BOC chief warns of weakness in US market

MAGNUS GRIMOND

Danny Rosenkranz sounded a note of caution yesterday in his first results as chief executive of BOC, the industrial gases to health-care group. He said demand from merchants in the key US market had been softer than expected in December.

The merchant market represents about 40 per cent of US gas sales. Results for January had not been analysed in depth yet, he said, and it remained unclear whether the weakness was due to economic factors or the severe weather conditions that have affected the north-eastern US where most of BOC's merchant business is.

The hints of a slowdown in the US came as BOC unveiled first-quarter results at the bottom end of expectations, which combined to send the shares 17p lower to 926p yesterday.

Pre-tax profits rose 13 per cent to pounds 101m in the three months to December, with earnings per share 16 per cent ahead at 13.2p. Turnover rose a tenth to pounds 910m.

The core gas business, supplying oxygen, nitrogen, argon and the like to steelmakers and other industries, saw growth in volumes on both sides of the Atlantic and gained a further boost from firmer US prices. Increases varied, Mr Rosenkranz said, but they had seen rises of up to 5 per cent in some lines, although prices remained "flattish" in the UK and Europe.

Operating profits from gases rose from pounds 86.6m to pounds 94.1m,helped by recent moves to restructure the business.

The health-care division was hit by the absence of the medical engineering systems business, sold a year ago, and lower sales of anaesthesia equipment in the US. Divisional profits slipped from pounds 15m to pounds 13.5m.

Volumes of Forane, the group's older inhaled anaesthetic that lost its patent protection in 1994, have held up, but prices have slumped by over a fifth in the past year as generic competitors have come into the market. Mr Rosenkranz said a competing product launched by Medeva, the UK drugs group against which BOC is taking legal action, had affected prices even if it had not won much business.

BOC's third arm, the vacuum products and distribution services arm, continued its recent strong performance, raising profits 56 per cent to pounds 18.4m in the latest three months. The continuing prosperity of the semiconductor industry, which receives around 60 per cent of its supplies of specialist pumps from BOC, has led to an "encouraging" order book.