Fresenius reports excellent sales and earnings growth, fully confirms 2012 outlook

H1/2012:

• Sales¹             €9.2 billion (+17% at actual rates, +12% in constant currency)
• EBIT²             €1.4 billion (+19% at actual rates, +14% in constant currency)
• Net income³  €434 million (+20% at actual rates, +15% in constant currency)

• Continued strong growth in all business segments
• Group sales and net income³ at all-time high in Q2/2012
• Cash flow margin increases to 12.3%

Ulf Mark Schneider, CEO of Fresenius, said: "Our strong growth trend continues and we posted record sales and earnings in the first half. The recently announced acquisition of Fenwal is a significant growth opportunity and will make us a worldwide leader in transfusion technology. We will focus on swiftly integrating this business and maintaining operational excellence in the Group. Commercial prudence will continue to guide us in assessing future acquisition opportunities."

¹ Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment of -€77 million in H1 2011 and of -€161 million for the full year 2011 solely relates to Fresenius Medical Care North America.² Adjusted for one-time costs of €7 million in Q2 2012 related to the offer to the shareholders of RHÖN-KLINIKUM AG.³ Net income attributable to shareholders of Fresenius SE & Co. KGaA – adjusted for a non-taxable investment gain of €34 million at Fresenius Medical Care and for one-time costs of €26 million in Q2 2012 related to the offer to the shareholders of RHÖN-KLINIKUM AG. 2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights.

 

Group outlook 2012 fully confirmed
Based on the Group's financial results in the first half of 2012, Fresenius confirms its guidance, which was raised in June 2012. For 2012, Fresenius expects sales¹ to increase by 12% to 14% and net income² to increase by 14% to 16%, both in constant currency.

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

The net debt/EBITDA ratio is projected to be <3.0 at year-end (including the acquisition of Fenwal Holdings, Inc.).

Sales growth of 12% in constant currency
Group sales increased by 17% (12% in constant currency) to €9,236 million (H1 2011¹: €7,927 million). Organic sales growth was 5%. Acquisitions contributed a further 7%. Currency translation had a positive effect of 5%. This is mainly attributable to the strengthening of the U.S. dollar against the euro by 7% in the first half of 2012 compared to the first half of 2011.

Sales in the business segments developed as follows:

Organic sales growth in North America was 3%, and in Europe 5%. Organic sales growth was again strong in Asia-Pacific with 10% and in Latin America with 19%. The sales decrease in Africa was due to the volatility in Fresenius Vamed's project business.

¹ Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment of -€77 million in H1 2011 and of -€161 million for the full year 2011 solely relates to Fresenius Medical Care North America.

² Net income attributable to shareholders of Fresenius SE & Co. KGaA – adjusted for a non-taxable investment gain of €34 million at Fresenius Medical Care and one-time costs related to the offer to the shareholders of RHÖN-KLINIKUM AG. 2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights. 

Excellent earnings growth

Group EBITDA¹ grew by 18% (13% in constant currency) to €1,806 million (H1 2011: €1,526 million). Group EBIT¹ increased by 19% (14% in constant currency) to €1,440 million (H1 2011: €1,207 million). The EBIT margin improved by 40 basis points to 15.6% (H1 2011: 15.2%).

Group net interest was -€313 million (H1 2011: -€276 million). Lower average interest rates were more than offset by incremental debt due to acquisition financing and currency translation effects.

The other financial result of -€29 million includes one-time costs for the offer to the shareholders of RHÖN-KLINIKUM AG, primarily related to financing commitments.

The Group tax rate² slightly improved to 30.8% (H1 2011: 30.9%).

Noncontrolling interest increased to €346 million (H1 2011: €280 million), of which 93% was attributable to the noncontrolling interest in Fresenius Medical Care.

Group net income³ increased by 20% (15% in constant currency) to €434 million (H1 2011: €363 million). Earnings per share increased by 16% to €2.58 (H1 2011: €2.23). The average number of shares grew to approx. 168 million in H1 2012, primarily due to the May 2012 capital increase.

