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Foreword

Foreword

Dear Readers,

The globalisation of our world continued in 2016, bringing about many political and economic changes.

An even more integrated global economy with multinational trade agreements is faced with trends back towards national interests. Especially in Europe, this development, which is politically rightwing in orientation, was reinforced by the Middle East refugee problem.

The Brexit vote meant that the United Kingdom became the first country to position itself against the European Union. Right-wing populist parties are also gaining in importance in other European countries. However, Europe must not fall apart if it is to hold its own against the emerging regions in Asia and America. On the contrary, we need to consolidate and use our economic strength, our cultural values and our high level of education to secure prosperity, peace and success. Going back to nation states would be fatal.

Fidel Castro, the legendary Cuban president, died in November 2016. He held this office for 47 years before handing over the reins to his brother, Raúl Castro, ten years ago. The world’s longest-serving monarch, King Bhumibol Adulyadej of Thailand, also passed away after 70 years on the throne. His controversial son, Maha Vajiralongkorn, became the tenth King of Thailand on 1 December 2016.

 

In the USA, property tycoon Donald Trump is in the Oval Office. In line with his slogan, “Make America great again”, he wants to bring economic added value back to the country and is positioning himself against international trade agreements.

The new Filipino president, Rodrigo Duterte, is taking a hard line against drugs and corruption – unfortunately disregarding human rights in the process. He is turning away from the United States and leaning more towards China, the dominant country in Asia.

Venezuela is mired in socialism and insolvent due to the low oil prices. Brazil is trying to extricate itself from a morass of corruption and mismanagement. The economy is on its knees.

After signing the nuclear agreement, Iran is showing increased interest in Western technology. European firms are lining up to explore potential business opportunities. Risks remain, however, with the US Senate having voted for renewed sanctions and President Trump pushing in the same direction.

The attempted coup in Turkey has helped President Erdogan to gain more power and influence. One of the threats he is now making is to open the country’s borders, which could mean another large influx of refugees for Germany.

Last but not least, the unresolved problems in the Middle East mean continued fighting and refugee misery.

Apart from the alarming political events, we are seeing an acceleration of global trends such as urbanisation, climate change, resource scarcity, demographic change, digitalisation and automation with all the associated opportunities and risks.

All in all, we live in an uncertain and rapidly changing world that is undergoing major political transformations – particularly due to the rapidly developing countries in Asia.

Now of all times, it is particularly important that the international community works together to solve the pressing problems of climate change. Many nationalist parties and populists are talking down the already noticeable effects of climate change because tackling them does not fit in with the party manifesto of isolationism. Meanwhile, according to the United Nations, the number of climate refugees is estimated to reach 200 million people in the next 30 years.

Germany is one of only four countries worldwide that have drawn up a climate protection plan. In the meantime, it is becoming increasingly apparent that our strong car industry in particular is coming under pressure as it has failed to consistently pursue the necessary developments. We need to be competitive when it comes to innovation.

Our rather conservative industrial gases sector has also seen a lot of changes in the recent past. For example, the takeover of Airgas by Air Liquide has continued the process of worldwide consolidation of our industry. This acquisition has now led to discussions between our competitors Praxair and Linde about a possible global merger between the two companies. This would create the world’s largest industrial gases company with a market share of approximately 40 per cent.

Despite all the political uncertainties and global changes, we at Messer are making good progress on the path to a successful future.

We were able to conclude 2016 with a slight increase in sales and a largely stable margin compared with the previous year’s operating results.
Increasing price pressure and the exchange rate difference caused by the devaluation of the Chinese currency did have an impact on our business in Europe and China though. However, we were able to counteract this with efficiency improvements and cost savings.

We were able to generate particularly strong growth in Vietnam, where we commissioned the third on-site facility for our steel customer Hoa Phat. In addition, we installed a nitrogen generator for the largest smartphone producer’s new plant near Hanoi.

In China, we performed well despite the ongoing consolidation in the steel industry and continued to develop our diversification strategy successfully. In Nanjing, our third new CO2 plant went into operation. We continued to develop our cylinder gases business with new filling plants in Changsha, Shaoxing and Sanshui. With copper producer Shuikoushan, we gained a new on-site customer in Messer-dominated Hunan province and were able to start up the facility that we built there. We also completed our new air separation unit in Shaoxing to supply the local market between Ningbo and Shanghai with oxygen, nitrogen and argon.

Our re-entry into the emerging ASEAN region in Southeast Asia began with the purchase of a 30 per cent stake in logistics company Smart-Gas in Singapore. This was followed by a second, majority-stake acquisition in a smaller gases company in Malaysia. Further projects in Indonesia, Thailand and Myanmar are progressing well.

In Poland, we were able to greatly expand our production capacities by putting a new air separation unit and a gas filling plant into operation in Turek. In Siegen, we are gradually supplementing our gas distribution network with the filling of additional gases and gas mixtures to give us an even more self-sufficient presence in the market.
In Belgium, a new CO2 facility was completed in cooperation with Ijsfabriek Strombeek and the crude gas supplier.
Following long delays, we also received planning and building permission for our air separation unit to supply O2 to Knauf in Škofja Loka, Slovenia, which allowed us to begin the installation process at the beginning of 2017.

We successfully completed the Turkey/Hungary country swap agreed with our competitor Air Liquide in 2015. The takeover – with antitrust approval – of Air Liquide by Messer in Hungary took a bit longer, but was completed at the end of 2016.

The Messer Eutectic Castolin Group had a difficult financial year: the low oil price and general uncertainties about the future of the economy led to significant sales losses in both the filler metals and cutting systems segments.

BIT, our diagnostic devices manufacturer, finished the 2016 financial year on target however. On 9 December 2016, we officially opened our new joint venture, EDAN Messer, for the manufacture of haematology equipment in Shenzhen. We are expecting significant sales opportunities in this segment of the Chinese market in the coming years.

In 2016, we were once again able to support numerous scientific projects at the universities in Frankfurt and Darmstadt as well as social projects in the Rhine-Main area through our two charitable foundations – the Adolf Messer Foundation and the Dr Hans Messer Social Foundation.

If we are to continue to be successful, it is important that we actively support ongoing generational change. Our Messer Academy carried on its work in 2016, providing training and professional development to our young employees.

Messer was again honoured with two prestigious awards in 2016: in the summer, in Berlin, we received the “Top Sustainable Family Business 2016” award from British business magazine CampdenFB and French bank group Société Générale.
At the end of November, in Hamburg, I had the privilege of accepting – on behalf of our team – the Axia Award in the “Best Family Successor” category from international auditing firm Deloitte in cooperation with the WirtschaftsWoche business magazine, Witten Herdecke University and the BDI (Federation of German Industries).

We have again set ourselves ambitious objectives for this year and predict stronger growth than last year. In this context, we are again counting on your support and your loyalty towards our company.

Let us work together to help ensure that the basic conditions of our lives do not deteriorate. We have now had 70 years of peace, freedom and prosperity in Europe, and we want to nurture and protect these achievements.

I would therefore be delighted if you joined me in supporting the continued existence of a united Europe. Because only together will we be able to preserve what we have achieved and confront new challenges with competence and strength.

Best wishes

Stefan Messer


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