Analyst Conference Drägerwerk AG & Co. KGaA March 7 th 2019
Disclaimer This presentation does not constitute an offer of securities for sale or a solicitation of an offer to purchase any securities. No money, securities or other consideration is being solicited by this presentation. This presentation contains forward-looking statements regarding the future development of the Dräger Group. These forward-looking statements are based on the current expectations, presumptions, and forecasts of the Executive Board as well as the information available to it to date, and have been made to the best of its knowledge and belief. No guarantee or liability for the occurrence of the future developments and results specified can be assumed in respect of such forward-looking statements. Rather, the future developments and results are dependent on a number of factors; they entail risks and uncertainties beyond our control and are based on assumptions which could prove to be incorrect. Notwithstanding any legal requirements to adjust forecasts, we assume no obligation to update the forward-looking statements contained in this presentation. Interim financial reports as well as preliminaries are not audited. 2
OVERVIEW Fiscal Year 2018 3
Net sales growth and EBIT improvement Business development Dräger Group Net Sales (in EUR million) 2,572 +3.9% FX adjusted +0.9% Nominal 496 620 613 866 2,595 2017 Q1 Q2 Q3 Q4 2018 EBIT (in EUR million) 6.1% Margin 155.7-40 3-4 104 2.4% Margin 62.6 2017 Q1 Q2 Q3 Q4 2018 Highlights Order intake +6.0% cc. Strong year-end business. Gross profit margin declined to 42.7% (PY 44.8%). Functional expenses increased due to investment program and additional unplanned cost. FY EBIT-margin declined to 2.4%. Full-year FX impact negative on net sales and EBIT. (FY FX: Net sales -3pp, EBIT margin ~ -1pp) DVA declined to EUR 26.5m (PY EUR 70.7m). 4
Positive order intake in all regions Order development Dräger Group Order entry (in EUR million) Group Medical Safety Net Sales America 526 +10.2% +8.0% +15.4% +4.4% Africa, Asia, Australia 710 +11.6% +12.4% +9.6% +6.1% Europe 1,450 +1.9% +1.1% +3.2% +2.8% Group 2,686 +6.0% +5.7% +6.5% +3.9% Growth rates are net of currency effects 5
Investmentplan for future growth Achievements 2018 and priorities 2019 What we have achieved New hub in Krefeld for supporting Dräger rental safety services. Strengthened Sales & Service resources and global Key account management. Strengthen Gas Detection System Centers. First large product launch of the roadmap to renew medical product portfolio on track. Pilot for the digital distribution sales channel up and running. 2018 Priorities 2019 Roadmap to renew medical product portfolio. Continue to focus on reducing time to market. Improve quality management process and set-up. Optimize logistic process and set-up. Implementation of go-to-market strategies, i.e. investing in North American Safety business. Strengthen organizational focus on medical and safety. 2019 6
