Financial Report

General economic conditions and sector environment

The various products made from industrial gases and related services and technologies are used in almost all branches of industry, but also in the foodstuffs technology, medicine and research and science sectors. For this reason, gross domestic product (GDP) is a highly relevant indicator for the Messer Group’s performance.

Actual global economic development in 2018 was largely in line with expectations. According to estimates made by the International Monetary Fund („IMF“)1 and the World Bank2, the global economy grew roughly at the same pace as one year earlier. According to the World Bank, global real GDP is estimated to have risen again by 3.0 % in 2018, despite a slowdown in growth momentum during the second half of the year in some areas. In geographical terms, however, actual growth figures differed significantly from forecasts originally made for the global economy. GDP growth in the USA in 2018 was once again significantly stronger than expected, whereas GDP growth in the euro area slowed on a slightly more pronounced scale than predicted. The pace of growth in emerging and developing economies, as well as in developed industrial countries, was similar to the previous year. The two different rates of GDP growth estimated by the IMF for emerging and developing countries at 4.6 % (2017: 4.7 %) and for developed industrialized countries at 2.3 % (2017: 2.4 %) continued to apply.1 

Economic growth in Europe in 2018 fell short of the rate recorded one year earlier. According to the figures of the Organization for Economic Cooperation and Development (OECD)3, GDP in the euro area grew by an estimated 1.9 % in 2018. If this figure turns out to be correct, the growth rate in the region would have slowed down by a further 0.6 percentage points compared to the previous year. Reflecting this trend, GDP growth in all major economic regions, such as Germany, France, Italy and Spain, slowed on a similar scale. GDP growth for European countries outside the euro area exceeded that recorded for the euro area. This was evident, for example, in growth rates posted by Poland (+5.2 %) and Slovakia (4.1 %) as well as by South Eastern European countries such as Hungary (+4.6 %) and Slovenia (+4.4 %). Apart from these trends, the pace of economic growth accelerated in some countries, such as in Poland and Switzerland.

In China, GDP growth slowed in 2018 in line with expectations and, according to World Bank estimates, will slip from an unexpectedly strong 6.9 % in 2017 to 6.5 % in 2018. The Chinese Government is continuing in its endeavors to reduce the Chinese economy’s dependence on exports by boosting domestic demand with a corresponding focus on consumption and services. So far, however, this has not caused China to lose its top spot in the world’s GDP growth table.

1World Economic Outlook, Update January 21, 2019
2Global Economic Prospects, January 2019
3 OECD Economic Outlook – Volume 2018 Issue 2

Course of business

For the Messer Group, the fiscal year 2018 was shaped above all by an unexpectedly strong performance in China, boosted by very strong demand and exceptionally high market prices, particularly in the liquefied gases market segment. Steel production in China also increased. Economic recovery continued throughout Europe, with economic activity up in many countries. These favorable economic conditions helped the Messer Group in 2018, contrary to our forecast at this stage last year, to achieve significant year-on-year revenue growth. In the final analysis, revenue (including revenue from discontinued operations) grew by 9.6 %. Similar to the revenue performance, the Messer Group’s EBITDA turned out considerably better than our original expectations for the year. Instead of the sharp decline in EBITDA forecasted for 2018, actual EBITDA (including EBITDA recorded for discontinued operations) increased by more than 15.5 % year-on-year. Dynamic developments in China, which far exceeded expectations, made the decisive contribution to this outcome. 

Including the impact of the USPP currency hedge and contrary to the prediction made in the previous year’s management report, the Messer Group again managed to reduce net debt during the reporting period from K€ 290,139 to K€ 264,291 at December 31, 2018. 

Results of operations
Adjusted for revenue from discontinued operations, the Messer Group generated worldwide revenue of K€ 1,010,444 in 2018 (2017: K€ 902,189) which can be analyzed by region as follows:


Jan, 1 - Dec, 31, 2018

Jan, 1 – Dec, 31, 2017

Change in 2018

China, Vietnam, ASEAN

South Eastern Europe

Central Europe

Western Europe










Continuing operations




Discontinued operations








The Messer Group’s revenue from continuing operations in the financial year 2018 was 12.0 % up on the previous year. Business developed in the various regions as follows:

China, Vietnam, ASEAN 
In local currency terms, revenue in China rose by 25.3 % year-on-year, reflecting unexpectedly strong demand for all products in our industry. Our companies benefited mainly from ongoing growth in steel production volumes and in particular from extremely buoyant demand for liquefied gases, accompanied by rising market prices. 

