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 management holding company and, together with its subsidiaries and affiliated companies, forms the Messer Group (“the Group”).

From acetylene to xenon, the Messer Group offers a product portfolio that must surely count as one of the most diverse in the market – the Company produces 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 foodstuffs technology, medicine and research and science.

The Group has its own operating facilities in 40 countries. Messer is therefore represented in each of the main markets in Europe (with the exception of the United Kingdom and Scandinavia) as well as in Asia and Algeria.

In Krefeld, Germany, Messer operates a highly specialized technical center for testing in the areas of cold grinding and recycling. In the area of welding and cutting, the Messer Group’s specialized technical centers in Germany, Hungary and China develop new technologies, mixed gases and applications. Our prime focus is on a future-oriented approach to our products, tailored to the needs of our customers. Gumpoldskirchen, near Vienna, Austria, is the hub for ongoing development of high-temperature processes, with customers, cooperation partners and research institutes. Numerous tests for the food-processing, pharmaceuticals and chemicals/environment sectors were performed at our Technical Center in Mitry-Mory, near Paris, France. In 2018, the Technical Center for food-processing, pharmaceuticals and chemicals/environment in Mitry-Mory will be relocated to Krefeld, Germany.

Changes in the group reporting entity in the fiscal year 2017

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

First-time consolidations 

The following entities were founded or acquired and commenced operations in 2017:

•    Messer (Thailand) Co. Ltd, Thailand, 79 %

•    PT. Chemindo Inti Usaha, Indonesia, 56 %

In accordance with a purchase agreement dated December 16, 2016, Messer Group GmbH acquired 60% of the shares of Universal Industrial Gas Sdn. Bhd, Malaysia. Smart-Gas Pte. Ltd., Singapore, in which Messer Group GmbH already had a 30 % investment, acquired a further 15 % of the company’s shares. Following the closing of the contract on February 28, 2017, the definitive purchase consideration amounted to K’MYR 9,251 (= K€ 1,985). In addition to the payment on account of K’MYR 800 (= K€ 174), a further portion of the purchase price amounting to K’MYR 8,222 (= K€ 1,763) was paid on February 28, 2017, and the remaining K’MYR 230 (= K€ 48) on June 15, 2017.

The acquisition is part of the strategic business expansion in South-East Asia. The Messer Group plans to invest and further optimize production processes, including both safety and quality aspects, in order to ensure its competitiveness on the rapidly growing Malaysian market. The acquisition of shares in Universal Industrial Gas Sdn. Bhd enables Messer to contribute its application know-how to support production at the level of Smart-Gas Pte. Ltd, and thus to participate in Malaysia’s economic growth.

Other

Effective January 1, 2017, Remco AG, Switzerland, was merged with ASCO Kohlensäure AG, Switzerland. Also effective January 1, 2017, Messer Iparigáz Kft., Hungary, was merged with Messer Hungarogáz Kft., Hungary. Neither of these mergers had a significant impact on the consolidated financial statements.

Effective January 30, 2017, the liquidation of Argos Ltd., Ukraine, became valid in law and the company – previously consolidated as an associated company – ceased to be part of the group reporting entity. The liquidation of this entity did not have any significant impact on the consolidated financial statements.

Chengdu Chenggang Messer Gas Products Co., Ltd., China, operates a customer supply pipeline in the Qingbaijiang industrial estate, which was laid across the property of the largest on-site customer. In 2015, the customer discontinued steel production permanently. During the year under report, our subsidiary was informed that the pipeline is required to be removed. It is therefore extremely doubtful whether Chengdu Chenggang Messer Gas Products Co., Ltd. will continue as a going concern. For this reason, the subsidiary’s financial statements were no longer drawn up on a going concern basis. All the company’s assets were measured on the basis of liquidation values.

With a view to optimizing the regional structure and focusing on our core markets in Europe and Asia, Messer Group GmbH sold all its shares (99.83 %) in Messer Gases del Peru SA on December 22, 2017. The company will cease to be part of the Messer Group reporting entity on completion of the transaction, effective February 1, 2018.

Financial performance indicators

The Messer Group uses parameters based on operating performance indicators to manage its business. The principal indicators are sales, 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.

Non-financial performance indicators

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 are reflected in various Messer Group Standards.

To take account of the growing importance of ensuring a healthy environment, social justice and effective business management, the Messer Group has embarked on the introduction of Corporate 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.

During the past fiscal year, 990 (2016: 946) SHEQ-related inspections and checks were carried out throughout the Messer Group (of which 859 in Europe), resulting in numerous improvement measures.

In addition, 192 ideas and suggestions for improvements were submitted by our staff members throughout the Messer Group (of which 85 in Europe). The suggestion rate within the Messer Group therefore stood at 0.03 ideas per employee.

Occupational safety

Occupational safety is of the utmost importance for all Messer companies. The Messer safety guidelines clearly 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.

