was excellent cash generated from operations, up 86% to £411 million.

And finally, earlier this week, we agreed the sale of Flow Control for an enterprise value of £275 million following the strong turnaround in profitability of the division. So strong execution across the group, underpinned by double-digit order growth for all the go-forward divisions.

Stepping back, I'm particularly proud that the group delivered this performance while also successfully executing the largest portfolio change in our recent history with the acquisition of ESCO and delivering the sale of Flow Control. These were not small tasks.

We expect the Flow Control sale to complete in Q2 while ESCO is making excellent progress, reaffirming the quality of the business and the fact it has a natural home in the Weir portfolio. So let me now turn to ESCO and quickly remind you of why the acquisition was so compelling.

ESCO is a global leader in the mining market and fits our business model perfectly with aftermarket generating 95% of revenue in 2018. Together, we create a unique offering to our customers as the only provider of premium solutions from extraction to concentration.

Equally importantly, it's a great cultural fit. The similarities are remarkable and were evident from the very first meeting between our teams more than a year ago now.

And that's been really important in accelerating the integration process. Since completion in July, our cost synergies have reached an annualized run rate of $15 million, well on our way to our target of $30 million, which we now expect to deliver for a total cost of $30 million rather than our original $45 million estimate.

Alongside stronger-than-expected trading, the synergy performance has helped to deliver 170 basis point improvement in ESCO operating margins, which is ahead of plan on the pathway towards our 17% target and demonstrates that this ambition is clearly achievable. Beyond the cost synergies, the really inspirational opportunity is the value we can create by fully leveraging our service network and relationships to further globalize ESCO and also support the Minerals offering in the pit and in comminution.

On my travels, I've seen firsthand multiple examples of the collaboration and excitement at shared customer visits, which has allowed us to target at least $50 million in revenue synergies over the medium term. With the integration almost complete, and ESCO colleagues, now firmly Weir colleagues, we have great platform to leverage our nearly combined technological and operational capability and to continue to build on these strong foundations.

On top of all of that, I'm also really pleased with the engagement and momentum we are generating through our We Are Weir strategy, which focuses on people, customer, technology and performance, our distinctive competencies underpinned by long-term KPIs. I've already spoken about the progress we've made towards becoming a 0 harm workplace, but we also want to be a place where people do the best work of their lives.

So more than ever, we are listening to and engaging with our people, and I have just completed our first-ever global employee survey, in which an amazing 84% of our employees participated and told us what they thought. The results show our people feel a great commitment to Weir and their colleagues and that their values are closely aligned with the group.

Our people also told us they wanted us to become a more diverse and inclusive workplace and wanted a pat on the back more regularly. I agree, and we've developed actions in our 2019 scorecard to deliver change.

In 2019, another major step in this direction will be the launch of our first global employee share ownership plan with an initial award of 3 shares and the opportunity to build up their holding over time. Now this involves some investment, but I'm certain the benefits will be significant as we ensure that every employee is fully aligned with the long-term success of Weir.

And that's important because we need highly engaged and motivated employees to help us delight our customers, and we see the benefits of that in Minerals' integrated solution strategy, which delivered over £90 million of additional orders last year. ESCO has also been gaining market share.

ESCO's Nemisys system won its 500th conversion, reaffirming its place as the global leader in GET for live mining machines. We've also continued to expand our unrivaled service network.

These included new mining facilities close to customers in Africa, Australia, Russia, Peru, the U.S. and Canada.

And our new Oil & Gas Permian super center will also open in this quarter, providing a 100,000 square foot one-stop shop for our customers in what is America's most prolific oil-producing region. In technology, we continue to see a good pipeline of innovations coming through as we build towards our target of investing 2% of revenues in R&D.

Achievements in the year included the commercialization of our Synertrex IoT solution, the establishment of an advanced manufacturing team and the installation of our first in-house 3D printing capability. For me, I've never been more excited by the potential of our technology pipeline.

From incremental improvements to core product ranges to potentially disruptive innovations, our engineers are truly determined to lead the change in our market, and I'll share how we see the opportunity later on. Finally, we continue to focus on Value Chain Excellence and have a number of projects across the group, supported by a training program that's being recognized by the global supply chain industry body, APICS, with their prodigious excellence in education award.

Some of the outcomes of that commitment can be seen in the progress we've made in reducing working capital as a percentage of sales that John will talk more about shortly, while the trajectory for margin expansion is clear. We're also challenging ourselves on sustainability with smart metering pilots now up and running across our largest manufacturing sites.

And we were pleased to see our efforts recognized with our CPP score moving from C to B. So the group is in good shape.

The business is executing well, our portfolio transformation is making Weir simpler and stronger, and we've put in some important foundations for long-term organic growth. Going forward, more than 80% of revenues will be from upstream mining and oil and gas markets.

So John will now take you through the numbers for 2018 in more detail, and I'll be back shortly to discuss our markets, outlook and tell you a little bit more about how we see our role in the future. John?

Thank you, Jon, and good morning, everyone. I'd like to start with a brief reminder of the makeup of our results for 2018.

The acquisition of ESCO was completed on the 12th of July and their results are included as a separately reported division for the 5.5 months after that date with no comparatives. We also announced our intention to sell the Flow Control division in April last year and since then has been reported as a discontinued operation as a single line in our income statement with total assets and liabilities being shown separately on the balance sheet.

The majority of the numbers I now talk about will be in respect to continuing operations, including ESCO. Turning to the numbers.

As you can see from this slide, we delivered another strong set of results, consistent with our guidance in early November. Orders increased 15% on a like-for-like basis or 27%, including ESCO.

Revenue similarly was up 15% like-for-like or 28%, including ESCO, with operating margins of 14.2%. Profit before tax, excluding exceptional items and intangibles amortization at £310 million, was £55 million higher than last year or £85 million higher, including discontinued operations.

Cash from total operations increased by £190 million to £411 million, reflecting ongoing progress in working capital efficiency. The strong performance and positive outlook in our main markets gave the board confidence to increase the final dividend for 2018 by 5% to bring the full year dividend to 46.2p per share.

I'll now give more detail on each of the divisions, starting with Minerals. Our commodity prices softened in the year, customers continue to focus on increasing production and efficiency from existing assets.

