HELIOS Kliniken GmbH, a subsidiary of Fresenius, expands its presence in the German hospital market. The company has agreed to acquire 94.7% of the share capital in Damp Group.

Damp operates seven acute care hospitals and four post acute care hospitals with a total of 4,112 beds (thereof 2,649 in acute care) and is among the ten largest private hospital operators in Germany. In addition, Damp operates eight outpatient medical care centers, two nursing care facilities with a total of 606 beds and a wellness resort. The company has 5,971 full-time employees.

The acquisition of Damp is an excellent geographic fit with the HELIOS hospital network in the north and northeast of Germany. The Damp hospitals enjoy a strong local market position and offer considerable growth potential. Both Damp and HELIOS were co-founders of the leading German medical quality initiative "Initiative Qualitätsmedizin".

In 2010, Damp achieved sales of €487 million and operating profit (EBIT) of €21 million. Acute care contributed 73% to total sales, post acute care 20%. The parties agreed not to disclose the purchase price.

Ulf Mark Schneider, CEO of Fresenius, commented: "We take advantage of this excellent opportunity to acquire a well-positioned and profitable company to strengthen HELIOS' presence in the German hospital market. As demonstrated with the acquisition of the privately-owned hospital operator Humaine in 2006, we will integrate Damp into the HELIOS network and achieve margin improvements in line with our established financial targets. Our focus on acquiring public-sector hospitals remains unchanged as we see a rebound in the German hospital privatization market."

The acquisition is still subject to the approval of local and antitrust authorities. Due to the geographic proximity of the HELIOS hospital Schwerin, HELIOS has to divest the Damp hospital Wismar (505 beds, sales of approximately €60 million) to secure regulatory clearance of the transaction.

HELIOS anticipates to close the transaction in the first half of 2012. The acquisition is expected to be accretive to Fresenius Group's earnings per share in 2013.

The acquisition will be financed from cash flow and debt. For 2012, the Damp acquisition and Fresenius Medical Care's recently announced acquisitions are not expected to lead to Group leverage above the target range of 2.5 to 3.0 net debt/EBITDA.

Fresenius has established a sponsored Level I American Depositary Receipt (ADR) program in the United States. An ADR is a receipt that is issued by a depositary bank representing ownership of a company's underlying shares. ADRs are created to facilitate U.S. investors to hold shares in non-U.S. companies and trade them in the same way as U.S. securities.

Fresenius ADRs will now be available for trading in the U.S. over-the-counter (OTC) market. Eight ADRs represent one Fresenius share. The ticker symbol is FSNUY. Deutsche Bank acts as depositary bank for the ADR program.

Ulf Mark Schneider, CEO of Fresenius, commented: "Fresenius is a global health care group with a strong presence in the United States. For many years, U.S. investors have been an important part of our shareholder base. The new ADR program now allows them to invest in Fresenius in their home market, providing them with the opportunity to participate in our Group's future development."

The Fresenius share is listed on the German stock exchanges in Frankfurt, Düsseldorf and Munich and is a member of the DAX30 stock index.

HELIOS Kliniken GmbH, a subsidiary of Fresenius, strengthens its position as the largest private hospital operator in the state of North-Rhine Westphalia, Germany. The company has agreed to acquire 51 percent of the share capital in Katholisches Klinikum Duisburg hospital (KKD). The remaining share capital will be held by local institutions related to the Catholic Church.

KKD operates a maximum care hospital with four locations in Duisburg and a total of 1,034 beds as well as a rehabilitation clinic with 220 beds. KKD also operates two nursing care facilities. In 2010, KKD's hospitals provided inpatient care for about 30,000 patients (thereof 26,500 in acute care). KKD has about 2,200 employees and achieved 2010 sales of approximately € 134 million.

HELIOS will establish two new hospital buildings to consolidate KKD's acute care operations into two locations. The total investments by the company will be approximately € 176 million, over five years.

HELIOS already operates 10 acute care hospitals in North-Rhine Westphalia including maximum care facilities in Wuppertal and Krefeld.

The acquisition is still subject to the approval of antitrust authorities and is expected to close in the first quarter of 2012. The parties agreed not to disclose the purchase price.

The acquisition will be financed from cash flow. For 2012, the KKD as well as the Damp acquisition and Fresenius Medical Care's recently announced acquisitions are not expected to lead to Group leverage above the target range of 2.5 to 3.0 net debt/EBITDA.

"The acquisition of this maximum care hospital is another important step in the growth strategy for our hospital business. It provides an excellent geographic and medical fit to the HELIOS network. The HELIOS success story at the nearby Krefeld hospital shows that we can successfully develop maximum care facilities under private ownership", said Dr. Ulf M. Schneider, CEO of Fresenius.

Fresenius Helios is one of the largest private hospital operators in Germany. HELIOS owns 64 hospitals, including five maximum care hospitals in Berlin-Buch, Erfurt, Krefeld, Schwerin and Wuppertal. HELIOS treats more than 2 million patients per year, thereof approximately 650,000 inpatients, and operates about 19,000 beds.

