The Weir Group is currently managing the consequences of a “sophisticated attempted ransomware attack” that occurred in the second half of September.
The Glasgow-headquartered engineering company reported that its cyber security systems and controls responded quickly to the threat and took “robust action”.
This included isolating and shutting down IT systems, including core enterprise resource planning and engineering applications. These applications are now restored on a partial basis, while other applications are being brought back online in a progressive manner in order of business priority.
These actions have led to a number of ongoing, but temporary, disruptions including engineering, manufacturing and shipment re-phasing, which has resulted in revenue deferrals and overhead under-recoveries.
Capabilities will be restored in the coming weeks, but the consequences of the operational disruption and associated inefficiencies are expected to continue into the fourth quarter.
Weir reported that a forensic investigation of the incident is continuing and so far, there is no evidence that any personal or other sensitive data has been exfiltrated or encrypted.
“We are continuing to liaise with regulators and relevant intelligence services,” read a statement. “Weir confirms that neither it, nor anyone associated with Weir, have been in contact with the persons responsible for the cyber attack.”
There has been no negative impact on orders during the third quarter and the group expects to deliver full year order growth in line with expectations.
However, as a result of the re-phasing of shipments caused by the cyber security incident, Weir experienced revenue deferrals of around £50m in September, alongside overhead under-recoveries in manufacturing and engineering.
While the bulk of the missed September revenue is expected to be shipped in the fourth quarter, “it is likely that the temporary disruption to our end-to-end value chain will cause some slippage of revenues” into 2022, together with some overhead under-recovery.
In order to reflect the incident, Weir is updating full year guidance.
The full year operating profit impact of fourth quarter revenue slippage is expected to be between £10m and £20m, while the impact of overhead under-recoveries is expected to be between £10m and £15m.
The majority of the impact is expected to be in the minerals division due to its engineering and supply chain complexity. The direct costs of the cyber incident are expected to be up to £5m.
As a result, the group now anticipates its full year profit before tax will be in the range of £230m to £245m.
Elsewhere, the third quarter trading update revealed that mining market demand remained strong as customers continued to maximise production to benefit from positive commodity prices, particularly for the group’s largest exposures of copper, iron ore and gold.
Infrastructure markets also continued at a high level, with growth moderating to reflect the impact of global supply chain issues on construction markets.
Overall, Weir’s orders increased by 31%, with original equipment orders up 71% and aftermarket up 21%.
The minerals division delivered order growth of 30%, with original equipment up 71%. The latter was supported by active market for small brownfield and integrated solutions, rather than any specific large projects.
The division also continued to make market share gains with its energy and water saving High Pressure Grinding Rolls technology, reflecting increased demand for more sustainable mining solutions.
Aftermarket demand was also strong, with orders up 16% despite ongoing restrictions on site access, travel and customers’ logistics, as miners continued to focus on maximising ore production.
Energy service company orders increased 36%, delivering a fifth straight quarter of order growth. Original equipment orders increased 65%, as the division benefited from a focus on expanding its product portfolio, particularly growth in large mining buckets.
Aftermarket orders increased 34%, as mining machine utilisation recovered and infrastructure demand remained strong.
Net debt at the end of September was slightly higher than that reported at the end of June, in line with expectations.
Chief executive Jon Stanton commented: “We responded quickly and comprehensively to what was a sophisticated external attack on our business.
“The robust action to protect our infrastructure and data has led to significant temporary disruption but our teams have responded magnificently to this challenge and have managed to minimise the impact on our customers.
“ More broadly, the continued strong demand across our markets in the third quarter, particularly for our more sustainable solutions, reinforces our view that Weir is ideally placed to benefit from a multi-decade growth opportunity, as the mining industry invests in expanding capacity while reducing its environmental impact.
“ We remain on track to deliver our recently announced three-year performance goals that will see us increase revenues, expand margins and significantly reduce our environmental footprint.”
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