Fresenius obtained antitrust approval from the European Commission for the acquisition of HELIOS Kliniken GmbH, Fulda, Germany, announced in October. Furthermore, Fresenius obtained the approval of the German antitrust authority to acquire the business of Clinico GmbH, Bad Hersfeld, Germany. This will allow the closing of both acquisitions before the end of this year.

With HELIOS, Fresenius has an excellent platform for further growth in the German hospital market. HELIOS is one of the largest and most successful private German hospital operators with expected sales of approx. € 1.2 billion in 2005. The company is recognized for having the highest medical standards in the sector. HELIOS owns 24 hospitals with a total capacity of approx. 9,300 beds. The company is the only hospital chain in Germany that operates four maximum-care hospitals with more than 1,000 beds each.

Clinico manufactures medical devices used for the application of infusion therapies and clinical nutrition. With this acquisition, Fresenius Kabi extends its product portfolio and will distribute Clinico's products through its existing sales and distribution organization. In addition, the company expands its development and production network for medical devices. Clinico achieved sales of € 51.5 million in the fiscal year 2004/05 (September 30).

• Sales: + 3 % to € 7.5 billion
  currency-adjusted: + 9 %
   
• EBIT: + 10 %* to € 837 million
   
• Net income: + 44 %* to € 134 million
   
• Dividend: + 10 % to
  € 1.14 per ordinary share and
  € 1.17 per preference share

The Fresenius health care group increased sales in the 2002 financial year by a plus of 3 % to € 7,507 million. Calculated at the exchange rates of the previous year the sales increase amounted to 9 %. Net income of the Fresenius Group increased by 44 % to € 134 million. This increase resulted from goodwill no longer being amortized in accordance with the changes in the US GAAP accounting rules effective since January 1, 2002.

Dividend
The Managing Board will propose to the Supervisory Board that the dividend be increased. This also reflects our strong belief in the future earnings development. A dividend of € 1.14 (2001: € 1.03) per ordinary share entitled to dividend, and of € 1.17 (2001: € 1.06) per preference share entitled to dividend is to be paid. This corresponds to an increase of 11 % per ordinary share and 10 % per preference share, and a total payment of € 47.3 million.

Accounting at the Fresenius Group has been in accordance with US GAAP since January 1, 2002. The figures for the previous year therefore correspond to the US GAAP accounting rules in force during 2001, i.e. the figures for 2001 include amortization of goodwill.

* Comparable figure without special charge for US legal issues

Group outlook on year-end 2003
The Fresenius Group is in an excellent strategic position worldwide. Thanks to its leading market positions in many of its fields of activity, Fresenius has a solid basis for growth in the future, supported by new products and therapies. Despite the difficult economic development and sustained pressure to save costs in the health systems, especially in the western health care markets, the Group expects a positive development in the 2003 financial year. At the exchange rates in force during 2002, a high single-digit sales growth rate is expected for the 2003 financial year. This is an ambitious target in view of the absolute sales figure of € 7.5 billion achieved in 2002, and since Fresenius has to exceed market growth. Earnings are also expected to further increase at constant exchange rates: The growth rate in net income will be higher than that of sales.


Sales
In the 2002 financial year, Fresenius increased consolidated sales to € 7,507 million (+ 3%). A continued strong organic growth of 6 % again confirms the good position of Fresenius in the markets. Acquisitions increased growth by 3 percentage points. The changes in exchange rates had an effect of –6 percentage points. The devaluation of the Argentinean peso, and in particular the weaker US dollar compared to the euro
(- 5.6 % on average over the year) negatively affected sales in the currency conversion.

The strongest regions of the Group from a sales point of view continue to be North America with 54 % and Europe with 34 % of total sales, followed by the region Asia-Pacific with 8 % and Latin America and other regions with 4 %. Fresenius achieved sales increases in all regions of the world on a currency-adjusted basis: High growth rates were achieved particularly in the region Asia-Pacific. Despite the difficult economic situation in Argentina and Brazil, sales in Latin America rose by 11 % currency-adjusted.

The breakdown of sales by business segment compared to the previous year changed in the favour of Fresenius ProServe, since Wittgensteiner Kliniken AG which was acquired effective June 1, 2001 was consolidated for a whole year for the first time in 2002.

 


Earnings
In the 2001 financial year Fresenius Medical Care had taken a special charge for expenses in connection with legal disputes in the United States relating to the National Medical Care transaction in 1996. In order to make it easier to compare the development of the Group, the following report includes comments on the previous year's figures without this special charge.

Earnings of the Fresenius Group were influenced in the 2002 financial year by two main factors: On the one hand, goodwill was no longer amortized as a result of the change in US GAAP accounting rules as of January 1, 2002, which had a positive effect on earnings. On the other hand, there were negative impacts on earnings through expenses in the production facilities and in the services field in connection with the conversion of dialysis treatment from re-use to single-use dialysers by Fresenius Medical Care in the United States.

Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to € 1,178 million and were 6 % (1 % at constant exchange rates) lower than the previous year's figure. The EBIT growth rate, 10 % to € 837 million, resulted from goodwill no longer being amortized. If EBIT of the year 2001 before special charge does not include goodwill amortization, EBIT of 2002 would have been 8 % (currency-adjusted: 4 %) lower. The goodwill in the Fresenius Group's balance sheet has substance.

Net interest of the Group amounted to € -270 million and improved in the 2002 financial year by 6 % (2001: € -286 million). The conversion of interest expenses from US dollars to euros had a positive effect, since a large portion of bank loans were granted in the United States. Furthermore, the redemption of the high-interest trust preferred securities due in 2006 of Fresenius Medical Care reduced the interest expense.

The tax ratio dropped from 42.6 % in 2001 to 37.0 % in the year under report, largely caused by goodwill no longer being amortized.

The share of earnings allocated to minority interests increased to € 218 million, after € 180 million in the 2001 financial year. Of this amount, 94 % of minority interests concern Fresenius Medical Care.

Net income increased to € 134 million compared to € 93 million in 2001.

Earnings per share amounted to € 3.27 after € 2.29 in the previous year, based on a total of 40,969,684 ordinary and preference shares.

The changes in currency exchange rates negatively influenced the earnings situation of the Group through translation effects: At constant exchange rates, i.e. calculated at the 2001 exchange rates, EBIT would have increased by 15 % and net income by 53 %.


Capital expenditure
Fresenius invested € 507 million in the year under report. This is 7 % of total consolidated sales. In the previous year the investment was € 1,233 million (17% of sales), strongly marked by acquisitions. With the number of acquisitions in the recent years Fresenius was able to achieve leading positions in its markets. These considerable efforts have been carried out to secure future growth.

While investments in tangible and intangible assets decreased by € 52 million to € 377 million, funds provided for acquisitions dropped substantially to € 130 million from € 804 million in 2001. Of the total amount invested in the year under report, 74 % was allocated to tangible and intangible assets and 26 % to acquisitions.

Acquisitions mainly concerned the purchase of dialysis clinics by Fresenius Medical Care. Major investment projects in the field of tangible assets were the founding and equipping of dialysis clinics, mainly in the United States, as well as the extension and modernisation of existing clinics, the building of a joint production facility in Mexico for infusion solutions of Fresenius Kabi and peritoneal dialysis products of Fresenius Medical Care. In addition, Fresenius Kabi's European production plants for infusion solutions continued to be build up and optimised.

Split into business segments, Fresenius Medical Care invested 68 % of the total amount, followed by Fresenius Kabi with 15 %. By region, 49 % of investments were made in Europe, followed by North America with 35 % and the regions Asia-Pacific and Latin America with 8 % each.


Cash flow
The cash flow statement of the Group developed extremely well. The operating cash flow and free cash flow showed high growth rates.

The operating cash flow amounted to € 697 million in the year under report (€ 509 million in 2001). This corresponds to an increase of 37 %. It fully covers the financing requirements from investment activities before acquisitions: Funds provided for investments of the Group amounted to € 377 million and proceeds from disposals of fixed assets amounted to € 62 million. The free cash flow before acquisitions and dividends amounted to € 382 million and was three times higher than the figure for the previous year due to the significantly lower capital expenditure and improved working capital management. All acquisitions and the dividends for 2002 were able to be financed from the free cash flow. The free cash flow after acquisitions and dividends was positive and amounted to € 163 million.


