Draegerwerk Stock

Ladies and gentlemen, welcome to the Drägerwerk Q3 2026 Earnings Call. I am Mattilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Stefan Drager, CEO. Please go ahead.

Good afternoon, and thank you for joining our conference call on our results for the first 9 months of 2026. With me today are Gert-Hartwig Lescow, our CFO; Tom Fischler; and Nikolaus Hammerschmidt from Investor Relations. After the presentation, we will be ready to take your questions.

Let's get started on Page 5 with the business highlights. With continued good demand and excellent net sales development, we delivered a strong top line in the first 9 months of 2026. At around EUR 2.7 billion, order intake was noticeably above the high prior year level, while net sales grew by around EUR 110 million to around EUR 2.5 billion. Earnings rose by roughly EUR 35 million to around EUR 112 million, lifting our EBIT margin to 4.6%. This was mainly due to customs refunds. But even without those one-off effects, there is still an improvement of around EUR 11 million.

As a result of the significant increase in earnings and continued effective working capital management, our free cash flow rose considerably to around EUR 114 million, coming from around EUR 16 million in the prior year. As communicated last week, we confirmed our guidance. I will come back to this in our outlook at the end of the presentation.

With that, I turn over to Gert-Hartwig for a review of our financials. Gert-Hartwig, please.

Thank you, Drager, and welcome, everyone. Please turn to Page 7 for the group overview. As usual, growth rates are quoted on a currency-adjusted basis. As Stefan Drager said, we continue to see good demand for our technology for life. Order intake rose by 3.6% in the first 9 months. This growth was supported by all regions except the Americas, which saw a significant decline as a result of a major order for hospital infrastructure systems from Mexico in the second quarter of 2025. In the third quarter, order intake increased by 7%, mainly due to strong development in Germany and APAC. Compared to order intake, net sales showed higher dynamics with an increase of 5.3% in the first 9 months, driven by Germany, EMEA and the Americas.

In Q3, net sales were 1% above the prior year quarter as growth in Germany, EMEA and APAC was largely offset by a decline in the Americas. This decline partly reflects the higher prior year base rather than a change in underlying demand. In 2025, medical deliveries, particularly in the U.S., were concentrated in the second half of the year. The gross margin benefited from customs refunds by around 1 percentage point and increased by 1.7 percentage points to 46.8%. Functional expenses rose by around EUR 55 million or 6.1% in the first 9 months, driven by higher costs for personnel, logistics and IT.

In Q3, the increase was more pronounced at 8.7%, mainly reflecting the same cost drivers. Looking closer, the increase in personnel expense reflects both structural and one-off effects. Since Q2 2026, higher expenses from the ongoing collective bargaining agreement have been a structural driver on top of one-off accruals for the share price-linked variable management compensation. In addition, logistics expenses rose particularly due to higher costs for air and container freight and ongoing geopolitical tensions in the Middle East. Furthermore, onetime project-related expenses were incurred in connection with taking over the newly leased international distribution center in Lübeck to ensure our ability to deliver during the transition phase.

We are working to offset these pressures and our target remains unchanged to keep full year expense growth below net sales growth. Our EBIT in the first 9 months increased by almost half to around EUR 112 million, lifting our EBIT margin from 3.3% to 4.6%. EBIT for the first 9 months included one-time effects of EUR 27.9 million from customs refunds. Of this amount, EUR 7.8 million was attributable to the second quarter and EUR 20.1 million to the third quarter. A portion of these refunds totaling EUR 3.8 million relates to customs expenses from the current fiscal year and therefore, has no impact on earnings in comparison to the prior year.

At the same time, customs expenses totaling EUR 25.8 million were incurred in the U.S. during the current year, which are not refundable under current law. So just to be clear, the net effect on tariffs year-to-date was negative with roughly minus EUR 2 million. In the third quarter, EBIT declined from around EUR 57 million to EUR 48 million. The EBIT margin amounted to around 5.6% after 6.8% in the prior year quarter. Lower net sales growth was offset by a disproportionate increase in financial costs.

At the same time, the comparative EBIT level was high. In the third quarter of 2025, EBIT had more than doubled due to significant sales growth characterized by catch-up effects and moderate cost development. Due to the significant increase in EBIT, our rolling 12-month EBITDA also rose considerably from around EUR 49 million to around EUR 117 million.

Let us now take a closer look at the development of the Medical division on Page 8. At around EUR 1.5 billion, order intake in the first 9 months was 3.5% below the prior year figure. The reason for this was the Mexico effect, it shows in the steep year-over-year decline in the Americas region. Adjusted for this, order volume in the Medical division would have remained almost stable. In EMEA and APAC, demand remained nearly unchanged, while Germany recorded a noticeable increase.

In the third quarter, order intake was 3% lower than the prior year figure. Growth in Germany, the Americas and APAC was offset by a significant decline in EMEA. Net sales increased by 4.4% to around EUR 1.4 billion in the first 9 months. This was driven by Germany, EMEA and the Americas. In Q3, net sales declined by 1.4%.

The main reason for this was the significant decline in the Americas, which was partly attributable to the high prior year level. In the third quarter of 2025, we were able to accelerate deliveries of anesthesia machines in the U.S. again. Despite negative currency effect, the gross margin improved by 2.2 percentage points to 45.2% due to customs refunds and a favorable product mix and country mix. Functional expenses rose by around 6.5% in the first 9 months and by 7.3% in the third quarter. This is primarily due to a higher personnel expense and freight costs.

Our EBIT margin in the Medical division stood at minus EUR 9.7 million after 9 months, coming from minus EUR 22.7 million in the prior year period. The EBIT margin, therefore, rose from minus 1.7% to minus 0.7%. In Q3, EBIT fell from EUR 11 million to EUR 4.5 million. The EBIT margin amounted to 1.0% after 2.3% in the prior year quarter. And our rolling 12-month DVA increased significantly by EUR 31.9 million to minus EUR 13.4 million.

I will now turn to our Safety division. We're on Page 9. Order intake in the first 9 months rose significantly by 13.1%. This was supported by all product areas and regions. In Germany, orders grew by almost 28% due to a major order for Defense Solutions. The Americas and APAC also recorded a disproportionate growth. In the third quarter, order momentum picked up even further, thanks to the good development in all regions and the major order in particular, the division recorded an impressive increase of 20%.

In addition to Germany, the Americas and APAC also delivered significant growth. Net sales were clearly above the prior year level with an increase of 6.5% in the first 9 months. This was particularly driven by EMEA as well as Germany and the Americas. The APAC region recorded a slight decline. In Q3, net sales increased by around 4% and the decline in the Americas was more than offset by the positive development in the other regions. Despite negative currency effect, the gross margin improved by 1.1 percentage points to 48.8% due to a better product mix and customs refunds. Functional expenses increased by 5.4% in the first 9 months and by 11.1% in the third quarter. This was largely due to higher personnel costs and freight costs.

Our EBIT in the Safety division increased significantly in the first 9 months from around EUR 100 million to around EUR 122 million. This lifted the EBIT margin from under 10% to over 11%. In Q3, EBIT was around EUR 2 million below the prior year figure at around EUR 44 million. The EBIT margin consequently came down from 12.6% to 11.4%. Rolling 12-month EBITDA improved by around EUR 36 million to around EUR 131 million.

Let's move on to the development of our cash flow and other key figures on to Slide 10. In the first 9 months, our operating cash flow increased significantly by around EUR 82 million to around EUR 175 million. In addition to the growth in earnings, which was mainly driven by the customs refund, this was particularly due to effective working capital management, especially better development of trade receivables and payables. Higher operating cash flow as well as lower investment outflow led to an improvement in free cash flow by around EUR 98 million. Going forward, we expect free cash flow to continue to develop positively.

Looking at our net financial debt, we had a significant reduction by around EUR 116 million to around EUR 106 million. 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 0.3. At the beginning of the first quarter, we repaid a maturing note loan in the amount of EUR 50 million with our own liquidity.

Our 12-month rolling return on capital employed rose from 12.0% to 15.6%. This was due to the higher EBIT in that period. At around EUR 736 million, net working capital was 2% higher than in the prior year. Our equity ratio as of September 30 stood at around 52%, around 1 percentage point above the year-end level of 2025.

Now I hand back to Stefan Drager for our outlook on Page 12.

Ladies and gentlemen, 2026 has been very successful for Dräger so far. After the first 9 months, we confirm our last guidance for the full year. We continue to expect net sales growth of 2% to 6%, net of currency effects and an EBIT margin of 6% to 8% for the full year of 2026. As a reminder, we will present our Ambition 2030 at our Capital Markets Day on November 18 in Lübeck. Please feel invited. The event will also be streamed live via webcast. You can find all the details on the Investor Relations pages on our website. We are looking forward to your participation.

With this, I would like to end the presentation and hand over to the operator to open the floor for your questions.

[Operator Instructions]

The first question comes from the line of Oliver Reinberg from Kepler Cheuvreux.

