General Information on the Group

Overview of the activities of the Messer Group

Messer Group GmbH (“the Company”), an industrial gases manufacturer, has its registered office in Sulzbach/Taunus near Frankfurt am Main and its postal address in Bad Soden am Taunus. It acts as a management holding company and, together with its subsidiaries and affiliated companies, forms the Messer Group (“the Group”).

Messer was founded in 1898 and is today the world‘s largest family-run specialist for industrial, medical and specialty gases. Products and services are offered in Europe, Asia and America under the ‘Messer – Gases for Life‘ brand. Messer Group GmbH has its own subsidiaries in Europe and Asia.

From acetylene to xenon, the Messer Group offers one of the most diverse product portfolios in the market, producing industrial gases such as oxygen, nitrogen, argon, carbon dioxide, hydrogen, helium, shielding gases for welding, specialty gases, medical gases and a wide variety of mixed gases.

In state-of-the-art competence centers, the Messer Group develops application technologies for the use of gases in almost all branches of industry, in food technology, medicine as well as research and science.

In June 2018, Messer began the process of pooling its application technology expertise. It now operates a new competence center located not far from its site in Krefeld, Germany, where tests are performed on gases-related technologies in the fields of food, industrial cryogenic applications, cutting and welding as well as chemistry and the environment. Messer prides itself on taking a forward-looking approach to the products it sells, tailored as far as possible to the needs of customers. Gumpoldskirchen, near Vienna, Austria, is the hub for developing high-temperature processes together with customers, cooperation partners and research institutes. New technologies, gas mixtures and applications for cutting and welding are being developed in Hungary and China.

On July 16, 2018, Messer and the financial company CVC Capital Partners reached an agreement with Linde AG and Praxair Inc. to acquire the majority of Linde‘s gases business in the USA, Canada, Brazil and Colombia and to take over Praxair‘s activities in Chile. The transaction itself was subject to the successful completion of the merger between Linde AG and Praxair Inc. and the approval of the relevant US antitrust authorities. On 22 October 2018, the U.S. Federal Trade Commission (FTC) gave its clearance for the merger between Linde AG and Praxair Inc. in accordance with merger control law. The FTC approved the Messer Group as a “suitable buyer” on December 21, 2018. Messer Industries GmbH, a joint venture between Messer Group GmbH and CVC Capital Partners, manages Messer‘s business in Western Europe and America. Effective February 27, 2019, Messer Group GmbH contributed to the joint venture its Western European operations in Spain, Portugal, Switzerland, France, Belgium, the Netherlands, Algeria, Denmark and Germany as well as a free-of-charge right to use the „Messer“ brand for a period of ten years. The fair value of the contribution was measured at € 772 million. 

For this reason, in the consolidated balance sheet of Messer Group GmbH as at December 31, 2018, the companies concerned are treated as discontinued operations within the meaning of IFRS 5 until the contribution becomes effective in law. The prior-year figures in the consolidated income statement and in the management report have been adjusted for the amounts relating to the Western European business units. The results of the Western European business units are shown separately as results from discontinued operations. Unless otherwise stated, the analysis of the results of operations, financial position and net assets is performed at the level of continuing operations. The general information provided on the Messer Group relates to the Group as a whole (including discontinued operations).

Changes in the group reporting entity in the fiscal year 2018

The group reporting entity changed as follows during the fiscal year under report:

First-time consolidations

The following entities were founded or acquired and commenced operations in 2018:

  • Ningxiang Xianggang Messer Gas Products Co., Ltd., China, 55% 
  • Kunming Anning Messer Gas Products Co. Ltd, China, 100%
  • Dongguang Moral Strength Messer Gas Co. Ltd, China, 60%
  • Messer Produktionsgesellschaft mbH Speyer, Deutschland, 100%
  • Messer GasPack II GmbH, Deutschland, 100%
  • Messer Family NewCo GmbH, Deutschland, 100%
  • Messer Industries GmbH, Deutschland, 49%
  • Yeti GermanCo 1 GmbH, Deutschland, 49%
  • Yeti GermanCo 2 GmbH, Deutschland, 49%
  • Yeti GermanCo 3 GmbH, Deutschland, 49%
  • Yeti NewCo 0 GmbH, Deutschland, 49%