Asset and equity structure
The balance sheet total of the Group dropped by € 952 million (10 %) compared to 31.12.2001 to € 8,915 million. This decrease is solely a result of currency effects. At constant exchange rates the balance sheet total increased only slightly, by 1 % over the previous year. This reflects the reduced acquisition activity of the Group and improvements in current assets.

The liabilities side of the balance sheet shows a decrease in equity including minority interests of 9 % to € 3,369 million (2001: € 3,689 million). This is largely due to the change in exchange rates; currency-adjusted the increase would have been 4 %. The equity ratio including minority interests increased marginally from 37.4 % as of 31.12.2001 to 37.8 % at the end of the year under report.

The liabilities of the Group from bank loans, Eurobonds, commercial papers and trust preferred securities totalled € 3,283 million on 31.12.2002; this corresponds to a drop of € 454 million compared to the previous year's figure of € 3,737 million. The decrease resulted to a large extent from the changed exchange rates in the translation into euros of the US dollar loans. € 175 million financial liabilities were repaid in the year under report.


The Business Segments

Fresenius Medical Care
In 2002, Fresenius Medical Care further expanded its market position in dialysis. As of 31.12.2002 Fresenius Medical Care treated around 112,200 patients in 1,480 dialysis clinics, 6 % more than in the previous year. In Europe, Latin America and the region Asia-Pacific growth rates were registered that were substantially higher than those of the market. As a result of the introduction of single-use dialysers the growth rates in North America were lower than anticipated. The switch from single-use dialysers however represents a major strategic step and the basis for future growth.

In 2002 Fresenius Medical Care increased sales by 5 % (currency-adjusted: 6 %) to US$ 5,084 million (2001: US$ 4,859 million). 74 % of sales were achieved in the United States, 18 % in Europe and 8 % in the other regions of the world.

The main growth driver was dialysis care, sales of which rose by 4 % to US$ 3,709 million (2001: US$ 3,557 million). The main reason for this growth was the increased number of dialysis treatments: Altogether Fresenius Medical Care performed 16.4 million dialysis treatments in the year under report, 7 % more than in the previous year. Sales of dialysis products amounted to 27 % of total sales of Fresenius Medical Care and rose by 6% to US$ 1,375 million (2001: US$ 1,302 million). If sales of products to company-owned dialysis clinics are included, sales reached US$ 1,776 million, which likewise corresponds to a 6 % increase.

Fresenius Medical Care increased EBIT by 8 % to US$ 695 million from US$ 644 million before special charge in the previous year (2001: goodwill-adjusted: US$ 765 million). The result was influenced by costs in connection with the switch from re-use to single-use dialysers in the United States.

For further information – see Investor News Fresenius Medical Care (www.fmc-ag.com).  

In the currency conversion into euros, the weakness of the dollar meant that sales of Fresenius Medical Care totalling € 5,378 million were 1 % lower than the previous year's figure of € 5,426 million. As far as EBIT is concerned, currency conversion resulted in an increase of 2 % to € 735 million (previous year: € 719 million before special charge).


Fresenius Kabi
Fresenius Kabi achieved sales of € 1,262 million, 1 % lower than the previous year's figure of € 1,277 million. The sales development was influenced to a large extent by shrinking sales of the company ProReha and its sale in August 2002 as well as lower sales in the manufacturing contract business. If these effects are not taken into account, Fresenius Kabi achieved an organic growth of 7 %, growing faster than the market. Acquisitions contributed 1 percentage point, currency effects reduced growth by 3 percentage points. The hospital business achieved a 76 % share of sales, namely € 959 million (2001: € 954 million). The Ambulatory Care Business, € 303 million, corresponded to 24 % of total sales (2001: € 323 million).

Fresenius Kabi achieved an EBIT amounting to € 91 million in the 2002 financial year compared to € 53 million in 2001 (goodwill-adjusted: € 63 million). The development of earnings was negatively affected in the 2002 financial year by measures to increase profitability at the factory in Uppsala, Sweden. Furthermore, losses made by the company ProReha, and its sale effective August 1, 2002, affected earnings. These expenses totalled € 27 million. The measures carried out in the year under report will make a substantial contribution towards the future development of earnings of Fresenius Kabi.


Fresenius ProServe
Fresenius ProServe was able to present a 55 % sales upswing: Sales amounted to € 701 million (2001: € 451 million). The healthcare business generated 80 % (€ 559 million) of total sales, and the pharma industry business € 142 million, or 20 %. Of the € 250 million increase in sales about € 100 million were generated organically and € 145 million were generated by acquisitions, mainly Wittgensteiner Kliniken AG which in 2001 only contributed seven months towards the total sales of Fresenius ProServe.

Orders received and orders on hand even exceeded the high level of the previous year: Orders received in the project business of Fresenius ProServe rose to € 327 million (2001: € 266 million); orders on hand reached € 424 million (2001: € 266 million). This corresponds to a plus of 23 % and 16 % respectively. Important orders were received by the healthcare business in the 2002 financial year. Fresenius ProServe was awarded engineering orders and turnkey projects for hospitals.

Fresenius ProServe achieved an EBIT of € 24 million in the year under report (2001: € 6 million; goodwill-adjusted: € 11 million). This significant increase is largely a result of the development in the healthcare business, particularly of the consolidation for the whole year of Wittgensteiner Kliniken AG.


Fresenius HemoCare
Fresenius HemoCare achieved sales of € 229 million in 2002 (2001: € 215 million). The 7 % increase is due to acquisition activities and organic growth. Currency conversion effects had an impact of –2 % on the sales development of Fresenius HemoCare.

EBIT of Fresenius HemoCare amounting to € 10 million was 25 % higher than the previous year's figure of € 8 million (goodwill-adjusted: € 10 million). Sustained high expenditure on research and development and the building up of the sales organisations had negative effects on earnings.

As from the 2003 financial year, the activities of the business segment Fresenius HemoCare were re-allocated within the Fresenius Group.

The Supervisory Board of Fresenius AG announced today that Dr. Gerd Krick has decided to resign his position as Member and Chairman of the Managing Board of Fresenius AG at the close of the Annual General Meeting on May 28, 2003. It is planned that Dr. Krick (64) will then move to the Supervisory Board and succeed Dr. Karl Schneider as its Chairman. Dr. Gerd Krick will continue to be Chairman of the Supervisory Board of Fresenius Medical Care AG, thus further underlining his continued close ties with the Group.

"After two difficult years, we have brought Fresenius back onto the growth track. Fresenius has an outstanding position in the health care market and excellent perspectives. Therefore, now it is the right time to pass on the responsibility for the company to younger hands", commented Dr. Gerd Krick, who will turn 65 this year, his decision.

The departure of Gerd Krick from the Managing Board of Fresenius AG marks the end of an era of an extremely successful entrepreneurial personality: Krick was at Fresenius for 28 years. For 11 of these years he was the Chairman of the Managing Board. He had assumed this position as successor to Dr. Hans Kröner who had built up the company together with his wife. During Dr. Krick's term of office, sales of the Group increased tenfold to 7.5 billion euros at the end of 2002. Krick, with skill and strategic farsightedness, has made Fresenius an international group of companies; the company generates 87 % of its sales abroad. Under his management it was possible to constantly increase the dividend – the tenth consecutive dividend increase will be proposed to the Annual General Meeting this year.

"After Hans Kröner, Gerd Krick has put his stamp on Fresenius as nobody else has. We are indebted to him and are extremely pleased that he will continue to support the company as the Chairman of its Supervisory Board" said Dr. Karl Schneider (75). It is planned that Dr. Schneider will continue to be an ordinary member of the Supervisory Board.

In its meeting of today, the Supervisory Board unanimously decided to appoint Dr. Ulf M. Schneider (37) as the new Chairman of the Managing Board of Fresenius AG. Dr. Schneider will assume his new position after the close of the Annual General Meeting on May 28, 2003.

