BOC Group has more than tripled its third quarter profit with the two global gases lines of business showing continued good progress.
Net income in the three months ended June 30 rose to £75.1 million, or 15.1 pence a share, from £18.8 million, or 3.7 pence, in the previous year
Earnings before interest and taxes or operating profit fell 7.2 per cent to £124.3 million while sales, including revenue from joint ventures and shareholdings, fell 5.6 per cent to £1.093 billion on slowing demand in the steel industry. The company recorded a loss of £79.8 million in the third quarter last year on the sale of its packaged gas unit to Airgas Inc.
Chief executive, Tony Isaac, explained the results. He said: “Our two global gases lines of business, which contribute over 80 per cent of Group operating profit, showed continued good progress. In aggregate, the adjusted operating profit growth of the Process Gas Solutions and Industrial and Special Products businesses was 6 per cent in the third quarter. The restructuring programme underway within BOC Edwards will deliver cost savings in the next financial year. Adjusted return on capital employed remained strong at 16.6 per cent.”
In the Process Gas Solutions segment, both turnover and adjusted operating profit increased in the quarter, partly because of BOC’s increased ownership in the nitrogen scheme supplying Pemex in Mexico and because of changes to the terms of a supply scheme contract in the US and through increased prices to recover higher energy costs in Europe and the US.
In the UK, there was good volume growth in tonnage schemes and turnover was increased by passing through higher energy and natural gas costs. In the liquid market slightly lower volumes were more than offset by higher selling prices, which recovered the majority of the increased energy costs.
Turnover and adjusted operating profit also increased in Japan.
The company says prospects for the Process Gas Solutions business remain strong, supported by a good pipeline of projects to be commissioned over the next two years, with major on-stream dates from late 2006.
In the Industrial and Special Products segment, adjusted operating profit grew by five per cent after absorbing restructuring costs of £0.7 million in the UK including the disposal of the US packaged gas business.
In BOC Edwards, turnover and adjusted operating profit were at a similar level to the previous quarter but lower than the same quarter a year ago. The company says the order intake for semiconductor equipment has remained broadly stable during the third quarter and a similar level of adjusted operating
profit is expected in the final quarter of this fiscal year. BOC Edwards continues to win a high share of new business with both semiconductor and flat panel display manufacturers. The company says the weakness of the US dollar continued to have an adverse effect on margins as a major proportion of sales are denominated in dollars while the bulk of BOC Edwards’ manufacturing costs remain in sterling. Cost savings from restructuring programmes in BOC Edwards are expected to contribute to adjusted operating profit by the first quarter of next year.
BOC says the outlook for its global gases business remains positive as manufacturing recovery in South Africa and positive trends in North America and much of Asia are offsetting weaker trends in the UK and Australia.