Fresenius today has sold its 5% stake in Rhön-Klinikum AG. Berenberg has acquired the approximately 6.9 million shares with the aim of placing them with institutional investors. The parties agreed not to disclose financial details of the transaction. Fresenius acquired the stake in 2012 as part of its takeover bid for Rhön-Klinikum AG.

The stock split with capital increase from company funds approved by the Annual General Meeting in May will become effective on August 1, 2014, subject to entry in the commercial register. After close of trading, shareholders' deposits and the stock exchange listing will be converted. Trading at the new split-adjusted price is scheduled for August 4, 2014.

Every shareholder will receive two additional shares for each share held. With the stock split, Fresenius aims to promote trading activity and increase the stock's attractiveness for a broader group of investors.

Fresenius shares will continue to trade under ISIN DE0005785604.

Following the split, the subscribed capital of Fresenius SE & Co. KGaA will amount to € 540,511,632 divided into 540,511,632 ordinary shares.

For American Depositary Receipt (ADR) investors:
In conjunction with the stock split, Fresenius will also change the ratio of its American Depositary Receipts ("ADRs") which trade on OTCQX International Premier in the U.S. At present, 8 ADRs represent one underlying Fresenius share. This ratio will now change so that 4 ADRs represent one underlying share. The ratio change will come into effect on August 4, 2014.

H1/2014:

• Sales €10.7 billion (+7% at actual rates, +12% in constant currency)
• EBIT¹ €1,403 million (-3% at actual rates, 0% in constant currency)
• Net income² €487 million (+1% at actual rates, +3% in constant currency)

Ulf Mark Schneider, CEO of Fresenius, said: "All business segments showed marked improvement from the first quarter. The integration of the newly acquired hospitals is fully on track and we are pleased with their strong financial performance. Kabi saw growing business momentum in all key markets. Looking ahead, we expect growth to accelerate further across the Group in the second half of the year and fully confirm our 2014 earnings guidance."

¹ 2014 before integration costs (Fenwal: €3 million; acquired Rhön hospitals: €8 million) and disposal gains (two HELIOS hospitals: €22 million; Rhön stake: €35 million); 2013 before integration costs (Fenwal: €27 million)

² Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs (Fenwal: €2 million; acquired Rhön hospitals: €6 million) and disposal gains (two HELIOS hospitals: €21 million; Rhön stake: €34 million); 2013 before integration costs (Fenwal: €20 million); including these effects, net income attributable to shareholders of Fresenius SE & Co. KGaA increased by 16% (+17% in constant currency) to €534 million

2014¹ Group sales outlook raised
Fresenius raises its sales outlook following acquisitions at Fresenius Medical Care, and now expects sales to increase by 14% to 16% in constant currency. Previously, the Company expected sales growth of 12% to 15%. Fresenius fully confirms its net income² guidance, and continues to expect an increase of 2% to 5% in constant currency.

The net debt/EBITDA ratio is expected to be approximately 3.25 particularly reflecting Fresenius Medical Care's acquisitions (previously 3.00 to 3.25).

12% sales growth in constant currency
Group sales increased by 7% (12% in constant currency) to €10,733 million (H1/2013: €9,987 million). Organic sales growth was 3%. Acquisitions contributed 9%. Divestitures had a marginal effect on sales growth.

Sales of the business segments developed as follows:

Organic sales growth was 3% in North America and 2% in Europe. In Asia-Pacific organic sales growth was 2%, impacted by a slow first quarter in China for Fresenius Medical Care and Fresenius Kabi. In Latin America organic sales growth was 9%. In Africa, the decline in sales is mainly due to fluctuations in the project business at Fresenius Vamed.

Adverse currency translation effects weighed on Group sales in all regions, particularly in Latin America (-19%), Asia-Pacific (-7%), Africa (-7%) and North America (-5%).

¹ Includes contributions from the acquisition of hospitals from Rhön-Klinikum AG

² Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs (Fenwal; acquired Rhön hospitals) and disposal gains (two HELIOS hospitals; Rhön stake); 2013 before integration costs (Fenwal)

 

 

Group net income in line with guidance

Group EBITDA¹ was €1,854 million (H1/2013: €1,860 million) and increased by 3% in constant currency. Group EBIT¹ decreased by 3% (0% in constant currency) to €1,403 million (H1/2013: €1,448 million). Besides currency headwinds, this development is mainly attributable to the year-over-year comparison of issues at Fresenius Medical Care and Fresenius Kabi which occurred in 2013. The EBIT margin was 13.1% (H1/2013: 14.5%). In Q2/2014, the EBIT margin increased sequentially by 150 bps to 13.8%.

Group net interest was -€283 million (H1/2013: -€313 million). Improved financing terms as well as favorable currency effects contributed to the decrease. In addition, H1/2013 net interest included €14 million one-time costs resulting from the early redemption of a Senior Note.

The Group tax rate² was 29.6% and above the prior–year level (H1/2013: 28.5%). In Q2/2014, the Group tax rate was 32.4% due to a special tax effect at Fresenius Medical Care.

Noncontrolling interest was €301 million (H1/2013: €330 million), of which 94% was attributable to the noncontrolling interest in Fresenius Medical Care.

