Fresenius Kabi 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.

 

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 will now become a global leader in transfusion technology.

 

In 2011, Fenwal had sales of US$614 million with an adjusted EBITDA of US$90 million. The company, with about 4,900 employees worldwide, runs a state-of-the-art R&D center and operates five manufacturing facilities.

 

Ulf Mark Schneider, CEO of Fresenius, said: "Acquiring Fenwal is a unique opportunity to significantly expand Fresenius Kabi's medical devices/transfusion technology segment. In addition, Fresenius Kabi will benefit from a more balanced product portfolio. Fenwal gives Fresenius Kabi broader access to the U.S. transfusion technology market and adds new momentum to building a global market presence in this segment."

 

"The products, services, technologies and cultures of both companies fit extremely well together," said Ron Labrum, Fenwal president and chief executive officer. "We are committed to assuring a smooth integration with Fresenius Kabi and to bring our customers even more value as a result of this unique combination."

 

The two companies' business activities perfectly complement each other: Fenwal holds an excellent position in the market for automated blood collection devices, while Fresenius Kabi is a major supplier of blood bags and filters used for manual blood collection. Combining the two businesses will lead to the most comprehensive product portfolio in transfusion medicine.

 

In addition, the acquisition will enhance Fresenius Kabi's geographical presence. Fenwal, headquartered in Lake Zurich, Illinois, generates more than half its sales in the United States, where its infrastructure will serve as a platform for further growth opportunities for Fresenius Kabi. Vice versa, Fresenius Kabi's international network will expand Fenwal's global product reach. Significant potential for revenue and cost synergies will be created.

 

Around the world, approximately 92 million whole blood donations are collected annually*. The transfusion technology market is mainly driven by demographic developments and the growing demand for products for automated blood component processing. In addition, the increasing demand in emerging markets will lead to further growth in this product segment.

 

Financial terms were not disclosed. The transaction will be financed initially from existing funds, whereas the enterprise value does not exceed the proceeds of the May 2012 capital increase. Irrespective of acquiring Fenwal, Fresenius continues to assess its options for an acquisition of Rhön-Klinikum AG.

 

The transaction is subject to the necessary regulatory approvals by the relevant antitrust authorities, and is expected to close at the end of 2012.

 

 

Telephone Conference

 

A telephone conference will be held at 2.30 p.m. CEST on Monday, July 23, 2012. All investors are cordially invited to follow the conference call in a live broadcast via the Internet at www.fresenius.com, Investor Relations, Presentations. Following the call, a replay will be available on our website.
 * www.who.int/worldblooddonorday/en/index.html

 

Automated and manual blood collection
Automated technology allows blood to be automatically separated into its therapeutic components, collecting only what is needed from donors — red blood cells, platelets, plasma, or therapeutic proteins. This enables blood centers to optimize each donation, limits further processing steps, and helps to ensure the right blood components are available in hospitals to meet patient needs.

During a manual blood collection the blood is collected from a donor and manually processed in a laboratory into its therapeutic components.

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.

Fresenius has decided not to submit a new takeover offer to the shareholders of RHÖN-KLINIKUM AG for the time being.

In recent weeks, Fresenius tried to find solutions to meet the strategic and financial targets of combining RHÖN-KLINIKUM AG and HELIOS with an equity stake in RHÖN-KLINIKUM AG of less than 90%. Unfortunately, there was no viable way to achieve this goal.

Ulf Mark Schneider, CEO of Fresenius, said: "A combination of RHÖN-KLINIKUM AG and HELIOS was the first-ever opportunity to build a country-wide integrated health care network. We regret that our public offer was blocked without providing a constructive alternative. All our investments must add value, with manageable risks. After thorough analysis, we have therefore reached the conclusion that a new offer cannot be justified. HELIOS' prospects are outstanding and it is well positioned to expand its leading position in the German hospital market."

Fresenius currently has a stake of 5% minus one share in RHÖN-KLINIKUM AG and plans to slightly increase its shareholding. This position will preserve the company's strategic options in the consolidating German hospital market.

Telephone Conference
A telephone conference will be held at 2 p.m. CEST on Monday, September 3, 2012. All investors are cordially invited to follow the conference call in a live broadcast via the Internet at www.fresenius.com, Investor Relations, Presentations. Following the call, a replay will be available on our website.

