Draegerwerk AG - H1/2003 Performance.

Business Editors

LUBECK, Germany--(BUSINESS WIRE)--Aug. 14, 2003

Draegerwerk AG (FWB:DRW3):

-- H1 expectations fulfilled

-- Sharp improvement in Group earnings - despite weak economy and

strong euro

-- Financial debts again down

-- Draeger Medical and Draeger Safety subgroups continue on track

-- Stock price doubled

-- Outlook bright

Lubeck-based Draegerwerk AG, the global medical and safety technology group, again made solid progress in the course of H1/2003, continuing on the path of growth. Net income surged from EUR11.3 million to EUR34.2 million, chiefly due to the extraordinary gain from the disposal of Draeger Aerospace GmbH. Yet even discounting this latter, net income for the period climbed 21 percent to EUR13.7 million. Exchange rates eroded the amount by EUR2.2 million. At EUR33.5 million (parity-adjusted EUR36.3 million), EBIT rose from the year-earlier EUR33.6 million despite additional expenses and forex effects in the region of a total EUR9 million.

Adjusted for exchange rates, Group sales in H1/2003 mounted 6.8 percent (nominally 1.0 percent) to EUR616.3 million (up from EUR610.5 million).

During this same period, order intake (excluding exchange rate influences) advanced 7.0 percent (nominally 1.2 percent) to EUR665.7 million (up from EUR657.5 million) Capital employed showed a seasonal rise from EUR532 million at the end of 2002 to EUR543 million. Net financial debt was downscaled from EUR190 million at the end of 2002 to EUR175 million in June 2003. Once more, Draeger preferred stock turned in a solid performance, soaring from EUR18 at the start of 2003 by 100 percent to EUR36 mid-August 2003.

Group indicators for H1/2003                 H1/2003   H1/2002
                                            EUR mill. EUR mill. Change
----------------------------------------------------- --------- ------
Order intake                                   665.7     657.5   +1.6%
----------------------------------------------------- --------- ------
Net sales                                      616.3     610.5   +1.0%
----------------------------------------------------- --------- ------
EBIT                                            33.5      33.6
----------------------------------------------------- --------- ------
Net income                                      34.2      11.3
----------------------------------------------------- --------- ------
Extraord. gain fr. disposal of Draeger
 Aerospace GmbH                                 20.5
----------------------------------------------------- --------- ------
Net income before extraord. gain Draeger
 Aerospace                                      13.7      11.3  +21.2%
----------------------------------------------------- --------- ------
                                             6/30/03  12/31/02
----------------------------------------------------- --------- ------
Capital employed                               542.8     531.5   +2,1%
----------------------------------------------------- --------- ------
Headcount                                     10,213     9,865   +3.5%
----------------------------------------------------- --------- ------

Most of these sales and earnings improvements are due to further efficiency and cost enhancements at the two subgroups Draeger Medical and Draeger Safety. Despite tough economic and competitive environments, both once more gained ground within their markets.

Draeger Medical elevates operating EBIT by 37 percent

With operating EBIT up 37 percent (before JV-related one-off expenses of EUR5.1 million), Draeger Medical posted for H1/2003 an operating result of EUR28.6 million (up from EUR20.9 million for H1/2002), equivalent to an EBIT margin of 7.6 percent (up from 5.6).

For Q2/2003, EBIT (excluding JV-related one-time expenses) reached EUR17.8 million (up from EUR15.9 million). For the tenth quarter running this subgroup has therefore outperformed its year-earlier quarterly EBIT, not least of all because of the steadily leaner cost structures worldwide. Accordingly, the Q2 EBIT margin has mounted to 8.4 percent (from 7.8 percent in Q2/2002).

Since Draeger Medical is well balanced in value-added terms, the weak US dollar eroded earnings by less than 2 million.

In contrast, the exchange rate did significantly impact on sales. While net sales had added up to EUR371.1 million for H1/2002, they climbed a mere 1.7 percent to EUR377.5 million. Applying like-for-like currency translation rates produces a sales rise of 7.2 percent.

Order intake in Q2/2003 showed an improvement versus the weak Q1/2003 and totaled EUR213.7 million, which compared with Q2/2002's EUR206.5 million is a growth of 3.5 percent at current exchange rates, parity-adjusted as much as 9.1 percent.

Hence, aggregate order intake for H1/2003 at EUR405.8 million was only slightly short of the year-earlier EUR413,8 million, despite a Q1 decline of 7.3 percent. One of the reasons for this upturn is that Asian business was no longer infected by the SARS epidemic. Up 20.1 percent over H1/2002, the Asia-Pacific region showed heartening growth. In contrast, the end of the Iraq war has so far not reawakened the Near & Middle East from its expenditure apathy.

Despite a strong June, H1/2003 order intake in the USA was down by 14 percent, mainly due to the weak dollar.