Acquisition of Buse Gaz S.R.L., Romania
Effective May 4, 2018, Messer Group GmbH – via its subsidiary Messer Romania Gaz S.R.L. – acquired 100 % of the shares in Buse Gaz S.R.L. The acquired company was subsequently renamed Messer Gaz Solutions S.R.L.

The acquisition strengthens Messer’s position in the Romanian market for industrial gases and in the South-Eastern European region, especially in the highly competitive market for liquid CO2 and dry ice. The filling plant acquired in Bucharest will be adapted to Messer’s technical standards and expanded in order to optimize flexibility and the availability of supplies of technical gases. Shorter supply routes now mean that customers can be served faster and more flexibly. All 39 employees were taken over and integrated into the organizational structure of Messer Romania Gaz S.R.L.

Sale of Messer Gases del Perú S.A., Peru
Effective February 1, 2018, the Messer Group sold Messer Gases del Perú S.A., based in Lima. The company was acquired by Indura S.A., Chile, a subsidiary of Air Products. All sites and facilities as well as the 153 employees of the Peruvian company were taken over by Air Products.

Sale of shares without loss of control
In November 2018, Messer Griesheim (China) Investment Co. Ltd., Shanghai, reduced its 100% holdings in Shaoxing Messer Gas Products Co., Ltd. (“Shaoxing”) and Messer Sunshine (Ningbo) Gas Products Co., Ltd, (“Ningbo”) in each case by 30% to 70%. These transactions were implemented in conjunction with an interim financing agreement with the original joint venture partner Hangzhou Tian-an Investment Holding Co. Ltd., following the exercise of that entity’s repurchase right.

Financial performance indicators

The Messer Group uses parameters based on operating performance indicators to manage its business. The principal indicators are revenue, EBITDA, investments, net debt and ROCE. Further explanations and the make-up of the indicators are provided in the sections on earnings performance and financial position.

Safety, health, environmental protection and quality (“SHEQ”) have been firmly embedded in Messer’s guiding principles since its foundation in 1898 and continue to have the utmost priority in the operations of the family-owned company. Messer is aware that well-organized safety and quality guidelines form the basis for dealing safely with operational risks and improving operational performance. For this reason, the health and safety of our workforce and the protection of the environment are firmly embedded in total quality management systems and reflected in various standards of the Messer Group. 

To take account of the growing importance of ensuring a healthy environment, social justice and effective business management, the Messer Group has introduced a system of Corporate Social Responsibility Management (“CSRM”). CSRM follows a long-term approach and will contribute to the sustainable development of Messer. To this end, the Messer Group has also enhanced its SHEQ performance indicator system.

The following information on non-financial performance indicators relates to the Group as a whole (continuing and discontinued operations).

During the past fiscal year, 899 (2017: 990) SHEQ-related inspections and checks were carried out throughout the Messer Group (of which 796 in Europe), resulting in numerous improvement measures. 

In addition, 241 ideas and suggestions for improvements were submitted by our staff members throughout the Messer Group (of which 58 in Europe).

Occupational safety

Occupational safety is of the utmost importance to the Messer Group. The Messer safety guidelines reflect our position: “All industrial illnesses, injuries and accidents are avoidable”.

Messer uses its global management system to identify and control potential operational risks. The principles of this system are carefully documented in its SHEQ manual and cover all safety-relevant areas such as risk management, safety training, safety inspections, personal protective equipment, communication safety and accident investigations. The SHEQ Manual is a constituent part of the Messer Group’s Compliance Management system and is regularly updated and improved. 