Strengthening organizational focus on medical and safety What we are changing Organizational set-up and business steering according to medical and safety: Introduction of business units with full product and customer accountability. Business units are combined to a medical division and a safety division, each managed by a dedicated board member. Financial reporting according to the new divisional structure. (as of FY 2020) One dedicated board member responsible for the global sales organization. We are NOT stopping to share resources across business units. What we will achieve Stronger customer focus in headquarter functions. Strengthening focus on customer needs also in non-customer facing functions, e.g. throughout the entire innovation process and roadmap management. Business Units have the freedom to operate where diversity is beneficial to customers. Strong focus on growth and profitability of both business divisions at the same time. Maintaining efficiency in shared resources systems and processes across business units. Implementation during 2019 7
Changes in board responsibilities 2019 As of January 1, 2020 Toni Schrofner Reorganization Medical Innovation Executive Board member for medical division Rainer Klug Dr. Reiner Piske Reorganisation Safety Region Americas Quality, Purchasing, Production & Logistics Region Europe Region AAA Human Resources Executive Board member for safety division Executive Board member for global sales Financial reporting for FY 2020 will be according to medical and safety (primary view) and regions (secondary view) 8
FINANCIALS Fiscal Year 2018 9
Business development Dräger Group Net Sales Comments EBIT 835,3 112.3 +5.8% FX adjusted +3.7% Nominal 865,9 Q4 17 Q4 18 13.4% EBITmargin 103.7 FX adjusted 2.572,3 +0.9% 2.595,0 Nominal FY17 155,7 +3.9% -8% -60% 12.0% EBITmargin 6.1% EBITmargin FY18 2.4% EBITmargin 62,6 Order intake (FX adjusted) Q4 FY Medical +13.9% +5.7% Safety +8.6% +6.5% Group +11.9% +6.0% Orders on hand ~+25% (cc) 12M Gross profit margin 42.7% (py 44.8%) 12M Functional Expenses yoy +7.0% (cc) 12M other fin.& invest. result -3.4m (py -4.7m) EBIT-margin incl. ~ -1 pp from FX DVA -26.5m (py 70.7m) Q4 17 Q4 18 FY17 FY18 10
Region Americas Financial performance Order Entry EBIT 509 FX adjusted +3.3% 526 Nominal 2017 2018 0.8% EBITmargin 4.0 +10.2% >-100% -6.0% EBITmargin -30.2 2017 2018 Net Sales +4.4% 510 FX adjusted -2.2% 499 Nominal 2017 2018 Comments Order intake: Q4 FY Medical +25.2% +8.0% Safety +35.1% +15.4% Americas +28.1% +10.2% Solid FY Order and net sales growth in Central-, South- America. North America order growth also strong but slight decline in net sales. Gross profit margin: -3.8pp yoy Functional expenses (FX adjusted): FY +8.1% yoy DVA EUR -51.6m (PY EUR -16.6m) 11
Region Europe Financial performance Order Entry EBIT 1,448 +0.2% 1,450 Nominal 2017 2018 7.6% EBITmargin +1.9% FX adjusted -24% 5.7% EBITmargin Net Sales +2.8% FX adjusted 1,415 +1.2% Nominal 1,432 2017 2018 Comments Order intake: Q4 FY Medical +2.3% +1.1% Safety +3.7% +3.2% Europe +2.9% +1.9% Good top line growth in Germany with mixed performance in other European countries. Gross profit margin: -1.1pp yoy Functional expenses (FX adjusted): FY +4.5% yoy 108.1 82.0 DVA EUR 41.4m (PY EUR 68.8m) 2017 2018 12