A reconciliation to adjusted earnings according to U.S. GAAP can be found on page 14 of the Investor News.

Group net income⁴ was €442 million or €2.63 per share (including the non-taxable investment gain at Fresenius Medical Care, which is a non-cash item, and one-time costs related to the offer to the shareholders of RHÖN-KLINIKUM AG).

¹ Adjusted for one-time costs of €7 million in Q2 2012 related to the offer to the shareholders of RHÖN-KLINIKUM AG.² Adjusted for the non-taxable investment gain at Fresenius Medical Care and for one-time costs of €36 million in Q2 2012 related to the offer to the shareholders of RHÖN-KLINIKUM AG. 2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds.³ Net income attributable to shareholders of Fresenius SE & Co. KGaA – adjusted for a non-taxable investment gain of €34 million at Fresenius Medical Care and for one-time costs of €26 million in Q2 2012 related to the offer to the shareholders of RHÖN-KLINIKUM AG. 2011 adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights.⁴ Net income attributable to shareholders of Fresenius SE & Co. KGaA

Continued investment in growth
The Fresenius Group spent €388 million on property, plant and equipment (H1 2011: €286 million). Acquisition spending was €2,097 million (H1 2011: €857 million). This relates primarily to Fresenius Medical Care's acquisition of Liberty Dialysis Holdings, Inc. as well as to the acquisition of Damp Group by Fresenius Helios.

Excellent operating cash flow development
Operating cash flow increased to €1,136 million (H1 2011: €650 million). This was mainly driven by strong earnings growth and tight working capital management, especially regarding trade accounts receivable. The cash flow margin improved to 12.3% (H1 2011: 8.2%). Net capital expenditure was €358 million (H1 2011: €292 million). Free cash flow before acquisitions and dividends was €778 million (H1 2011: €358 million). Free cash flow after acquisitions and dividends was -€1,154 million (H1 2011: -€791 million).

Solid balance sheet structure
The Group's total assets increased by 17% (15% in constant currency) to €30,758 million (Dec. 31, 2011: €26,321 million). Current assets grew by 25% (24% in constant currency) to €8,967 million (Dec. 31, 2011: €7,151 million). This includes the proceeds of the capital increase which were invested in short-term instruments. Non-current assets increased by 14% (12% in constant currency) to €21,791 million (Dec. 31, 2011: €19,170 million), mainly due to the recent acquisitions.

Total shareholders' equity increased by 16% (14% in constant currency) to €12,224 million, mainly due to the capital increase (Dec. 31, 2011: €10,577 million). The equity ratio was 39.7% (Dec. 31, 2011: 40.2%).

Group debt grew by 23% (21% in constant currency) to €12,035 million (Dec. 31, 2011: €9,799 million), primarily resulting from acquisition financing. Net debt increased by 10% (8% in constant currency) to €10,068 million (Dec. 31, 2011: €9,164 million). Net debt comprises the proceeds of the capital increase.

As of June 30, 2012, the net debt/EBITDA ratio¹ was 2.75 (Dec. 31, 2011: 2.83). At identical exchange rates for net debt and EBITDA, the ratio was 2.65.

¹ Pro forma including Damp Group and Liberty Dialysis Holdings, Inc., adjusted for one-time costs of €7 million in Q2 2012 related to the offer to the shareholders of RHÖN-KLINIKUM AG.

Number of employees increases

As of June 30, 2012, the Fresenius Group increased the number of its employees by 8% to 161,685 (Dec. 31, 2011: 149,351), mainly due to acquisitions.

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's sales increased by 14% to €16.6 million compared to €14.6 million in the first half of 2011. Removab sales grew by 17% to €2.1 million (H1 2011: €1.8 million). ATG Fresenius S sales increased by 13% to €14.5 million (H1 2011: €12.8 million). Fresenius Biotech's EBIT was -€11 million (H1 2011: -€13 million).

For 2012, Fresenius Biotech continues to expect an EBIT of -€25 million to -€30 million.

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, 2012, Fresenius Medical Care was treating 256,456 patients in 3,123 dialysis clinics.

