Hello, welcome back to our next presentation. This will be Drägerwerk as part of our today's German Select Conference. I'm happy to with me Thomas Fischler, Dräger's Head of Treasury and Investor Relations, and he will walk us through the company's presentation, touching on key milestones and the current market trends. Before we dive in, a quick housekeeping note from my side. The conference is being recorded, and all participants are in a listen-only mode. If you have questions, please submit them using the chat box down on the right-hand side of your screen, and we will address the question later on in the Q&A session. With this, I'll hand it over to you, Mr. Fischler. The floor is yours.
Yes. Thank you. Hello to everybody, and thank you very much for joining this short conference and your interest in Drägerwerk. What you see here on the deck, the first slide is a mixture of different pictures. We see a Self-Contained Breathing Apparatus. We see helmets. We see medical devices. We see even a soldier doing a gas measurement. Basically, that already is what we do because all of our products, they protect, support, and save lives. We have a guiding philosophy, which is Technology for Life, and that's the combining factor basically over everything that we do. Because when we go through the different kind of services and products that we have, you see a very broad spectrum and one could think about what is the combining factor and why is it the way it is? The answer is on this slide.
Let's jump into the company and take a bird's view, and starting on the top right corner here, if we look at the net sales distribution, we have two divisions, a Medical division, a Safety division, roughly 60/40 split in net sales. In the geographies, since we are a German-based company, founded in the same year as the Tour Eiffel was opened in 1889, now in the fifth generation of the Dräger family, that's why Germany-based, 20% of our net sales is still in our home market, followed by the rest of Europe and Middle East, 40%, followed by the Americas, North and South America, of which North America, of course, is the largest part. If you look at the U.S., $450 million net sales in the U.S. The smallest reporting region is Asia Pacific with 16%.
If we look at the distribution of our employees, then we see that the majority of our employees are customer-facing, 60%. Roughly 20% is then in production, quality, logistics, and 10% each is roughly R&D and administration. We do have quite a global footprint. We do business in basically every country of the planet, but with own subsidiaries, we do that in just about 50 countries. Those are then, in general, sales and service companies. We do also have maybe two handful of production and development facilities throughout the world. The largest is here in Lübeck. Starting from the West, we have in the U.S. a facility for our Patient Monitoring.
In the U.K., we have our SCBAs, all the way to the East, in China, where we develop and build in China for China since it has become something that we see in more and more large markets that require a certain local content. China is one of these markets, and that's why we do have own production facilities there. There is a new dot on this map in the middle in India. We're just building up a facility in India, also there with the impact to develop and produce products that are specifically for this fast-growing market in India and also for other similar markets in the Asian region. Now, if we jump into our markets, we talk about Medical, and we'll start with Medical, then we're just talking about the hospital. The other pictures here on this chart, they're all Safety. Safety is much more diverse.
Let's start with Medical, and within the hospital, which is our customer, we're looking at the high acuity areas. You will find Dräger in the operating room, you will find Dräger in the intensive care units. You will not find Dräger in the other wards, low acuity wards or so. There, usually, you will not encounter any Dräger products. The biggest franchises that we have product-wise are anesthesia and ventilation. Those are the big product areas that contribute the highest portion of net sales and also of earnings, followed by Workplace Infrastructure. Those are wall supply units, medical lights, thermoregulation, where we look at incubators and of course, the aftersales business, which is our service and consumable business, which, depending on the year, roughly is about 40 and above percent of net sales within this unit.
There's a smaller business on this chart, which is the Patient Monitoring business. There, we do not have similar high market shares like in the big businesses, anesthesia, ventilation. We're only a market follower, but it has a quite important strategic relevance for us. Because if we look at the Dräger products, anesthesia ventilator, then those are products which are quite far in their life cycle. They're very mature. Of course, with this maturity, there is a certain degree of commoditization. We believe that the future innovation will come more so in the interoperability of more than one device, several devices. In order to really develop that, you will require a certain footprint in Patient Monitoring. That's why we're investing in this area to build this up.
I would like to explain this quite important piece of our hospital strategy with a concrete product which we're marketing and which uses exactly this interoperability functionality of our devices. What we have done many years ago is started to develop a standard for a bidirectional possibility to exchange data between medical devices. We have not done this alone.
Dräger is too small to do that. We have done this under the roof of IEEE and developed a standard to exchange data between medical devices. This is one of our first products, which we actually have launched now together with other suppliers that exchange data over the boundary of the own ecosystem. It's an open ecosystem. What we see here is the Silent ICU, where the devices from Dräger, the ventilator, the patient monitor, the devices from B. Braun, the infusion pumps, and the alarm systems from Ascom build a system together.
What they do is they silence the ICU and forward all alarms out of that room to either the handheld device of the caregiver or the central station of the ward. By doing so, you have quite interesting benefits for the customer and the patient. One is obvious. The room remains silent, and that's beneficial for the healing of the patient. For our customer, we make it possible to have a more efficient treatment process. The caregiver does not have to enter the room, infection topic, does not have to enter the room to look at an alarm, to go to every device and actually then change settings or so. He can, from his handheld, see what the alarm is about, and then also return and silence the alarm on his handheld.