Region Africa, Asia, Australia Financial performance Order Enty Net Sales Comments 658 +11.6% FX adjusted +8.0% Nominal 710 +6.1% FX adjusted 646 +2.7% 664 Nominal Order intake: Q4 FY Medical +30.1% +12.4% Safety +4.7% +9.6% AAA +21.4% +11.6% EBIT 2017 2018 6.8% EBITmargin 43.7-75% 1.6% EBITmargin 10.8 2017 2018 2017 2018 Strong order growth in all sub- Regions. Sales development also strong in all sub-regions except India and MEA which decline slightly. Gross profit margin: -2.9pp yoy Functional expenses (FX adjusted): FY +10.3% yoy DVA EUR -16.3m (PY EUR 18.5m) 13
Functional Expenses Dräger Group 12M 2017 12M 2018 Change Change net of FX million million % % R&D -234.7-252.2 7.5 8.4 % of Net Sales -9.1% -9.7% Sales & Marketing -566.3-592.6 4.7 7.0 % of Net Sales -22.0% -22.8% Administration -197.7-198.5 0.4 3.0 % of Net Sales -7.7% -7.6% SG&A -764.0-791.1 3.5 6.0 % of Net Sales -29.7% -30.5% Functional Expenses total -992.0-1,042.2 5.1 7.0 % of Net Sales -38.6% -40.2% Headcount 1 13,739 14,399 4.8 1 Values as of reporting date 14
Key Figures Dräger Group 12M 2017 12M 2018 Change million million Cashflow from operating activities 143.3 4.1-97.1 Investments 106.2 77.8-26.7 % Cash and cash equivalents 1 247.6 179.6-27.5 Net financial debt 1-29.2 43.3 >100 Net financial debt 1 /EBITDA 2-0.12 0.29 Capital employed 1 1,243.6 1,344.7 8.1 ROCE (EBIT 2 /Capital employed 1 ) 12.5% 4.7% Net Working Capital 1 557.2 666.5 19.6 Equity ratio 45.4 44.8-0.6pp EPS per common shares (on full distribution) 4.12 1.42 EPS per preferred shares (on full distribution) 4.18 1.48 1 Values as of reporting date 2 EBITDA and accordingly EBIT of the last twelve months 15
OUTLOOK Fiscal Year 2019 16
Dividend proposal for FY 2018 2017 (in EUR million) 2018 (in EUR million) Net profit * 98.5 34.4 Dividend 11.4 4.3 Participation certificates ** 3.8 1.6 Common shares 4.1 1.3 Preferred shares 3.5 1.4 Net payout ratio 11.6% 12.6% Dividend per common share preferred share Dividend policy 0.40 0.13 2017 2018 0.46 0.19 2017 2018 Dräger plans to distribute at least 10% of group net profit (less earnings attributable to non-controlling interests) to the company s shareholders and participation certificate holders. * after earnings attributable to non-controlling interests ** Without minimum dividend, after taxes 17
Outlook FY 2019 Net Sales (net of currency effects) 2018 guidance 1 2018 2019e 2.0 % 5.0 % 3.9 % 1.0 % 4.0 % EBIT margin 2.0 % 3.5 % 2.4 % 1.0 % 3.0 % 2 Gross profit margin 42.5 44.0 % 42.7 % +/- 1 pp Dräger Value Added EUR -40m to 0m EUR -26.5m EUR -60 to -10m Assumptions for FY 2019 Guidance Increasing economic uncertainties will slightly slow down demand. Improving net sales development in North America will partly be off-set by softer demand in Central- / South America. Growth in the Europe Region expected to be slightly softer. Continuously strong top-line development in AAA Region. Positive growth in both product areas, with a stronger top-line growth for safety offerings. Higher functional expenses due to investments to support future growth. Increase of R&D budget to EUR 260 275 million. No meaningful FX impact on nominal net sales growth and EBIT-margin 2 1 last published guidance 2 based on exchange rates at the start of the year 2019 and without restructuring charges 18
19 Questions & Answers