Fresenius Kabi posted substantial organic growth across all regions and product areas during the first half of this year. The company is well on track for further strong growth in the second half. Demand in the United States is expected to remain high supported by ongoing IV drug shortages, particularly of Propofol. Supply constraints of a competitor for this anesthetic are now expected to last well into the fourth quarter.

As a result, Fresenius Kabi raises its outlook for 2012. The company now expects organic sales growth of approx. 9% and an EBIT margin of approx. 20.5%. Previously, Fresenius Kabi projected organic sales growth of 7% to 9% and an EBIT margin in the range of 20% to 20.5%.

Fresenius plans to invest the additional earnings contribution to reduce future interest expenses and optimize the maturity profile of the Group's financial liabilities.

Fresenius fully confirms its full-year guidance. For 2012, Fresenius expects net income* to increase by 14% to 16% in constant currency and sales growth** in the range of 12% to 14% in constant currency.

 

 

 

 

*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 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.

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

 

Q1-3/2012:

• Sales¹ €14.1 billion (+18% at actual rates, +12% in constant currency)
• EBIT² €2.2 billion (+19% at actual rates, +13% in constant currency)
• Net income³ €682 million (+21% at actual rates, +15% in constant currency)

• Group earnings at new single-quarter all-time high of €248 million
• Excellent operating cash flow development - Cash flow margin increases to 12.8%
• Sales and earnings guidance fully confirmed

Ulf Mark Schneider, CEO of Fresenius, said: "Our third quarter results demonstrate continued business strength and solid fundamentals, particularly in light of the excellent comparable prior-year quarter. Fresenius Kabi and Fresenius Helios stood out with strong financial results. Our broad geographic coverage and diversified business provide stability as we continue on our profitable growth path."

¹ Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment of -€119 million in the first three quarters of 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 (non-financing expenses) 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 €31 million 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 three quarters of 2012, Fresenius confirms its guidance. 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.).

 

Continued strong sales growth

Group sales increased by 18% (12% in constant currency) to €14,100 million (Q1-3 2011¹: €11,970 million). Organic sales growth was 5%. Acquisitions contributed a further 8%. Divestitures reduced sales growth by 1%. Currency translation had a positive effect of 6%. This is mainly attributable to the strengthening of the U.S. dollar against the euro by 9% in the first three quarters of 2012 compared to the first three quarters 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 11% 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 -€119 million in the first three quarters of 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 (€34 million) and potential special charges (up to €17 million) at Fresenius Medical Care as well as for one-time costs (€31 million) 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.

 

Strong earnings growth

Group EBITDA¹ grew by 19% (13% in constant currency) to €2,786 million (Q1-3 2011: €2,344 million). Group EBIT¹ increased by 19% (13% in constant currency) to €2,224 million (Q1-3 2011: €1,862 million). The EBIT margin improved by 20 basis points to 15.8% (Q1-3 2011: 15.6%).

Group net interest was -€480 million (Q1-3 2011: -€401 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 -€37 million includes one-time costs for the offer to the shareholders of RHÖN-KLINIKUM AG, primarily related to financing commitments.

The Group tax rate² improved to 30.1% (Q1-3 2011: 30.9%).

Noncontrolling interest increased to €537 million (Q1-3 2011: €445 million), of which 93% was attributable to the noncontrolling interest in Fresenius Medical Care.

Group net income³ increased by 21% (15% in constant currency) to €682 million (Q1-3 2011: €565 million). Earnings per share increased by 15% to €3.98 (Q1-3 2011: €3.47). The average number of shares grew to approx. 171 million in the first three quarters of 2012, primarily due to the May 2012 capital increase.

Group net income⁴ was €685 million or €4.00 per share (including the non-taxable investment gain at Fresenius Medical Care and one-time costs related to the offer to the shareholders of RHÖN-KLINIKUM AG). 

