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BOC Group: 3Q Results
BOC Group, a supplier oxygen, nitrogen and other industrial gases reported a 7.2% decline operating profits for the quarter to June 2005. Operating profits for Q3 were £124.3m compared to £134m for the same period last year. Operating profits for the nine months to June 2005 were £415.4m, slightly ahead of the £407.8m reported last year.
The poor results in Q3 were mainly due to a weak performance at its subsidiary BOC Edwards, which supplies gases, equipment and services to the semiconductor industry. Operating profits at BOC Edwards dropped 41% to £9m, mainly due to the weak US dollar.
A drop in contribution from Afrox Healthcare following the disposal of the majority shareholding in March 2005 under a black empowerment scheme in South Africa also contributed to the decline. Until disposal, Afrox Healthcare was fully consolidated into the BOC accounts. BOC now consolidates only 20% of Afrox’s profits, in Q3 Afrox’s contribution dropped by 83% to £2.7m.
BOC’s main businesses reported growth. In the industrial and special products business, turnover declined by 3% but operating profits improved by 5% to £70.3m in the quarter. The decline in turnover in this business was due to the disposal of the packaged gas business in the US and of the Unique Gas business in Thailand. Excluding the disposals, turnover in the continuing businesses grew by 7%.
In process gas solutions turnover, grew by 16% and operating profits by 7% (to £52.5m) in Q3. Better prices in Europe and the US and increased ownership in the nitrogen scheme supplying Pemex in Mexico were responsible for the improved results.
The outlook for the company is reasonable. Weak markets in the UK and Australia are being offset by a recovery in South Africa and growth in north America and Asia. The share trades at 1056p, on a prospective PE (2005 earnings) of 15.3x with a yield of 3.9%.
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