Since the workflow is one of the big topics of our customer, this is very beneficial for the customer, and especially since it's an open ecosystem, meaning that the customer can do something like cherry-picking. He can set up according to his IT strategy, take in the suppliers that he sees fit to run his ward best by using this new protocol, which we are marketing very strongly currently. Now, we move on to the Safety division. On the Safety side of the business, we have a much more diverse customer base. Here on the top in gray, we see some of them, the biggest verticals, which would be firefighters, the oil and gas industry, the chemical industry, and the mining. These four, which are the biggest single ones, only account for maybe 50%-60% of net sales.
The rest comes from many different other verticals. May it be the beverage industry, law enforcement, and many others, any kind of process industry that at some point can use Dräger products. Products that you will find within our offering are breathing systems, so Self-Contained Breathing Apparatuses, the devices that firefighters use when working to extinguish fires, Gas Detectors, so sensors that can identify explosive or toxic gases, either to protect people or to protect the infrastructure where people work, Personal Protective Equipment like any kind of protection suits in harsh environments, and other areas. Here, the aftersales business compared to at least the Medical is a little bit smaller. It's more in the area of 20%-25%. That just has to do with the kind of products that we offer.
Also here I have brought, let's say, a special topic that I would like to dive into, which has gained importance over the last two or three years, which we have been conducting for a long period of time, but has now the potential to become a substantial part of our equity story, and that is the defense business. We cater to law enforcement and defense customers, especially NATO customers. Mostly the same products that also industry customers would buy, self-contained breathing apparatus, for example, but also specific products that have been developed for defense customers, like specialized filters to protect military vehicles or vessels or airplanes. And specialized gas sensors that can detect chemical warfare gases. And this is an area due to the obvious reasons, where we see quite substantial growth potential.
We think that it will be possible to grow this business over the next two to three years to 2028 to reach a volume of EUR 300 million. So far, we have seen in the last year, 2025, already quite a strong acceleration from a net sales level of below EUR 100 million to above EUR 100 million. Order intake has grown even a lot stronger than that since, as we all probably have read, these kind of deals take quite some time in the preparation phase before they actually turn into net sales. This is quite a strong area of future growth in the Safety side of the business. Jumping into the financials and starting with 2025, the last year was, for Dräger, a very strong year. We had a record top line, the highest net sales ever with good growth of some roughly 5% currency adjusted.
In line with that, also our earnings have increased to an EBIT margin of 6.7%, and that also obviously improved our free cash flow, which is up by EUR 16 million to EUR 140 million. All that translated into a very good also share price performance, as you as investors certainly are aware of. If we look at the earnings development of last year, and this is clearly my favorite chart of the deck, then this should be seen in light of the actual circumstances that we had to deal with in 2025. We did have a starting point, 2024, which had benefited from quite some one-off effects. We sold some non-strategic business units. We sold some properties which amounted in total to a windfall profit of EUR 22 million on the EBIT level. That was not there in 2025.
In addition, we had to compensate for quite strong headwinds coming from especially currencies that contribute negatively EUR 45 million. Of course, the tariffs, the U.S. tariffs that hardly anybody had on his plan, that had to be compensated an amount for Dräger at least of EUR 25 million, totaling EUR 70 million headwinds. If you add that together, then we have compensated in 2025 purely from operational performance, EUR 90 million in EBIT, which makes 2025, setting aside the abnormal COVID years, the strongest year that I have seen from Dräger in the time I have worked for the company. I joined in 2012, so quite a long time. It was a really very strong year for us. As you might know, after the very strong COVID time, we had a very difficult year, 2022, in light of the supply chain difficulties.
At that time, we announced the corporate objective that we will put profitability first, the profitability expansion. We quantified that with the target to develop our EBIT margin by one percentage point on average in the coming years. We have delivered on that in the last years to the level of 6.7% last year. If we then take this, and we never said that would be a linear process, but if we take that from the starting point, then we are even a little bit ahead of target. That, with the good earnings of last year, put us into the position to actually also share that with our shareholders. We are increasing the dividend for the third or fourth time in a row by some 10% in this year to pay out a dividend of above EUR 2, which the payout is 30% of our earnings.
That is also due to the fact that our equity ratio is very strong, with above 50% currently. Bringing us to the outlook for the current year, we expect to continue our growth path. This year we are looking at growth in the area of nominal, in the area of 1%-5%. Here we see 2%-6%. That is net of currency effects. Currently, we do expect to see FX headwinds of roughly 1 percentage point, so it will be currency adjusted 2%-6%, nominal 1%-5% growth in the current year. We're looking at an expectation on the EBIT margin in somewhere in the area of 5%-7.5%. That is, if we take the midpoint, not an expansion of margin. Of course, we do hope, and we're also working towards seeing a further expansion of margins also in the current year.
Since last year, we did have some good positive effects on the mix side. We did have a very strong year-end business, which doesn't have to repeat. It is not completely off the table that we will not see the same margin expansion as we've seen in 2025. As I said, of course, it is our internal goal to deliver a further margin expansion. In all fairness, we also see the possibility that we will not be able to expand the margin in the current year. We remain committed to see a margin expansion over the medium term, as we've seen it in the last couple of years, on average of one percentage point per annum. With this, I would then open the Q&A session, please.
