Chemicals: BOC PAKISTAN LIMITED - Six months Ended March 31, 2005 (Un-audited)

BOC Pakistan Limited (BOC Pakistan), formerly Pakistan Oxygen Limited, one of the pioneers of the state of Pakistan in the field of Industrial & Medical Gases and Welding Technology, was incorporated in 1949 to acquire the assets in Pakistan of the then Indian Oxygen and Acetylene Company Limited.
It was originally a 100% subsidiary of the British Oxygen Company Limited (now the BOC Group) which was established in 1886. On 17th March 1958, the company became a public limited company and its capital structure was broadened by the offer of 40% shares to Pakistan Nationals. Since then this equity structure has been maintained.
Its shares are quoted on all the Stock Exchanges of Pakistan. The company is principally engaged in the manufacture of industrial and medical gases, welding electrodes and marketing of medical equipment. Total number of employees as on March 31, 2005 was 420 persons (2004: 432 persons).
BOC Group companies reportedly operate in more than 60 countries including Pakistan. BOC Gases - the Core Business of The BOC Group - is said to be one of the world's largest Industrial Gases Companies. BOC gases have over £ 2.6 billion sales and over 27,600 employees in over 60 countries. BOC Gases worldwide supplies over 20,000 different gases and mixtures, from atmosphere gases like oxygen and nitrogen to complicated specialty products. Every year about 1000 new products and processes to meet the evolving needs of worldwide customers are said to be added in the product range.
BOC Gases constantly review their systems and use their world wide experiences to identify and share the best operating practices from each market in order to apply them to customer needs in other. BOC Pakistan, being a member of the BOC Group can offer customers in Pakistan both the experience to solve local problems and the highest international standards demanded by the industrial leaders of today.
The notes to the financial statements for the half year ended March 31, 2005 provide that the accounting policies adopted in the preparation of the financial statements are the same as those applied in the preparation of the preceding annual published financial statements for the year ended September 30, 2004 except for the change in the basis of reporting segment information, which has been presented in accordance with the new Line of Business (LOB) structure ie.
(i) Process Gas Solutions (PGS) and (ii) Industrial and Special Products (ISP). The new LOB structure has been adopted by the company from October 1, 2004 to conform with the BOC Group plc. global reporting structure, revised recently. Previously, business segments were classified and reported as (i) Industrial & Medical Gases and (ii) Others related to Welding Business. However, it is said that there is no effect on the company's overall profit reported for the period.
The Process Gas Solutions (PGS) line of business covers business with larger-scale industrial customers, typically in the oil and chemicals, food and beverage, metals, and glass sectors. Gases and services are supplied as part of customer specific solutions. These range from supply by pipeline or from dedicated on-site plants to the largest users and to supply by road tankers in liquefied form to others. Contribution by PGS to company operations including profitability is summarised below:

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Process Gas Solutions                (Rs in 000)       (Rs in 000)

                                    (Un-audited)      (Un-audited)

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Half year ended March 31                   2005               2004

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Gross Sales:                            456,887            371,375

Less: Trade discount and Sales Tax:      57,166             45,514

Net Sales:                              399,721            325,861

Cost of Sales:                          188,780            167,442

Gross Margin:                           210,941            158,419

Distribution and marketing:              24,172             14,853

Administration Expenses:                 32,187             28,729

Sub total:                               56,359             43,582

Operating Margin:                       154,582            114,837

Gross margin to Net Sales:                   53%               49%

Operating margin to Net Sales:               39%               35%

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The Industrial and Special Products (ISP) covers gases for cutting and welding, hospitality, laboratory applications and a variety of medical purposes are mainly distributed under pressure in cylinders. The ISP line of business covers products and services provided to this section of the market together with sales of packaged chemicals. Customers are typically in the fabrication, engineering, automotive, refrigeration, hospitality or medical sectors. The customer base is therefore broad and varied. The number of separate customers served by ISP is much greater than the other line of business. In addition to supplying gases, it also supplies a range of associated equipment. This includes medical, cutting and welding products and associated safety equipment.
Contribution by ISP to company operations including profitability is summarised below:

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Industrial and Special Products      (Rs in 000)       (Rs in 000)

                                    (Un-audited)      (Un-audited)

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Half Year Ended March 31                   2005               2004

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Gross Sales:                            463,746            452,237

Less: Trade discount and Sales Tax:      57,921             59,974

Net Sales:                              405,825            392,263

Cost of Sales:                          267,475            244,573

Gross Margin:                           138,350            147,690

Distribution and Marketing:              32,788             31,479

Administration Expenses:                 39,340             35,115

Sub Total:                               72,128             66,594

Operating Margin:                        66,222             81,096

Gross Margin to Net Sales:                   34%               38%

Operating margin to Net Sales:               16%               21%

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BOC Pakistan with Current Ratio around one and Debt-Equity Ratio at 33:67 as on March 31, 2005 (March 31, 2004 was 24:76) has satisfactory financial position. Dividend pay out has been high. The company's net sales for the half year ended March 31, 2005 were of Rs 806 million as against Rs 718 million for the corresponding period last year. The increase in sales was more than proportionate reflected in profits over profits for the corresponding period last year. With expectations of high growth in the manufacturing sector, the company expects the demand for its products to grow in the next half year. Performance statistics are given below.

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Performance Statistics                                 (Rs in 000)

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Balance Sheet                       (Un-audited)         (Audited)

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As on March 31,                             2005              2004

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Share Capital-Paid-up:                   250,387           250,387

Reserves:                                517,932           517,932

Un-appropriated Profit:                  180,598           250,387

Equity-Basic:                            948,917         1,018,706

Surplus on Revaluation of Assets:              0                 0

Total Equity:                            948,917         1,018,706

Non-Current Liabilities:                 463,770           327,378

Capitalisation:                        1,412,687         1,346,084

Current Liabilities:                     433,211           591,600

Total Liabilities and Equity:          1,845,898         1,937,684

Operating Fixed Assets:                1,311,824         1,348,962

LT loans, deposits, etc:                  97,386            18,902

Stock-in-Trade:                           63,134            90,618

Trade Debts:                             125,955            88,734

Current Assets:                          436,688           569,820

Total Assets:                          1,845,898         1,937,684

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Ratios:

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Current Ratio:                              1.01              0.96

Debt-Equity Ratio:                         33:67             24:76

Book Val./share - Rs:                      37.90             40.69

Quoted Share Price- (1-7-05)- Rs:         148.00                 -

Price/Book Value Ratio:                     3.91                 -

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Income Statement                     (Un-audited)      (Rs in 000)

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Year Ended March 31,                        2005              2004

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Net Sales:                               805,546           718,124

Gross Profit:                            349,291           306,109

Operating Profit:                        236,828           185,795

Profit Before Taxation:                  226,513           176,555

Profit After Taxation:                   180,598           137,395

Interim Cash Dividends Declared:              30%              30%

Dividend Paid out During the Period:     247,024           150,266

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Ratios:

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Gross Profit to Sales:                        43%              43%

Operating Profit to Sales:                    29%              26%

Profit After Tax to Sales:                    22%              19%

Net Profit to Equity - %:                     19%              13%

ROA:                                          10%               7%

ROCE:                                         13%              10%

Earnings Per Share (Rs):                    7.21              5.49

Inventory Turnover (times):                12.76              7.92

Receivable Turnover (times)                 6.40              8.09

Price/Earning Ratio:                       20.52                 -

Asset Turnover (Times):                     0.44              0.37

Days Inventory:                               29                46

Days Receivable:                              57                45

Debt Service Coverage (Times):              0.29              1.63

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