Profits fell 5% at Glasgow engineering group Weir last year following a “substantial reduction” in new equipment sales to the oil and gas industry.
Announcing final results for 12 months to the end of December, the firm said strong growth in aftermarket and service activity had failed to make up for the decline despite increased profit margins.
It said overcapacity in the market for fracking equipment was to blame for a downturn in orders.
But the company’s board recommended an 11% hike in the year-end dividend, creating a 42p total payout per share and a 10% increase over the period.
Markets responded well, with stock closing the day up 7% at 2,352.00.
Chief executive Keith Cochrane admitted that 2013 had proven to be a “challenging year” in many of Weir’s markets but said he had high hopes for the current period.
“We will continue to capture profitable aftermarket opportunities, cross-selling our full product portfolio across all our end markets and delivering further efficiencies from our Value Chain Excellence initiatives,” he said.
“We expect good constant currency revenue and profit growth with group margins broadly in line with 2013 levels, although our reported results are likely to be impacted by recent adverse foreign currency movements.”
Overall revenues in the mineral division slipped 2%, following a 16% reduction in capital spending in the mining industry last year. Losses in original equipment sales were partially made by aftermarket work as operators instead sought to optimise their equipment.
Oil and gas business fell 13% after a massive 42% decline in original equipment revenues.
Weir blamed pricing in North American markets, flooding in Alberta and an extended Canadian spring break for a slower recovery than had been expected.
Fracking activity did not step up significantly, meaning a lack of demand for new equipment but there was a step up in activity in China and the rebuilding of oil infrastructure in Iraq also attracted interest.