Draegerwerk AG & Co. KGaA (Xetra:DRW8) Q1 2026 Earnings Call

0:00 Ladies and gentlemen, welcome to the Dragerwerk Q1 twenty twenty six Earnings Call. I am Sandra, the Chorus Call operator. I would like to remind you that all participants have been in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Stefan Drager, CEO. Please go ahead, sir. Hello. Good afternoon and thank you for joining our conference call on our financial results for the first three months of twenty twenty six.

0:46 I have with me today Gerhard Mikhletko, CFO, as well as Tom Fischler and Nicolas Hammerschmidt, both Investor Relations. We would like to take you through the results of the presentation that we made available on our web page 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 continued good demand, positive net sales development and significantly improved profitability, we delivered a strong business performance in the first three months of twenty twenty six. Order intake rose to around eight sixty five million dollars while net sales came back to growth at around $756,000,000 Thanks to the good operating business, improved gross margin and lower expenses, our EBIT increased significantly to roughly EUR18 million, lifting our EBIT margin to 2.4% for the first quarter.

1:53 As a result of the good earnings performance, our free cash flow rose considerably to more than €44,000,000 As communicated two weeks ago, we confirm our guidance. I will come back to this in our outlook at the end of the presentation. The next week, we are hosting our annual shareholders meeting and will propose a higher dividend to our shareholders, the third consecutive increase for three years. This shows the good progress we have achieved in our developing the business and improving our profitability. With that, I turn over to Gerhard Hapic for a review of the financials. Gerhard, please.

2:39 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 Drager said, we continue to see good demand for our technology for life. Thanks to the Medical division and Germany in particular, our order intake rose by more than 3%. Net sales increased by around 7%, driven by both divisions. The slight decline in APAC was clearly overcompensated by the positive development in the other regions, particularly The Americas. Our gross margin declined by 0.5 percentage points to 46.3%, supported by the improvement in the Medical Division, which more than offset the slight decline in the Safety Division.

3:30 Nominally, expenses fell by 0.8% due to the strengthening of the euro. At constant currency, expenses would have increased by 1.7%. The growth was also influenced by a onetime payment to employees in Germany under a collective agreement in the prior year. If we exclude the space effect, expenses would have increased nominally by some 2.4%, still below the growth rate of net sales. Due to the good top line and the lower expenses, our EBIT rose significantly from €400,000 to €17,900,000 Consequently, our EBIT margin increased from 0.1% to 2.4%.

4:15 Finally, our rolling twelve months DBA improved considerably by roughly €68,000,000 to around €106,000,000 Let us now take a closer look at the development of the medical division on Page eight. Molar intake grew by more than 5% to around €480,000,000 thanks to a higher demand for nearly all product areas and services. In Germany, orders were significantly up, mainly due to stronger demand for therapy devices and hospital infrastructure systems. The other regions also developed favorably. Looking forward, please keep in mind that there will be substantial base effects in order entry in Q2 since last year in April, we received a major order in the mid double digit million euro range from Mexico, which will not repeat.

5:11 Net sales in the past quarter rose by more than 5% to around €480,000,000 particularly driven by strong growth in The Americas, which was mainly attributable to higher revenues from anesthesia machines and services. EMEA and Germany also contributed to growth, while APAC recorded slight declines. Our gross margin expanded by around two percentage points to roughly 44% due to a good product mix and higher capacity utilization in production and despite the negative currency effect. Functional expenses rose by around 3%, mainly due to higher personnel expenses driven by a higher headcount in the sales region.

5:57 Our EBIT in the Medical division increased significantly from minus EUR27.7 million to minus EUR18.5 million, lifting the EBIT margin from minus 6.7% to minus 4.4%. Our rolling twelve month DBA improved significantly, too, by roughly €53,000,000 to around minus €40,000,000 I will now turn to our Safety division. We are on Page nine. Order intake rose by 1.2 thanks to a high demand for occupational health and safety equipment, gas detection, and services. In Germany, orders increased significantly, which, in addition to the reasons mentioned, was primarily attributable to strong demand for engineered solutions, mainly orders from defense customers.

6:53 The Americas region also recorded growth while volume in the EMEA and APAC regions declined. Net sales rose significantly by roughly 9%, driven by considerable growth in Germany, EMEA and The Americas. Net sales in the APAC region were below the prior year level. Our gross margin fell by 1.4 percentage point to around 49. The main reasons for this were the lower profitability due to the product mix and negative currency effects. Pactual expenses were 0.2% below the prior year level, particularly due to lower R and D expenses. Our EBIT in the Safety division increased significantly from around €28,000,000 to around €36,000,000 lifting margin from roughly 9% to around 11%.

7:49 Rolling twelve months DDA improved by roughly €15,000,000 to around €120,000,000 Let's move on to the development of our cash flow and other key figures on to Slide 10. In the first three months, we significantly improved the operating cash flow by around €6,000,000 to roughly €62,000,000 In addition to the increase in earnings, this was mainly due to effective working capital management, especially better development of trade receivables. Higher operating cash flow as well as lower investment outflow led to an improved free cash flow by around €12,000,000 Going forward, we expect free cash flow to continue to develop positively.

8:36 Looking at our net financial debt, we had a significant reduction by around €56,000,000 to around €85,000,000 The reason for this was the increase in cash and cash equivalents due to the strong free cash flow. As a result, the already healthy ratio of our net financial debt to EBITDA further improved to 0.2. At the beginning of the first quarter, we repaid a maturing note loan in the amount of €50,000,000 with our own liquidity. Our twelve month rolling return on capital employed rose from 11.5% to 15.2%. This was due to the higher EBIT in the past three quarters. At around €745,000,000 net working capital was around 7% higher than in the prior year.

9:27 Our equity ratio as of March 31 stood at around 52%, slightly above the year end level of 2025. Now I hand back to Stefan Drager for our outlook on Page 12. Ladies and gentlemen, Q1 was a strong quarter for Drager. A good order development makes us optimistic about the further course of business this year. Regarding The U. S. Tariffs and the war against Iran, we continue to expect similar impact from tariffs like in 2025, and we do not see any material impact on our business from the war so far. Therefore, we continue to expect net sales growth of 1% to five percent and two to 6% net of currency effect and an EBIT margin of 5% to 7%.

10:24 With this, I would like to end the presentation and hand over to the operator to open the floor for your questions, please. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the telephone. You will 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 2. Participants are requesting to use only handsets when asking a question. Anyone with a question may press star and 1 at this time. Once again, to ask a question, please press star followed by 1.

11:18 It seems that we have no questions. Back over to you, Mr. Drager, for any closing remarks. Well, let's wait just one more second if there is a question coming. Well, last chance, if there's any questions, please ask either now or join us next week at our Annual General Meeting for the shareholders. Thank very much for joining us today, for your interest in Drea, and have a pleasant afternoon and get in a good way into next month, into May, this coming weekend. Thank you, and bye bye.

12:15 Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect the lines. Goodbye.