BOC Report and accounts 2005 - Alle jaarverslagen

50 The BOC Group plc Annual report and accounts 2005 Operating review (comparing 2004 with 2003)
South and South East AsiaThese regions came under the same business unit management during 2004.
The economies continued to be buoyant across both regions during the year, helped by generally strong steel
demand and a more active electronics industry in Singapore, Malaysia and the Philippines.
The SARS infection that had adversely affected 2003 was no longer an issue in 2004 but in Thailand and
Malaysia the food sector was hit by an outbreak of avian flu.The Thai shrimp industry was further affected by the
imposition of US tariffs on imports.
In September 2004, BOC’s subsidiary in Thailand announced a major investment in new joint venture air
separation capacity to supply oxygen for ethylene glycol production and to increase the availability of products for
sale in the expanding merchant market around Map Ta Phut.
South PacificTurnover and adjusted operating profit were higher than a year ago.The Australian and New Zealand
economies remained generally strong in 2004.The strength of local currencies led to some further customer plant
closures but firm commodity prices for minerals and particularly for steel enabled leading customers to prosper.
There was some increase in tonnage volumes but volumes overall were similar to a year ago.
Electricity prices increased in eastern Australia and more so in New Zealand. Increased costs were passed
through to tonnage customers and progressively recovered in the merchant markets.At the same time, BOC’s
major plants in Australia achieved significant cost savings as a result of implementing a global plant optimisation
programme.
During 2004 BOC outsourced the transport of its bulk products to Australia’s leading transport company,
while retaining control of distribution and scheduling.This change was made only after ensuring that there would be
no diminution of safety standards or the quality of service to customers.
A hydrogen purification plant and bus re-fuelling facility to support BP in the Government of Western
Australia’s environmentally friendly fuel cell bus trial came into operation during September 2004.Three hydrogenfuelled
buses will be operating in the city of Perth.The trial is to continue for at least the next two years.
Water services BOC acquired Environmental Management Corporation (EMC), a US water services company in
October 2002.Turnover increased modestly in 2004 but the business remained close to breakeven after the
amortisation of goodwill as a result of planned costs to increase business development resources.
BOC’s strategy for water services is to focus on its industrial customers. Significant new business was won
during 2004, including a multiyear contract for process and waste water services to a major US beef producer.
Tightening regulations for proteins in effluent seem likely to create fresh demands for water treatment in the food
industry.
Industrial and Special Products (ISP)
Change
on 2003 1
2004 Change (constant
£ million on 2003 currency)
Turnover 1,782.3 +2% +3%
Operating profit 253.9 +7% +5%
Adjusted operating profit 2 269.5 +11% +10%
1. A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 40.
2. A reconciliation of adjusted operating profit with operating profit is shown on page 41.
3. All comments below are on a constant currency basis.
Nearly all regions delivered better results in 2004 with increased turnover in most countries and an overall
improvement in operating margin. Robust economic conditions supported a further improvement in the south
Pacific region and Africa delivered better results despite the handicap of the stronger currency on manufacturing
and mining.There was also some improvement in the US manufacturing economy.
At the same time further progress was made in successfully integrating the businesses recently acquired in
Canada and Poland.
Sales to the medical sector grew further in 2004 as a result of both gases and liquid helium sales. Heliox, a
new low-density breathing mixture was introduced in the UK and in Australia.This product enables patients with
obstructed airways to breathe more easily and thereby provides time to treat the underlying problems. Helium is
also used to cool the coils of superconducting magnets in MRI scanners. BOC not only sells the liquid nitrogen and
helium cryogens but offers a related CryoFill service, taking responsibility for filling customers’ magnets. Helium sales
also increased in Taiwan,Thailand and China, where significant growth potential has been identified and where an
important distributor agreement was signed with Meike.The cost of producing and purchasing helium continued
to increase rapidly during 2004 but BOC was largely successful in recovering higher costs in selling prices to
customers. BOC installed helium recovery systems at the University of Liverpool in the UK and at Trane in the
US during 2004.
Consistent progress was made in growing refrigerant sales.The alliance with Hudson Technologies for the
reclaim of contaminated refrigerants began operation in the UK during 2004 and will be applied in South Africa
in 2005.
BOC’s major liquefied petroleum gas (LPG) businesses in Australia and South Africa were notably successful
in managing volatile input costs and sustaining margins during 2004 as LPG prices increased sharply.