What Drägerwerk AG & Co. KGaA (DRW3) Said on Its Q3 Earnings Call

Key Points

• First-nine-month performance improved: Currency-adjusted order intake rose 3.6%, sales increased 5.3%, and EBIT grew to approximately €112 million. Profitability benefited from €27.9 million in one-time customs refunds, although the company still recorded a roughly €2 million net negative tariff effect year to date.
• Safety outperformed medical: Safety order intake rose 13.1% and EBIT increased to about €122 million, supported by a major multiyear defense order. Medical order intake declined 3.5%, though sales rose 4.4% and the division narrowed its EBIT loss.
• Outlook reaffirmed: Drägerwerk maintained its 2026 forecast for currency-adjusted sales growth of 2%–6% and an EBIT margin of 6%–8%. Cash flow and leverage improved significantly, while management cited defense opportunities and potential supply-chain and currency risks for 2027.

Drägerwerk AG & Co. KGaA ETR: DRW3 reported higher order intake, sales and earnings for the first nine months of 2026, supported by continued demand across much of its business and customs refunds that lifted profitability.

Order intake rose 3.6% on a currency-adjusted basis to approximately €2.7 billion, while net sales increased 5.3% to about €2.5 billion. EBIT climbed by roughly €35 million to approximately €112 million, producing an EBIT margin of 4.6%, compared with 3.3% in the prior-year period.

CFO Gert-Hartwig Lescow said the nine-month EBIT result included €27.9 million in one-time customs refunds, including €20.1 million recognized in the third quarter. Of the refunds, €3.8 million related to customs expenses in the current fiscal year and therefore did not affect the year-over-year earnings comparison. Drägerwerk also incurred €25.8 million in U.S. customs expenses during the year that are not refundable under current law, resulting in a net negative tariff effect of roughly €2 million year to date.

Third-quarter profit declined from a high comparison base

Third-quarter order intake increased 7%, led by Germany and the Asia-Pacific region, while net sales rose 1%. Sales growth in Germany, EMEA and APAC was largely offset by lower sales in the Americas, where comparisons were affected by a stronger prior-year period that included accelerated U.S. deliveries of medical equipment.

Third-quarter EBIT declined to about €48 million from approximately €57 million a year earlier, and the EBIT margin narrowed to 5.6% from 6.8%. Lescow said lower sales growth and a disproportionate increase in functional costs weighed on the quarter, while the prior-year EBIT comparison was elevated by catch-up effects, strong sales growth and moderate cost development.

The group’s gross margin improved by 1.7 percentage points to 46.8% during the first nine months, aided by about one percentage point from customs refunds. Functional expenses rose around €55 million, or 6.1%, over the nine-month period, reflecting higher personnel, logistics and IT costs. In the third quarter, functional expenses increased 8.7%.

Personnel costs rose due to the ongoing collective bargaining agreement and one-time accruals related to share-price-linked variable management compensation. Freight expenses increased amid higher air and container freight costs and geopolitical tensions in the Middle East. The company also incurred one-time costs connected with the transition to a newly leased international distribution center in Lübeck.

Lescow said Drägerwerk still aims to keep full-year expense growth below net sales growth, though he acknowledged this would require tight spending control in the fourth quarter. He said about one-third of the third-quarter rise in functional expenses was related to one-off items.

Safety division outperformed as medical orders fell

In the medical division, nine-month order intake declined 3.5% to around €1.5 billion. The decline was chiefly attributed to a major Mexican hospital-infrastructure order recorded in the Americas during the second quarter of 2025. Excluding that order, medical order intake would have been nearly stable, according to the company.

Medical sales rose 4.4% to about €1.4 billion in the first nine months, driven by Germany, EMEA and the Americas. However, third-quarter medical sales declined 1.4%, primarily due to lower sales in the Americas against a high comparison base. The division’s nine-month EBIT loss narrowed to €9.7 million from €22.7 million, while its EBIT margin improved to negative 0.7% from negative 1.7%.

Management said Germany was performing relatively well in medical, while China remained below expectations and showed no growth for Drägerwerk. The company said Chinese competitors were also experiencing double-digit domestic-sales declines, which could make them more aggressive in regions including Latin America, Africa and parts of Asia.

The safety division posted stronger momentum. Order intake increased 13.1% in the first nine months and 20% in the third quarter, supported by all product areas and regions. German safety orders rose nearly 28%, aided by a major defense-related order.

Lescow said the defense order was from one customer, was in the low double-digit million-euro range, and will be delivered over two to three years. Drägerwerk said it is pursuing additional multiyear defense contracts and continues to target growth in defense business from roughly €100 million in 2025 to around €300 million.

Safety sales increased 6.5% in the first nine months, while EBIT rose to around €122 million from approximately €100 million. The division’s EBIT margin rose to more than 11% from less than 10% in the prior-year period.

Cash flow and outlook

Operating cash flow increased by approximately €82 million to about €175 million, supported by higher earnings and working-capital management, particularly trade receivables and payables. Free cash flow rose to around €114 million from approximately €16 million a year earlier.

Net financial debt declined by around €116 million to roughly €106 million, and the company’s net-debt-to-EBITDA ratio improved to 0.3. Drägerwerk said it paid a €50 million maturing note loan with its own liquidity at the start of the first quarter.

The company reaffirmed its 2026 outlook for currency-adjusted net sales growth of 2% to 6% and an EBIT margin of 6% to 8%.

Looking toward 2027, management cited potential supply-chain shortages related to artificial-intelligence demand and currency movements as possible headwinds. Potential tailwinds include defense opportunities and a tender involving the New York City Fire Department, where Drägerwerk said it remains on the shortlist, while cautioning that the award cannot be assumed.

About Drägerwerk AG & Co. KGaA (ETR:DRW3)

Drägerwerk AG & Co KGaA operates as a medical and safety technology company worldwide. It develops, produces, and markets system solutions, equipment, and services for acute point of care, including emergency medicine, perioperative care, intensive care, and perinatal medicine. The company also develops, produces, and markets products, system solutions, and services for personal protection, gas detection technology, and integrated hazard management to customers in industry and mining sectors, as well as public sectors, such as fire departments, police, and disaster protection.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.