Dragerwerk Ag Prd Shs Non

Ladies and gentlemen, welcome to the Q3 2025 earnings conference call. I am Matilde, the course call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stefan Träger, CEO. Please go ahead.

Yes, good afternoon, and thank you for joining our conference call on our financial results for the first nine months of 2025. I have with me today Gert-Heinrich Lesbos, CFO, as well as Tom Fischer and Nikolaus Hammerschmidt, both investor relations We would like to take you through the results of the presentation that we made available on our webpage this morning. Following the presentation, we will open the floor to your questions. Let's get started on page five with the business highlights. With a significant increase in orders, noticeable growth in sales and very good earnings, We delivered a strong business performance in the first nine months of 2025. Despite difficult economic conditions, demand for our technology for life rose to around 2.6 billion euros. The last time we had such a high order intake after three quarters was in our record year 2020. Growth was determined by both divisions and all reasons. The same is true for net sales, which increased to around 2.3 billion euros. Earnings before interest and taxes almost reached the prior year level at around 77 million euros, despite the positive one of the effects which supported last year's. As a reminder, last year we had divested a non-core business in the Netherlands and unused property in the United States and a building in Spain, totaling around 30 million euro in one-off effects. Similar effects are missing this year. In addition, this year, we need to compensate for some quite strong headwinds, currencies and tariffs had a substantial negative impact on our earnings. So without these headwinds, our EBIT which has been significantly above the prior year level. Our business in the third quarter made a substantial contribution to the strong overall performance in the first nine months. That says we're significantly above the prior year level in Q3, while EBIT more than doubled. In addition to our top line, we were able to improve our operating cash flow in the first nine months with a considerable increase by more than €35 million to around €93 million. This development has also been recognized by investors. Until the publication of our preliminary figures, our preferred shares had already increased by around 44% year to date. On the day after the publication, they rose by 12% resulting in an increase of around 63% in the current year. Our common shares have shown strong performance as well, with an increase of around 41% year-to-date. Ladies and gentlemen, as communicated two weeks ago, we now tend to expect the net sales goals at the EBIT margin in the upper half of our forecast range. I'll come back to our outlook at the end of our presentation. For that, I turn over to Gerd Hartwig for a review of the financials. Gerd Hartwig, please.

