Q1 2010: Successful start into 2010 - Outlook fully confirmed

• Sales €3.6 billion,
  +8% at actual rates, +10% in constant currency
• EBIT €500 million,
  +5% at actual rates, +7% in constant currency
• Net income¹ €119 million,
  8% at actual rates, +8% in constant currency

 

• Continued strong growth in all business segments
• Charges arising from the devaluation of the Venezuelan bolivar and the amendment of the syndicated credit agreement fully included in reported results
• Cash flow margin increases to 12%
• All business segments on track - 2010 outlook fully confirmed

Ulf Mark Schneider, CEO of Fresenius SE: "All our business segments made significant progress and achieved excellent results in the first quarter of 2010. We will continue to focus on revenue growth and our operating margin. Our first-quarter results give us full confidence in confirming our outlook for 2010. We expect Group net income to be at the upper end of our guidance."

Outlook for 2010 confirmed
Based on the Group's strong first-quarter financial results Fresenius confirms its positive outlook for 2010: Sales growth in constant currency is projected to be in a 7 to 9% range. Net income is expected to increase by 8 to 10% in constant currency.

The Group plans to invest approximately 5% of sales in property, plant and equipment.

The net debt/EBITDA ratio is expected to improve further and reach a level below 3.0. 

¹ Net income attributable to Fresenius SE; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. Both are non-cash items.


Sales growth of 10% in constant currency
Group sales increased by 10% in constant currency and by 8% at actual rates to €3,643 million (Q1 2009: €3,373 million). Organic sales growth was 9%. Acquisitions contributed a further 1%. Currency translation had a negative impact of 2%.

Sales growth in the business segments was as follows:

In Europe, sales grew by 10% in constant currency with organic sales growth contributing 9%. In North America, sales grew by 11% in constant currency. Organic growth was 9%. The organic growth rates in the emerging markets reached 4% in Asia-Pacific and 13% in Latin America. The low organic growth in Asia-Pacific is due to the volatility of the project business of Fresenius Vamed.

 

Continued strong earnings growth
Group EBITDA increased by 8% in constant currency and by 6% at actual rates to €649 million (Q1 2009: €613 million). Group EBIT grew by 7% in constant currency and by 5% at actual rates to €500 million (Q1 2009: €477 million). The EBIT margin was 13.7% (Q1 2009: 14.1%). At Fresenius Medical Care, the EBIT margin was impacted by the devaluation of the Venezuelan bolivar and related charges. As expected, Fresenius Kabi's EBIT margin was lower than in the first quarter of 2009 mainly due to delayed IV drug product launches and continued price competition in the U.S. market. The Group EBIT margin is expected to improve over the course of the year.

Group net interest improved slightly to -€143 million (Q1 2009: -€145 million). Net interest includes one-time charges in a low single-digit million-euro range related to the reduction and renegotiation of the 2008 syndicated credit agreement.

The other financial result was -€51 million and includes valuation changes of the fair redemption value of the Mandatory Exchangeable Bonds (MEB) of -€69 million and the Contingent Value Rights (CVR) of €18 million. Both are non-cash items.

The adjusted Group tax¹ rate was 33.3% (Q1 2009 adjusted: 32.2%). The increase is attributable, among others, to the charges in Venezuela which are not tax deductible. The adjusted Group tax rate is expected to decrease over the course of the year.

Noncontrolling interest increased to €119 million (Q1 2009: €115 million), of which 93% was attributable to the minority interest in Fresenius Medical Care.

Group net income² grew both in constant currency and at actual rates by 8% to €119 million (Q1 20092: €110 million). Earnings per ordinary share² and earnings per preference share² increased both to €0.74 (Q1 20092: ordinary share €0.68, preference share €0.68). This represents an increase of 8% for both share classes.

Net income³ (including special items) was €88 million, or €0.54 per ordinary share and €0.54 per preference share. 

¹ Adjusted for the effect of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) related to the acquisition of APP Pharmaceuticals. 
² Net income attributable to Fresenius SE; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. Both are non-cash items. 
³ Net income attributable to Fresenius SE.

 

Continued investments in growth
The Fresenius Group spent €124 million in Q1 2010 on property, plant and equipment (Q1 2009: €128 million). Acquisition spending was €81 million (Q1 2009: €112 million).

 

Excellent cash flow development
Operating cash flow increased significantly to €438 million (Q1 2009: €182 million), driven by strong earnings growth and tight working capital management. The cash flow margin improved to 12.0% (Q1 2009: 5.4%). Net capital expenditure was only €130 million (Q1 2009: €147 million). Cash flow before acquisitions and dividends significantly improved to €308 million (Q1 2009: €35 million). Free cash flow after acquisitions and dividends was €218 million (Q1 2009: -€62 million).