I have 3 questions from my side, if I may. Firstly, can you just talk a bit more on the kind of medical margin? I mean, I think when we strip out the tariff refunds effect, it was even down in the 9 months compared to the last year. And I guess to move towards the kind of 10% margin ambition, Medical has to contribute meaningfully. So can you just provide some kind of color here on the main building blocks to improve the Medical margins going forward, please?

Secondly, also Medical and the orders, I think these were flat now in the first 9 months, excluding the Mexico effect. Can you just talk a bit more detail what held that back and quantifying the Middle East impact and probably talk around the kind of product groups and what kind of visibility you have that this kind of order growth is going to accelerate going forward?

And then thirdly, just on functional costs. I guess if you want to increase functional costs below the growth of sales, that means a quite material decline in Q4. Is that correct? Because I think we have seen like 8% to 10% growth of functional costs in Q2 and Q3. Can you just confirm that and give us any kind of color what was the kind of magnitude of this, what we can probably call special items in terms of the effect from the share price increase and onetime project cost?

So first question is for the Medical margin. Without going into like too much detail as we're going to share in more detail our road map for margin improvement is, of course, for the -- so firstly, your observation is obviously correct that the margin improvement for the group includes the margin improvement on the Medical, and that's driven by a couple of factors. That includes net sales growth also supported by our portfolio by better standing in the monitoring after the warning letter that includes higher efficiency in research.

And the tariff reimbursement.

I understood the question was going forward for the margin improvement.

Yes.

Or maybe you can clarify that...

I think to your first and your second question together. One was for the year-to-date and the other was the order development going forward.

Both are basically looking ahead, like what are the drivers for the improvement going forward, that would be most helpful.

So for the -- I would -- Stefan Drager speaking for the order development. I would say there is no particular product category or region that stands out there, let's say, Germany is doing relatively well. China still below our expectations, but no particular big thing that is deviating from the normal. And also there, we expect for the remainder of the year that the order intake and sales will be better and the fourth quarter will be the best quarter. We have no indication to believe that any unusual or deviation for any product group or region should occur. So -- and for the margin, yes, year-to-date, it does include the tariff reimbursement other than that, it is on a good track and it's slightly improved, but no big thing has happened so far or is expected to happen for the remainder of the year.

And to your other question, firstly, your observation is accurate. That requires a tight tariff spending in the fourth quarter. And for the third quarter alone, roughly 1/3 of the increase is due to, say, one-off effects either because they occurred in the third quarter of '25 and did not repeat themselves positively or items like the burden from the shares that occurred in the third quarter this year, but will not repeat themselves.

The next question comes from the line of Harald Hof from MWB Research.

I've got 2 questions. The first one is the order intake in Germany. It was quite strong. Could you provide more details on the contract from the defense sector? What is its size and value? And do you expect further orders in this area? And the second question is regarding the FDA warning letter and following the closure of this letter, what are the next steps? And what can we expect for 2027 and potentially beyond?

The order intake in Germany, as you said, that's to a large degree driven by a one-off order from one customer that will be delivered over the next few years. So it will not turn into net sales as our normal order entry within like a short amount of time, but over a period of 2 to 3 years. And the total volume is in the low double-digit million.

And yes, we are working on more similar orders from the defense sector for multiyear contracts that can be even a larger magnitude, but that's to be seen.

And in total, as you are probably aware, our goal is to increase our defense business from roughly EUR 100 million, which we had in around '25 to around EUR 300 million, and that goal is unchanged. And the current order entry well supports that ambition.

For the warning letter, that after almost 7 years is now lifted. And so we are prepared to reap the benefits from the approvals of the products and from no longer employing resources on all the work that's associated with satisfying the FDA to fulfill all the requirements. So that's done. What it means for the future, stay tuned for our Capital Markets Day. So if we ask for more patience and please visit us or join us on the conference. We will show it in great detail.

[Operator Instructions]

We now have a question from the line of Jean-Marc Mueller from JMS Invest AG.

Most have been answered. But on the functional cost in Q4, I have to emphasize the math here. I mean, when you're talking about not growing faster than sales, that implies, if I do the math, that Q4 functional cost will be roughly at the level of Q3. And I understand that you just mentioned that of the EUR 30 million increase, roughly EUR 10 million was kind of a one-off in Q3 and will not repeat in Q4. But still, typically, we see quite a step-up in functional costs in Q4. So to have a similar level in Q4 as in Q3 would imply very tight cost management. Can you elaborate maybe a little further or just give us a bit more confidence that you can achieve this number?

Well, at this point, as I said, there are some one-off effects that will go away, and they will provide for some increase in the fourth quarter. And as you said and as you imply, that requires a tighter spending management in the Q4. There's not much more that I can add at this point.

Okay. Okay. And then one thing went nearly a little unnoticed, it's that you changed your net debt guidance for the year to basically a net debt of [ EUR 0 million ] to minus EUR 50 million. You stood at minus EUR 106 million after 9 months. So that implies a free cash flow in Q4 of something between EUR 56 million to EUR 106 million. Is this how we have to look at cash flow in Q4?

I think so. I'd probably have to get back to you on the math there. We'll get in touch with [indiscernible]

Okay. It just implies a super strong free cash flow, not just in Q4, but for the whole year. And my add-on question, obviously, then would be what -- I mean, ideas will be with the dividend that is going to be paid out in '27.

Well, the dividend policy will remain unchanged, and that is we will distribute at least 30% of our net income as dividend.

[Operator Instructions]

We have a follow-up question from the line of Oliver Reinberg from Kepler Cheuvreux.

Two, if I may. Firstly, on China, can you just talk to what you actually see on the ground in China in terms of dynamics? Some people are quoting some kind of improvements. It was my understanding you don't see that. And also, what is the kind of activities of the Chinese player globally? Where do you see the most? And do you observe any kind of change in dynamics there? That would be question number one. And secondly, just thinking about 2027, is there any kind of -- from a big picture perspective, any kind of relevant tail and headwinds that we should be aware of?

So on China, as I already said, it's below our expectations and no growth for us. And we see that also in China, our Chinese competitors also suffer from -- what we know from both from Mindray and our -- as well as our development partner, Edan, they both have a decline, a double-digit decline in their domestic sales and have to take, also, some measures to reduce their spending and cost because of the domestic sales in China decline. That makes them even more dangerous and stronger in some other parts of the world, in particular, in CSA, so Latin America and Africa, some parts of Asia to a lesser extent in Europe and North America.

So in -- I can say in North America, we hired their Chief sales person, now working for us and gives us a lot of good insights on the strategy and opportunities for the future, which we again enlighten and highlight on the Capital Markets Day to come on November 18. And what we do in addition. So our Chief Sales Officer traveled to China together with the German Minister of Economy, Katherina Reiche, met the Chinese government on a federal level and also on a provincial level.

And surprisingly, the Guangdong Province is supporting us, asking local and local tenders to promote Dräger in the procurement process. So the business impact is not yet very relevant. As I say, it's overall below our expectations, but we don't give up for China, neither domestically in China nor in the competition around the world. And now next question on the headwind...

What kind of headwinds we expect for '27? Actually both tail and headwinds, whatever is worth considering.

So maybe some headwinds from supply chain shortages coming from this AI hype may spill over to us. So that could happen. And some -- so currency is also always a factor. At this point, it's neutral. It's neutral to us, which is -- so not bad, it could be worse.

Okay. And any tailwinds to consider any kind of positive from a big picture perspective? Or business as usual?

Defense, as we already touched before, we have some pretty sizable opportunities. Then if I may say, we are working on a very prestigious project, the FDNY, the Fire Department of New York City, the biggest in the world, which has been in the hands of our market company, Scott, for 70 years, and there is a tendering process right now and Scott is out, and we are still in the shortlist. You can't count on it, please. So it's -- like you said, would be a tailwind or a bonus on top of the -- what we are doing, motivated to make it happen.

[Operator Instructions]

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Stefan Drager for any closing remarks.

Well, ladies and gentlemen, thank you very much for joining us today on our 9 months conference call and look forward to see -- hopefully, many of you on the Capital Markets Day on November 18, either in person or in the live stream. So it will also be possible to ask questions online and see -- get the answers online in real time. So with that, I close the conference. Thank you, and have a pleasant afternoon and evening.

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 your lines. Goodbye.

Ladies and gentlemen, welcome to the Drägerwerk Q2 2026 Earnings Call. I'm Moritz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stefan Drager, CEO. Please go ahead, sir.

Good afternoon, and thank you for joining our conference call on our financial results for the first half of 2026. I have with me today Gert-Hartwig Lescow, Group CFO; as well as Thomas Fischler and Nikolaus Hammerschmidt, both Investor Relations. We would like to take you through the results with 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 5 with the business highlights. With continued good demand, excellent net sales development and significantly higher profitability, we delivered a strong business performance in the first 6 months of 2026. At around EUR 1.75 billion, order intake was slightly above the high prior year level, while net sales grew by more than EUR 90 million to around EUR 1.6 billion. Thanks to the good operating business, the improved gross margin and some customs refunds, -- our EBIT more than tripled to around EUR 64 million, lifting our EBIT margin to 4.0%.