In 2017, additional safety guidelines were drawn up especially for work in acetylene plants and made available to staff and customers.

In addition, a new brochure for the series “Safety Pocket Guides” was written and distributed to staff and customers. The fourth guide in the series focused on the safety of customers in connection with the transportation of dry ice.

During the fiscal year 2017, 19 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 2017, 15 working accidents causing lost days were reported. Accident frequency therefore decreased sharply year-on-year (25 accidents or 2.4 accidents per million hours worked). The level of accident severity fell to 45.4 days lost per million hours worked.

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.

Unfortunately, one fatal accident occurred in 2017: during inspection of paintwork on a storage tank, a worker fell from five-meter high scaffolding and died of his injuries.

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 most risks in the gas 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). 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.

Furthermore, Messer specialists are actively involved in all relevant EIGA bodies and to a large extent too in the 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 2017 of 5,633 employees (2016: 5,487 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:

As at December 31, 2017 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. It is considered to be a crucial aspect of business to develop employee skills from an early stage. The Messer Group is committed to providing educational and vocational training opportunities to young people, based on the tenet that vocational training for the next generation is essential for the future competitiveness and underlying strength of our business. In Germany we offer vocational training to ambitious school and college leavers in the areas of industrial business studies, mechatronics, IT data processing and IT support. Training takes place at various sites, in some cases supplemented by several weeks spent at international locations.

The Messer Group Academy expands the range of systematic development programs available to employees, including a range of training courses and lectures as well as the annual autumn lectures for our managers and junior executives. A further series of seminars was held in 2017 for the Junior Circle, our program for the next generation of managers, with participants from various national companies and specialist areas. In July 2017, the second group successfully completed the Junior Circle with their “BioKryo” project work. Cryo-preservation is a procedure to preserve cells or complete tissue by cooling to very low temperatures. These low temperatures render biological activity impossible, including biolog- ical reactions which would cause cell death. The results of the project work will be implemented under a cooperative agreement with BioKryo GmbH.

Following the Junior Circle II, the third Junior Circle group was launched in July 2017. It will be addressing the topic “Digitalization in the Messer World” over the coming two years.

The focus of the Junior Circle is on the dissemination of knowledge by our own experts from various functions within the organization. Aspiring managers will attend five one-week modules covering various fields of focus, including inter-cultural training. The principal objective of the Messer Academy will be 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.

At the Messer Group Academy, the transnational training course for cylinder salesmen “Focus on Cylinder” was continued in 2017, with training provided in the Messer companies in Switzerland, France, Spain, Belgium, Poland and the Baltic region. Staff from eight European companies participated in the training program.

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.

An “English offensive” has been in progress worldwide since 2014 to increase knowledge of English in the Group. In each company, employees, split into three groups according to their language skills, have the opportunity to improve their language qualifications. Some employees have already taken the opportunity to acquire a Cambridge certificate, which is recognized worldwide.

Furthermore, 2017 saw the first-time successful launch of the online e-learning training platform for pharmacovigilance.

Digitalization

The Messer Group has also responded to the changing market requirements in the field of digitalization. On September 1, 2017, a newly created position of Group Digital Officer (GDO) was filled. The GDO’s remit is to support central functions and national companies in the design and development of digitalization projects and to ensure that projects are making progress. On January 1, 2018, a newly created position of Group Security Officer (GSO) was also filled. The GSO is responsible for advising central functions and national companies on IT security issues.

During the annual worldwide HR-Meeting in September 2017, the HR managers of the national companies also addressed the topic of “digitalization”. During a workshop, development and application possibilities were worked out (video interviews–recruitment platforms, Wade and Wendy online training platform for job-seekers and recruiters, review of the performance review, etc.). The exchange of information and knowledge served, in a first step, to identify the needs, expectations and requirements of different interest groups with a view to subsequent gradual implementation of the necessary digitalization measures.

Uniform employer 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, 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 optimized, including a redesigned career page. An in-house job applications portal has been created and made available to the national companies for adaptation. In 2017, the job applications portal was also used in Austria. In this way, the Messer Group, via uniform employer branding, will be able to showcase itself as an international, versatile, attractive employer.

Messer invests in vocational training for young employees. This human resources strategy, in combination with the know-how of our workforce and our high-quality products, ensures that we enjoy an excellent reputation among customers, partners and job-seekers alike.

Environmental management

The environment must be protected at all times and in all places. As a company, Messer takes this obligation very 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 EIGA (for example, EIGA IGC Doc. 107 — Guidelines on Environmental Management Systems). In 2017, 21 of our subsidiaries obtained external certification of their environmental management systems, the same number as in 2016.

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 has been certified in accordance with ISO 50001 at all Messer production facilities in Germany and Spain. A total of nine Messer companies are thus now certified in accordance with ISO 50001.

