The Weir Group PLC

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The Weir Group PLC

Clydesdale Bank Exchange
20 Waterloo Street
Glasgow,
United Kingdom
Telephone: (+44 0141) 637 7111
Fax: (+44 0141) 221 8789
Web site: http://www.weir.co.uk

Public Company
Incorporated: 1871 as G. & J. Weir; 1971 as Weir Group
Employees: 7,817
Sales: £789.38 million ($1.48 billion) (2005)
Stock Exchanges: London
Ticker Symbol: WEIR
NAIC: 333911 Pump and Pumping Equipment Manufacturing; 541330 Engineering Services; 332911 Industrial Valve Manufacturing

The Weir Group PLC is one of the United Kingdom's oldest engineering firms, and the last of the great Scottish engineering firms to remain an independent company in the 21st century. The Glasgow-based company has long been a leading name in the global market for industrial pumps, as well as a major manufacturer of valves and related industrial equipment, such as turbines, cyclones, mill liners, and compressors. The company operates through five core divisions: Minerals, Clear Liquids, Valves and Controls, Services, and Defence, Nuclear & Gas. The Minerals division is a world-leading designer and producer of pumps, valves, and related equipment for the mining industry, claiming a global market share of more than 18 percent. This division, which includes such brands and subsidiaries as Warman, Envirotech, WeiResist, Hazleton, and Geho, is Weir's largest accounting for 28 percent of the group's sales of £790 million ($1.5 billion) in 2005. Weir Clear Liquid focuses on developing pumps for the oil and gas, water and wastewater, and other industrial markets, and holds a top five position in the highly fragmented global market. Valves and Controls especially targets such niche areas within the power generation and oil and gas markets as the subsea and nuclear sectors. In these niche markets, the company's brand family, including Atwood & Morrill, Flowguard, MacValves, Sebim, Tricentric, and others, holds a 15 percent share. The company's Services division, which supplies plant operations and maintenance support, as well as equipment rental, is number one in the U.K. market. The last division, Defence, Nuclear & Gas, supplies niche contract engineering services. Weir has long been an internationally focused group, with subsidiaries in the United States, Canada, the Netherlands, France, India, China, Chile, South Africa, Italy, and Australia. The United Kingdom accounts for just 14 percent of the company's total turnover, while the rest of Europe adds just 9 percent to sales. North and South America combine for 36 percent of group revenue, while the Asia Pacific, and especially India and China, add 18 percent to sales. The company also has a strong presence in the Middle East and Africa, particularly in the construction of desalination plants, which adds 13 percent to sales, and in Australia, which generates 10 percent of group sales. Weir Group is listed on the London Stock Exchange and is led by Managing Director Mark Selway.

PUMP INVENTORS IN THE 19TH CENTURY

The Weir Group originated as a marine engineering consultant supporting the Scottish shipbuilding industry of the late 19th century. The company was founded in 1871 by James Weir and his younger brother George, who were also the great-grandsons of famed Scottish poet Robert Burns. Born in 1842 in Airdrie, James Weir was only a boy when he went to Glasgow to serve an apprenticeship with Randolph Elliot & Co., which later grew into the noted shipbuilder Randolph Elder.

James Weir went to sea at the age of 23, serving as a marine engineer, but in 1871 returned to shore to set up his own business, initially in Liverpool and then in Glasgow. Joined by George Weir, the firm initially served the local shipyards as engineering consultants, developing new equipment and improvements for the shipbuilding industry. Over the next decade, G. & J. Weir Ltd. succeeded in developing and patenting a number of innovations, such as the patented feed heater, which helped solve the problem of marine boiler corrosion, the direct-acting feed pump, and the patented evaporator for the newly designed triple expansion engine. Many of Weir's patents from this era remained essential and standard equipment on ships around the world.

With its lineup of patents, the Weir company decided to launch its own manufacturing operations in the mid-1880s. In 1886, the company purchased a site in Cathcart, then a small village located next to Glasgow, and set up a small workshop, foundry, and smithy. The company was quickly successful, and played a major role in the technological advancement of the Scottish shipbuilding industry, and in the development of modern shipping vessels in general.

Weir expanded rapidly, expanding its production facilities from the original single building to a massive 13-acre site that became one of the jewels in the Scottish industrial crown. Weir was also among the first in the United Kingdom to employ electric power in its works, replacing steam-driven engines with the more powerful and more efficient electric equivalent. While marine equipment, and especially pumps, remained the major focus of Weir's production through the end of the century, the company soon began diversifying, producing pumps and other equipment for industries beyond the shipbuilding industry. The company had also developed a strong international operation, shipping its products to a number of international markets, including North America. At the beginning of the new century, the company also began supplying the Middle East, where it became an important producer of pumps and other equipment for desalination plants.