In addition, we continue to develop plans for expansion and new build mines, albeit with a degree of caution remaining around committing final investment decisions. These factors continue to play to our strengths with our highly skilled sales and engineering teams based close to our customers' main sites, ensuring optimal operating efficiency and availability of spare parts and helping to drive benefit of brownfield solutions.

Against this backdrop, aftermarket orders increased 13% on a constant currency basis, significantly ahead of our production, with strong growth across most regions but most notably in the Canadian oil sands, Russia and Central Asia. You will also remember that we secured a number of one-off commissioning and multi-period spares orders in Q3, which boosted performance in that period.

While aftermarket growth in the fourth quarter was more modest at 3% and down sequentially on Q3, this reflects the one-offs described in the third quarter, and as you will recall, the record quarter that we had in Q4 last year. OE orders increased 16% on a constant currency basis with strong second half growth of 25%, reflecting a number of projects starting to convert but also a weaker comparative in the second half of '17.

Sequentially, quarter 4 was 14% up and 29% up on last year. The major drivers of OE growth were lithium and dewatering projects in Australasia, brownfield copper projects in Latin America and contracts across multiple geographies for GEHO PD pumps, which are ordered earlier than the project life cycle than our other products.

OE growth in that product line was up 78% with a number of such project orders being in excess of £5 million. We've also made some good progress selling initial high-pressure grinding rolls with one order in North America greater than £6 million.

Overall, the pipeline for OE projects remains strong and bodes well for the future. Revenue broadly forward input, up 13% on a constant currency basis, with a result in book-to-bill of 1.06.

Aftermarket represented 72% of revenues, in line with last year. Operating profit increased by 14% on a constant currency basis or £31 million to £250 million with operating margins of 17.7%, slightly up from last year, with second half margins of 18% with slightly normal seasonality.

Moving on to ESCO. We've been really pleased with both the performance of the business since we took ownership and the smooth integration process.

You will recall that we based our acquisition modeling on $675 million of revenue and $80 million of EBITA for 2018. We're pleased to say that on a pro forma basis, the full year results delivered $701 million of revenue and $85 million of EBITA.

Remember, though, that it's only the 5.5 months post acquisition that are consolidated into our results. From a mining market perspective, we've seen ESCO experience the same conditions as Minerals with customers focusing on maximizing production on existing assets, driving strong demand for GET consumables across all regions.

Construction markets in North America were also strong, seeing a record year in both adaptors and buckets. And this shows good evidence of initial success in our strategy to use our technology to bring construction markets up the value chain with a total cost of ownership model.

These conditions and actions were reflected in the pro forma full year revenue of £525 million, which was 11% higher than the same period last year with £252 million of that included in our results for the post-acquisition period. EBITA for the full year on a pro forma basis was £64 million with £33 million of that post acquisition, where the operating margin was 13%, 170 basis points higher than the pre-acquisition period.

As noted, this was ahead of our acquisition assumptions due to stronger revenues and pricing gains as well as $6.5 million of realized cost synergies. On a run rate basis, synergies at the end of December were $15 million compared to our original 3-year target of $30 million, underlining our confidence in full achievement.

Turning to Oil & Gas. 2018 was a year in 2 parts: WTI averaged $67 through September before falling back to $42 by year-end.

The early part of the year was characterized by fleet refurbishments and start-ups with a good amount of capital spend predicated on the positive market conditions before Permian pipeline and budget constraints and macro-geopolitical factors caused investment to be reined in during the latter part of the year. Notwithstanding the above, 2018 was a record year for U.S.

production, increasing by around 1.6 million barrels per day to 11 million barrels. On a like-for-like basis and to finish the year, up 17%, with H1 up 33% and H2 up 2% as we saw sequential declines of 12% in each of Q3 and Q4.

The first half saw us underlining at hand our market-leading position in Pressure Pumping with us selling more than 2 million horsepower of new pumps and power ends as well as incremental volumes of flow iron to support the start-up of new and stacked equipment. The slowdown in the second half was mainly market-driven, but we did see a more significant dropoff in fluid end volumes while we address the legacy quality issue referred to in November, which is now behind us.

The market dropoff was partially mitigated by the great success we've seen with our new large bore flow iron product line with orders of almost $30 million since launch in the second half of the year. Our international business continues to see competitive market conditions as all players look to secure volumes after a multiyear downturn.

We still believe we are in the early stages of a slow recovery. And in keeping with this, there was a modest sequential increase in orders from H1 to H2.

On a like-for-like basis, revenue followed a similar trend to end up 19% in the year with the first half up 42% and the second half flat, with sequential declines of 9% and 16% in Q3 and Q4, respectively. Operating profit at £96 million was in keeping with our guidance issued in November and represented a 12.3% operating margin.

Second half profits of £30 million was £36 million lower than the first half and this dropoff included a gross margin impact on lower sales of around £12 million, lower recoveries of £10 million as the first half benefited from both higher sales volumes and inventory build for the anticipated ramp-up in volumes, together with around £3 million of impact from China tariffs. The second half profits were biased to quarter three, although the division did remain profitable throughout quarter 4.

Pricing remains robust throughout the year with modest gains on a full year basis. Flow Control saw orders grew by 15% on a constant currency basis while revenues were lower, mainly due to Gabbioneta as 2017 revenues included significant volume of overdue OE contacts.

Operating profit at £23 million was £13 million higher than last year, driven by the non-repeat of £13 million of one-off charges in Gabbioneta, not charging depreciation from the point when Flow Control became a discontinued operation of £6 million and the strength of the underlying aftermarket. These factors increased operating margins to 6.7% and resulted in a divisional EBITA of £26 million.

Turning now to exceptional items. Starting with ESCO, which gives rise to two exceptional items: firstly, a technical accounting point in relation to the fair value accounting in the opening balance sheet.

IFRS requires you to value the inventory on the opening balance sheet at fair value of selling price less cost of sale, thereby effectively eliminating profit on subsequent sale of that inventory. As a standard practice, we treated the result in £63 million uplift in post-acquisition cost of sales as an exceptional cost to ensure that the underlying profitability of the business was properly reflected.

Secondly, we have £31 million of acquisition and integration costs, integration cost being $13 million of that compared to the $45 million we estimated at the time of the acquisition to achieve real cost synergies. We now expect to incur no more than $30 million in total to achieve the original synergy target.

