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Interim report as of September 30, 2004
Dräger again making solid progress
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- Dräger Group with sustained sales growth and steady earnings
- Dräger Safety once more very successful
- Dräger Medical shows double-digit sales growth
- Good results expected for Q4/2004 and all of 2004
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| Lübeck-based Drägerwerk AG looks back on a generally successful first nine months of 2004. As reported by this medical and safety technology group, 3Q order entry climbed 5.4 percent to €1,083 million (up from €1,027 million), 9-month sales rose 6.9 percent to €1,015 million (up from €949 million). In terms of like-for-like exchange rates the advance was in each case 2 percentage points higher, i.e., order entry mounted by 7.4 percent and sales by 8.9 percent. Adjusted 3Q EBIT stayed steady at €56.6 million (up from €56.4 million). At €26.6 million, the Group’s 9-month net income was short of the year-earlier €34.4 million which had included an extraordinary gain of €20.5 million from the disposal of Dräger Aerospace GmbH. This year's figure includes an extraordinary gain of €9.5 million from the divestment of various service companies. |
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| 3Q/2004
| 3Q/2003
| Change
| Order entry |
€1,083 Mio |
€1,027 Mio |
+6.9% |
| Net sales |
€1,015 Mio |
€ 949 Mio |
+5.4% |
EBIT before
one-time expenses |
€56.6 Mio |
€56.4 Mio |
+0.4% |
| EBIT-margin |
5.6% |
5.9% |
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Net income
thereof extraordinary gains |
€26.6 Mio
9,5 Mio € |
€34.4 Mio €
€20.5 Mio |
-22,7%
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9-month
average headcount |
10,092 |
10,282 |
-1.8% |
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*unaudited |
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| t was in America that business was most buoyant, the 18.7-percent surge (parity adjusted 26.6 percent) typifying the solid progress being made by both Dräger Safety and Dräger Medical in this part of the world, although Dräger Medical’s reorganization of its USA distribution network has not yet had full effect. At 10.5 percent, growth in Europe (excluding Germany) is better than average while Asia-Pacific sales increases (exchange rate adjusted 11.6 percent) reached 6.5 percent, the year-earlier revenues including the incremental orders due to SARS. German sales dropped 3.2 percent, whereas LFL (i.e., excluding the divested companies) they rose around 3 percent. |
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| €77.4 million went toward R&D in 3Q/2004, equivalent to 7.6 percent of the Group's sales in the period. |
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- 3Q order entry and sales encouragingly up, albeit EBIT below budget
- Operational launch of newcomer Air-Shields well underway
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| In the first nine months of fiscal 2004, Dräger Medical generated an adjusted EBIT of €36.0 million (down from €42.4 million) before deducting the one-time expenses for the Siemens joint venture and the Air-Shields integration of a total €7.2 million (down from €11.5 million). The EBIT margin reached 5.4 percent (down from 7.1 percent). In all, 3Q sales at €661.8 million were some 10+ percent higher than a year ago (€597.7 million), albeit short of expectations.
Q3/2004 EBIT at Dräger Medical, before one-time expenses, amounted to €7.3 million (down from €13.8 million) while Q3 sales rose from €220.2 million in 2003 to €226.8 million in 2004.
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As already reported, the reason for these results is that the benefits of the US distribution network reorganization are taking longer than planned to materialize. The expected incremental sales will be generated with some delay and the shortfall accrued up to the end of September this year can no longer be made good, the out-come being that 12-month sales will be below budget, totaling between €1,000 million and €1,050 million.
Although US business is short of budget it is up 31 percent over the previous year when adjusted for parity effects. The expected steep sales growth in a number of European countries such as Italy and France, the ongoing healthy cost structure of the subgroup, and seasonally spurred, traditionally far stronger year-end business all suggest an adjusted EBIT of around €100 million.
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| Nine-month order entry totaled €702.5 million in 2004, 7.3 percent higher than the €654.8 million in 2003. Q3/2004 orders received at €247.8 million were slightly down from the year-earlier €249.0 million which, however, had included the order backlog taken over from Siemens. |
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| M&As in recent years have meant worldwide competition has become fiercer, and as a consequence, pricing pressure has built up in some product sectors yet in all, Dräger Medical managed to defend market shares and even penetrate deeper into a number of large European markets. |
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| R&D expenses in 3Q added up to €59.7 million, equivalent to 9 percent of sales.