Group net income³ increased by 1% (3% in constant currency) to €487 million (H1/2013: €482 million). Earnings per share³ were €2.71 (H1/2013: €2.70). Group net income³ excluding the special tax effect at Fresenius Medical Care increased by 2% (4% in constant currency).

Group net income attributable to shareholders of Fresenius SE & Co. KGaA including integration costs for Fenwal and the acquired Rhön hospitals, as well as the disposal gains from two HELIOS hospitals and the Rhön-Klinikum stake increased by 16% (+17% in constant currency) to €534 million. Earnings per share increased by 15% (+16% in constant currency) to €2.97. A reconciliation to earnings according to U.S. GAAP can be found on page 14 of this Investor News.

Continued investment in growth

The Fresenius Group spent €522 million on property, plant and equipment (H1/2013: €425 million). The Company primarily invested in the modernization and expansion of production facilities and hospitals as well as in the equipment of new, and the expansion of existing dialysis clinics.

Total acquisition spending was €1,216 million (H1/2013: €150 million), including €756 million for the acquisition of hospitals from Rhön-Klinikum AG.

¹ 2014 before integration costs (Fenwal: €3 million; acquired Rhön hospitals: €8 million) and disposal gains (two HELIOS hospitals: €22 million; Rhön stake: €35 million); 2013 before integration costs (Fenwal: €27 million)

² 2014 before integration costs (Fenwal; acquired Rhön hospitals) and disposal gains (two HELIOS hospital; Rhön stake); 2013 before integration costs (Fenwal)

³ Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs (Fenwal: €2 million; acquired Rhön hospitals: €6 million) and disposal gains (two HELIOS hospitals: €21 million; Rhön stake: €34 million); 2013 before integration costs (Fenwal: €20 million)

Strong cash flow in Q2

Operating cash flow was €750 million (H1/2013: €947 million) with a margin of 7.0% (H1/2013: 9.5%). The decrease was mainly attributable to the payment for the W.R. Grace bankruptcy settlement of US$115 million¹, increased working capital at Fresenius Medical Care and Fresenius Kabi as well as a change from annual to monthly upfront payments to Fresenius Vamed for a technical management contract all in Q1/2014. In Q2/2014, the operating cash flow margin was 11.0%.

Net capital expenditure increased to €532 million (H1/2013: €416 million). Free cash flow before acquisitions and dividends was €218 million (H1/2013: €531 million). Free cash flow after acquisitions and dividends was -€1,275 million (H1/2013: 92 million).

¹ See Annual Report 2013, page 150 f.

Solid balance sheet structure

The Group's total assets increased by 8% (at actual rates and in constant currency) to €35,502 million (Dec. 31, 2013: €32,758 million). This increase is mainly attributable to the first-time consolidation of hospitals acquired from Rhön-Klinikum AG. Current assets grew by 19% to €9,464 million (Dec. 31, 2013: €7,972 million). Non-current assets increased by 5% to €26,038 million (Dec. 31, 2013: €24,786 million).

Total shareholders' equity increased by 3% to €13,706 million (Dec. 31, 2013: €13,260 million). The equity ratio was 38.6% (Dec. 31, 2013: 40.5%).

Group debt was €14,527 million (Dec. 31, 2013: €12,804 million). Net debt was €13,457 million (Dec. 31, 2013: €11,940 million).

As of June 30, 2014, the net debt/EBITDA ratio was 3.39¹ (Dec. 31, 2013: 2.51²). The increase is mainly due to the acquisition of hospitals from Rhön-Klinikum AG.

¹ Pro forma including acquired Rhön hospitals and excluding two HELIOS hospitals; before integration costs (Fenwal; acquired Rhön hospitals) and disposal gains (two HELIOS hospitals; Rhön stake)

² Pro forma excluding advances made for the acquisition of hospitals from Rhön-Klinikum AG; before integration costs (Fenwal)

Number of employees increases

As of June 30, 2014, the number of employees increased by 18% to 209,933 (Dec. 31, 2013: 178,337). This is mainly due to the acquisition of hospitals from Rhön-Klinikum AG.

 

Business Segments

 

Fresenius Medical Care

Fresenius Medical Care is the world's leading provider of services and products for patients with chronic kidney failure. As of June 30, 2014, Fresenius Medical Care was treating 280,942 patients in 3,335 dialysis clinics.

• Second quarter shows accelerated growth and margin improvement 
• Net income impacted by US$ 18 million special tax effect 
• 2014 guidance confirmed

Sales increased by 5% (6% in constant currency) to US$7,398 million (H1/2013: US$7,076 million). Organic sales growth was 4%. Acquisitions contributed 2%. Adverse currency effects reduced sales by 1%.

Sales in dialysis services increased by 6% (7% in constant currency) to US$5,731 million (H1/2013: US$5,421 million). Dialysis product sales increased by 1% (1% in constant currency) to US$1,667 million (H1/2013: US$1,655 million).

In North America sales grew by 5% to US$4,914 million (H1/2013: US$4,663 million). Dialysis services sales increased by 6% to US$4,517 million (H1/2013: US$4,261 million). Dialysis product sales decreased by 1% to US$397 million (H1/2013: US$402 million).

Sales outside North America ("International" segment) increased by 3% (5% increase in constant currency) to US$2,458 million (H1/2013: US$2,397 million) impacted inter alia by the reorganization of the distribution network in China. Sales in dialysis services increased by 5% (10% in constant currency) to US$1,214 million (H1/2013: US$1,161 million). Dialysis product sales increased by 1% (1% in constant currency) to US$1,244 million (H1/2013: US$1,236 million).

