Fresenius makes solid start to 2019 and confirms Group guidance

• Fresenius Kabi with continued good growth in Q1/19
• Helios Germany stabilized; Helios Spain with continued dynamic growth
• Fresenius Medical Care with strong financial performance supported by agreements that materialized earlier than planned
• Growth investments on track
• Group guidance confirmed despite expected earnings dilution from NxStage

¹ Adjusted for IFRS 16 effect
² Q1/18 adjusted for divestitures of Care Coordination activities at FMC
³ Net income attributable to shareholders of Fresenius SE & Co. KGaA

Stephan Sturm, CEO of Fresenius, said: “We have made a successful start into 2019. All four Fresenius business segments have developed in line with our expectations, putting us well on course to meet our targets for the year. High-quality, yet affordable healthcare for ever more patients worldwide is our commitment. Consistent organic growth and major investments into key growth areas continue to reinforce our delivery of that commitment. Those strong foundations will also ensure the long-term success of our business.”

Group guidance for 2019 confirmed
After closing the NxStage acquisition on February 21, the related sales and earnings contributions are now included in the Group guidance. Despite the expected earnings dilution from NxStage, Fresenius confirms its FY/19 guidance. Fresenius projects sales growth¹ of 3% to 6% in constant currency. Net income^2,3 growth is expected to be ~0% in constant currency.
Including the NxStage acquisition which is increasing the net debt/EBITDA ratio in 2019 by ~30 basis points and excluding IFRS 16, Fresenius now expects year-end 2019 net debt/EBITDA ratio  to be at the upper-end of the original self-imposed target corridor of 2.5 to 3.0x.
Due to the adoption of the IFRS 16 accounting standard (“IFRS 16 effect”), Fresenius increases its self-imposed target corridor of 2.5x to 3.0x net debt/EBITDA to 3.0x to 3.5x.

¹ On a comparable basis: FY/18 base: €33,009 million; FY/18 adjusted for divestitures of Care Coordination activities at FMC (H1/18); FY/19: adjusted for IFRS 16 effect
² Net income attributable to shareholders of Fresenius SE & Co. KGaA
³ On a comparable basis: FY/18 base: €1,872 million; FY/18 before special items and adjusted for divestitures of Care Coordination activities at FMC (H1/18); FY/19: before special items (transaction-related expenses, expenses associated with the cost optimization program at FMC, revaluations of biosimilars contingent liabilities); adjusted for IFRS 16 effect
⁴ Both net debt and EBITDA calculated at expected annual average exchange rates; excluding further potential acquisitions

5% sales growth¹ in constant currency
Group sales were €8,495 million including an IFRS 16 effect of -€22 million. Group sales1 on a comparable basis increased by 8% (5% in constant currency) to €8,517 million (Q1/18: €7,870 million). Organic sales growth was 5%. Acquisitions/divestitures contributed net 0% to growth. Positive currency translation effects of 3% were mainly driven by the appreciation of the U.S. dollar against the euro.

Group sales by region:

¹ On a comparable basis: Q1/18 adjusted for divestitures of Care Coordination activities at FMC; Q1/19 adjusted for IFRS 16 effect

Net income^1,2 growth flat in constant currency
Group EBITDA before special items was €1,701 million including an IFRS 16 effect of €220 million. Group EBITDA² on a comparable basis increased by 6% (3% in constant currency) to €1,481 million (Q1/18: €1,394 million).

Group EBIT before special items was €1,130 million including an IFRS 16 effect of €19 million. Group EBIT² on a comparable basis increased by 6% (2% in constant currency) to €1,111 million (Q1/18: €1,050 million). The EBIT margin² on a comparable basis was 13.0% (Q1/18: 13.3%). Reported Group EBIT  was €1,115 million.

Group net interest before special items was -€181 million including an IFRS 16 effect of -€48 million. On a comparable basis, net interest² improved to -€133 million (Q1/18: -€139 million) mainly due to lower rates for refinancing activities. Reported Group net interest was -€184 million.

