Dräger Medical AG & Co.

$1.8 Billion ($2.7B total)

KEY EXECUTIVES:

Stefan Dräger, CEO
Herbert Fehrecke, COO
Gert Hartwig Lescow, CFO

NO. OF EMPLOYEES:

6,077 (10,345)
   

GLOBAL HEADQUARTERS:

Lübeck, Germany

Dräger has been supplying ventilation, respiration and air filtration technology for more than 100 years (the company celebrated 100 years in the US market in fiscal 2007). Its healthcare subsidiary, Dräger Medical AG & Co., a joint venture with Siemens started in 2003, may not have been around quite that long but already has distinguished itself as the company’s largest revenue generator.

Dräger Medical develops medical devices and related services for the acute point-of-care sector—from emergency, perioperative (the three phases of surgery: preoperative, intraoperative, postoperative) and critical care to perinatal care and home care. Though headquartered in Germany, the company also has development centers and production plants in the Netherlands, China, Telford, PA and Danvers, MA.

To kick off fiscal 2007 (ended Dec. 31), Dräger upped its stake in the partnership with Siemens with the purchase of an additional 10%, making it a 75%/25% venture—with Dräger holding the majority shares. The purchase cost was approximately $143.9 million, which the company financed.

Despite steady growth during the past few years, Dräger Medical’s orders were down 4% for FY07. As a result, revenues also fell short of expectations, falling 2.4% ($1.78 billion). According to the company, this mainly was due to the absence of large contracts and the failure of its US business to meet expectations. In addition, the strength of the euro, particularly against the dollar, reduced order intake and revenues.

The company’s largest market even after sluggish US performance, remains the Americas (41% of sales, down 2%), followed by Europe (except Germany), which made up 27% of sales (down 1%). Asia-Pacific represented 19% of sales in fiscal 2007, up 1%. In particular, the company reported a large volume of orders from Spain and Russia. The major markets, however, remained the driving force behind global economic activity in 2007, despite increasing fears of a recession.

For the year, Dräger Medical’s earnings before interest and taxes (EBIT, before non-recurring expenses) fell 7.5% to $153.5 million. The division’s net profit also declined—31%—to $85.3 million. The cost of launching the new Infinity Acute Care System contributed to decreased profit, the company reported.

The Infinity Acute Care System, introduced in 2006 but rolled out in fiscal 2007, is a product that integrates monitors and medical treatment equipment to form one system. The company is betting much of its long-term success on this new product line. The system incorporates patient monitoring, anesthesia, ventilation and information management for all treatment phases, creating a cross-departmental, standardized and integrated platform.

In the field of perioperative care, the company unveiled its Fabius Plus anesthesia machine (to replace older Fabius devices) during the Medica trade show in November 2007, along with the Fabius MRI anesthesia machine designed specifically for use in strong magnetic fields. During the year, Dräger Medical’s Critical Care business unit launched the Carina intensive care ventilator.

Moving forward, for 2008, Dräger is still betting on mature markets in the United States and Europe. The company expects a boost from population growth in the United States, despite a tightening of healthcare purse strings. Dräger officials believe that increased investment in new process-supporting technologies as a means of increasing efficiency and decreasing costs in the healthcare sector will help the company’s bottom line. 

For the first three months of fiscal 2008, The Dräger Group’s overall order intake rose 11% to $779.2 million. Despite the weak performance of the US dollar against the euro, net sales grew by 3.4% to $640.6 million. Dräger Medical increased its order intake by 16.1% to $505.2 million in the first quarter of 2008. Net sales of $417 million were 1.6% above the same period in 2007. The Medical division generated an above-average increase, 42.4%, in EBIT (before non-recurring expenses), taking it to $19 million. After non-recurring expenses, EBIT was $18 million.