Additional safety guidelines have been developed for work at acetylene plants and are regularly updated and improved. In 2018, further safety guidelines were put in place for work at gas filling plants as well as for work with oxygen used for cleaning. In addition, regular training courses are offered via an e-learning platform for employees in various working environments. 

Additional safety guidelines have been developed for work at acetylene plants and are regularly updated and improved. In 2018, further safety guidelines were put in place for work at gas filling plants as well as for work with oxygen used for cleaning. In addition, regular training courses are offered via an e-learning platform for employees in various working environments. 

A tutorial with step-by-step instructions on how to correctly connect the “MegaPack C” compact cylinder gas bundle was developed and published in early 2018. The video, which is available in German and English on Messer’s YouTube channel, is a continuation of Messer’s strategy of offering users of cylinder gases more service and safety.

During the fiscal year 2018, 26 safety audits were conducted to underline and ensure compliance with the SHEQ standards in all of the Messer Group’s operational activities. The success of the safety measures and initiatives is assessed by means of the following annual performance indicators: working accidents causing lost days and accident frequency (number of working accidents causing lost days per million hours worked) and accident severity (days lost per million hours worked). 

In 2018, 14 working accidents causing lost days were reported. The ratio of days lost per million working hours (accident frequency) went down from 1.4 (2017) to 1.3. However, the number of lost working days (accident severity) per million working hours increased sharply from 45.4 in 2017 to 64.0 in 2018. Injuries or illnesses were not directly related to our products, but were mostly the result of carelessness, haste, taking shortcuts or disorder.

 

2014

2015

2016

2017

2018

Working accidents causing lost days

18

22

25

15

14

Accident frequency

1.7

2.2

2.4

1.4

1.3

Accident severity

47.6

65.1

77.9

45.4

64.0

As a specialist in industrial gases, Messer is aware of its duty in relation to its staff and customers to efficiently identify and avoid potential work-related risks. With campaigns such as our “Safety Day”, we highlight potential hazards and endeavor to raise safety-at-work consciousness. 

Messer is an active member of the European Industrial Gases Association (EIGA) and of the Industrial Gases Association (AIGA) in China. Our experts actively exchange experience, knowledge and lessons to learn from incidents in the industrial gases sector. In addition, some Messer Group entities cooperate with local research institutes and universities to enhance safety in production processes.

Transport safety

The transportation of gases and equipment on the road and customer deliveries are activities which involve the greatest risks in the gases industry. For this reason, the Messer Group has put its signature to the European Road Safety Charter, thus undertaking to place particular emphasis on transport safety. As well as complying with applicable laws and regulations for operating a vehicle fleet, the Messer Group’s own transport safety plan has proved invaluable.

A large proportion of the drivers working for Messer are employed by external transport firms, which are responsible for training the drivers in accordance with the ADR (European Agreement concerning the international carriage of dangerous goods by road). Unfortunately, the number of avoidable accidents in the transport of our cylinder gases rose from four (2017) to nine in 2018, causing the ratio per million kilometers driven to increase from 0.17 to 0.41.

The number of avoidable accidents involving the transport of liquefied gases also rose slightly from 13 (2017) to 14, as a result of which the frequency rate per million kilometers driven increased from 0.15 in 2017 to 0.19 in 2018.

The Messer Group is endeavoring to reduce the number of accidents with the help of raft of measures, including supplier management, information on defensive driving and securing loads. Messer has also drawn up its own modular driver training package, which is used to train drivers. The main themes covered by the training are:

  • Laws and regulations (ADR and national provisions)
  • Technical aspects (hazards arising from product, vehicle and tank technology, vehicle checks, safety technology)
  • Accident avoidance
  • Defensive, economical driving

In addition, all drivers receive a driver manual specific to their work (bulk, cylinders or service vehicles). This ensures that drivers have immediate access to all important information relating to their activities.