"Dr. Ulf M. Schneider has exceptional experience in the health care field and in international business. He has already proven his abilities as a member of the Managing Board of Fresenius Medical Care AG and is the right person to ensure that we will achieve our ambitions", said Dr. Gerd Krick.

Ulf M.Schneider has been Chief Financial Officer of Fresenius Medical Care AG since November 2001. He will resign from this position when he assumes the Chairmanship of the Managing Board of Fresenius AG. Previously, he was Group Finance Director of Gehe UK plc. in Great Britain that is part of the Haniel Group for which Dr. Schneider worked for twelve years. Schneider holds a degree in Finance and Accounting and a Ph.D. in Economics from the University of St. Gallen and an MBA from Harvard University.

Dr. Karl Schneider, Chairman of the Supervisory Board of Fresenius AG, commented on the appointment: "Dr. Ulf M. Schneider was likewise the first choice of the Supervisory Board. We are pleased that we have found an experienced executive for this task".

• Sales: € 1.7 billion
  + 7 % currency-adjusted, - 7 % at current exchange rates
   
• EBIT: € 194 million
  + 2 % currency-adjusted, - 11 % at current exchange rates
   
• Net income: € 36 million
  + 46 % currency-adjusted, + 29 % at current exchange rates

The development of the Fresenius Group in the 1st quarter 2003 was substantially affected by the changes in the exchange rates in the currency translation. On the basis of constant exchange rates, Fresenius increased sales by 7 % in the 1st quarter 2003. However, due to exchange rate effects, especially of the US dollar/euro, sales in the 1st quarter 2003 amounting to € 1,729 million at current exchange rates were 7 % lower than the figure for the previous year. The Fresenius Group achieved an operating profit (EBIT) of 2 % at constant exchange rates. At current exchange rates, EBIT was 11 % lower than in the same period of the previous year. Net income of the Fresenius Group rose by 46 % currency-adjusted (at current exchange rates: 29 %).


Group outlook on year-end 2003
The Group confirms its forecast made in February for the year as a whole and anticipates an altogether positive development for the 2003 financial year. At 2002 exchange rates, a high single-digit sales increase rate is expected. In view of the weak economic development and the increasing cost pressure in the health systems, this is an ambitious target. Earnings are also expected to further increase at constant exchange rates: the growth rate in net income is expected to be higher than that of sales.


Sales
As a result of the exchange rates, consolidated sales of the Fresenius Group decreased by 7 % in the first quarter to € 1,729 million (Q1/2002: € 1,854 million). Organic growth amounted to 4 %. Acquisitions contributed 3 % to this growth. The changes in exchange rates had a negative impact of 14 % on sales development. Especially the 22.4 % weaker US dollar compared to the previous year's quarter and the weakening of the Argentinian peso compared to the euro had negative effects on sales in the currency translation.

The regions with the strongest sales of the Group are still North America with 51 % and Europe with 38 % of total sales, followed by Asia-Pacific with 7 % and Latin America and other regions with a total of 4 %. In all Fresenius' important markets, the Group succeeded in increasing sales at constant exchange rates. We should like to emphasize that despite the continuing difficult economic situation in Argentina and Brazil sales in Latin America increased by 30 % at constant exchange rates.

The breakdown of sales by business segment has shifted to the advantage of Fresenius Kabi and Fresenius ProServe compared to the previous year's quarter. Due to the currency translation effect of the US dollar to the euro the sales contribution of Fresenius Medical Care in the first quarter 2003 was 70 %.

Earnings
The exchange rate effects were also reflected in the earnings of the Fresenius Group: Calculated at constant exchange rates, consolidated earnings before interest, income taxes, depreciation and amortization (EBITDA) increased by 2 % compared to the figure for the previous year. At current exchange rates EBITDA amounted to € 271 million in the 1st quarter 2003, 11 % below previous year's figure of € 303 million. Consolidated EBIT also increased by 2 % at constant exchange rates. On the basis of current exchange rates consolidated EBIT in the 1st quarter 2003, € 194 million, was also 11 % below the previous year's figure of € 217 million. Earnings development in the 1st quarter 2003 was marked by the lower EBIT contribution of Fresenius Medical Care, which was - 3 % compared to the same period of the previous year on a US dollar basis.

The particularly strong increase in EBIT of Fresenius Kabi (84 % compared to the previous year) had a positive impact. The EBIT contribution of Fresenius Kabi is the result of the successful implementation of the restructuring measures in 2001 and 2002. Fresenius ProServe increased its operating profit by 50 % over the previous year.

Balance of interest decreased to € - 64 million in the 1st quarter 2003 compared to the same period of the previous year and was positively influenced by currency effects from the conversion of the US dollar to the euro, since a high proportion of bank loans is in the United States.

As the following table shows, balance of interest and following figures of the statement of income of the previous year have been adjusted, since US GAAP rule SFAS No. 145 stipulates that as of 1.1.2003, the majority of earnings and losses from the early redemption of financial liabilities is no longer classified as extraordinary. This rule also concerns the expenses amounting to € 22 million before taxes (€ 13 million after taxes and related minority interests amounting to € 8 million) for the early redemption in 2002 of trust preferred securities of Fresenius Medical Care due in 2006. Accordingly, the following table shows the development of the previous year's statement of income:

The tax ratio amounted to 39.2 % in the period under report (Q1/2002: 37.9 %).

Minority interests fell to € 43 million, following € 49 million in the 1st quarter 2002. This drop is also a result of the strong exchange rate effects. 95 % of minority interests concern Fresenius Medical Care.

Fresenius increased consolidated net income by 29 % from € 28 million in the 1st quarter 2002 to € 36 million in the 1st quarter 2003. At constant exchange rates, the increase would have amounted to 46 %. Without adjustment of the previous year's figures to take into account the extraordinary expenses, net income would have increased by 9 % (currency-adjusted: 24 %).

Earnings per ordinary share amounted to € 0.87 following € 0.67 in the same period of the previous year, and earnings per preference share amounted to € 0.88 following
€ 0.68 in the previous year; an increase of 29 % (currency-adjusted: 46 %). Without adjusting the previous year's figures for the extraordinary expenses, earnings per ordinary share for the previous year was € 0.79 and earnings per preference share € 0.80; this corresponds to a plus of 10 % in the 1st quarter 2003 (currency-adjusted: 26 %).


Capital expenditure
Fresenius invested € 88 million in the 1st quarter 2003. This is € 12 million less than in the same period of the previous year when the investment volume was € 100 million.

Of the total capital expenditure of the period under report, 64 % was invested in tangible and intangible assets and 36 % in acquisitions. Investments in tangible and intangible assets dropped by 32 % to € 56 million compared to the same period of the previous year. Cash used for acquisitions increased from € 18 million in the 1st quarter 2002 to € 32 million in the period under report. This increase is solely due to the comparatively low investment volume in the same period of the previous year.

Acquisitions in the 1st quarter 2003 mainly concerned the acquisition of dialysis clinics by Fresenius Medical Care. Investments in tangible assets were chiefly in the founding and equipping of dialysis clinics, especially in the United States, in expanding and modernising existing clinics and in the further expansion and optimisation of production plants.

Looking at the breakdown by business sector, Fresenius Medical Care spent 83 % of the total investment volume, followed by Fresenius Kabi with 10 %. By region, 42 % of the total amount was invested in Europe, 49 % in North America and with a total of 9 % in the regions Asia-Pacific and Latin America.


Cash flow
The consolidated cash flow statement again showed a good development. The operating cash flow and the free cash flow showed high growth rates. The operating cash flow amounted to € 137 million in the period under report (Q1/2002: € 80 million). This corresponds to an increase of 71 % and is largely due to the further improvement in receivables management. The operating cash flow fully covered the financing requirements resulting from investment activities before acquisitions. The free cash flow before acquisitions and dividends also improved significantly and rose from € 3 million in the same period of the previous year to € 83 million in the 1st quarter 2003. This resulted from the considerably lower investment volume; cash used for investments in the Group amounted to € 56 million and cash received from the disposal of tangible assets amounted to € 2 million. The free cash flow after acquisitions and dividends, € 57 million, was positive.