Q1-3 2011:

• Sales €12.1 billion, +2% at actual rates, +5% in constant currency
• EBIT €1,862 million, +5% at actual rates, +9% in constant currency
• Net income¹ €565 million, +14% at actual rates, +17% in constant currency
  
   
• Fresenius improves 2011 earnings¹ outlook of 15% to 18% constant currency growth to upper half of range
• Group earnings at single-quarter all-time high – €202 million net income¹, record 16% EBIT margin
• Fresenius Medical Care with further margin improvement and strong earnings growth
• Fresenius Kabi with 3% organic sales growth over outstanding Q3 2010
• Fresenius Helios continues expansion in the German hospital market - raises earnings guidance
• Fresenius Vamed with excellent order intake of €171 million in Q3
  
   

Ulf Mark Schneider, CEO of Fresenius, commented: "Fresenius had a very strong third quarter. With a Group EBIT margin of 16% and net income of €202 million we reached new all-time highs. We improve our 2011 earnings outlook and expect to achieve the upper half of our 15% to 18% target range. HELIOS' acquisitions of the private hospital chain Damp and the maximum care hospital in Duisburg significantly strengthen our presence in the German hospital market. This marks a further step in our growth strategy, which combines organic growth and acquisitions."

 

Group outlook 2011

Fresenius improves its 2011 earnings guidance and expects to achieve constant currency net income¹ growth in the upper half of the 15% to 18% range. Based on the sales growth of the first three quarters, Fresenius now expects to increase sales by c. 6% in constant currency.

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

In 2011, the net debt/EBITDA ratio is expected to stay in the range of 2.5 to 3.0. For calendar year 2012, Fresenius Medical Care's and Fresenius Helios' recently announced entirely debt and cash flow-financed acquisitions are not expected to cause Group leverage to exceed that target range.   

¹ Net income attributable to Fresenius SE & Co. KGaA; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. Both are non-cash items.

 

Sales growth of 5% in constant currency

Group sales increased by 2% (5% in constant currency) to €12,089 million (Q1-3 2010: €11,821 million). Organic sales growth was 4%. Acquisitions contributed a further 1%. Currency translation had a negative effect of 3%. This is mainly attributable to the average USD/EUR rate in Q1-3 2011 decreasing 8% compared to Q1-3 2010.

Sales growth in the business segments was as follows:

Organic sales growth was 1% in North America, due to the implementation of the new Medicare end-stage renal disease prospective payment system as well as lower pricing of renal drugs. In Europe organic sales growth was 3%. Prior-year sales in Europe were positively influenced by Fresenius Vamed's large medical supply contract to the Ukraine. Organic sales growth reached 12% in Africa and 15% in both Latin America and Asia-Pacific.

 

Continued strong earnings growth

Group EBITDA grew by 4% (8% in constant currency) to €2,344 million (Q1-3 2010: €2,244 million). Group EBIT increased by 5% (9% in constant currency) to €1,862 million (Q1-3 2010: €1,776 million). The EBIT margin improved by 40 basis points to 15.4% (Q1-3 2010: 15.0%). In Q3 2011, the Group achieved a strong EBIT margin of 16.0%.

Group net interest was -€401 million (Q1-3 2010: -€424 million).

The other financial result was -€100 million and includes valuation changes of the fair redemption value of the Mandatory Exchangeable Bonds (MEB) of -€105 million and the Contingent Value Rights (CVR) of €5 million. Both are non-cash items. As the CVR were delisted in March 2011, the effect relates solely to Q1 2011. As the MEB came to maturity on August 14, 2011, no further effect will occur after Q3 2011. Upon maturity, the bonds were mandatorily exchanged into ordinary shares of Fresenius Medical Care AG & Co. KGaA. Fresenius' shareholding now amounts to 30.3% of Fresenius Medical Care's ordinary share capital.

The Group tax rate¹ was 30.9% (Q1-3 2010: 32.2%).

Noncontrolling interest increased to €445 million (Q1-3 2010: €421 million), of which 93% was attributable to the noncontrolling interest in Fresenius Medical Care. 

Group net income² increased by 14% (17% in constant currency) to €565 million (Q1-3 2010: €495 million). In Q3 2011, Group net income² reached a new all-time high of €202 million (Q3 2010: €193 million). In Q1-3 2011, earnings per share increased by 13% to €3.47.

A reconciliation to adjusted earnings according to U.S. GAAP can be found on page 15 of this Investor News.

Group net income³ (including special items) reached €485 million or €2.98 per share.

¹ Adjusted for the effect of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) related to the acquisition of APP Pharmaceuticals

² Net income attributable to Fresenius SE & Co. KGaA; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. Both are non-cash items.

³ Net income attributable to Fresenius SE & Co. KGaA

 

Continued investments in growth

The Fresenius Group spent €480 million on property, plant and equipment (Q1-3 2010: €494 million). Acquisition spending was €908 million (Q1-3 2010: €223 million), mainly due to the acquisitions of Euromedic's dialysis service business as well as a minority stake in Renal Advantage, Inc., both by Fresenius Medical Care.

 

Cash flow development

Operating cash flow was €1,156 million (Q1-3 2010: €1,346 million). The strong earnings growth was offset by increased working capital requirements due to business expansion. The cash flow margin was 9.6% (Q1-3 2010: 11.4%). Net capital expenditure was €475 million (Q1-3 2010: €491 million). Free cash flow before acquisitions and dividends was €681 million (Q1-3 2010: €855 million). Free cash flow after acquisitions and dividends was -€538 million (Q1-3 2010¹: €348 million).

¹ Does not include a €100 million cash out for a short-term bank deposit by Fresenius Medical Care in 2010.

