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  • Sales € 5.1 billion, + 37 % at actual rates, + 34 % in constant currency
  • EBIT € 681 million, + 50 % at actual rates, + 46 % in constant currency
  • Net income € 140 million, + 39 % at actual rates, + 36 % in constant currency
  • Fresenius Medical Care with strong sales and earnings growth
  • Fresenius Kabi in the second quarter with EBIT margin record of more than 15 %
  • Fresenius ProServe fully on track
  • Integration of Renal Care Group progressing well; integration of HELIOS/WKA completed

 
Group outlook 2006: Sales and earnings forecast raised
Given the Company's strong performance in the first half, Fresenius raises its full-year 2006 sales and earnings outlook. Group sales are now expected to increase by approximately 35 % in constant currency to about € 10.7 billion. Net income is projected to grow by about 40 % in constant currency. The net income guidance already includes an amount of approximately € 27 million (after tax) associated with expected one-time expenses as well as expenses related to the stock option accounting change. Previously, the Company had expected net income growth to exceed 30 %. Earnings per share are now projected to increase by approximately 15 % in constant currency. Previously, earnings per share growth of around 10 % had been projected.

Sales – Strong growth continues
Group sales increased by 37 % to € 5,078 million (H1 2005: € 3,702 million). Excellent organic growth contributed 9 % to revenue growth. Acquisitions, in particular the first-time consolidation of Renal Care Group and HELIOS Kliniken in the income statement, contributed 25 %. Currency translation effects added 3 % to sales growth.

In North America, sales grew significantly due to the first-time consolidation of Renal Care Group. In addition, organic growth was excellent with 8 %. In Europe, the substantial sales increase was driven by the first-time consolidation of HELIOS Kliniken. However, underlying organic growth came in at a very good rate of 7 %. Excellent growth rates were achieved in the emerging markets, with organic growth of 24 % in Asia-Pacific and 19 % each in Latin America and Africa.

 

Sales contribution of the three business segments:

Fresenius ProServe's increased sales contribution is the result of the consolidation of HELIOS Kliniken.


Strong earnings growth
Group EBIT increased by 50 % at actual rates and by 46 % in constant currency to € 681 million (H1 2005: € 453 million). The growth was driven by the successful operating performance of all business segments as well as the first-time consolidation of Renal Care Group and HELIOS Kliniken. EBIT includes a gain of € 32 million from the divestitures of dialysis clinics in the USA. The sale was a condition of the US Federal Trade Commission for the approval of the Renal Care Group acquisition. EBIT also includes a total of € 11 million one-time expenses and expenses related to the stock option accounting change.

Primarily, given the debt financing of the Renal Care Group acquisition, Group net interest increased to € -194 million (H1 2005: -97 million). This number however also includes one-time expenses of € 30 million associated with the refinancing of Group debt.

The tax rate was 41.9 % (H1 2005: 39.3 %). It was substantially influenced by the tax expense associated with the divestitures of the dialysis clinics in the USA. As the goodwill attributable to the divested clinics is not considered for tax purposes, the sale resulted in a loss of € 2 million after tax. Excluding this effect the tax rate was 36.9 %.

Minority interest was € 143 million (H1 2005: € 115 million). 94 % was attributable to the minority interest of Fresenius Medical Care.

Group net income grew by 39 % at actual rates and by 36 % in constant currency to € 140 million (H1 2005: € 101 million). This result includes one-time expenses of € 19 million, primarily for the refinancing of debt as well as for expenses related to the stock option accounting change. Thus, approximately 70 % of the expected one-time expenses for the full-year 2006 are already included in the Group net income.

Earnings per ordinary share rose to € 2.75 (H1 2005: € 2.46) while earnings per preference share rose to € 2.77 (H1 2005: € 2.48). This is an increase of 12 % for both share classes (9 % in constant currency). The average number of shares grew to 50,852,320 mainly due to the share issue in December 2005.

Investments
Fresenius Group spent € 225 million for property, plant and equipment and intangible assets (H1 2005: € 115 million). Acquisition spending increased to € 3,408 million due to the acquisition of Renal Care Group (H1 2005: € 227 million).

Cash flow
Operating cash flow increased by 17 % to € 385 million (H1 2005: € 329 million). The key driver was the significant improvement in earnings whereas the tax expense associated with the divestitures of the dialysis clinics had a negative effect. Cash flow before acquisitions and dividends was € 172 million (H1 2005: € 224 million). The acquisition of Renal Care Group was financed through bank debt.

