Turn the clock back more than 80 years to 1923, and hyperinflation was at its peak in Germany. Post World War I reparations, coupled with unfavourable economic conditions, ensured that the country was experiencing one of the worst periods of hyperinflation in Europe’s recent history.
It was a scenario that would also provide a gap in the market for the birth of Westfalen AG.
In January 1923, French and Belgian troops occupied the industrial region of Germany in the Ruhr valley, to ensure war reparations were paid in goods like coal rather than the devalued German Marks.
The occupation blocked the supply of welding gases from the Ruhrgebiet (Ruhr area), leaving the metalworking industry in Münster and the surrounding Münsterland starved of gas supply.
Seizing on a clear gap in the market, Wilhelm Albert founded Sauerstoffwerke AG and the Westfalen story began in earnest. The company first focused on the production of oxygen and nitrogen via air separation, to meet the immediate demand, but in later years would also branch out into fuels and lubricants, and petrol-pump stations.
So successful were Westfalen’s formative years, that the supply of oxygen was extended to the wider northwest Germany region in the early 1930s.
It wasn’t until 1938 that the company first adopted the ‘Westfalen’ name, however. Then, 15 years after the company’s inception, the name evolved into Sauerstoffwerk Westfalen AG – the latter part of which was derived from the nearby mine Westfalen in Ahlen.
Gerhard Schlüter, Technical Director of Westfalen AG and our interviewee this month, explained, “In 1938 the name of our company was changed into Sauerstoffwerk Westfalen AG. The name was derived from the nearby mine Westfalen in Ahlen, from which our company obtained benzol (synthetic petrol) since 1925.”
“At that time the second business line of our company, Tankstellen (service stations), was born. The first Westfalen service-station opened in 1927 and our third business line – LPG (branded Westfalengas) for heating purposes – started in 1954.”
Those same three business lines have remained at the heart of the company ever since, right up to present day 2010.
It’s as we cast our minds back to the present day that we realise things have gone almost full circle in Westfalen’s lifetime, as hyperinflation has taken hold of Zimbabwe and the Wall Street crash of 1929 was echoed by the deep recession of 2008/9. The parallels between then and now are stark indeed.
Yet Westfalen has been able to shake off the shackles of recession and is looking ahead to its next wave of growth in Europe. In fact, recessions and economic crisis can afford opportunities to prosper – as Westfalen’s very existence has proven already.
Schlüter says, “Westfalen was founded in a period of crisis in 1923. Nevertheless, Westfalen succeeded. We believe that a crisis allows you to demonstrate how healthy a company is. In our opinion, size is not the most important point.”
Even though size may not be everything, the company has made steady progress of expanding its network of operations throughout Europe.
From its humble beginnings as an oxygen producer and supplier in 1923, Westfalen has grown to supply a whole range of gases including industrial gases, welding, cutting and laser gases, specialty gases, medical gases, food gases and refrigerants. In addition, the company is involved in LPG and equipment for various gas use.
This portfolio of provisions comprises a network of operations throughout Western Europe. Schlüter tells us, “Our Technical Gases division offers technical gases in Germany – seven sales offices and 16 plants – and in the countries where our subsidiaries are based: Belgium (including Luxemburg) and the Netherlands, France, Austria and Switzerland. Westfalen AG produces and distributes about 300 gases and gas mixtures for nearly all applications in industry and trade, in food production, laboratories and medicine.”
“We develop innovative gas applications in order to optimise industrial processes, for example our Protadur® food gases or Ekonor, our special technology for the welding of tubes.”
“For smaller demands we offer the gases in cylinders or bundles, and for higher volumes as bulk products. If the demand and load profile of the customer’s installation allows, we even provide plants for the onsite production of gases, especially for compressed air, nitrogen, oxygen and hydrogen. After a detailed analysis of the customer’s needs, our supply engineers work out an optimised proposal. Westfalen not only delivers the gases, but can also provide the necessary equipment.”
“Our Service Station division,” he continues, “runs approximately 250 gas stations in the Northwest of Germany. This division is operating only regionally. Meanwhile, our division ‘Westfalengas’ offers LPG throughout Germany for heating purposes or as fuel (LPG) for cars or forklifts.”
Family-owned Westfalen, now with Wilhelm Albert’s grandson Wolfgang Fritsch-Albert as CEO, built upon this healthy network with the shrewd acquisition of Messer Griesheim’s refrigeration business in 2002.
