Earnings Transcript for WEIR.L - Q4 Fiscal Year 2021

Jon Stanton: Good morning, everyone, and welcome to Weir's full year results presentation. I'm joined today by our CFO, John Heasley, and we'll follow our usual format. So after some opening remarks from me, I'll hand over to John to take you through the financial review in detail. I'll then return with a business review and strategy update before we open up for questions. Ricardo Garib, President of our Minerals Division; and Andrew Neilson, President of ESCO, are also here with us for the Q&A. Before I start our presentation, I would like to say a few words on the shocking events in Ukraine, which have rapidly escalated over the last week. Our first priority has been the safety of our impacted colleagues and their families and our thoughts are very much with them. We're doing all we can to support them through this very difficult and dynamic situation. I'll say a little more on the business context of these events later on in the presentation. But first, I'll move on to reflect on 2021. 2021 has been a milestone year for Weir on many fronts, not least because it marked 150 years since the company's foundation. It also saw us complete our strategic transformation into a premium mining technology business and the emergence of the new Weir that's being positioned to take advantage of highly attractive opportunities that lie ahead and which is already demonstrating the benefits. It was also a year characterized by an extremely complex operating environment, exacerbated by the cybersecurity incident we had to deal with in the fourth quarter. So let me start by giving you the headlines from these results. In 2021, we delivered very strong order growth, which accelerated later in the year, and we expanded our operating margins despite the external challenges. We remain on track to deliver our medium-term financial and sustainability goals where we see a clear pathway to 17% operating margins and have added new operating cash conversion targets and are enhancing our CO2 reduction targets. 2021 has seen a real strengthening in global commitments to take action on climate change, adding impetus to the opportunity for Weir to enable the ongoing and transformational shift in the environmental performance of the mining sector. We continue to deliver world-beating technologies today, and we're upping our investment in the next generation of technologies that will make mining smarter, more efficient and sustainable. And we're making these investments because we believe the structural growth opportunities in our markets are going to be phenomenal for many years ahead. Our performance reflects the fundamental strength of our business and is testament to the magnificent efforts of everyone across the company. It's not been an easy year and I'd like to personally thank all of our employees for their commitment and hard work to overcome the challenges we faced. Speaking of challenges, I wanted to deal with the cyber incident upfront. I'm pleased to say that the attack, which we flagged in October, is now behind us, and we finished the year well. Internally, it has been hugely disruptive. And so I just wanted to give you a flavor of how we have dealt with it and how we emerged stronger from the experience. Our security operations team first detected suspicious activity in late September, and it quickly became clear that the initial breach was escalating into a very sophisticated human controlled ransomware attack. We acted quickly to contain the threat actors and took down all of our corporate Internet activity with connected devices. While this meant a shift to manual processes for a period of time, it enabled us to quickly contain the attack, avoided a full shutdown of our business, and we saw no evidence of any exfiltration of our data. It also allowed us to move rapidly on to recovery and restoration according to business priority, which continued through to the end of the year. The financial impact of GBP 25 million at the lower end of our guidance range was a good outcome in the circumstances, and John will go into more detail on how that breaks down in the financial review. But it was transitory, we did not engage or pay any ransom, and by the end of January, we were largely back to normal operations, having delivered an uninterrupted level of customer service throughout. The impact of the attack touched everyone in the business in 1 way or another and consumed a lot of time and resources, but we've learned a lot and emerged stronger with an even more resilient IT infrastructure. The way our teams responded and adapted to keep delivering for our customers has been outstanding, exemplifying everything that is so special about the culture and attitude at Weir. The cyber incident was a pretty major bump in the road, but we had to deal with it, and it did not stop us making strong strategic progress in the year. Among the highlights in the year were maintaining best-in-class safety standards and staying focused on safety despite the operational disruptions caused by the cyber incident; winning large orders for sustainable solutions, such as high-pressure grinding rolls and electric dewatering pumps; acquiring Motion Metrics, strengthening our ability to offer data-led insights and accelerating our broader digital strategy, while also increasing R&D spend to 1.7% of revenue; committing to set science-based targets in 2022 to further drive reductions in our Scope 1, 2 and 3 emissions; improving gender diversity at senior management levels by 4% to 26%; and announcing the forthcoming appointment of Barbara Jeremiah as the first woman to chair Weir. So pleasing progress across all aspects of our strategic priorities, which I'll build on shortly, but first I'll hand over to John to take you through the numbers. John?

