FRESENIUS SE & CO. KGAA Bad Homburg v.d.H.
H1/2014:
- Sales €10.7 billion (+7% at actual rates, +12% in constant currency)
- EBIT1 €1,403 million (-3% at actual rates, 0% in constant currency)
- Net income2 €487 million (+1% at actual rates, +3% in constant currency)
Ulf Mark Schneider, CEO of Fresenius, said: "All business segments showed marked improvement from the first quarter. The integration of the newly acquired hospitals is fully on track and we are pleased with their strong financial performance. Kabi saw growing business momentum in all key markets. Looking ahead, we expect growth to accelerate further across the Group in the second half of the year and fully confirm our 2014 earnings guidance."
1 2014 before integration costs (Fenwal: €3 million; acquired Rhön hospitals: €8 million) and disposal gains (two HELIOS hospitals: €22 million; Rhön stake: €35 million); 2013 before integration costs (Fenwal: €27 million)
2 Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs (Fenwal: €2 million; acquired Rhön hospitals: €6 million) and disposal gains (two HELIOS hospitals: €21 million; Rhön stake: €34 million); 2013 before integration costs (Fenwal: €20 million); including these effects, net income attributable to shareholders of Fresenius SE & Co. KGaA increased by 16% (+17% in constant currency) to €534 million
20141 Group sales outlook raised
Fresenius raises its sales outlook following acquisitions at Fresenius Medical Care, and now expects sales to increase by 14% to 16% in constant currency. Previously, the Company expected sales growth of 12% to 15%. Fresenius fully confirms its net income2 guidance, and continues to expect an increase of 2% to 5% in constant currency.
The net debt/EBITDA ratio is expected to be approximately 3.25 particularly reflecting Fresenius Medical Care's acquisitions (previously 3.00 to 3.25).
12% sales growth in constant currency
Group sales increased by 7% (12% in constant currency) to €10,733 million (H1/2013: €9,987 million). Organic sales growth was 3%. Acquisitions contributed 9%. Divestitures had a marginal effect on sales growth.
Sales of the business segments developed as follows:
Organic sales growth was 3% in North America and 2% in Europe. In Asia-Pacific organic sales growth was 2%, impacted by a slow first quarter in China for Fresenius Medical Care and Fresenius Kabi. In Latin America organic sales growth was 9%. In Africa, the decline in sales is mainly due to fluctuations in the project business at Fresenius Vamed.
Adverse currency translation effects weighed on Group sales in all regions, particularly in Latin America (-19%), Asia-Pacific (-7%), Africa (-7%) and North America (-5%).
1 Includes contributions from the acquisition of hospitals from Rhön-Klinikum AG
2 Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs (Fenwal; acquired Rhön hospitals) and disposal gains (two HELIOS hospitals; Rhön stake); 2013 before integration costs (Fenwal)
Group net income in line with guidance
Group EBITDA1 was €1,854 million (H1/2013: €1,860 million) and increased by 3% in constant currency. Group EBIT1 decreased by 3% (0% in constant currency) to €1,403 million (H1/2013: €1,448 million). Besides currency headwinds, this development is mainly attributable to the year-over-year comparison of issues at Fresenius Medical Care and Fresenius Kabi which occurred in 2013. The EBIT margin was 13.1% (H1/2013: 14.5%). In Q2/2014, the EBIT margin increased sequentially by 150 bps to 13.8%.
Group net interest was -€283 million (H1/2013: -€313 million). Improved financing terms as well as favorable currency effects contributed to the decrease. In addition, H1/2013 net interest included €14 million one-time costs resulting from the early redemption of a Senior Note.
The Group tax rate2 was 29.6% and above the prior-year level (H1/2013: 28.5%). In Q2/2014, the Group tax rate was 32.4% due to a special tax effect at Fresenius Medical Care.
Noncontrolling interest was €301 million (H1/2013: €330 million), of which 94% was attributable to the noncontrolling interest in Fresenius Medical Care.
Group net income3 increased by 1% (3% in constant currency) to €487 million (H1/2013: €482 million). Earnings per share3 were €2.71 (H1/2013: €2.70). Group net income3 excluding the special tax effect at Fresenius Medical Care increased by 2% (4% in constant currency).
Group net income attributable to shareholders of Fresenius SE & Co. KGaA including integration costs for Fenwal and the acquired Rhön hospitals, as well as the disposal gains from two HELIOS hospitals and the Rhön-Klinikum stake increased by 16% (+17% in constant currency) to €534 million. Earnings per share increased by 15% (+16% in constant currency) to €2.97. A reconciliation to earnings according to U.S. GAAP can be found on page 14 of this Investor News.