¹ Adjusted for one-time costs of €7 million (non-financing expenses) 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 €44 million 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 €31 million 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 €611 million on property, plant and equipment (Q1-3 2011: €480 million). Acquisition spending was €2,192 million (Q1-3 2011: €908 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

Operating cash flow increased to €1,807 million (Q1-3 2011: €1,156 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 12.8% (Q1-3 2011: 9.7%). Net capital expenditure was €564 million (Q1-3 2011: €475 million). Free cash flow before acquisitions and dividends was €1,243 million (Q1-3 2011: €681 million). Free cash flow after acquisitions and dividends was -€823 million (Q1-3 2011: -€538 million).

 

Solid balance sheet structure

The Group's total assets increased by 15% (15% in constant currency) to €30,225 million (Dec. 31, 2011: €26,321 million). Current assets grew by 21% (20% in constant currency) to €8,621 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 13% (12% in constant currency) to €21,604 million (Dec. 31, 2011: €19,170 million), mainly due to the recent acquisitions.

Total shareholders' equity increased by 18% (18% in constant currency) to €12,532 million, mainly due to the capital increase (Dec. 31, 2011: €10,577 million). The equity ratio was 41.5% (Dec. 31, 2011: 40.2%).

Group debt grew by 16% (15% in constant currency) to €11,325 million (Dec. 31, 2011: €9,799 million), primarily resulting from acquisition financing. Net debt increased by 4% (4% in constant currency) to €9,556 million (Dec. 31, 2011: €9,164 million). Net debt comprises the proceeds of the capital increase.

As of September 30, 2012, the net debt/EBITDA ratio¹ was 2.53 (Dec. 31, 2011: 2.83). At identical exchange rates for net debt and EBITDA, the ratio was also 2.53.

¹ Pro forma including Damp Group and Liberty Dialysis Holdings, Inc., adjusted for one-time costs of €7 million (non-financing expenses) related to the offer to the shareholders of RHÖN-KLINIKUM AG.

 

Number of employees increases

As of September 30, 2012, the Fresenius Group increased the number of its employees by 9% to 163,463 (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 15% to €25.8 million compared to €22.4 million in the first three quarters of 2011. Removab sales grew by 22% to €3.3 million (Q1-3 2011: €2.7 million). ATG Fresenius S sales increased by 14% to €22.5 million (Q1-3 2011: €19.7 million). Fresenius Biotech's EBIT was -€15 million (Q1-3 2011: -€19 million).

In July 2012, ATG-Fresenius S was added to the list of reimbursable medications for stem cell transplantation. Besides Germany and Austria, ATG-Fresenius S can now be actively marketed in another relevant country for this additional indication.

For 2012, Fresenius Biotech now expects an EBIT of ~ -€25 million. Previously, the company expected 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 September 30, 2012, Fresenius Medical Care was treating 256,521 patients in 3,135 dialysis clinics.

• Strong operating cash flow margin of 14.5%
• Debt maturity profile improved – Syndicated loan successfully renewed

Sales increased by 8% to US$10,095 million (Q1-3 2011¹: US$9,306 million). Organic sales growth was 4%. Acquisitions contributed a further 8%. Divestitures reduced sales growth by 1%. Currency translation had a negative effect of 3%.

Sales in dialysis services increased by 11% (in constant currency: 13%) to US$7,688 million (Q1-3 2011: US$6,905 million). Dialysis product sales grew by 6% in constant currency to US$2,407 million (Q1-3 2011: US$2,401 million).

In North America sales grew 12% to US$6,602 million (Q1-3 2011: US$5,888 million). Dialysis services sales grew by 14% to US$6,007 million (Q1-3 2011: US$5,289 million). Average revenue per treatment for U.S. clinics increased to US$349 in the third quarter of 2012 (Q3 2011: US$345). Dialysis product sales were US$595 million (Q1-3 2011: US$599 million).

Sales outside North America ("International" segment) grew by 2% (in constant currency: 10%) to US$3,470 million (Q1-3 2011: US$3,405 million). Sales in dialysis services increased by 4% (in constant currency: 12%) to US$1,680 million (Q1-3 2011: US$1,616 million). Dialysis product sales of US$1,790 million remained close to the previous year's level of US$1,789 million at actual rates. In constant currency, dialysis product sales grew by 8%.

¹ Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment amounts to -US$167 million in Q1-3 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 three quarters of 2012.

