BOC Report and accounts 2005 - Alle jaarverslagen

Operating review (comparing 2005 with 2004) 45
Turnover was lower in 2005 as a result of the disposal of BOC’s packaged gas business in the US in July 2004 and
the disposal of part of the Unique Gas business in Thailand in December 2004.These disposals accounted for a
ten per cent decrease in turnover for 2005 compared with 2004.The effect of disposals on turnover was partly
offset by growth in Europe,Africa and the south Pacific region.
The elimination of overhead costs following the US packaged gas disposal helped towards an increase in
operating profit.This together with new business won was reflected in a £15 million increase in north American
adjusted operating profit in 2005. Other factors supporting profitability were the extension of ‘best commercial
practice’ and ‘best operating practice’ business efficiency programmes to more parts of the world.
Further progress was made with the refurbishment of retail stores - particularly in South Africa and Australia -
during 2005 and this led to increased sales. Retail outlets also supported the growth of BOC’s safety products
business.At the same time further comprehensive safety product contracts were won with major customers.
New user-friendly product packages, including lightweight cylinders for emergency services, continued to drive
sales growth of medical gases.Turnover of medical gases for BOC’s major subsidiaries, joint ventures and associates
(excluding Japan) increased by seven per cent in 2005.There was also good growth in the special products and
services business, which includes scientific gases, refrigerant gases and other packaged chemicals. Special gases
turnover increased by 11 per cent in 2005 on the same basis.
Higher petroleum prices in 2005 presented a challenge to margins in the liquefied petroleum gas businesses in
Australia and South Africa but most of the cost increases were recovered in higher selling prices.
Demand for helium remained strong worldwide, driven by increasing use of medical imaging. New helium
capacity is expected to come into production in Qatar in 2006.This will make more product available to BOC but
at a higher price than existing supplies.
There were no operating exceptional items in 2005. Operating exceptional items in 2004 were for the
integration of the industrial and medical gases businesses of BOC and Air Liquide in Japan that began in 2003, as
well as for the restructuring of the ISP business in the US following the disposal of the packaged gas business.
Europe Increased turnover reflected growing sales of medical and special products in the UK and generally
favourable business trends in Poland.The UK industrial market remained flat, but BOC’s business was expanded by
increased sales of welding products. Increased energy costs were recovered by increased selling prices.
Growth in the medical gases business was once again driven by the introduction of new lightweight cylinder
packages and by winning hospital facilities management contracts.
Increased turnover of special products was based largely on growing sales of gas mixtures for scientific
applications and additional helium business. New capacity is being added to satisfy additional requirements for
Siemens Magnet Technology (formerly Oxford Magnet Technology) the leading MRI scanner manufacturer. BOC
already manages Siemens’ helium requirements during manufacturing and will now provide on-site services for
Siemens magnets in hospitals.Additional sales also resulted from the acquisition of Calor’s aerosol propellants and
hydrocarbon refrigerants business in the UK.
Growth of BOC’s Sureflow hospitality gas and cellar services business was curtailed by lower sales of draught
beer in the UK during 2005.Additional business was gained in Ireland by providing cellar services for a major
brewery chain.
Changes in the provision of domiciliary oxygen in England and Wales were announced by the National Health
Service in 2005. BOC was awarded one of the 11 regional contracts and from February 2006 will supply all forms
of domiciliary oxygen to patients for the Eastern region. It is expected that this will lead to a reduction of BOC’s
home oxygen sales in the UK over the next two years. However, the majority of BOC’s UK medical gases business
is with hospitals and the emergency services, which is unaffected by this change.
The AmericasThe disposal of BOC’s US packaged gas business was completed on 30 July 2004 when initial cash
proceeds of US$175 million were received.This business had turnover of approximately US$240 million in 2003.
The ISP business in the US now consists of bulk medical gases, bulk supplies to distributors, tube trailer and
liquefied helium. BOC’s US overhead costs were reduced following the disposal, as the business was then
concentrated on a much smaller number of customers.As a result the US business became profitable in 2005.
During 2005, new distributor channels were added, new helium business was secured in the US and new bulk
industrial contracts were won with biotechnology and laser welding customers.
Buoyant conditions in the oil and gas industry helped towards an improved performance in Canada
during 2005.
BOC’s global helium business grew strongly in 2005 with increasing demand in China and Korea. During 2006
the first supplies from a new source in Qatar will enable these markets to be served more efficiently. However the
financial impact is expected to be negative initially as additional volumes will be offset by higher feedstock costs.
Growth in Latin America was driven by increased sales in Venezuela and Colombia, where the medical sector
is the most important. However there was also growth in the industrial markets served by BOC’s associated
company based in Chile.
Africa Lower interest rates continued to stimulate South African domestic consumption and manufacturing output
during 2005, leading to better turnover for the African region. Operating profit also increased but by somewhat less
than turnover, which was additionally inflated by higher liquefied petroleum gas (LPG) prices.
Turnover grew in every part of the South African business but was led by particularly strong sales of safety
products. During 2005 Afrox Safety was launched as a business brand and an on-site safety services business was
acquired. Sales of scientific gases increased but from a relatively low base.
Despite the challenge of a strong South African rand, export business also grew considerably. Plans are in
place to expand production of welding products for local use and particularly for export.
Other African countries also produced satisfactory results with particularly good performances in Kenya
and Zambia.