EBIT decreased by 4% to US$1,001 million (H1/2013: US$1,038 million). The EBIT margin was 13.5% (H1/2013: 14.7%). EBIT was impacted by sequestration and rebasing of Medicare's reimbursement rate in the United States. In Q2/2014, EBIT increased by 2% to US$556. The EBIT margin increased sequentially by 200 bps to 14.5%.

Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA decreased by 10% to US$439 million (H1/2013: US$488 million). Excluding a special tax effect at Fresenius Medical Care in Q2/2014, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA was US$457 million.

Operating cash flow was US$562 million (H1/2013: US$841 million). The decrease was mainly attributable to the payment for the W.R. Grace bankruptcy settlement of US$115 million and increased working capital in Q1/2014. The cash flow margin was 7.6% (H1/2013: 11.9%).

Fresenius Medical Care confirms its outlook for 2014. Fresenius Medical Care expects sales of approximately US$15.2 billion, translating into a growth rate of around 4%. This outlook excludes sales of about US$500 million from acquisitions. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA is expected to be unchanged between US$1.0 to US$1.05 billion. The company has initiated a global efficiency program designed to enhance its performance over a multi-year period. Potential cost savings before income taxes of up to US$60 million generated from this program are not included in the outlook for 2014.

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

¹ Net income attributable to shareholders of 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.

• 4% organic sales growth and EBIT margin of 16.8% in Q2
• €10 million adverse currency impact on EBIT in Q2
• 13.8% cash flow margin in Q2
• 2014 guidance fully confirmed

Sales decreased by 2% (+3% increase in constant currency) to €2,466 million (H1/2013: €2,519 million). Organic sales growth was 2% (Q2/2014: 4%). Adverse currency translation effects weighed on sales (-5%), mainly due to the weaker currencies in the United States, Brazil, Argentina and South Africa against the Euro.

Sales in Europe decreased by 1% (organic sales growth: +1%) to €1,024 million (H1/2013: €1,030 million). Sales in North America decreased by 5% (organic sales growth: 0%) to €747 million (H1/2013: €784 million). Asia-Pacific sales were €464 million (organic sales growth: +6%; H1/2013: €456 million). Sales in Latin America/Africa decreased by 7% (organic sales growth: +11%) to €231 million (H1/2013: €249 million).

EBIT¹ was €411 million (H1/2013: €469 million), a decrease of 9% in constant currency. Adverse currency translation effects particularly weighed on Q2 EBIT with -4% compared to -2% in Q1/2014. Besides currency headwinds, EBIT was impacted by lower HES sales and the 2013 price cuts in China. The EBIT margin of 16.7% was in line with expectations and our guidance range. Sequentially, EBIT margin improved by 20 bps to 16.8% in Q2/2014.

Net income² decreased by 10% to €217 million (H1/2013: €242 million).

Fresenius Kabi's operating cash flow was €215 million (H1/2013: €238 million) with a margin of 8.7% (H1/2013: 9.4%), mainly due to temporarily higher working capital requirements. Cash flow improved from Q1 (€42 million) to Q2 (€173 million). Cash flow before acquisitions and dividends in H1/2014 was €73 million (H1/2013: €120 million).

Integration costs for Fenwal were €3 million (pre-tax) in H1/2014. These costs are reported in the Group Corporate/Other segment. The vast majority of planned integration costs of €40-50 million are expected to accrue towards the end of 2014.

Fresenius Kabi fully confirms its 2014 outlook and projects organic sales growth of 4% to 6% and an EBIT margin of 16.5% to 18%.

¹ Before integration costs (Fenwal)

² Net income attributable to shareholders of Fresenius Kabi AG; before integration costs (Fenwal)

Fresenius Kabi guidance excludes €40-50 million pre-tax Fenwal integration costs (€30-40 million after tax); see Group guidance

 

Fresenius Helios

Fresenius Helios is Germany's largest hospital operator. HELIOS owns 110 hospitals, thereof 86 acute care clinics including seven maximum care hospitals in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin, Wiesbaden and Wuppertal and 24 post-acute care clinics. HELIOS treats more than 4.2 million patients per year, thereof more than 1.2 million inpatients, and operates more than 34,000 beds.

• 3% organic sales growth fully in line with guidance
• Acquired hospitals show positive margin development
• New 2014 guidance: EBIT of €540-560 million for HELIOS including the acquired hospitals

Sales increased by 49% to €2,521 million (H1/2013: €1,695 million). The strong increase in sales is mainly due to the acquired hospitals from Rhön-Klinikum AG. The divestment of two HELIOS hospitals reduced sales growth by 2%. Organic sales growth was 3% in H1 and Q2.

EBIT¹ grew by 40% to €250 million (H1/2013: €179 million). The EBIT margin was 9.9% (H1/2013: 10.6%). The margin decline is due to the consolidation of the newly acquired hospitals. The EBIT margin increased by 120 bps from 9.3% in Q1/2014 to 10.5% in Q2/2014.

Net income² increased by 50% to €179 million (H1/2013: €119 million).

