Lawsuit fears weigh on BOC despite rise in profits

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The Independent Online

The industrial gases business BOC beat expectations yesterday with a 26 per cent rise in first-quarter profits, and painted a rosier picture of trading thanks to an improvement in general economic conditions.

The upbeat tone came just a week after the company unveiled plans to sell its packaged gas business in the United States, comprising mainly filling stations, for $200m (£109m) to Airgas of the US.

Tony Isaac, the chief executive, said yesterday: "We are now beginning to benefit from an upturn in trading conditions around the world. Our margins were helped by firm pricing as well as business efficiency and cost-saving programmes."

In the three months to 31 December, BOC made pre-tax profits of £116.7m - a rise of 26 per cent from the same period last year, or 16 per cent at constant currencies.

The figures - buoyed by solid performances across all of the company's divisions - exceeded market expectations. Shares in BOC closed down 2.6 per cent, however, at 871p.

There was a return to form for its BOC Edwards arm, which supplies gases to chip makers such as Intel. The division, which has been hurt by a downturn in spending, recorded a 40 per cent rise in operating profits to £6m.

City analysts were impressed with the first-quarter numbers in general, which prompted many to upgrade their profit forecasts for the year - some by as much as 5 per cent. "The underlying performance of the group was better than expected in all areas," said analysts at Smith Barney, adding: "All activities contributed to the better than expected results." Analysts at the company's house broker Cazenove, meanwhile, upgraded their profit forecast for 2004 by about 4.5 per cent to £468m.

However, the group's shares remain dogged by the possibility of litigation, analysts say, although they noted there were no further adverse changes in the quarter. BOC's US unit is a party to cases in the US alleging neurological injury through exposure to manganese in welding fumes. BOC says that the number of plaintiffs in the US welding rods dispute has fallen by about 1,300 from 9,800 at the end of December.

The results announcement comes just a week after BOC cautioned that jobs would go if the $200m sale of its US packaged gas business to Airgas goes ahead. Since the company is selling only assets - mainly filling plants for gas cylinders - rather than an entire company or unit, no staff are being transferred as part of the disposal.