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'We want a measured and well-managed transformation of Fresenius.'

In an interview, CEO Stephan Sturm discusses the “Fresenius of the future,” sustainable growth, our group structure and the war in Ukraine.

Dialysis under difficult circumstances during the war in the Ukraine.

Mr. Sturm; a terrible war is being waged in the Ukraine that has brought great suffering to many people. What is Fresenius doing to help them?

(Published: June 2022)

Stephan Sturm: We are helping in many ways. By continuing to provide dialysis services to our patients in the Ukraine under, at times, very difficult circumstances. By getting urgently needed medicines, blood for transfusions and other medical supplies into the country, despite the increasingly complicated logistics. By cooperating with aid organizations on location and supporting their work with substantial donations. And by offering assistance to refugees. My heartfelt thanks go out to the employees who are caring for our patients there with so much courage and energy. And to those who, outside of work, are involved in aid for Ukraine. Thank you so much!

Fresenius is still operating in Russia. In light of the terrible images from Bucha, isn’t it finally time to pull out of Russia?

Sturm: I was also deeply affected by those horrible pictures. It is extremely shocking and disturbing. And the impulse to want to urgently put an end to what is happening is very human. It’s no different for me than for many of our colleagues. However, as difficult as it may be, we need to keep a clear head. We bear the same responsibility for our patients in Russia as for all the patients who’ve put their trust in us. We cannot and must not set human lives against each other. Who would we be if we placed a higher value on one human life than on another – based simply on nationality, residence or form of government when a war breaks out?

Is there nothing we can do to put pressure on the Russian government?

Sturm: Our motto is ‘ever better medicine for ever more people’ – sustainably and everywhere in the world. This means staying in countries and remaining active where many people, now as before, don’t have access to quality medical care. This also holds true for Russia. It is about helping people who deserve our help. That’s why a complete pullout from Russia is not an option for us, at least voluntarily. But it’s also clear that as long as the Putin regime remains in power, we will not expand our presence in Russia. We have put all investments there on ice. And we will continue to offer in Russia only what our patients urgently need. By the way, we are not making any money there.

Changes to the Management Board

On a different subject: How would you describe our company’s business performance in the first quarter of this year?

Sturm: In a word: Solid. Perhaps even somewhat better than we could have expected in February; especially at Fresenius Helios and Fresenius Kabi. Fresenius Medical Care and Fresenius Vamed performed in line with expectations. The pandemic remains a burden, and there is the war in Ukraine, supply chain problems and, in particular, cost increases that have in some cases been quite substantial. There really is no cause for euphoria but, under these circumstances, we can be satisfied with our start into 2022. In any case, we continue to expect overall healthy growth in sales and earnings this year. I consider that encouraging and gratifying.

At the same time as the first-quarter results came the announcement that two Management Board members are leaving. Is there any connection between that and the recent, somewhat uneven, development of our business?

Sturm: No, the personnel changes are completely unrelated to one another. Rice Powell will be 67 this year. Rice will complete his contract and enter a well-earned retirement at the end of the year after 25 years at Fresenius Medical Care. In Dr. Carla Kriwet, we have found a very worthy successor, and also quite early, too; a person who, together with the entire management team, will lead Fresenius Medical Care into a successful future. Rachel Empey decided for personal reasons to leave the company, after some intensive and challenging years. I’ll be sorry to see her go. But of course, I respect her decision. Here too, we have found an outstanding successor, this time from our own ranks. Sara Hennicken heads our Global Treasury & Corporate Finance department and has worked closely with Rachel over the last few years. I’m very thankful for everything that Rice and Rachel have done for Fresenius, and I wish both of them all the best. At the same time, I am very much looking forward to working with my two new Management Board colleagues. We are, and will remain, a strong team.

Sturm: "In Fresenius Kabi we see the best growth opportunities and strongest earnings potential."

The 'Fresenius of the Future'

A team that has a lot of work ahead of it. When you announced the 2021 financial results in February, you outlined some ways Fresenius could change. What will the ‘Fresenius of the Future’ look like?

Sturm: Essentially, it’s about ensuring that Fresenius remains successful over the long term – and benefits as many people as possible while creating added value. A year ago, I called for an examination of our corporate structure. It was aimed at providing us with the best possible framework for continued and healthy growth. To sum up the results: Fresenius is focused on health. And it is successful in different areas. This will remain so in the future – but we will sharpen our profile.

How do we do that?

Sturm: All our business segments have strong market positions with outstanding growth opportunities. We want to leverage this potential. Organic growth will remain the basis for us. But we also intend to pursue bigger strategic growth steps. This means substantial investments, for example in digital transformation or major acquisitions. To do this we must distribute available capital wisely and tap new sources of capital – then deploy it where it can create the most value. That’s why we are open to partnerships that make sense for us. In this manner, we intend to link dynamic growth with the advantages of a broad, diversified structure – in the best way possible.

Fresenius Kabi is supposed to first in line for future investment and receiving capital. Why?

Sturm: In Fresenius Kabi, a pharmaceutical business that is also the historical core of our company, we see the best growth opportunities and strongest earnings potential. For decades, we have built up and expanded our services business. Now we want to again strengthen the products side. Fresenius Kabi has identified key goals with its Vision 2026 initiative. At the core of it are three growth paths: the biopharmaceutical portfolio, more launches of clinical nutrition products, and an expansion in medical technology. And we are putting our money where our mouth is: The recently announced taking of a majority stake in mAbxience and acquisition of Ivenix are proof of this."Fresenius remains focused on health."You don’t rule out that we could divest Fresenius Medical Care. Why, of all things, should we get out of the dialysis business? To finance growth at Fresenius Kabi?