Group tax rate before special items and adopting IFRS 16 was 23.3%. Group tax rate² on a comparable basis was 23.4% (Q1/18: 20.9%). The prior-year was positively influenced by one-time effects related to the adoption of the U.S. tax reform.

Noncontrolling interest before special items was €271 million including an IFRS 16 effect of €13 million. Noncontrolling interest² on a comparable basis was €284 million (Q1/18: €270 million), of which 94% was attributable to the noncontrolling interest in Fresenius Medical Care.

Group net income¹ before special items was €457 million including an IFRS 16 effect of -€8 million. Group net income^1,2 on a comparable basis increased by 3% (0% in constant currency) to €465 million (Q1/18: €451million). Reported Group net income^1,3 was €453 million.
Earnings per share¹ before special items was €0.82 including an IFRS 16 effect of -€0.02.

Earnings per share¹ before special items was €0.82 including an IFRS 16 effect of -€0.02. Earnings per share^1,2 on a comparable basis increased by 3% (0% in constant currency) to €0.84 (Q1/18: €0.81). Reported Earnings per share^1,3 was €0.81.

¹ Net income attributable to shareholders of Fresenius SE & Co. KGaA
² On a comparable basis: Q1/19 before special items and adjusted for IFRS 16 effect; Q1/18 adjusted for divestitures of Care Coordination activities at FMC
³ After special items and including IFRS 16 effect

Continued investment in growth
2019 is an investment year for the Fresenius Group. Fresenius is making good progress in all of its investment initiatives to secure long-term sustainable growth. Spending on property, plant and equipment was €441 million (Q1/18: €380 million), primarily for the modernization and expansion of dialysis clinics, production facilities as well as hospitals and day clinics. This corresponds to 5% of sales.

Total acquisition spending was €1,923 million (Q1/18: €192 million), mainly for the acquisition of NxStage.

Cash flow development
Group operating cash flow was €289 million including an IFRS 16 effect of €171 million. On a comparable basis, Group operating cash flow was €118 million (Q1/18: €236 million) with a margin of 1.4% (Q1/18: 2.9%). After a strong Q4/18, operating cash flow was impacted by working capital changes at Fresenius Kabi, for example by some phasing of payments and stockbuild to prepare for a possible Brexit. Moreover, as in previous years’ first quarters, operating cash flow was influenced by the seasonality in invoicing at Fresenius Medical Care North America. Fresenius does not expect these temporary effects to have a significant impact on FY/19 cash flow.

Given the effects described above in combination with increasing investments, free cash flow before acquisitions and dividends adjusted for IFRS 16 was -€339 million (Q1/18: - €155 million). Free cash flow after acquisitions and dividends adjusted for IFRS 16 was -€2,282 million (Q1/18: -€389 million). The IFRS 16 effect amounts to €171 million respectively. Correspondingly, cash flow from financing activities declined by €171 million.

Solid balance sheet structure
The Group’s total assets were €64,985 million including an IFRS 16 effect of €5,669 million. Adjusted for IFRS 16, Group total assets¹ increased by 5% (3% in constant currency) to €59,316 million (Dec. 31, 2018: €56,703 million). Current assets¹ grew by 1% (0% in constant currency) to €14,958 million (Dec. 31, 2018: €14,790 million). Non-current assets¹ increased by 6% (5% in constant currency) to €44,358 million (Dec. 31, 2018: € 41,913 million).

Total shareholders’ equity was €25,830 million including an IFRS 16 effect of -€167 million. Adjusted for IFRS 16, total shareholders’ equity¹ increased by 4% (2% in constant currency) to €25,997 million (Dec. 31, 2018: €25,008 million). The equity ratio was 39.7%. Adjusted for IFRS 16, the equity ratio was 43.8% (Dec. 31, 2018: 44.1%).