 

Solid balance sheet structure
The Fresenius Group's total assets grew by 6% to €22,048 million (December 31, 2009: €20,882 million). In constant currency, the increase was 1%. Current assets increased by 4% in constant currency and by 8% at actual rates to €5,795 million (December 31, 2009: €5,363 million). Non-current assets were at €16,253 million, an increase of 5% (December 31, 2009: €15,519 million).

Total shareholders' equity increased by 7% to €8,182 million (December 31, 2009: €7,652 million). The equity ratio (including noncontrolling interest) improved to 37.1% (December 31, 2009: 36.6%).

Group debt grew by 2% to €8,500 million (December 31, 2009: €8,299 million). In constant currency, Group debt decreased by 2%. In Q1 2010, Fresenius considerably improved the terms of its 2008 syndicated credit agreement. Pursuant to the amended agreement, the interest rate of the approximately US$1.2 billion term loan B (new term loan C) will be reduced by one-third. The new applicable interest rate will consist of the relevant money market rate (LIBOR and EURIBOR) subject to a 1.50% floor (formerly 3.25%), plus a 3.00% margin (formerly 3.50%). One-time charges related to the amendment slightly impacted Fresenius' results for the first quarter of 2010. Fresenius expects a positive contribution from the amendment for the full fiscal year.

The net debt/EBITDA ratio remained unchanged at 3.0 as of March 31, 2010 (December 31, 2009: 3.0). In constant currency, the net debt/EBITDA continued to improve.

 

Number of employees increased
As of March 31, 2010, Fresenius employed 132,246 people (December 31, 2009: 130,510). This is an increase of 1%.

 

Fresenius Biotech
Fresenius Biotech develops innovative therapies with trifunctional antibodies for the treatment of cancer. 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 reported sales of approximately €0.8 million with the trifunctional antibody Removab (catumaxomab) in the first quarter of 2010. Market launches in other European countries are in preparation.

Fresenius Biotech's EBIT was -€8 million (Q1 2009: -€10 million). For 2010, Fresenius Biotech confirms its guidance of an EBIT between -€35 and -40 million.


The 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 March 31, 2010, Fresenius Medical Care was treating 198,774 patients in 2,580 dialysis clinics.

• High organic sales growth of 8%
• 2010 outlook fully confirmed

Fresenius Medical Care achieved sales growth of 13% to US$2,882 million (Q1 2009: US$2,560 million). Organic growth accounted for 8%, acquisitions contributed 2% and currency translation contributed a further 3%.

Sales in dialysis care increased by 13% to US$2,171 million (Q1 2009: US$1,923 million). Dialysis product sales grew by 12% at actual rates and 5% in constant currency to US$711 million (Q1 2009: US$636 million).

In North America, sales increased by 10% to US$1,960 million (Q1 2009: US$1,774 million). Dialysis services revenue increased by 12% to US$1,760 million. Average revenue per treatment for U.S. clinics increased to US$355 in the first quarter of 2010 compared to US$338 for the corresponding quarter in 2009. This development was attributable principally to reimbursement increases and increased utilization of pharmaceuticals. Sales in dialysis products improved by 1% to US$200 million.

Sales outside North America ("International" segment) grew by 17% at actual rates and by 8% in constant currency to US$922 million (Q1 2009: US$786 million). Sales in dialysis care increased by 19% (9% in constant currency) to US$411 million. Dialysis product sales improved by 16% (7% in constant currency) to US$511 million.

EBIT increased by 7% to US$423 million (Q1 2009: US$396 million) resulting in an EBIT margin of 14.7% (Q1 2009: 15.5%). In North America, the EBIT margin increased to 15.6% (Q1 2009: 15.3%). The margin development was favorably influenced by an increase in revenue per treatment and cost-containment measures.

In the International segment, the EBIT margin was 16.4% (Q1 2009: 18.7%). The EBIT margin was impacted by the devaluation of the Venezuelan bolivar and related charges.

Net income¹ increased by 7% to US$211 million (Q1 2009: US$198 million).

For 2010, Fresenius Medical Care expects to achieve revenue of more than US$12 billion. Net income¹ is expected to be between US$950 and 980 million.

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

¹ Net income attributable to 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 also is a leading provider of medical devices and transfusion technology products.

• High organic sales growth of 9%
• 2010 outlook fully confirmed

Sales increased by 11% to €800 million (Q1 2009: €722 million). Organic sales growth was 9%. Acquisitions contributed 1%. Currency translation had a positive impact of 1%.