Guidance 2018 / 2019 Net sales 2018 2019e 3.9% +1.0 - +4.0 % (net of currency effects) (net of currency effects) EBIT margin 2.4% 1.0-3.0 % 1 Dräger Value Added EUR -26.5 million in the range EUR -60 to -10 million Other forecast figures: Gross margin 42.7 % on prior year's level (+ / - 1pp) Research and development costs EUR 252.2 million EUR 260-275 million Interest result EUR -11.0 million on prior year's level Days working capital (DWC) 3 117.4 days stable Investment volume EUR 77.8 million 2 EUR 85-100 million 2 Net financial debt EUR -29.2 million improvement 1 Based on exchange rates at the start of the year 2019 and excluding restructuring charges 2 excluding company acquisitions 3 The calculation method will be adjusted during 2019 20
Business Development Segments 5y view 2014 2015 2016 2017 2018 SEGMENT EUROPE Order Entry 1 million 1,357.0 1,391.0 1,382.5 1,447.8 1,450.2 Net Sales 1 million 1,362.2 1,420.7 1,384.3 1,415.5 1,431.9 EBIT million 128.5 59.4 84.5 108.1 82.0 EBIT margin % 9.4 4.2 6.1 7.6 5.7 SEGMENT AMERICA Order Entry 1 million 461.5 496.8 515.0 509.2 526.0 Net Sales 1 million 471.2 509.1 503.7 510.4 499.3 EBIT million -0.4-18.6 10.3 4.0-30.2 EBIT margin % -0.1-3.7 2.0 0.8-6.0 SEGMENT AFRICA, ASIA, AUSTRALIA Order Entry 1 million 597.0 644.5 641.2 657.6 710.2 Net Sales 1 million 601.3 679.1 635.8 646.4 663.8 EBIT million 50.5 25.8 42.1 43.7 10.8 EBIT margin % 8.4 3.8 6.6 6.8 1.6 1 year 2014 were adjusted pro-forma due to the change in segment reporting. 21 For further analysis, this data (including quarterly figures) can be downloaded as an Excel file from the Dräger website
Business development Q4 Segments Europe Americas Africa, Asia, Australia Dräger Group Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 million million million million million million million million Order entry 397.9 401.6 129.8 162.9 158.8 190.7 686.4 755.3 Net Sales 454.7 447.9 165.6 181.6 214.9 236.5 835.3 865.9 EBITDA 76.3 67.5 19.1 21.5 38.8 37.0 134.1 126.0 EBIT 65.8 56.6 13.4 15.8 33.1 31.2 112.3 103.7 EBIT-margin 14.5 12.6 8.1 8.7 15.4 13.2 13.4 12.0 Capital Employed 1 575.9 593.8 294.4 338.2 373.3 412.7 1,243.6 1,344.7 ROCE 1,2 18.8 13.8 1.3-8.9 11.7 2.6 12.5 4.7 DVA 68.8 41.4-16.6-51.6 18.5-16.3 70.7-26.5 1 Values at due date 2 EBIT of the last twelve months 22
Business development 12M Segments Europe Americas Africa, Asia, Australia Dräger Group 12M 2017 12M 2018 12M 2017 12M 2018 12M 2017 12M 2018 12M 2017 12M 2018 million million million million million million million million Order entry 1,447.8 1,450.2 509.2 526.0 657.6 710.2 2,614.7 2,686.5 Net Sales 1,415.5 1,431.9 510.4 499.3 646.4 663.8 2,572.3 2,595.0 EBITDA 148.6 123.6 25.6-8.2 65.8 32.6 240.0 148.0 EBIT 108.1 82.0 4.0-30.2 43.7 10.8 155.7 62.6 EBIT-margin 7.6 5.7 0.8-6.0 6.8 1.6 6.1 2.4 Capital Employed 1 575.9 593.8 294.4 338.2 373.3 412.7 1,243.6 1,344.7 ROCE 1,2 18.8 13.8 1.3-8.9 11.7 2.6 12.5 4.7 DVA 68.8 41.4-16.6-51.6 18.5-16.3 70.7-26.5 1 Values at due date 2 EBIT of the last twelve months 23
Business Development medical and safety products 5y view 2014 2015 2016 2017 2018 Medical Order Entry million 1,569.8 1,646.0 1,662.6 1,683.7 1,723.4 Net Sales million 1,577.2 1,698.8 1,647.4 1,668.0 1,643.0 EBIT million 107.6 46.2 85.3 92.9 6.9 EBIT margin % 6.8 2.7 5.2 5.6 0.4 Safety Order Entry million 845.7 886.2 876.1 931.0 963.1 Net Sales million 857.5 910.1 876.5 904.3 952.0 EBIT million 71.0 20.5 51.6 62.8 55.8 EBIT margin % 8.3 2.2 5.9 6.9 5.9 For further analysis, this data (including quarterly figures) can be downloaded as an Excel file from the Dräger website 24
