First half of 2005: Fresenius achieves excellent financial results and raises full-year earnings outlook

• Sales: € 3.70 billion, + 6 % in constant currency, + 4 % at actual rates
• EBIT: € 453 million, + 12 % in constant currency, + 10 % at actual rates
• Net incombe: € 101 million, + 28 % in constant currency, + 26 % at actual rates
• Strong sales and earnings growth at Fresenius Medical Care; driven by continued gains in North America and Europe
• Fresenius Kabi achieves new record in EBIT margin; very good sales development in all regions
• Fresenius ProServe improves earnings and achieves good order intake

2005 Group outlook raised
Based on these excellent results Fresenius raises its full-year outlook (before the acquisition of Renal Care Group by Fresenius Medical Care) and now expects net income growth of 20 to 25 % in constant currency. Previously, the Company expected 15 to 20 % net income growth. The projection for sales growth in constant currency remains at 6 to 9 %. All business segments are expected to achieve sales and earnings growth.

Sustained sales growth
In the first half of 2005, Group sales increased 6 % in constant currency. Organic growth contributed 5 % and acquisitions 2 % to this increase. Currency translation had a -2 % and divestments a -1 % effect on sales. Sales were € 3,702 million, an increase of 4 % at actual rates (H1 2004: € 3,553 million).

Strong constant-currency sales growth was achieved in North America (+7 %), in Latin America (+19 %) and in Africa (+44 %). In Asia-Pacific, Fresenius Kabi achieved an excellent sales growth. The lower project volume at Fresenius ProServe primarily impacted the sales development in this region.



Sales contribution of the three business segments:



Strong earnings growth
EBITDA increased 9 % in constant currency and 7 % at actual rates to € 604 million (H1 2004: € 564 million). Group EBIT rose 12 % in constant currency and 10 % at actual rates to € 453 million (H1 2004: € 412 million). The Group EBIT margin further improved to 12.2 % in the first half of 2005 (H1 2004: 11.6 %).

Group net interest expense was € -97 million in the first half of 2005 (H1 2004: € -104 million). This improvement was mainly the result of a lower debt level compared to the first half of 2004 in combination with lower interest rates and currency translation effects. The tax rate for the first half of 2005 was 39.3 % (H1 2004: 40.6 %), in line with the full-year expectation of 39 to 40 %.

Minority interest increased to € 115 million (H1 2004: € 103 million) mainly due to the strong earnings development of Fresenius Medical Care, which accounts for 96 % of minority interest.

Group net income grew strongly by 28 % in constant currency and 26 % at actual rates to € 101 million (H1 2004: € 80 million). Excellent operating results of Fresenius Medical Care and Fresenius Kabi, lower interest expenses and a slightly lower tax rate contributed to this increase.

Earnings per ordinary share were € 2.46 (H1 2004: € 1.95). Earnings per preference share were € 2.48 (H1 2004: € 1.97). EPS increased 26 % for both share classes.

Investments considerably increased
In the first half of 2005, Group investments doubled to € 342 million (H1 2004: €172 million). This significant increase was mainly driven by acquisitions at Fresenius Kabi. € 115 million was spent for property, plant and equipment and intangible assets (H1 2004: € 111 million) and € 227 million for acquisitions (H1 2004: € 61 million).

Solid cash flow performance
Operating cash flow was slightly lower than in the previous year at € 329 million (H1 2004: € 340 million) despite the excellent earnings development. This was mainly due to higher income tax payments of Fresenius Medical Care in North America. Free cash flow before acquisitions and dividends was € 224 million (H1 2004: € 239 million). Free cash flow after acquisitions (€ 182 million) and dividends (€ 127 million) was € -85 million (H1 2004: € 67 million).

Solid balance sheet structure
Total assets increased 10 % to € 9,045 million (December 31, 2004: € 8,188 million). In constant currency, total assets grew 3 %. Current assets increased 12 % to € 3,090 million (December 31, 2004: € 2,755 million). In constant currency, current assets grew 6 %. This increase was driven by acquisitions and growth of operations.

Group debt rose 9 % to € 2,993 million as of June 30, 2005 (December 31, 2004: € 2,735 million). In constant currency, debt grew 5 % and was driven by acquisitions.

The net debt/EBITDA ratio was 2.4 as of June 30, 2005 (December 31, 2004: 2.2). The positive EBITDA increase partially offset the higher debt level.

Shareholders' equity including minority interest rose 11 % to € 3,721 million compared to € 3,347 million on December 31, 2004. The equity ratio including minority interest improved to 41.1 % (December 31, 2004: 40.9 %).

Employee numbers continue to grow
As of June 30, 2005, the Group had 71,109 employees worldwide, an increase of 4 % (December 31, 2004: 68,494).

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.

In the field of antibody therapies, two phase II studies are in preparation to investigate the treatment of gastric cancer and breast cancer following positive results from two phase I studies for the treatment of peritoneal carcinomatosis and breast cancer. Current studies for malignant ascites, malignant pleural effusion and ovarian cancer are continuing according to plan.

For 2005, Fresenius Biotech continues to expect an EBIT in the range of € -35 to € -40 million, largely due to the 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 2005, Fresenius Medical Care was serving approximately 128,200 patients (+4 %) in 1,645 dialysis clinics (+3 %).