Revenue in Vietnam in local currency terms rose by 15.3 % year-on-year, driven by increased demand from our on-site customer, Hoa Phat, and the continued good utilization of production capacities for liquefied gases in the north of the country. 

Our companies in the ASEAN region (excluding Vietnam) made a € 5.3 million (2017: € 2.4 million) contribution to overall revenue.

In the previous year, our company Messer Gases del Perú S.A., based in Lima, Peru, was also reported as part of this region, with revenue of EUR 15.9 million recorded in 2017. Effective February 1, 2018, the Messer Group disposed of the company.

South Eastern Europe
Messer Group revenue in South Eastern Europe increased by 7.8%, with almost all companies recording significant revenue growth. The commissioning of the first air separation plant in Slovenia in April 2018 as well as the acquisition of Buse Gaz S.R.L. in Romania had a particularly positive impact. In addition, the Group’s operations in Bosnia, Serbia and Hungary recorded significant growth, with revenue up on average by 9 % in local currency.

Central Europe
The Central Europe region recorded a 7.0 % increase in revenue. All countries in the region performed well, with Austria, Poland, Slovakia and the Czech Republic, recording revenue growth of between 5 % and 10 %. 

Western Europe
Figures for Western Europe have been adjusted for discontinued operations, so that this region now only includes the industrial gases operations of ASCO Kohlensäure AG as well as the operations of the service companies Messer GasPack GmbH, Messer Information Services GmbH, Messer Finance B.V. and Messer Group GmbH. Revenue of these companies rose by 31% year-on-year, boosted in particular by growth recorded by the centralized engineering department at Messer Group GmbH. 

The Group recorded an EBITDA of K€ 302,699 for the fiscal year 2018 (2017: K€ 225,320).


Jan, 1 - Dec, 31, 2018

Jan, 1 – Dec, 31, 2017

Continuing operations

Discontinued operations

Continuing operations

Discontinued operations






Depreciation, amortization and impairment losses on intangible assets and property, plant and equipment





Dividend incomee1








: Revenue






30.0 %

18.4 %

25.0 %

19.6 %

1 Dividend income from non-consolidated companies

Operating profit from continuing operations was influenced above all by a sharp rise in revenue (+12 %), while selling expenses remained virtually unchanged. In addition, the deconsolidation of Messer Gases del Perú S.A., Peru, in the year under report gave rise to a gain of K€ 8,477. Impairment losses of K€ 3,854 recognized on property, plant and equipment and intangible assets had an offsetting effect. In addition, an impairment loss of K€ 4,400 (2017: K€ 4,725) was recognized on goodwill. Operating profit in 2017 included a positive effect of K€ 5,113 arising on the reversal of impairment losses on property, plant and equipment and a negative effect of K€ 2,745 as a result of impairment losses recognized on intangible assets. 

The improvement in the operating result from discontinued operations was mainly attributable to the impairment loss of K€ 10,614 recognized in the previous year on goodwill. No impairment losses were recorded on non-current assets in 2018. Furthermore, in accordance with IFRS 5, with effect from October 22, 2018, no systematic depreciation or amortization was recognized on individual items included in non-current assets relating to discontinued operations. Instead, these items were measured at the lower of their carrying amount and their fair value less costs to sell. The suspension of systematic depreciation and amortization helped improve the operating result from discontinued operations by K€ 7,274.

The financial result includes a net negative interest result of K€ 20,237, representing a deterioration of K€ 2,968 compared to the previous year.

As a consequence of the contribution of the Western European operating companies to Messer Industries GmbH, the USD-denominated US private placements (USPPs) which had been issued to finance the Messer Group were terminated before their due date. The resulting early repayment penalty of K€ 5,580 is reported as part of the net interest result. 

Gross financial debt increased by 16 % over the twelve-month period under report, mainly due to new borrowings raised in 2018 to finance long-term investment projects in Vietnam. Due to the more favorable interest rates on new borrowings and the scheduled repayment of financial debt existing at the beginning of the financial year, it was possible – excluding the impact described above – to reduce interest expense year-on-year.

The termination of the USD-denominated USPPs also necessitated the termination of the USD-denominated cross currency interest rate swaps. For this reason, there was no effective hedging relationship in place for these derivative financial instruments at December 31, 2018. Accordingly, the corresponding changes in fair value were recognized for the first time in the fiscal year 2018 in the income statement. The related expense of K€ 8,814 is included in other financial result. We refer to our comments in the section “Financial position”. 