Sales of the established hospitals grew by 3% to €1,713 million. EBIT improved by 5% to €184 million. The EBIT margin increased to 10.7% (H1/2013: 10.6 %).

Sales of the acquired hospitals were €808 million, EBIT was €66 million and EBIT margin was 8.2%. Q2/2014 EBIT margin increased substantially to 9.1% (Q1/2014: 7.0%).

In Q1/2014, approximately 90% of the acquisition of hospitals from Rhön-Klinikum AG was completed. Approximately 70% of the acquired business was consolidated as of January 1, 2014, and approximately 20% as of March 1, 2014. The acquisition of HSK Dr. Horst Schmidt Kliniken in Wiesbaden is consolidated as of June 30, 2014. In addition, HELIOS acquired Rhön-Klinikum's 265-bed hospital in Cuxhaven with 2013 sales of approximately €40 million. The transaction is expected to be completed July 31, 2014.

The integration of the acquired hospitals is progressing as planned.

Fresenius Helios continues to project 2014 organic sales growth of 3 to 5%. The acquired hospitals are also expected to show 3 to 5% organic growth and to contribute sales of approximately €1.8 billion. EBIT for HELIOS including the acquired hospitals is expected to increase to €540-560 million.

¹ 2014 before integration costs (€8 million) and disposal gains (two HELIOS hospitals: €22 million; Rhön stake: €35 million)

² Net income attributable to shareholders of HELIOS Kliniken GmbH; 2014 before integration costs (€6 million) and disposal gains (two HELIOS hospitals: €21 million; Rhön stake: €34 million)

Fresenius Helios guidance before integration costs for the hospitals acquired from Rhön-Klinikum AG and disposal gains of two HELIOS hospitals and Rhön stake. The integration costs will be reported in the Group Corporate/Other segment, see Group guidance.

 

Fresenius Vamed

Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide.

• Continued strong order intake of €300 million
• Results reflect typical quarterly fluctuations in the project business
• 2014 guidance fully confirmed

Sales decreased by 5% to €398 million (H1/2013: €421 million). Organic sales growth was -8%. Acquisitions contributed 3%. Sales in the project business decreased by 17% to €173 million (H1/2013: €208 million) reflecting typical quarterly fluctuations. Sales in the service business grew by 6% to €225 million (H1/2013: €213 million).

EBIT was €15 million (H1/2013: €15 million) with a margin of 3.8% (H1/2013: 3.6%).

Net income¹ increased to €10 million (H1/2013: €9 million).

Order intake was €300 million (H1/2013: €311 million). As of June 30, 2014, order backlog was €1,262 million (Dec. 31, 2013: €1,139 million).

Fresenius Vamed fully confirms its 2014 outlook and expects to achieve organic sales growth of 5% to 10% and EBIT growth of 5% to 10%.

¹ Net income attributable to shareholders of Vamed AG

Analyst-/Investor Conference Call
As part of the publication of the results for the first half of 2014, a conference call will be held on July 31, 2014 at 2 p.m. CEST (8 a.m. EDT). All investors are cordially invited to follow the conference call in a live broadcast via the Internet at www.fresenius.com, see Investor Relations, Presentations. Following the call, a replay of the conference call will be available on our website.

IR News Ticker
Obtain additional information on current topics relating to the Fresenius Group - beyond our Investor News. Subscribe to the IR News Ticker through our information service or the Fresenius Investor Relations RSS newsfeeds.

The stock split with capital increase from company funds was recorded in the commercial register today. After close of trading, shareholder's deposits and the stock exchange listing will be converted. Trading at the new split-adjusted price will start on Monday, August 4, 2014.

Fresenius shares will continue to trade under ISIN DE0005785604.

The subscribed capital of Fresenius SE & Co. KGaA now amounts to € 540,511,632 divided into 540,511,632 ordinary shares.

For American Depositary Receipt (ADR) investors:
In conjunction with the stock split, Fresenius will also change the ratio of its American Depositary Receipts ("ADRs") which trade on OTCQX International Premier in the U.S. At present, 8 ADRs represent one underlying Fresenius share. This ratio will now change so that 4 ADRs represent one underlying share. The ratio change will come into effect on August 4, 2014.

This Investor News and future issues will feature more detailed information on the individual quarter. If no timeframe is specified, information refers to the first nine months of 2014.

Q3/2014:

• Sales €6.0 billion (+20% in constant currency, +18% at actual rates)
•  EBIT¹ €820 million (+10% in constant currency, +9% at actual rates) 
• Net income² €281 million (+5% in constant currency, +4% at actual rates)

Q1-3/2014: 

• Sales €16.7 billion (+14% in constant currency, +11% at actual rates)
• EBIT³ €2.2 billion (+3% in constant currency, +1% at actual rates) 
• Net income⁴ €768 million (+4% in constant currency, +2% at actual rates)

Ulf Mark Schneider, CEO of Fresenius, said: "Fresenius had a strong third quarter with growth accelerating in all four business segments. Emerging markets stood out with double-digit organic sales growth. We confirm our full year Group guidance and remain optimistic about the fundamental growth trends in our markets."

 

¹ before integration costs
² Net income attributable to shareholders of Fresenius SE & Co. KGaA; before integration costs
³ 2014 before integration costs and disposal gains (two HELIOS hospitals, Rhön stake); 2013 before integration costs
⁴ Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs and disposal gains (two HELIOS hospitals, Rhön stake); 2013 before integration costs

For a detailed overview of integration costs and disposal gains please see the reconciliation tables in the PDF on page 15f.