Business development Medical Q4 2017 Q4 2018 Change Change 12M 2017 12M 2018 Change Change million million % % (FX adj.) million million % % (FX adj.) Order entry 430.3 480.5 11.7 13.9 1,683.7 1,723.4 2.4 5.7 Europe 234.4 233.5-0.4 2.3 859.1 852.6-0.8 1.1 America 91.5 112.3 22.8 25.2 356.9 361.4 1.3 8.0 Africa, Asia, Australia 104.5 134.7 29.0 30.1 467.7 509.3 8.9 12.4 Net Sales 561.7 562.8 0.2 2.4 1,668.0 1,643.0-1.5 1.5 Europe 278.7 261.7-6.1-4.2 842.9 833.5-1.1 0.4 America 125.2 130.9 4.5 8.4 358.6 343.6-4.2 2.3 Africa, Asia, Australia 157.8 170.2 7.8 9.4 466.5 465.8-0.1 3.0 EBIT 88.2 63.0-28.5 92.9 6.9-92.6 EBIT-margin (%) 15.7 11.2 5.6 0.4 25
Business development Safety Q4 2017 Q4 2018 Change Change 12M 2017 12M 2018 Change Change million million % % (FX adj.) million million % % (FX adj.) Order entry 256.1 274.7 7.3 8.6 931.0 963.1 3.4 6.5 Europe 163.5 168.1 2.8 3.7 588.7 597.5 1.5 3.2 America 38.3 50.6 32.1 35.1 152.3 164.6 8.1 15.4 Africa, Asia, Australia 54.3 56.0 3.1 4.7 190.0 200.9 5.8 9.6 Net Sales 273.6 303.2 10.8 12.6 904.3 952.0 5.3 8.3 Europe 176.1 186.2 5.7 6.8 572.6 598.4 4.5 6.2 America 40.4 50.7 25.4 30.0 151.8 155.6 2.5 9.5 Africa, Asia, Australia 57.1 66.3 16.2 18.2 180.0 198.0 10.0 14.0 EBIT 24.1 40.6 68.8 62.8 55.8-11.2 EBIT-margin (%) 8.8 13.4 6.9 5.9 26
Functional expenses 5y view 2014 2015 2016 2017 2018 Change million million million million million % R&D -212.0-231.1-219.0-234.7-252.2 7.5 % of Net Sales SG&A -8.7% -749.2-8.9% -861.2-8.7% -762.1-9.1% -764.0-9.7% -791.1 3.5 % of Net Sales Other operating income Functional Expenses total -30.8% -6.6-967.8-33.0% -6.1-1,098.4-30.2% -18.1-999.2-29.7% 6.7-992.0-30.5% 1.0-1,042.2 5.1 % of Net Sales Headcount 1-39.7% 13,737-42.1% 13,936-39.6% 13,263-38.6% 13,739-40.2% 14,399 4.8 1 Values as of reporting date 27
Cash-flow statement 2014 2015 2016 2017 2018 Change million million million million million % Group net profit 104.7 33.3 81.7 98.5 34.9-64.6 Change in inventories -1.2-5.4 17.4-30.0-76.9 >-100 Change in receivables 1.6-44.6 31.3-22.4-41.0-83.3 Change in payables 25.2-22.8-10.2 22.2-2.3 >-100 Depreciation and amortizatio 77.0 84.2 85.8 84.2 85.3 1.3 Other operating cash flow ite -19.3-4.8-10.6-9.3 4.2 >100 Operating cash flow 188.0 39.9 195.3 143.3 4.1-97.1 Investing cash flow -102.6-167.0-77.3-65.5-63.5 3.1 Free cash flow 85.4-127.1 118.1 77.8-59.4 >-100 Financing cash flow -26.3-1.3-70.0-41.9-6.2 85.3 Change in cash 1 59.0-128.4 48.1 35.9-65.6 >-100 Cash and cash equivalents 296.9 172.8 221.5 247.6 179.6-27.5 1 Change in cash and cash equivalents, i.e. without any effect of exchange rates 2 Values as of reporting date 28
Consolidated balance sheet 31 Dec 2017 31 Dec 2018 Change million million % Intangible Assets 342.5 336.0-1.9 Property, plant and equipment 432.3 429.1-0.7 Other noncurrent assets 154.0 168.6 9.4 Noncurrent assets 928.8 933.7 0.5 Inventories 387.7 459.2 18.4 Trade receivables 669.2 703.9 5.2 Other current assets 121.1 133.9 10.6 Cash and cash equivalents 247.6 179.6-27.5 Current assets 1,425.5 1,476.5 3.6 Total assets 2,354.4 2,410.2 2.4 29