Other investment result (net) deteriorated by K€ 1,783 year-on-year, mainly due to the lower valuation of our investments in Estonia and Ukraine accounted for using the equity method.

Overall, the Group posted a net profit for the year (including minority interests) of K€ 138,039 (2017: K€ 83,663). Of this amount, K€ 101,460 (2017: K€ 59,864) is attributable to the shareholders of the parent company. 

Group Treasury is responsible for overall liquidity, interest rate and currency management. The most important objective of Group Treasury is to ensure that a minimum level of liquidity is always available to ensure solvency at all times. High levels of liquid funds help to improve our flexibility, security and independence. If necessary, we can call on additional liquidity potential under further various available credit lines amounting to € 59.5 million.

The Messer Group is financed via a Term and Revolving Facilities Agreement (RFA I) with a volume of € 160 million, provided by prestigious banks in Germany. Interest is based on IBOR (Inter Bank Offered Rate) in the currency in which amounts are drawn down plus a margin, depending on the ratio of net debt / EBITDA. In addition, two US Private Placements (USPP II, USPP III) remain in place. 

Guarantees provided by individual Group entities serve as collateral for the financing arrangements.

The contribution of the operating Western European companies to Messer Industries GmbH in February 2019 (see section 1 „Overview of the activities of the Messer Group“) triggered contractually agreed reasons for the USPP II and USPP III noteholders and for the RFA I banks to terminate the relevant agreements. Notification of termination was received for USPP III (USD 100 million) and USPP II (USD 57 million) (both denominated in USD) and for the repayment of these USD notes in the event of the contribution. However, all USPPs denominated in euro remain in place.

A new Term and Revolving Facilities Agreement (RFA II) was agreed with the banks that had previously been party to RFA I agreement, thereby underpinning a sound financing basis for the Group. RFA II comprises tranche A for џ 40 million (Term Loan), tranche B for € 100 million (Revolving Credit) and a USPP backstop facility (BSF) for € 380 million, and runs until December 18, 2023. 

The BSF served to secure the possible repayment of the part of the financial debt financed by US Private Placements. RFA II becomes available once specified conditions precedent have been fulfilled. These conditions were fulfilled on February 26, 2019. The BSF was not needed in conjunction with the repayment of the USPPs and is therefore no longer applicable.

In anticipation of the necessary repayment of the USD Notes (totaling USD 157 million), Messer Group GmbH refinanced € 87.8 million at 1.49 % on January 29, 2019 by means of a further US Private Placement (USPP IV) and USD 100 million of USD Notes issued by Metlife. Funds managed by Prudential Management Inc. have provided the money. Messer Group GmbH is the debtor under the five-year USPP IV, which falls due for repayment at the end of the term.

The USD Notes issued by Voya (USD 57 million) were repaid when the operating Western European companies were contributed to Messer Industries GmbH, and the outstanding amounts under RFA I were rolled into RFA II.

Net debt as at December 31, 2018 stood at K€ 264,291 (2017: K€ 290,139) and is broken down as follows:

Net debt

Dec, 31, 2018

Dec, 31, 2017

Change in 2018

Financial debt

Currency hedge USPP





Gross financial debt




Cash and cash equivalents








Net debt of the Messer Group decreased in 2018 by K€ 25,848 compared to the end of previous fiscal year. The ratio of gross financial debt (K€ 541,767) to total assets (K€ 2,405,397) was 22.2 % at the end of the reporting period (2017: 22.5 %).

The change in gross financial debt excluding USPP currency hedging is shown below:

Gross financial debt at January 1, 2018


Cash-relevant changes:

New debt raised





Non-cash-relevant changes:


Changes due to currency translation

Other non-cash-relevant changes 



Gross financial debt at December 31, 2018


Due to the contractual arrangements for the contribution of the Western European companies, the financial liabilities of these companies totaling K€ 60,676 are reported as part of continuing operations. 

Cash flow statement
Cash flows from continuing and discontinued operations were as follows:

Abridged version in K€ 

1.Jan. 1. - Dec. 31, 2018

Jan. 1. - Dec. 31, 2017

Profit before taxes



Cash flows from operating activities



Cash flows from investing activities



Cash flows from financing activities



Changes in cash and cash equivalents



Cash and cash equivalents
at the beginning of the period



Exchange rate impact on cash and cash equivalents



Cash, change in group reporting entity



Cash classified as held for sale



at the end of the period



At K€ 322,298 the total of cash flows from operating activities was K€ 41,064 higher than in the previous year. This increase was influenced in particular by the higher net income reported for the year. 