Asset and equity structure
Balance sheet total of the Group changed only slightly compared to 31.12.2002, by 1 % to € 8,964 million (31.12.2002: € 8,915 million). This is largely due to the US$ 133 million reduction in the receivable securitization programme of Fresenius Medical Care to US$ 312 million, which is reflected in a corresponding increase in accounts receivable.

The liabilities side of the balance sheet shows an almost unchanged shareholders' equity including minority interests of – 1 % to € 3,348 million (31.12.2002: € 3,369 million). This drop resulted from the change in exchange rates; at constant exchange rates, an increase of 2 % would have resulted. Equity ratio including minority interests fell slightly from 37.8 % as at 31.12.2002 to 37.3 % at the end of the reporting period.

The liabilities of the Group from bank loans, Eurobonds, commercial papers and trust preferred securities amounted to € 3,337 million on 31.3.2003 (31.12.2002: € 3,283 million). The increase resulted from Fresenius Medical Care utilising credit lines in order to reduce the receivable securitization programme. An opposite effect had the changed exchange rates in the translation of the US dollar loans into euros.

Debt of the Group including liabilities from the receivable securitization programme of Fresenius Medical Care were reduced from € 3,707 million as at 31.12.2002 to € 3,624 million on 31.3.2003.

The key ratio net debt/EBITDA remained unchanged at 3.0 on 31.3.2003 compared to the end of the 2002 financial year.


Employees
On 31.3.2003, the Fresenius Group had 64,806 employees all over the world. This was around 2 % or 1,168 people more than at the end of 2002.



The Business Segments

Fresenius Medical Care

Fresenius Medical Care AG is the world's leading provider of products and services for patients with chronic kidney failure.

In the 1st quarter 2003, Fresenius Medical Care increased sales by 10 % to US$ 1,299 million (previous year: US$ 1,187 million). 72 % of these sales were achieved in North America and 28 % outside North America.

The dialysis care business generated 73 % of sales, and dialysis products 27 %. Sales of dialysis products increased by 16 % to US$ 355 million (Q1/2002: US$ 305 million). The dialysis care business grew by 7 % to US$ 944 million (Q1/2002: US$ 881 million). The main reason for this growth was the increased number of dialysis treatments: Altogether, Fresenius Medical Care performed 4.2 million treatments in the reporting period, 9 % more than in the same period of the previous year. As at 31.3.2003, Fresenius Medical Care treated around 114,300 patients in 1,500 dialysis clinics, 7 % more than in the same period of the previous year.

Operating profit (EBIT) of Fresenius Medical Care in the 1st quarter 2003 was US$ 169 million. EBIT of the same period of the previous year amounted to US$ 174 million including a one-time benefit of US$ 6.3 million. Before this one-time item, EBIT of the 1st quarter 2002 was 168 US$. Earnings of the 1st quarter 2003 were affected particularly by the Middle East crisis, the difficult economic conditions in various countries of Latin America and the continued price pressure in Central Europe.

Net income of Fresenius Medical Care increased by 10 % to US$ 70 million. Without adjusting the previous year's figures by the extraordinary expenses caused by the early redemption of trust preferred securities, net income would have decreased by 7 %.

For further information – please see the Fresenius Medical Care Investor News (www.fmc-ag.com).

The weakness of the dollar means that sales of Fresenius Medical Care amounting to US$ 1,299 million after conversion into euros were 11 % lower than the figure for the previous year. Currency translation caused EBIT to decrease by 21 % to € 157 million (previous year: € 198 million).



Fresenius Kabi

The portfolio of Fresenius Kabi focuses on the nutrition and infusion therapy of patients in the hospital, many of whom are seriously ill, and in ambulatory care, as well as on infusion and transfusion technology.

In the 1st quarter 2003, Fresenius Kabi recorded sales of € 355 million, the same as in the previous year (€ 354 million). This is almost solely the result of currency translation effects. The organic growth of Fresenius Kabi was 7 % in the reporting period and thus within the framework of our defined target of 6 to 7 % for 2003 as a whole. The development of sales was significantly affected by currency effects (- 6 percentage points). Furthermore, disinvestments (the sale of the company ProReha effective August 1, 2002) reduced sales by – 1 percentage point.

The hospital business achieved € 284 million, 80 % of total sales (Q1/2002: € 279 million including transfusion and infusion technology), the Ambulatory Care business
€ 71 million (Q1/2002: € 75 million), 20 % of total sales.

Fresenius Kabi achieved an EBIT of € 35 million in the 1st quarter 2003, significantly higher than the previous year's figure of € 19 million. Thus, Fresenius Kabi achieved an EBIT margin of 9.9 % in the 1st quarter 2003, a significant increase compared to the 1st quarter 2002 (5.4 %). This also substantially exceeded the EBIT margin of the whole 2002 financial year (6.7 %).

The measures to increase efficiency which have been successfully implemented chiefly in the production facilities, particularly in the Uppsala, Sweden, facility, had a positive impact on earnings for the 1st quarter 2003. The measures implemented will continue to make a substantial contribution to the future earnings development of Fresenius Kabi.

Fresenius Kabi has an excellent position in its markets. In the growth countries of the region Asia-Pacific, Fresenius Kabi again achieved double-digit organic growth in the 1st quarter 2003. In Europe, Fresenius Kabi continued its solid growth despite the strong cost pressure in the health systems, which mainly makes itself felt in Germany.

* The previous year's figures have been adjusted to include the newly-assigned activities of the business segment Fresenius HemoCare (transfusion and infusion technology) effective January 1, 2003.
 

Fresenius ProServe

Fresenius ProServe offers services for the international health care systems. The range of services includes hospital management, the planning and construction of hospitals as well as of pharmaceutical and medical-technical production plants.

Fresenius ProServe succeeded in increasing sales by 11 % in the 1st quarter 2003 to € 166 million (Q1/2002: € 149 million). The company generated sales of € 140 million in the healthcare business, a plus of 18 % over the same period of the previous year (Q1/2002: € 119 million). Sales of services increased by 29 % to € 116 million (Q1/2002: € 90 million). The increase was largely driven by the consolidation for the first time of newly-acquired hospitals (mainly Klinikum Rhein-Sieg in Siegburg). Sales of the project business (€ 24 million) as well as of the pharma industry business (€ 26 million) were lower than the previous year (project business Q1/2002: € 29 million and pharma industry business Q1/2002: € 30 million) due to delays in the invoicing of projects in the 1st quarter, which is traditionally a weak period.

Orders received relating to the project business of Fresenius ProServe dropped to € 66 million (Q1/2002: € 94 million), a result of delays in the closing of projects. Orders on hand were nearly unchanged at € 422 million (31.12.2002: € 424 million).

Fresenius ProServe significantly improved EBIT in the period under report, from € 4 million in the 1st quarter 2002 to € 6 million in the 1st quarter 2003.



Note:
The full quarterly report including notes will be available in the middle of May on our website www.fresenius-ag.com under Investor Relations / Publications.

For your information, you can find figures on the subsequent quarters of 2002 on page 12 of this Investor News. These figures have been adjusted for:

• the extraordinary expenses resulting from the early redemption of trust preferred securities of Fresenius Medical Care
• the newly-assigned activities of the business segment Fresenius HemoCare, effective January 1, 2003.

• Sales: € 3.46 billion
  + 5 % at constant currency, - 8 % at current exchange rates
• EBIT: € 390 million
  + 7 % at constant currency, - 7 % at current exchange rates
• Net income: € 70 million
  + 45 % at constant currency, + 27 % at current exchange rates

• Exchange rates affect sales and earnings
• Operating cash flow and free cash flow at record level
• Continued margin improvements at Fresenius Medical Care
• Operating improvement at Fresenius Kabi
• Program initiated to reduce costs and increase profitability at Fresenius ProServe

In the first half of 2003 the Fresenius Health Care Group was substantially impacted by exchange rate fluctuations in the currency translation. At constant currency, sales increased 5 % in the first half of 2003. At current rates sales decreased 8 % to € 3,456 million mainly due to the strengthening of the euro against the dollar. Operating income (EBIT) increased 7 % at constant currency. At current rates, EBIT was 7 % lower than in the same period of 2002. Net income of the Fresenius Group grew 27 %, 45 % at constant currency.