John Heasley: Thank you, Jon, and good morning, everyone. 2021 was characterized by excellent order growth with revenues and operating profit showing more modest progress after being negatively impacted by the cyber-attack, albeit our actions ensured that the impact was minimized to the low end of the range that we outlined in October. Orders at GBP 2.2 billion increased 22% with the second half seeing our later cycle aftermarket really accelerate across both divisions. Revenues at GBP 1.9 billion were 2% up on last year, which combined with the strong orders through the second half, meaning that the book-to-bill was 1.14, and resulted in a record order book at the start of 2022. Operating profit of GBP 296 million was 5% higher than last year, with the impact of the cyber incident being limited to the lower end of the previously guided range of GBP 25 million to GBP 40 million, with GBP 10 million of overhead under-recoveries, GBP 10 million of lost profit on revenue slippage, and GBP 5 million of direct costs, which have now been treated as exceptional. Operating margins improved by 40 basis points to 15.3% with the impact of freight and raw material inflation being fully mitigated. Profit before tax of GBP 249 million was in line with last year, including an FX translation headwind of GBP 15 million with EPS at GBP 71.3 per share. Operating cash flow was more impacted by the cyber incident, but even so, net debt-to-EBITDA was 1.9x in keeping with our capital allocation policy. I will now turn to provide some detailed commentary on each of the divisions. Starting with Minerals. As expected, we saw strong market conditions reach our later point in the cycle with OE orders starting to convert and aftermarket demand build through the year to reach record levels in Q4. Those market conditions continues to be supported by strong commodity prices and demand for energy and water-efficient solutions for expansion and upgrade projects. On the project side, key wins in the first half included the Ferrexpo HPGR order for GBP 36 million and the Indonesian electric dewatering pump order for GBP 33 million, supporting 57% OE order growth in H1. The second half was characterized by solid conversion of smaller brownfield and expansion projects still driving 34% growth in H2. HPGRs and associated comminution products continue to be a key growth driver, with orders up 60%, representing 7% of the total division. Regionally, we've seen strong growth across the Board with standout performances in Asia, Africa and North America, which all bounced back strongly from a COVID impacted 2020. This all left orders 22% higher with OE up 45% and aftermarket up 13%. Q4 aftermarket orders were up 29% year-on-year and 19% sequentially, reaching record levels in absolute terms. Revenues were 1% lower than the prior year with aftermarket up 2% and OE down 8% with a non-repeat of GBP 80 million of Iron Bridge OE revenue from last year and the impact of a cyber incident, which net-net meant we saw a bit a week of revenues slip into 2022. Book-to-bill at 1.16 means we enter 2022 with a record order book. Operating profit increased by GBP 1 million on a constant currency basis to GBP 251 million, with margins up 20 basis points to 17.7%, with the benefits of mix and efficiency gains being offset by cyber-related overhead under-recoveries. While inflationary pressures across raw material and freight were significant in the year, we managed to maintain gross margins at a product level through a combination of focus on material recycling, robust supplier negotiations and aftermarket price increases. The aftermarket revenue mix increased in the year to 71% compared to 69% last year, providing a margin benefit of around 60 basis points. As we expected, while some of the temporary cost savings realized last year, such as bonus and T&E returned, these were largely offset by lower levels of under-recoveries as we faced fewer COVID-related plant disruptions. However, the division's operations, and therefore, H2 margins were impacted by the cybersecurity incident, which resulted in an estimated GBP 10 million of under-recoveries with the slippage of around 1 week's revenues also having about a GBP 10 million impact on operating profit. Moving briefly to the next slide, our margins continued to be supported by operational efficiencies. These included a refresh of the Weir production system that assesses every production and service facility against a standard set of Lean criteria as well as further progressing our back-office shared services rollout. On the operational side, we consolidated 2 facilities in China, thereby realizing overhead savings, while optimizing our foundry network with an upgrade in Australia. In the back office, we continue to roll out our finance shared services such that 70% of the group is now covered by a common shared service function. We expect that to increase to 90% over the course of 2022. And as set out in our strategic framework, some of the benefits of these activities have been and will continue to be reinvested in R&D as we look to achieve our medium-term investment target of at least 2% of revenues. Moving on to ESCO, where we experienced similar mining market conditions as the Minerals division, with mining orders running at significantly higher levels than last year as machine utilization returned to pre-COVID levels. Infrastructure and construction markets in Europe and North America recovered strongly supported by easing of COVID restrictions and government stimulus, resulting in record order levels. Total orders have now increased sequentially for 6 straight quarters with Q4 orders 37% higher than last year and 7% sequentially, leaving the year 25% ahead. Revenues were up 11%, lagging orders due to phasing and lead times. This was demonstrated with H2 revenue being up 20% compared to 1% in the first half. And with book-to-bill at 1.07, the highest since we acquired the business in 2018, we carry a strong order book into 2022. Operating profit of GBP 83 million was GBP 8 million or 11% higher than last year, with margins up 10 basis points at 16.3%. The margin performance was especially pleasing given the significant raw material and freight inflation, which is more impactful than in Minerals. This is due to exposure to North American steel plate and ESCO's centralized manufacturing model, which results in more freight costs. Both those input costs more than doubled in the year. Our market-leading position allows us to be the price setter, and this pricing power is what has enabled us to maintain gross margins through a series of price increases and surcharges as appropriate. As highlighted in July, H2 margins were slightly lower than H1, which benefited from the phasing of sales price increases and advance of input costs given extended period purchase agreements. You will remember that last year, ESCO profits benefited from COVID-related temporary cost savings such as bonus and T&E with no significant offsetting recovery impact. As these costs have largely returned this year, they have been offset by the leverage benefit of higher revenues and ongoing efficiency savings. These factors resulted in an operating margin of 16.3%, up 10 basis points from last year, and we remain on track to achieve our medium-term target of 17% set at the time of the acquisition. Now bringing things together to look at the group operating margins. Overall, group margins, as reported, have reduced 20 basis points to 15.3%. After restating the prior year downwards by 60 basis points for accounting adjustments and FX, we delivered a 40 basis points increase across 3 main areas, as I will describe shortly. 