The change in cash flows from investing activities again reflected the continued high level of investments made by the Messer Group. The major part of the outflows related to investments in property, plant and equipment. The sale of our company in Peru generated proceeds, which were offset by outflows for the acquisition of Buse Gaz S.R.L., Romania. 

Cash inflows from financing activities corresponded to positive amount of K€ 8,925, an improvement of Kџ 87,160 compared to one year earlier, reflecting new debt raised compared to scheduled repayments in 2018. 

Liquid funds held by the Messer Group at December 31, 2018 totaled K€ 277,476. 

In 2019, the Messer Group will again require further capital to fund its expanding business operations and scheduled capital expenditure and to repay loans and interest as they fall due, notwithstanding the fact that the medium-term strategy is to consolidate net debt levels relating to operations outside China. The necessary funds will be generated out of cash flows from operating activities, existing funds and credit lines available to the Group. The Messer Group’s strong position in the various markets in which it already operates, combined with expansion into new markets, will enable us to maintain our robust financial position.

The Messer Group has committed to purchase, or invest in the construction and maintenance of, various production facilities. Obligations under these agreements represent commitments to purchase plant and equipment at market prices in the future. The Group is also party to long-term contracts which give rise to obligations. As of December 31, 2018, purchase and capital expenditure commitments and long-term contracts totaled K€ 82,528 (2017: K€ 91,282).

Capital expenditure
Capital expenditure continues to be focused on safeguarding existing business and opening up opportunities for growth. In accordance with normal business principles, the Messer Group invests primarily in projects that will secure supply capabilities and/or which create opportunities for profitable growth. Furthermore, regular investments are made in the modernization of production plants and distribution channels.

The following section describes capital expenditure undertaken for the Messer Group as a whole i.e. including both continuing and discontinued operations. 

The Messer Group’s capital expenditure on property, plant and equipment and financial investments totale 240 million. The capital expenditure ratio corresponds to 17.8 % (2017: 11.7 %) of revenue.

Investments in intangible assets and property, plant and equipment totaling € 232 million mainly related to the construction of air separation plants in Vietnam and production plants in Hungary and China. 
Investments in financial assets of € 7.6 million mainly relate to the acquisition of Buse Gaz S.R.L., Romania. Reference is made to the disclosures provided in the section 1 “Changes in the group reporting entity in the fiscal year 2018”.

Capital expenditure by region was as follows:

Capital expenditure in K€

Jan. 1. - Dec. 31, 2018

Jan. 1. - Dec. 31, 2017

China, Vietnam, ASEAN 



South Eastern Europe 



Western Europe 



Central Europe 



Continuing operations



Discontinued operations






In China, the main focus is on investing projects that will further strengthen our position in the liquified gases market and help promote a good balance in terms of customer diversification based on the existing business model. Systematic endeavors to increase customer diversification also include investments in a gases supply plant for high-purity industrial gases for an on-site customer from the electronics industry in Sichuan province, the general expansion of CO2 capacities and the start of construction of a specialty gases plant in Anhui province for the electronics industry. 

In Vietnam, construction work on the fourth air separation plant for on-site customer Hoa Phat at its production site to the east of Hanoi and on two further air separation plants for its new steelworks in the center of the country in Dung Quat progressed sufficiently to enable commissioning of the plants by mid-2019. 

Capital expenditure in Europe remains focused on investment in distribution channels and selected growth projects. The latter includes the completion of the project to expand existing CO2 production capacities in Hungary as well as the construction of the first air separation plant in Slovenia, which will ensure the independence of supplies for our industrial gases operations in this country going forward. In addition, we also acquired Buse Gaz S.R.L. in Romania. In Germany, as a part of discontinued operations, construction began on the third air separation plant (in Speyer) and the first hydrogen plant. 

The balance sheet total went up by K€ 199,371 during the fiscal year under report and stood at K€ 2,405,397 thousand as at December 31, 2018, with a K€ 101,462 increase in cash and cash equivalents making a major contribution to this development. 

At 59.1 % (2017: 76.8 %), non-current assets accounted for the largest proportion of the balance sheet total. At December 31, 2018, assets relating to discontinued operations were classified as “assets held for sale”. Including these assets, total non-current assets at December 31, 2018 accounted for 73.73 % of the balance sheet total. 