Group outlook on year-end 2003
In the first half of 2003, health care systems were affected by cost-cutting, delayed investments and price pressure. The Fresenius Group showed positive results despite this difficult environment. With 5 % sales growth in the first half of 2003, the Group now anticipates a mid single-digit revenue growth rate at constant currency for the full year 2003.

The Fresenius ProServe business segment initiated a program at Wittgensteiner Kliniken AG to reduce costs and increase profitability. With these measures Fresenius ProServe is overcoming at an early stage challenges in the German health care system, and is supporting its strong position in the German hospital market. The expected one-time expenses of this program are € 25 million (see also page 8).

Before these one-time expenses, the Managing Board maintains its forecast that at constant currency, net income will increase at a double-digit rate. This increase will be mainly driven by the good performance of Fresenius Medical Care and Fresenius Kabi. After these one-time expenses, net income at constant currency will remain at previous year's level.


Sales
Sales of the Fresenius Group decreased by 8 % in the first half of 2003 to € 3,456 million (first half 2002: € 3,749 million) due to exchange rate fluctuations. Organic growth was 3 %. Acquisitions contributed 2 % to this growth. Exchange rates had a 13 % negative impact on sales development. On average the 23 % weaker US dollar and 33 % weaker Argentinian peso had a negative impact on sales due to currency translation.

The region with the strongest sales was North America with 51 %, followed by Europe with 38 %. Asia-Pacific had 7 % and Latin America and other regions a total of 4 %. In almost all the regions the Group increased sales at constant currency. Even with the continuing difficult economic climate in Latin America, sales increased by 29 % at constant currency.

Fresenius Kabi and Fresenius ProServe increased their sales contribution compared to the first half of 2002. Due to the weaker US dollar the sales contribution of Fresenius Medical Care in the first half of 2003 was 70 %.

Earnings
The stronger euro was also reflected in the earnings of the Fresenius Group. At constant currency, earnings before interest, income taxes, depreciation and amortization (EBITDA) increased by 5 % compared to the previous year. At current rates EBITDA was € 543 million in the first half of 2003, 8 % below previous year's € 592 million. EBIT increased 7 % at constant currency. At current rates, EBIT of € 390 million in the first half of 2003 was 7 % below previous year's € 420 million.

The 87 % increase in EBIT of Fresenius Kabi had a positive impact on group earnings. This increase is the result of the successful implementation of restructuring measures in 2001 and 2002 and the strong operating performance.

Net interest decreased to € -125 million in the first half of 2003 from € -165 million in the first half of 2002.

In the following table the previous year's income statement has been adjusted according to Statement of Financial Accounting Standards No. 145 which stipulates that as of January 1, 2003 the gains and losses from the early redemption of financial instruments are no longer classified as extraordinary. This rule requires the reclassification of € 22 million of expenses before taxes (€ 13 million after taxes and related minority interests of € 8 million) for the early redemption of Fresenius Medical Care's trust preferred securities which were to come due in 2006.

The decrease of net interest is mainly due to changes in US GAAP. Further, net interest was positively influenced by the translation of US dollar to the euro, since a large portion of Fresenius Medical Care's bank loans are in US dollars.

The tax ratio was 39.2 % in the first half of 2003 compared to 38.0 % in the first half of 2002.

Minority interests decreased to € 91 million from € 103 million in the first half of 2002. This is a result of exchange rate effects. 93 % of minority interests involve Fresenius Medical Care.

Fresenius increased net income considerably. It grew 27 % from € 55 million in the first half of 2002 to € 70 million in the first half of 2003. At constant currency the increase was 45 %.

Earnings per ordinary share were € 1.70, up from € 1.33 in the same period of 2002. Earnings per preference share were € 1.72, up from € 1.35 in 2002. This was an increase of 28 % and 27 %, respectively (at constant currency: 46 % and 45 %).


Capital expenditure and acquisitions
Fresenius spent € 157 million in the first half of 2003 for capital expenditure and acquisitions. This is a reduction of 39 % compared to € 257 million in the first half of 2002 and was in line with Company planning. In 2001 and 2002 Fresenius made significant investments in increased capacity of production plants and further market expansion.

Of the total investments, 72 % was for capital expenditure, 28 % was for acquisitions. Capital expenditure was € 113 million, 39 % below the first half of 2002. Acquisitions were € 44 million in the first half of 2003 compared to € 72 million in the first half of 2002.

Acquisitions in the first half of 2003 were mainly dialysis clinics purchased by Fresenius Medical Care. Capital expenditure was mainly used for opening and equipping new dialysis clinics, especially in the United States, for expanding and modernising existing clinics and for the further expansion and optimization of production plants.

49 % of capital expenditure was made in Europe, 41 % in North America and 10 % elsewhere.


Cash flow
The Fresenius Group's operating cash flow and free cash flow were at record levels. Operating cash flow was € 311 million in the first half of 2003 (first half 2002: € 296 million). This 5 % increase is mainly due to continued improvement in receivables management. The free cash flow before acquisitions and dividends also improved and rose by 35 % to a record figure of € 208 million (first half 2002: € 154 million). This increase resulted from a lower investment volume of € 103 million (first half 2002: € 142 million). After net cash used for acquisitions of € 38 million and dividends of € 107 million Fresenius achieved an excellent free cash flow of € 63 million (first half 2002: € -6 million).


Asset and equity structure
Balance sheet total of the Group was € 8,867 million, a decrease of € 48 million (1 %) compared to December 31, 2002 (€ 8,915 million). This is solely due to currency effects. At constant currency balance sheet total increased 4 % over the previous year. This was mainly due to the reduction in the receivables securitization program of Fresenius Medical Care from US$ 445 million to US$ 249 million which led to a corresponding increase in accounts receivable.

Shareholders' equity including minority interests was € 3,217 million at June 30, 2003 compared to € 3,369 million as at December 31, 2002. This was a result of exchange rate fluctuations; at constant currency there was an increase of 2 %. Equity ratio including minority interests was 36.3 % at June 30, 2003 compared to 37.8 % as at December 31, 2002.

Liabilities from bank loans, Eurobonds, commercial paper and trust preferred securities were € 3,339 million on June 30, 2003. (December 31, 2002: € 3,283 million). This increase was the result of Fresenius Medical Care using existing credit lines to reduce the receivables securitization program. US dollar exchange rate fluctuations had an opposite effect.

Debt, including liabilities from the receivables securitization program of Fresenius Medical Care decreased from € 3,707 million as at December 31, 2002 to € 3,557 million on June 30, 2003.

The key ratio net debt/EBITDA was unchanged at 3.0 on June 30, 2003, the same as at the end of 2002.


Employees
On 30.6.2003, the Fresenius Group had 65,626 employees worldwide. This was around 3 % or 1,988 people more than at the end of 2002.


Fresenius Biotechnology
In biotechnology, Fresenius is active in the field of immune and cell therapies. Various clinical trials for the immunotherapeutical treatment of cancer are currently being carried out. The results of a phase I/II study for treatment of ovarian cancer patients with symptomatic ascites are to be presented at the European Cancer Conference (ECCO) in September.



The Business Segments

Fresenius Medical Care

Fresenius Medical Care AG is the world's leading provider of products and services for patients with chronic kidney failure.

In the first half of 2003, Fresenius Medical Care increased sales 9 % to US$ 2,666 million (previous year: US$ 2,441 million). 71 % of sales were achieved in North America, 29 % elsewhere. At constant currency, Fresenius Medical Care increased sales 5 % in the first half of 2003.

Dialysis care business contributed 72 % to sales and dialysis products 28 %. Sales of dialysis products increased 15 % to US$ 743 million (first half 2002: US$ 648 million). The dialysis care business grew 7 % to US$ 1,922 million (first half 2002: US$ 1,793 million). The main source of growth was the increased number of dialysis treatments. Fresenius Medical Care performed approximately 8.7 million treatments in the first half of 2003, an increase of 9 % year over year. As at June 30, 2003, Fresenius Medical Care provided treatment to around 115,800 patients in 1,510 dialysis clinics, 7 % more than in the first half of 2002.

