* Draegerwerk cuts outlook for 2014 EBIT margin
* Now sees margin at 4.5-6.5 pct vs 8-10 pct
* Says to review medium-term targets
* Announces plans for efficiency measures
* Shares drop 17 pct
(Adds detail, background, comment)
By Maria Sheahan
FRANKFURT, July 15 German medical technology
group Draegerwerk has warned of a squeeze on sales
from the strong euro and said it had suffered tough trading in a
number of markets, sending its shares down 17 percent to a 2-1/2
Draegerwerk has suffered from the strong euro because it
makes most of its products - which range from incubators for
premature babies to surgical lights and breathing air systems
for fire fighters - in Europe but generates almost half of its
sales outside its home continent.
It had already warned in May that its business environment
was becoming more difficult and now said it expected its margin
on earnings before interest and tax (EBIT) to come to between
4.5 percent and 6.5 percent this year, compared with previous
expectations for 8 to 10 percent.
In addition to the effects of the strong euro, Draegerwerk
cited a substantial decline in business with Russia, slow demand
from medical customers in the United States and a weak business
performance in some countries in Asia-Pacific as reasons for the
To combat a slide in profitability, it said it was working
on a set of efficiency measures for the short to medium term,
without providing details.
"Any attempts to implement new cost savings initiatives or
capitalise on share price weakness to clean up its capital
structure would likely help pave the way to unlocking value from
the business and shares," analysts at banking group Berenberg
said in a note.
Draegerwerk now sees full-year sales growing by between 2
percent and 4 percent before currency effects, compared with a
previous outlook for 3 to 6 percent, but said forex moves were
likely to shave more than 2 percentage points off the net
outcome, indicating currency could eradicate any improvement in
In the second quarter, its sales slipped by 1.2 percent to
559.9 million euros ($763.7 million) while order intake was down
by 2.3 percent.
Draegerwerk said it would review its medium-term guidance
but would not announce any changes until it publishes financial
results for the full year 2014 early next year.
The stock dropped about 17 percent and traded as low as
60.50 euros, its lowest since January 2012. "What a shame again
... sell the shares if you can," a local trader said.
($1 = 0.7331 Euros)
(Editing by David Holmes)