Weir's diversification took on steam especially after James's son William Weir took over as head of the company in 1912. Under the new generation, the company expanded into a variety of areas, including air compressors, aircraft and aircraft equipment—the company backed the development of the United Kingdom's first successful helicopter in the late 1930s—and, during the war years, armaments and munitions. Weir also became interested in the automotive industry, and rushed out several prototypes in time for a race in 1904. When all three automobiles failed to finish the race, William Weir abandoned plans to lead the company into the automotive market.

The company's diversification helped to shield it during the downturn in the British shipbuilding industry following World War I. During the war, William Weir served at the Ministry of Munitions, achieving national recognition as its Controller of Aeronautical Supplies, and later received the title of Viscount of Eastwood. Into the postwar era, Weir continued to seek new areas for the company, which, in support of the returning troops, became the first in the United Kingdom to launch production of prefabricated housing. While this initial effort proved temporary, following World War II, the company established a new subsidiary for its renewed interest in prefabricated housing.

COMPANY PERSPECTIVES

We work together to create engineering solutions, which help our customers deliver processes vital to society.

POST–WORLD WAR II GROWTH

Weir went public in January 1946, listing its stock on the London Stock Exchange. By then, the company had expanded its operations to include three additional production units. The first of these, Drysdale & Company (later Weir, Drysdale), had been established in 1874 and had moved its operations to Yoker, in Glasgow, in 1907. The addition of Drysdale expanded Weir's range of centrifugal pumps, rotary air pumps, and positive rotary pumps, used both on sea and on land. The second was the Argus Foundry, which had been launched in Thornliebank, Glasgow, in 1920, and specialized in the production of iron and nonferrous castings. Finally, Weir also operated through Zwicky Ltd., in Slough, which produced filtration, pumping, and fueling equipment for the aviation industry.

In the immediate postwar period, the company continued to post strong orders from the shipbuilding industry, which saw a revival of its fortunes into the early 1950s. Nonetheless, the steady decline of that industry, particularly in Scotland, was already evident, and accordingly Weir had stepped up its operations elsewhere, such as supplying equipment for power stations. The surge in demand for pumps in the early 1950s encouraged the company to expand that production. In order to accommodate this expansion, the company moved its valve production to a new 85,000-square-foot plant in Queenslie, Glasgow, in 1951. Weir Valves Limited then became part of the United Kingdom's nuclear development program during the decade. In that year, also, Weir began expanding its overseas operations, taking over its Canadian sales agent, including its small manufacturing works in Quebec. The company then launched an expansion of those works in order to supply equipment as part of the Canadian rearmament program. Similarly, the company acquired its U.S. distributor, Pacific Valves Ltd., toward the end of the decade.

Through the 1950s, the company's export orders continued to rise steadily, notably with the rapid development of desalination plants in the Middle East and elsewhere, including contracts to supply evaporation and distilling equipment for fresh water production aboard the Queen Mary and Queen Elizabeth cruise ships.

Under the next generation of Weirs, in the form of Kenneth Weir, who was appointed chairman in 1956, the company maintained its growth. Acquisitions became a feature of the group's expansion during this time, starting with the acquisition of William Simons & Co., a prominent marine engineering and shipbuilding group specialized in dredging vessels and equipment based in Renfrew. The company added to this purchase in 1959 when it took over Simons' next-door neighbor Lobnitz & Co. This move was part of a larger consolidation of the Scottish shipbuilding industry, and then its engineering sector in general, as, with the collapse of the British Empire, it struggled to compete on the increasingly competitive global market.

Into the 1960s, the company acquired a number of other noted names in the Scottish industrial sector, including the Pulsometer Group, CF Taylor, Catton & Company, and B.A.L. Ltd. By the middle of the decade, the drive to consolidate the region's industries spread to the pumps sector, leading Weir to begin merger talks with a number of other leading pump manufacturers. Weir stepped up its acquisition program, acquiring a number of new businesses and business lines through the 1960s and 1970s. These included Harland Engineering and G. Perry & Sons, both in 1969, which led the company to merge all of its pump businesses into a single unit, Weir Pumps. The new subsidiary then became the United Kingdom's leading pumps manufacturer. Following a further reorganization, Weir changed its name to Weir Group in 1971, and then came under the direction of William Weir, who had worked his way up the company's ranks under his father from the early 1960s.

