Dräger countering negative earnings trend by launching turnaround program

Reduction in non-personnel and personnel costs as well as optimization of revenues planned

17-Jun-2009 - Germany

After a Supervisory Board meeting the Executive Board of Drägerwerk AG & Co. KGaA approved a turnaround program. As a result the Executive Board is expecting a positive effect of EUR 100 million by 2011 against the benchmark figure of the net sales and cost structure in 2008 given comparable foreign Exchange rates. The majority of the more than 400 individual measures are already to impact in 2010. The Company is taking this action to sustainably counter the unsatisfactory earnings and cash flow situation. For 2009 the Executive Board assumes that earnings will be well below previous year figures. These negative impacts on earnings are attributable to an expected decline in net sales of around 5 percent and a shift in the product mix towards less profitable products. These effects will not be offset sufficiently by already available flexibility to adjust capacities and will not be completely compensated by the fast-acting measures of the turnaround program. Despite the negative development trend in earnings, the Company will continue to maintain its R&D investments at high levels in line with the previous year and will be launching 13 new products in the medical division and 16 new products in the safety division.

Earnings in the safety division are being affected by a higher proportion of public sector orders and a corresponding decline in the share of industrial sector orders. The medical division is being impacted by currency effects as well as a shift towards less profitable portfolio components. Both divisions are recording a considerable shift towards growth markets which again only offer low margins.

Stefan Dräger, Chairman of the Drägerwerk AG & Co. KGaA Executive Board: "All in all even a moderate decline in net sales would result in a dramatic decline in earnings in 2009 if no counter measures were taken. As a result, we are going to be very determined in the implementation of our turnaround program. This will put us in a position to generate positive earnings even in a more challenging environment and to continue making investments into renewing our product portfolio, enhancing quality and accessing growth markets. The overall package will make Dräger even more competitive and therefore safeguard jobs in the long-term."

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