Consolidated balance sheet 31 Dec 2017 31 Dec 2018 Change million million % Equity 1,068.3 1,080.7 1.2 Liabilities from participation certificates 23.8 24.8 4.5 Provisions for pensions and similar obl 313.0 339.3 8.4 Noncurrent interest bearing loans 137.8 125.1-9.2 Other noncurrent liabilities 114.0 117.0 2.6 Noncurrent liabilities 588.6 606.2 3.0 Current Provisions 195.1 201.3 3.2 Current loans and liabilities to banks 71.5 90.1 26.0 Trade payables 202.9 201.4-0.7 Other current liabilities 228.0 230.5 1.1 Current liabilities 697.4 723.3 3.7 Total equity and liabilities 2,354.4 2,410.2 2.4 30
Earnings per share Net profit (less the share of earnings attributable to non-controlling interests) 2016 2017 2018 '000 81,391 98,530 34,355 Scenario: 100% pay-out ratio 100% 100% 100% = tax benefit from pay-out to PCs* '000 7,888 9,493 3,302 Earnings attrib. to shares and PCs (incl. tax benefit) '000 89,279 108,023 37,657 100% Earnings attributable to PCs** '000 28,425 34,420 11,973 32% Earnings attributable to shares '000 60,855 73,603 25,685 68% EPS (common share) 3.40 4.12 1.42 EPS (preferred share) 3.46 4.18 1.48 Scenario: actual/proposed pay-out ratio 5.3% 11.6% 12.7% tax benefit from pay-out to PCs* '000 341 960 341 Earnings attrib. to shares and PCs (incl. tax benefit) '000 81,732 99,490 34,696 100% Earnings attributable to PCs** '000 1,236 3,482 1,236 4% Earnings attributable to shares '000 80,496 96,008 33,460 96% EPS (common share)*** 4.51 5.38 1.86 EPS (preferred share)*** 4.57 5.44 1.92 + * tax benefit arises from the tax deductible pay-out to the PCs; please refer to Annual Report 2017, note 19 ** without minimum dividend (as interest, the minimum dividend is already included in net earnings) ** the EPS is not calculated in accordance with IAS 33 PCs = participation certificates (Genussscheine) 31
Innovation rate Share on new products and upgrades medical 1 45% 40% Net sales Upgrades New products 35% 30% 25% 20% 15% 10% 34% 28% 32% 22% 27% 20% 20% 18% 26% 22% 31% 25% 5% 0% 6% 2013 10% 2014 7% 2015 2% 2016 4% 2017 6% 2018 1 Launched in the last 3 years; products are regarded as new, if they enable Dräger to either enter a new market segment or if products are regarded as completely new according to Dräger s customers and Dräger s sales force. Upgrades are those products, which serve existing Dräger markets, but their functionality is perceived as significantly enhanced by Dräger s customers and Dräger s sales force. 32
Financial calendar 2019 March 7, 2019 - Final 2018 figures Conference call April 25, 2019 - Report for the first three months 2019 Conference call May 10, 2019 - Annual shareholders' meeting, Lübeck, Germany August 8, 2019 - Report for the first six months 2019 Conference call October 30, 2019 - Report for the first nine months 2019 Conference call 33
Contact Melanie Kamann Corporate Communications Thomas Fischler Investor Relations Drägerwerk AG & Co. KGaA Drägerwerk AG & Co. KGaA Moislinger Allee 53 55 Moislinger Allee 53 55 23558 Lübeck, Germany 23558 Lübeck, Germany Tel +49 451 882-3998 Tel +49 451 882-2685 Fax +49 451 882-3944 Fax +49 451 882-3296 Mobile +49 170 8558152 Mobile +49 151 12245295 melanie.kamann@draeger.com www.draeger.com thomas.fischler@draeger.com www.draeger.com 34