EBIT increased by 11% to US$1,659 million (Q1-3 2011: US$1,488 million). The EBIT margin increased to 16.4% (Q1-3 2011: 16.0%).

The EBIT margin in North America increased to 18.2% (Q1-3 2011: 17.6%). In the International segment the EBIT margin improved to 17.2% (Q1-3 2011: 17.0%).

Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA for the first three quarters of 2012 was US$930 million, an increase of 22% 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. Excluding this investment gain, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 4% to US$790 million (Q1-3 2011: US$761 million).

The operating cash flow increased by 55% to US$1,467 million compared to US$950 million for the same period in 2011, supported by favorable development of working capital items. The cash flow margin improved to 14.5% (Q1-3 2011: 10.2%).

Fresenius Medical Care successfully renewed its syndicated credit agreement including a revolving facility and a long term loan. The refinancing of those facilities was well received in the market. The company entered into a US$3.85 billion syndicated credit agreement, comprised of 5-year revolving facilities (including a US$200 million U.S. dollar facility, a €500 million euro facility and a US$400 million multi-currency facility) and a 5-year US$2.6 billion term loan. Proceeds from the credit facilities were used to refinance the company's existing credit facilities, which otherwise would have matured on March 31, 2013, and for general corporate purposes.

Fresenius Medical Care confirms its sales and earnings outlook for 2012. The company expects sales to grow to ~ US$14 billion¹. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA is expected to grow to ~ US$1.14 billion¹. This does neither include the investment gain in the amount of US$140 million in the first three quarters of 2012 nor does it consider charges of up to US$70 million after tax mainly related to the intended renegotiation of the distribution, manufacturing and supply agreement for iron products in North America to reflect changes in the market and a donation to the American Society of Nephrology Foundation to establish the Ben J. Lipps Research Fellowship Program. These potential special charges translate into up to €17 million after tax for the Fresenius Group.

In summary, Fresenius Medical Care confirms its guidance for the full year at the lower end of the previously indicated range. The company anticipates some special collection efforts related to services performed in prior years and other initiatives in the fourth quarter that will help to achieve its guidance.

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

¹ Fresenius Medical Care defines the ~ sign as a +/- 0-2% deviation from the respective numbers.

 

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.

• Continued strong organic sales growth of 9%
• 2012 outlook fully confirmed

Sales increased by 14% to €3,363 million (Q1-3 2011: €2,950 million). Organic sales growth was 9%. Currency translation had an effect of 4%. Acquisitions contributed 1%.

In Europe sales grew by 7% (organic growth: 6%) to €1,449 million (Q1-3 2011: €1,360 million). Sales in North America increased by 21% to €910 million (Q1-3 2011: €755 million). Strong organic growth of 10% was supported mainly by continued competitor supply constraints as well as new product launches. In Asia-Pacific sales increased by 26% (organic growth: 15%) to €642 million (Q1-3 2011: €511 million). Sales in Latin America and Africa increased by 12% (organic growth: 14%) to €362 million (Q1-3 2011: €324 million).

EBIT grew by 14% to €700 million (Q1-3 2011: €613 million). EBIT growth was driven particularly by excellent earnings growth in North America and the emerging markets. The EBIT margin of 20.8% remained at the strong previous year's level.

Net income¹ increased by 22% to €330 million (Q1-3 2011: €271 million).

Fresenius Kabi's operating cash flow increased by 29% to €452 million (Q1-3 2011: €350 million). The strong increase was favorably influenced by extraordinary payments of trade accounts receivable. The cash flow margin was excellent at 13.4% (Q1-3 2011: 11.9%). Cash flow before acquisitions and dividends improved to €322 million (Q1-3 2011: €234 million).

Fresenius Kabi fully confirms its outlook for 2012, which was raised in September 2012. The company targets organic sales growth of approx. 9%. Furthermore, Fresenius Kabi forecasts an EBIT margin of approx. 20.5%.

¹ Net income attributable to shareholders of Fresenius Kabi AG

 

Fresenius Helios

Fresenius Helios is one of the largest private hospital operators in Germany. HELIOS owns 72 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.