Sturm: Fresenius Medical Care was hit particularly hard by the pandemic. However, the outlook continues to be positive. It’s now about getting the most out of these growth opportunities – either under our umbrella or by putting them in new hands that could possibly make better use of them than we can. But a sale would have to be to the advantage of all stakeholders, in particular the employees, and would therefore have to be weighed very carefully. I am fond of repeating that we want a measured and well managed transformation of our company and will only avail ourselves of opportunities that support our long-term growth. Let me make this very clear: there has absolutely been no decision to sell. We do not have to divest FMC to finance growth in other business segments.

There are rumors that Fresenius is in the market to sell a 20 percent stake in Helios. Does this mean one in every five Helios hospitals is up for sale?

Sturm: We said in February that we’re open for suitable partners who want to participate in the further growth of Helios; it’s about making Helios as a whole even bigger and better. That means two things: First, it would involve a share in the Helios company, not individual hospitals or facilities going into other hands. Second, such a step would be closely linked to a major, concrete growth step that we would work to achieve with such a partner. To put it simply: We are investing in the further growth of Helios – Helios will remain an integral part of Fresenius.

Sturm: "Our contribution to battling the pandemic has been enormous."

Burdens due to the pandemic

You have set Fresenius on a strict cost-saving program. What role did the pandemic play in this?

Sturm: Our contribution to battling the pandemic has been enormous. In the past year alone, we have treated more than 42,000 COVID-19 patients in our hospitals. We have done all that we could to retain our ability to deliver needed drugs and necessary medical products – even in cases where demand for them has risen considerably. We have vaccinated well over one million people against the virus. Although we have accomplished so much, the pandemic has hit the company hard and will remain a heavy burden for some time to come.

That sounds paradoxical . . . 

Sturm: Despite all our efforts, a disproportionately high number of dialysis patients have died from COVID-19. This is above all, in every single case, a human tragedy. For Fresenius Medical Care this excess mortality also means a reduction in the number of treatments performed. That means lower sales as costs continue to rise. The situation was similar at Helios hospitals in 2021. They were faced with higher outlays for hygienic measures. Fewer treatments and operations also meant reduced demand for Fresenius Kabi products. Fresenius Vamed suffered as well, due to travel restrictions and a COVID-19-related hesitation on the part of many clients.

You mentioned the Fresenius motto ‘ever better medicine for ever more people.’ But aren’t the cost-saving measures and profit goals mainly intended to benefit shareholders? 

Sturm: Everything that we do is undertaken primarily to benefit our patients. When we take good care of them, our company also benefits. Simply put: If the patient does well, then the company does well. And that means the shareholders also do well. The flipside is also true: Our business success is the basis for even better medicine. This is because we invest our profits to make possible better-than-average quality medical care. You can see this at Helios: 95 percent of their patients recommend Helios hospitals to others.

"There is more to this than satisfying investors."Nevertheless, Fresenius’ share price has fallen by more than half since 2017. How do you explain that?

Sturm: I’m also not satisfied with the share price, which doesn’t reflect the trend in our financials. Take 2021 as an example: Despite the pandemic, we increased sales by 5 percent in constant currency terms. And by the same amount for our earnings. This is more than we expected at the start of the year. We continue to work on gaining the confidence of capital markets in us as a reliable, high-growth company. Of course, we must keep asking ourselves what will make us still more attractive to investors. However, there is more to this than satisfying investors and shining on the stock exchange. We need to take the right decisions to ensure the growth of our company is sustainable – for the benefit of all our stakeholders. If we succeed in that, it will be reflected in our share price.

Sturm: "We want to reduce by half our direct and indirect greenhouse gas emissions by 2030 and achieve carbon neutrality by 2040."

Sustainability and climate goals

With all these concerns, will urgent issues like sustainability and environmental protection be shelved?

Sturm: Not at all. Just recently – in conjunction with the presentation of our financial balance – we set a climate goal for Fresenius. We are guided by the targets of the Paris Agreement on climate change, which seeks to cap global warming at 1.5 degrees Celsius. We want to reduce by half our direct and indirect greenhouse gas emissions by 2030 and achieve carbon neutrality by 2040. Fresenius is not one of the major CO2 emitters. Nonetheless, as a globally active healthcare company, we must shoulder responsibility in the battle against climate change and limit damage to the environment to the least possible.

What concrete steps are planned to reduce our CO2 footprint? 

Sturm: We have identified our use of electricity around the world as one of the key drivers. So, in steps we will substantially increase the purchase of electricity from renewable sources. We also will intensify our efforts to raise energy efficiency.

Despite the many crises and challenges, it appears progress is being made and this is something to be happy about. What are you personally looking forward to the most in the coming weeks and months?

Sturm: Most of all, I hope that this terrible war in the Ukraine soon comes to an end. And that we can finally put the pandemic behind us – or at the very least, the many restrictions that have weighed on us both at home and on the job during the past two years. As the CEO of Fresenius, what brings me the most happiness is working together with all colleagues to move Fresenius forward. Our goal is, and will remain, to create added value that will benefit all of us. We will do this the way we have been doing it for 110 years now – by delivering high-quality, affordable medicine, tailored to the needs of people around the world who need medical care. In short: ever better medicine for ever more people. 

Contact

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