As a result of the good earnings performance, our free cash flow rose considerably to around EUR 16 million from minus EUR 42 million of the prior year. As communicated last week, we raised our guidance. I will come back to this and our outlook at the end of the presentation. With that, I turn over to Gert-Hartwig for a review of the financials. Gert-Hartwig, please.

Thank you, Stefan, and welcome, everyone. Please turn to Page 7 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. Order intake rose by 1.8% in the first 6 months. This was driven by all regions, except the Americas, which saw a significant decline as a result of a major order for hospital infrastructure systems from Mexico in the second quarter of 2025.

Despite this substantial base effect, our order entry for the group was due to a very strong development in safety on par with the prior year's quarter. Compared to order intake, net sales showed a much higher dynamics with an increase of 7.7% in the first half of the year and 8.5% in the Q2.

In both reporting periods, the decline in APAC was offset by significant growth in EMEA and the Americas as well as a noticeable increase in Germany. Our gross margin in the first 6 months improved by 1.7 percentage points to 46.5%, supported by both divisions. Functional expenses rose by EUR 24 million or 4.8% in the first half of the year, driven by higher personnel costs evenly split between Germany and the rest of Europe.

Freight costs and marketing expenses each accounted for roughly 1/8 of the rise. In Q2, the increase was more pronounced at 8%, mainly reflecting the same cost drivers in the second quarter. Importantly, in both periods, functional expenses grew slower than net sales and keeping it that way is our target for the full year. Looking ahead, we are watching our headcount development closely. Freight rates also remain a headwind due to geopolitical tensions in the Middle East.

We are working to offset these pressures, and we remain confident in keeping full year expense growth below net sales growth. Our EBIT in the first 6 months rose significantly from around EUR 20 million to around EUR 64 million, lifting our EBIT margin from 1.3% to 4.0%.

In the second quarter, our EBIT more than doubled, rising from around EUR 20 million to around EUR 46 million. Consequently, our EBIT margin climbed from 2.6% to 5.4%.

In addition to the strong net sales growth, the operational business supporting a higher gross margin and slightly better currencies. Earnings were driven by a one-off of EUR 7.8 million from the customs refunds received in Q2 recognized in our cost of goods sold.

Shortly after the half year balance sheet date, we received additional customs refunds of around EUR 14.2 million, including interest payments. This one-off will be recognized in our Q3 earnings. We also consider further customs refunds of around EUR 7 million to EUR 9 million to be possible. However, it is currently not clear whether, when and in what actual amount such refunds will be received.

Thanks to the significant increase in EBIT, our rolling 12-month DVA also improved considerably from around EUR 17 million to around EUR 129 million. Let us now take a closer look at the development of the Medical division on Page 8. At around EUR 956 million, order intake in the first 6 months was 3.7% below the prior year figure. As I mentioned before, the main reason for this was the Mexico effect.

It shows in the steep year-over-year decline in the Americas region. Adjusted for this, order volume in the Medical division would have remained around stable. Demand for anesthesia machines and ventilators as well as patient monitors declined while warming therapy devices, consumables, accessories and services went up.

APAC recorded a slight decline while demand in Germany and EMEA increased noticeably. In the second quarter, the Mexico effect had a significantly stronger impact than in the first half of the year, driven by the considerable decline in the Americas, order intake decreased by 11.5%.

In Germany and APAC, demand was also below the prior year figure, while EMEA recorded strong growth. Net sales rose by 7.6% to around EUR 898 million in the first half of the year. In Q2, growth was even stronger at 9.7%. In both reporting periods, the Americas were by far the biggest growth driver, followed by EMEA and Germany.

Due to a favorable product mix, our gross margin in the first 6 months expanded by 2.1 percentage points to 44.6% despite negative currency developments. Functional expenses rose by around 6.2% in the first half of the year and by 9.6% in the second quarter. This is primarily due to higher personnel expenses and freight costs.

Our EBIT in the Medical division was still negative at minus EUR 14.3 million after 6 months, but it improved significantly coming from minus EUR 33.7 million in the prior year period. This also applied to the EBIT margin, which rose from negative 4.0% to negative 1.6%.

In Q2, EBIT came back to positive territory at EUR 4.3 million after negative EUR 5.9 million in the prior year quarter, lifting the EBIT margin from negative 1.4% to positive 0.9%. Our rolling 12-month DVA improved significantly by EUR 54.4 million to around minus EUR 5.4 million.

I will now turn to our Safety division. We are on Page 9. Order intake in the first 6 months rose significantly by 9.5%, driven by strong demand in all product areas and regions. Respiratory and personal protection products, gas detection and occupational health and safety equipment were particularly in demand. Services also made a significant contribution to growth.

Above all, the Americas, Germany and APAC showed strong momentum. In the second quarter, order momentum picked up even further. The division recorded strong order growth of an impressive 19.8%, thanks to very good development in all regions, particularly the Americas and APAC. Net sales rose significantly by 7.8% in the first half of the year, driven by considerable growth in the Americas and EMEA as well as an increase in Germany.

The APAC region recorded a decline. In Q2, net sales increased by around 7% due to the positive development in the Americas and EMEA. In Germany, net sales were just below the prior year figure, while APAC developed more weakly. Despite higher customs expenses, our gross margin in the first 6 months increased by 1 percentage point.

This was in part attributable to higher capacity utilization and lower negative currency effects. Functional expenses were 2.7% above the prior year level, primarily due to the increase in personnel and marketing expenses and freight costs. In the second quarter, functional expenses increased by 5.6%.

Here, the development of personnel cost was the main driver. Our EBIT in the Safety division increased significantly in the first 6 months, EUR 54 million to EUR 78 million. This lifted the EBIT margin from around 8% to around 11%. In Q2, EBIT grew from around EUR 26 million to around EUR 42 million. The EBIT margin consequently rose from 7.6% to 11.3%. Rolling 12 months DVA improved by around EUR 57 million to around EUR 134 million.

Let's move on to the development of our cash flow and other key figures on to Slide 10. In the first 6 months, we significantly improved the operating cash flow by around EUR 43 million to around EUR 60 million. In addition to the increase in earnings, this was mainly due to lower income tax payments and effective working capital management, especially better development of trade payables and contract liabilities. Higher operating cash flow as well as lower investment outflow led to an improved free cash flow by EUR 58 million. Going forward, we expect free cash flow to continue to develop positively.

Looking at our net financial debt, we had a significant reduction by around EUR 79 million to around EUR 190 million. 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 0.5.

At the beginning of the first quarter, we repaid a maturing note loan in the amount of EUR 50 million with our own liquidity. Our 12-month rolling return on capital employed rose from 9.9% to 15.7%. This was due to the high EBIT in the past 4 quarters. At around EUR 798 million, net working capital was 8% higher than in the prior year. Our equity ratio as of June stood at around 52%, around 1 percentage point above the year-end level of 2025.

With that, I hand back to Stefan Drager for our outlook on Page 12.

Ladies and gentlemen, 2026 has been very successful for Dräger so far. Our strong operating business in the first 6 months and usually higher dynamic in the second half make us optimistic about the further course of the business. Therefore, we continue to expect net sales growth between 2% and 6% net of currency effects.

Regarding our earnings guidance, we have made 2 positive adjustments in recent weeks. Due to the strong operating performance and the customs refunds received in the second quarter, we raised the lower end of the EBIT margin to 5.5% 2 weeks ago. Following the additional custom refunds received after the balance sheet date, we raised our guidance once more, and we now expect an EBIT margin between 6% and 8%. But even without any refunds, which are an unplanned margin tailwind in this year, we are going to perform well in 2026.

This resilience is a result of our shift from net sales growth to earnings growth, which we started 10 years ago. Since then, we have been making very good progress in improving our profitability each year. And we are well on track to reach our ambition to improve the EBIT margin by 1 percentage point per year to reach 10% by the year 2030.

Now is the right time to sharpen our equity story and to explain our markets and our position and the resulting growth and margin improvement. We will, therefore, host a Capital Markets Day for institutional investors and analysts on November 18, 2026, at our headquarters here in Lübeck.

The entire Executive Board will present, followed by live on-site demonstrations of our innovations and use cases. Invitations will be sent out shortly. We look forward to welcoming you in person on our premises in November.

With this, I would like to end the presentation and hand over to the operator to open the line for your questions, please.

[Operator Instructions]

And the first question comes from Oliver Reinberg from Kepler Cheuvreux.

Three questions from my side. First one to be on safety. I mean, the division continues to perform quite strongly, both in terms of top line and also margin outlook. I was wondering if you can provide us with some thoughts like how sustainable this momentum is? And also in terms of margin, we are now probably approaching the full year all-time high peak. I mean, is this a kind of level from where you see further expansion potential?