• Excellent sales growth of 20%
• 2012 outlook fully confirmed

 

Sales increased by 20% to €2,347 million (Q1-3 2011: €1,950 million). Strong organic sales growth contributed 5%, acquisitions contributed 17% to sales growth. Divestitures reduced sales growth by 2%. In the third quarter of 2012, HELIOS' Swiss post-acute care clinic was sold to Fresenius Vamed and retrospectively deconsolidated as of January 1, 2012.

EBIT grew by 19% to €232 million (Q1-3 2011: €195 million). The EBIT margin was 9.9% (Q1-3 2011: 10.0%).

Net income¹ increased by 26% to €148 million (Q1-3 2011: €117 million).

Sales of the established hospitals grew by 5% to €2,023 million. EBIT improved by 21% to €235 million. The EBIT margin increased to 11.6% (Q1-3 2011: 10.2%) driven by excellent operating results and a one-time gain. Sales of the acquired hospitals (consolidation <1 year) were €324 million. As expected, EBIT was -€3 million. Restructuring of these hospitals is on track.

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.

• Accelerated Q3 order intake of €166 million exceeds H1 order intake of €156 million
• Outlook improved - 2012 sales and EBIT now expected at upper end of range

Sales increased by 12% to €536 million (Q1-3 2011: €480 million). Acquisitions contributed 11% to sales growth. In the third quarter of 2012, HELIOS' Swiss post-acute care clinic was transferred to Fresenius Vamed and retrospectively consolidated as of January 1, 2012. Sales in the project business were €285 million (Q1-3 2011: €311 million). Sales in the service business increased to €251 million (Q1-3 2011: €169 million).

EBIT increased by 9% to €24 million (Q1-3 2011: €22 million). The EBIT margin reached 4.5% (Q1-3 2011: 4.6%). Net income was €16 million (Q1-3 2011: €17 million).

The order intake was €322 million (Q1-3 2011: €335 million). In the third quarter of 2012, Fresenius Vamed again received supply contracts for medical-technical equipment in China with an order volume of €40 million. The order for the San Fernando General Hospital in the Republic of Trinidad and Tobago was extended by €65 million. In addition, Fresenius Vamed received an order for the reconstruction and expansion of an Austrian rheumatology clinic with a total volume of €37 million. Order backlog was €878 million as of September 30, 2012 (Dec. 31, 2011: €845 million).

Fresenius Vamed improves its outlook for 2012 and now expects to grow both sales and EBIT at the upper end of the targeted range 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 three quarters of 2012, a conference call will be held on October 31, 2012 at 2 p.m. CET (9 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.

Fresenius is planning to refinance the revolving facility and Term Loan A of its 2008 syndicated credit agreement, which will become due in September 2013 through a forward start bank deal. The syndication is expected to close late December 2012, while funding of the deal is only projected for June 2013. This will allow Fresenius to take advantage of the currently favorable financing conditions in the debt market.

The intended refinancing of the credit agreement is part of the Group's ongoing liability management to reduce interest expenses and to improve the maturity profile, and is likely to involve the exercise of a redemption option for the Senior Notes due 2016.

Potential one-time expenses related to the planned refinancing are fully included in Fresenius Group's earnings outlook which was confirmed end of October. For 2012, Fresenius expects net income* to increase by 14% to 16% in constant currency.

*Net income attributable to shareholders of Fresenius SE & Co. KGaA – adjusted for a non-taxable investment gain (€34 million) and potential special charges (up to €17 million) at Fresenius Medical Care as well as for one-time costs (€31 million) 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.

HELIOS Kliniken GmbH, a subsidiary of Fresenius, further strengthens its position as the largest private hospital operator in the German state of North-Rhine Westphalia. The company has agreed to acquire a 194-bed hospital close to the company's maximum care hospital in Wuppertal. The two hospitals already co-operate in the field of specialist care. Following the acquisition, HELIOS will operate a network of 19 clinics in North-Rhine Westphalia, including the maximum care hospitals in Duisburg, Krefeld and Wuppertal.

The acquired hospital employs about 500 people and had sales of €20 million in 2011. HELIOS plans to invest at least €8 million in the hospital's modernization by the end of 2017.

The acquisition is still subject to the approval of the anti-trust authorities. The parties agreed not to disclose the purchase price. HELIOS expects to close the transaction in the first quarter of 2013.