In 2018, Messer also tested the introduction of an on-board computer system focusing on transport safety. The system gives direct visual and acoustic feedback to drivers regarding economical and safe driving, enabling them to adapt their driving style directly. It also allows limit violations and accidents to be evaluated with the aid of driving data analysis. The data obtained is also utilized to benchmark the driving styles of individual drivers and to support specific driver training courses on safety and economy. After a successful test phase in two national companies, the plan is to rollout the system to a large part of the vehicle fleet in 2019.

Furthermore, Messer specialists are actively involved in all relevant EIGA bodies and to a large extent too in the various national associations. The findings from the activities conducted within these bodies are incorporated in the driver manual and the driver training scheme on an ongoing basis, with a view to enhancing transport safety. In this way, the Messer Group is making its contribution to a steady reduction in the number of transport incidents.

Employees and corporate culture

Worldwide workforce
The Messer Group had an average worldwide workforce in 2018 of 5,728 employees (2017: 5,633 employees), each contributing to the success of the business with his or her extensive knowledge, ideas, know-how, motivation, attitude to work, active commitment and in many cases longstanding experience. 

The average number of employees per region was as follows:

 

Jan. 1 - Dec. 31, 2018

Jan. 1 - Dec. 31, 2017

Western Europe

1,108

1,108

Central Europe

774

752

South Eastern Europe

1,398

1,354

China, ASEAN

2,448

2,419

Total number of employees

5,728

5,633

At December 31, 2018, approximately 88 % of our employees were working in non-German speaking countries.

Training and the Messer Group Academy  
The expertise and experience of our workforce of well-motivated and well-qualified employees provides the foundation for the Messer Group’s success. They are constantly being required to rise to the practical challenge of highly demanding tasks and projects, at which stage they can also draw on the knowledge gained through attendance at internal and external training courses, specifically designed to meet their needs. This combined approach gives them the wherewithal to master the vast array of constantly changing work requirements, while at the same time enhancing the professional manner with which they go about their work. A transparent leadership style, based on an “open door” principle, allows for open communication and remains a core element of our management culture. 

We endeavor to make school pupils and students aware of the potential of the fascinating world of gases, also with an eye to winning well-trained staff in the future. In this context, we encourage bachelor’s and master’s theses and offer working student jobs, especially in the field of engineering as well as work experience for school pupils, especially in the field of information technology. The Messer Group is committed to providing educational and vocational training opportunities to younger staff, based on the tenet that investment in the next generation is essential for the future competitiveness and underlying strength of our business. In Germany we offer vocational training in the areas of industrial business studies, mechatronics, IT data processing and IT support to school and college leavers who are motivated and willing to learn. Training takes place at various sites, in some cases supplemented by several weeks spent at international locations. In addition, dual courses of study are promoted, in some cases immediately after the successful completion of in-house training.

As a tried and tested basis for systematic staff development, the Academy Messer Group offers various training courses covering technical issues as well as the development of personal skills. The regular series of events organized each year for local managing directors and junior managers, during which current trends are addressed, always proves popular. 

2018 also saw the continuation of the series of Junior Circle seminars, our program for the next generation of managers, with participants from various national companies and specialist areas. The focus of the Junior Circle is on the dissemination of knowledge by our own experts from various functions within the organization. Aspiring managers attend five one-week modules covering various fields of focus, including inter-cultural training. The principal objective of the Messer Academy is to provide an insight into our products, technical solutions, structures and specific internal issues based on a comprehensive and practice-oriented approach. Effective networking of the participants is also a primary concern. Training in the Junior Circle is organized over a two-year period, with candidates being selected and invited directly by the management under an internal application procedure. The Junior Circle is now into its third group of participants, who started the two-year program back in July 2017, and are now engaged in a range of projects focused on digitalization. These projects include preparing a so-called “chatbot”, looking at ways of optimizing the cylinder business using digital technology and preparing for the introduction of digitally controlled air separation plant maintenance.