• Excellent constant currency sales growth of 12% (North America +12%, International +11%)
• 2012 outlook confirmed

Sales increased by 9% to US$6,677 million (H1 2011¹: US$6,121 million). Organic sales growth was 4%. Acquisitions contributed a further 8%. Currency translation had a negative effect of 3%.

Sales in dialysis services increased by 12% to US$5,082 million (H1 2011: US$4,538 million). Dialysis product sales grew by 1% to US$1,594 million (H1 2011: US$1,584 million).

In North America sales grew 12% to US$4,353 million (H1 2011: US$3,896 million). Dialysis services sales grew by 13% to US$3,960 million (H1 2011: US$3,501 million). Average revenue per treatment for U.S. clinics increased to US$351 in the second quarter of 2012 compared to US$348 for the corresponding quarter in 2011. Dialysis product sales were US$393 million (H1 2011: US$395 million). Higher sales of hemodialysis products were offset by lower sales of renal pharmaceuticals.

Sales outside North America ("International" segment) grew by 4% to US$2,307 million (H1 2011: US$2,218 million). Sales in dialysis services increased by 8% to US$1,122 million (H1 2011: US$1,037 million). Dialysis product sales of US$1,185 million remained close to the previous year's level of US$1,181 million at actual rates. In constant currency, dialysis product sales grew by 7%, mainly driven by higher sales of dialysis machines and dialyzers.

EBIT increased by 14% to US$1,092 million (H1 2011: US$955 million). The EBIT margin increased to 16.4% (H1 2011: 15.6%).

The EBIT margin in North America increased to 17.9% (H1 2011: 17.0%). In the International segment the EBIT margin improved to 17.4% (H1 2011: 16.9%).

Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA for the first half of 2012 was US$660 million, an increase of 37% compared to the corresponding period of 2011. This includes a non-taxable investment gain of US$140 million related to the acquisition of Liberty Dialysis Holdings, Inc. (Liberty), including its 51% stake in Renal Advantage Partners, LLC (RAI). The gain is a result of measuring the 49% equity interest in RAI held by the company at its fair value at the time of the Liberty acquisition. The second quarter includes an additional gain of US$13 million to the amount recorded in the first quarter of 2012 due to an adjustment of the fair value reported in Q1/2012. Excluding this investment gain, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 8% to US$520 million (H1 2011: US$481 million).

Fresenius Medical Care confirms its sales and earnings outlook for 2012. The company expects sales to grow to around US$14 billion³. Net income is expected to grow to around US$1.3 billion and net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA is expected to grow to around US$1.14 billion³. This does not include the investment gain in the amount of US$140 million in the first half of 2012.

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

¹ Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment amounts to -US$109 million in H1 2011; the 2011 sales adjustment amounts to -US$224 million.² Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA – adjusted for a non-taxable investment gain of US$140 million in the first half of 2012.³ Outlook includes a +/- 0-2% deviation from the respective number.

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.

• Strong organic sales growth of 9%
• 2012 outlook fully confirmed

Sales increased by 13% to €2,234 million (H1 2011: €1,971 million). Organic sales growth was 9%. Currency translation had an effect of 3%. Acquisitions contributed 1%.

In Europe sales grew by 7% (organic growth: 6%) to €974 million (H1 2011: €909 million). Sales in North America increased by 17% to €609 million (H1 2011: €519 million). Strong organic growth of 9% was supported by continued competitor supply constraints and new product launches. In Asia-Pacific sales increased by 25% (organic growth: 15%) to €415 million (H1 2011: €332 million). Sales in Latin America and Africa increased by 12% (organic growth: 14%) to €236 million (H1 2011: €211 million).

EBIT grew by 10% to €452 million (H1 2011: €411 million). EBIT growth was driven particularly by excellent earnings growth in North America and the emerging markets. The EBIT margin was 20.2% (H1 2011: 20.9%).

Net income¹ increased by 16% to €210 million (H1 2011: €181 million).