According to Dr. Wolfgang Reim, CEO at Draeger Medical, the three highlights during H1/2003 were the successful conclusion to the preparations for operating the joint venture with Siemens as of June 30, 2003 and the worldwide sales training with IBM Global Services already completed on three continents. These courses enable sales staff to devise comprehensive solutions for customers and thus operate even more rewardingly. Of the some 1,000 Draeger Medical sales staff, 20 percent have now received instruction in the program. In addition, Fabius Tiro, a new inhalation anesthetizing device specifically for preoperating rooms, was showcased to the German Anesthetics Congress in April. Together with the restructuring and process enhancement measures initiated in the preceding quarters, this is therefore a sound basis for the latter half of 2003.

Successful H1/2003 for Draeger Safety, too - EBIT matching budget, and global growth in high-volume products

In the first six months of 2003, Draeger Safety achieved an EBIT of EUR19.3 million (EUR20.5 million at LFL exchange rates), which compares with EUR23.2 million for H1 of the year before. The change is mainly related to temporary consolidation effects during H1/2003. The EBIT margin amounted to 8.4 percent (down from 10.1 percent). By mid-2003, worldwide sales by Draeger Safety rose to EUR230.2 million (up from EUR227.6 million). In terms of last year's exchange rates, the growth was 7.6 percent, in terms of current ones 1.1 percent. Hence, Draeger Safety's sales have again outpaced the market.

At EUR248.8 million (up from EUR228.9 million), order intake climbed 8.7 percent at current rates, exchange rate adjusted 15.8 percent.

At EUR9.1 million, capital expenditures exceeded the year-earlier EUR4.6 million by EUR4.5 million and were mainly related to rationalizing and expanding production for new products.

Business flourished particularly in the NAFTA region, specifically through high-volume products. Order booked in the United States for civilian protection ("domestic preparedness") and in Canada for mining rescue gear propelled orders up 41 percent (at LFL exchange rates) and 21.1 percent at current exchange rates. Draeger equipment competed successfully, chiefly on account of its innovative technology and vast efficiency. In the wake of the SARS pulmonary epidemic, demand in the Asia-Pacific region for the Piccola filtrating respiratory protection face masks continued into the current second quarter. H1/2003 had seen the countries affected by SARS place orders for these masks at a value of around EUR7 million.

Europe was another region in which Draeger Safety again expanded business and extended market shares. In France, for instance, Draeger Safety accelerated to become the foremost supplier of breathalyzer equipment, now that the French police are immediately gearing themselves with the Draeger Alcotest 7110 whose measurements may be effectively used in courts of law (against traffic offenders, e.g.) as an alternative to blood samples.

In order to extend its product lineup, Draeger Safety will in the latter half of 2003 take over RWE Piller GmbH's respiratory air business. An agreement to this effect was signed in July. In doing so, says Prof. Albert Jugel, CEO at Draeger Safety, this subgroup is underscoring its role as a supplier of integrated hazard management systems. Based in Osterode, in Germany's Harz mountains, this RWE Piller division specializes in the development, planning and manufacture of vehicle-mounted respiratory supply systems.

Prospects

Despite present conditions, economic uncertainties, and the strong euro, the Executive Board is nonetheless confident that the Draeger Group will continue on course in the latter half of 2003 and achieve for all of 2003 the targeted EUR37 million (up from EUR19.2 million) net income (including the extraordinary gain from the disposal of Aerospace and H2 revenues from the joint venture). EBIT, too (before one-time expenses for joint-venture integration), is predicted to reach the budgeted EUR98 million. Group sales for all of 2003 are still forecast to rise to EUR1,415 million (up from EUR1,333 million).

With the dollar staying weak, the Draeger Medical subgroup is budgeting for all of 2003 (including for six months the JV business), an EBIT of EUR95 million (up from EUR75.3 million), excluding one-time JV expenses of around EUR35 million since the input-output structure of the value-added chain is well balanced through matching currencies. As to predicted sales, Draeger Medical does not expect the budgeted figure of EUR975 million for fiscal 2003 to be attained. For reasons of currency parities, this subgroup predicts sales of EUR940 million (up from EUR848.3 million).

Likewise for parity reasons, Draeger Safety expects a slight decline in sales to EUR460 million (from EUR471.1 million) yet does assume that the budgeted EBIT of EUR39 million (down from EUR40.1 million) can be reached.

Estimates: This press release contains a number of forecasts and estimates which are based on present expectations, anticipations and predictions on the part of the Executive Board and the information it currently has. Such estimates should not be construed as a warranty that the future developments and results therein stated will in fact materialize since these hinge on a host of factors, and encompass a variety of risks and imponderables while resting on assumptions that might be inappropriate. We therefore incur no obligation to update any forecasts or estimates herein made.