The legacy product warranty relates to the Pressure Pumping issue we referred to in November, while the restructuring and rationalization mainly reflects the closure of our Minerals foundry in Malaysia and further restructuring of our international Oil & Gas business. Of the £158 million total charge, £68 million is in cash with £37 million of that having been incurred in 2018.

This discontinued operations exceptional items totaled £51.6 million that principally reflects the requirement to carry discontinued operations at fair value less cost to sell. Based on the agreed sale to First Reserve announced earlier this week and our estimate of debt and debt-like items and future cost of sale, including separation cost, we've written down the carrying value by £45 million to £260 million.

I would now like to turn to our cash performance, which is shown for the total group and once again demonstrates the strong underlying cash-generative nature of our operations. Operating cash flow is at £411 million or £190 million higher than last year, driven by an £88 million increase in total group EBITA and a £77 million improvement in working capital flows.

Debtor days improved from 73 to 66 days, while working capital as a percentage sales reduced from 24.7% to 22.9%, demonstrating strong improvement in overall working capital efficiency. The working capital performance in the second half was especially pleasing with a £21 million inflow.

This improvement has been driven by absolute focus on value chain initiatives from detailed sales and operations planning through supply chain, engineering, operation and finance. That said, we continue to dedicate significant effort on driving further improvement, especially on inventory terms.

CapEx at £85 million represents 1.3x depreciation, while the settlement of derivatives reflects normal debt structuring where we used derivatives to structure our external debt into the required currencies around the group and see the value of that a foreign currency debt increase or decrease depending on foreign exchange movements. Free cash inflow after dividends but before exceptional items and acquisitions and disposals of £109 million was £133 million higher than last year.

Turning now to net debt, which increased by £284 million in the year, primarily related to the ESCO acquisition and adverse foreign exchange. Net debt-to-EBITDA on a lender covenant basis, including 12 months' pro forma results for ESCO, was 2.3x improved from 2.5x at the end of 2017.

Finally, let me leave you with some guidance and financial markers for this year. Based on January exchange rates as included in the appendix of this presentation, we would see a £9 million FX tailwind at operating profit level in 2019.

But clearly with the strengthening of sterling in recent days towards 1.33 against the dollar, there remains uncertainty as to how this will enfold. CapEx will remain just above depreciation at around £120 million as we continue to ensure the business is in good shape to retain and build upon its market leadership position, including a step-up in investment in facilities, safety and technology, especially with an ESCO.

Central costs are expected to increase by £8 million as we continue to support the We are Weir strategy, including investment in technology and people and our new all-employee share ownership plan. The effective tax rate is expected to be around 26%, primarily due to the mix of profits towards higher tax implications but also the ongoing impact of U.S.

tax reform, which continues to be a significant driver of the weight, given the scale of our U.S. operations.

Finally, with the introduction of IFRS 16 accounting for leases, we will bring the majority of leases on to the balance sheet from 1 January this year. While our work is progressing to finalize this, we expect to bring on liabilities of around £200 million.

This will not impact our covenant calculations, which are on an existing GAAP basis. We do expect an associated reduction in profit of around £3 million with an £8 million increase in interest being offset by a £5 million pickup in operating profit.

In summary, 2018 was a year of strong execution through a period of transformation. The profitability and cash-generative nature of our business was once again underlined.

We now look forward to our first full year with our newly focused group and are well placed to deliver another year of good growth and deleveraging. Thank you, and I'll now hand back to Jon.

Thank you, John. So it's been a good year for the group and one in which we have taken some important steps to make Weir simpler and stronger.

Let me take you back to what we're trying to achieve as a business. From our foundation almost 150 years ago, we always sought the soul of our customer's toughest challenges.

That's what engineers do and it's what Weir does best. When I became CEO in 2016, we looked at our strategy and concluded we should focus the portfolio on aftermarket-intensive operations where we could add most value and deliver the best returns through the cycle.

That's why we acquired ESCO and that's why we're selling Flow Control. We see a clear path to long-term growth by aligning the business closely with some of the biggest structural changes happening in the world.

Population growth means that more infrastructure, which means more natural resources, will be needed. They're essential but they need to be accessed and processed responsibly and sustainably, and that's where innovative engineers, born problem solvers, will create the solutions and so help Weir become the most admired engineering business in our markets.

And the value we create is based on our business model. It's simple and it's effective, highly engineered solutions used in mission-critical applications that require intensive aftermarket care and comprehensive global support.

Weir engineers and materials scientists work with our customers to drive continuous improvement in performance, underpinning the strength of our premium brands. Our equipment is critical for the successful operations of our customers with the cost of failure, disproportionate of price of the equipment, strengthening the position of our brands further.

More than 3/4 of the group's revenues come from aftermarket sales, providing resilience throughout the cycle. And these opportunities are supported by an unrivaled commitment to customer proximity through our regional manufacturing and service network.

It's a great platform that maximizes opportunity in the upturn and provides resilience through the cycle. So what does the business look like now after a year of change?

Well, we have 3 world-class franchises with strong competitive positions and leadership in attractive markets, all benefiting from the same proven business model. In Ricardo, Jon and Paul, we have strong entrepreneurial leaders with a clear plan of how to grow their businesses.

The result is a group that has great momentum, good long-term prospects and the ambition to further strengthen our position as a leading provider of premium solutions to attractive markets. So let me now turn to those markets, starting with mining, which represents around 55% of group revenues.

I've spoken before about my view that we are in the early stages of a multiyear upturn. And while we're watching the macro, you have to start with the fundamentals for our commodities.

Firstly, the drivers of ore production continue to strengthen with population and living standards growth continuing to increase demand for copper, gold, iron ore and coal. At the same time, accessing ore is getting harder.

Escondida, the world's largest copper mine, recently reported an 11% decline in ore grade and it is not alone in having to dig deeper and to process more rock just to stand still. The industry continues to emerge from a period of underinvestment with supply challenges being compounded, given environmental permits are increasingly hard to secure.

Take copper, where suppliers expected to move into tested in the early 2020s, just now structural trends like the electrification of transport and increase in renewable energy start to accelerate. I've mentioned more than once the statistic that an electric vehicle requires 4x the copper of a conventional car.

Our customers know all this, of course, and that's why they're investing heavily in increased productivity and brownfield expansions today while doing a lot of work planning greenfield projects for the future. We tracked large projects, defined as having a value of more than $1 billion, as we speak.