Continued investment in growth
The Fresenius Group spent €522 million on property, plant and equipment (H1/2013: €425 million). The Company primarily invested in the modernization and expansion of production facilities and hospitals as well as in the equipment of new, and the expansion of existing dialysis clinics.
Total acquisition spending was €1,216 million (H1/2013: €150 million), including €756 million for the acquisition of hospitals from Rhön-Klinikum AG.
1 2014 before integration costs (Fenwal: €3 million; acquired Rhön hospitals: €8 million) and disposal gains (two HELIOS hospitals: €22 million; Rhön stake: €35 million); 2013 before integration costs (Fenwal: €27 million)
2 2014 before integration costs (Fenwal; acquired Rhön hospitals) and disposal gains (two HELIOS hospital; Rhön stake); 2013 before integration costs (Fenwal)
3 Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs (Fenwal: €2 million; acquired Rhön hospitals: €6 million) and disposal gains (two HELIOS hospitals: €21 million; Rhön stake: €34 million); 2013 before integration costs (Fenwal: €20 million)
Strong cash flow in Q2
Operating cash flow was €750 million (H1/2013: €947 million) with a margin of 7.0% (H1/2013: 9.5%). The decrease was mainly attributable to the payment for the W.R. Grace bankruptcy settlement of US$115 million1, increased working capital at Fresenius Medical Care and Fresenius Kabi as well as a change from annual to monthly upfront payments to Fresenius Vamed for a technical management contract all in Q1/2014. In Q2/2014, the operating cash flow margin was 11.0%.
Net capital expenditure increased to €532 million (H1/2013: €416 million). Free cash flow before acquisitions and dividends was €218 million (H1/2013: €531 million). Free cash flow after acquisitions and dividends was -€1,275 million (H1/2013: 92 million).
1 See Annual Report 2013, page 150 f.
Solid balance sheet structure
The Group's total assets increased by 8% (at actual rates and in constant currency) to €35,502 million (Dec. 31, 2013: €32,758 million). This increase is mainly attributable to the first-time consolidation of hospitals acquired from Rhön-Klinikum AG. Current assets grew by 19% to €9,464 million (Dec. 31, 2013: €7,972 million). Non-current assets increased by 5% to €26,038 million (Dec. 31, 2013: €24,786 million).
Total shareholders' equity increased by 3% to €13,706 million (Dec. 31, 2013: €13,260 million). The equity ratio was 38.6% (Dec. 31, 2013: 40.5%).
Group debt was €14,527 million (Dec. 31, 2013: €12,804 million). Net debt was €13,457 million (Dec. 31, 2013: €11,940 million).
As of June 30, 2014, the net debt/EBITDA ratio was 3.391 (Dec. 31, 2013: 2.512). The increase is mainly due to the acquisition of hospitals from Rhön-Klinikum AG.
1 Pro forma including acquired Rhön hospitals and excluding two HELIOS hospitals; before integration costs (Fenwal; acquired Rhön hospitals) and disposal gains (two HELIOS hospitals; Rhön stake)
2 Pro forma excluding advances made for the acquisition of hospitals from Rhön-Klinikum AG; before integration costs (Fenwal)
Number of employees increases
As of June 30, 2014, the number of employees increased by 18% to 209,933 (Dec. 31, 2013: 178,337). This is mainly due to the acquisition of hospitals from Rhön-Klinikum AG.
Business Segments
Fresenius Medical Care
Fresenius Medical Care is the world's leading provider of services and products for patients with chronic kidney failure. As of June 30, 2014, Fresenius Medical Care was treating 280,942 patients in 3,335 dialysis clinics.
- Second quarter shows accelerated growth and margin improvement
- Net income impacted by US$ 18 million special tax effect
- 2014 guidance confirmed
Sales increased by 5% (6% in constant currency) to US$7,398 million (H1/2013: US$7,076 million). Organic sales growth was 4%. Acquisitions contributed 2%. Adverse currency effects reduced sales by 1%.
Sales in dialysis services increased by 6% (7% in constant currency) to US$5,731 million (H1/2013: US$5,421 million). Dialysis product sales increased by 1% (1% in constant currency) to US$1,667 million (H1/2013: US$1,655 million).
In North America sales grew by 5% to US$4,914 million (H1/2013: US$4,663 million). Dialysis services sales increased by 6% to US$4,517 million (H1/2013: US$4,261 million). Dialysis product sales decreased by 1% to US$397 million (H1/2013: US$402 million).
