Calor's price cuts fail to stop profit increase: Benefits start to flow from restructuring

CALOR Group, the bottled gas distributor, increased pre-tax profits 47 per cent to pounds 51.3m in 1993 even though it cut prices to customers and paid more for its supplies.

Restructuring costs of nearly pounds 15m in 1992 explain most of the improvement. Howard Robinson, chief executive, said the benefits of restructuring were now flowing and market share had stabilised. Calor started cutting some selling prices two years ago to become more competitive.

Turnover slipped pounds 15m to pounds 296m in 1993 due to the lower prices, but operating profits in the core gas business, at pounds 54.4m, were close to the previous year's level. Average temperatures in the winter months were similar to those in 1992.

The group's air separation division, which leases drinks dispensing systems to pub chains, reduced its losses by pounds 2.2m to pounds 3.2m. Calor expects enough new lease contracts this year for the division to break even in 1995. Pam Gas, an Eastern European joint venture in which Calor has a 20 per cent stake, covered its costs. Mr Robinson said its future continued to look promising.

At the end of February Calor entered the natural gas market, offering supplies to commercial customers through the existing mains network. It hopes to sell to domestic customers after the British Gas monopoly ends in 1996.

Irene Himona, an analyst at Societe Generale Strauss Turnbull, said: 'There are interesting long-term prospects. In the short term the results depend on the weather, but at least Calor has halted the erosion of its market share.' The shares rose 2p to 318p.