2020 margins have been restated from 15.5% to 14.9% to reflect accounting changes and latest foreign exchange rates. Accounting guidance was issued in the year by the International Financial Reporting Interpretations Committee, clarifying the treatment of accounting for Software-as-a-Service. Essentially, it has ruled that any configuration costs should be expensed rather than capitalized. With the implementation of our global HR Management system and other cloud-based software in 2020 and 2021, we incurred GBP 7 million of configuration costs in 2020 and GBP 4 million in '21, which historically would have been capitalized. These have now been expensed in both years and included largely within our allocated costs resulting in a restatement of the 2020 results with a 30 basis points impact on margins. Going forward, we would expect the impact to be modest as our system transformation activities reduce, thereby having no significant impact on our medium-term targets. Translational FX has reduced the margins by 30 basis points, simply due to the mix of profitability relative to currency movements in the year. And of course, that can move positively or negatively as we move forward. Now moving on to the 3 drivers of underlying margin improvement in the year. Firstly, as expected and in line with our 3-year plan, we delivered a 40 basis points underlying improvement in margins driven by ESCO operating leverage and operational improvements across the group, including those examples previously described. This amounted to around 80 basis points with a 40 basis points offset for our increase in strategic R&D investment. Secondly, the 2 percentage points movements in minerals mix towards aftermarket and a 60 basis points favorable impact. And thirdly, the net impact of the cyber incident and residual COVID impact was a negative 60 basis points. COVID was net neutral in minerals and returning costs were offset by lower under-recoveries. In ESCO, COVID was a slight negative as cost returned, but without the corresponding opportunity to improve recoveries which, as we said last year, were less impacted than minerals. The main net impact, therefore, related to cyber and was mainly driven by under-recoveries in the Minerals division. These costs are expected to reverse next year and beyond. While there have been a number of moving parts this year, we've been pleased with the underlying improvements in challenging circumstances. It was great to see the resilience of our gross margins supported by robust sales price increases. With the impact of cyber and COVID to reverse and Software-as-a-Service to be less significant going forward, we remain on track to deliver a 17% constant currency margin by 2023. As we said last year, this improvement will be driven by operating leverage, continued operational efficiencies and a focus on maintaining our gross margins through this inflationary period, and will be spread broadly evenly over the next 2 years. Specifically, for 2022, we will see some headwinds from mix as revenue moves towards OE and from our increased investment in R&D. For the avoidance of doubt, we see higher OE mix as a positive in terms of value creation with every OE sale setting the foundation for a long-term, highly profitable aftermarket annuity. These margin headwinds will be more than offset by operating leverage as we deliver on a strong order book from within existing production capacity, and we see a reversal of the cyber overhead recovery impact, while continuing to mitigate the effects of raw material and freight inflation. H1 margins are expected to be lower, driven by a heavier weighting of OE shipments seen in the opening order book. Turning to cash flow. We've seen a more significant impact from the cyber incident and our growing order book. The working capital outflow of GBP 103 million is reflective of an increase in trade receivables following the back-end loading of revenues related to the cyber incident and a buildup of inventories in both Minerals and ESCO to support a record closing order book. As a result, working capital as a percentage of sales at 27.9% was above normal levels. CapEx was lower than last year and our plans as overall spend was delayed during the cyber incident and final permits for our new China foundry for ESCO took slightly longer than planned. CapEx also includes the benefit from the proceeds from the sale of a property in China as part of our efficiency program. We're also starting to report a free operating cash flow conversion measure, and this will become a KPI for the group. This reflects the conversion of adjusted operating profit to operating cash flow, after CapEx, lease payments, dividends from JVs, and purchase of shares for employee share plans. Over the course of 2019 and 2020, this averaged 82% and clearly this year at 63% has been impacted by the working capital outflow. I will talk about our targets for operating cash flow conversion shortly. Turning to the next slide. Free cash flow of GBP 62 million is GBP 70 million lower than last year, mainly due to the operating cash flow just described. Net interest is GBP 8 million lower than the prior year, reflecting a lower net debt, while cash tax is GBP 19 million adverse due to a higher tax charge and some payment deferrals from last year. With regards to net debt, we saw absolute levels reduced by GBP 279 million. This follows the completion of the sale of oil and gas, partially offset by the acquisition of Motion Metrics in November and leaves net debt-to-EBITDA at 1.9x on a lender covenant basis. Returning now to operating cash conversion and our targets going forward. As you can see, our free operating cash conversion has averaged 82% over the course of 2019 and 2020. Over the medium term, we target this to improve to between 90% and 100%. This will be driven by maintaining working capital to sales between 20% and 25% and CapEx and lease costs being at around 1x depreciation. Our working capital will be optimized as we continue to leverage the benefits of a global SAP platform in Minerals to allow global inventory management and the increasing digitization of our supply chain in ESCO. For 2022 and 2023, we expect CapEx and leases to be elevated to around 1.5x depreciation, amounting to an incremental GBP 40 million to GBP 50 million per year. This is to support the build of the new ESCO foundry in China, the final SAP rollout in Minerals as well as other digital initiatives. This will reduce cash conversion to 80% to 90% over the next 2 years before settling at a long-term through-cycle target of 90% to 100%. Below operating cash flow, we do not expect any unusual items going forward. Exceptional cash costs will be minimized, legacy defined benefit pension deficit repair costs are expected to be GBP 10 million to GBP 15 million per annum, while interest and tax should broadly match the income statement charge. These operational cash flow targets provide further context and underpinning detail to our capital allocation policy as announced last year. Very briefly, this slide sets out some financial guidance for this year. I would just remind you from a cash perspective that we still have GBP 12 million of the initial motion metrics consideration and some integration costs to pay in 2022. And from an income statement and cash perspective, we will see around a GBP 6 million saving in interest this year. In summary, we minimized the cyber impact on profit to the lower end of our previous guidance, while cash conversion was impacted by a higher-than-normal level of working capital. Even with the cyber challenges, net debt-to-EBITDA of 1.9x shows our financial strength. We are managing through the inflationary environment with scale as gross margins have been maintained across both divisions. Order momentum is strong and we entered 2022 with a record order book. Execution of that order book and associated operating leverage, together with further ongoing efficiency benefits, means we remain confident in our medium-term growth, margin and cash targets. Thank you, and I will now hand back to Jon.

