Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Draegerwerk AG & Co KGaA (DGWPF, Financial) reported a slight increase in order intake to EUR2.4 billion, driven by growth in Germany and positive developments in EMEA and America.
- The safety division outperformed the medical division, contributing to an increase in the group's gross profit margin by 0.4 percentage points to 44.4%.
- The company achieved a significant improvement in operating cash flow and free cash flow, with net financial debt further improved during the quarter.
- The safety division saw a significant increase in order intake by roughly 12% in Q3, with strong demand in occupational health and safety equipment.
- The company's equity position improved, with an equity ratio of almost 48% as of September 30, 2024.
Negative Points
- The medical division faced challenges, particularly in China, leading to a decrease in order intake by around 2% and a decline in net sales by around 5% in the first nine months.
- The EBIT margin for the medical division decreased from 0.1% to minus 0.9% in Q3, with a year-to-date EBIT of minus EUR28 million.
- The company is still awaiting a response from the FDA regarding a reinspection of their site in Andover, which could impact future operations.
- Currency effects and higher expenses from inventory adjustments negatively impacted the medical division's profitability.
- The company faced challenges in the APAC region, with reduced demand for ventilators in China and a challenging market environment affecting all western med-tech suppliers.
Q & A Highlights
Q: What are the expectations for Q4, given the need to achieve most of the year's earnings in this quarter?
A: Gert-Hartwig Lescow, CFO, explained that Q4 is typically the strongest quarter, especially for the medical side. Confidence is based on strong regional developments in North and South America, with large orders expected to be delivered, particularly in Mexico. However, no quick recovery is expected in the Chinese market.
Q: What are the structural and seasonal effects impacting the safety and medical divisions?
A: Stefan Drager, Chairman, noted that the safety division benefits from investments in sales capabilities and a strong product portfolio, while the medical division faces challenges due to the Chinese market and legacy product architecture. Seasonal effects are typical for both divisions, with government bodies spending budgets towards year-end.
Q: Why was the gross profit margin in Q4 last year the lowest despite higher revenue, and what is expected for this year?
A: Gert-Hartwig Lescow explained that last year's Q4 margin was affected by a write-down of factories for FFP masks. This year, no similar write-downs are expected, and while large orders may come with discounts, a significant hit on gross profit margin is not anticipated.
Q: Why was the Q3 topline in the safety division flat despite positive order intake?
A: Stefan Drager stated that there was no specific reason for the flat topline; it is the nature of the business, with fluctuations being more statistical when broken down to shorter time frames.
Q: How does the silence from the FDA impact planned product launches for next year?
A: Stefan Drager mentioned that there is currently no impact on product launches. The FDA's reorganization is causing delays, but there have been positive replies for some approval processes, providing optimism for future developments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