It was a move that led Westfalen to the leadership of the refrigerant market in Germany and as Schlüter explains, added a sound revenue stream too.
“It was a good chance to earn more money! The business was fitting in, in an ideal way, into our refrigerant business – which is part of our industrial gases business. By now we are the leader in this segment in Germany. Messer obviously felt this business was too small for them,” he said.
Focused on growth
It’s clear from our interview that Schlüter is more than happy with Westfalen’s performance and position in the industrial gas business.
Turnover of ‘approximately €1.5bn in 2008’ across its three core business units would appear to support this. Of that figure, around €510m is attributed to gases (including LPG business), while planned investment of up to €60m per year demonstrates the commitment to growth.
Our interviewee tells us that around €46m of this investment, or three quarters, will be made in the technical gases business and a long-term strategy is central to the company’s thinking. In fact, Westfalen is looking at a ‘generation’ of success in Europe.
“In a family-owned company like Westfalen, the decisions are based rather on sustainability than on short-term effects – our CEO (and owner) wants to achieve success for more than a few years, he is rather planning for the period of a generation.”
“Having started in Austria only recently, we feel rather small compared to our main competitors. Within our home market, Germany, the expression ‘mid-sized’ would perhaps be more appropriate. In the German market for technical gases we are number five in the ranking, and in some product segments we have a market share of more than 10%. The market structure in Germany is somewhat special because, besides the global players, there are some smaller family-owned companies in the southern part of Germany. In the European ranking we occupy the ninth place.”
He adds, “Our clear vision for Westfalen is to act as a European gas supplier. We started ‘to leave the church tower of Münster’ (the city where our main office is based) in 1989 with the foundation of our Dutch subsidiary. In 2005 we opened our youngest subsidiary in Austria.”
So, gasworld is keen to ask, where can we expect to see Westfalen emerging next? Where is the next wave of growth focused?
“We are at the moment erecting a new ASU in Le Creusot, France,” Schlüter explains.
“The investment of €30m is the highest amount Westfalen has ever invested outside of Germany.”
“To me it is a highly interesting task, to coordinate more than 30 companies at the building site and to see the plant growing and the plan becoming reality. It’s no secret that we are on our way to becoming a complete European gas supplier. Our focus today lies on the neighbouring countries of Germany.”
“The growth of Westfalen as a family-owned company is planned to be an organic growth – this might not be the fastest way, but it is certainly a solid one.”
And what of possible growth in the evolving Eastern Europe market – does this present any viable opportunities for the Westfalen group?
“We don’t have specific plans to go east or to leave the European continent. But if an opportunity arises – who knows?”
“Of course there will be new projects,” he affirms. “The Westfalen group invests about €60m per year, so we always have new projects on our agenda. Our focus is on strategic and organic growth in order to strengthen our position as European gas supplier.”
Westfalen is not to be deterred from its goal by economic woes either, not even in the face of the worst recession for more than 30 years.
Given that the company was born during an extreme period of German hyperinflation and just six years later witnessed the 1929 Wall Street crash, it’s little wonder that Westfalen is currently unperturbed and well-versed at operating during tough financial climates.
The aforementioned broad business portfolio and growing network of operations has seen the company cope well with the business environment of late. Schlüter says, “We have learned from the economic crisis, that Westfalen is less sensitive to the influences of decreasing markets than other companies. We feel that the combination of the business units succeeds very well.”
“The results of our business depend on a lot of factors – not at least on the oil price, or more generally speaking on energy prices. When one business unit was not running very well, this was levelled out by one of our other sectors.”
“When talking about technical gases, our main industries are the metal industry and machine building. But our customers show a broad variety of gas use: for example let me mention medical oxygen, our product group Protadur® for food purposes or specialty gases for laboratories. The trick is to be present in a lot of branches of industry. While the metal industry lost, we experienced growth in the pharmaceutical and the food industries.”
With our interview reaching its conclusion, we ponder, what lies ahead for the European gases business?
If Westfalen is so focused on growth in Europe, it should surely have an idea where the region’s market is heading.
Schlüter concludes, “As mentioned before, business in homecare and the food & beverage industry is running fine. It seems as if these business sectors are immune to the [economic] crisis.”
“The European market will develop differently: In Western Europe in the long run there seems to be a stabilisation, after going through the crisis. In the East European countries we still expect a growing market, corresponding to the needs of the people for goods.”