Group debt was €26,378 million including an IFRS 16 effect of €5,836 million. Adjusted for IFRS 16, Group debt¹  increased by 8% to €20,542 million (8% in constant currency) (Dec. 31, 2018: € 18,984 million). Group net debt was €24,835 million including an IFRS 16 effect of €5,836 million. Adjusted for IFRS 16, Group net debt¹ increased by 17% (16% in constant currency) to € 18,999 million (Dec. 31, 2018: € 16,275 million) mainly due to the acquisition of NxStage by Fresenius Medical Care and the negative free cash flow.

As of March 31, 2019, the net debt/EBITDA ratio increased to 3.09^1,2,3 (December 31, 2018: 2.712,3). Excluding the acquisition of NxStage the net debt/EBITDA ratio was 2.83^1,2,3 as of March 31, 2019. Including the IFRS 16 effect, the reported net debt/EBITDA ratio increased to 3.53^2,3.

¹ Adjusted for IFRS 16 effect
² At LTM average exchange rates for both net debt and EBITDA; pro forma closed acquisitions/divestitures
³ Before special items

Increased number of employees
As of March 31, 2019, the number of employees was 283,795 (Dec. 31, 2018: 276,750).

Business Segments

Fresenius Medical Care (Figures according to Fresenius Medical Care Investor News)
Fresenius Medical Care is the world's largest provider of products and services for individuals with renal diseases. As of March 31, 2019, Fresenius Medical Care was treating 336,716 patients in 3,971 dialysis clinics. Along with its core business, the company provides related medical services in the field of Care Coordination.

 

• 6% sales^1,2  growth in constant currency
• Earnings supported by agreements that materialized earlier than planned
• Outlook confirmed

Adjusted for the Q1/18 contribution from the divested Care Coordination activities, the effect of the adoption of the IFRS 16 accounting standard (“IFRS 16 effect”) and the contribution from NxStage, sales increased by 11% (6% at constant currency) to €4,125 million (Q1/18: €3,725 million). Organic sales growth was 6%. Positive currency translation effects of 5% were mainly related to the appreciation of the U.S. dollar against the euro.

Health Care Services sales^1,2 increased by 12% (6% at constant currency) to €3,316 million (Q1/18: €2,958 million). Health Care Products sales^1,2 increased by 5% (4% at constant currency) to €809 million (Q1/18: €767 million).

In North America, sales^1,2 increased by 14% (5% in constant currency) to €2,879 million (Q1/18: €2,523 million). Health Care Services sales^1,2 increased by 14% (6% in constant currency) to €2,679 million (Q1/18: €2,339 million).

¹ On an adjusted basis: before expenses associated with the cost optimization program, the IFRS 16 effect, excluding effects from NxStage transaction
² Q1/18 adjusted for divestitures of Care Coordination activities
³ Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA

Sales² outside North America increased by 4% (6% in constant currency) to €1,246 million (Q1/18: €1,202 million). Health Care Services sales² increased by 3% (8% in constant currency) to €637 million (Q1/18: €619 million). Health Care Product sales² adjusted increased by 4% (5% in constant currency) to €609 million (Q1/18: €583 million).

Fresenius Medical Care’s EBIT³ increased by 9% (4% in constant currency) to €551 million (Q1/18: €506 million). The EBIT margin3 decreased to 13.4% (Q1/18: 13.6%).

Net income^1,3 increased by 8% (3% in constant currency) to €318 million (Q1/18: €296 million).

Operating cash flow was €76 million (Q1/18: -€45 million) with a margin of 1.8% (Q1/18: -1.1%). The increase was mainly driven by the adoption of the IFRS 16 accounting standard leading to a reclassification of the repayment portion of rent to financing activities (€141 million). Adjusted for the IFRS 16 effect, operating cash flow was -€65 million.

For FY/19, Fresenius Medical Care expects adjusted sales to grow by 3% to 7% ,6 in constant currency. Net income1 is expected to develop in the range of -2% to +2% ,7 in constant currency.

For further information, please see Fresenius Medical Care’s Investor News at www.freseniusmedicalcare.com.