Yes. We have received a couple of questions already, and we will try to cover as many as we can in the time we have got. Mr. Fischler, you just finished the outlook talking about the margin. What are the [audio distortion] for further improvement of your EBIT margin in 2026 compared to 2025?
Acoustically, what are the what?
The margin, what is the biggest driver for further improvement of the margin?
Okay. Thank you for clarifying that. The margin expansion that we hope for and working for in the current year is built basically on three things. One is the decent top-line development, as I just said, that is a good growth that we see there. The second is on price enforcement. We expect to continue our price increases, at least in most markets. That has become more difficult with fading inflation. Okay, now it's a new picture with possibly higher inflation figures again, but it currently is on our agenda to continue our price enforcement. The third is just prudent cost management. We have several, let's say, activities going in terms of to remain on expense growth below the net sales growth. If we take the biggest chunk, then that would be the expense development here in Lübeck.
We are planning to see no increase in headcount in the administration functions here in Lübeck. That shall remain on last year's level, and that clearly in targeting the careful further development on the cost side.
Perfect. Thank you. Can you say anything about the launch of the new Silent ICU product? How successful has the launch been? Has this led to an increase in orders in Q1?
Okay. Thank you for this question because that gives me the possibility to put this into perspective. At the end of this year and the end of next year, these single products, they don't contribute a meaningful portion of net sales and earnings. It's a future topic. We will still be doing the biggest part of our business with the core products that we're selling also last year and the year before. It is the important part of the further development going forward. This is clearly a future area of innovation.
The business is not just to sell a Silent ICU, but by doing that, to sell the other products that come with it. Ventilators, anesthesia machines, all of the above, that are SDC, which is the protocol, ready and are future-proof because they are able to speak this protocol. It is an enabler for further growth of the core businesses.
Okay, perfect. Let's talk about the Defense business. Could you please share any update on the Defense business? How has the revenue been tracking in 2025, and what do you expect for 2026? What can you observe from your Defense order intake?
Okay. In 2025, we already saw a very decent increase in net sales. Coming from below EUR 100 million, we are now above EUR 100 million. What has even grown with a higher rate, much higher rate, is the order intake. Even the order intake is only a small portion of the funnel, the actual projects that we're discussing with customers. That's what I meant with the lead times in this business are quite long. Let me give you an example. We're working on winning the business for the vessels the Bundeswehr is planning on building. You might have read that there have been delays in what kind of vessels are to be built, with whom they are to be built, and these delays then also trickle down to us, the supplier of that.
If they come, then they will be coming within the next years and be a net sales contributor for the next years after. It's a back-end loaded story, but already in 2025, we have seen good top-line acceleration, which is within our expectation for the development to triple these net sales to EUR 300 million until 2028.
Perfect. Thank you. Can you give us your perspective on the competitive dynamics of the Software business within Medical division? What are the reasons you win or lose prospective contracts?
That pays into what I explained with the Silent ICU. If you have a hospital, a customer that has an IT strategy built around an ecosystem where he wants to choose which provider he wants, versus he has to buy into a proprietary system. That's a big decision for customers. You have on the one side, you have these proprietary systems from some of our competitors. They work fine, and many in the past have gone with this path. Having an open ecosystem as a new competition, as a new choice next to it, is a very compelling proposition, which is new, which is the proposition that Dräger is making to our customers. This currently is winning business for us.
We do have won tenders that, especially for this reason, open ecosystem roadmap that we're developing on this open ecosystem and the investment safety of the customer perspective, buying into such an open ecosystem is the reason we believe that this is the right way forward. I'm not saying that it's the right thing for every customer. Some customers might be completely happy buying into a closed shop ecosystem. That's fine. For a big chunk of the market, an open ecosystem is very interesting.
Also a competitive question. Given the strong growth of Blackline Safety and other players in connected mobile gas detection, to what extent are you seeing competitive pressure on your installed base? What differentiates your solution today?
Okay. Dräger has been in the Gas Detection business for a very long time. There are some competitors that are on a similar good level, if we take competitors like Honeywell, MSA, or something like that. Dräger is very sophisticated in the sensor technology, meaning that we can do many different kind of gases. Very important, we are very reliable on measuring gases, meaning that we don't have the same false alarms that many of no-name competitors have. If you're looking for quality in your processes without the risk of having false alarm, with all the consequences for your own processes, you will be going with one of the proven quality suppliers, and that is a limited number of customers. There are, of course, many different aspects to look at that.
Sure.
That is the top line.
Yeah. Mr. Fischler, actually, we are running out of time, but not out of questions. We have to come to an end right now as the next presentation has started already. I would like to thank you for the presentation and all participants for the questions you've asked. We send short email to you, and we would appreciate if you share your feedback with the company. The next presentation will be Elmos Semiconductor, and we put a direct link to this meeting in the chat box already. See you there.
Thank you, everybody. Bye-bye.