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| For the year as a whole, the subgroup expects downstream one-time M&A expenses to be a lot lower than budgeted, meaning well short of the predicted €20 million. |
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| In the first nine months of 2004, Dräger Safety generated an EBIT of €28.5 million, 14.5 percent higher than the year-earlier €24.9 million, largely on account of measures for process improvements and cost reductions. Concurrently, the subgroup was able to compensate for the burdens imposed by the strong euro. The EBIT margin advanced from 7.3 to 8.0 percent. As consequence, Dräger Safety has achieved its goal of accelerating EBIT over sales. During 3Q/2004, worldwide sales by Dräger Safety climbed to €357 million, 5.2 percent up over the year-earlier €339.5 million. With LFL parity, the growth was as much as 6.9 percent. Order entry mounted by 6.3 percent to €383.9 million (up from €361.3 million), exchange rate adjusted 7.9 percent. |
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- Sustained EBIT growth outpaces sales
- Parity burdens compensated
- Portfolio extended
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| It was within NAFTA that the subgroup managed to expand its position in 3Q/2004 especially through volume business branching out. On a same-parity basis, NAFTA order entry climbed 19.3 percent and sales 22.9 percent. Asia/Pacific LFL order entry climbed 9.5 percent. In all, using unchanged exchange rates, sales soared 15.4 percent (volume business by 24 percent). The prime revenue sources were stationary gas monitoring equipment and systems, and respiratory protection gear for miners and firefighters. In many European countries, too, 3Q business made good progress. In terms of LFL parity, total European order entry mounted 6.4 percent and sales 3.1 percent. Spending reluctance on the part of the public sector in Germany meant that the home market tended to be generally weak. |
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| Q3/2004 order entry at Dräger Safety climbed from €112.5 million to €121.6 million, hence 8.1 percent up. Q3 sales rose from €109.3 million to €116.1 million, up 6.2 percent. EBIT advanced from €5.6 million to €7.5 million, an improvement of around 34 percent.
This year Dräger Safety is continuously extending its product and technology line-ups while emphasizing its role as a supplier of system solutions for holistic hazard management.
Effective July 1, 2004, and as reported, Dräger Safety took over the respiratory protection mask manufacturer Zenith Safety Products Trust, King William's Town, South Africa and, in acquiring Swede Survival Systems Inc., California, USA, and Fire Training Systems (FTS) Ltd., Ontario, Canada, Dräger Safety is expanding its international operations in the high-growth NAFTA market for fire department and rescue team training systems.
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| R&D spending reached €17.7 million (5 percent of sales), chiefly for developing new products. |
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| Dräger Medical expects Q4, as in past years, to deliver an overproportionately high percentage of annual sales, 12-month revenues then reaching between €1,000 million and €1,050 million and adjusted EBIT around €100 million. The one-time expenses for integrating the Siemens joint venture and for the Air-Shields acquisition will be well below the predicted €20 million. |
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| Dräger Safety predicts its uptrend continuing through the fourth quarter, allowing the budgeted sales of €490 million to be easily achieved. The same applies to the EBIT of €39 million. |
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| In all, the Dräger Group’s fiscal 2004 sales ranging between €1,500 million and €1,550 million should deliver an adjusted EBIT (before one-time expenses) in the region of the budgeted €124 million and net income (before minority interests) of €46 million. Major factors will be the solid earnings shown by Dräger Safety, the reduced one-time expenses at Dräger Medical, and the gains from the disposal of the IT companies. |
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| Additional one-time expenses might, however, result from a decision to construct new buildings for Dräger Medical – possibly at some new location (as reported earlier). The purpose behind this project is a further sustained improvement in cost structure through process enhancements. The related one-time expenses can, however, only be determined once a decision has been made to this effect. |
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| This press release contains statements regarding the Dräger Group's future development. No warranty can be given for such statements since they are based on assumptions and estimates which are subject to risks and uncertainties. |
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Contacts
Corporate Communications: Dr. Welf Böttcher, Drägerwerk AG, phone (+49-451) 882-2201, welf.boettcher@draeger.com
Investor Relations: Vanina Herbst, Drägerwerk AG, phone (+49-451) 882-2685, vanina.herbst@draeger.com
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(c) Drägerwerk AG & Co. KGaA, 2007 |
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