Fresenius Kabi's operating cash flow increased by 40% to €288 million (H1 2011: €205 million). The cash flow margin was excellent at 12.9% (H1 2011: 10.4%). Cash flow before acquisitions and dividends improved to €199 million (H1 2011: €124 million). The strong increase was also favorably influenced by extraordinary payments of trade accounts receivable.

On July 20, 2012, Fresenius Kabi announced that it has signed a definitive agreement to acquire Fenwal Holdings, Inc., a leading U.S.-based provider of transfusion technology products for blood collection, separation, and processing, from TPG and Maverick Capital. In 2011, Fenwal had sales of US$614 million with an adjusted EBITDA of US$90 million.

The acquisition marks another major step in Fresenius Kabi's growth strategy. The company had announced previously that expanding its medical devices/transfusion technology segment is a priority.

Fresenius Kabi raises its guidance² announced at the Capital Market Day. With the closing of the acquisition, Fresenius Kabi targets sales of approx. €6 billion by 2015 and EBIT of >€1.1 billion. Previously, the company targeted sales of approx. €5.5 billion and EBIT of >€1 billion.

Fresenius Kabi fully confirms its outlook for 2012. The company targets organic sales growth of between 7% and 9%. Furthermore, Fresenius Kabi forecasts an EBIT margin of between 20% to 20.5%.

¹ Net income attributable to shareholders of Fresenius Kabi AG² at current exchange rates

Fresenius Helios
Fresenius Helios is one of the largest private hospital operators in Germany. HELIOS owns 73 hospitals, including six maximum care hospitals in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin and Wuppertal. HELIOS treats more than 2.7 million patients per year, thereof more than 750,000 inpatients, and operates more than 23,000 beds.

• Strong organic sales growth of 5.4%
• 2012 outlook fully confirmed

Sales increased by 19% to €1,540 million (H1 2011: €1,293 million). Organic sales growth was 5.4%. Acquisitions contributed 14%.

EBIT grew by 23% to €151 million (H1 2011: €123 million). The EBIT margin improved by 30 basis points to 9.8% (H1 2011: 9.5%).

Net income¹ increased by 28% to €92 million (H1 2011: €72 million).

Sales of the established hospitals grew by 5% to €1,359 million. EBIT improved by 31% to €162 million. The EBIT margin increased to 11.9% (H1 2011: 9.6%) driven by excellent operating results and a one-time gain. Sales of the acquired hospitals (consolidation <1 year) were €181 million. As expected, EBIT was -€11 million. Restructuring of these hospitals is on track.

Fresenius remains convinced of the merits of combining RHÖN-KLINIKUM with HELIOS, and continues to assess its options.

Fresenius Helios fully confirms its outlook for 2012. The company projects organic sales growth of 3% to 5% and EBIT to increase to the upper end of the targeted range of €310 million to €320 million.

One-time costs relating to the offer to the shareholders of RHÖN-KLINIKUM AG are included in the segment "Corporate/Other".

¹ Net income attributable to shareholders of HELIOS Kliniken GmbH

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

• Sales and EBIT fully in line with expectations
• 2012 outlook fully confirmed

Sales increased by 6% to €333 million (H1 2011: €313 million). Sales in the project business were €184 million (H1 2011: €202 million). Sales in the service business increased by 34% to €149 million (H1 2011: €111 million).

EBIT was €13 million (H1 2011: €12 million). The EBIT margin reached 3.9% (H1 2011: 3.8%). Net income¹ remained at previous year's level of €9 million.

In H1 2012, the order intake was €156 million (H1 2011: €164 million). In Q2 2012, Fresenius Vamed received additional supply contracts for medical-technical equipment in China with an order volume of €18 million. The order intake also includes a turnkey contract for the construction of an additional building for the San Fernando General Hospital in the Republic of Trinidad and Tobago. The order volume is approx. €14 million. Order backlog was €816 million as of June 30, 2012 (Dec. 31, 2011: €845 million).

Fresenius Vamed fully confirms its 2012 outlook. The company expects sales and EBIT growth of 5% to 10%.

¹ Net income attributable to shareholders of VAMED AG

Analyst Conference Call
As part of the publication of the results for the first half of 2012, a conference call will be held on August 1, 2012 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.