EBIT of Fresenius Medical Care in the first half of 2003 increased 2 % to US$ 353 million. Net income increased 8 % to US$ 149 million.
For the year 2003, Fresenius Medical Care reconfirms its outlook and expects mid single digit revenue growth (in constant currency) and net income growth in the high single digit to low double digits range. As mentioned in the first quarter of 2003 Fresenius Medical Care expects to achieve net income growth for the full year 2003 near the lower end within the predicted range due to the increased risks and unpredictability.

Fresenius Medical Care's US dollar sales of US$ 2,666 million were € 2,413 million after conversion into euros. This is a decrease of 11 % compared to previous year's € 2,718 million. EBIT decreased 17 % to€ 319 million (first half 2002: € 383 million) due to currency translation.

For further information please see the Fresenius Medical Care Investor News www.fmc-ag.com.  


Fresenius Kabi

The portfolio of Fresenius Kabi focuses on the nutrition and infusion therapy of patients in the hospital, many of whom are seriously ill, and in ambulatory care, as well as on infusion and transfusion technology.

In the first half of 2003, Fresenius Kabi's sales were € 718 million, substantially the same as in the previous year (€ 717 million). This is the result of currency translation effects of  -6%. The organic growth of Fresenius Kabi increased 7 %. This is fully in line with our expected growth of 6 to 7 % for 2003 as a whole. Furthermore, divestments (the sale of the company ProReha effective August 1, 2002) reduced sales by 1 percentage point.

The hospital business had € 574 million in sales, which was 80 % of total sales (first half 2002: € 568 million). The Ambulatory Care business had sales of € 145 million (first half 2002: € 149 million), which was 20 % of total sales.

Fresenius Kabi achieved an EBIT of € 71 million in the first half of 2003 compared to the previous year's figure of € 38 million. Fresenius Kabi achieved an EBIT margin of 9.9 % in the first half 2003 compared to 5.3 % in the first half of 2002. This also exceeds the EBIT margin for 2002 as a whole (6.7 %).

Our restructuring of production facilities, particularly in Uppsala, Sweden, and the good operating performance had a positive impact on earnings in the first half of 2003. These measures will continue to contribute to the future earnings growth of Fresenius Kabi.

In the important European market, the Company achieved a single-digit growth rate. In all other regions, Fresenius Kabi achieved double-digit organic growth in the first half of 2003.

For the full year 2003, Fresenius Kabi expects to achieve an organic growth of 6 to 7 %. EBIT of the second half of 2003 is expected to be in the range of the first half of the year.

* The previous year's figures have been adjusted to include the newly-assigned activities of the business segment Fresenius HemoCare (transfusion and infusion technology) effective January 1, 2003.


Fresenius ProServe

Fresenius ProServe offers services for the international health care systems. The range of services includes hospital management, the planning and construction of hospitals as well as of pharmaceutical and medical-technical production plants.

Fresenius ProServe increased sales 5 % to € 336 million in the first half of 2003 (first half 2002: € 321 million). 85 % of sales were from the Healthcare business, 15 % from the Pharma Industry business. Sales were € 287 million in the Healthcare business, an increase of 12 % (first half 2002: € 256 million). Sales were € 49 million in the Pharma Industry business compared to € 65 million in the previous year due to a general investment caution of the pharma industry and delays in project handling.

In the Healthcare business, sales generated by services increased 31 % to € 239 million (first half 2002: € 183 million). This was driven by the consolidation of newly-acquired hospitals (mainly Klinikum Rhein-Sieg in Siegburg). Project sales in the healthcare business were € 48 million compared to € 73 million in the first half of 2002 due to delays in project handling.

Fresenius ProServe's EBIT in the first half of 2003 was € 10 million compared to € 8 million in 2002. However, Fresenius ProServe did not achieve its earnings target for the second quarter. This is mainly due to the hospital management business in Germany. The bed utilization rate declined to 81 % compared to 85 % for the same period of the previous year. In addition, delays in the project business had an impact on earnings.

A major study of Wittgensteiner Kliniken AG, which is part of Fresenius ProServe, was completed in July 2003. This study shows that in addition to the measures carried out in the past one and a half years, there is additional potential to reduce costs and increase efficiency. Fresenius ProServe expects to fully utilize this potential and create a solid basis for Wittgensteiner Kliniken to achieve sustainable growth. The implementation of the measures, including further staff reductions, will result in one-time expenses of € 25 million before tax. It is expected that Wittgensteiner Kliniken will achieve annual cost savings of € 20 - 25 million which will become fully effective in the 2005 financial year.

Assuming a reserve is created for the one-time expenses in 2003, Fresenius ProServe expects, that it will have a single-digit negative EBIT for the full year 2003. Sales for 2003 are expected to increase to approximately € 800 million.

These measures will significantly strengthen the position of Wittgensteiner Kliniken in the German hospital market.


Note: The full quarterly and half-year report including notes will be available in the middle of August on our website www.fresenius-ag.com under Investor Relations / Publications.

The Fresenius Health Care Group has successfully completed a phase I/II study with the new trifunctional antibody removab®. This antibody was used to treat late-stage ovarian cancer patients with symptomatic ascites, which is an accumulation of fluid in the abdominal cavity caused by tumor cells. The study is the world's first completed trial with a trifunctional antibody.

This phase I/II study was designed to identify potential side effects associated with removab® therapy, to evaluate potential dosing schedules and to obtain first indications regarding efficacy. Results of the completed study demonstrate that the antibody is well tolerated at various doses. Four or five very small doses of the antibody were infused into the patient's abdominal cavity over a period of less than two weeks. The most frequent side effects observed in the trial were increased temperature and nausea. In addition, initial indications observed from this study suggest that removab® is efficacious in killing tumor cells in the ascites fluid and thus prevents the re-accumulation of fluid. All patients responded to the therapy. 22 of 23 patients who previously suffered from ascites were ascites-free on day 37, the last day of the study. A significant decrease in the number of tumor cells detected in the ascites fluid was observed in all patients in the study. The average number of tumor cells detected per one million cells in ascites fluid decreased from 540,000 prior to treatment to 39 following the last infusion.

The head of the clinical trial, Prof. Dr. Rainer Kimmig from The University Hospital of Essen, presented the results of the study yesterday (22.9.) at the European Cancer Conference (ECCO) in Copenhagen. In total, 23 ovarian cancer patients with malignant ascites were treated. Prior to entering the Phase I/II study, all patients had suffered one or more relapses following surgical tumor resection, with consequent tumor development in the abdominal cavity. In most cases, patients had previously undergone one or more courses of chemotherapy. The adhesion molecule EpCAM, the target of the removab® antibody, had been detected on the surface of tumor cells in the abdominal cavity fluid of all patients participating in the study. Production of EpCAM, which is also present in healthy cells, is significantly increased in approximately 90 per cent of ovarian cancer patients. EpCAM can thus be targeted for tumor cell recognition and induction of tumor-specific killing.

Due to the encouraging results of the phase I/II study, Fresenius Biotech is planning to launch two further studies in December 2003 and February 2004. The first study is designed to test the efficacy of the antibody with regard to ovarian cancer metastases and thus increase life expectancy. The second trial will investigate the efficacy of the antibody against ascites in other malignancies.

Assuming successful completion of clinical trials and following consultation with regulatory officials, Fresenius plans potential market launch of removab® in Europe in 2007.

Background information

Trifunctional antibodies
The trifunctional antibodies developed and produced by TRION Pharma, a Fresenius partner, are proteins which specifically bind cancer cells to two different immune cells of the immune system, T-cells and macrophages, thus triggering a process that effectively kills tumor cells. The goal of scientists and clinicians is to eradicate those tumor cells that may still be present in the body following surgical resection of the tumor, preventing the development of ascites or metastases and extending patient survival.