Secondly, just on cost inflation. I mean, most companies now see more headwinds driven by the kind of geopolitical challenges. So I was wondering if you can provide some kind of color to what extent costs have also increased on your side? And then thirdly, I think in your prepared remarks, you also talked about that the order intake in medical in therapy devices is a bit declining.

I wonder if you can share some kind of thoughts in terms of what we see in the market. I mean GE is about to launch a new anesthesia device in H2 and monitoring people talk about larger size deals and there was also kind of change in ownership. Had any of this an impact on your kind of demand level here?

Yes. Okay. First question, Mr. Reinberg, on safety. Yes, I would absolutely say the development in the profitability and sales growth in the Safety division is sustainable. So from the very different markets that we serve, by far, the largest part is very solid and healthy and sound.

Some, like the chemical industry, it's a little bit weak. However, defense is picking up overall, yes, it's sustainable and our expectation it should continue to develop as we see. However, maybe going directly to your third question, I see medical should develop so even faster, in particular, in its profitability in the near to midterm future. So the difference between the two should become lesser and a larger part of the Dräger overall, the growth development and profitability is carried by the Medical division.

What other players are doing that is sometimes a little bit different from what we are doing, but we see as well here in the medical environment, markets are intact. And the general development of new technology, including the service-oriented device connectivity that we are pushing are enabling the customers to develop further for assisted therapy and automation. And in times where personnel is crucial, that's a very good thing to do as we can see more and more as we are bringing this to the market that is very well received.

So on that side, a very positive outlook. Your second question on the geopolitical, say, effect on Dräger, does it say, result in an induced hike of expenses or cost? Yes, I would say we can no longer say that it goes unnoticed. So the blocking of the Strait of Hormuz and the Iran conflict do have some limited effect on Dräger.

We see currently higher logistics costs in air and sea freight, where the rates have gone up all over the globe with an expected impact of up to EUR 10 million for the full year 2026.

And in the region, we see a little bit lower top line as the business is muted, it is becoming difficult to travel in the area. However, it's relatively small given the comparison to the overall cost and size of the business of Dräger.

But it does have some limited effect in the meantime. I remember, I predicted in the first call we had this year that it will last for the minimum -- for the remainder of the year. And that is what we are currently seeing, and it will take years to rebuild the capacity. Whenever that commences, the rebuilding of the refineries and so then we will benefit for sure.

That's very helpful. And if I just can follow up on the safety margin. I mean, we are approaching now kind of a peak level most likely this year. I mean, is this the peak? Or do you see further expansion potential from there?

We will discuss this further on the Capital Markets Day with you, hopefully in person, Mr. Reinberg. So in general, I would not say it's the peak. And from now, we will see a decline. So that's for sure. So I don't fear that.

[Operator Instructions]

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Stefan Drager for any closing remarks.

Well, it appears that you are saving all your questions for the discussion in November. So I look very much forward to meet as many as possible from you in person by then.

So until then, thank you very much for your interest and for being with us today, and have a pleasant summertime and look forward to meet you again in the not-too-distant future, ideally in November.

Thank you very much, and goodbye.

Ladies and gentlemen, the conference has now concluded. Thank you for joining, and have a pleasant day.

Ladies and gentlemen, welcome to the Drägerwerk Q1 2026 Earnings Call. I am Sandra, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] 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 3 months of 2026. I have with me today Gert-Hartwig Lescow, CFO; as well as Tom Fischler and Nikolaus 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 5 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 3 months of 2026. Order intake rose to around EUR 865 million, while net sales came back to growth at around EUR 756 million. Thanks to the good operating business, the improved gross margin and lower expenses, our EBIT increased significantly to roughly EUR 18 million, lifting our EBIT margin to 2.4% for the first quarter.

As a result of the good earnings performance, our free cash flow rose considerably to more than EUR 44 million. As communicated 2 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 3 years. This shows the good progress we have achieved in our developing the business and improving our profitability.

With that, I turn over to Gert-Hartwig for a review of the financials. Gert-Hartwig, please.

Thank you, Stefan, and welcome, everyone. Please turn to Page 7 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. Nominally, functional 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 collective agreement in the prior year. If we exclude this base 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 EUR 0.4 million to EUR 17.9 million.

Consequently, our EBIT margin increased from 0.1% to 2.4%. Finally, our rolling 12 months DVA improved considerably by roughly EUR 68 million to around EUR 106 million. Let us now take a closer look at the development of the Medical division on Page 8.

Order intake grew by more than 5% to around EUR 480 million, 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. Net sales in the past quarter rose by more than 5% to around EUR 480 million, 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 a slight decline. Our gross margin expanded by around 2 percentage points from 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.

Our EBIT in the Medical division increased significantly from minus EUR 27.7 million to minus EUR 18.5 million, lifting the EBIT margin from minus 6.7% to minus 4.4%. Our rolling 12-month DVA improved significantly too by roughly EUR 53 million to around minus EUR 14 million.

I will now turn to our Safety division. We are on Page 9. 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.

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 points to around 49%.

The main reasons for this were the lower profitability due to the product mix and negative currency effects. Functional expenses were 0.2% below the prior year level, particularly due to lower R&D expenses. Our EBIT in the Safety division increased significantly from around EUR 28 million to around EUR 36 million, lifting margin from roughly 9% to around 11%. Rolling 12-months DVA improved by roughly EUR 15 million to around EUR 120 million.

Let's move on to the development of our cash flow and other key figures on to Slide 10. In the first 3 months, we significantly improved the operating cash flow by around EUR 6 million to roughly EUR 62 million. 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 EUR 12 million.

Going forward, we expect free cash flow to continue to develop positively. Looking at our net financial debt, we had a significant reduction by around EUR 56 million to around EUR 85 million. 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 EUR 50 million with own liquidity. Our 12-month rolling return on capital employed rose from 11.5% to 15.2%. This was due to the higher EBIT in the past 3 quarters. At around EUR 745 million, net working capital was around 7% higher than in the prior year. 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 Dräger. Our 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 5% and 2% to 6% net of currency effect and an EBIT margin of 5% to 7.5%.

With this, I would like to end the presentation and hand over to the operator to open the floor for your questions, please.

[Operator Instructions] 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. Last chance, any questions? Please ask them either now or join us next week at our Annual General Meeting for the Shareholders.

There are still no questions, gentlemen.

Yes. Well, then thank you very much for joining us today, for your interest in Dräger, and have a pleasant afternoon and get in a good way into the next month into May this coming weekend. Thank you and bye-bye.

Ladies and gentlemen, welcome to the Drägerwerk Full Year 2025 Earnings Call. I'm Moritz, your Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stefan Drager, CEO. Please go ahead, sir.

Very good afternoon, and thank you for joining our conference call on our financial results for the fiscal year 2025. I have with me today Gert-Hartwig Lescow, CFO, as well as Tom Fischler and Nikolaus Hammerschmidt, both Investor Relations. We would like to take you through the results with the presentation that we made available on our web page this morning. Following the presentation, we will open the floor to your question.

Let's get started on Page 5 with the business highlights. In 2025, we continued our successful course and generated the highest net sales in our company's history. Both divisions and all regions contributed to this. At around EUR 3.5 billion, net sales were slightly above our last forecast and around EUR 25 million above the level of the exceptionally strong coronavirus year 2020. Unlike during the pandemic, this is a new record that we achieved entirely without a special economic situation. Thanks to the operating momentum, our earnings before interest and taxes also developed very well. EBIT rose by more than 20% to around EUR 233 million despite difficult conditions. The EBIT margin increased by roughly 1 percentage point to 6.7%, also exceeding our last forecast. This shows that we are making progress in improving our profitability.

Order intake also developed very well as with net sales, both divisions contributed to growth. This underlines the continuing demand for our Technology for Life and gives us a positive outlook for the future. Positive is also the key word with regard to our cash flow development, which Gert-Hartwig Lescow will explain later. We have also performed well on the stock market. Last year, our common shares rose by more than 1/3, while our preferred shares even increased by almost half and were included in the TecDAX. This means that we are once again one of the 30 largest listed technology companies in Germany. This listing increases our visibility on the capital market and could make us even more attractive to investors.

In mid-January, we published our preliminary business figures for 2025 and our forecast for 2026. Our shares then rose significantly again and reached their highest level since July 2017. This shows that investor confidence in Dräger is higher than it has been for a long time. Our first goal remains to increase profitability such that our EBIT margin is the same as the last digit of the calendar year as we have more goals that are strategic to steer the company. We are strengthening our innovative power and expanding our competence in the systems business and further expanding our services and recurring business.

In our Medical division, we are particularly driving forward the marketing of network solutions. To this end, we launched a large marketing campaign in 2025. Our goal is to strengthen Dräger's position as the leading provider of connected solutions in the hospital sector. That said, we are also launching a big wave of SDC-based solutions. That is service oriented device connectivity, the new standard for interoperability of medical devices according to IEEE 11073. It creates new functionalities and therefore, added value. With our new Silent Care Package, for example, we contribute to solving one of the biggest problems in the ICU by reducing the alarm noises.

