The Weir Group manufactures equipment that helps mining companies keep their operations running efficiently.
Equity investors seeking consistent growth potential wouldn’t typically look at businesses associated with the highly cyclical mining industry. Yet behind the scenes of some of the world’s largest mining sites, a little-known industrial company is generating steady cash flows by enabling heavy equipment to move the earth without interruption.
Mining is a messy business. To extract gold, diamonds or copper from the earth, mining companies generate mountains of waste. The Weir Group, based in Scotland, manufactures mining equipment such as slurry pumps, which transport waste from mining operations.
Equipment like this is vital to keep mines running smoothly. Weir’s products—including mineral-crushing machines and digging tools—require spare parts several times a year during their lifecycle.
Resilient Growth Through Macroeconomic Cycles
“Because of the ongoing need for spare parts, Weir generates about 80% of its revenue from the aftermarket,” says Marcus Morris-Eyton, Portfolio Manager—European and Global Growth Equities at AllianceBernstein. “This type of aftermarket-focused business model offers much greater margin and top-line growth visibility than you would typically find in a sector where new equipment orders tend to fluctuate with the mining cycle.”
The company was founded in 1871, when brothers George and James Weir established an engineering business in Glasgow that built pumping equipment for shipyards. In the first half of the 20th century, Weir manufactured aircraft engines and pioneered technology for helicopters. After 1950, its acquisitions consolidated a global presence in the mining industry as well as in oil and gas markets.
In recent years, Weir has moved away from oil and gas to sharpen its focus on mining. By 2023, the minerals division accounted for 73% of revenues, with the remainder coming from a second group called ESCO. This division was acquired in 2018 and produces ground engaging tools (GETs) for digging into the earth. According to Weir, the company has a leading market position in key product areas, such as slurry handling and GETs. Its regional sales mix is diversified, with North America accounting for 31%, followed by South America (22%), Australasia (16%) and Asia-Pacific (13%).
Global Service Network Sharpens Competitive Edge
Weir’s competitive edge is rooted in its strong brand perception, the long-term cost benefits of its products and a global service network. For example, its main line of slurry pumps is relatively expensive versus peers but boasts a lower total cost of ownership over time. The company also places its own engineers on the ground at the largest mines and support staff within 200 kilometres of many major mines. Spare parts are available year-round. This helps reduce downtime of mining operations—and is a big advantage versus smaller rivals who can’t afford a global service network.
“For mining customers, downtime on a site can cost about $10 million a day, so having Weir company reps nearby is a powerful selling point,” says Morris-Eyton. “It also helps explain why customers are willing to pay a bit more for Weir’s spare parts.”
Solid, recurring revenue streams are an important ingredient of consistent, long-term earnings growth and return potential. Weir also offers a great example of how an active approach can unearth quality businesses in surprising industry segments that are well off the beaten track for growth-oriented equity investors.