Tangible and intangible assets represented the largest combined item on the assets side of the balance sheet, accounting, as one year earlier, for 51.2 %. The carrying amount of these two items together decreased by K€ 252,970. The reclassification of assets relating to discontinued operations caused tangible and intangible assets to decrease by K€ 341,091. New capital expenditure in the fiscal year 2018 had an offsetting effect. 

Currency effects (including minority interests) had the effect of decreasing the balance sheet total by K€ 7,827 and were related mainly to our Chinese and Hungarian companies. The equity ratio (including minority interests) increased to 61.2 % (2017: 61.0 %). 

Gross financial debt went up by K€ 60,304 and accounts for 22.5 % of the balance sheet total. USD-denominated USPPs amounting to K€ 160,593 were reclassified to current financial debt as a result of their upcoming early repayment. This reclassification was the main reason for the K€ 152,259 increase in current financial debt. At the same time, non-current financial debt decreased by K€ 91,955. In this case, the aforementioned reclassification compared with K€ 70,909 of new financial debt. We refer to our comments in the section on the Group’s financial position.

Return on employed capital
The return on capital employed (ROCE) in the past fiscal year for continuing operations was 16.63 % and is calculated as follows:


Jan. 1. - Dec. 31, 2018

Jan. 1. - Dec. 31, 2017

Continued operations

Discontinued operations

Continued operations

Discontinued operations






+ Amortization of goodwill





EBIT adjusted





: capital employed





ROCE in % 

16.63 % 

8.57 % 

11.33 % 

8.30 % 

Derivation of capital employed from the balance sheet:


Other intangible assets and property, plant and equipment





Finance lease receivables





Net working capital





Capital Employed





In 2018, assets relating to discontinued operations were classified as non-current assets held for sale. The analysis of the change of the capital employed ratio is presented separately for discontinued operations and continuing operations. 

Operating assets
In 2018, assets relating to discontinued operations were classified as non-current assets held for sale. The analysis of the change of the operating assets is presented separately for discontinued operations and continuing operations.

Net working capital comprises the following:

Net working capital 

Jan. 1 - Dec. 31, 2018

Jan. 1 – Dec. 31, 2017

Continuing operations

Discontinued operations

Continuing operations

Discontinued operations






Trade receivables 





Trade payables 





Advance payments received










The 11.8 % increase in net working capital for continuing operations was mainly attributable to the increase in trade receivables (K€ 11,982), mainly at the level of our companies in China and Germany. 

The ratio of inventories (less advance payments from customers) plus trade receivables less trade payables was, as year earlier, approximately 2:1. The ratio of net working capital to revenue for continuing operations remained unchanged at 8.3 %. 

DSO (Days Sales Outstanding) for continuing operations decreased by one day from 50 to 49 days. The decrease in DSO related in particular to China and was attributable to improvements in the management of receivables and the conduct of our customers with regard to payments. 

Taking into account discontinued operations, the ratio of net working capital to revenue would be 8.7 % (2017: 8.5 %). The DSO for the Group as a whole would be 55 days (2017: 56 days).

Overall statement on the Group’s overall situation

Benefiting from an almost ideal economic climate, revenue of the Messer Group from continuing operations rose by 12.0 % year-on-year. Our business activities in Asia – and first and foremost in China – made a strong contribution to this result. 

The EBITDA margin from continuing operations improved to 30% (2017: 25.0 %), while EBITDA rose sharply from € 225 million to € 303 million. 

The Messer Group’s return on capital employed (ROCE) from continuing and discontinued operations improved sharply to 14.77 % (2017: 10.71 %). Instead of the sharp decline in ROCE forecasted for 2017, ROCE actually increased significantly, mainly reflecting the positive impact of the exceptional strong performance of our companies in China. 

Good progress was also made with the consolidation of net debt during the fiscal year under report. In 2018, for instance, net debt was reduced year-on-year by a further € 26 million to € 264 million. Despite the termination of the USD-denominated USPP II and USPP III instruments, secure financing of our operations continues to be ensured by the new financing agreements. We refer to our comments in the section “Financing”.

These overall very favorable developments represent good progress and testify to the stability and sustainability of the Group’s business model. The Messer Group, operating in the two principal regions of Europe and China, has a global presence and good regional diversification in a number of countries or provinces within the two principal regions, so that falling demand in individual markets or downturns in specific sectors can often be offset.