That list includes the total potential value in excess of $200 billion, much of that in Latin America, our largest mining region by revenue. And while our share of that total would be relatively modest, it gives a sense of the momentum in our markets and it's why we remain confident we're getting into a multiyear upturn.

And what will that mean for Weir? It gives us great opportunities to grow.

Increasing productivity is what we do. Our ore grade declines mean more extraction and processing, which leads the greater aftermarket sales.

And mine expansions give us the opportunity to grow our installed base further with the promise of a steady stream of future aftermarket opportunities. We believe this is a great market to be in and it's why we've increased our focus and exposure in the past year with the acquisition of ESCO.

Let me move on to Oil & Gas, our second-largest market, responsible for around 28% of revenues. Here again, the fundamentals remain positive.

Oil demand continues to increase with the EIA predicting growth of around 1.5 million barrels a day in each of the next two years. At the same time, supply risks are increasing with OPEC cutbacks around sanctions and the turmoil in Venezuela, all contributing to the recent price recovery.

North America is expected to help fill the gap vacated by others with oil production expected to reach around 12.5 million barrels per day in 2019, a 13% increase on last year, which was itself a record. That's being achieved by working equipment harder with 24/7 operations and longer laterals continuing the frac efficiency story.

We also see a gradual recovery in international market after a period of record underinvestments. So the fundamentals are positive but the upward part is not always smooth and the North American industry is dealing with 2 constraints: the first is takeaway capacity in the Permian where the pipelines are currently full.

Now that will ease as new infrastructure comes online with gradual additions this year and eventually significant additional capacity. The other challenge is capital discipline with producers increasingly having to align their ambitions with their ability to generate positive cash flow rather than rely on the capital markets.

As a result, the industry currently expects E&P CapEx in North America to decline this year and that's likely to lead to steady or declining U.S. land rig count with E&P's having the option to convert their stock of nearly 9,000 drilled but uncompleted wells into cash.

To give you some idea what that means, analysts at Wood Mackenzie estimate that completing just 40% of these DUCs could generate $10 billion of cash for E&P operators. So the brakes have been tapped but the fundamental drivers of the industry remain positive and that's where our focus will be.

In a month, the oil price gloom in December, that was another reminder of the opportunity we have ahead of us. The U.S.

geological survey confirmed the Delaware Basin in the West Permian contains undiscovered and technically recoverable resources of 45 billion barrels of oil and 281 trillion cubic feet of gas. I believe this underpins the excellent long-term potential of the Permian.

With discipline once again the watchword, we are as well placed to deliver the technology and service that will allow our customers to further reduce costs and increase productivity. I'll have more on this shortly.

So let me now turn to how we will take full advantage of the positive conditions in our markets. I said earlier that I have never been more excited about the strength of our technology pipeline.

Our engineers are working on a range of innovations from incremental product improvements to solutions that have the potential to disrupt our markets. They're all rooted in real-world challenges where we can make a difference.

So let's look at Weir's role in the mine of the future. Miners want their operations to be increasingly efficient, smarter and more sustainable, and the external pressure to deliver on these objectives from government, communities and NGOs is only going to grow.

So these are the big themes that will help shape our industry in the years to come, and we intend to play our part in helping our customers deliver on it. Think efficiency, which means increasing productivity and reducing weight.

We're working on solutions to better separate the ore, which is processed into mill circuit, which will increase recovery and reduce energy costs. We're also developing ore hoisting concepts that will lead to a significant reduction in the cost of transporting materials to the surface and take more people out of harms way in underground operations.

Our smart products include the Synertrex IoT solution that provides condition monitoring and big data analysis commonly used in the mill circuit equipment performance to improve productivity and eliminate unplanned downtime. In a similar vein, ESCO has developed asset tracking tools to prevent loss of GET in stockpiles, saving potentially millions of dollars in lost production.

And it's also pioneering automated GET change-outs, again taking people out of the pit, the most dangerous part of the mine. More broadly, we know mining is a large user of energy and water and another focus is how we can help reduce its environmental footprint with our HPGR technology able to reduce energy consumption in the comminution segment by more than 1/3 compared to traditional mills.

Let me show you what we mean with an example where we are helping one of the big mining industry issues of the day. The terrible tragedies in Brazil have focused attention on the tailings dams that contain what is a waste byproduct of the mining process.

These reservoirs of finely ground waste material and water can become a liability for mining companies for centuries. And as we have seen, if they fail, have devastating economic consequences for local communities.

In our Melbourne Technical Center, we have been developing a world-class testing facility and research hub for tailings management, where we work with customers to identify opportunities to modify, transport or repurpose this byproduct. This includes using Weir equipment to dewater tailings from the typical liquid state that goes into a tailings dam, something that is drier and safer, which could be dry stacked or pumped as a low viscosity paste with our GEHO product line.

Furthermore, we're building an increased number of recycling options to tailing, including concrete, shotcrete and support structure. Our engineers have already helped customers turn tailings into concrete road surfaces for mines and reused tailings paste as backfill to fill the underground void left by the mining process.

In some cases, historic tailings deposits have better ore grades than the new mines, given poor recovery rates with old technology. And here we can help customers to reprocess the material and then safely store it in what is a win-win solution.

Understandably, this is an area of increasing focus and we'll continue to work with our customers to help find solutions that deal with this major issue. And the themes of efficiency, smart connected operations and increased sustainability are equally relevant to the frac site of the future, where customers need lower cost, lower energy consumption, lower water consumption and lower emissions.

Weir is meeting these demands through a range of innovation across our products and services. For example, our asset management and monitoring technology is increasing productivity and improving emissions reporting.

We're also driving technologies that will significantly reduce the footprint and complexity of frac sites, making them more efficient and safer places to work. That means fewer, more powerful pumps, alternative electric drive and transmission systems and highly simplified pressure transmission and control equipments.

Some of this could be game changing, and we are working with a range of technology partners to help rapidly prototype these technologies. More immediately, our continued investment in R&D is delivering significant savings for our customers, helping make fracking more efficient and sustainable.

For example, our QEM 3000 technology can reduce the number of pumps required on a typical frac site by up to 40%, given its continuous duty capability. As hoped, its durability has become an industry talking point and we had orders for over 60 pumps into new build fleets, positioning us strongly for the future replacement cycle.

We see variance of this technology able to deliver significantly more horsepower per pump in the not-too-distant future. Then with our simplified large-bore frac system, we are seeing manifold rig setup time reduced to 2 hours from 8 to 12 hours with legacy systems and the system that will have less wear, purely cost and a much safer footprint.