Ascites
Ascites, an accumulation of body fluid in the abdominal cavity, is painful and severely impairs a patient's quality of life. Up to 89 per cent of final-stage ovarian cancer patients develop ascites. Existing palliative treatment methods are unsatisfactory: Puncturing the abdominal cavity (paracentesis) and draining the fluid provides rapid but short-lived relief to the patients. In addition, paracentesis causes patients to lose valuable endogenous proteins. Another approach is to infuse chemotherapeutic agents into the abdominal cavity. This method is not generally accepted due to the severe side effects and limited clinical benefits.

Phase I/II Studies
Phase I studies are aimed at determining the dose and side effects, while phase II studies test the efficacy of the drug treatment.

• Sales: € 5.25 billion
  + 6 % at constant currency, - 5 % at actual exchange rates
   
• EBIT: € 590 million
  + 8 % at constant currency, - 4 % at actual ex-change rates
   
• Net income: € 105 million
  + 38 % at constant currency, + 24 % at actual exchange rates

• Operating cash flow and free cash flow at record levels
• Fresenius Medical Care: strong margin improvement in Q3
• Fresenius Kabi: Strong organic growth and positive earnings development
• Fresenius ProServe: further measures to improve profitability
• Reported figures impacted by exchange rate fluctuations

In the first nine months of 2003 the results of the Fresenius Group were significantly impacted by exchange rate fluctuations in the currency translation. At constant currency, sales increased 6 % for the first nine months of 2003. At actual rates, sales decreased 5 %. Operating income (EBIT) increased 8 % at constant currency and
decreased 4 % at actual rates. Net income grew significantly at both constant currency and actual rates (+38 % and +24 % respectively).


Group outlook for the full year 2003
In the first nine months the health care systems were affected by postponed investments, cost-cutting measures and price pressure. In this difficult environment,
Fresenius Group achieved further significant improvements in sales and earnings at constant currency. For the full-year 2003 expectations for a mid single digit sales growth remain unchanged.

The largest business segments, Fresenius Medical Care and Fresenius Kabi, both performed very well during the first nine months of 2003. The Group expects this trend to continue in the fourth quarter. Fresenius ProServe's performance during the third quarter 2003 was marked by declining bed utilization rates in the German hospitals, project delays and a general investment caution of the pharma industry. Fresenius ProServe plans to focus its business operations to improve profitability. In addition to the restructuring program initiated in the second quarter for Wittgensteiner Kliniken AG (WKA), Fresenius ProServe will take measures in the current year to reorganize its health care project and Pharma Industry businesses.
The Managing Board maintains its forecast that, at constant currency and before one-time expenses for the WKA program and the reorganization of the health care project and Pharma Industry businesses, the Group's net income will increase at a double-digit rate. Forecast is based on the continued strong performance of Fresenius
Medical Care and Fresenius Kabi. After one-time expenses, it is expected that net income at constant currency will show a high single to low double digit rate decrease compared to previous year.


Sales
In the first nine months of 2003, Fresenius Group increased sales at constant currency 6 %. Organic growth was 4 %. Acquisitions contributed 2 %. At actual rates,
consolidated sales of € 5,254 million were 5 % lower than previous year's figure (Q1-3/2002: € 5,552 million). Exchange rates fluctuations had a 11 % negative impact on sales, mainly due to the 20 % weaker US dollar.

In all regions, Fresenius expanded its business successfully and increased sales at constant currency. The strongest sales were in North America with 50 % and Europe with 38 % of total sales. Asia-Pacific had 7 %, Latin America 4 % and other regions a total of 1 %. Despite the continuously difficult economic climate in Latin America, sales showed a significant growth of 31 % at constant currency.

Sales contribution of the business segments:

Fresenius Medical Care's reduced proportion of sales is mainly a result of currency translation effects.

Earnings
At constant currency, earnings before interest, income taxes, depreciation and amortization (EBITDA) increased 5 % compared to previous year. Currency translation effects also had a negative impact on Group earnings. At actual rates, EBITDA for the first nine months of 2003 was € 825 million, 6 % below previous year's € 874 million. EBIT increased 8 % at constant currency but decreased 4 % at actual rates to € 590 million (Q1-3/2002: € 617 million).

Fresenius Kabi contributed the largest share to the EBIT increase (+ € 42 million or +65 % compared to previous year). This is thanks to the successful implementation of restructuring measures in 2001 and 2002 and a strong operating performance in the regions.

Net interest expense for the first nine months of 2003 improved to € -186 million compared to € -230 million for the same period in 2002.

In the following table previous year's consolidated statement of income has been adjusted according to Statement of Financial Accounting Standards No. 145 which stipulates that, as of January 1, 2003, the gains and losses from the early redemption of financial instruments are no longer classified as extraordinary. This rule requires the reclassification of € 21 million of expenses before taxes (€ 13 million after taxes and related minority interests of € 8 million) for the early redemption of Fresenius Medical Care's trust preferred securities in February 2002 which were to come due in 2006.

The decrease in net interest expense is equally attributable to the change in US GAAP and to currency translation effects of US dollar into euro, since a large portion of Fresenius Medical Care's bank loans are in US dollars.

The effective tax rate for the first nine month of 2003 was 39.1 % (Q1-3/2002: 38.5 %).

Minority interests decreased to € 141 million from € 153 million for the first nine months of 2002, solely due to exchange rate effects. 96 % of minority interests relate to Fresenius Medical Care.

Net income increased 24 % to € 105 million, compared to € 85 million for the first nine months of 2002. At constant currency, the increase was with 38 % even more significant.

Earnings per ordinary share were € 2.55, up from € 2.06 in the same period of 2002. Earnings per preference share were € 2.57, up from € 2.08 in 2002. This was an increase of 24 % (at constant currency: 38 %).


Capital expenditure and acquisitions
Fresenius spent € 247 million in the first nine months of 2003 on capital expenditure and acquisitions. (Q1-3/2002: € 393 million). This reduction was in line with Company planning. In 2001 and 2002 Fresenius made significant investments to increase the capacity of production plants and further market expansion.

73 % of total investments was for capital expenditure, 27 % was for acquisitions.
Capital expenditure was € 180 million, 36 % less than in the same period of 2002.
Acquisitions were € 67 million compared to € 110 million in the first nine month of 2002.

Acquisitions related mainly to the purchase of dialysis clinics by Fresenius Medical Care. Capital expenditure was mainly used to equip new dialysis clinics, to expand and modernize existing clinics and to expand and optimize production plants.

Fresenius invested 55 % in Europe, 36 % in North America and 9 % in other regions.


Cash flow
Operating cash flow and free cash flow for the first nine months of 2003 were at record levels. Operating cash flow increased 11 % to € 565 million (Q1-3/2002: € 507 million). This excellent figure resulted from improved receivables management. Free cash flow before acquisitions and dividends increased 47 % to € 399 million (Q1-3/2002: € 272 million). This increase was also due to the significantly lower investment volume of € 166 million (Q1-3/2002: € 235 million). Free cash flow after acquisitions (€ 61 million) and dividends (€ 114 million) tripled to € 224 million (Q1-3/2002: € 72 million). In the third quarter 2003, operating cash flow was € 254 million (Q3 2002: € 211 million) and free cash flow before acquisitions and dividends was € 191 million (Q3 2002: € 118 million), again record levels for a third quarter.


Asset, liability and equity structure
Balance sheet total of the Group was € 8,817 million, a decrease of € 98 million (1 %) compared to December 31, 2002 (€ 8,915 million). This was due to currency effects. At constant currency, balance sheet total increased by 5 %.

Shareholders' equity (including minority interests) was € 3,264 million as of September 30, 2003 compared to € 3,369 million as of December 31, 2002, a decrease of 3 % or € 105 million due to currency translation effects. At constant currency there was an increase of 4 %. Equity ratio (including minority interests) was 37.0 % as of September 30, 2003 compared to 37.8 % as of December 31, 2002.

Bank loans, Eurobonds, commercial paper and trust preferred securities were € 3,181 million as of September 30, 2003 compared to € 3,283 million as of December 31, 2002. The reduction was due to currency translation effects, partially offset by reduction in Fresenius Medical Care's receivables securitization program.

Debt, including liabilities from the receivables securitization program of Fresenius Medical Care decreased from € 3,707 million as of December 31, 2002 to € 3,335
million as of September 30, 2003. The reduction was almost equally achieved from the strong free cash flow as well as currency translation effects.