Messer uses atmospheric air and electrical power at its production sites as the main raw materials to produce the air 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 11 % 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 1.7 % compared to the previous year.

New on-site plants were commissioned again in 2016 with a view to bringing about a reduction both in transport costs for the delivery of liquefied gases and at the same time in CO2 emissions. These plants are used for on-site gas production and save approximately 2,300 truck journeys and 420 tons of CO2. As a result, local customers benefit from flexibility and security of supply.

In Hungary, a new production line was commissioned for the manufacture of CO2 for the food industry, with an annual capacity of 45,000 tons. An optimized plant design enabled the energy consumption to be reduced by more than 20 MWh per month compared to the existing production line.

In addition to new construction projects, there are also a large number of smaller-scale activities that contribute to improving energy efficiency.

At a major air separation plant in South America, control of product compressors was optimized through installation of new equipment, allowing savings up to 400 MWh of electricity per month.

In an Asian plant, the visualization of customer purchases was significantly improved by installing new measuring equipment. This equipment enables the operator to react considerably more quickly and effectively to the changing pattern of customer purchases. Discharges of unused product were nearly halved, leading to reductions in annual electricity consumption of more than 3,000 MWh.

All national companies have replaced old light bulbs in production halls and administrative buildings with low-energy LED bulbs. The absolute saving for each individual measure is admittedly small, but the total results in a significant energy saving.

Health management

Messer is aware of its social responsibility and its impact on employees, as employees play a decisive role in all work processes. Messer therefore aims to ensure the health and well-being of the individual through its working standards. For instance, Messer 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

Customer satisfaction is a key factor in the success of the Messer Group. Measuring customer satisfaction allows the services provided to be monitored and the effectiveness of measures implemented to be verified, thereby increasing customer satisfaction and, in the long term, enabling the Messer Group to improve performance continually. In 2017, more than 14,000 Messer Group customers in six countries were asked whether they were satisfied with the services received. This number represents a 57 % increase on the previous year. The percentage of customers completing the questionnaire in full fell compared to the previous year (10.9 %) to 6.4 %. Overall, 879 customers responded. The number of customers completing the questionnaire in part also fell from 478 to 447. On a scale of 1 for very dissatisfied to 10 for very satisfied, the overall performance of the Messer Group in Europe as a whole achieved a rating of 8.49, similar to the previous year’s rating of 8.51 %.

The online questionnaire on general customer satisfaction consists of between 9 and 21 questions. To measure satisfaction, an analysis is carried out of whether the customers were satisfied with the services in general, whether customers consider it advantageous to be supplied by Messer and whether they are prepared to recommend Messer. The questionnaire focuses on 15 services provided by Messer and assessed by customers.

The results of the customer satisfaction analyses in individual national companies are not always comparable, owing to differences in mentality in the individual countries when it comes to assessing levels of satisfaction. Carrying out the customer satisfaction analyses regularly ensures that satisfaction within a country can be compared. The customer satisfaction analyses should be repeated for each national company every two years.

In 2017, the survey was repeated for Messer companies in France, Austria, Bulgaria, Romania, the Netherlands and Slovakia,. With the exception of France, where the general satisfaction fell from 7.7 to 7.4, it proved possible to maintain general satisfaction at a high level or even to improve it in all of the other countries. In Austria, a score of 9.1 was received for general satisfaction, in line with the previous survey’s high level. In Bulgaria too, customers are very satisfied, with the overall performance in 2017 rated at 9.4 in 2017, the highest level achieved by the Messer Group. In 2015, the score for general satisfaction was 8.9. In Romania, customer satisfaction rose from 8.8 to 8.9. A slight improvement in satisfaction was also achieved by the services in the Netherlands. In the last survey, in 2014, an assessment of 7.7 had been achieved. This rose in 2017 to 8.1. In Slovakia, overall performance was again assessed at a very high level of satisfaction of 8.9, which represented a further improvement compared to the assessment of 2015 (8.3).

In addition to customer satisfaction, the satisfaction of the gas centers was also surveyed. Gas centers are external distribution partners which sell industrial gases to our customers on our behalf in defined regions. Cooperation with the gas centers is very important, since they maintain direct contact with our customers in their region. This was the first time that we had assessed satisfaction regarding our collaboration with gas centers in France. In Spain, this survey has already been carried out for several years. In total, 229 gas centers were contacted, of which 43 completed the questionnaire in full and 13 in part.

The online questionnaire consists of a total of nine questions, which, in addition to general satisfaction, also cover the gas centers’ assessment of the service quality of the various Messer departments.

The general satisfaction of the gas centers in France in 2017 resulting from this first survey stood at 7.0. In Spain, the general satisfaction increased from 6.6 in 2016 to 7.6 in 2017.

The survey results are evaluated at regular intervals and are taken as an opportunity to make improvements to the relevant areas.

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