Thank you, Stefan, and welcome, everyone. Please turn to page seven for a group overview. As usual, all growth rates are quoted on a currency-adjusted basis. As Stefan Dreger said, we continue to see strong demand for our technology for life in both divisions in all regions. Order intake rose by 9% to around 2.6 billion in the first nine months of 2025. The Americas led the growth with an increase of around 19%, followed by EMEA and APEC. In Germany, the order volume was slightly above the prior year level. In the third quarter, orders grew by roughly 7%, as the slight decline in Germany and APEC was more than offset by an increase in the other regions. Our net sales development has further accelerated in the future. We are well on track to compensate for the slow start in the year caused by some supply chain slashes. Net sales rose by more than 10% in the third quarter. In the first nine months, they increased by roughly in the EMEA and the Americas regions. I'll comment on that when we get to the divisions. Our gross profit margin increased by 0.7 percentage points in the first nine months to 45.1%, despite currency headwinds and higher tariffs. The margin improvement was stronger in the medical division than in the safety division. Operating costs rose only moderately disciplined expense management. Our financial expenses increased around 6% in the first nine months, but mainly driven by the absence of last year's $30 million one-off income. Excluding the positive one-off effects mentioned above, the cost increase amounted to 2.4% in the first nine months and to 1.5% in the third quarter. In nominal terms, however, financial expenses were on a slight decline in Q3. Due to the only moderate increase in costs and the significant growth in net sales, we more than doubled our EBIT to around 57 million in Q3, coming from around 24 million in the prior year quarter, which had been still supported by the positive one-time effects amounting to 10 million in the quarter. Our EBIT margin rose from 3.6 at 3.1 to 6.8%, a strong earnings performance in the quarter. Over the first nine months, EBIT came in at around 77%, a 3.3% margin, slightly below last year's 80 million and a 3.5% margin. Again, the positive and one-off effects from the prior year are now missing. In addition, headwinds on currencies and tariffs strained our EBIT as the euro appreciated sharply against key trading currencies. carefully monitored the development of foreign currencies and managed its risks proactively through hedging and price adjustments. Having said that, FX still had a negative impact of roughly €22 million a year. Our operating performance improved year on year, and that improvement nearly, but not fully, upset the absence of one-offs and VFX and tariff drag. Thus, our EBIT declined slightly. Finally, our rolling 12-month BVA improved significantly from roughly 30 million to around 49 billion euros. Let us now take a closer look at the numbers on page 8. We grew order intake by almost 12% to around 1.5 billion in the first nine months of 2025, driven by high demand for ventilators, anesthesia machines, services, and consumers. In the second quarter, the mid-double-digit million euro order for hospital infrastructure from hospital further powered our growth in demand. But even without this large order, demand in the medical division rose here and here. In the third quarter, order intake in the medical division increased by more than 5%. The decline in APEC was compensated by the significant growth in EMEA and by the positive developments in the other regions. Thanks to EMEA and the Americas in particular, net sales rose significantly by more than 10% third quarter after a slight decline in the prior year period. Looking at the first nine months, net sales increased by around 5% to 1.3 billion euros driven by all regions. In APEC, Growth was driven mainly by India and China, with business development somewhat uneven in China. After solid growth in the first six months, demand has cooled considerably in the third quarter. Although the resolution of our Q1 supply chain problems had a positive impact in Q3 as expected, resulting in a decline in net sales compared to the prior year quarter. Our gross margin expanded by nearly three percentage points in Q3 and by 1.1 percentage points in the first nine months, thanks to a favorable product and country mix and lower quality expenses from field actions. Functional expenses rose by 6% in the first nine months of 2025 and by roughly 8% in the third quarter. Excluding the proportionate positive one-off effects from the sale of real estate in the prior year, the increase amounted to roughly 4% in the first nine months and also in the third quarter. Earnings in medical returned to positive territory in June, as we are making progress Our EBIT grew considerably from minus 4 million to plus 11 million, lifting the EBIT margin from minus 0.9% to 0.3%. For the first nine months, EBIT must have amounted to around minus 23 million euros after around minus 28 million euros in the prior year period. As mentioned before, one of the facts in the prior year's period played a role. Our role in 12 months DBA improved significantly by around 22 million to around minus 45 million. I will now turn to our safety division. We're on page nine. In the first nine months, order intake rose by roughly 6% driven by gas reduction, respiratory and personal protection products, and intermediate solutions. Orders for occupational health and safety normalized after last year's large order for NBC protective filters leading to a lower demand for EMEA and the Americas, delivered strong double-digit order growth, while APEC remained almost stable. After a somewhat slower development in the second quarter, order intake accelerated through three, with orders rising by roughly 9%. In addition to the significant increase in EMEA and the Americas, growth in APEC also contributed to this development. Q3 net sales rose significantly by roughly 10%, driven by India and the Americas in particular. The first nine months, net sales increased by more than 2%, thanks to growth in all regions. That said, our safety business is back on track after its slight weakness at Q2. Our gross margin expanded by 1% at Q3 and was stable in the first nine months, thanks to a favorable product mix. Functional expenses rose about 5% in the first nine months. This was mainly due to other operating income in the prior year period from the sale of our fire alarm systems business in the Netherlands and the sale of real estate. Higher marketing expenses also had a negative impact on functional costs. Excluding the other operating income of the prior year period, functional expenses decreased slightly by 0.3% in the first nine months of the year and by 2.4% in the third quarter. So good expense management and safety needs. Q3 EBIT improved significantly to roughly $46 million after $28 million by year quarter. The EBIT margin increased to 12.6%. After the first nine months, the EBIT came to just under €100 million down from €108 million. The EBIT margin was just below 10%. Rolling 12-month BVA decreased slightly by roughly €3 million to around €94 million, coming from €97 million in the previous year. That concludes the Safety Division review. Let's move on to the development of our cash flow and other key figures on to slide 10. In the first nine months, We significantly improved operating cash flow by around 35 million euro to roughly 93 million euro. This was mainly due to effective work in capital management, especially better development of trade receivables, trade payables, and other liabilities. Outflows from investing activities more than tripled from euros to about 76 million euros, resulting in a free cash flow 17 million euros after round 35. Among other things, the significant increase in outflow was due to a base fact. In the prior year, the sale of our fire alarm systems business in the Netherlands, the sale of the property in the US, had led to a considerable inflow, which is now missing. On the other hand, Draeger added an investment to one of which has contributed to a higher outflow year-to-date. Looking at our net financial debt, we had modest reduction keeping our leverage at a healthy 0.7 net financial debt to the PTA. Our 12-month return on capital employed rose from 10.9% to 12%. This was due to the significant increase considerable growth of our rolling 12-month EBIT resulted from the good performance in the fourth quarter of 24, which had delivered much higher earnings compared to Q4 23. Net working capital was around 3% higher than in the prior year at around 721 million euros. Our equity ratio is of