 

Solid balance sheet structure

The Group's total assets increased by 5% to €24,707 million (Dec. 31, 2010: €23,577 million). In constant currency, the increase was 6%. Current assets increased by 6% (8% in constant currency) to €6,836 million (Dec. 31, 2010: €6,435 million). Non-current assets increased by 4% (5% in constant currency) to €17,871 million (Dec. 31, 2010: €17,142 million).

Due to the maturity of the MEB, total shareholders' equity increased by 14% (16% in constant currency) to €10,049 million (Dec. 31, 2010: €8,844 million). The equity ratio improved to 40.7% (Dec. 31, 2010: 37.5%).

Group debt grew by 5% (also 5% in constant currency) to €9,181 million (Dec. 31, 2010: €8,784 million) primarily resulting from acquisition financing. Net debt increased by 6% (7% in constant currency) to €8,527 million (Dec. 31, 2010: €8,015 million).

The net debt/EBITDA ratio increased slightly to 2.70 as of September 30, 2011 (Dec. 31, 2010: 2.62). 

 

Number of employees increased

As of September 30, 2011, Fresenius Group increased the number of its employees by 6% to 145,118 (Dec. 31, 2010: 137,552).

 

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.

Sales increased by 13% to €22.4 million (Q1-3 2010: €19.9 million). ATG sales increased by 11% to €19.7 million and Removab sales by 29% to €2.7 million.

In 2011, Removab was launched in the Benelux countries, Italy, Scandinavia and the UK. The trifunctional antibody has already been marketed in Austria and France since 2010 and was launched in Germany in 2009.

Fresenius Biotech's EBIT was -€19 million (Q1-3 2010: -€21 million). For 2011, Fresenius Biotech expects an EBIT of about -€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, 2011, Fresenius Medical Care was treating 228,239 patients in 2,874 dialysis clinics.

• Strong earnings growth and further margin improvement
• 2011 outlook confirmed

Fresenius Medical Care achieved sales growth of 7% to US$9,473 million (Q1-3 2010: US$8,886 million). Organic sales growth was 2%, acquisitions contributed a further 2%.

Sales in dialysis services increased by 5% to US$7,072 million (Q1-3 2010: US$6,716 million). Dialysis product sales grew by 11% to US$2,401 million (Q1-3 2010: US$2,170 million).

In North America sales were US$6,055 million (Q1-3 2010: US$6,058 million). Dialysis services sales were US$5,456 million (Q1-3 2010: US$5,441 million). Average sales per treatment for U.S. clinics was US$345 in Q3 2011 compared to US$359 in Q3 2010. This is a result of the implementation of the Medicare end-stage renal disease prospective payment system. Dialysis product sales decreased to US$599 million (Q1-3 2010: US$617 million) as increased sales of hemodialysis and peritoneal dialysis products could not entirely offset lower pricing of renal drugs.

Sales outside North America ("International" segment) grew by 20% to US$3,405 million (Q1-3 2010: US$2,828 million). Sales in dialysis services increased by 27% to US$1,616 million. Dialysis product sales increased by 15% to US$1,789 million.

EBIT increased by 7% to US$1,488 million (Q1-3 2010: US$1,385 million). The EBIT margin improved by 10 basis points to 15.7% (Q1-3 2010: 15.6%).

In North America the EBIT margin increased to 17.1% (Q1-3 2010: 16.7%). This increase was mainly favorably influenced by the development of pharmaceutical costs.

In the International segment the EBIT margin remained at the previous year's level of 17.0%.

Net income¹ increased by 8% to US$761 million (Q1-3 2010: US$707 million).

Fresenius Medical Care confirms the outlook for 2011. The company projects sales of more than US$13 billion. Net income¹ is expected between US$1,070 million and US$1,090 million.

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

¹ Net income attributable to Fresenius Medical Care AG & Co. KGaA

 

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.

• Organic sales growth of 9%, strong EBIT margin of 20.8%
• 3% organic sales growth over outstanding Q3 2010
• 2011 outlook improved – Organic sales growth between 8% and 8.5%, EBIT margin ≥20%

Fresenius Kabi reported excellent financial results. In Q3 2011, Fresenius Kabi achieved 3% organic sales growth over previous year's outstanding quarter. Q3 2010 results were driven by significant supply constraints in the injectable drug market in North America.

In Q1-3 2011, sales increased by 8% to €2,950 million (Q1-3 2010: €2,723 million). Organic sales growth was 9%, acquisitions contributed 1%. Currency translation had a negative effect of 2%. This is mainly attributable to the U.S. dollar weakness against the euro.

In Europe sales grew by 8% to €1,360 million (Q1-3 2010: €1,264 million), driven by organic sales growth of 6%. In North America sales were impacted by currency translation and increased by 3% to €755 million (Q1-3 2010: €730 million). Organic sales growth was 10%. In Asia-Pacific sales increased by 17% to €511 million (Q1-3 2010: €436 million), with excellent organic sales growth of 18%. Sales in Latin America and Africa increased by 11% to €324 million (Q1-3 2010: €293 million), with organic sales growth contributing 11%.  

EBIT grew by 10% to €613 million (Q1-3 2010: €557 million). The EBIT margin improved to 20.8% (Q1-3 2010: 20.5%). EBIT growth was mainly attributable to the strong development in North America and the emerging markets.

Net interest remained at the previous year's level of -€212 million.

Net income¹ increased by 19% to €271 million (Q1-3 2010: €228 million).