¹ Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
² Q1/18 adjusted for divestitures of Care Coordination activities; Q1/19 adjusted for IFRS 16 effects, excluding effects from NxStage transaction
³ Q1/18 before special items and after adjustments; Q1/19 before special items (before transaction-related expenses, expenses associated with the cost optimization program), adjusted for IFRS 16 effect, excluding effects from NxStage transaction
⁴ Before special items (operating cash flow after special items)
⁵ Adjusted for IFRS 16 effect
⁶ FY/18 base: €16,026 million
⁷ FY/18 base: €1,341 million

Fresenius Kabi
Fresenius Kabi offers intravenously administered generic drugs, clinical nutrition and infusion therapies 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. In the biosimilars business, Fresenius Kabi develops products with a focus on oncology and autoimmune diseases.

 

• 4% organic sales growth and 7% EBIT¹ growth in constant currency
• High prior-year base impacts organic sales growth in North America
• FY/19 outlook confirmed

Sales increased by 6% (4% in constant currency) to €1,701 million (Q1/18: €1,603 million). Organic sales growth was 4%. Positive currency translation effects of 2% were mainly related to the appreciation of the U.S. dollar against the euro.

Sales in Europe grew by 3% (organic growth: 3%) to €573 million (Q1/18: €557 million). Sales in North America increased by 5% (decreased organically by 2% from a high prior-year basis) to €623 million (Q1/18: €591 million). Sales in Asia-Pacific increased by 13% (organic growth: 11%) to €341 million (Q1/18: €301 million). Sales in Latin America/Africa increased by 6% (organic growth: 18%) to €164 million (Q1/18: €154 million).

EBIT¹ increased by 13% (7% in constant currency) to €303 million (Q1/18: €268 million) with an EBIT margin1 of 17.8% (Q1/18: 16.7%).

Net income^1,2 increased by 19% (12% in constant currency) to €203 million (Q1/18: €170 million).

Operating cash flow³ was €132 million (Q1/18: €226 million). After a strong Q4/18, operating cash flow was impacted by working capital changes, for example by some phasing of payments and stockbuild to prepare for a possible Brexit. The cash flow margin was 7.8% (Q1/18: 14.1%).

Fresenius Kabi confirms its outlook for FY/19 and expects organic sales growth⁴ of 3% to 6% and EBIT growth⁵ in constant currency of 3% to 6%.

¹ On a comparable basis: before special items and adjusted for IFRS 16 effect
² Net income attributable to shareholders of Fresenius SE & Co. KGaA
³ Adjusted for IFRS 16 effect, before special items (operating cash flow after special items)
⁴ On a comparable basis: FY/18 base: €6,544 million; FY/19 before special items (acquisition-related expenses, revaluations of biosimilars contingent liabilities) and adjusted for IFRS 16 effect
⁵ On a comparable basis: FY/18 base: €1,139 million; FY/18 before special items; FY/19 before special items (acquisition-related expenses, revaluations of biosimilars contingent liabilities) and adjusted for IFRS 16 effect.

Fresenius Helios
Fresenius Helios is Europe's leading private hospital operator. The company comprises Helios Germany and Helios Spain (Quirónsalud). Helios Germany operates 86 hospitals, ~125 outpatient centers and treats approximately 5.3 million patients annually. Quirónsalud operates 47 hospitals, 56 outpatient centers and around 300 occupational risk prevention centers, and treats approximately 13.3 million patients annually.

 

• 4% organic sales growth
• Helios Germany stabilized; Helios Spain with continued dynamic growth
• FY/19 outlook confirmed

Sales decreased by 1% (increased by 4%¹; organic growth: 4%) to €2,311 million (Q1/18: €2,331 million).

Sales of Helios Germany decreased by 6% (increased by 1%¹; organic growth: 2%) to €1,485 million (Q1/18: €1,574 million). Sales were impacted by a decline in admissions in Germany, partially due to the transfer of the post-acute care business from Helios to Vamed, a shortage of nurses at selected intensive care units and a less pronounced flu season. The admission decline was more than compensated by positive price effects.