Ladies and gentlemen, Q3 was a strong quarter for TREGA. Our excellent order development and the increasing sales momentum make us optimistic about the protocols of the business for this year. Therefore, we now expect the upper half of our previous guidance. We now tend to expect net sales growth of 3.0% to 5.0%. net of currency effects and an EBIT margin of 4.5 to 6.5. EVO is now expected to be in the range of 10 to 80 million euros. So far, business development during the year has given us a good basis to reach our targets. We are in the most important quarter of this year with our typical seasonality. In the next coming weeks, we will remain focused on execution to deliver on our promises. With this, I would like to end the presentation and hand over to the operators to open the line for your questions, please.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one under touch tone telephone. You'll hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Oliver Reinberg from Kepler-Chevreux. Please go ahead.

Thanks very much for taking my questions. I would have three and probably take them one by one if possible. The first one would be on the ventilation market, if you just can discuss the dynamics there. I mean, I assume the whole industry has benefited from the exit of wire, GE and Medtronic. There have been some kind of voices who claim that Yettinger and Hamilton have gained most from these kind of changes and Drägerberg somewhat less. I mean, I assume everyone has seen significant growth. I was just trying to get a kind of feeling. Do you feel that's fair or do you believe you have captured your kind of fair share in this kind of market development? And also, to what extent, if we move into next year, is this kind of challenging base effect or will this kind of market consolidation support further growth next year? That would be question number one, please.

Yeah, this is the answer to your question. So I believe they are all market participants that are still there to get a fair share, including ourselves, of the opportunities that come from the rest of all of the three players. So for me, I couldn't understand why they made this withdrawal with three players. And I see that as for the times to come, very beneficial to be in the market. As you know, we have the longest tradition and experience and the greatest production capacity for all players as we invented the ventilator in 1907. My great-great-grandfather did this. And I still see it for the future as very beneficial to be in there. And I see that both Mr. Hamilton and myself, we address our customers personally with a video message to let them know that we will be there at their site in the future. So far, it's not a secret. For Hamilton, it's a challenge because although it's a US-owned company, operations are based in Switzerland, the tariffs for the US are 39%. So that costs some extra effort to cope with that that we don't have. So it's beneficial for other European ventilator manufacturers, including the one in Sweden.

That makes sense. And do you believe you can still grow from this kind of base next year, or is that the kind of demanding base of which we would expect a kind of decline?

No, I would not expect a decline. I think overall the market has still opportunities and room for growth. as the medical technology and the environment, the general positive trends, they're still there and continue. So despite maybe some single countries drop out, the global trend is still there.

but that's helpful. The second question is just on supply chain. I mean, there's obviously the kind of discussion on Nextperia, the kind of Dutch company where the conflict with China, I think largely people focus on the automotive industry, but I think they're also a major supplier for chips for the METEC industry. I'm just wondering, is there any kind of risk factor that you face here in particular as we move into the kind of key of Q4 now?

not a big effect we do use some of these chips but only to a small extent and we have the larger inventory that we keep on stock as the automotive people do and from what you can see luckily these are used for applications that are not so regulatory dependent, so it's easier to replace and there are alternative suppliers. So we may see some smaller effect, but not in Q4. Maybe in the next year.

That's super, that's reassuring. And then the last question, I mean, obviously it's a bit too early for next year, but just to get any kind of flavor, We are making nice margin progress in 2025. At the midpoint, we would probably run 50 basis points ahead of the kind of normalized one rates toward a 10% EBIT margin in 2030. I'm just wondering, looking at the polls and pushes for next year, I mean, is there any reason why you should be below the kind of 6% EBIT margin, which would be implied by this one rate for next year? In particular, can you provide any kind of color? What incremental