Fresenius Kabi's operating cash flow was €350 million (Q1-3 2010: €378 million), resulting in a cash flow margin of 11.9% (Q1-3 2010: 13.9%). Given increased capital expenditures, cash flow before acquisitions and dividends was €234 million (Q1-3 2010: €272 million).

In September 2011, Fresenius Kabi expanded its production capacity in Asia and opened a new production facility in Vietnam. With the new plant Fresenius Kabi almost doubles its local manufacturing capacity for infusion solutions and liquid medications. Most of these products are intended for the Vietnamese market. Total investment amounted to approximately €20 million.

Fresenius Kabi improves its outlook for 2011. The company now forecasts organic sales growth between 8% and 8.5%. Previously, Fresenius Kabi projected organic sales growth of ~8%. The EBIT margin is now expected to be ≥20%. The previous guidance was ~20%.

Fresenius Kabi plans to host a Capital Market Day on June 12, 2012 in Bad Homburg providing an update on the strategy and growth prospects of the company.

Special items relating to the acquisition of APP Pharmaceuticals are included in the segment "Corporate/Other".

¹ Net income attributable to Fresenius Kabi AG

 

Fresenius Helios

Fresenius Helios is one of the largest private hospital operators in Germany. HELIOS owns 64 hospitals, including five maximum care hospitals in Berlin-Buch, Erfurt, Krefeld, Schwerin and Wuppertal. HELIOS treats more than 2 million patients per year, thereof approximately 650,000 inpatients, and operates about 19,000 beds.

• Organic sales growth of 4%, EBIT margin increase to 10% 
• Expansion in the German hospital market – acquisition of Damp Group and Katholisches Klinikum Duisburg hospital
• 2011 EBIT outlook raised to €260 million to €270 million

Sales increased by 6% to €1,950 million (Q1-3 2010: €1,840 million), mainly driven by solid organic sales growth of 4%. Acquisitions contributed 2% to overall sales growth.

EBIT grew by 13% to €195 million (Q1-3 2010: €172 million). The EBIT margin improved by 70 basis points to 10.0% (Q1-3 2010: 9.3%).

Net income¹ increased by 19% to €117 million (Q1-3 2010: €98 million).

The established clinics increased sales by 4% to €1,916 million. EBIT improved by 16% to €199 million. The EBIT margin was 10.4%. The acquired clinics (consolidation < 1 year) achieved sales of €34 million and an EBIT of -€4 million. Restructuring of these hospitals is fully on track.

On October 12, HELIOS announced that it agreed to acquire 94.7% of the share capital in Damp Group. The acquisition of Damp is an excellent geographic fit with the HELIOS hospital network in the north and northeast of Germany.

Damp operates seven acute care hospitals and four post-acute care hospitals with a total of 4,112 beds (thereof 2,649 in acute care). In addition, Damp operates eight outpatient medical care centers, two nursing care facilities and a wellness resort. In 2010, Damp achieved sales of €487 million and operating profit (EBIT) of €21 million.

The acquisition is still subject to the approval of local and antitrust authorities. Due to the geographic proximity of the HELIOS hospital Schwerin, HELIOS has to divest the Damp hospital Wismar (505 beds, sales of approximately €60 million) to secure regulatory clearance of the transaction. HELIOS anticipates closing the transaction in the first half of 2012.

On October 31, HELIOS announced that it agreed to acquire 51% of the share capital in Katholisches Klinikum Duisburg hospital (KKD), North-Rhine Westphalia. KKD provides an excellent geographic and medical fit to the HELIOS network, as HELIOS already operates ten acute care hospitals in North-Rhine Westphalia including maximum care hospitals in Wuppertal and Krefeld.

KKD operates a maximum care hospital with four locations in Duisburg and a total of 1,034 beds as well as a rehabilitation clinic with 220 beds. KKD also operates two nursing care facilities. In 2010, KKD's hospitals achieved sales of approximately €134 million. HELIOS will consolidate the acute care hospitals into two locations and build two new hospitals. The total investments will be approximately €176 million, over five years. The acquisition is still subject to the approval of antitrust authorities. Closing of the transaction is anticipated in the first quarter of 2012.

The recent acquisitions are significant achievements in Fresenius Helios' growth strategy. As a result, a new mid-term sales guidance for Fresenius Helios will be provided in spring 2012. Currently, the company targets sales of €3.5 billion by 2015.

Fresenius Helios raises its earnings outlook and now projects EBIT of €260 million to €270 million. Previously, the company expected to reach an EBIT of ~€260 million. Fresenius Helios fully confirms its sales outlook and projects organic sales growth
of 3% to 5%.

¹ Net income attributable to HELIOS Kliniken GmbH

 

Fresenius Vamed

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

• Sales and EBIT in line with expectations
• Excellent order intake of €171 million in Q3
• 2011 outlook confirmed

Fresenius Vamed's sales reached €480 million (Q1-3 2010: €517 million). Sales in the project business were €311 million (Q1-3 2010: €351 million). Prior-year sales included a substantial medical supply contract with the Ukraine. In addition, current sales were impacted by the unrest in the Middle East / North Africa region. Sales in the service business increased by 2% to €169 million (Q1-3 2010: €166 million).

EBIT was €22 million (Q1-3 2010: €24 million). The EBIT margin of 4.6% was at previous year's level. Net income¹ was €17 million (Q1-3 2010: €18 million).