With these benefits, the new system delivered over $30 million of orders in the second half alone and ongoing demand is very strong. So as you can see from mines to frac sites, our engineers are proving that they are the solution to some of our customer's toughest challenges.

Let me now turn to our We are Weir priorities for 2019. These include improving safety and particularly getting ESCO up to Weir standards as quickly as possible.

Diversity and inclusion will be subject to a step change and focus, and we will go live with our first global employee share plan and build capabilities through enhanced strategic workforce planning. We will also further expand our service center network and use this great platform to support ESCO's entry to new markets.

I've spoken about the pipeline and the more disruptive technology we're working on. And alongside that, we'll continue to invest to support our core product ranges while also looking at more radical solutions to our own operations, including advanced manufacturing and smart factories as we look to develop our capacity and optimize our manufacturing footprint.

This will be alongside our Value Chain Excellence efforts to improve inventory turns, and importantly, develop a group-wide sustainability strategy building on the energy pilots undertaken in 2018. Our medium-term target of sustainably higher margins through the cycle remains the focus.

And in ESCO, in particular, we'll show further improvement in 2019. So I'd now like to turn to the group's outlook for 2019.

And as you can see from this slide, we've included some of the main market assumptions that we look at when assessing the external environment, which we thought would be helpful in adding context to our specific guidance and to monitor as the year progresses. These include commodity prices, ore production and CapEx in mining.

Whilst for Oil & Gas, we also look at oil prices, completions activity and expected hydraulic waterpower additions in the year. So assuming no material change to mining market conditions, we expect Minerals to deliver good growth in constant currency revenues with margins broadly stable in the lower part of the normal range, consistent with this stage of the growth cycle.

We also expect good revenue growth from ESCO, with margins continuing to improve as a result of our cost synergy and business improvement actions. Turning to Oil & Gas and given recent oil price volatility and the capital constraints in North America I spoke about earlier, operators have adopted a cautious approach to activity in 2019, with E&P CapEx and completions expected to decline year-on-year.

Although pipeline additions in the Permian will add substantial takeaway capacity, it's currently expected that this will translate into only a modest pickup from current activity levels, and consequently, demand for new horsepower will also be much lower. Accordingly, the division expects to see lower constant currency revenues with operating profit expected to be in a range between £55 million and £95 million, depending on how market conditions develop through the year.

Taking that altogether, assuming macroeconomic conditions remain supportive, we expect to deliver another year of good constant currency revenue and profit growth. So let me finish by summing up today's main messages.

2018 was a year of strong execution across the group, delivering a good set of numbers. We made significant progress with We are Weir and our organic growth initiatives.

This was achieved at the same time as completing one of the largest portfolio transformations in the group's history. Our markets have good fundamentals, and we have a great platform to create value as we become even more relevant to our customers.

So thank you for your time. And now I, John, Ricardo, Paul and Jon would be delighted to take any questions you have.

You each have microphones on your desks. You've probably been here before.

Just press the red button and your microphone will come live, and then press it to turn off. As you ask your question, please state your name and organization.

Thank you very much.

Mark?

Mark Jones with Stifel. Two, if I may.

Firstly, on ESCO, very encouraging first contributions there. Can you just update us on the thinking of how separate that remains from the rest of the mining business, and indeed, how committed you remain longer term to be more construction related end to the ESCO business?

Is that very closely tied to the core activity in mining? And then the other one was a broader one, perhaps for Paul on Oil & Gas.

I understand everything you say and the caution and all the recent noise obviously have been fairly grim. But equally, we are seeing record DUCs.

We are seeing those Midland Cushing differentials come in. So clearly, the industry is less worried about those bottlenecks now than it was a few months ago.

And the oil prices rallied since budgets were set in the end of last year. So what's the challenge of being overly cautious on the outlook as '19 moves ahead?

Okay. Let me start with ESCO.

So the reason we kept ESCO as a separate division is that notwithstanding the adjacency in the markets that they operate in, its operating model is fundamentally different to Minerals, let's say, a centralized operating model, whereas our Mineral is a regionally decentralized model. So we concluded the complexity of putting them together would put at risk both synergy delivery and the growth potential that we see in the market.

And I think you'll see from the results that, that has certainly been the case in terms of what we have delivered so far. And the intention remains that we will keep it as a separate division.

I think what we're particularly pleased about is the way that the Minerals and ESCO have collaborated the work together to leverage each other's strengths. And that goes to Weir's culture of values, indeed, those of ESCO as well, which, in my mind, has been tremendous.

So for the foreseeable future, it's absolutely the case that we will keep it as a separate division. I'll maybe ask Jon give a little bit of color on the construction markets, but it is a very important part of the business.

ESCO has particular strength through its distribution model in North America and Europe, and we're going to continue to drive that. And even though there is a slightly more commodities market, actually the margins are very strong that we get and so we're going to continue to try and develop that.

And there's lots of synergy opportunity actually for Minerals to leverage that -- those third-party distributional platforms we have. Jon, maybe just a little bit more color on construction markets as you see them?

Yes. So construction continues to be a focus for us.

It's not as large as the mining portion of our business but it's still significant. It's mostly North America and Western European business, where we sell construction products.

But there's also construction-sized products using the mine. So we're able to leverage our channels, both into the construction market as well as into the mining market.

And we see a positive outlook for construction in both North America and Europe going into 2019.

And then on Oil & Gas, I'll maybe ask Paul to give some color on what you need to believe to get to either end of the spectrum. We've been very thoughtful the about the range that we put out there.

And clearly, our base case, as I said earlier, is that we see moderate improvement from here. From our own customer budgeting, we have literally redone our budget in February, so it's clearly our latest to greatest view based on current oil prices and Midland differentials and what our customers are saying and where we believe the market to go.

So we think it's a robust case based on what we see in front of us at this point in time. But Paul, maybe a little bit of color as to where we -- how we feel either end of range.

Yes. About your question, are we being too cautious?

I think the Permian takeaway issues get all the press. But you don't realize that in Canada, they've got some pretty significant takeaway issues.

They probably don't have solutions that are as near term as they do in the Permian. And sometimes, those don't get as much press as the ones out in the Permian Basin, but that's going to significantly hamper any growth or potential that we have in Canada, which is a fairly large market for us.