At the Messer Group Academy, the transnational training course “Focus on Cylinder”, devised for cylinder salesmen, was also continued in 2018. Training sessions took place in the Messer companies in Western Switzerland, the Baltic States, Hungary, Bosnia, Bulgaria and Macedonia. This international, standardized sales training course consists of six modules, is offered to a maximum of 14 participants and takes place in the respective national language. In addition to internal and external speakers, the respective sales manager and deputy are trained as co-trainers who are then able to provide support for future training courses. Throughout, country-specific needs are taken into account in terms of training content. 

The training needs of Messer Group staff are discussed on the occasion of annual employee performance reviews with the local HR departments responsible for drawing up specific training plans.

In order to increase knowledge of English in the Group, we offer an “English language offensive” worldwide. In each company, employees have the opportunity to improve their language qualifications in one of three groups, depending on their language skills. Some employees have already taken the opportunity to acquire a Cambridge certificate, which is recognized worldwide.

In addition, the e-learning platform was further expanded in 2018.

Digitalization, IT security and data protection
Digitalization is becoming an increasingly important topic for the Messer Group, a development reflected in the current Junior Circle group’s work on a range of digitalization-related projects. Similarly, the importance of IT security is also growing. Both the Group Digital Officer (“GDO”) and the Group Security Officer (“GSO”) specify the standards to be applied throughout the Messer Group. In addition to their involvement in IT projects, they also advise centralized functions and national companies in the relevant areas.

The transitional period for implementing the General Data Protection Regulation (GDPR) expired in May 2018, necessitating a great deal of additional and varied work to ensure compliance with data protection legislation. In November 2018, an internal Data Protection Officer was nominated for the first time for Messer Group GmbH and is committed to optimizing and bringing the relevant projects to a successful conclusion. 

During the annual worldwide HR-Meeting in September 2018, the HR managers of the national companies also addressed the topics of data protection and cybercrime. The appointment of a Data Protection Officer has contributed significantly to a good understanding of these complex issues across the Messer Group. 

Uniform employee branding
The Messer Group’s Employer Branding project is an international program aimed at depicting a corporate culture that is easy to recognize and understand. On the one hand, it is seen as a way of tying in new and current employees more closely to the business, but also as a means of getting potential employees to be enthusiastic about us, our products and our solutions, with the aim of achieving the anticipated result of receiving fewer, but qualified applicants. As a flanking measure, image promotion films and posters have been completed and the Group’s website further optimized, including a redesigned career page. The applicant portal for the Messer Group, which has been programmed by our IT company Messer Information Systems GmbH, is being continually optimized. In this way, the Messer Group, via uniform employer branding, is able to showcase itself as an international, versatile, attractive employer.

Environmental management

The environment must be protected at all times and in all places. As a company, Messer takes this obligation seriously and employs its global management system to further the protection of the environment. Internal environmental protection guidelines are documented in the Messer Group’s SHEQ manual. These and the environmental management systems in place at all the subsidiaries follow international standard ISO 14001 and recommendations of the European Industrial Gases Association (for example, EIGA IGC Doc. 107 — Guidelines on Environmental Management Systems). In 2018, 23 of our subsidiaries obtained external certification of their environmental management systems, compared with 21 companies in 2017.

Efficient use of energy goes without saying at Messer and is clearly in the Group’s own interests. With the main aims of cost-cutting and economic use of resources, energy management is an ongoing process which also makes a contribution to reducing our CO2 emissions. Our energy management system, for instance, has been certified in accordance with ISO 50001 at all Messer production facilities in Germany and Spain. 

Messer uses atmospheric air and electrical power at its production sites as the main raw materials to produce the gases nitrogen, oxygen and argon. Production by means of air separation plants accounts for over 75 % of total energy consumption. Particular emphasis is therefore placed on the ongoing improvement of energy efficiency. Accordingly, Messer has assigned the specific task to a Global Energy Officer (“GEO”) to increase the energy efficiency of the Group’s air separation plants. 