Sales outside North America ("International" segment) increased by 3% (5% increase in constant currency) to US$2,458 million (H1/2013: US$2,397 million) impacted inter alia by the reorganization of the distribution network in China. Sales in dialysis services increased by 5% (10% in constant currency) to US$1,214 million (H1/2013: US$1,161 million). Dialysis product sales increased by 1% (1% in constant currency) to US$1,244 million (H1/2013: US$1,236 million).
EBIT decreased by 4% to US$1,001 million (H1/2013: US$1,038 million). The EBIT margin was 13.5% (H1/2013: 14.7%). EBIT was impacted by sequestration and rebasing of Medicare's reimbursement rate in the United States. In Q2/2014, EBIT increased by 2% to US$556. The EBIT margin increased sequentially by 200 bps to 14.5%.
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA decreased by 10% to US$439 million (H1/2013: US$488 million). Excluding a special tax effect at Fresenius Medical Care in Q2/2014, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA was US$457 million.
Operating cash flow was US$562 million (H1/2013: US$841 million). The decrease was mainly attributable to the payment for the W.R. Grace bankruptcy settlement of US$115 million and increased working capital in Q1/2014. The cash flow margin was 7.6% (H1/2013: 11.9%).
Fresenius Medical Care confirms its outlook for 2014. Fresenius Medical Care expects sales of approximately US$15.2 billion, translating into a growth rate of around 4%. This outlook excludes sales of about US$500 million from acquisitions. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA is expected to be unchanged between US$1.0 to US$1.05 billion. The company has initiated a global efficiency program designed to enhance its performance over a multi-year period. Potential cost savings before income taxes of up to US$60 million generated from this program are not included in the outlook for 2014.
For further information, please see Fresenius Medical Care's Investor News at www.fmc-ag.com.
1 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
Fresenius Kabi
Fresenius Kabi offers infusion therapies, intravenously administered generic drugs and clinical nutrition for seriously and chronically ill patients in the hospital and outpatient environments. The company is also a leading supplier of medical devices and transfusion technology products.
- 4% organic sales growth and EBIT margin of 16.8% in Q2
- €10 million adverse currency impact on EBIT in Q2
- 13.8% cash flow margin in Q2
- 2014 guidance fully confirmed
Sales decreased by 2% (+3% increase in constant currency) to €2,466 million (H1/2013: €2,519 million). Organic sales growth was 2% (Q2/2014: 4%). Adverse currency translation effects weighed on sales (-5%), mainly due to the weaker currencies in the United States, Brazil, Argentina and South Africa against the Euro.
Sales in Europe decreased by 1% (organic sales growth: +1%) to €1,024 million (H1/2013: €1,030 million). Sales in North America decreased by 5% (organic sales growth: 0%) to €747 million (H1/2013: €784 million). Asia-Pacific sales were €464 million (organic sales growth: +6%; H1/2013: €456 million). Sales in Latin America/Africa decreased by 7% (organic sales growth: +11%) to €231 million (H1/2013: €249 million).
EBIT1 was €411 million (H1/2013: €469 million), a decrease of 9% in constant currency. Adverse currency translation effects particularly weighed on Q2 EBIT with -4% compared to -2% in Q1/2014. Besides currency headwinds, EBIT was impacted by lower HES sales and the 2013 price cuts in China. The EBIT margin of 16.7% was in line with expectations and our guidance range. Sequentially, EBIT margin improved by 20 bps to 16.8% in Q2/2014.
Net income2 decreased by 10% to €217 million (H1/2013: €242 million).
Fresenius Kabi's operating cash flow was €215 million (H1/2013: €238 million) with a margin of 8.7% (H1/2013: 9.4%), mainly due to temporarily higher working capital requirements. Cash flow improved from Q1 (€42 million) to Q2 (€173 million). Cash flow before acquisitions and dividends in H1/2014 was €73 million (H1/2013: €120 million).
Integration costs for Fenwal were €3 million (pre-tax) in H1/2014. These costs are reported in the Group Corporate/Other segment. The vast majority of planned integration costs of €40-50 million are expected to accrue towards the end of 2014.
Fresenius Kabi fully confirms its 2014 outlook and projects organic sales growth of 4% to 6% and an EBIT margin of 16.5% to 18%.
1 Before integration costs (Fenwal)
2 Net income attributable to shareholders of Fresenius Kabi AG; before integration costs (Fenwal)
Fresenius Kabi guidance excludes €40-50 million pre-tax Fenwal integration costs (€30-40 million after tax); see Group guidance
Fresenius Helios
Fresenius Helios is Germany's largest hospital operator. HELIOS owns 110 hospitals, thereof 86 acute care clinics including seven maximum care hospitals in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin, Wiesbaden and Wuppertal and 24 post-acute care clinics. HELIOS treats more than 4.2 million patients per year, thereof more than 1.2 million inpatients, and operates more than 34,000 beds.