Solid balance sheet structure
Total assets increased by 28 % to € 14,831 million (December 31, 2005: € 11,594 million). In constant currency, total assets grew 34 %. The substantial increase is mainly related to the Renal Care Group acquisition which was consolidated in the balance sheet for the first time as of March 31, 2006. Current assets increased by 10 % to € 3,871 million (December 31, 2005: € 3,531 million). Non-current assets were € 10,960 million (H1 2005: € 8,063 million), an increase of 36 %. This was primarily due to the goodwill resulting from the Renal Care Group acquisition.

Group debt increased to € 6,154 million (December 31, 2005: € 3,502 million) due to financing of the Renal Care Group acquisition.

As of June 30, 2006, the net debt/EBITDA ratio was 3.3 (December 31, 2005: 2.3).

Shareholders' equity including minority interest grew 5 % to € 5,380 million (December 31, 2005: € 5,130 million), driven by the very good earnings development. Given the debt financing of the Renal Care Group acquisition, the equity ratio (including minority interests) decreased to 36.3 % (December 31, 2005: 44.2 %).

Employees
As of June 30, 2006, the Group had 100,196 employees worldwide (December 31, 2005: 91,971). The increase of 8,225 employees is primarily due to the acquisition of Renal Care Group.

Fresenius Biotech
Fresenius Biotech develops innovative therapies with trifunctional antibodies for the treatment of cancer as well as cell therapies for the treatment of the immune system. In the field of polyclonal antibodies, Fresenius Biotech has successfully marketed ATG-Fresenius S for many years. ATG-Fresenius S is an immunosuppressive agent used to prevent and treat graft rejection following organ transplantation.

Fresenius Biotech has successfully continued its clinical study program. The company reported encouraging results of a phase IIa study with the trifunctional antibody removab® in the treatment of ovarian cancer patients. Based on these results, Fresenius Biotech is planning to start a European phase II study for this indication in the second half of 2006.

A phase II study on breast cancer started in March 2006. About 40 patients will be included in the trial. A phase II study for the treatment of gastric cancer with approximately 50 patients started in June 2006. The results from the malignant ascites phase II/III study are expected at the end of this year.

For the full year 2006, Fresenius Biotech continues to expect an EBIT in the range of € -45 to -50 million, largely due to the higher expenses for expanded clinical study program.


The Business Segments

Fresenius Medical Care
Fresenius Medical Care is the world's leading provider of products and services for patients with chronic kidney failure. As of June 30, 2006, Fresenius Medical Care (incl. Renal Care Group and after divestitures) was serving 161,675 patients in 2,078 dialysis clinics.
 

* before one-time expenses, expenses related to the stock option accounting change and the effect of the FTC-related clinic divestitures in the USA

 

  • Strong sales and earnings growth in all regions
  • Renal Care Group integration well under way and on track
  • Outlook for 2006 upgraded

Fresenius Medical Care achieved strong sales growth of 19 % to US$ 3,912 million (H1 2005: US$ 3,283 million). This was driven by both the excellent operating performance and the first-time consolidation of Renal Care Group in the income statement. Organic growth reached 9 %. Sales in dialysis care increased by 24 % to US$ 2,924 million (H1 2005: US$ 2,363 million). In dialysis products, Fresenius Medical Care achieved sales of 988 million US$ (H1 2005: US$ 920 million), an increase of 7 % (10 % in constant currency).

In North America, Fresenius Medical Care increased sales by 24 % to US$ 2,754 million (H1 2005: US$ 2,215 million). Organic growth reached 8 %. Sales outside North America ("International") grew by 8 % (12 % in constant currency) to US$ 1,158 million (H1 2005: US$ 1,068 million).

Net income increased by 10 % to US$ 246 million (H1 2005: US$ 223 million). This result includes one-time expenses of US$ 20 million primarily for the refinancing of Fresenius Medical Care debt, for expenses related to the stock option accounting change as well as for the after-tax loss on the divestitures of dialysis clinics in the USA. Excluding the above effects net income was up 19 % to US$ 266 million.

Based on the strong performance in the first half of 2006, Fresenius Medical Care upgrades its guidance for the full year 2006. After expecting to report a revenue of about US$ 8.1 billion, the company now expects a revenue for 2006 of about US$ 8.3 billion.

Fresenius Medical Care also upgrades its outlook for reported net income for 2006. After expecting a net income between US$ 515 million and US$ 535 million, the company now expects to report a net income of at least US$ 542 million, which represents an increase of at least 15% over the 2005 level.

In order to show the underlying performance of Fresenius Medical Care, the guidance provided does not take into effect any expected one-time items and the stock option accounting change. After previously assuming the after-tax impact of one-time items and the stock option accounting change to be about US$ 60 million Fresenius Medical Care now expects this impact to be about US$ 40 million for the full year 2006.