Fresenius Kabi has successfully closed the acquisition of Fenwal Holdings, Inc., a leading U.S.-based provider of transfusion technology products for blood collection, separation and processing. The Fenwal acquisition was announced on July 20, 2012, and the closing now follows completion of the review by the antitrust authorities. Fenwal will be consolidated as of December 1, 2012.

For the fiscal year 2011, Fenwal reported sales of US$614 million and an adjusted EBITDA of US$90 million.

Fresenius expects one-time integration costs of approx. €100 million. Cost synergies should reach approx. €60 million annually in the medium term.

Fresenius Kabi fully confirms its 2015 outlook, which was raised on August 1, 2012. The company expects sales of approx. €6 billion and EBIT of >€1.1 billion at current exchange rates. Previously, Fresenius Kabi had targeted sales of approx. €5.5 billion and EBIT of >€1 billion.

Fresenius has decided to focus on its four established business segments Fresenius Medical Care, Fresenius Kabi, Fresenius Helios and Fresenius Vamed, which offer significant growth opportunities. The Fresenius Biotech subsidiary will be discontinued.

The company is in talks with several parties about a sale of Fresenius Biotech, while simultaneously assessing the equally viable option of continuing the immunosuppressive drug ATG-Fresenius S within the Fresenius group. ATG-Fresenius S has been well established in the hospital market for decades, and is consistently profitable. Fresenius will divest the trifunctional antibody Removab (catumaxomab) business. The final decision on how to proceed will be made in the first quarter of 2013.

In the first nine months of 2012, Fresenius Biotech's sales increased by 15% to €26 million. ATG-Fresenius S sales grew by 14% to €22.5 million. Removab sales rose by 22% to €3.3 million. Fresenius Biotech's EBIT was -€15 million (Q1-3 2011: -€19 million). For the full year 2012, an EBIT of about -€25 million is expected. Withdrawing from Removab will have a positive effect on Group earnings starting in 2013.

Fresenius Biotech received the only Europe-wide approval to date for a monoclonal antibody developed in Germany when the European Commission approved Removab in 2009 for treating malignant ascites. The company subsequently obtained reimbursement approvals for Removab from the national health care systems of several European countries, providing the opportunity to expand marketing of the drug.

With ATG-Fresenius S, Fresenius Biotech offers a polyclonal antibody that has been used since 1981, for both organ and stem-cell transplantation.

Fresenius will focus on the attractive growth opportunities of its four core business segments, which have grown strongly over the last years and offer outstanding prospects. Between 2001 and 2011, Group sales increased from €7.3 billion to €16.5 billion, and Group net income from €93 million to €770 million. For the full year 2012, Fresenius expects sales¹ of more than €19 billion, corresponding to an increase of 12% to 14% in constant currency. Net income² is forecast to exceed €900 million, an increase of 14% to 16% in constant currency.

 

About malignant ascites

Malignant ascites can be caused by various kinds of tumors. The peritoneal spread of tumor cells leads to an accumulation of fluid in the peritoneal cavity and is associated with an unfavorable prognosis for the patient. The most common method of treatment is paracentesis, which generally must be repeated at intervals of one to two weeks and can lead to complications such as infections or elevated losses of fluids and proteins. Removab® destroys the peritoneal cancer cells and thus directly attacks the cause of malignant ascites.

¹ Previous year's sales were adjusted according to a U.S. GAAP accounting change. The sales adjustment of -€119 million in the first three quarters of 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 (€34 million) and potential special charges (up to €17 million) at Fresenius Medical Care as well as for one-time costs (€31 million) 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.

Fresenius Kabi has signed an agreement to sell its subsidiary Calea France SAS to The Linde Group. Calea is active in the French homecare market and focuses on respiratory therapy, which is not a core business of Fresenius Kabi.

Ulf Mark Schneider, CEO of Fresenus, said: "Calea is a successful business and will be a great fit in a global respiratory homecare organization. The divestiture underlines our strong commitment to focused growth in our four core business segments, where prospects for further expansion are bright."

In 2011, Calea France had sales of €28 million. The transaction is expected to be completed at the start of 2013.