In the Safety division, connectivity is becoming more important, too. Our fire ground monitoring system, for example, helped us to win the Paris Fire Department as a new customer in 2025. Speaking of firefighting, we also received the important approval for our PSS AirBoss SCBA, in North America, reaching a milestone for strengthening our position in this key market. In addition to our core business, we are consistently investing in new business opportunities in areas such as clean tech and defense. Last year, our defense business grew significantly. We are well on track to triple our defense sales to more than EUR 300 million by 2028.

I will talk about the other highlights on the past fiscal year, the dividend and the outlook at the end of our presentation. I would first like to explain in more detail on Page 6, what challenges we had to overcome last year. So Page 6, headwind compensated. Ladies and gentlemen, 2025 was a very successful year, particularly in light of the difficult condition. In 2024, we have benefited from positive one-off effects from the sale of a nonstrategic business activity that was the smoke and fire alarm systems in the Netherlands and some real estate loss in the United States. This has boosted our EBIT by around EUR 22 million. In the past year, we missed these effects and also faced strong headwinds from tariffs and currency. The tariffs imposed by the U.S. government had a negative impact of roughly EUR 26 million on our EBIT. Around EUR 21 million out of this was attributable to the Medical division and around EUR 5 million to the Safety division.

In addition, EBIT was impacted by currency effects initiated from the White House and propagated over the world totaling to around EUR 45 million. Thereof, EUR 28 million were attributable to the Medical division and around EUR 16 million to the Safety division. So overall, we had to compensate opposing effects of more than EUR 90 million. The fact that we even overcompensated these effects is a clear proof of our resilience. We were, therefore, able to improve our profitability even under difficult conditions.

Let's take a look at the margin development of recent years on Page 7. Following the significant loss in '22, we have shifted our focus from net sales growth to earnings growth. We have thus set ourselves the goal of increasing our EBIT margin by an average of 1 percentage point per year from 2024. The focus on profitability in accordance with our corporate objective #1 has worked well so far. After the strong turnaround in '23, we were able to improve our EBIT margin by roughly 1 percentage point in both '24 and '25. While positive one-off effects, in particular, contributed to the improvement in '24, the improvement in '25 came mainly from the operating business. This is a development that we very much welcome. And we have our strategic, our corporate objective 2 is innovation and our corporate objective 3 is systems business and recurring business.

Now I would like to hand over to Gert-Hartwig to explain our business development further. I will then turn back with the dividend and the outlook. Gert-Hartwig?

Thank you, Stefan. I would also like to extend a warm welcome to everyone joining this conference call for our results for the fiscal year 2025. Please turn to Page 6 for a view on the Dräger Group. As usual, I will be stating currency-adjusted figures, and I will be referring to growth rates. As Stefan mentioned, demand for our Technology for Life remains strong. Overall, orders increased by 7.7% to around EUR 3.6 billion. In Q4, orders rose by 5.6%. Both divisions contributed to growth in both reporting periods. Net sales climbed by 5.3% in the full year and by 8.7% in the fourth quarter. This was due to good development in both divisions and all regions. Like for orders, the Americas region and the EMEA region were the biggest growth drivers. At around EUR 3.5 billion, net sales -- reached 2025, the highest level in the company's history. In addition to the high order intake, this was mainly due to the strong year-end business.

Benefiting from the record net sales in December and the margin improvement in the Medical division, our group's gross margin rose slightly by 0.3 percentage points to 45.2% in the full year. Functional expenses rose by 4.6% in 2025 after they had been positively impacted by one-off effects of around EUR 32 million in the prior year. These effects included the net sale of a nonstrategic business in the Netherlands and the sale of real estate in Spain and the U.S. Excluding these one-off effects, the increase in functional expenses in 2025 was only 2.5%. This increase is attributable to higher personnel expenses, which went up due to collective wage increases in Germany and higher number of employees, among other things. Despite the missing positive one-off effects in '24 and the negative currency and tariff effect in '25, our EBIT increased by more than 20% to around EUR 233 million.

Consequently, our EBIT margin rose from 5.8% to 6.7%. The mentioned headwinds were overcompensated by the high order intake, the strong net sales momentum and the improved gross margin. In addition, the strong year-end business contributed to the resilient development. Our EBIT improved by around 37% in the fourth quarter, while the EBIT margin declined to 13.7% from 10.6% in that period. The full year EBIT development is in line with our medium-term goal to increase the EBIT margin by 1 percentage point per annum on average. Guided 2026 EBIT margin includes an additional margin improvement on the higher end of the guidance range. The result of the strong increase in earnings, our DVA in 2025 improved by roughly EUR 36 million to around EUR 9 million.

Let us now take a closer look at the development of the 2 divisions, starting with the Medical division on Page 10. Following a slight increase in the prior year, our order intake in the Medical division rose by roughly 9% in 2025. This was primarily due to the high demand for our anesthesia machines, ventilator services and consumables. In addition, we received a major multiyear order for hospital infrastructure systems for Mexico, which significantly supported the above-average growth in the Americas region. Demand also developed positively in the other regions, particularly EMEA. In the fourth quarter, order intake rose by 2.2% as the decline in APAC and EMEA was overcompensated by significant growth in Americas and a high demand in Germany. Driven by growth in all regions, net sales in the Medical division increased by 7.4% in 2025 after decline in the prior year. In Q4, net sales rose by 13%, thanks to considerable growth in EMEA, Americas and Germany.

Net sales in the APAC region were around 3% below the prior year level. Our gross margin in the division rose by 0.6 percentage points to 43.6%. The negative currency and tariff effects were overcompensated by the favorable product and country mix. In Q4, on the other hand, the gross margin decreased by 0.6 percentage points due to higher inventory write-downs. Functional expenses climbed by 5.7% in 2025, having been positively impacted in the prior year by one-off effects of around EUR 15 million from the sale of real estate and the adjustment of the product. Without these effects, the increase in 2025 amounted to only 3.7% with higher personnel expenses being the main cause. The EBIT of the Medical division doubled to EUR 57 million after a decline in the prior year. Consequently, the EBIT margin rose from 1.5% to 2.9%. In Q4, the EBIT increased significantly to by around 40% to roughly EUR 80 million, thanks to the strong year-end business. As a result of the strong increase in earnings, our DVA in the Medical division improved considerably in 2025 from around minus EUR 50 million to minus EUR 23 million.

I will now turn to our Safety division, which delivered another good performance. We are now on Page 11. Our Safety business continues to grow. Order intake rose by more than 6% in 2025. This was primarily due to the high demand for engineered solutions and gas detection devices. In addition, respiratory and personal protection products as well as alcohol and drug testing devices contributed. The EMEA and Americas regions recorded a significant increase in orders, while the APAC region also developed positively. In Germany, demand declined after we had received a major order for NBC protection filters in the prior year. However, industrial demand in Germany is also generally restrained at present. Net sales increased by 2.6% in the fiscal year, driven by positive development in the EMEA and APAC regions. In Germany, net sales were roughly on par with the prior year, while the Americas recorded a decline. In Q4, net sales rose by just under 3% as the decline in the Americas and Germany was overcompensated by the growth in EMEA and APAC.

Our gross margin in the division remained stable at 47.3% in 2025 with the negative currency and tariff effects being offset by the more favorable product mix and price adjustments. In Q4, the gross margin slightly decreased by 0.2 percentage points. Functional expenses went up by roughly 3%, having been positively impacted from the prior year by one-off effects of around EUR 17 million from the sale of a nonstrategic business area and from the sale of real estate. Excluding these effects, functional expenses fell by 0.4%. The capitalization of development costs led to a reduction in functional expenses in the reporting year. The EBIT of the Safety division increased in 2025 by 6.4% to around EUR 176 million, while the EBIT margin rose from 11.3% to 11.9%. In Q4, the EBIT climbed by around 33% to roughly EUR 77 million as a result of the strong year-end business. The EBIT margin also improved significantly by 4 percentage points to 16.5%. Our DVA in Safety division increased by around EUR 9 million to around EUR 113 million, coming from around EUR 104 million in the prior year. All in all, a very positive development in our Safety business.

Let's move on to some key ratios on Page 12. Thanks to the strong growth in earnings, our cash flow from operating activities improved significantly by around EUR 71 million to around EUR 238 million in 2025. At the same time, outflow from investing activities rose from just under EUR 55 million to around EUR 98 million. Among other things, this was due to a supplier loan granted and the purchase of further shares in an investment. Moreover, the sale of our fire alarm systems business in the Netherlands and the sale of the property in the U.S. have led to a considerable inflow in 2024. All in all, our free cash flow amounted to around EUR 140 million, which is a considerable improvement of around EUR 60 million compared to the prior year. Since free cash flow was on par with net profit, the cash conversion rate amounted to 100%, the level we also expect for the current year. As a result of the decrease in free cash flow, cash and cash equivalents rose significantly by about EUR 22 million to EUR 282 million. This led to a considerable decline in net financial debt by around 25% to EUR 123 million.