Jon Stanton: Thank you, John. In this next section, I'll update you on the strategic progress we're making towards our medium-term goals and share why we are so excited and confident about the future. First, let me remind you of where we play, what we do and why customers choose to work with us. Weir has a unique position in the mining value chain. No other business provides the same range of premium solutions from the pit to the processing plant. We have leading market positions on premium brands from extraction through comminution to the mill circuit and tailings management. We are operating every day at the very heart of the mining processes. Our highly engineered technology is mission-critical to our customers who rely on our solutions to avoid downtime, downtime that can easily cost $10 million a day. We're very focused on where we operate, concentrating on higher abrasion applications, which generate strong aftermarket demand. And we support that demand through our extensive service network. It's a highly resilient razor-razorblade business model. Once we sell the original equipment, we have the opportunity to provide spares and service in the aftermarket. And for every original equipment sale we make, we on average achieve around 30% of the original value in spare parts per year. And that figure is even higher for our large Warman slurry pumps. So we have a reliable sustained revenue stream throughout the mining cycle. Increasingly, we are extending digital connectivity across our portfolio with our proprietary Synertrex platform and the recent addition of Motion Metrics, rugged camera and AI visualization technology is adding to our leadership in mechanical engineering and material science. With such a broad portfolio across the mine and a trusted reputation, customers look to Weir as a key enabler of innovation and performance improvement in the industry. Strategically, we're working even more closely in partnership with customers to develop new technologies that will help make the mines of the future smarter, more efficient and sustainable. Our deliberate repositioning to focus on mining technology is enabling us to take advantage of the multi-decade growth opportunities that exist in partnership with the industry we serve. Demand for metals will continue to increase with demographic drivers, but these factors have now been overtaken by expected demand from the clean energy transition driven by ever-increasing global action against climate change. As the rise of electric vehicles and transition to renewable energy generation gathers pace, this is translating into significant increases in demand for metals like copper, nickel and lithium. And at the same time, there's a technology shift underway in mining as the industry grapples with the ongoing challenge of all grade declines, meaning more material needs to be mined and processed while keeping safety as a top priority and also while responding to pressure to decarbonize and reduce energy and water intensity. Without a reduced environmental impact, our customers will not have the social license to operate. So the challenge is twofold. More essential resources are needed to meet the levels of electrification and renewable power generation required to get to net zero. But the way those resources are produced must significantly change. And that's why mining needs to become smarter, more efficient and sustainable. And this presents Weir with tremendous opportunities as we leverage our leading market positions and global footprint, all of which plays right to the core of our organization's purpose. Our strategic ambitions ensure that we focus on the areas that will deliver against those opportunities accelerating sustainable profitable growth in the future for the benefit of all our stakeholders. They are aligned to our Weir framework and its 4 pillars of people, customers, technology and performance. First and foremost, we want to be a zero harm workplace. We're determined to get there, building on the significant progress we've made in recent years and to help our customers with their journey, too. We also know the benefits of an inclusive, diverse and equitable workplace where people can be themselves and feel like they belong. And this helps reinforce a vibrant and purpose-driven culture. At the same time, we continue to invest in our people at all levels across Weir, giving them the opportunity to do the best work of their lives and creating the talent and capabilities we need to be successful in the future. Turning to customers. Our goal is to grow ahead of our markets by getting closer to customers, working in partnership to solve their biggest challenges. And more broadly, we will raise our voice to show leadership in the mining industry's transformation to net zero. In technology, we continue to invest to expand our development pipeline, marrying our engineering excellence with digital capability to create new, smarter ways of doing business that are based on data-driven decisions and insight. And as we grow profitably, we will continuously work to be leaner, cleaner and more efficient, which will support expanded margins and strong cash conversion, demonstrating the quality inherent in our business. In 2021, we made good progress towards realizing these ambitions. And over the next few slides, I want to give more color on the level of our ambition. Starting with people. Safety remains our #1 priority. And throughout Weir, we do everything we can to ensure we all have a safe start, safe finish and safe journey home every day. For the group as a whole in 2021, our total incident rate of 0.45 is broadly in line with the prior year, which I believe is very creditable given the ongoing challenges around COVID and other disruptions. ESCO continued to significantly improve its safety performance and its TIR is now over 50% lower than when we acquired the business in 2018, a terrific achievement. Overall, our TIR continues to place us among the leaders in our sector. Our absolute goal remains zero harm. And in 2022, we'll focus on further embedding the right safety behaviors in order to drive a breakthrough in performance. 2021 has thrown a lot at the organization, but we continue to listen to our employees. I was delighted to see participation reach 90% in our 2021 employee survey and our employee Net Promoter Score increased again, putting us in the top quartile against industrial benchmarks. Meanwhile, the completed deployment of the Workday HR system has been a major step forward in streamlining and enhancing our people processes and gives us a great platform from which to drive further progress on talent in 2022. We saw our purpose come alive in 2021, most notably in celebration of our 150th anniversary when employees on every corner of the globe took part in our day of purpose program to give something back to their families and communities. People gave blood, spent time in schools, overhauled community gardens, cycled in aid of charities and much, much more. We continue to support our people and their families with company-organized vaccine clinics such as the 1 at our site in India, where over 700 individuals took part. And it's been great to see the expansion of our global affinity groups as more and more colleagues engaged in our ID&E activities. This caring and purposeful culture is an enormous asset to Weir and 1 that requires continual investment. It is the absolute bedrock of our ongoing success as an organization and will underpin our ability to deliver on our strategy in the future. Turning to growth. We continue to expect our markets, principally driven by oil production, to grow at around 3% per annum in line with long-term averages. In contrast, our goal is to grow faster than our markets and deliver mid- to high single-digit growth through the cycle. This will be achieved through our strategic growth initiatives, where we will build further on our existing momentum. For Minerals, the largest growth driver will be our further expansion in comminution, where we are rapidly growing our installed base of HPGRs, a market-leading technology that supports increased production while reducing energy consumption by around 40% compared to alternatives. Over the last year, we saw comminution orders increase by 60% as miners recognize the benefits as more efficient and sustainable solution. In 2021, we won around 80% of the hard rock expansion projects, which specified high-volume, large-format HPGRs, and with currently around GBP 150 million of sales per annum, comminution has the potential to triple on a sustainable basis over the next 5 years. The focus for geographic expansion in Minerals is Central America, Eastern Europe, Central Africa and Central and Southeast Asia, where we are rapidly expanding our service footprint to support new mines and expansion projects. We have a deeply embedded philosophy of having boots on the ground with our customers, and this remains core to our offer. During the last year, we've opened 7 new service centers across these regions, including 2 joint minerals ESCO centers as we leverage our complete mining technology portfolio into new markets. We will continue to grow market share of our core products, particularly in territories where we have been underrepresented or lost some share in the past. And we'll introduce new products such as hydro hoisting drawing on our traditional strengths in material science, mechanical engineering and hydraulic technology to make our customers' operations smarter, more efficient and sustainable. Customer intimacy is a big differentiator for Weir. Mining is a 24/7 need in our industry, and we aim to have engineers on the ground no more than 200 kilometers from any customer, so that we can provide them with the high-quality products and service they need to keep production going. Our approach means we're able to develop and maintain long-standing relationships built on trust. And with that trust and our unique viewpoint at the heart of the core processes across the mine, we'll develop integrated solutions. This activity ranges from basic problem solving and debottlenecking to expand production and productivity, running through to process transformation, where we've been able to combine our technical capabilities to offer novel approaches to customer challenges. For example, our customer at a copper mine in the north of Chile needed to increase plant capacity and equipment availability. Our engineering team designed a new solution, comprising a larger capacity, Synertrex enabled CapEx hydrocyclone cluster, together with a large Warman cyclone feed pump. Using 3D scanning to design the new layout within the existing footprint, minimize downtime for the customer and the new integrated solution increased capacity by over 20% and service life by more than 65%. It's 3 examples such as this that we continue to grow our integrated solutions. Orders in 2021 increased by 32% to GBP 210 million, representing some 10% of our total orders in the year. In ESCO, we will continue to leverage the strong value propositions of our core product range to grow our share, such as in the case of our Nemisys GET system, which is now established as the market leader across all mining systems, delivering over 200 net conversions in 2021 and underpinning our leading market share in mining GET. Beyond the core GET product range, we're extending the range of parts we offer on large mining machines to other Weir areas and adding more capital equipment such as truck trays to our offering. We're extending the number of markets where we offer bespoke engineered bucket solutions with the target that we become the global #1 in aftermarket mining machine attachments. Geographic expansion will follow in similar regions to minerals for