I think we've already mentioned the financial discipline that's occurring in the E&P customers. We're not just going out and borrowing money at will anymore.

I think it's kind of as you generate cash, you drill more wells. I think the other thing that probably won't occur again this year is the significant amount of capital and OE build that we had in '18 as we brought a significant amount of horsepower from the cold stack status to active status.

So we've got ample horsepower out there now for the foreseeable future and it would take another fairly significant uptick in activity for us to see us needing to build significantly more horsepower. So again, I think as Jon and John have said, we've tried to give a range that we think, hopefully, if things are relatively stable where they are today, would be somewhere in the middle of that.

And if it gets a little bit better, we'll be on the upper end. If things tighten up a bit, we'll be a little bit at the lower end of that.

Just to give you a stat on the cold stack because I think it's really important. Going into 2017, 50% of the fleet was cold stacked.

It has not been maintained, had been cannibalized. It was sitting, gone rusty in yards.

Coming into 2019, only 5% is cold stacked, so everything is either warm stacked or ready to go. It's been maintained.

It's been maybe cannibalized here and there but not very much. So the amount of spend that is required to bring that back is much lower on that basis.

And also, a cold-stacked refurb probably cost 4x as much as bringing back warm stacked. So there's two layers of multiple there in terms of how you have to think about that, that we saw through the back end of '17 and into '18.

Yes. I mean, right now, in North America, we've got about 26 million of horsepower, 24 million in the U.S.

and roughly 2 million in Canada. I'd say right now, we've got 1 million horsepower that's cold stacked and 2 million that's warm stacked and the rest is active.

But at that active horsepower, we're probably 60% utilization. So again, there's ample horsepower and that's the big driver of our Pressure Pumping business, which is the largest part of the division.

So again, I think it's a -- we're being relatively cautious. The mid-cap and small-cap operators have come out pretty much and revised their new CapEx budgets even after they came out late last year.

And if you look at it, most of them on average are down about 6%. So I think we're fairly low.

Okay, next question. Right here.

[Indiscernible].

Yes, I mean, just very briefly. I mean, it's -- those markets have been particularly tough.

And as I referenced, the underinvestment that we've seen over the last few years, there are a few green shoots but it's pretty competitive environment at that, particularly for what we do. And if you think about international, it's really our service businesses in EMEA and the Pressure Control businesses in Eastern Hemisphere.

Now we're driving hard the strategy around wellhead, particularly into the NOCs in the Middle East, and are making good progress. But it's a bit more positive.

We're going to be hard yards. So we just expecting that we'll see a bit of the business probably sort of flattish from a revenue perspective and a modest nudge into profitability in 2019.

So I think there's a couple of moving parts to that for me. I mean, first of all, the 4 million is gross additions and that's the market in total.

So we probably had about half of that in the first half. Most of that was supplied in the first half of 2018.

We probably had about half of that. And whilst we expected to do some pumps and power frames in 2019, it's going to be at much lower level, clearly, given all of the -- where we are from a utilization perspective at the moment.

So I think those are dynamic. And of that 4 million gross, clearly, quite a bit came out of the market as well and that was not all new build.

So some of that was new pumps. Sure, there were a few new fleets built but quite a lot of it was new power frames going on to old trailers.

So that was the net additions in terms overall horsepower to the fleet. In terms of the dynamics compared to 2010, '11, then I say, clearly, pricing is not today where it is, so that is -- that's probably a factor.

But the new build that was going on in 2011, of course, that was pumps but it's also a massive amount of flow iron streams. It was also classified as OE going into that new build.

And all of that 4 million was pure new build at that point in time. So the OE that we're seeing today is moderated by comparison.

I think as we sit here today that, that feels right. But then the big driver that's still out there is the replacement cycle and if and when that kicks in.

And I think if we get into an environment where the oil price remains supportive and we see stable growth, then you can see the replacement cycle kick in and that would allow OEs to come and go above levels that it is up today. Jonathan?

It's Jonathan Hurn from Deutsche Bank. Can I just sort of dig a little bit deeper on Q4 [indiscernible]?

Can you sort of talk a little bit more about where profitability fell, both for Flow Control and for Pressure Pumping? And also taking on your comments about pricing being flat to the full year, obviously, that probably came back in Q4.

Can you just give us a little bit of flavor about that price degradation, please?

Yes. Well, let me take the pricing question and maybe ask John to just square the run rates for you.

Yes. I mean, from a pricing perspective, I think we held on through 2018 and quite pleased with that.

It did vary quite a lot across the product lines. So where we have particularly strong market shares and less competition, for example, in flow iron, then pricing was much stronger.

Fluid ends is now a more competitive market, and therefore, there is more pricing pressure in that market. So we have some ups and downs.

But in the round, broadly held onto pricing and we're able to offset the impact of tariffs that we saw coming through the business. And as we look forward to 2019, that's the sort of dynamic that we'd expect.

John, in terms of the...

Yes. In terms of the profitability, Jonathan, so the second half profits for Oil & Gas, the £40 million, to further my remarks, that was biased to Q3 but still remaining possible in Q4.

Pressure Pumping is almost the total contributor to profitability in Q4 with the other, the international business, Pressure Control dipping a little bit into a smaller loss in Q4. So biased to Q3 but still profitable overall as a division in Q4, driven by Pressure Pumping.

Press your red button.

Yes, just maybe one follow-up for Ricardo. Just so if you're looking at iron ore, it's probably about 13% of Minerals' sales.

I mean, how important is Vale to you as a customer? Is there any impact of them pulling back in terms of iron ore?

Yes. Of course, depends [indiscernible].

Most of the growth in iron ore comes from the dry stack in Brazil, where we have some activity. We see a big growth in some place coming in Australia and that -- those are going to develop as relatively soon.

And we are well positioned to support those. I think that's the answer.

I don't know, it's still very lumpy, a bit down in terms of what's happening in China, specifically with the foundries being reduced because of the pollution issue. But we're positioned to develop those.

We have a couple of things going on. But if they develop, will be a good impact for us.

What we do iron ore is slightly different in a way. It's a different process to copper and gold in terms of the processing.

The high-quality iron ore deposits, they just don't go out of the ground and put on a train or palletized. And so throughout, it's either more general process pumps or HPGR used in iron ore or indeed the ESCO product lines for extraction.

So it's different exposures that we see in the traditional mill circuit. Questions?