That said, the ratio of net financial debt to EBITDA declined from 0.5 to 0.3, keeping our leverage at a very healthy level. With regard to net financial debt, we expect the figure to increase in the current year. A large distribution center is currently being built in Lübeck where we intend to consolidate various logistics warehouses in the future. Dräger will rent the property on a long-term basis, which under IFRS results in a higher lease liability. This, together with higher investments is in turn a key driver for the higher expected net debt in 2026 with an increase of around 4% to EUR 1.7 million capital employed -- EUR 1.7 billion capital employed rose much lower than our EBIT. Therefore, our 12 months return on capital employed went up from 12.1% to 14.2%. Net working capital was around 2% higher than in the prior year at around EUR 755 million. Due to the good business development, in particular, our equity ratio stood at around 52% as of December 31, coming from roughly 50% at the end of the prior year.

Let's take a closer look at our EPS on Page 13. With the increase in earnings since 2022 that Stefan Drager mentioned at the beginning of his presentation, our EPS has also improved continuously over the past years, coming from around minus EUR 3.50 per share in 2022, earnings per common share climbed to more than EUR 7.40 in 2025. At the same time, earnings per preferred share rose from around minus EUR 3.40 to roughly EUR 7.50 per share. Again, this clearly underlines the progress we are making in improving our profitability.

Now I hand back to Stefan Drager for the outlook, starting with our dividend proposal on Page 14.

Thank you, Gert-Hartwig. Well, in line with our dividend policy, we intend to distribute around 30% of our net profit to our shareholders. Since our net profit has increased significantly, we will also increase the dividend significantly again for the third time in a row since 2023. We intend to propose a dividend of EUR 2.21 per common share and EUR 2.27 per preferred share for our Annual Shareholders Meeting in May. Our equity ratio is clearly over 50%. Provided that the equity situation remains as positive as it is now, we will continue to distribute at least 30% of our net profit in the coming years.

That said, let's move on to our outlook for 2026 on Page 15. Ladies and gentlemen, with good demand, record sales and significantly improved earnings, 2025 was a very successful year. This is even more apparent when you consider the headwind from a difficult economic environment. Our operating business is showing good momentum. Both order intake and order backlog are at a high level. We, therefore, want to increase net sales again in the current fiscal year. In 2026, we expect an increase in net sales from 2% to 6% of net of currency effects at an EBIT margin between 5% and 7.5%. Both divisions are likely to contribute to net sales growth and a positive EBIT. We will continue to counter the U.S. import tariffs by raising prices. In the past fiscal year, we developed a package of measures to compensate for some of the customs duties.

We expect this compensation to be more effective during the course of the 2026 fiscal year than before. For '26, we expect the level of custom duties at group level to be similar to the prior year overall. The burns in the Medical division are likely to be significantly higher than in the Safety division where we have more possibilities to concentrate and forward with improved prices. The corporate planning, therefore, the net sales and EBIT forecast for '26 are based on the assumption that custom duties will remain at the level of the reporting date for the annual financial statements. However, when we recall the Greenland discussion over a certain weekend in this spring, this is not guaranteed and it motivates us to further pursue increased profitability to be able to live through the challenges and uncertainties.

When it comes to the war in Iran, we do not see any material impact on our business so far. We are present in the Middle East with our own Dräger people in Saudi Arabia and Dubai. Our local employees are doing well so far. In general, the region remains a growth market for us. Risks from the war depend heavily on its duration and regional extent and its impact on the global economy. We are able to mitigate this through our high level of diversification. We are very broadly positioned in terms of markets, products, geographies, business mechanics and customers. This strengthens our resilience and gives us a positive outlook to the future. With this, I would like to end the presentation and hand over to the operator to open the floor for your questions.

[Operator Instructions] And the first question comes from Oliver Reinberg from Kepler Cheuvreux.

Firstly, just on the Middle East situation as you just confirmed that you don't expect any kind of larger impact. Can you just confirm that there's also not any kind of expected impact from the developments basically in terms of supply chains and inflation? That would be question number one.

Secondly, can you just provide an update on the ventilation market? We have seen quite some changes basically with Mindray -- I am sorry, with Medtronic and Bayer actually exiting the market. And I think Mindray is now entering in the U.S. market. I mean it's also a high base. Do you continue to expect actually significant growth in this market segment? Any update on the developments here would be helpful?

And then thirdly, as you called out corporate objective #3 to increase the kind of recurring business at Dräger, can you just provide some kind of flavor where do you stand these days percentage-wise? And any kind of targets that you can share in that regard?

Well, on the Middle East, yes, I confirm that we do not see a material impact of the war on our business at the moment in the foreseeable future. Including the supply chain, there is no -- not to our knowledge, a significant impact on any specific component of production that we can see so far. We have taken some measures in the past to work with our suppliers more carefully with whom we work and have some reasonable stocking levels for our inventory for components. So we, of course, cannot compensate for all seasonal effects, and we will remain interdependent from the world and the supply chain. However, I confirm there is no impact that we can see from the current conflict in the Middle East. What I do see though is that the energy prices will remain worldwide on the current level and not return to the level they were like 6 weeks ago, including the electricity gas and fuel at the gas station. However, our sensitivity to energy in real is quite limited. So that has no material effect on our outlook and prognosis.

Your second question, Mr. Reinberg, on the ventilation. So yes, there are 2 major players have exited the market. And, yes, Mindray is there. We, on the other hand, we do not see a significant effect or even, I would say, threat from Mindray having a more comprehensive offer in the U.S. Where we see more and we see they are more active is in Africa in remote regions where they have also political -- Chinese government has political influence in financing some of the African governments or very obvious direct influence and control on government and purchasing decisions. There, we are out. On the more developed markets I won't say it is a significant new development or a threat. On a global scale, yes, it is a good copy of Dräger with similar offerings and a similar portfolio on both the geographical scale and portfolio. So it is a very viable market companion, not only on ventilation, but in many modalities to watch geographically mostly in Africa.

Your question on our corporate objective #3, which is developing the business model further from transaction-based device selling towards interoperability and systems business competence and actually doing, including recurring businesses, services based on contracts instead of transactions. Yes, we can say that last year, we crossed the EUR 1 billion threshold in services and some countries in Europe, our sales, the majority already is in services more than in devices, including our home market in Germany, but some other European countries as well, services sales is greater than devices.

And can you share any kind of targets like where you want to go with this kind of offering?

Yes, the goal is to grow this further as it is a good way to defend our business over a business that is purely on cost like some of the business mentioned from Mindray in Africa where the decision is not alone, they have a larger share of mind, they are more deeply entrenched with the customer in offering the service. It is -- we have a better understanding of the customer needs and it's more challenging to replace the assets on a pure device that is -- the trend is that it may become a commodity.

And the next question comes from Harald Hof from mwb research.

As we talked about the Iran conflict already, just 2 questions left from my side. The first one is talking about the tariffs. The situation has changed significantly. So what does this mean for Dräger? And will you apply for reimbursements? And the second question is how has the defense activities developed so far in 2026.

Happy to. So firstly, there is a couple of developments firstly, the court decided that the tariffs that the Trump administration has put in place is not legal. And we have, in fact, also filed for a reimbursement. As of today, it is open, how fast the courts will decide and when or if we will in fact be paid out. And secondly...

It's not part of the plan.

It's not part of the plan at this point. So if there was a significant payment that would be upside, so to speak and the signals have been mixed, how quickly that can happen. I think you've read the news, to courts as far as I remember, have decided they are not allowed to delay it, but so far, nothing has happened. So there is a chance that we can recollect some of our tariffs. Having said that, given that the previous tariffs have been declared illegal, the Trump administration has put in place another set of tariffs which are a little bit lower by 5 percentage points, but there are in fact for full year instead just 2/3 of the year.

And if that is -- when those run out after 150 days, there are other potential tariffs to be enacted the one that may run. The so-called Section 122 tariffs may be replaced by Section 301 and Section 222 and we would expect that, that will actually take place in the second half of the year. So when it comes to effective tariff burden, we still assume that they will remain in place. And as we have seen earlier this year, and as Stefan Drager pointed out, sometimes, there is even a discussion about additional Greenland tariffs or not. But so far, we expect actual tariff burn to be of the same magnitude as last year.

Okay. And your other question on the defense business. Well, in general, we benefit in both divisions. The medical also benefits if there is the need, for instance, to additionally serve 1,500 wounded soldiers that come per day from the Eastern front. They're currently preparing and planning for that needs capacity in the German hospital system or the field hospitals or hospital war ships. But that is regular medical equipment. But we say we would not directly classify that as defense business. What we do call such is part of the safety portfolio that can be specific products for personal protection like the classical gas mask for a soldier or gas detection equipment, filters for military vehicles to protect those who protect us in our freedom to operate our democracy. And last year, around the same time of the year, we predicted that would actually more than triple until the year 2028 to approximately EUR 300 million. Well, already last year, we saw a good development, and we crossed the EUR 100 million threshold with these elements of the portfolio. And we confirm that we think in 2028, it can be EUR 300 million because there are quite some opportunities out there.

