BOC Gases Posts $4 Millioin Profit As Regional Growth Slows Down

The Kenyan arm of regional gases supplier BOC Gases has recorded a 15 per cent increase in operating profit, even as operations in Tanzania and Uganda reported slower-than-expected growth due to ongoing power cuts.

In the year ended September 30, BOC Kenya Ltd posted a Ksh300 million ($4.10 million) operating profit, up from Ksh262 million ($3.58 million) the previous year. The profit was premised on a 12 per cent increase in turnover to Ksh1.1 billion ($15 million), up from Ksh987 million ($13.52 million) in 2005.

The results mean that BOC's earnings per share rose 9 per cent, while a generous dividend policy over the year saw dividends per share rise by 105 per cent to an annual total of Ksh11.30 (0.16 US cents) compared with Ksh5.50 the previous year.

The company had in April paid a special dividend of Ksh5.80 and in July an interim dividend of 25 per cent, making it one of the highest paying companies quoted at the Nairobi Stock Exchange.

"The growth in turnover was supported by the continued economic recovery in key sectors that we service, and improved sales from new products that were launched into the market towards the end of the 2005 financial year," a statement announcing the end-of-year result said.

Among the sectors that provide a market for BOC's products are the manufacturing and beverages industries, which last year recorded double-digit growth levels. BOC's range of products also includes gases used in the glass, medical and chemical sectors.

Several months ago, the company completed the construction of a $270,000 filling plant in Uganda, which was expected to lower the transportation costs associated with having to fill cylinders in Nairobi. The company also spent another $1.6 million to streamline its Kenyan operations, especially in storage and distribution.

Last year, BOC signed a franchise with America's Miller Electric Manufacturing, to distribute the latter's range of welding equipment in East and Central Africa. Then managing director John Kariuki projected that the deal as well as other product diversification would push up sales by about 30 per cent.

According to BOC's statement released week, the company's upward profit trajectory in Kenya was blunted by high production costs, especially due to rising costs of crude oil and electric power, the latter of which rose by 18 per cent.

In Tanzania and Uganda, production losses were largely related to those two country's crippling power outages. "Our subsidiary companies in Uganda and Tanzania continue to record appreciable growth, which reflects the market potential in those countries," the firm said in a statement. "The performance of the subsidiaries was (however) impacted negatively by the ongoing power rationing."

BOC Kenya's rosy outlook has in the past half-year been clouded by the failure of the company to complete the takeover of Carbacid Investments, the other major gas supplier in Kenya, due to queries raised by the regulatory Capital Market Authority (CMA).

The CMA is reportedly concerned about issues touching on the Monopolies Act as well as minority share-holder approval of the deal as both companies are listed on the NSE.

According to BOC's end-of-year statement: "The company has appealed against the stand taken by the CMA and is awaiting the outcome in the near future."

The stalled takeover means that BOC's shareholders will not benefit from any price movements of their shares at the NSE, as trading in the equities was suspended pending the resolution of the matter.

On September 6, the global operations of the BOC Group, the parent company for the subsidiaries in East Africa, were taken over by Linde AG creating the Linde Group, the world's largest industrial gases company. Linde AG, a German multinational, is a leader in industrial gases and engineering that last year had a net income of 501 million euros.