85m pounds provision pushes BOC 9m pounds into the red: Sickly US healthcare profits take their toll

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The Independent Online
A SHARP downturn in US healthcare profits and an pounds 85m provision for restructuring pushed BOC Group into first-quarter losses of pounds 8.9m against pre-tax profits of pounds 90.8m.

The pounds 85m provision - pounds 60m for healthcare operations and pounds 25m for gases - was foreshadowed at the company's annual meeting and is expected to bring cost savings of pounds 60m over three years. But the market was disappointed and BOC shares fell 17p to 681p.

'The overall figures were closely in line with forecasts. But the analysts' meeting with BOC was cautious in tone and there was some surprise at the erosion of margins in the gases operations,' explained Andrew Stott, a chemicals analyst with Kleinwort Benson.

Although gas sales rose 12 per cent to pounds 610.7m, operating profits rose barely 1 per cent as pressure on prices in most markets cut back margins from 13.7 to 12.3 per cent.

With overcapacity in the Far Eastern gas market showing no signs of receding BOC has found it increasingly difficult to pass through significant price increases for its products. This is reducing the impact of economic growth on profits.

Overall operating profits in the first quarter to 31 December fell 11 per cent to pounds 97.1m, but this was slightly ahead of the three months to 30 September. Interest charges rose from pounds 18.1m to pounds 21m.

Healthcare profits have continued to suffer from generic competition for its Forane anaesthetic whose patent expired in January 1992.

Despite improved profits from medical equipment, healthcare profits more than halved from pounds 32.6m to pounds 14m.

A rationalised vacuum and distribution division failed to hold profits at the levels of the previous quarter, but showed a strong improvement from pounds 2.1m to pounds 9m over the comparable first-quarter figures.

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