mining, but in ESCO, additionally, we're expanding our infrastructure business for premium applications beyond our core markets of North America and Europe to create a global business. And similar to Minerals, ESCO has an opportunity to offer its own version of integrated solutions in the mine, such as load haul optimization solutions that enable our customers to significantly increase productivity and reduce energy consumption. For example, when a South African-based hard rock mining customer approached us to bid for a replacement rope shovel bucket, our engineers saw an opportunity for a more innovative and impactful solution. They proposed an alternative option to the customer, which through a superior engineering design, lightweight construction and development of a custom lip system would enable them to use a larger shovel bucket and hence transform more material onto their haul trucks each time the bucket was filled. To get a sense of how much of these units move, each bucket scoop is over 100 tonnes, and the shovel will excavate the equivalent of an Olympic swimming pool in less than an hour. The customer accepted the proposal and we've now installed our latest Nemisys N3 shovel bucket and lip system at the mine, and the results have been impressive. The average payload realized in each bucket is exceeding designed outcomes. Haul trucks are now filled consistently in 3 passes, not 4, while realizing higher average target payloads. We're doing more with less. Each scoop saved reduces truck idle time under the shovel, directly reducing truck fuel burn and therefore, CO2 emissions per unit of mine production. Additionally, a 25% increase in shovel capacity allows the client to maximize their lowest cost and most efficient loading unit, while deprioritizing more expensive and less efficient loading units and efficient and more productive solution all round. Superior technology is a whole market Weir and we're investing more in R&D to support future growth. As I've already said, a technology-led transition gathering pace as the global mining industry looks to achieve net zero and fulfill its ESG promises, while producing more of the essential natural resources needed for a sustainable future. This will see accelerated investment in the development of new breakthrough technologies which, of course, will provide tremendous future growth opportunities for us. Our goal is to play a leading role in developing and deploying the technologies that will support our customers on this journey. Our technology strategy is underpinned by our world-class core expertise in Material Science, Mechanical Engineering and Hydraulics, now augmented with Digital capability. We're directing our technology towards smart, efficient, sustainable solutions and allocating increased levels of R&D investment across 3 key arenas to grow our technology pipeline. Firstly, we're investing to maintain the competitive advantages of our existing products through advances in Material Science and the mechanical and hydraulic properties of our equipment. For example, we recently launched a new super resilient [indiscernible] rubber compound, which is tear and heat resistant, which will support our expansion in that market. Secondly, we're investing more in developing new sustainable solutions to help customers reduce their emissions and water consumption, building on the success we've had with HPGRs in comminution, where we're now the clear market leader. We'll also continue to focus on integrated solutions where we can combine our existing technologies or with those of strategic partners to solve difficult problems for our customers. And thirdly, we're increasing our investment in scouting and technology foresighting to identify new opportunities that have the potential to deliver more from less in mining processes such as ore fragmentation and characterization, coarse particle flotation, and additive manufacturing. We believe the transformation to a net zero future can only be achieved through partnership and system solutions, so we'll continue to develop the right strategic alliances and technology partners to complement our expertise, such as those announced with Henkel and Andritz in 2021. Turning to the digital arena, of course, it's a given, as for any industrial company, that everything we do today has to be digitized to drive efficiency, automation, and deliver an overall enhanced customer experience. ESCO, for example, is digitizing its supply chain to deliver an Amazon-like experience for customers. And in Minerals, our field service management tool is shifting the end-to-end management of our installed base from analog to digital, bringing real-time performance data and technical product information into the hands of service technicians in the field. But beyond this, we're seeking out new ways to create data and insights for our customers across our touch points in the mine and process plant. Our capability in this regard gained a significant boost late last year when we acquired Motion Metrics, a market-leading developer of innovative AI and 3D machine vision technology. The Motion Metrics technology is already used in several mines around the world and comprises smart rugged cameras which, were initially developed to provide tooth loss and Weir rate detection to shovel and loader operators, whereby data from the cameras is processed by artificial intelligence to provide real-time feedback that enables immediate identification of potential issues that could compromise safety or cause unplanned downtime at the mine. The market demand for this technology has increased rapidly and will be complemented by our sensor-based technology with growth significantly accelerated through our global distribution networks. But we believe there's a much broader opportunity to use 3D visual technology and AI to provide data on the performance of equipment, faults, payloads and rock fragmentation through comminution and across the mining process, offering the possibility of end-to-end process optimization as part of our wider digital strategy. Motion Metrics will report through the ESCO division, but recognizing this broader opportunity will serve as Weir's global center of excellence for AI and machine vision technology supporting the increased digitization of our broader product portfolio and with a direct line into me. We have already secured early orders as we leverage our global sales network and ESCO's large install base to expand adoption and drive significant revenue growth. I am very excited about the potential of this acquisition. As well as supporting our customers with more sustainable and digitized solutions, we're also making progress on our own path to net zero, aiming to deliver a 30% reduction in Scope 1 and 2 emissions relative to revenue by 2024, and SBTi-aligned absolute reduction by 2030. We've made further progress in 2021, reaching a cumulative 15% reduction in CO2 emissions versus our 2019 baseline, focusing on targeted actions to reduce our overall energy intensity and increase the proportion of energy from renewables. For example, our Chinese foundry was named a Green foundry via a prestigious government-certified scheme in 2021. And in Chile, a power purchase agreement at our operations has reduced our local carbon footprint from electricity consumption by 95% per annum. We're also pleased to retain our A- score with CDP despite the bar being raised once again. And looking beyond our own operations, we've now completed our assessment of Scope 3 emissions, which confirms that by far the biggest overall impact we can have as a business is by reducing the energy consumption of our products in use on our customer sites. That's why our business strategy is focused on helping our customers meet their net zero ambitions, both in terms of the products we have in the field and those we're developing. This includes Scope 4 offerings where, for example, emissions are avoided due to increased Weir life or energy efficiency, which is our sweet spot. We remain on track with the strategy we set out in 2020, and accordingly, we've now pledged our commitment to the science-based targets initiative, which means we will set strengthened emissions reduction targets aligned with the Paris agreement on climate change across Scopes 1, 2 and 3. We expect to publish these more ambitious, externally validated emission targets later this year. And of course, we're providing both our first full TCFD disclosures and our Scope 3 evaluation in our forthcoming annual report. Putting that all together, I want to reaffirm our confidence in delivering the following medium-term goals. Firstly, growing revenue strongly ahead of our markets through the strategic growth initiatives that I outlined in detail earlier; second, expanding group operating margins to 17% in 2023 through operational leverage, the elimination of recent one-off effects and driving back-office efficiency, as John outlined earlier; third, achieving 90% to 100% operating cash conversion in 2024 and beyond; and finally, not only fulfilling our existing sustainability linked targets, but going on to set more ambitious externally validated ones. And we'll deliver all of this while investing more in our people and technology to support our strategic ambition. Let me close with a few words on what we're seeing in the market and the outlook for 2022. Current market conditions are extremely favorable. Our customers are focused on maximizing production to benefit from record commodity prices, supporting underlying spares and service demand. We have seen really good activity in smaller brownfield projects where paybacks are quick and don't disrupt ongoing production. For larger brownfield and greenfield opportunities, we have a strong pipeline, but conversion remains slow, although our customers are focusing more on new supply, given expectations for future demand and expected shortages for the key future-facing metals. So on to outlook, 2022 has started well. The impact of last year's cybersecurity incident is behind us. We have a record order book and our markets are buoyant, which is expected to remain the case. We expect to continue to have to deal with ongoing disruption from COVID-19 and inflationary and logistics challenges in the supply chain, while remaining vigilant of a heightened geopolitical risk. Specifically, the rapid escalation of events in Ukraine and Russia has created significant uncertainty about our operations and trading in those countries. Our priority is the safety of our impacted colleagues and we continue to provide them with all the support we can. Our overall exposure is small with combined Ukraine and Russia net assets of around 2% of the group total and combined revenue and profit being less than 5%. We are actively assessing the situation closely and considering options as to how best to look after our people and protect our assets, and we'll update further as required. Subject to the ongoing geopolitical uncertainty in 2022, we expect to deliver strong growth in constant currency revenue and profit, consistent with our medium-term objectives. Before we move to questions, let me quickly summarize the key messages from this presentation. Today, Weir is a premium, highly resilient mining technology business, and we have a major opportunity to make mining smarter, more efficient and sustainable. Long-term trends from technology-led transition to net zero mining are in our favor, and we have a clear strategy to deliver profitable growth ahead of our markets while delivering sustainable margin improvement. That's why I remain excited by the prospects for our business in 2022 and beyond. Thank you. And John and I, together with Ricardo and Andrew will be pleased to take any questions that you have.

