| - PROCESS GAS SOLUTIONS |
| - INDUSTRIAL AND SPECIAL PRODUCTS |
| - BOC EDWARDS |
| - AFROX HOSPITALS |
| - GIST |
| Process Gas Solutions | 2004 £ million |
Change on previous year |
Change on previous year1 |
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| Turnover | 1,275.2 | +3% | +9% |
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| Operating profit | 189.5 | +7% | +14% |
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| Adjusted operating profit2 | 190.3 | +3% | +10% |
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| 1. At constant currency. 2. Adjusted operating profit excludes exceptional items. |
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Process Gas Solutions
Process Gas Solutions achieved growth in both turnover and adjusted operating profit as industrial activity remained strong in most parts of the world. We delivered more to the metals industries in general and for iron and steel production in particular as it rose driven by demand from China. Increased activity in the chemicals and refining sector resulted in major project wins as the year drew to a close. We maintained our leading position in the food sector although market conditions varied around the world. The electronic packaging market continued to grow strongly in Asia, driving demand for liquid nitrogen as the industry continued to move to lead-free soldering. The rapidly rising cost of oil was, and will remain, a feature of the business environment as it feeds into increased power costs and higher natural gas prices.
Asia remains a focus for growth with China having attracted the most attention and the greatest levels of foreign direct investment. We brought on stream little new capacity in China this year but have four large air separation units and five on-site production units currently under construction to meet growing customer demand in key economic regions, such as Dalian, Tianjin, Taiyuan, Nanjing, Shanghai and the Pearl River delta. These new plants consolidate our position with a number of existing customers and establish us in important new industrial parks. The move of manufacturing from Taiwan to mainland China appears to have slowed and as a result our business in Taiwan saw increased adjusted operating profit with plants running at high levels of capacity. New argon and hydrogen capacity coming on stream in Korea contributed to improved performance there. General economic growth elsewhere in Asia, increased demand for steel from China and continued growth in electronics packaging supported our business activity in India, Malaysia, Singapore and the Philippines. Thailand experienced growth from petrochemical expansions while bird flu adversely affected the food industry there.
In the US a new hydrogen plant serving the Citgo refinery in Illinois came on stream and several steel customers emerged from Chapter 11 bankruptcy protection, again supported by higher world prices for steel and increased demand from China. We won the contract to supply hydrogen to BP's refinery in Toledo and this was followed shortly afterwards by a similar award from Sunoco. Our joint venture with Linde, building process plants in Oklahoma, has been an important factor in bidding successfully for business with US refiners. Our 'premier beverage' carbon dioxide service for carbonated drink producers continued to grow but competition intensified as additional volume entered the market from new carbon dioxide sources in the mid-west. Our water services business announced a major multi-year contract from a food manufacturer and has an extensive list of prospective industrial customers. In Latin America our new 400 tonnes-a-day plant entered production serving CST in Brazil, the world's biggest producer of steel slabs for export.
In 2003 our business in the UK saw some notable customers move production to lower cost environments. The trend was much reduced this year. Growth at Corus led to increased demand and we signed a 15 year deal to supply 30 per cent more oxygen, nitrogen and argon to its strip products plant at Port Talbot in Wales. Adjusted operating profit in the UK was helped by excellent plant performance and by continuing efficiency improvements. Polish production grew and a new operations centre was established to control our key plants in that country. Ireland, on the other hand, saw further customer closures in the year. Cryostar, our specialist business based in France, continued its good performance: it supplies a range of products for liquefied natural gas carriers and these ships are being built in greater numbers.
A growing economy, strong commodity prices for minerals and increased demand for steel were positive factors in Australia although continuing rationalisation and business closures driven by the high level of the Australian dollar moderated growth. The hydrogen fuel bus trial in Perth was successfully commissioned, following a similar project now underway in the UK.
South Africa saw export manufacturing decline as the rand strengthened, with gold and platinum mines particularly affected, but in common with other parts of the world, steel production remained buoyant. Adjusted operating profit grew ahead of turnover largely due to active cost management.
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