The key ratio net debt/EBITDA improved substantially as of September 30, 2003 to 2.8 (December 31, 2002: 3.0). The Group is therefore well on track to achieve its target of 2.5 in 2005.


Employees
As of September 30, 2003, Fresenius Group had 65,941 employees worldwide. This was 4 % or 2,303 people more than at the end of 2002.



The Business Segments

Fresenius Medical Care
Fresenius Medical Care AG is the world's leading provider of products and services for patients with chronic kidney failure. As of September 30, 2003, Fresenius Medical Care provided treatment to around 117,600 patients in 1,540 dialysis clinics, 7 % more than at the same date last year.

Fresenius Medical Care increased sales for the first nine months of 2003 by 9 % to US$ 4,075 million (Q1-3/2002: US$ 3,726 million). At constant currency, the increase was 6 %. Fresenius Medical Care had 70 % of sales in North America and 30 % elsewhere.
Both, dialysis products and dialysis care had increased sales. Sales of dialysis products increased 14 % to US$ 1,134 million (Q1-3/2002: US$ 991 million). The international business in particular showed strong growth rates. The number of dialysis treatments increased 9 % to 13.2 million, increasing sales by 8 % to US$ 2,941 million (Q1-3/2002: US$ 2,735 million). Dialysis care sales and dialysis products sales were 72 % and 28 % of sales respectively.

Fresenius Medical Care improved EBIT 8 % to US$ 550 million (Q1-3/2002: US$ 511 million). Net income increased 14 % to US$ 237 million.
For the year 2003, Fresenius Medical Care confirms its outlook and expects mid single digit revenue growth (in constant currency) and net income growth in the high single digit to low double digit range. As mentioned in the first quarter of 2003, Fresenius Medical Care expects to achieve net income growth for the full year 2003 near the lower end within the predicted range.
As a result of the weaker US dollar against the euro, Fresenius Medical Care's sales of US$ 4,075 million (€ 3,665 million) were 9 % lower than the € 4,018 million recorded in the first nine months of 2002 after conversion to euros. EBIT decreased 10 % to € 494 million (Q1-3/2002: € 551 million), also due to currency translation effects.

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


Fresenius Kabi
Fresenius Kabi focuses on nutrition and infusion therapy of patients, many of whom are seriously ill, in hospital and the ambulatory environment, as well as on infusion and transfusion technology.

Fresenius Kabi's sales for the first nine months of 2003 were € 1,082 million, 1 % above the level of € 1,068 million recorded in the same period last year. Currency translation had a negative impact of –5 % on sales. Fresenius Kabi achieved strong organic sales growth of 7%, in line with the full-year target. Divestments (the sale of the company ProReha effective August 1, 2002) reduced sales by –1 % percentage point.

The hospital business generated sales of € 865 million (Q1-3/2002: € 843 million; +3 %). The Ambulatory Care business had sales of € 217 million (Q1-3/2002: € 225 million).

EBIT for the first nine months of 2003 increased to € 107 million, well ahead of previous year's figure of € 65 million. The EBIT margin for the first nine months of 2003 was 9.9 %, well above the margin achieved in the same period last year (6.1 %). Next to the good development in the operating business, cost optimization measures had a positive impact on earnings. These improvements will continue to make a significant contribution to future earnings growth.

This positive development is based on the sustainable success of Fresenius Kabi's products in the European, Asian-Pacific and Latin American markets. In Europe, Fresenius Kabi was able to achieve a good 4 % organic sales growth despite cost saving measures and price pressure in the first nine months of 2003. In other, strong growing regions, Fresenius Kabi achieved double-digit organic growth rates.

For the full year 2003, Fresenius Kabi confirms its outlook of achieving organic sales growth of 6 to 7 %. EBIT for the full year 2003 is expected to be in the range of € 140 million.

 

* The previous year's figures have been adjusted to include the newly-assigned activities of the business segment Fresenius HemoCare (transfusion and infusion technology) effective January 1, 2003.

 

Fresenius ProServe
Fresenius ProServe offers services for the international healthcare systems. The range of services includes hospital management, the planning and construction of hospitals as well as of pharmaceutical and medical-technical production plants.

Fresenius ProServe increased sales 11 % to € 526 million for the first nine months of 2003 (Q1-3/2002: € 475 million). The Healthcare and Pharma Industry businesses achieved 86 % and 14 % of sales respectively.

Healthcare sales grew by 20 % to € 452 million (Q1-3/2002: € 377 million). Sales generated by services increased 30 % to € 361 million (Q1-3/2002: € 277 million). This was mainly due to the first-time consolidation of newly-acquired hospitals (mainly Klinikum Rhein-Sieg in Siegburg). Healthcare sales from project business, at € 91 million, were 10 % lower than in the same period last year (Q1-3/2002: € 100 million) due to project delays. Pharma Industry sales of € 74 million were 24 % lower than in the same period last year due to a general investment caution of the pharma industry.

Fresenius ProServe's EBIT for the first nine months of 2003 was € 5 million, after one-time expenses of € 8 million (Q1-3/2002: 16 million). The company announced in August 2003 a program at WKA to reduce costs and improve profitability. The program has been implemented in line with plan.
A bed utilization rate of 80 % in the third quarter 2003, compared to one of 81% in the last quarter, shows that bed utilization in acute and post-acute hospitals has not yet seen a turnaround. In addition, delayed project business orders had a negative impact on quarterly earnings.

A primary task is to improve Fresenius ProServe's profitability. In addition to the WKA program, further reorganization measures are currently being taken for the health care project and Pharma Industry businesses and will be implemented during the current year. This includes focusing Pharma Industry business regionally on selected key markets and the related closure of business sites. In addition, the ProServe subsidiary hospitalia international, which is active in the hospital project business such as the subsidiary VAMED, will operate in future under the umbrella of VAMED. This will lead to advantages from a joint market approach and from cost savings in administration. The reorganization will lead to one-time expenses of approximately € 15 million, mainly in connection with the write-down of the carrying amount of assets. These expenses will incur in 2003.

For the full year 2003, Fresenius ProServe expects EBIT before one-time expenses to be in the range of € 15 million. After one-time expenses, Fresenius ProServe anticipates that it will report a negative EBIT of approximately € 20 million.



Note: The full quarterly report including notes will be available from mid November on our website www.fresenius-ag.com under Investor Relations / Publications.

Fresenius will exercise the call option for its 5.5% Senior Notes due 2016 (ISIN: XS0240919372, WKN: A0GMAY). The aggregate principal amount of €650 million will be redeemed on February 7, 2013 at a price of 100.916% plus accrued and unpaid interest.

The redemption will be financed initially by utilizing existing credit lines, and from the end of June by drawings under the Senior Secured Credit Agreement arranged in December 2012. At current rates, this will result in annual interest savings of approximately €20 million. For 2013, these savings will be partially offset by one-time expenses of around €14 million in connection with the early redemption.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA OR JAPAN.

Fresenius intends to issue €500 million of senior unsecured notes with a maturity of 7 years.

The proceeds will be used to refinance the €500 million 5.0% senior notes due January 2013 (ISIN: XS0240918218, WKN: A0GMAX). Given the currently favorable market conditions, Fresenius expects to reduce its interest expense as a result of the refinancing.

Fresenius Finance B.V., a wholly owned subsidiary of Fresenius SE & Co. KGaA, will issue and offer the senior notes through a private placement to institutional investors.

Fresenius has applied to the Luxembourg Stock Exchange to admit the senior notes to trading on its regulated market.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA OR JAPAN.

Fresenius successfully placed €500 million of senior unsecured notes. The notes have a coupon of 2.875%, a maturity of seven years and were issued at par. The proceeds will be used to refinance the €500 million senior notes due January 2013. The offering was extremely well received by investors and substantially oversubscribed.

Fresenius Finance B.V, a wholly owned subsidiary of Fresenius SE & Co. KGaA, issued and offered the senior notes through a private placement to institutional investors. Fresenius has applied to the Luxembourg Stock Exchange to admit the senior notes to trading on its regulated market.