Operator: [Operator Instructions] Our first question comes from the line of Max Yates from Credit Suisse.

Max Yates: Just my first question would be on pricing in the aftermarket. I think we've previously been used to mine production growing at around 3%, maybe the overall business growing at 5%, but I guess this is largely volume related. So I just wanted to understand sort of how much pricing would be likely to contribute to order growth this year for the aftermarket business?

John Heasley: Yes. So I think on pricing, as you've seen from the release, we did a great job in 2021, I think, getting ahead of the curve, getting the price increases out so that we protected our gross margins. We expect to continue to do the same in 2022. We have already issued new price increases at the beginning of this year across both businesses. And as I look at 2022, the realization I would expect from those price increases is probably approaching mid-single-digit contribution to our growth as the price increases kick in through the course of the year.

Max Yates: Okay. That's very fair. Just the follow-up question would be around -- I think there was a comment where you started talking about the Lean manufacturing and benchmarking all of your facilities to certain metrics. And I just wanted to understand sort of how far along we are in that process? Is that something that's been going on for a couple of years now or you've just started? And do you have internally, kind of as a bridge to get to the sort of 2023 targets, any cost savings, absolute numbers of cost savings that these actions may yield over the next couple of years?

Jon Stanton: Yes. Well, let me make the overarching comment, and then maybe I'll ask Ricardo and Andrew to talk about what they're doing on manufacturing efficiencies in each of the 2 businesses. I would say that I think Lean is something that we've refocused on over the course of the last 2 years, recognizing as we emerge from the portfolio transformation as a mining technology pure play, the operational improvements and efficiencies. Maximizing our capacity utilization is going to be an important factor in terms of driving the operating leverage that will extend our margins over the course of the next 2 or 3 years. So it has been an area that we have reprioritized and are making really good progress on, but maybe Andrew and Ricardo could give a little bit of color on each division.

Ricardo Garib: Thank you, Jon. Yes, Max. Lean is a never-ending journey. You're never finished with that. There's always ways to improve. We have our absolute shops, a huge amount of casing wells, so we can get from the base of our employees exactly what are the ideas to improve production. But structurally, the whole division -- 80% division now is on SAP. So we have a really good tool. We can really see live what is going on, it's there in inventory, manufacturing, and production. We're rolling out a new system like 42Q, where we can see our top efficiency. And also structurally, we just expanded our shop in Australia, our Foundry in Artarmon, after we expanded our shop in Santiago to modern. And now we're getting the efficiency of 15%, 16%. Also we shut down our shop in China, opening a complete new modern facility. So efficiency is absolutely in our mindset. In the supply chain, we also expanded our supply chain base in China, Mexico and the Black Sea. So we're now giving access to new sources of suppliers out of the traditional ones. Of course, the supply chain is always the case. But Lean, as I said before, it's a journey that never ends, and we have a good program to go for the base where our employees contribute to ideas to make things quicker, cheaper and faster. Andrew?

Andrew Neilson: Yes, I think it's in ESCO, Max. And we really reinvigorated this over the last 12, 18 months. So I do feel there's a lot more to come over the next 3, 4 years. And it's really about, as Ricardo says, Lean continuous improvement journey. It's 1 big focus area for us, also process control. And around supporting that, we actually imputed last year a new system [indiscernible], which lets us digitally see data far quicker. We put actually some of the visualization in the hands of the operators, so we can react quickly when we see process control moving away from optimal performance. So for example, that drags directly to lower scrap, less rework, and it gives us the benefit of also efficiencies, but also effectively more capacity in the system. We also will see the benefits of the investments we've made over the last couple of years and ongoing, which improves the quality of the assets and makes us deliver better. And then lastly, and as Ricardo says, supply chain is always an ongoing area where we're looking to best course source where we can and optimize our cost across the supply chain, including looking at the logistics routes, for example, given the stress we see in that right now.

Max Yates: Okay. Very helpful. Maybe just 1 very quick final 1 on ESCO. I think we're used to in ESCO seeing the business have a sort of seasonal Q1 uptick in line with activity. We obviously exited this year at a pretty healthy order level. So I just wanted to understand, as the year has started, have you seen the normal sort of Q1 versus Q4 seasonal uptick in ESCO? Or were we already running at very high levels in Q4?

Jon Stanton: Andrew?

Andrew Neilson: Yes, I think in terms of Q1, we've gone into the year kind of underlying similar levels, continued strong performance really. And really, the driver of that uptick is typically the start of the year, seeing some customers placing orders for the year, and the construction market tends to be quite seasonal, and you see more orders in Q1, which are delivered over the course of the year. So we are seeing a degree of those patterns continuing, albeit the construction industry obviously left the year at a very high rate. And we didn't really see the tail off in Q4 in construction orders that you would normally see.

John Heasley: And if you remember, Max, last year was sort of characterized by infrastructure spending and orders ramping up really, really quickly at the beginning of the year, and that continued at a high level throughout the year. The mining GET legged that as the large mining machines sort of came back online over the course of the year. So we saw the growth in mining GET catch up over the course of the year. And that part of the business exits with momentum, whereas the infrastructure piece is probably sort of at high levels of activity, but not going to leg up again from where it is at the moment.

Operator: Our next question comes from the line of Andrew Douglas from Jefferies.

Andrew Douglas: I've got 4 questions. Two, hopefully, you can answer them quick. Two, hopefully, they are more big picture. Can we just talk about Russia and your supply chain. So I just want to make sure that there's nothing that we need to worry about from that. We're hearing 1 or 2 automotive companies now suggest that they are struggling because they would get components our of Russia, which they can't get hold of. So I appreciate it's a small profit number, but I just want to make sure there's nothing untoward there. I'm slightly surprised by the fourth quarter order intake in original equipment. In minerals, plus 9%. It was on a weak comp, minus 18%, which might be under strong comp the prior year before that. Just thought plus 9% might have been a bit better. So I just want to make sure that I'm not missing anything or there's anything untoward there. And then 2 slightly bigger picture questions. Can you just talk about how you think you're positioned relative to your peers from a mining technology perspective? I appreciate your recent acquisition is another leg up. But I've got no idea how you compare to your peer groups. It would be just helpful to understand that a bit more. And then this is really unfair question, but I'm going to ask it anyway. Your 17% margin target, you're nice and robust in terms of getting there in '23. Is there any structural reason why 17% margins for Weir as a group can't be higher?

Jon Stanton: Okay. Well, let me start with the third and fourth questions, Andy, the bigger picture ones. And I'll ask Ricardo to talk because he's got, by far, the largest business in Russia. Just talk about how that business works and whether there are any supply chain concerns, and the fourth quarter orders question. So look, I think it's difficult for me to talk about our peers on the technology positioning, but I think we are -- when I look at where we are unique in the positions with leading brands that we have from the pit right through to the process plant, right through to tailings, it gives us unique touch points and boots on the ground as to what's going on. As we said in the prepared remarks, customers are hugely focused at the moment on trying to maximize production out of their existing facilities, and we're positioned to help them both tactically with that, but also by having bigger picture conversations about how all of that run of mine process is working, listening to voice of customer, and then feeding that into our technology and R&D pipeline, so that we can bring technology to bear. And that's our traditional technology, material science, mechanical skills, hydraulics, now supplemented by the digital touch points and the data we're getting through Synertrex and Mineral now with Motion Metrics in ESCO. So we've got a great position and we're really excited about the combination of the touch points that we have in the mine, our technology skills supplemented by digital, as to how we can then help our mining customers in the future on process optimization and getting more from less, which is really what they need to try to do. So I think we're in a great space. On the margin point, of course, we felt it was very important today that we are absolutely clear on the pathway to getting to 17% margins, and we've explained that through the course of the presentation. We are determined to get there in 2023. Are we going to stop there? Of course, we're not. But we want to deliver over the course of the next 2 years, give you the evidence of execution, and then we'll go on from there. Ricardo, on the 2 points about the structure of the Russian business? I mean it's all inbound isn't it?