In Europe, sales reached €409 million (Q1 2009: €376 million), driven by 6% organic growth. In North America, sales increased to €179 million (Q1 2009: €168 million). Organic growth was 11%. In the Asia-Pacific region, Fresenius Kabi achieved organic sales growth of 14% to €128 million (Q1 2009: €111 million). Sales in Latin America and Africa increased to €84 million (Q1 2009: €67 million), and organic growth was 7%.

EBIT grew by 5% to €145 million (Q1 2009: €138 million). The EBIT margin was 18.1% (Q1 2009: 19.1%). As expected, the EBIT margin decreased mainly due to delayed IV drug product launches and continued price competition in the U.S. market. Net interest improved slightly to -€74 million (Q1 2009: -€79 million). Net income¹ grew by 21% to €46 million (Q1 2009: €38 million).

Sales at APP Pharmaceuticals increased by 12% to US$216 million (Q1 2009: US$192 million). APP Pharmaceuticals achieved significant sales growth of 14% in its product portfolio excluding heparin. Adjusted EBITDA² reached US$72 million (Q1 2009: US$81 million). EBIT was US$55 million (Q1 2009: US$61 million). The EBIT margin was 25.6%.

Operating cash flow of Fresenius Kabi increased significantly to €74 million (Q1 2009: €40 million). The cash flow margin improved to 9.3% (Q1 2009: 5.5%). Cash flow before acquisitions and dividends was strong at €42 million (Q1 2009: €3 million).

Fresenius Kabi fully confirms its outlook for 2010: The company targets organic sales growth between 7 and 9% for 2010. Furthermore, Fresenius Kabi forecasts an EBIT margin between 18 and 19%.

Special items relating to the acquisition of APP Pharmaceuticals are included in the segment "Corporate/Other". 

¹ Net income attributable to Fresenius Kabi AG. 
² Non-GAAP financial measures - Adjusted EBITDA is a defined term in the indenture governing the Contingent Value Rights (CVRs), however it is not a recognized term under GAAP.


Fresenius Helios
Fresenius Helios is one of the largest private hospital operators in Germany. The HELIOS Kliniken Group owns 61 hospitals, including five maximum care hospitals in Berlin-Buch, Erfurt, Krefeld, Schwerin and Wuppertal. HELIOS treats more than 2 million patients per year, thereof ~600,000 inpatients, and operates a total of more than 18,500 beds.

• Continued high organic sales growth of 6%
• 2010 outlook fully confirmed

Sales increased by 5% to €608 million (Q1 2009: €577 million). Organic growth was again strong and achieved 6%. This was driven by an increase in hospital admissions. Divestitures reduced sales growth by 1%.

EBIT grew by 18% to €52 million (Q1 2009: €44 million). The EBIT margin improved to 8.6% (Q1 2009: 7.6%). Net income increased by 40% to €28 million (Q1 2009: €20 million).

Fresenius Helios fully confirms its outlook for 2010. The company expects to achieve organic sales growth of 3 to 5%. EBIT is projected to be between €220 and 230 million.

¹ Net income attributable to HELIOS Kliniken GmbH.


Fresenius Vamed
Fresenius Vamed offers engineering and services for hospitals and other health care facilities.

• Order intake nearly tripled - order backlog at new all-time high
• Outlook 2010 fully confirmed

Sales increased by 34 % to €156 million (Q1 2009: €116 million). This excellent increase was fully achieved by organic growth. Sales in the project business rose by 50% to €102 million (Q1 2009: €68 million). Sales in the service business increased by 13% to €54 million (Q1 2009: €48 million).

EBIT increased by 75% to €7 million (Q1 2009: €4 million). The EBIT margin improved to 4.5% (Q1 2009: 3.4%). Net income rose by 50% to €6 million (Q1 2009: €4 million).

The excellent development of order intake and order backlog continued: Order intake in the project business nearly tripled to €260 million (Q1 2009: €88 million). This includes two turnkey contracts, for a hospital in Austria with an order volume of €102 million, and for a hospital with a cancer clinic in Gabon with an order volume of €43 million. Order backlog increased to a new all-time high of €838 million (December 31, 2009: €679 million, +23%).

Fresenius Vamed fully confirms the outlook for 2010 and expects to achieve both sales and EBIT growth between 5 and 10%. 

¹ Net income attributable to VAMED AG.


Analyst Meeting and Audio Webcast
As part of the publication of the results for the first quarter 2010, a conference call will be held on May 4, 2010 at 2.00 p.m. CEDT (8.00 a.m. EDT). All investors are cordially invited to follow the conference call in a live broadcast over the Internet at www.fresenius.com see Investor Relations / Presentations. Following the call, a recording of the conference will be available on our website.