KEY DATES

1871:: James and George Weir establish a marine engineering consultancy in Glasgow.
1886:: Weir launches manufacturing operations based on its own patented inventions at Cathcart, Glasgow.
1946:: Weir goes public as G. & J. Weir Limited on the London Stock Exchange.
1969:: Company merges pump businesses into single Weir Pumps subsidiary, which becomes the United Kingdom's largest.
1971:: Company changes name to Weir Group.
1985:: After nearing bankruptcy in 1980, Weir completes five-year restructuring, including cutting nearly 4,000 jobs.
1994:: Weir completes largest acquisition to date, of EnviroTech Pumpsystems, as part of a ten-year, £260 million acquisition drive.
1999:: Weir acquires Warman International in Australia for AUD 460 million.
2005:: Company completes new restructuring effort with purchase of Italy's Pompe Gabbionata SpA.
2007:: Weir announces decision to close Cathcart site and move to smaller facilities.

REVITALIZED FOR THE 21ST CENTURY

While Weir's expansion drive enabled it to ride out much of the economic downturn of the 1970s, the company's heavy borrowing during this period at last caught up with the group in 1980. By then, the company, like the rest of the morose British engineering sector, found itself approaching bankruptcy. The company was forced to shut down four of its companies, slashing some 1,000 jobs from its payroll. By the mid-1980s, under a restructuring plan carried out by Chief Executive Ron Garrick, later company chairman, Weir had cut its payroll in half, eliminating some 4,000 jobs.

Through the 1990s, Weir again relied on acquisitions to help fuel its expansion. By the middle of that decade, the company had acquired more than 35 companies, spending a total of £260 million. Its largest acquisition during that period was of EnviroTech Pump-systems, based in the United States, which cost the company £135 million in 1994. During this period, the company also expanded into Chile and Brazil, while also starting up operations in China. By the end of the 1990s, the company sought its next major acquisition, in part in order to thwart a hostile takeover offer from U.S. rival Flowserve. In 1999, the company bought Australian pump leader Warman International, paying AUD 460 million.

With a new slump in the economy, and growing shareholder impatience at its lagging share price, Weir brought in its first chief executive from outside Scotland, Mark Selway, of Australia. Selway set the company on a new five-year restructuring effort, refocusing the group around a new five-division corporate structure. As part of that restructuring process, the company also began seeking new large scale acquisitions, such as the EUR 100 million purchase of Italy's Pompe Gabbionata SpA in 2005. In that year, also, the company announced its intention to shut down its operations at Cathcart, moving those operations to a smaller Glasgow site by 2007. While the closure marked the end of a 120-year history, it reflected the shift in Weir's geographic focus; by then, less than 25 percent of the group's revenues came from Europe, with just 14 percent represented by the United Kingdom itself. Having successfully repositioned itself as a major player in the global engineering market, Weir had become the last remaining independent company of the former Scottish industrial empire.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

EnviroTech Pumpsystems Inc. (U.S.A.); Liquid Gas Equipment Ltd.; Strachan & Henshaw Ltd. (U.K.); Vulco S.A. (Chile); Warman India Private Ltd. (India; 75%); Weir Canada Inc.; Weir do Brasil Ltda. (Brazil); Weir EnviroTech SAS (France); Weir Floway Inc. (U.S.A.); Weir Gabbioneta S.r.L (Italy); Weir Hazleton Inc. (U.S.A.); Weir Minerals Australia Ltd.; Weir Minerals China Co. Ltd.; Weir Minerals Europe Ltd.; Weir Netherlands b.v.; Weir Pumps Ltd.; Weir Services Australia Pty Ltd.; Weir Services USA Inc.; Weir Slurry Group Inc. (U.S.A.); Weir Valves & Controls France S.A.S.; Weir Valves & Controls UK Ltd.; Weir Valves & Controls USA Inc.; Weir-EnviroTech (Pty) Ltd. (South Africa).

PRINCIPAL DIVISIONS

Minerals; Clear Liquids; Valves and Controls; Services; Defence, Nuclear & Gas.

PRINCIPAL COMPETITORS

Klein Schanzlin und Becker AG; FE Petro Inc.; Pumper Parts L.L.C.; FAST and Fluid Management Srl; Wright Pump Inc.; Depco Pump Company Inc.; Shanghai Liancheng Pump Manufacturing Company Ltd.; Kataysk Pump Plant Joint Stock Co.; MAN AG; Voith AG; Flowserve Corp.; Grundfos Management A/S.