Ricardo Garib: Well, of course, the situation in Russia today is very liquid that we still know about. But what I can say is that we have invested in the last 3 years, pre-Ukranian invasion, on making sure that our Russian customers understand that with the modern Western technology, they can improve efficiency and productivity. And we have been very successful in that. So everything is at hold now. But of course, the big expansion that happened before that, we were a big player. So we will wait and see how it develops, but I think we've proven to our Russian customers that the Western technology, the Warman pumps HPGRs, our Trio crushers, works pretty well. In terms of the quarter 4 growth, we'll talk about mining, but mining has 2 really big sectors, what is going on in the pit on the front end and what is going on in the plants. I mean our playground is mostly in the plants. And there has been a delay on decisions on CapEx investment in the plants in the past years, and probably because of coming to the year-end and budgets of investment not being used, we see a huge sprint on orders coming, especially in the bottlenecks, mostly another pump, another HPGR, another crusher here or there, more cycles to improve production. So I'm glad to say that, that continues on Q1 this year. So it was a very healthy OE growth on quarter 4 and I think it will stay with us.

Andrew Neilson: Yes. And just coming back to the point I made earlier, Andy, it can be quite lumpy in terms of when the big orders land. And actually, we had a couple of quite large ones that we were expecting in the fourth quarter for various reasons just slipped into Q1. But it is a very positive environment. We have a really strong pipeline, lots of activity. I think your point on Russia was the -- are we dependent on -- from a supply chain perspective, for supply within Russia, and that is not the case. Everything that we do in Russia or have done up until now is based on product that is shipped into Russia. We have no reliance on Russia for components or anything, or any other part of the world, if that was your question.

Operator: Our next question comes from the line of Robert Davies from Morgan Stanley.

Robert Davies: My first one was just on, I guess, the sort of short- and medium-term cash targets. Just kind of interested in that. I noticed you sort of guided to slightly lower in the next 2 years relative to what you're seeing over the medium term. Just maybe you could kind of walk us through the biggest risks to delivering on those cash targets and where that extra CapEx is going over the next sort of 24 months? And is it fair to assume that's going to taper down? Or what are the sort of relative sort of moving parts there? That was my first question.

Jon Stanton: Can I just start by saying, we know that the subject of cash conversion has been a topic of discussion in the markets. We thought it was important that today, we came out with a very clear analysis of where our cash conversion has been and where it is going over the next few years. And we know that it's important to deliver on the targets that we've set ourselves through to 2024 and beyond. In terms of the specific moving parts, John?

John Heasley: Yes. Robert, so I'd probably start by just commenting on the 2021 cash conversion, which obviously was lower than we expect going forward. That was really due to the build of working capital as a result of, firstly, the cyber incident, which meant our revenues were way back-end loaded this year. That didn't give us time to collect the amounts due from our customers. So that will reverse as we move into 2022. Secondly, with the big build in our order book, you saw the difference between orders and revenue in the year was more than GBP 260 million. And therefore, we've had to be building that inventory to support revenue that will be delivered next year. So really clear reasons why working capital was an outflow this year. As we move into next year, we will grow into that new level of working capital, and therefore, we will be back in the range of 20% to 25% of revenues. And from a cash perspective, that effectively means we'll see a broadly neutral cash effect of working capital through 2022. So coming to the free cash conversion targets, which starts with clearly working capital being in that normal range. So I think as we move into 2022, we're confident of that. And then beyond the operational improvement initiatives that both Ricardo and Andrew have already talked to, especially with SAP and Minerals and then the digital supply chain initiatives and ESCO will really ensure that we've got underlying internal improvements to keep that working capital in the right place. Then medium-term, CapEx spend, 1x depreciation. We think that's appropriate. For the next 2 years, there are some specific good reasons to support future growth in the business that we'll be spending closer to 1.5x, which is about an extra GBP 40 million to GBP 50 million a year, Robert. The big items in there, the ESCO foundry in China to support both operating efficiency and future growth. SAP final rollout in Minerals as well as further investment in some of the technology. Jon was talking around the digital aspects of our business, especially on Motion Metrics. And we are 100% behind making that investment. So to your specific point on risk, we're very comfortable with that 90% to 100% medium-term target. And then the 80% to 90% likewise, we've got a clear path to it.

Robert Davies: So I guess, partly picking up on those comments and some comments you made earlier, just in terms of sort of the Lean journey and everything you're doing to sort of improve the underlying performance of the business itself, is there anything else from a sort of manufacturing footprint that needs addressing. I guess I'm just asking within the sort of context of, is there any risk to sort of taking some one-off charges or restructuring costs for reshaping the business, moving production around, obviously, kind of customers, supply demand sort of moves around a different policy role. It's difficult sometimes looking too far out. But is there anything on the medium-term horizon where you think we need to build a new factory, we need to consolidate these service networks, anything like that, that we should be aware of?

John Heasley: The answer to that is no, Robert. Jon has explained clearly there, the investments we need to make over the course of the next couple of years, which we have actually flagged before and are very, very important. And then from there, it's about getting our CapEx down to closer to 1x depreciation. Within that, we will continue to develop the capacity that we have through investment in the existing facilities, as we've demonstrated with some of the examples we gave in 2021. We talked in the past about a new Minerals Heavy Bay foundry. A Minerals Heavy Bay foundry is a much sort of simpler beast than an ESCO high-volume, low-mix products sort of foundry. So we would expect to be -- if we need to do that, and the jury is still out -- if we need to do that, that's sort of an investment that we will be able to cover over a couple of years within the onetime depreciation. So we're very, very focused on getting down to that after we've gone through this period where we make these investments that we need to make to set the business up for the growth that lies ahead.

Robert Davies: And then my final one, if I can squeeze 1 more in, if just, I think you've mentioned you were stepping up R&D spend a little bit. I'd just be curious to know, is any of that sort of incremental R&D money going into developing, I guess, kind of more ESG-friendly products? Is that likely to sort of be a bit of a continuing situation over the next few years? It clearly is becoming a more and more important issue. You've flagged it in a few of the slides. I am just wondering, I guess, where that incremental money is going into developing those products and the uptake from customers for those new things? Does it just become part and parcel of the overall selling package or the customers sort of look at the traditional products and then the sort of more ESG kind of leaning bits as 2 different pockets of spend?

Jon Stanton: No. I mean it's a huge driver of -- sustainability is a huge driver of where we are investing in -- further in R&D, but it's not in 1 specific bucket. It's pervasive across all of the categories. And that's the existing products and making them last longer, improve Weir life and so on, which would inherently reduce the CO2 footprint. It's then creating the new sort of sustainable solutions, integrated solutions that help our customers use less energy and less water. And then it's also looking at some of the longer horizon things that also play to that theme, which is around all fragmentation, characterization, core particle flotation -- comes back to what I said about earlier about the touch points we have across the mine and where we can see things need to be better. Mine is, one of the ways you get more from less, is by processing less and how can you use discrimination in terms of the ore body that you're actually processing versus that which is waste, because everything gets processed today basically. So that's the question that we're trying to solve for in the longer term. So yes, it's pervasive across the sort of technology and R&D investments that we're making at the moment.