Continuous monitoring of plant efficiency brings to light any energy variations and enables potential for improvement to be identified. Working together with local managers, projects are continuously initiated in order to improve energy efficiency. 

The key environmental data of Messer’s production activities during the past year are as follows:

The volumes of gases produced rose by 8 % compared to the previous year, as a result of which the electricity consumption of the Group’s air separation plants also rose. On the other hand, energy efficiency, measured in terms of energy consumption per cubic meter of gas sold, improved by 1.2 % compared to the previous year.

New on-site plants were commissioned again in 2018 with a view to bringing about reductions in transport costs to deliver liquefied gases as well as in CO2 emissions. These plants are used for on-site gas production, saving approximately 3,100 truck journeys and 550 tons of CO2. As a result, local customers benefit simultaneously from flexibility and security of supply.

Numerous other smaller-scale activities also contributed to improving energy efficiency.

At one southern European plant, the cooling water system was retrofitted with frequency-regulated pumps, saving 270 MWh per year.

At one filling plant, improved building insulation and replacement of the boiler reduced natural gas consumption during the heating season by around 4,000 m³.
A product compressor was renewed to supply a major pipeline customer. The new compressor is more efficient, and its capacity can be adapted more effectively to the customer’s requirements. At peak times, electrical power consumption can be reduced by up to 1 MW, saving, on average, about 1,500 MWh p.a.

Health management

Messer is aware of its social responsibility vis-a-vis its employees. With this in mind, it strives to encourage the good health and well-being of each individual through its working standards. For instance, Messer has introduced various health programs, such as free access to fitness and wellness centers for employees and their families. Measures of this kind are designed to promote a healthy lifestyle among employees. 

Furthermore, a comprehensive training program for handling gas cylinders was initiated, with a view not only to reducing accidents associated with this, but also to improving the prevention of industrial diseases such as musculoskeletal disorders.

Customer satisfaction

Respecting the opinions of our customers and getting feedback of customer satisfaction are self-evident for us as a responsible company, which is why we measure customer satisfaction in systematic surveys and integrate the results into our management processes. Customer satisfaction analyses are performed for each European national company every two years.

In total, customer satisfaction surveys were conducted at nine companies in Europe in 2018 (France, Belgium, Bosnia, Macedonia, Germany, Switzerland, Slovenia, Spain and Hungary), with more than 19,000 customers contacted in 2018. This number represents a 34 % increase on the previous year. The percentage of customers completing the questionnaire in full increased compared to the previous year to 8.0 % (2017: 6.2 %). In total, questionnaires from precisely 1,522 customers were analyzed.

The results of the various surveys are summarized by region. On a scale of 1 for very dissatisfied to 10 for very satisfied, the overall performance of the Messer Group in Western Europe achieved a rating of 8.0, compared with an average rating of 8.6 for Eastern Europe. In Western Europe, we saw a significant improvement on the previous year’s results, when satisfaction in terms of overall performance was rated at 7.4. In Eastern Europe, the result deteriorated slightly compared to the previous year’s rating of 9.0. Overall, the results are at a high level. Potential for improvement was identified and implemented for the individual countries.

At the same time, a survey was also conducted to measure satisfaction ratings for the cooperation between the relevant Messer companies and the Gases Center. These surveys have been carried out in Spain for several years and were performed for the first time in Slovakia, the Czech Republic, Poland, Switzerland and Austria in 2018. In total, 468 gases centers were contacted, of which 182 completed the questionnaire in full. Compared to 2017, when the survey was launched in Spain and France, this was an increase of more than 300 % in the number of questionnaires assessed. The overall satisfaction rating for the gases centers was 7.6, compared to the satisfaction rating of 7.2 recorded in 2017 by the French and Spanish companies.