Macroeconomic and sector-specific risks

Developments such as a more restrictive monetary policy in the USA, the withdrawal of financing from emerging and developing countries, the global trade conflicts between the USA and both China and the EU, and the prospect of a disorderly „Brexit” increased uncertainty around the world, particularly during the second half of 2018. Against this background, leading economic institutes are increasingly coming to believe that growth momentum has reached its peak and will slow down in 2019. For example, the IMF1 and the OECD2 expect global GDP to grow by 3.5 % in 2019, reflecting the first signs of weakening compared to the estimated GDP growth rate of 3.7 % for 2018. The slowdown in growth momentum is expected to be particularly noticeable in developed industrial countries, whereas growth rates in emerging and developing economies should not be far off their previous year’s levels. For 2019, the IMF forecasts a GDP growth rate of 2.0 % for developed industrial countries as a whole (2018: 2.3 ,%) and one of 4.5 % for emerging and developing economies (2018: 4.6 %). In China, the ongoing process of change embarked upon with a view to strengthening domestic demand on the basis of consumption and services is expected to continue the trend of a decelerating growth rate. The IMF and World Bank forecast a GDP growth rate of 6.2 % for 2019, compared to the 6.5 % to 6.6 % estimated for 2018. 

The World Bank and the IMF again point out the existence of forecasting risks in their predictions for 2019, the most significant of which are seen as a sudden change on the extremely favorable current level of financing conditions on the one hand and escalating global trade conflicts on the other. 

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

The figures reported by the Messer Group for the year ended December 31, 2018 include new best results for EBITDA as well as for the ratio of net financial debt to EBITDA. The Messer Group’s medium-term forecast continues to show growing profitability, coupled with a moderate increase in net financial debt. By investing on a sound basis, we also intend to raise revenue at a pace appropriate for the prevailing economic conditions and to take advantage of selected opportunities in order to stabilize or improve the profitability of the Messer Group. 

We expect a moderate slowdown in Europe’s economic growth rate. The pace of the slowdown could, however, be negatively impacted by a number of factors including selling price and competitive pressures (which could differ from country to country), a resurgence of the steel or financial crisis, a disorderly “Brexit“ or trade conflicts. In Europe, we will continue to focus on improving the profitability of our operations by optimizing the utilization of production capacities created in recent years and by engaging selectively in specific customer projects and increasing production capacities (e.g. in Slovenia or Hungary). Future investment decisions will be taken in line with the stated strategy of maintaining a good balance with net financial debt. 

The China region accounted for approximately half of revenue and approximately 60 % of the EBITDA of the Messer Group in 2018, based on key performance indicators for continuing operations. The net cash / EBITDA ratio for the China region was negative, reflecting the fact that cash funds exceeded financial debt. These figures underline the continuing importance of Chinese operations for total revenue, profitability and internal financing of the Messer Group. 

Looking to the future, we expect China’s growth rate to remain above the global average. Thanks to the excellent progress we have already made in diversifying our business, we remain convinced of our ability to participate in China’s market growth across our entire product range. On the revenue side, however, we expect the exceptionally high selling price levels seen in the liquefied gases business during the past year to normalize in 2019. Furthermore, we think it likely that the continued focus on consumption and services in China will reduce the dominance of the production economy, particularly in the steel industry, which is so important for our business. 

In the area of energy costs, which are important for our industry, we expect further price increases, especially in Europe. 

The main key financial performance indicators for the Messer Group’s continuing operations are forecast to develop as follows in the coming year:


2019 compared to 2018


Moderately decreasing


Sharply decreasing

Capital expenditure

Significantly rising

Net debt

Sharply rising


Sharply decreasing

Overall conclusion

The Messer Group’s outlook has been drawn up based on the assumption that Europe’s economic growth rate will slow down during the fiscal year 2019. China’s growth rate is likely to continue to decelerate. Although global economic conditions still appear to be generally favorable, the growing number of risks present a serious challenge in terms of accurate forecasting of future economic developments. The main sources of risk and uncertainty that could have an impact on global conditions relevant for the Messer Group are a potential escalation of simmering trade conflicts, possible distortions following any radical change in monetary policy, the unknown effects of Brexit as well as the uncertain outcome of the ongoing transformation of the Chinese economy. These potentially adverse factors could also be accompanied by unforeseeable negative news from current trouble spots, particularly the North African and Arab region. 

The Messer Group considers that it is well placed to meet the forthcoming challenges, while at the same time deeming it wise to adopt a prudent stance with regard to short-term expectations. The budgeted decrease in revenue and EBITDA for 2019 is mainly attributable to the assumption that the industrial gases market in China will normalize again compared to 2018 and that the euro will continue to gain in strength. The corresponding change in ROCE reflects the expected decrease in revenue and EBITDA. 

Future investment decisions will be taken in line with the stated strategy of maintaining a good balance with net financial debt. Capital expenditure levels will be determined on an appropriate selective basis to underpin solid earnings growth for the Messer Group. At present, favorable investment opportunities beckon in China and Vietnam. Suitable opportunities to expand production capacities are also available in Eastern Europe.

Forward-looking assertions

The Outlook Report contains forward-looking assertions which are based on the management’s current appraisal of future developments. These assertions are not to be interpreted as a guarantee that these expectations will in fact be met. Future business performance and earnings of the Messer Group are dependent upon a number of risks and uncertainties and may therefore diverge significantly from the forward-looking assertions made here.