Operator: Our next question comes from the line of Will Turner from Goldman Sachs.

WillTurner: It be would great if we could just go in a bit more detail on how you see the order intake outlook in 2022. Clearly, as you've emphasized throughout conversation, you're very optimistic on your end market and your market demand and some of the new products that you've launched. But is there any more color you can give in terms of like order intake? For example, how has the order intake performed year-on-year in the first 2 months? And or so, anything that we need to be aware of in terms of orders. Obviously, we've got the Iron Bridge aftermarket orders. Should they start to impact the business this year? And yes, any further color on order intake outlook, that would be great.

Jon Stanton: Okay. I mean I sort of stand by the comments I made earlier about how we expect the profile to come through. 2022 has started really well. So we're sort of halfway through the quarter. But my sort of expectation at this point is that we will probably be up year-on-year. Q4 2021 was a massive quarter, particularly on the aftermarket side. So whether we achieve that sequentially remains to be seen. But then I come back to the -- our markets are very, very buoyant around the world. Customers are very, very focused on maximizing production activity. That plays a sweet spot in terms of the spare parts and service that we can provide. So we're not seeing anything that sort of changes the dynamic at this point in time at all. Specifically, you asked about Iron Bridge, I think that's the spare start right at the end of this year or '23.

Ricardo Garib: Maybe '23 because it will be delayed in '22.

Jon Stanton: Yes, 6 months behind. So I think that's all I can say at this point, Will, to be honest.

Will Turner: Okay, sure. That's great. And then if we break down the kind of aftermarket order intake growth that you had in the fourth quarter, which like you said, it was very strong. But when we look at like mine production rates, they certainly won't grow that fast. There's obviously an element of pricing, which you said is mid-single digits. What were the other reasons for the aftermarket growing so strongly? And yes, could you break that down a little bit more? Has there been any kind of prebuying? Or is this kind of the pent-up demand because you sensed strong aftermarket growth earlier on in 2021 and in 2020?

Jon Stanton: Yes. I mean, let me make some comments and then if Andrew or Ricardo have anything to add, please do so. But I think it's a combination of momentum building through the course of the year. So as I said, in ESCO, the large mining machines utilization was lower at the end of the year and -- at the beginning of the year and it gradually built up through the course of the year. So you've got activity ramping up and momentum going on as we went through the year. There were specific parts of the regions around the world that we supply, which were quieter earlier in the year. So Canadian oil sands, for example, when the oil prices were lower earlier in the year, they were slow to spend on the OpEx side, and that really sort of ramped up, I think, in the third or the fourth quarter. But getting back to sort of normal levels, so I think those are a couple of features that I would call out. And yes, and I think you probably did see the effect that you mentioned of some deferred maintenance earlier in the year catching up on people and customers wanting to be ready going into 2022 in order to sort of continue the journey of maximizing production. But in terms of restocking, destocking, I don't think we really saw any of that in terms of -- across the 2 businesses, Andrew or Ricardo.

Ricardo Garib: I would say, Jon, that in general terms, what we see on quarter 4 was an accelerating of the users of our equipment. When you speed up a pump at 10%, that doesn't mean 10% will use it -- it will go to 20%, 30% more because there were increases a lot. So we see the production improvements giving us much more use of equipment and spares. Also, we see that as COVID is not out, but is still -- we have to live with COVID, we might have seen more service coming from -- requesting service from our companies to come and do some service work. So we see a lot of the market coming for that. So it's basically accelerating of Weir.

Andrew Neilson: I think ESCO very much followed the similar trends in terms of, as Jon said, we saw recovery really coming fully in the mining side into Q4 as the mines are now fully adjusted to COVID operating environment. They are getting far better in utilization of machines as that whole area normalizes. So there's no real restocking, destocking, no other features for me in the fourth quarter for ESCO, where the construction side that we talked about earlier, we didn't see a seasonal tail off, that could remain strong through the quarter. And then as Jon touched on oil sands, we saw some delayed maintenance orders starting to come through as that sector really started to face up to some of the issues that had delayed. And again, the reason that we're delaying that was in terms of COVID operations and having keep people on the site safe. So really just a sort of full return to normalization for me in the fourth quarter.

Jon Stanton: Operator, I think we've got time for 1 more question.

Operator: So our next question comes from the line of Mark Davies Jones from Stifel.

Mark Jones: Firstly, can I go back to the grim situation in Ukraine? You've been clear on your relatively limited direct exposure, but 2 things. Firstly, is there anything you can say on the current status of that important Ferrexpo HPGR order given that backdrop? And secondly, perhaps to broaden on Andy's question earlier, what do you think the risks in terms of indirect impact on your end markets might be? Obviously, we've seen massive increases in energy prices. We've seen disruption to some supply chains, if not yours. Do you think that could actually have a material impact on end demand elsewhere in the world this year?

Jon Stanton: So yes, on the Ferrexpo contract, you'll recall that was actually a multiyear contract in terms of delivery. So the first phase was actually built and shipped, and we had the cash in 2021. I think it was about GBP 10 million in the round. The rest of that is in -- there's no deliveries in 2022. The rest is in '23 and beyond. So that's how that phases. So we've got no sort of net exposure on that contract as we sit here today. And obviously, we'll wait and see what the future holds. Yes, so that's a really big question to end on the risks. So I think I would say a couple of things. First of all, we're a totally global business. So if production of commodities in Russia is essentially isolated and cut off, that is probably going to create more commodity inflation where we are today. But I would expect that supply will expand where it can elsewhere to try and cover that off. Obviously, the big macro thing that we should all worry about, not that we can -- sitting here, it's above my pay grade, but if we see commodity prices rise to such an extent that there is demand destruction and stipulation, then that's a different world that we're in today. So I mean, I hope that's low risk, but that clearly is a possibility that's out there at the moment. So we think about that. But as we sit here today in terms of other indirect effects, I think the global nature of our business, the fact that we have regional manufacturing and supply chain in large parts of the world, and as demonstrated in 2021, means that we are perhaps more insulated than others, actually, the virtually integrated operating model that we have is highly, highly resilient. And so I would -- whatever happens, I would expect us to fare reasonably well and probably better than most because of the footprint that we have.

Operator: This concludes the Q&A session. So I'll hand back over to you for any closing remarks.

Jon Stanton: Well, thank you very much, everybody, for your questions. It's great to have the opportunity to talk to you in what is a very, very challenging time around the world. But as I said, I think Weir is very well set for the long term and excited about what we can deliver. And of course, if there are any further questions, then our IR team will be ready today to help you with those. So thanks again, and have a good day.