Order backlog was €775 million as of September 30, 2011 (Dec. 31, 2010: €801 million). In Q3 2011, Fresenius Vamed achieved an excellent order intake of €171 million. New orders include turnkey contracts for the construction of a general hospital in Sochi, Russia (total order volume €98 million) as well as for the reconstruction of a general hospital in Hesse, Germany (total order volume €42 million). The order intake in Q1-3 2011 was €335 million (Q1-3 2010: €418 million).

Fresenius Vamed confirms the 2011 outlook. The company projects sales and EBIT growth of 0% to 5%.

¹ Net income attributable to VAMED AG

 

Analyst Meeting and Audio Webcast

As part of the publication of the results for Q1-3 2011, a conference call will be held on November 2, 2011 at 2.00 p.m. CET (9.00 a.m. EDT). 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 of the conference call will be available on our website.

Fresenius SE & Co. KGaA („Fresenius") plans to increase its voting interest in Fresenius Medical Care AG & Co. KGaA („FME") through the purchase of approximately 3.5 million ordinary shares.

The planned transaction shall be executed through share purchases, carried out from time to time, in a manner intended to have minimal impact on FME's share price on the stock exchange.

After maturity of the Mandatory Exchangeable Bond on August 14, 2011, Fresenius' current voting interest in FME is 30.3%. The exercise of FME stock options could, however, dilute Fresenius' interest to 29.3% mid-term.

The planned share purchase is meant to preserve a long-term voting interest in FME above 30%, maintaining the current ownership situation. Under applicable German law, if Fresenius' ownership were to fall below 30% and Fresenius purchased additional ordinary shares to bring its ownership above 30%, Fresenius would become obligated to offer to purchase all of FME's shares. Upon completion of the purchase of approximately 3.5 million ordinary shares, Fresenius' voting interest in FME would increase to approximately 31.5%.

Fresenius' position as general partner of FME requires ownership of at least 25% of FME's share capital.

The number of shares to be purchased corresponds to the XETRA trading volume of four to five average trading days.

Based on FME‘s current share price, the financing requirement for Fresenius is approximately €180 million. It shall be funded from cash flow and existing credit lines. Fresenius expects its incremental share in FME's net income to exceed its cost of financing the share purchase. The planned share purchase is therefore expected to be slightly accretive to Group net income. From today's perspective, Group Net Debt/EBITDA, including the effect of the planned share purchase, will stay below 3.0 in 2012.

Fresenius will provide details on the share purchase upon its completion.

HELIOS Kliniken GmbH, a subsidiary of Fresenius, has completed the acquisition of 51% of the share capital of Katholisches Klinikum Duisburg (KKD), following approval by the German antitrust authority. The other shareholders of KKD are local institutions related to the Catholic Church. HELIOS will fully consolidate KKD's sales and earnings as of January 1, 2012. The acquisition was announced in October 2011.

KKD operates a maximum care hospital with four locations in Duisburg and a total of 1,034 beds as well as a rehabilitation clinic with 220 beds. KKD also operates two nursing care facilities. In 2010, KKD's hospitals provided inpatient care for about 30,000 patients (thereof 26,500 in acute care). KKD has about 2,200 employees and achieved 2010 sales of approximately €134 million.

After a strong third quarter, Fresenius expects to achieve excellent fourth quarter earnings growth in 2011. In particular, Fresenius Kabi and Fresenius Helios have continued to perform strongly.

Therefore, Fresenius improves its 2011 earnings outlook slightly and now expects to achieve constant currency net income¹ growth of approximately 18%. Fresenius previously improved its earnings outlook of 15% to 18% constant currency growth to the upper half of this range on November 2, 2011.

Sales growth in constant currency is expected to just reach the targeted c. 6% as current sales at Fresenius Medical Care and Fresenius Vamed remain slightly below expectations. Fresenius Kabi and Fresenius Helios continued to see excellent sales growth and are fully on track to achieve their guidance.

¹ Net income attributable to Fresenius SE & Co. KGaA; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights related to the acquisition of APP Pharmaceuticals. Both are non-cash items.

• Sales €14.2 billion,
  +15% at actual rates, +13% in constant currency
• Adjusted EBIT €2.1 billion, +19% at actual rates,
  +17% in constant currency
• Adjusted net income¹ €514 million,
  +14% at actual rates, +14% in constant currency

 

• Excellent sales and earnings growth in all business segments
• All financial targets met or exceeded
• EBIT exceeds the €2 billion mark for the first time
• Strong cash flow supports rapid de-leveraging
• 17th consecutive dividend increase proposed 

Ulf Mark Schneider, CEO of Fresenius SE: "Fresenius took full advantage of its business opportunities in the past year. Despite a challenging macroeconomic environment, we have met or even exceeded our earnings guidance for 2009. Our comprehensive and well-diversified portfolio of products and services as well as our global presence proved to be valuable assets. Based on these outstanding results, we will propose the 17th consecutive increase in dividends to our shareholders. We will continue to pursue our long-term strategy which is based on sustainable, profitable growth."

Dividend increase proposed
Based on the excellent financial results the Management Board will propose to the Supervisory Board a dividend increase of 7% to €0.75 per ordinary share (2008: €0.70) and €0.76 per preference share (2008: €0.71). The total dividend distribution is expected to be €122 million.

Positive outlook for 2010
For 2010, Fresenius projects further improvements in its financial results: Sales growth in constant currency is projected to be in a 7 to 9% range. Adjusted net income¹ is expected to increase by 8 to 10% in constant currency.

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

The net debt/EBITDA ratio is expected to improve further and reach a level below 3.0.

