BOC pledges radical review as profits dive

BOC, the troubled international gases company, yesterday announced a far ranging review into its entire business designed to stem a rapid decline in its profits. The review is likely to lead to a radical shake- up of the group in an effort to slash costs.

The announcement came as BOC revealed a 17 per cent fall in pre-tax profits to pounds 179.8m for the six months to March due to the economic turmoil in Asia and the strong pound.

BOC is looking at implementing a more centralised operational structure to keep a tight rein on costs. The group may also embark on a large scale disposal programme or slim down some of its worst performing units, which would inevitably involve job cuts.

Prime candidates for reform include BOC's chilled food division and its French distribution operation. Danny Rosenkrantz, BOC's chief executive, said yesterday the two business had plunged into the red over the last few months. The chilled food division encountered problems after taking on a loss-making contract and the French business has been hit by difficult local economic conditions.

As the biggest speciality gases producer in Asia, BOC has been badly affected by the economic crisis in the region. The group predicted yesterday that the turmoil in the Far East is far from over, with the Japanese economy at severe risk of falling into recession.

BOC has been vulnerable to the sharp rise in the value of the pound, which wiped another pounds 13m off its pre-tax profits in the six-month period. The crash in the world-wide semiconductor market has also battered profits at its vacuum technology business, which is heavily dependent on the sector.

BOC has already embarked on a large programme to improve the efficiency of the business but its latest initiative will dramatically accelerate this process. The group is also looking for acquisitions after recently selling Ohmeda, its healthcare business, for pounds 630m.

Mr Rozenkranz said yesterday: "The sale of Ohmeda was a key moment in the history of BOC. Now we have got to sort out how we are going to run the rest of the business. We have got to get more improvements."

BOC has underperformed the FTSE 100 by around a fifth over the last 12 months after problems in Asia left it with a gloomy earnings outlook. Analysts cut current-year profit forecasts by another pounds 35m to pounds 420m. However, its shares rose 3.5p to 976p as the City welcomed the group's move to clear its decks. The group plans to unveil the results of its review by August.