Oil and gas demand pumps up the volume for Scots icon Weir Group

Strengthening demand for Weir's equipment in the third quarter was fuelled by customers in the North American shale fields where its pumps are used in the process to help extract oil and gas.

Weir said the surge in orders from oil and gas companies would help it would enter 2011 with a strong order book given the time lag between orders being converted to revenues but chief executive Keith Cochrane cautioned the rise was an "exceptional spike" and didn't expect the same level of new orders in the fourth quarter of the year.

The company said the strong performance of both oil and gas and also its mining business offset weakening demand from customers in the power and industrials sector.

In mining, equipment orders rose 33 per cent in the period compared to 29 per cent in the first half with markets in South America and Australia in particular showing strong activity levels.

Weir said major new project enquiry levels in mining remain strong and aftermarket orders also saw increasing pace, up 19 per cent in the period.

But in power and industrial markets order input for the 39 weeks was down 7 per cent compared to a fall of 1 per cent in the first half reflecting the phasing of major nuclear orders and continued weakness in industrial markets, especially Canada.

The company said that the overall performance along with some currency benefits meant it expected profits to come in slightly ahead of previous expectations. Analysts had pencilled in a full-year profit figure of around 278m.

Net debt rose in the period, mainly due to the 138m acquisition of Kuala Lumpur-based Linatex in September and an increased investment in working capital to support business growth.

Last month the group also completed the acquisition of the valves business of BDK Engineering Industries, based in Karnataka, India.

Analysts welcomed yesterday's trading update.

"Weir typifies global presence with high market shares in niche growth markets. The model has much further to run," predicted Evolution analyst Harry Philips, who raised his target price to 1,800p from 1,450p.

Analysts at Killik agreed that the long-term outlook remains positive, driven by the continued industrialisation of emerging markets and growing demand for energy and commodities."Weir is well placed to benefit given its market-leading positions, and management is looking to double profitability by 2014," Killik said in a note.

But it said it didn't expect shares in the company, which joined the FTSE100 in September, to progress much further in the short term.

"Although the group has lifted its profit guidance, the size of upgrades will be minimal, and we would argue that the current rating already takes this into account. As a result, we believe the stock will pause for breath."

Despite the positive update, shares in Weir dipped yesterday blamed on profit taking following a strong performance on the stock market this year which has seen shares more than double. They fell 21p to close at 1,537p.