 

2014 Group outlook¹ fully confirmed

Based on the Group's strong financial results in the first three quarters, Fresenius confirms its 2014 Group guidance. Sales are expected to increase by 14% to 16%, net income² is expected to increase by 2% to 5% (both in constant currency).

The net debt/EBITDA ratio is expected to be approximately 3.25 at year-end.

14% sales growth in constant currency

Group sales increased by 11% (14% in constant currency) to €16,711 million (Q1-3/2013: €15,032 million). Organic sales growth was 4%. Acquisitions contributed 11%. Divestitures reduced sales growth by 1%. In Q3/2014, Group sales increased by 18% (20% in constant currency) to €5,978 million (Q3/2013: €5,045 million). Organic sales growth was 6%.

Group sales by region developed as follows:

In the first nine months, organic sales growth was 4% in North America and 3% in Europe. In Asia-Pacific organic sales growth was 5%. In Latin America organic sales growth was 10%. In Africa, the decline in sales is mainly due to fluctuations in the project business at Fresenius Vamed. Adverse currency translation effects weighed on Group sales in Latin America (-17%), Asia-Pacific (-4%), Africa (-5%) and North America (-3%).

¹ Includes contributions from the acquisition of hospitals from Rhön-Klinikum AG and acquisitions at Fresenius Medical Care

² Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs and disposal gains (two HELIOS hospitals, Rhön stake)

 

4% net income growth in constant currency

Group EBITDA¹ grew by 3% (5% in constant currency) to €2,905 million (Q1-3/2013: €2,824 million). Group EBIT¹ increased by 1% (3% in constant currency) to €2,223 million (Q1-3/2013: €2,202 million). The EBIT margin was 13.3% (Q1-3/2013: 14.6%). In Q3/2014 Group EBIT² was €820 million (Q3/2013: €754 million), the EBIT margin was 13.7% (Q3/2013: 14.9%).

Group net interest was -€431 million (Q1-3/2013:-€449 million). Improved financing terms as well as favorable currency effects contributed to the decrease.

The Group tax rate¹ was 29.5% and above the prior-year level (Q1-3/2013: 28.3%). This is mainly due to a special tax effect at Fresenius Medical Care in Q2/2014.

Noncontrolling interest was €495 million (Q1-3/2013: €504 million), of which 95% was attributable to the noncontrolling interest in Fresenius Medical Care.

Group net income³ increased by 2% (4% in constant currency) to €768 million(Q1-3/2013: €753 million). Earnings per share³ increased by 1% (2% in constant currency) to €1.42 (Q1-3/2013: €1.41). The weighted average number of shares outstanding was 539,976,138 (Q1-3/2013: 535,366,314). In Q3/2014, Group net income⁴ increased by 4% (5% in constant currency) to €281 million (Q3/2013: €271 million).

Group net income attributable to shareholders of Fresenius SE & Co. KGaA (including special items) increased by 11% (13% in constant currency) to €810 million (Q1-3/2013: €727 million). Earnings per share increased by 10% (12% in constant currency) to €1.50 (Q1-3/2013: €1.36). In Q3/2014, Group net income attributable to shareholders of Fresenius SE & Co. KGaA (including special items) increased by 4% (6% in constant currency) to €276 million (Q3/2013: €265 million). Earnings per share increased by 2% (4% in constant currency) to €0.51 (Q3/2013: €0.50).

¹ 2014 before integration costs and disposal gains (two HELIOS hospitals, Rhön stake); 2013 before integration costs

² 2014 before integration costs; 2013 before integration costs

³ Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs and disposal gains (two HELIOS hospitals, Rhön stake); 2013 before integration costs

⁴ Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs; 2013 before integration costs

Reconciliations to earnings according to U.S. GAAP can be found on page 15f in the PDF of this Investor News.

 

Continued investment in growth

The Fresenius Group spent €854 million on property, plant and equipment (Q1-3/2013: €676 million). The Company primarily invested in the modernization and expansion of production facilities and hospitals as well as in the equipment of new, and the expansion of existing dialysis clinics.

Total acquisition spending was €1,861 million (Q1-3/2013: €442 million), including €805 million for the acquisition of hospitals from Rhön-Klinikum AG and €919 million for acquisitions at Fresenius Medical Care.

Strong cash flow margin increase in Q3

Operating cash flow increased by 8% to €1,695 million (Q1-3/2013: €1,566 million) with a margin of 10.1% (Q1-3/2013: 10.4%). The margin decrease was attributable to the payment for the W.R. Grace bankruptcy settlement of US$115¹ million in Q1/2014 and increased working capital at Fresenius Medical Care. Operating cash flow in Q3/2014 increased to €945 million with a margin of 15.8% (Q3/2013: €619 million with a margin of 12.3%). The strong Q3/2014 margin is due to the very good sequential and year-on-year cash flow development in all business segments.

Net capital expenditure increased to €848 million (Q1-3/2013: €659 million). Free cash flow before acquisitions and dividends was €847 million (Q1-3/2013: €907 million). Free cash flow after acquisitions and dividends was -€1,154 million (Q1-3/2013: €151 million).