- 3% organic sales growth fully in line with guidance
- Acquired hospitals show positive margin development
- New 2014 guidance: EBIT of €540-560 million for HELIOS including the acquired hospitals
Sales increased by 49% to €2,521 million (H1/2013: €1,695 million). The strong increase in sales is mainly due to the acquired hospitals from Rhön-Klinikum AG. The divestment of two HELIOS hospitals reduced sales growth by 2%. Organic sales growth was 3% in H1 and Q2.
EBIT1 grew by 40% to €250 million (H1/2013: €179 million). The EBIT margin was 9.9% (H1/2013: 10.6%). The margin decline is due to the consolidation of the newly acquired hospitals. The EBIT margin increased by 120 bps from 9.3% in Q1/2014 to 10.5% in Q2/2014.
Net income2 increased by 50% to €179 million (H1/2013: €119 million).
Sales of the established hospitals grew by 3% to €1,713 million. EBIT improved by 5% to €184 million. The EBIT margin increased to 10.7% (H1/2013: 10.6 %).
Sales of the acquired hospitals were €808 million, EBIT was €66 million and EBIT margin was 8.2%. Q2/2014 EBIT margin increased substantially to 9.1% (Q1/2014: 7.0%).
In Q1/2014, approximately 90% of the acquisition of hospitals from Rhön-Klinikum AG was completed. Approximately 70% of the acquired business was consolidated as of January 1, 2014, and approximately 20% as of March 1, 2014. The acquisition of HSK Dr. Horst Schmidt Kliniken in Wiesbaden is consolidated as of June 30, 2014. In addition, HELIOS acquired Rhön-Klinikum's 265-bed hospital in Cuxhaven with 2013 sales of approximately €40 million. The transaction is expected to be completed July 31, 2014.
The integration of the acquired hospitals is progressing as planned.
Fresenius Helios continues to project 2014 organic sales growth of 3 to 5%. The acquired hospitals are also expected to show 3 to 5% organic growth and to contribute sales of approximately €1.8 billion. EBIT for HELIOS including the acquired hospitals is expected to increase to €540-560 million.
1 2014 before integration costs (€8 million) and disposal gains (two HELIOS hospitals: €22 million; Rhön stake: €35 million)
2 Net income attributable to shareholders of HELIOS Kliniken GmbH; 2014 before integration costs (€6 million) and disposal gains (two HELIOS hospitals: €21 million; Rhön stake: €34 million)
Fresenius Helios guidance before integration costs for the hospitals acquired from Rhön-Klinikum AG and disposal gains of two HELIOS hospitals and Rhön stake. The integration costs will be reported in the Group Corporate/Other segment, see Group guidance
Fresenius Vamed
Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide.
- Continued strong order intake of €300 million
- Results reflect typical quarterly fluctuations in the project business
- 2014 guidance fully confirmed
Sales decreased by 5% to €398 million (H1/2013: €421 million). Organic sales growth was -8%. Acquisitions contributed 3%. Sales in the project business decreased by 17% to €173 million (H1/2013: €208 million) reflecting typical quarterly fluctuations. Sales in the service business grew by 6% to €225 million (H1/2013: €213 million).
EBIT was €15 million (H1/2013: €15 million) with a margin of 3.8% (H1/2013: 3.6%).
Net income1 increased to €10 million (H1/2013: €9 million).
Order intake was €300 million (H1/2013: €311 million). As of June 30, 2014, order backlog was €1,262 million (Dec. 31, 2013: €1,139 million).
Fresenius Vamed fully confirms its 2014 outlook and expects to achieve organic sales growth of 5% to 10% and EBIT growth of 5% to 10%.
1 Net income attributable to shareholders of Vamed AG
Analyst-/Investor Conference Call
As part of the publication of the results for the first half of 2014, a conference call will be held on July 31, 2014 at 2 p.m. CEST (8 a.m. EDT). All investors are cordially invited to follow the conference call in a live broadcast via the Internet at www.fresenius.com, see Investor Relations, Presentations. Following the call, a replay of the conference call will be available on our website.
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This release contains forward-looking statements that are subject to various risks and uncertainties. Future results could differ materially from those described in these forward-looking statements due to certain factors, e.g. changes in business, economic and competitive conditions, regulatory reforms, results of clinical trials, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, and the availability of financing. Fresenius does not undertake any responsibility to update the forward-looking statements in this release.
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