Dave Larkam, Numis. A few questions, please.

Oil & Gas, can you just talk about what your expectations are H1, H2 at the bottom end of that range? Do you expect it to be sort of flat?

But secondly, can you talk about how you see that business going forward and past the group? I mean, obviously, it's swinging around the numbers.

It's 20% of EBIT. It's about 80% of the conversation this morning.

You're quite keen on portfolio transformation. That was the thought process for that business going forward.

And then finally, on the mining side, just on the gold. We're seeing some sort of mega mergers potentially coming through there.

Is that technically quite good news for you? Or if you see those coming through...

Sorry, just repeat the final question?

Just on the mining side for the proceeds from the gold mine. They're talking about some mergers coming through there.

What trends happen to the market?

Yes. Okay, so let me try and answer those questions.

In terms of run rates in Oil & Gas, clearly, the mid case of the guidance assumes that we see a sort of similar level of profitability in the first half of the year that we've seen in the second half of 2018. So some carrying on current run rates through the first half.

And then just a modest pickup as we go through the back half of the year. I think completions activity that will see the aftermarket pickup but clearly not very significant movements in terms of the original equipment.

The bottom end, I think that's the scenario where oil price dips back down again below $50, in which case we just sort of carry on at the current run rate fundamentally. So that's how we're thinking about it.

And of course, top end of the range, as we said earlier, if we see a further improvement in the oil price operators get after the DUC wells and we'll see the pickup in aftermarket. It will be against what we said earlier.

You need to assume that gets pretty strong, given we're not going to see the OE and refurb build that we saw in the second half of 2017 and the first half of 2018. On the portfolio question, I hope you will have taken from my presentation the excitement I have about the -- where we stand today, the exposures that we have and the long-term potential to create value across the businesses that we have.

Our markets are strong. We've got some great technology, potentially disruptive coming down the track, great businesses, leading positions and the opportunity to create real value with the portfolio.

So that's how we're thinking about it. From a cash allocation perspective, I think consistent to say that the priority probably is Minerals, given the foundation that we now have from extractions, concentration and the opportunity to infill.

But I'm very excited about how we can take all the platform we've now created. On the gold potential mergers, I think, by and large, that's a positive for us because the more that the industry consolidates and goes to the premium providers of equipment, then I think that should play to our strengths.

Andy?

It's Andy Douglas from Jefferies. Four quick questions, please, if I may.

On the mining aftermarket in the fourth quarter of 3%, clearly, a long way below where we are through the rest of the year, and I appreciate the third quarter was quite strong for -- with some one-offs. Going forward, that should really be 3% or 4% market plus your comments on the ore side, meaning that it should be more than that.

Given the tough comp year-on-year, should we be still assuming mid-single-digit aftermarket order intake throughout the year? Is that a fair assumption?

Or can you...

That's a very fair assumption. I think, yes, the third quarter -- the fourth quarter in my opinion is low relative to that mid-single-digit range.

But of course, the year was absolutely stellar in terms of delivering double-digit margins. The aftermarket, there was some one-off reasons for that alongside the prevailing strength.

But as we look forward, we absolutely expect it to revert to the norm of mid-single-digit growth, reflecting the factors you talk about. And we started 2019 in a very nice manner, should I say.

It's very nice to hear. In your comments, you highlighted that you've closed the foundry in Malaysia.

Yet, I'm working on the assumption that if we have this monster OE growth that we're talking about, an ongoing aftermarket growth, that you're going to need more foundry capacity. So what's kind of going on there?

Are you shifting it? Are you -- got a problem in Malaysia or you're kind of finding an even cheaper source of foundry locations or please explain to me what's going on there?

Let me talk about the Malaysian situation and Ricardo can talk about what he's thinking about from a capacity perspective and look around going forward. The foundry we had in Malaysia, it was certainly an experiment that we acquired it a few years ago, and we're trying to turn it into something that was quite difficult to do.

It was actually a multipurpose foundry that did a little bit from indoors, little bit of Flow Control and then a little bit of third party. And it was not a large footprint that was capable of being translated into one of the big heavy bay iron foundries that we need in the mining space, so we just -- it was losing money.

So it's just a decision to cut our losses and cut off the bleeding and move the work with platform. And then, Ricardo, in terms of how you're thinking about future capacity.

Yes. We have our -- we operate 5 foundries and we have been expanding all of them.

We have, we call, the low-hanging fruit expansion. So we have increased our capacity in the last 24 months in about 15% to 80%.

The actions of those foundries have been switched to more high chrome alloys and we have been subcontracting the -- with how they're keeping IP products protected. We have some contractors for the low alloys like [indiscernible].

We have a really strong firm where we can level our capacity with our needs. And we are ahead, of course, today.

We have just -- I will suggest -- in the U.K., we have already expanded our production in the U.K., wired in some developments. We are starting further to expand our state-of-the-art foundry and probably will be the new foundry somewhere in North America in the near future to have everything in one region, one big steel foundry.

So we have really strong plans and that has been supported by the group.

Yes. And then just to tariffs, I think £3 million in '18, I think from what you just said, it's going to be more in '19.

But we're hoping that -- is that a fair assumption?

Yes, yes. We -- well, certainly, we hope that the U.S.

and China comes to an agreement and the tariffs don't go up. At the moment, we're expecting that to the extent that tariffs continue to come through, we'll be able to offset them with pricing.

We have managed an exception here and there through the Department of Commerce in the U.S. But that has been a very painful process, I would say, but we expect to be able to manage it within the normal bands.

Okay. And then lastly, on the industrial incented things within Minerals, clearly, you're very excited about what you can do there.

Did you guys find a way to actually price that appropriately and make it profitable? Or is it now just kind of an ongoing best practice that you guys have to have because everyone else does?

Or is it -- has it moved beyond that and actually you can price properly and make some profit now?

I mean, I would say, and the Presidents can comment, we're very early days, right? And we've developed commercial solutions and we're now taking those out into the market.

We're learning. And our customers are learning about what information it gives them and what they're going to need going forward.

We have sold some of the units on a -- in a individual unit basis, but for me the value is going to come from what is it going to tell us in terms of the debates from the algorithms that we can write that is going to add value to our customers? And then how do we price that?

And we're not there yet but that -- the intent is that it will add value in terms of us being able to further improve the efficiency of our customer's operations, eliminate unplanned downtime and enable us to get much smarter with maintenance schedules. So it's coming.