MARGIN HEADWINDS YOU EXPECT FROM CURRENCY NEXT YEAR PLEASE THANK YOU YEAH SO I'LL GIVE YOU THE FIRST PART OF THE ANSWER MR. HEIMERK YOU KNOW WE KEEP REITERATING SO THE DRIGGER BUSINESS CANNOT BE JUDGED BY THE QUARTER SO IT CAN ALWAYS BE A BAD QUARTER THAT DOES NOT MEAN THAT THE WORLD IS BAD AND THE SAME HOLDS TO IF WE HAVE A VERY GOOD QUARTER LIKE SO If we look at the figures and analyze where we are, then we see we had an exceptional good margin in Q3. And so, in addition, we had an exceptional good margin in Q4 last year. So, if we go back on an average margin for this coming Q4, then there is a reason to assume that it's not so extraordinary than you might probably first think at the first glance. And going back to the margin to normal, that's partially, say, fueled because there are some large tender businesses that start, say, delivering in this current quarter, so it's better to be, you see, a little bit cautious with the forecast and development of the future. The effect of the currency, I know that you'll get out there.

Yeah, there will be, given current average rates, there will be an additional FX headwinds. We are in the final steps of finalizing planning and currency adjustments, but it's possibly in the range of another percentage point margin. We will provide more clarity on that with the publication of our guidance for 26.

Okay, Subhan. That's very helpful. Thanks so much indeed.

As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from the line of Virendra Chauhan from Alfa Value. Please go ahead.

Yeah, good afternoon. Thanks for taking my question. So for now, just one question around your margin. So Q3 was fairly strong margin and like you pointed out in your notes as well as presentation that it came from the strong net sales growth that you saw in this quarter. Now with of course the sales growth guidance as well being upgraded, is there a chance that we see a similar uh year-on-year margin expansion in q4 as well because q4 of last year was also very strong it's i think close to 20 percent if i remember correctly so that's that's my question around your ebit margin please as i just explained it on the question from over there is indeed qc was a very good margin

And that is added from a favorable mix of the products in the portfolio. And it is safe to assume that the normalized and the decline slightly for the Q4 and for the future. And keep in mind that Q4 in 2024 was also a very good margin if you compare the quarters. Keep that in mind and think about this. So, should not be too overoptimistic for the good margin to persist. As I explained in TRIGA, we do not think in quarters. So, because a single quarter can always be a little bit up or down versus the others. We, as much as we appreciate the current good results and the general outlook on the single quarter and the margin, I expect that for the Q4, there could be a slight decline. The EBIT margin overall, if that is the focus, That is, as we said in our guidance, it is the upper end of the previous guidance, and it is in line with what we said earlier, that we strive for a continuous improvement of the EBIT margin that should be about the same figure as the calendar year. So for this year, it's 25. so that we said that already a couple years ago, then it should be plus minus 5%. And again, 2006, you can see, think about the ballpark figure of 6%.

Okay. Sorry, maybe can I just ask one more question? I just came back one. Yeah, so all your connected cave launched the silent ICU that you had talked about on the previous call and it was scheduled to be launched in H2 25. So I have two bits on that. One is what is your early customer feedback? What is that? And then secondly,

when do you expect in terms of a timeline that this you know this entire project or focus could translate into meaningful revenue generation for the firm and then the customer feedback from the first the the projects it's very excited so very happy to observe that and we look very much forward to taking off. We just these days, we started our marketing campaign where we toot the horn more explicitly for this approach. And so I expect that from the next year on that can be a sensible effect to the business on these kind of projects.

We now have a question from the line of Jean-Marc Muller from JMS Invest AG. Please go ahead.

Yes, thank you for taking my question. First, I would like to congratulate you on very good Q3 results. Quickly on Q4, I mean, you know, you spent quite some time when we spoke about the numbers, adjusting them for one-offs, and it's fair to say that in Q4 last year, all by numbers was good. It was actually worse by roughly 10 million than what it should have been because you had an impairment charge last year in Q4, right? The underlying number would have been 124 million, not 114 million.

Yeah, that is correct.

Okay. So when you're now saying that Q4 might be maybe a little weaker than last year, are we talking about adjusted numbers or reported numbers?

There is a range and what we try to emphasize is, and I think you're iterating that, Q4 last year was also operationally a strong quarter. And depending on the delivery and given that it is just by the total number of net sales, there's a higher, if you will, sensitivity sales variations, there is a chance that we also get at the lower end when it comes to reported figures even. Not that we're striving for that, but the discussion was we just wanted to point out that the Q4 was operationally and also nominally, in spite of the charge, a relatively strong quarter.

Yeah, okay. I understand. I understand. And maybe ask a little differently. I mean, it's the most important quarter. I understand that. And it's typically a big number when it comes to full year results. But the range of the guidance is still very wide. I mean, we're talking from the lower end to the upper end. We're talking about roughly 70 million EBIT range. Maybe you can help us a little bit. would need to happen that we really hit the lower end of the range, and what has to happen that we get to the upper end of the range?