Sales growth of 13% in constant currency
Group sales increased by 13% in constant currency and by 15% at actual rates to €14,164 million (2008: €12,336 million). Organic sales growth was 8%. Acquisitions contributed a further 5%. Currency translation had a positive impact of 2%.

Sales growth in the business segments was as follows:

In Europe sales grew by 11% in constant currency with organic sales growth contributing 7%. In North America sales grew by 16% in constant currency, mainly due to the consolidation of APP Pharmaceuticals from September 2008. Organic growth was 8%. Strong organic growth rates were achieved in the emerging markets, reaching 9% in Asia-Pacific and 12% in Latin America.

¹ Net income attributable to Fresenius SE; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. Both are non-cash items.


Group net income growth of 14% in constant currency
Group EBITDA increased by 17% in constant currency and by 19% at actual rates to €2,616 million (2008 adjusted: €2,203 million). Group operating income (EBIT) grew by 17% in constant currency and by 19% at actual rates to €2,054 million (2008 adjusted: €1,727 million). Group EBIT exceeded the €2 billion mark for the first time. The Group's EBIT margin increased to 14.5% (2008 adjusted: 14.0%).

Group net interest was -€580 million (2008: -€431 million). Lower average interest rates on liabilities of Fresenius Medical Care were more than offset by incremental debt related mainly to the acquisition of APP Pharmaceuticals.

The other financial result was -€31 million and includes valuation changes of the fair redemption value of the Mandatory Exchangeable Bonds (MEB) of -€37 million and the Contingent Value Rights (CVR) of €6 million. Both are non-cash items.

The adjusted Group tax¹ rate was 31.4% (2008 adjusted: 33.4%). This decrease was largely driven by the revaluation of a tax claim at Fresenius Medical Care in Q2 2009.

Non-controlling interest increased to €497 million (2008: €413 million), of which 93% was attributable to the minority interest in Fresenius Medical Care.

Adjusted Group net income² grew both in constant currency and at actual rates by 14% to €514 million (2008 adjusted: €450 million). Adjusted earnings per ordinary share increased to €3.18 and adjusted earnings per preference share increased to €3.19 (2008 adjusted: ordinary share €2.85, preference share €2.86). This represents an increase of 12% for both share classes. 

¹ Adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. 
² Net income attributable to Fresenius SE; adjusted for the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. Both are non-cash items.


The Group's US GAAP financial results as of December 31, 2009 and as of December 31, 2008 include the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and the Contingent Value Rights (CVR) related to the acquisition of APP Pharmaceuticals. Those special items are recognized in the financial result of the "Corporate/Other" segment. Adjusted earnings represent the Group's business operations in the reporting period. In addition, the Group's US GAAP financial statements as of December 31, 2008 include several special items related to the acquisition of APP Pharmaceuticals. Please see page 14 of this Investor News for the reconciliation to earnings according to US GAAP.

Net income¹ (including special items) was €494 million or €3.06 per ordinary share and €3.07 per preference share.

Continued investments in growth
The Fresenius Group spent €671 million on property, plant and equipment (2008: €764 million). This was below the initially projected range of €700 to 750 million due to the cautious investment policy pursued by the business segments. At 4.7% of sales, capital expenditures returned to our target range of approx. 5%. Acquisition spending was €260 million (2008: €3,853 million, primarily due to the acquisition of APP Pharmaceuticals).

Excellent cash flow development
Operating cash flow increased by 45% to €1,553 million (2008: €1,074 million), driven by strong earnings growth and tight working capital management. The cash flow margin improved to 11.0% (2008: 8.7%). Net capital expenditure was €662 million (2008: €736 million). Cash flow before acquisitions and dividends increased 2.6-fold to €891 million (2008: €338 million). Free cash flow after acquisitions and dividends was €389 million (2008: -€2,864 million).

Solid balance sheet structure
The Fresenius Group's total assets grew by 2% to €20,882 million (December 31, 2008: €20,544 million). In constant currency, the increase was 3%. Current assets increased by 6% to €5,363 million (December 31, 2008: €5,078 million). Non-current assets were virtually unchanged from previous year's level at €15,519 million (December 31, 2008: €15,466 million).

Total shareholders' equity increased by 10% to €7,652 million (December 31, 2008: €6,943 million). The equity ratio (including non-controlling interest) improved to 36.6% (December 31, 2008: 33.8%).

Group debt decreased by 6% to €8,299 million (December 31, 2008: €8,787 million).

As of December 31, 2009, the net debt/EBITDA ratio was 3.0 and improved significantly from 3.6 at December 31, 2008 (pro forma the acquisition of APP Pharmaceuticals and excluding special items). With that, the 2010 target range of 2.5 to 3.0 has been reached one year ahead of time.

Given the progress in de-leveraging and improved conditions in the debt capital markets since the acquisition of APP, Fresenius has launched an amendment request to its 2008 syndicated credit agreement with the aim to reduce its average cost of debt and to gain enhanced flexibility for further growth. 

¹ Net income attributable to Fresenius SE.

Number of employees increased
As of December 31, 2009, Fresenius increased the number of its employees by 7% to 130,510 (December 31, 2008: 122,217). The increase was mainly driven by Fresenius Medical Care and by Fresenius Helios' acquisition of five acute care clinics.

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.

On April 22, 2009, the European Commission granted Fresenius Biotech the approval for Removab (catumaxomab) for the treatment of malignant ascites. Removab was launched in Germany in May 2009. Market launch is in preparation in other European countries. As of December 31, 2009, Fresenius Biotech achieved Removab sales of more than €1.6 million.