For further information, please see Fresenius Medical Care's Investor News at www.fmc-ag.com.

Fresenius Kabi
Fresenius Kabi offers infusion therapies and clinical nutrition for seriously and chronically ill patients in the hospital and out-patient environments. The company is also a leading provider of transfusion technology products.
 

  • Strong organic sales growth of 8 %
  • Record EBIT margin of more than 15 % in the second quarter
  • Sales and earnings outlook for 2006 raised

Fresenius Kabi's sales increased by 15 % to € 937 million (H1 2005: € 818 million). The company achieved strong organic growth of 8 %. Acquisitions, primarily Clinico and the first-time consolidation of Pharmatel, contributed 4 % to sales. Currency translation added a further 3 %.

Sales in Europe (excluding Germany) increased by 9 %, in Germany by 5 %.
Fresenius Kabi did extremely well in the emerging markets outside Europe and achieved sales growth of 44 % in Asia-Pacific, 36 % in Latin America and 25 % in the other regions. Organic growth in the regions outside Europe was well into the double digits.

Fresenius Kabi showed an excellent performance at the EBIT level, with an increase of 26 % to € 139 million (H1 2005: € 110 million). The EBIT margin improved by 140 basis points to 14.8 % (H1 2005: 13.4 %). In the second quarter, the EBIT margin reached a new record level of 15.1 %. Net profit rose by 18 % to € 60 million (H1 2005: € 51 million). This already includes one-time expenses of € 11 million for the early redemption of the 2003 Eurobond.

Based on the excellent performance in the first half, Fresenius Kabi raises its EBIT margin outlook for the full year 2006 from previously 14.5-15.0 % to now >15 %. The company now expects sales growth of 11 to 12 % in constant currency. Previously, growth of around 10 % had been projected.

Fresenius ProServe
Fresenius ProServe is a leading German hospital operator with more than 50 facilities. Moreover, the company offers engineering and services for hospitals and other health care facilities as well as for the pharmaceutical industry.
 

  • Very good performance in hospital operations
  • Strong order intake in the engineering & services businesses
  • Outlook for 2006 fully confirmed

Fresenius ProServe achieved excellent financial results. Sales grew by 3 % to € 974 million (H1 2005 incl. HELIOS Kliniken: € 942 million). Organic growth amounted to 4 %. On a comparable basis, EBIT increased by 15 % to € 62 million (H1 2005 incl. HELIOS Kliniken: € 54 million).

Sales in hospital operations (HELIOS Kliniken Group) amounted to € 767 million (H1 2005: € 765 million). Organic growth was 2 %. EBIT increased to € 56 million, the EBIT margin improved to 7.3 % (H1 2005 incl. HELIOS Kliniken: € 48 million and 6.3 %). The integration of WKA into HELIOS Kliniken Group was successfully completed. The focus is now on continued efficiency improvements at the WKA clinics and on further growth through privatization in the German hospital market.

Sales in the engineering and services business (VAMED, Pharmaplan) increased 17 % to € 207 million (H1 2005: € 177 million). EBIT rose 50 % to € 9 million (H1 2005: € 6 million). Order intake and order backlog continued to develop very positively. Order intake increased by 19 % to € 185 million (H1 2005: € 156 million). Order backlog rose 14 % to € 409 million as of June 30, 2006 (December 31, 2005: € 360 million).

In March 2006, HELIOS Kliniken agreed to acquire HUMAINE Kliniken GmbH. HUMAINE operates six acute and post-acute care hospitals with a total of 1,850 beds. The transaction is expected to be completed in the third quarter. The acquisition of HUMAINE will be accretive to Fresenius Group's earnings per share in the fiscal year 2006 already.

Fresenius ProServe confirms its 2006 full-year outlook and expects revenue growth of 1 to 3 % before acquisitions, based on 2005 revenues including HELIOS of € 2,009 million. EBIT is forecast to rise to € 140 to 150 million (2005 incl. HELIOS: € 125 million).

Video Webcast
As part of the publication of our results for the first half of 2006, an analyst conference will be held at the Fresenius headquarters in Bad Homburg on August 3, 2006 at 1:30 p.m. CEDT (7.30 a.m. EDT). All investors are cordially invited to follow the conference in a live broadcast over the Internet at www.fresenius-ag.com / Investor Relations / Presentations. Following the meeting, a recording of the conference will be available as video-on-demand.

Quarterly report
The report for the first half and the second quarter of 2006 will be available on August 14, 2006 on the Internet at www.fresenius-ag.com / Investor Relations / Financial Reports / Quarterly Reports.

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.