There is a couple of factors, and obviously, firstly, I mean, let me just, that's not what we're planning for, but I think you're asking what risks we have seen ethics, turning against us, and this could certainly be a risk going forward. We do see that in spite of the good development overall, we do see some areas where our business is developing not as nicely, if you will. We talked about China in particular in the Q3, where we saw a bit of a like sprömungsabriss. We also see that our safety business, while very robust overall, is in Germany, for example, being put under pressure due to the general market trends. For the industry. Who does the customers in the chemical industry? We also see that in the US. For different reasons, many customers are reluctant to fully engage in investments and to the degree that we see some of these risks to materialize over proportionally and perhaps not see the support or a bit of a slowdown in the support, we see a risk that we also get to the low end. But let me also reiterate, we would be disappointed if our margin falls below the 5%. But at this point, we wouldn't rule that out either.

Okay. And the upper end would just be flawless execution of all the projects?

Exactly. Exactly. Flawless execution would clearly lead to the upper end.

But this is what you're good at, no? Flawless execution?

Well, you can keep the fingers, the thumbs pressed, and I'm sure we get an ethics development that for change is not running against us, but in our favor.

No, no, I know. I understand. And an add-on question quickly on the cash flow. I mean, also Q4 last year, the cash flow was pretty solid, despite that the working capital movement in Q4 was actually negative. What should we expect this year? I mean, we obviously should still expect a positive free cash flow, I would assume. But the magnitude, I mean, you lowered your investment guidelines. So I would assume that also cash flows in Q4 should be fairly strong. Is this a fair assessment or do you see things which go against the strong cash flow in Q4?

By and large, I would support that. And that leads in our range of possible net financial debt, we expect in the normal course to be at the lower end, so more positively for us, since there's no underlying risk for our Q4 cash flow situation.

Okay, understood. Thank you.

Once again, to ask a question, please press star and one on your telephone. We have a follow-up question from the line of Oliver Reinberg from Kepler Chevrolet. Please go ahead.

Oh yeah, thanks very much for taking my follow-up. Probably also two or three. I mean, the first question would be on anesthesia. There was some kind of news in the industry, obviously Yettingen now has lined up with Philips and in fact also GE has introduced and called out the kind of launch of a new workstation, which is more meaningful apparently. I'm not sure if this is a kind of normal industry development, or is there a certain risk that may provide a kind of headwind for anesthesia going forward? That would be the first question, please.

I would say that's a normal industry development. There are discussions all the time, and we also are having discussions. And that's a normal thing. So they're not afraid of this development.

Right. So when you also have a discussion, that means you also are generally open to more different new ways of distribution. Is that the way to understand that?

That's correct. And so there are obviously the companies like Dear Philips that do not have certain modalities, and they're seeking and contacting the ones that have. Because they want to become a full-service supplier, so that's a normal development. And that has its pros and cons. And as I said, we are not afraid of this setup.

Okay, perfect. And on China, I mean, we've seen an improvement in the first half. Q3 looks like a kind of a larger change to the opposite again. I mean, is this larger volatility or because you're calling that out, is there any kind of specifics that happened here and why has it happened if you have any visibility here?

Oh, yes. Basically, there's nothing new. It's very fragile from where we ended last year. And so far, it's stable, but at a modest level. And it's not likely that it comes back to where it was. for various reasons.

Understood. And last question, any update on the defense-related demand in Germany in terms of what have you seen so far? Is there any kind of acceleration being seen at the moment? Thank you.

Please keep in mind, Mr. Reimert, that last year in Q1, we received a large order for this MASC-2000. uh for the army uh of uh um roughly 15 million euro and so that obviously did not repeat this year and despite this not repeating a single order effect from last year our orders are currently having a double digit growth of around 25 percent year over year for the defense business. So it is eventually picking up and we do expect to receive more than 100 million euros in orders in the current year.

Perfect. Thanks so much for taking my questions.

For any further questions, please press star and one on your telephone. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Stefan Dräger for any closing remarks.

Stefan Dräger Thank you very much to all of you with us today for your time and your interest, Andrea, and I look very much forward to meet you again, hopefully sometime in person in the future. Have a pleasant afternoon and evening and goodbye.

Ladies and gentlemen, the conference is now over.