Fresenius Biotech's EBIT was -€44 million (2008: -€47 million). For 2010, Fresenius Biotech expects an EBIT between -€35 and -40 million.


The 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 December 31, 2009, Fresenius Medical Care was treating 195,651 patients in 2,553 dialysis clinics.

• Excellent organic sales growth of 8%
• 2010 outlook: Sales of more than US$12 billon and net income¹ of US$950 to 980 million expected

Fresenius Medical Care achieved sales growth of 6% to US$11,247 million (2008: US$10,612 million). Excellent organic growth accounted for 8%, net acquisitions contributed a further 1%. Currency translation effects had a negative impact of 3%.

Sales in dialysis care increased by 8% to US$8,350 million (2008: US$7,737 million). Dialysis products sales grew by 1% at actual rates and 6% in constant currency to US$2,897 million (2008: US$2,875 million).

In North America sales increased by 9% to US$7,612 million (2008: US$7,005 million). Dialysis services revenue increased by 9% to US$6,794 million. Average revenue per treatment for the U.S. clinics increased to US$357 in the fourth quarter of 2009 compared to US$335 for the same quarter in 2008 and US$348 for the third quarter of 2009. This development was principally attributable to reimbursement increases and increased utilization of pharmaceuticals. Sales in dialysis products improved by 8% to US$818 million.

Sales outside North America ("International" segment) grew by 1% at actual rates and 9% in constant currency to US$3,635 million (2008: US$3,607 million). Sales in dialysis care increased by 4% (14% in constant currency) to US$1,556 million. Dialysis products sales decreased by 2% (increase by 6% in constant currency) to US$2,079 million.

EBIT rose by 5% to US$1,756 million (2008: US$1,672 million) resulting in an EBIT margin of 15.6% (2008: 15.8%). This was mainly due to higher personnel expenses, cost increases for pharmaceuticals, and the launch of a generic product for the phosphate binder PhosLo^® by a competitor in the United States. These effects were partially offset by an increase in revenue per treatment, the strong development in dialysis products, and successful cost control measures.

Net income¹ increased by 9% to US$891 million (2008: US$818 million).

For 2010, Fresenius Medical Care expects to achieve revenue of more than US$12 billion. Net income¹ is expected to be between US$950 and 980 million.

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

¹ Net income attributable to Fresenius Medical Care AG & Co. KGaA.


Fresenius Kabi
Fresenius Kabi offers infusion therapies, intravenously administered generic drugs and clinical nutrition for seriously and chronically ill patients in the hospital and out-patient environments. The company also is a leading provider of medical devices and transfusion technology products.

• Strong organic sales growth of 8%
• EBIT margin increased to 19.7%
• 2010 outlook: Organic sales growth between 7 and 9% and EBIT margin between 18 and 19% expected

Fresenius Kabi increased sales by 24% at actual rates and 26% in constant currency to €3,086 million (2008: €2,495 million). Organic sales growth was 8%. Net acquisitions contributed a further 18%. Currency translation had a net negative impact of 2%. The depreciation of currencies in Great Britain, Poland and Mexico against the euro was only partially offset by the strengthening of the Chinese yuan.

In Europe, sales reached €1,566 million (2008: €1,499 million), driven by 5% organic growth. In North America, sales increased to €728 million (2008: €336 million) primarily due to the full-year consolidation of APP Pharmaceuticals. In the Asia-Pacific region, Fresenius Kabi achieved organic sales growth of 15% to €482 million (2008: €381 million). Sales in Latin America and Africa increased to €310 million (2008: €279 million), and organic growth was 13%.

EBIT grew by 37% to €607 million (2008: €443 million). EBIT includes a €26 million non-cash charge related to the amortization of APP Pharmaceuticals' intangible assets. The EBIT margin increased to 19.7% (2008: 17.8%). Net interest grew to -€302 million (2008: -€145 million), driven by the APP acquisition financing. Net income1 was at previous year's level of €200 million.

Sales at APP Pharmaceuticals increased by 14% to US$889 million. APP Pharmaceuticals achieved significant sales growth of 18% in its product portfolio excluding Heparin in the fourth quarter, taking full year 2009 sales growth to 8%. Adjusted EBITDA¹ reached US$347 million. EBIT was US$273 million. EBIT includes a US$37 million non-cash charge related to the amortization of acquisition-related intangible assets. The EBIT margin was 30.7%. APP Pharmaceuticals received seven drug approvals from the U.S. Food and Drug Administration (FDA) in fiscal year 2009.

Operating cash flow of Fresenius Kabi nearly doubled to €397 million (2008: €205 million). This was primarily achieved through tight working capital management. Given only moderate growth in capital expenditures, cash flow before acquisitions and dividends more than tripled to €272 million (2008: €83 million).

Fresenius Kabi targets organic sales growth between 7 and 9% for 2010. Furthermore, Fresenius Kabi forecasts an EBIT margin in a range between 18 and 19%. Whilst still at an excellent level, the slightly reduced margin guidance reflects delayed IV drug market launches, lower Heparin product sales and the expectation of further increased price competition in the US IV generics market. For the mid-term, Fresenius Kabi expects organic sales growth of 7 to 10 % p.a. and an EBIT margin in the 18 to 20 % range.

Special items relating to the acquisition of APP Pharmaceuticals are included in the segment "Corporate/Other".