¹ see Annual Report 2013, page 150 f.

 

Solid balance sheet structure

The Group's total assets increased by 15% (10% in constant currency) to €37,718 million (Dec. 31, 2013: €32,758 million). This increase is mainly attributable to the first-time consolidation of hospitals acquired from Rhön-Klinikum AG, acquisitions at Fresenius Medical Care and currency effects. Current assets grew by 20% (16% in constant currency) to €9,584 million (Dec. 31, 2013: €7,972 million). Non-current assets increased by 14% (8% in constant currency) to €28,134 million (Dec. 31, 2013: €24,786 million).

Total shareholders' equity increased by 12% (7% in constant currency) to €14,854 million (Dec. 31, 2013: €13,260 million). The equity ratio was 39.4% (Dec. 31, 2013: 40.5%).

Group debt grew by 16% (11% in constant currency) to €14,878 million (Dec. 31, 2013: €12,804 million). Net debt was €13,843 million (Dec. 31, 2013: €11,940 million). The increase is mainly due to the hospitals acquired from Rhön-Klinikum AG, the acquisitions at Fresenius Medical Care as well as currency effects.

As of September 30, 2014, the net debt/EBITDA ratio was 3.44¹ (Dec. 31, 2013: 2.51²).

¹ Pro forma including acquired Rhön hospitals, acquisition at Fresenius Medical Care and excluding two HELIOS hospitals; before integration costs and disposal gains (two HELIOS hospitals; Rhön stake)

² Pro forma excluding advances made for the acquisition of hospitals from Rhön-Klinikum AG; before integration costs

 

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, 2014, Fresenius Medical Care was treating 283,135 patients in 3,349 dialysis clinics.

• 7% organic sales growth in Q3
• 17.3% operating cash flow margin in Q3
• 2014 guidance confirmed

Sales increased by 7% (8% in constant currency) to US$11,511 million (Q1-3/2013: US$10,743 million). Organic sales growth was 5%. Acquisitions contributed 4%, while divestitures reduced sales growth by 1%. In Q3/2014, sales increased by 12% to US$4,113 (Q3/2013: US$3,666).

Sales in dialysis services increased by 8% (10% in constant currency) to US$8,928 million (Q1-3/2013: US$8,235 million). Dialysis product sales grew by 3% (3% in constant currency) to US$2,583 million (Q1-3/2013: US$2,508 million).

In North America, sales grew by 7% to US$7,624 million (Q1-3/2013: US$7,099 million). Dialysis services sales increased by 8% to US$7,015 million (Q1-3/2013: US$6,485 million). Dialysis product sales decreased by 1% to US$609 million (Q1-3/2013: US$614 million).

Sales outside North America ("International" segment) increased by 6% (9% in constant currency) to US$3,843 million (Q1-3/2013: US$3,619 million). Sales in dialysis services increased by 9% to US$1,913 million (Q1-3/2013: US$1,750 million). Dialysis product sales increased by 3% to US$1,930 million (Q1-3/2013: US$1,869 million).

EBIT was US$1,591 million (Q1-3/2013: US$1,595 million). The EBIT margin was 13.8% (Q1-3/2013: 14.8%). EBIT was impacted by sequestration and rebasing of Medicare's reimbursement rate in the United States. In Q3/2014, EBIT increased by 6% to US$590 million (Q3/2013: US$557 million). EBIT margin was 14.3% (Q3/2013: 15.2%).

Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA was US$710 million (Q1-3/2013: US$761 million). In Q3/2014, net income was US$271 million (Q3/2013: US$273 million).

Operating cash flow was US$1,274 million (Q1-3/2013: US$1,446 million). The decrease was mainly attributable to the payment for the W.R. Grace bankruptcy settlement of US$115 million and increased working capital in Q1/2014. The cash flow margin was 11.1% (Q1-3/2013: 13.5%). In Q3/2014, operating cash flow increased to US$712 million (Q3/2013: US$605 million), the cash flow margin was 17.3% (Q3/2013: 16.5%).

Fresenius Medical Care confirms its outlook for 2014. Fresenius Medical Care expects sales of approximately US$15.2 billion, translating into a growth rate of around 4%. This outlook excludes sales of approximately US$500 million from acquisitions completed during the first nine months of 2014. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA is expected to be unchanged between US$1.0 to US$1.05 billion. The company has initiated a global efficiency program designed to enhance its performance over a multi-year period. Potential cost savings before income taxes of up to US$60 million generated from this program are not included in the outlook for 2014.

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

¹ Net income attributable to shareholders of 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.

• 5% organic sales growth in Q3
• Sequential EBIT margin increase by 40 bps to 17.2% in Q3
• 2014 guidance: 4 % to 6 % organic sales growth confirmed,
  EBIT-margin of approximately 17% expected

Sales were €3,760 million (Q1-3/2013: €3,742 million). In constant currency, sales increased by 4%. Organic sales growth was 3%. Acquisitions contributed 1% sales growth. Adverse currency translation effects (-4%) were mainly driven by the weaker currencies in the United States and Argentina against the Euro. In Q3/2014, sales increased by 6% (7% in constant currency) to €1,294 million (Q3/2013: €1,223 million). Organic sales growth was 5%.