Just a quick follow-up. When talking about tariff reimbursement, do you communicate volume? How much is the figure that could be reimbursed?

We communicated that we paid the EUR 26 million.

That's actually the net effect. So to the degree that it will be the net effect, it will be in that order. The gross effect is in turn higher runs around EUR 30 million, and that would be the impact if we get full reimbursement without the need to pass on anything to customers in that context. And as I said, at this point, we view that as perhaps not speculative, but we have not received a clear indication that we should account for that in the near future. But we'll keep you posted, obviously, when that situation changes.

And the next question comes from Pierre-Yves Gauthier from AlphaValue.

My question relates to your capital spending. You had quite a big surge in '25. Is that likely to last? Or is it some sort of a bump that we will not see in '26, '27?

The part of the higher investment are due to a loan, which actually has to be accounted for to one of our suppliers, which have to be accounted for under IFRS as an investment. I'm not sure whether that is -- that actually was one of the reasons for the bump. And that we do not expect in '26 nor later. We do, however, as I pointed out in the presentation, have to account for an investment for a rental agreement. Again, that's due to the statement. So all in, we expect an increase in the investment volume from around EUR 103 million to EUR 110 million to EUR 130 million. And the substantial portion is, in fact, the long-term rental agreement, which is as these things are not cash effective for the full amount in the period of '26, but over the course of the rental agreement.

And we do have a follow-up question from Oliver Reinberg from Kepler Cheuvreux.

Three, if I may. One on China. Can you just provide an update what you see there on the ground? I mean, it's not a huge market, but any kind of pickup would be helpful to just get the latest dynamics here. Secondly, I think Q1 nearly comes to an end. Any kind of light you can share how you started into the year? And then last question, just on currencies. I mean, if -- I think in the last call, we guided for quite a significant impact. If currencies stay where they currently are, can you just give us any kind of flavor what kind of isolated margin impact you have?

I can -- Stefan speaking. I can pick the start in '26, where we started with a good order backlog after the order intake at the fourth quarter was also very good. And so with this, we had a good start in '26 and the order intake and sales at this moment is according to our expectations and planning. So it's on the way to deliver on our forecast and prognosis.

And with regards to the FX development, in addition to the headwind that we had in '25, we overall see a further deterioration, but not by another similar amount. Our currency headwind when we look at net sales is around 1 percentage point. And when it comes to the EBIT margin, it's between 30 to 60 basis points.

I think Mr. Reinberg, this is important to figure in when you compare our actual '25 result, in particular, the EBIT margin and the prognosis for '26 because the prognosis for '26 and the whole planning for '26 is based on less favorable exchange rates. So if these develop and they would be the same as last year's actual exchange rates, then the outcome, of course, would be better than the current forecast and prognosis. But it's -- from our perspective, not safe to assume that it would be the same. So we have our best guess included into the planning. And that is the major reason if you wonder why our forecast does not show a stronger improvement because our goal is to improve our profitability by 1 percentage point per year. So on average, that is unchanged.

China?

Yes, China, we didn't touch China. There is no relevant news on that. That is relatively stable and continues to be on a much lower level than it used to.

[Operator Instructions] So it looks like there are no further questions. So I would like to turn the conference back over to Stefan Drager for any closing remarks.

We thank you very much for all of you being with us today during our annual results conference for '25. Thank you for your questions and the interaction. We look forward to meeting you again either online or preferably at some point in time in the not-too-distant future in person. Have a pleasant afternoon and evening.

Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.

Ladies and gentlemen, welcome to the Q3 2025 Earnings Conference Call. I am Mattilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Stefan Drager, CEO. Please go ahead.

Yes. Good afternoon, and thank you for joining our conference call on our financial results for the first 9 months of 2025. I have with me today Gert-Hartwig, CFO; as well as Tom Fischler and Nikolaus Hammerschmidt, both Investor Relations.

I 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 5 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 9 months of 2025.

Despite difficult economic conditions, demand for our Technology for Life rose to around EUR 2.6 billion. The last time we had such a high order intake after 3 quarters was in our record year 2020. Growth was driven by both divisions and all. The same is true for net sales, which increased to around EUR 2.3 billion.

Earnings before interest and taxes almost reached the prior year level at around EUR 77 million despite the positive one-off effects mentioned above in the prior year. 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 EUR 30 million 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 would have 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 9 months. Net sales were 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 9 months with a considerable increase by more than EUR 35 million to around EUR 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 2 weeks ago, we now expect the net sales growth and the EBIT margin in the upper half of our forecast range. I'll come back to our outlook at the end of our presentation.

With that, I turn over to Gert-Hartwig for a review of the financials. Gert-Hartwig, please.

Thank you, Stefan, and welcome, everyone.

Please turn to Page 7 for a group overview. As usual, all growth rates are quoted on a currency-adjusted basis. As Stefan Drager 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 EUR 2.6 billion in the first 9 months of '25.

The Americas led the growth with an increase of around 19%, followed by EMEA and APAC. 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 APAC was more than offset by an increase in the other regions.

Our net sales development has further accelerated in Q2. We are well on track to compensate for the slow start in the year caused by some supply chain disruptions. Net sales rose by more than 10% in the third quarter. In the first 9 months, they increased by roughly 4% to around EUR 2.3 billion.

All divisions and regions contributed to growth in the respective reporting periods. The positive development in the third quarter was driven in particular by a significant increase in the EMEA and 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 9 months to 45.1% despite currency headwinds and higher tariffs. The margin improvement was strong in the Medical division than in the Safety division.

Operating costs rose only moderately, reflecting disciplined expense management. Our functional expenses increased around 6% in the first 9 months, but mainly driven by the absence of last year's EUR 30 million one-off income.

Excluding the positive one-off effects mentioned above, the cost increase amounted to 2.4% in the first 9 months and to 1.5% in the third quarter.

In nominal terms, however, functional expenses were on a slight decline in Q3. Due to the only moderate increased costs and the significant growth in net sales, we more than doubled our EBIT to around EUR 57 million in Q3, coming from around EUR 24 million in the prior year quarter, which had been still supported by the positive one-time effects amounting to EUR 10 million in the quarter.

Our EBIT margin rose from 3.6% at 3.1% to 6.8%, strong earnings performance in the quarter. Over the first 9 months, EBIT came in at around 3% margin, slightly below last year's EUR 80 million and a 3.5% margin. Again, the positive one-off effects from the prior year are now missing.

In addition, headwinds from currencies and tariffs strained our EBIT as the euro appreciated sharply against key trading currencies. Carefully monitor the development of foreign currencies and manage risks proactively through hedging and price adjustments. Having said that, FX still had a negative impact of roughly EUR 22 million on EBIT. Our operating performance improved year-on-year, and that improvement nearly but not fully offset the absence of one-offs and the FX and tariff drag; thus, our EBIT declined slightly.

Finally, our rolling 12-month EBITDA improved significantly from roughly EUR 30 million to around EUR 49 million.

Let us now take a closer look at on Page 8. We grew order intake by almost 12% to around EUR 1.5 billion in the first 9 months of 2025, driven by high demand for ventilators, anesthesia machines, services, and consumables. In the second quarter, mid-double-digit million euro order for hospital infrastructure from hospital further powered our growth in the Americas. But even without this large order, demand in the Medical division rose year-on-year. In the third quarter, order intake in the Medical division increased by more than 5%.

The decline in APAC was compensated for by the significant growth in EMEA and by the positive development in the other regions. Thanks to EMEA and the Americas, in particular, net sales rose significantly by more than 10% in the third quarter after a slight decline in the prior year period.

Looking at the first 9 months, net sales increased by around 5% to EUR 1.3 billion, driven by all regions. In APAC, growth was driven mainly by EMEA and China, with business development somewhat uneven in China. After solid growth in the first 6 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, these effects were offset by the overall weak business in China, resulting in a decline in net sales compared to the prior year quarter.

Our gross margin expanded by nearly 3 percentage points in Q3 and by 1.1 percentage points in the first 9 months, thanks to a favorable product and country mix and lower quality expenses from field actions.

Functional expenses rose by 6% in the first 9 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 9 months and also in the third quarter. Earnings in Medical returned to positive territory in Q3 as we are making progress in improving the profitability in the division.

Our EBIT grew considerably from minus EUR 4 million to plus EUR 11 million, lifting the EBIT margin from minus 0.9% to 0.3%. For the first 9 months, EBIT amounted to around minus EUR 23 million after around minus EUR 28 million in the prior year period. As mentioned before, one-off effects in the prior year's period played a role. Our rolling 12-month EBITDA improved significantly by around EUR 22 million to around minus EUR 45 million.