Helios Spain increased sales by 9% (organic growth: 9%) to €826 million (Q1/18: €757 million), mainly driven by the private sector. The occupational risk prevention business also had a valuable contribution. Performance in Q1/18 was impacted by the Easter holidays.

¹ Adjusted for the post-acute care business transferred to Fresenius Vamed as of July 1, 2018
² Adjusted for IFRS 16 effect
³ Net income attributable to shareholders of Fresenius SE & Co. KGaA

EBIT¹ of Fresenius Helios decreased by 4% (-3%²) to €266 million (Q1/18: €278 million) with an EBIT margin of 11.5% (Q1/18: 11.9%).

EBIT¹ of Helios Germany decreased by 16% (-14%²) to €149 million (Q1/18: €177 million). The EBIT margin improved sequentially by 50 bps to 10.0% (Q4/18: 9.5%). The development of Helios Germany is impacted by the admissions decline and the investments for preparatory structural measures.

EBIT¹ of Helios Spain increased by 16% to €119 million (Q1/18: €103 million), mainly due to the strong operating performance with an EBIT margin of 14.4% (Q1/18: 13.6%).

Net income^1,3  decreased by 8% to €176 million (Q1/18: €191 million).
Operating cash flow¹ was €91 million (Q1/18: €97 million) with a margin of 3.9% (Q1/18: 4.2%). The decrease is mainly attributable to the increase in days sales outstanding (DSO).

Fresenius Helios confirms its outlook for FY/19 and expects organic sales growth of 2% to 5% and an EBIT¹ growth of -5% to -2%.

¹ Adjusted for IFRS 16 effect
² Adjusted for the post-acute care business transferred to Fresenius Vamed as of July 1, 2018
³ Net income attributable to shareholders of Fresenius SE & Co. KGaA

Fresenius Vamed
Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide and is a leading post-acute care provider in Central Europe. The portfolio ranges along the entire value chain: from project development, planning, and turnkey construction, via maintenance and technical management to total operational management.

• Excellent organic sales growth of 31%
• Order backlog at all-time high ‒ strong foundation for future growth
• FY/19 outlook confirmed

Sales increased by 77% (33%¹) to €440 million (Q1/18: €249 million). Organic sales growth was 31%, acquisitions contributed 2% to growth. Both the project and the service business showed strong momentum. Sales of the project business increased by 17% to €108 million (Q1/18: €92 million). Sales in the service business grew by 111% (41%¹) to €332 million (Q1/18: €157 million), supported by an intensified collaboration with Fresenius Helios.

In Q1/19, EBIT² increased by 83% (83%² in constant currency) to €11 million (Q1/18: €6 million) with an EBIT margin of 2.5% (Q1/18: 2.4%). EBIT² additionally adjusted for the acquisition of the German post-acute care business was €7 million with an EBIT margin of 2.1%.

Net income^2,3 increased by 50% to €6 million (Q1/18: €4 million).

Order intake increased by 47% to €383 million (Q1/18: €260 million). As of March 31, 2019, order backlog reached a new all-time high of €2,698 million (Dec 31, 2018: €2,420 million).

Operating cash flow² increased by 45% to €-23 million (Q1/18: €-42 million) with a margin of -5.2% (Q1/18: -16.9%).

Fresenius Vamed confirms its outlook for FY/19 and expects organic sales growth of ~10% and EBIT growth² of 15% to 20%.

¹ Adjusted for German post-acute care business acquired from Fresenius Helios as of July 1, 2018
2 Adjusted for IFRS 16 effect
³ Net income attributable to shareholders of VAMED AG

Conference Call
As part of the publication of the results for the first quarter 2019, a conference call will be held on May 2, 2019 at 1:30 p.m. CET (7:30 a.m. EST). You are cordially invited to follow the conference call in a live broadcast over the Internet at www.fresenius.com/media-calendar. Following the call, a replay will be available on our website.

For a detailed overview of special items and adjustments please see the reconciliation tables on pages 19-22 of the PDF file.

For additional information on the performance indicators used please refer to our website www.fresenius.com/alternative-performance-measures.