Sales in Europe grew by 1% (organic sales growth: 2%) to €1,538 million (Q1-3/2013: €1,524 million). Sales in North America decreased by 3% (organic sales growth: 0%) to €1,118 million (Q1-3/2013: €1,158 million). Asia-Pacific sales increased by 5% (organic sales growth: 7%) to €723 million (Q1-3/2013: €689 million). Sales in Latin America/Africa increased by 3% (organic sales growth: 13%) to €381 million (Q1-3/2013: €371 million).

EBIT¹ was €634 million (Q1-3/2013: €695 million), a decrease of 6% in constant currency. Besides currency headwinds, EBIT was impacted by lower HES sales and the easing of drug shortages in North America. The EBIT margin of 16.9% was in line with expectations and our guidance range. In Q3/2014, EBIT1 was €223 million (Q3/2013: €226 million), an increase of 1% in constant currency. Sequentially, the EBIT margin improved by 40 bps to 17.2% in Q3/2014.

Net income² was €337 million (Q1-3/2013: €367 million). In Q3/2014, net income² was €120 million (Q3/2013: €125 million).

Operating cash flow was €432 million (Q1-3/2013: €303 million) with a margin of 11.5% (Q1-3/2013: 8.1%). In Q3/2014, operating cash flow was €217 million (Q3/2013: €65 million) with a margin of 16.8% (Q3/2013: 5,3%).

Integration costs for Fenwal were €6 million (pre-tax) in Q1-3 2014. These costs are reported in the Group Corporate/Other segment.

Fresenius Kabi confirms its 2014 organic sales growth outlook of 4% to 6%. The EBIT margin is now confirmed at approximately 17%, so within the previously guided range of 16.5% to 18%.

¹ before integration costs
² Net income attributable to shareholders of Fresenius Kabi AG; before integration costs

For a detailed overview of integration costs please see the reconciliation tables on page 15f in the PDF. Fresenius Kabi guidance excludes €40-50 million pre-tax Fenwal integration costs (€30-40 million after tax); see Group guidance.

 

Fresenius Helios

Fresenius Helios is Germany's largest hospital operator. HELIOS owns 110 hospitals, thereof 86 acute care clinics including seven maximum care hospitals in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin, Wiesbaden and Wuppertal and 24 post-acute care clinics. HELIOS treats more than 4.2 million patients p.a., thereof more than 1.2 million inpatients, and operates more than 34,000 beds.

• 6% organic sales growth in Q3 
• Sequential EBIT margin increase of 30 bps to 10.8% in Q3 
• 2014 guidance fully confirmed

Sales increased by 53% to €3,883 million (Q1-3/2013: €2,537 million). The strong increase is mainly due to the acquired hospitals from Rhön-Klinikum AG. The divestment of two HELIOS hospitals reduced sales growth by 2%. Organic sales growth was 4%. In Q3/2014, sales increased by 62% to €1,362 million (Q3/2013: €842 million), organic sales growth was 6%.

EBIT² grew by 41% to €397 million (Q1-3/2013: €282 million). The EBIT margin was 10.2% (Q1-3/2013: 11.1%). The margin decline is due to the consolidation of the newly acquired hospitals. In Q3/2014, EBIT1 was €147 million (Q3/2014: €103 million). Sequentially, the EBIT margin increased by 30 bps from 10.5% in Q2/2014 to 10.8% in Q3/2014.

Net income^2,3 increased by 47% to €286 million (Q1-3/2013: €194 million). In Q3/2014, net income^1,3 increased by 43% to €107 million (Q3/2013: €75 million).

Sales of the established hospitals grew by 4% to €2,583 million. EBIT improved by 4% to €287 million. The EBIT margin was 11.1% (Q1-3/2013: 11.1%).

Sales of the acquired hospitals were €1,300 million, EBIT was €110 million and EBIT margin was 8.5%. Q3/2014 EBIT margin decreased by 20 bps sequentially to 8.9% due to the first time consolidation of the acquired hospital in Wiesbaden (HSK) as of June 30, 2014.

The integration of the acquired hospitals is progressing as planned. Integration costs are now expected to be between €60-80 million (before: approximately €80 million) in total for 2014 and 2015. Fresenius Helios confirms expected cost synergies of approximately €85 million p.a. by 2015.

Fresenius Helios fully confirms its 2014 outlook, and projects organic sales growth of 3% to 5%. The acquired hospitals are also expected to show 3% to 5% organic growth and to contribute sales of approximately €1.8 billion. EBIT for HELIOS including the acquired hospitals is expected to increase to €540-560 million.

¹ 2014 before integration costs
² 2014 before integration costs and disposal gains (two HELIOS hospitals, Rhön stake)
³ Net income attributable to shareholders of HELIOS Kliniken GmbH

For a detailed overview of integration costs and disposal gains please see the reconciliation tables on page 15f in the PDF. 

Fresenius Helios guidance before integration costs for the hospitals acquired from Rhön-Klinikum AG and disposal gains of two HELIOS hospitals and Rhön stake. The integration costs will be reported in the Group Corporate/Other segment, see Group guidance.

 

Fresenius Vamed

Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide.