We're very focused on the economics of it and how we make you pay, but we're a long way to go on the journey.

It's Ed Maravanyika from Citi. Just two questions on minerals.

For the outlook for 2019, does good revenue growth equates to double digits organic growth? And if I look at your second half margin at 18% versus 17.3%, was that seasonal or is that a structural trend improvement, which could see better 2019?

Very nice. John?

Yes. So in terms of the revenue growth for '19, good revenue growth.

So I mean, to Andy's question on the aftermarket, they're comfortable with mid-single digit on the aftermarket growth. And from an OE perspective, stronger than that, so we'd expect that to be into double digits on the OE side.

And in terms of the margins, as Jon and I have both said, where the margins at 17.7% are buying in line with where we'd expect them to be at this point in the cycle. The H1, H2 is just normal seasonality, so nothing too much to read into that.

And we're comfortable with the broadly stable outlook for Minerals margins into next year.

Mark?

Mark Fielding from RBC. Just two questions.

Firstly, could you maybe just talk a bit more about the pricing environment in the Minerals business? And also actually a bit to just in ESCO and that's part of the group, talk about sort of pricing trends that generally see and how that's been evolving.

And the second question, a bit more of analyst question, which is potential cost. With your guidance kind of risen about £15 million in 2 years, do we think of that as an ongoing level?

Is any of it sort of slightly one-off because of the share scheme, et cetera?

Okay. Well, I'll ask John to talk about central cost, but I would just say for both Minerals and ESCO, the pricing environment for aftermarket is pretty good actually and coming out of the downturn.

And as the market improved through 2018, we've been able to push price increases through. Clearly, we've seen some input cost increases on the labor side and some commodities, but we more than cover that with the price increases that we've been able to push through.

And we expect to be able to continue to do that through 2019, given the environment that we are in. So I think the pricing market, the aftermarket mining market is pretty benign.

OE, it was -- it's as its always been. It's a -- quite a price -- more price aspect of the market because everybody fights tooth and nail for the installed base.

And ultimately, even though we -- usually, we're on total cost of ownership, it's always a little price cheap at the end of the day, that we have to give just to secure the installed base but it's a price well worth paying. But -- and that environment just -- I mean, that really doesn't change through the cycle, which we don't have a way of playing that because of the fact that certainly for bigger projects, we're selling into EPCMs rather than the end user.

The one on central cost?

Yes, central cost. So over the last two years, Mark, this is really underpinning the obvious capacity that we all passionately believe in.

So if we look into last year, then -- where we have been investing in technologies for some of the digitals that we were just talking about, the additive manufacturing that John touched upon as well as investment in people and training and capability. So that's really last year's cost.

This year, the £8 million entries that we referred, the vast majority of that is the all-employee share plan and that is something that is absolutely 100% the right thing to do, that we want all of our employees, every single person, all levels in the organization, to share in the -- jointly with Weir and have some skin in the game. And so that cost represents over this year and next.

It's a few hundred pounds a share per person across the 15,000-plus employees. And then that will convert into a margin scheme that will be an ongoing cost.

So it's just absolutely the right thing to do for the We are Weir strategy.

Yes. No, we did an absolutely iconic movement to -- we've got a great culture in Weir and to underpin that by saying we want our employees to become shareholders, I think, is a very, very powerful thing.

And we are -- we've gone the extra mile to make sure that literally every person who works for Weir is going to get shares in the company. Probably have time a couple of more quick questions given the busy day ahead.

Amy?

It's Amy from -- Wong from UBS. Question on your Oil & Gas medium-term target of 20% margin.

Can you give some insights into how -- time frame of getting there? And also what's it going to be, pricing, cost regional mix, products, how -- what are your thoughts behind that, please?

Yes. So I think notwithstanding the small tapping of the brakes that we've seen over the course of the last few months, that is absolutely our medium-term goal, to get the business back to 20% margins.

There are a few moving parts in that. I mean, you have to believe that environmental -- the environment is going to develop nicely, and you'll see production growth in the Permian and the corresponding demand for aftermarket and increased volumes for Weir.

You need to assume that if you think about the 20%-plus pricing that we lost through the downturn, we've only got 5% of that back. I would -- we would need another 5% also to get us back to that 20% but that assumption is we'll only get half back of the historic amount that we've lost.

And you also need the international businesses come back to a reasonable level of profitability, high single-digit, low double-digit profitability to help with the overall balance across the Oil & Gas portfolio. But as I say, it's absolutely the gold that we're shooting for over the medium term.

John?

Over here. I just wanted to ask on the comminution.

You mentioned your successful high-pressure grinding rolls in your opening remarks. I just wanted to check, how big is Trio now as part of Minerals and how is its growth compared to the rest of Minerals in 2018.

I'll ask maybe Ricardo to give a little bit of color on HPGRs and the excitement we've got for comminution. It's still relatively small.

I mean, it's less than 10% of the business. And we're -- if I'm honest, we probably not quite had the traction that we -- once we have had so far.

But we're very focused on turning that around. And particularly, there's a synergy with ESCO and Minerals supporting each other to do that.

But maybe Ricardo, just a little bit about your plans, and John, add anything as you see fit.

Yes. This HPGR technology has been around for a long time as the mining industry is extremely conservative.

And of course, the plan designed with HPGR competitors is suddenly with competition. So we are doing a lot of the training and helping the EPCMs, the back of the floors and those people to understand how to build this plan.

But we have really good wins this year. I mean, especially we have on design industry in Canada in gold.

Ireland, also we have some interesting bids. And with energy costs going up and 1/3 of the cost of the SAG mill, the customers don't understand, okay, let's spend more time and money, understand how to deal with an HPGR plant.

There are 3 or 4 cases in the world of success on Australia and South America. And we are very confident that HPGR industry will get spared.

We have invested some capital on developing new tools like wear protection and digitalization of the HPGR is paying off. In this very moment, we have a previous customer -- with a customer going on about transforming the plant from -- back to HPGR.

So we are -- this technology will be here for the future and we're the leaders in the market. So it's just within our customers to get more innovation and that's it.

Okay, great. Well, look, thank you very much, everybody.

We'll be around for about 10, 15 minutes at the front here if you want to ask one-to-one questions. But thank you very much for coming today, and thank you for those questions.

Appreciate it.