¹ Net income attributable to Fresenius Kabi AG.


Fresenius Helios
Fresenius Helios is one of the largest private hospital operators in Germany. The HELIOS Kliniken Group owns 61 hospitals, including five maximum care hospitals in Berlin-Buch, Erfurt, Krefeld, Schwerin and Wuppertal. HELIOS treats more than 2 million patients per year, thereof ~600,000 in-patients, and operates a total of more than 18,500 beds.

• Excellent sales and earnings growth
• 2010 outlook: Organic sales growth of 3 to 5% and EBIT in a range between €220 and 230 million expected

Fresenius Helios increased sales by 14% to €2,416 million (2008: €2,123 million). Organic growth was at a strong 7%, to a large degree driven by an increase in hospital admissions. Net acquisitions contributed 7% to overall sales growth.

EBIT grew by 17% to €205 million (2008: €175 million) due to the excellent business operations of the established clinics. The EBIT margin reached 8.5% (2008: 8.2%). Net income¹ improved by 34% to €107 million (2008: €80 million).

At HELIOS' established clinics, sales rose by 7% to €2,253 million. EBIT increased by 22% to €213 million. The EBIT margin improved to 9.5% (2008: 8.2%). The newly acquired clinics (consolidation <1 year) achieved sales of €163 million and an EBIT of €-8 million, in line with our expectations.

For 2010, Fresenius Helios expects to achieve organic sales growth of 3 to 5%. EBIT is projected to increase in a range between €220 and 230 million. 

¹ Net income attributable to HELIOS Kliniken GmbH.


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

• Record sales, EBIT and net income
• Order intake and order backlog at new all-time highs
• Outlook 2010: Sales and EBIT growth between 5% and 10% expected

Fresenius Vamed achieved excellent sales and earnings growth and new all-time highs for order intake and order backlog.

Sales increased by 18% to €618 million (2008: €524 million). Organic sales growth was 15%. The clinics in the Czech Republic acquired from Fresenius Helios contributed 3%. Sales in the project business rose by 25% to €420 million (2008: €336 million). Sales in the service business increased by 5%2 to €198 million (2008: €188 million).

EBIT grew by 20% to €36 million (2008: €30 million). The EBIT margin improved slightly to 5.8% (2008: 5.7%). Net income¹ rose by 4% to €27 million (2008: €26 million).

The excellent development of order intake and order backlog continued: Order intake in the project business increased by 27% to €539 million (2008: €425 million). In the fourth quarter of 2009, order intake was €226 million, including turn-key contracts for three clinics in Austria. Furthermore, VAMED received an order to deliver medical supplies to the Ukraine with an order volume of approximately €100 million. Order backlog increased by 19% to €679 million (December 31, 2008: €571 million).

In 2010, Fresenius Vamed expects to achieve both sales and EBIT growth in a range between 5 and 10%. 

¹ Net income attributable to VAMED AG. 
² Adjusted for project orders carried-out for the Vienna General Hospital - university clinics (AKH), which were included in the service business in 2008, sales growth was 22%.


Analyst Meeting and Video Webcast
As part of the publication of the results for fiscal year 2009, an analyst meeting will be held at the Fresenius headquarters in Bad Homburg on February 24, 2010 at 1.30 p.m. CET (7.30 a.m. EST). All investors are cordially invited to follow the conference in a live broadcast over the Internet at www.fresenius.com see Investor Relations / Presentations. Following the meeting, a recording of the conference will be available as video-on-demand.

Fresenius considerably improved the terms of its 2008 syndicated credit agreement through an amendment supported by a vast majority of its lenders.

Within the scope of the amended agreement, the interest rate of the approximately US$1.2 billion term loan B (new term loan C) will be reduced by one-third. The new applicable interest rate will consist of the relevant money market rate (LIBOR and EURIBOR) subject to a 1.50% floor (currently 3.25%), plus a 3.00% margin (currently 3.50%). Based on current market rates, the amendment results in a 2.25% reduction compared with the current applicable interest rate. One-time expenses related to the amendment will impact Fresenius' results for the first quarter of 2010. Fresenius expects a positive contribution to Group earnings for the full fiscal year.

The syndicated credit agreement was concluded in August 2008 as part of the acquisition financing for APP Pharmaceuticals, Inc. Since the acquisition, both Fresenius' debt ratios and conditions on the debt markets have improved considerably. In light of these developments, Fresenius decided in February 2010 to approach its lenders to renegotiate terms of the agreement.

The resolutions on authorized capitals adopted by a large majority at Fresenius SE's annual general meeting on May 8, 2009, are final and binding. This results from the decision delivered today by the appellate court (Oberlandesgericht) in Frankfurt am Main, Germany, with regard to a judicial clearance proceeding (Freigabeverfahren) initiated by Fresenius. An appeal to a higher court is not available. As a consequence, the authorized capitals, which are already recorded in the commercial register, are definitively available.

The judicial clearance proceeding was prompted by legal challenges filed by two individual shareholders. The court's presiding division (Senat) upheld Fresenius SE's argument that the company's interest in implementing the resolutions outweighs the plaintiffs' interest in staying such implementation. The legal challenge underlying the decision is pending with the same court. However, this forthcoming decision has now become irrelevant with respect to the authorized capital resolutions covered by the clearance proceeding.

Authorized capital is commonly used by companies to maintain financial flexibility. Fresenius has currently no plans for a capital increase.