• 7% organic sales growth in Q3
• Record quarterly order intake of €378 million in Q3 
• 2014 guidance: flat organic sales growth expected
  5% - 10% EBIT growth expectation confirmed

Sales were €655 million (Q1-3/2013: €654 million). Organic sales growth was -2%, acquisitions contributed 2%. Sales in the project business decreased by 8% to €306 million (Q1-3/2013: €332 million), mainly due to project delays in Russia and Ukraine. Sales in the service business grew by 8% to €349 million (Q1-3/2013: €322 million). Sales in Q3/2014 were €257 million (Q3/2013: €233 million). Organic sales growth was 7%.

EBIT grew by 8% to €27 million (Q1-3/2013: €25 million) with a margin of 4.1% (Q1-3/2013: 3.8%). In Q3/2014, EBIT increased by 20% to €12 million (Q3/2013: €10 million) with a margin of 4.7% (Q3/2013: 4.3%).

Net income¹ increased by 13% to €18 million (Q1-3/2013: €16 million). In Q3/2014, net income¹ increased by 14% to €8 million (Q3/2013: €7 million).

Order intake increased by 78% to €678 million (Q1-3/2013: €380 million). Q3/2014 order intake was at a record level of €378 million, mainly driven by the modernization contract with the University Hospital Schleswig-Holstein in Germany. As of September 30, 2014, order backlog increased to €1,504 million (Dec. 31, 2013: €1,139 million).

Due to project delays in Russia and Ukraine Fresenius Vamed now expects flat organic sales growth (before: 5% to 10%). The EBIT growth guidance of 5% to 10% for 2014 remains unchanged.

¹ Net income attributable to shareholders of Vamed AG.

 

Analyst-/Investor Conference Call

As part of the publication of the results for the first three quarters of 2014, a conference call will be held on November 4, 2014 at 2 p.m. CET (8 a.m. EST). All investors are cordially invited to follow the conference call in a live broadcast via the Internet at www.fresenius.com, see Investor Relations, Presentations. Following the call, a replay of the conference call will be available on our website.

 

Fresenius Kabi and its partners Sistema JSFC and Zenitco Finance Management LLC have mutually agreed to terminate the joint venture agreement announced in April 2014. The intention was to combine Fresenius Kabi's Russian and CIS business with the partners' subsidiary CJSC Binnopharm. Changing political and regulatory circumstances in the region have made the closing of the joint venture more challenging than anticipated.

Fresenius Kabi entered the Russian market in 1994 and today provides infusion therapies, clinical nutrition and I.V. drugs. The company is committed to further grow its business in the region, and is exploring other potential options to cooperate with Binnopharm.

Fresenius Kabi has been informed by the U.S. Food and Drug Administration that its pharmaceutical manufacturing facility in Grand Island, N.Y., has achieved the upgraded status of voluntary action indicated (VAI) following an October 2014 inspection. The status change is an improvement from the "official action indicated" status the facility had been operating under.

The new VAI classification permits FDA approval of new Fresenius Kabi products at the plant.

The status change reflects the improvements that have been made at the plant since receiving a warning letter in 2012. Fresenius Kabi remains committed to continuous improvement and compliance in its operations worldwide.

Fresenius has launched a refinancing of the revolving facilities and the term loan A tranches (aggregate volume approx. €3 bn) under its 2013 senior credit agreement. The maturity will be extended by 2 years to June 28, 2020. Given the improved credit profile and favorable bank market conditions, Fresenius' proposal also includes reduced credit margins.

S&P has upgraded the corporate credit rating of Fresenius from BB+ to BBB- with a stable outlook. The upgrade reflects Fresenius' enhanced stability – derived from overall critical mass coupled with sound diversification and leading positions in non-cyclical markets – rather than a shift in its financial policy.

Moody's Investors Service has raised the outlook on the Ba1 rating for Fresenius to stable.

Fresenius continues to view itself as an active consolidator in its markets and will continue to focus on financing acquisitions primarily with debt. Minimizing the weighted average cost of capital continues to be a key aim of Fresenius' financial policy. This requires the conscious and prudent use of debt in the Group's capital structure.

Birgit Grund, Senior Vice President of Investor Relations at Fresenius for the past 24 years, plans to leave the Company on March 31, 2015, to pursue a new opportunity. Ulf Mark Schneider, CEO of Fresenius, commented: "Her significant contributions and outstanding commitment were instrumental in building the trust and credibility Fresenius enjoys within the financial community. We wish her all the best in her future endeavors."

Markus Georgi will succeed Birgit Grund as Senior Vice President of Investor Relations, effective April 1, 2015. He has worked in Investor Relations for more than 15 years and will join Fresenius from Celesio AG, where he is currently Director Investor Relations. Prior to joining Celesio in 2011, Georgi was Head of Investor Relations at CompuGroup Medical AG and before that Vice President Investor Relations & Head of Equity Capital Markets at Deutsche Telekom AG. Ulf Mark Schneider, CEO of Fresenius, said: "We are pleased to have Markus Georgi assume this important position at Fresenius. His extensive experience in Investor Relations makes him well qualified for this role. We wish him every success with his new duties."

Fresenius Kabi has sold its German subsidiary CFL GmbH to NewCo Pharma GmbH, a compounding company founded by pharmacist Michael Schill. Both companies specialize in IV oncology drug compounding.

Fresenius Kabi will remain active in compounding. In Germany the focus will be on parenteral nutrition products, an area that offers attractive growth opportunities.

In 2014, CFL had sales of €77 million. Financial terms of the transaction were not disclosed.