• Strong sales and earnings growth continued
• North America and Europe once again key sales and earnings drivers
• 2005 net income outlook raised

In the first half of 2005, Fresenius Medical Care achieved sales growth of 9 % to US$ 3,283 million (H1 2004: US$ 3,011 million). In constant currency, sales rose 7 %. Organic growth was 6 %.

In North America Fresenius Medical Care achieved a strong sales increase of 7 % to US$ 2,215 million (H1 2004: US$ 2,063 million). Sales outside North America ("International") rose 13 % to US$ 1,068 million (H1 2004: US$ 948 million) mainly because of the very good development of the European business.

Sales in dialysis care increased 8 % to US$ 2,363 million (H1 2004: US$ 2,185 million). In the first half of 2005, Fresenius Medical Care delivered approximately 9.6 million dialysis treatments, an increase of 4 % over the same period in the previous year. North America accounted for 6.6 million treatments (+3 %) and the International segment for 3.0 million treatments (+5 %). Fresenius Medical Care achieved sales growth in dialysis products of 11 % to US$ 920 million (H1 2004: US$ 826 million).

EBIT rose 11 % to US$ 458 million (H1 2004: US$ 411 million) and the EBIT margin was 14.0 % (H1 2004: 13.6 %). Net income at Fresenius Medical Care grew to US$ 223 million in the first half of 2005, an increase of 17 %.

Based on its strong performance in the first half of 2005, Fresenius Medical Care now expects net income growth to be between 12 and 15 %. Previously, the company anticipated net income growth for 2005 to be in the low double-digit range. This guidance does not take into effect the impact of the Renal Care Group acquisition or the expected one-time costs of around US$ 10 million for the full year 2005 in connection with the transformation of Fresenius Medical Care's legal form, or the conversion of the preference shares into ordinary shares. Top-line revenue growth at constant currency should remain between 6 and 9%.

For further information, please see Fresenius Medical Care's Press release.

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.

• Earnings target exceeded: new record EBIT margin of 13.8 % in the second quarter of 2005
• Excellent organic growth of 6 % in the first half of 2005
• 2005 earnings outlook raised

In the first half of 2005, sales at Fresenius Kabi rose 11 % to € 818 million (H1 2004: € 738 million). The company achieved an excellent organic growth of 6 %. Acquisitions, primarily the Portuguese company Labesfal, contributed 5 % to sales. Currency translation added 1 % to sales growth. Divestments had a -1 % effect on sales.

Sales in Germany rose 2 %. Sales in Europe (excluding Germany) increased 13 %. Acquisitions contributed significantly to this growth. Fresenius Kabi continued to grow at double-digit rates outside of Europe: The Asia-Pacific region showed strong organic growth with an increase of 16 % and Latin America posted organic sales growth of 13 %.

Fresenius Kabi significantly increased earnings. EBIT rose 29 % in the first half of 2005 to € 110 million (H1 2004: € 85 million). The EBIT margin was 13.4 %, an increase of 190 basis points compared to the first half of 2004 (11.5 %). Compared to the first quarter of 2005, the Q2-EBIT margin improved by 70 basis points to 13.8 %.

Fresenius Kabi clearly exceeded the projected full-year EBIT margin target of >13.0 % in the first half of 2005. Therefore, the company raises its full-year EBIT margin outlook to >13.5 %. Constant-currency sales growth should remain at about 10 %.

Fresenius ProServe
Fresenius ProServe offers services for the international health care sector including hospital management and hospital planning and construction as well as planning and construction of pharmaceutical and medical-technical production sites.

• Further improvement in earnings
• Good order intake
• Sales below previous year due to project delays

In the first half of 2005, Fresenius ProServe achieved sales of € 350 million (H1 2004: € 383 million). On a comparable basis (excluding the nursing home business sold in 2004 and the discontinued international hospital management business), the sales decrease would have been 4 %. This decrease resulted from delayed closing of projects in the hospital engineering and services business (VAMED). In addition, the ongoing investment caution in the pharmaceutical industry led to lower sales in pharmaceutical engineering and services (Pharmaplan). An increase in sales of 3 % was achieved in the hospital management business (Wittgensteiner Kliniken).

EBIT increased to € 7 million in the first half of 2005 despite lower sales (H1 2004: € 0 million; before one-time charges: € 6 million). On a comparable basis, this is an increase of 17 %.

Order intake developed very positively in the second quarter and reached € 109 million. Order intake in the first half of 2005 increased 15 % to € 156 million (H1 2004: € 136 million). Order backlog in the first half of 2005 increased 14 % to € 382 million (December 31, 2004: € 335 million). Based on this development and additional contracts expected to be signed in the third and fourth quarters of 2005, Fresenius ProServe expects improved sales in the second half of 2005.

Fresenius ProServe confirms its full-year outlook for 2005 and expects an EBIT of € 20 to € 25 million and an organic sales growth of 5 to 8 %.


Live video webcast
As part of the earnings announcement for the first half of 2005, an analyst conference will be held at the Fresenius headquarters in Bad Homburg on August 4, 2005 at 1:30 p.m. CEDT (7.30 a.m. EDT). The analyst conference will be broadcast live 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 full first-half and second-quarter report will be available on the Internet by August 15, 2005 at www.fresenius-ag.com / Investor Relations / Publications.