I will now turn to our Safety division on Page 9. In the first 9 months, order intake rose by roughly 6%, driven by gas detection, respiratory and personal protection products, and Engineered Solutions. Orders for occupational health and safety normalized after last year's large order for NBC Protective filters, leading to a lower demand in Germany. EMEA and the Americas delivered strong double-digit order growth, while APAC remained almost stable.

After a somewhat slower development in the second quarter, order intake accelerated in Q3 with orders rising by roughly 9%. In addition to the significant increase in EMEA and the Americas, growth in APAC also contributed to this development. Q3 net sales rose significantly by roughly 10%, driven by EMEA and the Americas in particular. The first 9 months, net sales increased by more than 2%, thanks to growth in all regions. That said, our safety business is back on track after slight weakness in Q2. Our gross margin expanded by 1 percentage point in Q3 and was stable in the first 9 months, thanks to a favorable product mix.

Functional expenses rose about 5% in the first 9 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 function costs. Excluding the other operating income of the prior year period, functional expenses decreased slightly by 0.3% in the first 9 months of the year and by 2.4% in the third quarter. So good expense management and safety.

Q3 EBIT improved significantly to roughly EUR 46 million after EUR 28 million in the prior year quarter. The EBIT margin increased to 12.6%. After the first 9 months, the EBIT came to just under EUR 100 million, down from EUR 108 million. The EBIT margin was just below 10%. Rolling 12-month EBITDA decreased slightly by roughly EUR 3 million to around EUR 94 million, coming from EUR 97 million in the prior year. That concludes the Safety division revenue.

Let's move on to the development of our cash flow and other key figures on to Slide 10. In the first 9 months, we significantly improved operating cash flow by around EUR 35 million to roughly EUR 93 million. This was mainly due to effective working capital management, especially better development of trade receivables, trade payables and other liabilities. Outflows from investing activities more than tripled from EUR 2 million to about EUR 76 million, resulting in a free cash flow of around EUR 17 million after around EUR 35 million.

Among other things, the significant increase in outflow was due to a base effect in the prior year, the sale of our fire alarm systems business in the Netherlands and the sale of the property in the U.S. led to a considerable inflow, which is now missing. On the other hand, Drager added an investment to one of its holdings in the first quarter of 2025, 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 EBITDA. Our 12-month return on capital employed rose from 10.9% to 12%. This was due to the significant increase in our rolling 12-month EBIT, which was much stronger than the increase in capital employed.

The 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 EUR 21 million. Our equity ratio as of September 30 stood at nearly 50%, remaining at the year-end level of 2024. Now I hand back to Stefan Dr ger for our outlook on Page 12.

Ladies and gentlemen, Q3 was a strong quarter for Drager. Our excellent order development and the increasing sales momentum make us optimistic about the further growth of the business for this year. Therefore, we now expect the upper half of our previous guidance. We now expect net sales growth of 3.0% to 5.0% net of currency effects and an EBIT margin of 4.5% to 6.5%.

EBIT is now expected to be in the range of EUR 10 million to EUR 18 million so far, business development during the year has given us a good basis to reach our targets. We start 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 operator to open the line for your questions, please.

[Operator Instructions] The first question comes from the line of Oliver Reinberg from Kepler Cheuvreux.

I would have 3 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 Bayer, GE and Medtronic. There have been some kind of voices who claim that Tania and Hamilton have gained most from these kind of changes and Dr gerwerk 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 that kind of challenging base effect? Or will this kind of market consolidation support further growth next year? That would be question number one, please.

Yes. This is Stefan answering your question, Mr. So, I believe all the market participants that are still there, they get a fair share, including ourselves of the opportunities that come from the withdrawal of the 3 players. And so, for me, I couldn't understand why they made this withdrawal these 3 players and I see that 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 this. And I still see it for the future as very beneficial to be in there. And I see that both Mr. Hammerschmidt and myself, we address our customers personally the video message to let them know that we will be there at their side in the future.

So, it's not a secret. For Hamilton, it's a challenge because although it's a U.S.-owned company, operations are based in [Biel/Bienne] in Switzerland, the tariffs for the U.S. are 39%. So that led to 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 a kind of demanding base, of which we would expect to kind of decline?

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

Super. That's helpful. The second question is just on supply chain. I mean, there's obviously the kind of discussion on Nexperia, 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 Medtech 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 Q4 now?

Not a big effect. We do use some of these chips, but only to a small extent. And we have larger inventory that we keep on stock as the automotive people do. And from what we 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, 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 run rates toward a 10% EBIT margin in 2030. I'm just wondering, looking at the pulls 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 run rate for next year? And in particular, can you provide any kind of color what incremental margin headwinds you expect from currency next year, please?

So I'll give you the first part we keep reiterating. So the business cannot be judged by the quarter. So it can always be a bad quarter that does not mean that the worst is bad. And the same holds true 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 exceptionally good margin in the Q3. And so in addition, we had an exceptionally 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 is not so extraordinary, then you might probably speak at the first glance.

And going back to the margin to normal, that's partially fueled because there are some large tender businesses that start delivering in this current quarter. So it's better to be a little bit cautious with the forecast and development of the future. The effect of the currency, I hand over to Gert-Hartwig.

Yes, there will be given current average rates, there will be an additional FX headwind. 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.

[Operator Instructions] The next question comes from the line of Virendra Chauhan from AlphaValue.

So for now, just one question around your margins. 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, of course, the sales growth guidance as well being upgraded, is there a chance that we see a similar year-on-year margin expansion in Q4 as well, because Q4 of last year was also very strong, I think close to 12%, if I remember correctly. So that's my question around your EBIT margin, please.

As I just explained on the question from [Indiscernible] Q3 was a very good margin that resulted from a favorable mix of the products in the portfolio. And it is safe to assume that will normalize and decline slightly for the Q4 and for the future. And also keep in mind that Q4 in 2024 was also a very good margin if you compare the quarters.

So keep that in mind and think about this so should not be overoptimistic for the good margin to persist. As I said in, we do not think in quarters because in single quarter can always be a little bit up or down versus the others. So we, as much as we appreciate the current good result 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 that is more the focus that is as we said in our guidance, 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 that we said that already a couple of years ago, then it should be plus/minus 5%. And again, 2026, you can think about the ballpark figure of 6%.

Sorry, maybe can I just ask one more question. So on your connected care launch, the silent ICU that you had talked about on the previous call, and it was scheduled to be launched in H2 '25. So I had 2 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 time line that this entire project or focus could translate into meaningful revenue generation for the firm?

The customer feedback from the ICU projects, it's very excited. So we are very happy to observe that, and we look very much forward to taking off. We just this we started our marketing campaign where we took the horn more explicitly for this approach. And so I expect that from the next year on, that can be effect to the business from these kind of projects.

We now have a question from the line of Jean-Marc Mueller from JMS Invest.

First, I would like to congratulate you on a very good Q3 results. Quickly on Q4. I mean, 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, albeit the numbers was good, it was actually worse by roughly EUR 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 EUR 124 million, not EUR 114 million.

Yes, that is correct.

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 is a higher, if you will, sensitivity to variations in net sales variations. There is a chance that we also get at the lower end when it comes to reported figures even. Not that we are striving for that, but the discussion was just wanted to point out that the Q4 was operationally and also nominally in spite of the charge, a relatively strong quarter.

Yes. 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 EUR 70 million EBIT range.

Maybe you can help us a little bit what 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 forward. I think you're asking what risks, we have seen FX 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 like up. 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.

For the industry. And that s the customer to a chemical industry.

We also see that in the U.S. 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. The flawless execution will 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 it will help us.

Say you will get an FX development that for change is not running against us, but in our favor happen.

No, no. I understood. 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, we 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 will go against the strong cash flow in Q4?

By and large, I would support that, and that leads is 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. There is no underlying risk for our Q4 cash flow situation.

[Operator Instructions] We have a follow-up question from the line of Oliver Reinberg from Kepler Cheuvreux.

Probably also two or three. I mean the first question would be on anesthesia. There was some kind of news flow in the industry. Obviously, Jetting 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 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, say, all the time. And we're also having discussions and that's a normal thing. So we're not afraid of this development.

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

That's very correct. And so there are obviously the companies like that do not have certain modalities and they are seeking and contacting the ones that have, because they want to become a full service suppliers. So that's a long development. And that has its pros and cons. And as I said, we are not afraid of this setup.

Okay. Perfect. Understand. 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 this is 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?

Basically I would say there's nothing new. It's very fragile from where we ended last year. And so far, it's say, stable, but at a modest level. And it's not likely that it comes back to where it was. So, 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?

Please keep in mind that last year in Q1, we received a large order for this last Mask 2000 for the Army of roughly EUR 15 million. 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% year-over-year for the defense business. So, it is eventually picking up, and we do expect to receive more than EUR 100 million in orders in the current year.

[Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Stefan Drager for any closing remarks.

Thank you very much to all of you that with us today for your time and your interest in here, and we look very much forward to meet you again, hopefully, sometime in person in the future. Have a pleasant afternoon and evening. Goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you.