BOC Report and accounts 2005 - Alle jaarverslagen

52 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. In
aggregate there were modest improvements in both turnover and adjusted operating profit. In Taiwan, buoyant
activity in manufacturing and infrastructure development was reflected in higher turnover and adjusted operating
profit.There were also sharply better results from the industrial products business in Thailand but ammonia margins
were under strong competitive pressure and liquefied petroleum gas (LPG) selling prices remained subject to
restrictive regulation. Hong Kong continued to be affected by the migration of manufacturing to mainland China
and in Singapore shipbuilding and construction activity failed to improve in 2004. Competition intensified in the
Malaysian market for industrial gases. Demand for helium was strong throughout Asia.
In south Asia, turnover increased and adjusted operating profit was further boosted by an asset disposal.
Trading conditions in Bangladesh were adversely affected by a combination of political uncertainty, strikes and
floods.
South PacificTurnover and adjusted operating profit increased in 2004 and margins were improved by holding
down costs.The economic environment remained favourable across the region. Manufacturing activity was buoyant
in Australia despite a challenging environment for export-oriented manufacturers created by the stronger currency.
New projects in the oil and gas sector and in mining generated increased demand for welding and safety products.
During 2004 BOC secured major contracts with Western Mining to meet its requirements for safety products
across Australia.
The economy also continued to grow in New Zealand but somewhat less rapidly than in Australia.There was
also an improvement in the Pacific Islands, while gold mining activity and oil refining investment led to increased
business in Papua New Guinea.
Major initiatives in 2004 included an agreement with the Australian CSIRO to commercialise ethanedinitrile,
a gas that can be used to sterilise soil and timber, and which management believes has significant potential.
The acquisition of OccCorp, an injury management provider, gives BOC entry to a largely untapped market
by combining BOC’s safety services and products.
A dedicated refrigerant reclaim fleet was established to help customers comply with new refrigeration
regulations that make it mandatory to recover, return and safely dispose of hydrofluorocarbons. BOC’s new Heliox
gas mixture, which helps the treatment of patients with airway obstructions, and Inhalo, the new lightweight
cylinder, were both successfully launched into the medical market.
BOC commenced an extensive redevelopment program of its Gas & Gear stores, supporting traditional
industrial customers and new customers alike, giving a stronger retail position, providing better visibility, higher traffic
flow, attractive merchandising and design.
The price of liquefied petroleum gas (LPG) was particularly volatile during 2004. BOC’s associated company
in Australia, Elgas, was notably successful in preserving sales margins in these difficult circumstances and adjusted
operating profit was increased. Elgas expanded through the acquisition of a leisure gas business during the year.
The potential impact of Government plans to remove an excise tax exemption for automobile gas in the period
from 2008 to 2012 was softened by a subsequent decision to delay the introduction by three years and by an
agreement to provide capital allowances to encourage car owners to convert their vehicles to use LPG fuel.
Automobile gas is a minor part of Elgas turnover.
BOC Edwards
Change
on 2003 1
2004 Change (constant
£ million on 2003 currency)
Turnover 816.5 +19% +27%
Operating profit 46.8 +492% +588%
Adjusted operating profit 2 47.8 +158% +181%
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.
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.
Conditions improved in most of BOC Edwards’ key markets during 2004. Orders for semiconductor
equipment began to pick up in the first quarter leading to increased sales in subsequent quarters.At the same time
a major expansion of liquid crystal display (flat panel) manufacturing facilities got under way.This provided fresh
business opportunities for both gases and equipment. Sales of chemical management equipment for new
semiconductor fabrication plants improved only slightly and profitability continued to be affected by competitive
market conditions. Demand for scientific equipment vacuum systems and for pharmaceutical packaging machines
was better in 2004 but sales of vacuum systems for aerospace metallurgy applications remained at a low level.
At the beginning of 2004, high levels of capacity utilisation encouraged a number of semiconductor
manufacturers to add fresh capacity or upgrade existing facilities.This led to increased orders, which were reflected
in higher turnover and adjusted operating profit from the second quarter onwards.
BOC Edwards was successful in winning new equipment business with the majority of semiconductor
fabrication facilities for which construction began in 2004.These included several investments in Taiwan, Korea,
Japan, China, Europe and the US.