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• Growth trend unchanged: organic revenue growth of 4% for full year 2018
• Net income growth of 60% (14% on a comparable basis) at constant currency
• 22nd consecutive dividend increase proposed: +10% to EUR 1.17
• Share buyback program of up to EUR 1bn over the next 2 years
• Meaningful investments in 2019 to capture future growth opportunities and optimize cost base
• Significantly accelerated net income growth in 2020 expected

Key figures (IFRS) – fourth quarter and full year 2018



For a reconciliation of adjusted figures, please refer to the table at the end of the PDF.
cc = constant currency

“Our company’s growth continued in 2018, generating very solid cash flow that we are using for further investments in future growth and to create direct shareholder return,” said Rice Powell, Chief Executive Officer of Fresenius Medical Care. “We achieved a strong increase in earnings per share, steadily strengthened our core competencies, and further positioned the company to meet the challenges of a rapidly evolving healthcare market. The ongoing Global Efficiency Program continues to improve the company’s efficiency. In addition, our focus in 2019 will be on accelerating our investments to further improve our cost base and capture future growth opportunities. Key growth areas are for example U.S. home care supported by the acquisition of NxStage and increasing patient numbers in developing economies.”

Solid revenue growth targeted for 2019 and 2020
For 2019, Fresenius Medical Care expects adjusted revenue^2,3 to grow between 3% and 7% and adjusted net income^2,3 to develop in the range of (2%) to 2%. Based on the ramp-up of the new 2019 cost optimization program, the phasing of contributions from the Global Efficiency Program II and other measures initiated, Fresenius Medical Care anticipates a back-end loaded acceleration of adjusted net income^2,3 growth.

For 2020, Fresenius Medical Care expects adjusted revenue² as well as adjusted net income² to grow at a mid to high single digit rate.

These targets as well as the 2018 base are and will be adjusted in order to make the business performance in the respective periods comparable for items such as: FCPA related charges, the IFRS 16 implementation, the contributions from Sound in H1 2018, the gain (loss) related to divestitures of Care Coordination activities and expenses for the cost optimization program. All effects from the pending NxStage acquisition are excluded from the targets for 2019 and 2020.

Global Efficiency Program II on track
Fresenius Medical Care launched the second phase of its Global Efficiency Program (GEP II) in 2018. The program’s objectives are to identify and realize further efficiency potential and enhance the company’s overall competitiveness. In 2018, we achieved 15% of the targeted sustained cost improvements, which is well ahead of the anticipated contribution of 10% for the year. Therefore, the company increases the lower end of the expected range of sustained cost improvements to EUR 150 million and now expects EUR 150 million to EUR 200 million per annum by 2020.

Investments in future growth and improved cost base
New 2019 cost optimization program
Fresenius Medical Care remains committed to a continuous optimization of its business. In 2019, the company will invest around EUR 100 million in order to sustainably improve its cost base in addition to the GEP II program. Based on enhancements in the products and services business, the 2019 cost optimization program is expected to be accretive to net income already from 2020 onwards.

Investments in future growth
Based on very positive patient sentiment towards the provision of dialysis in the home setting and an innovative product portfolio, Fresenius Medical Care plans to invest in building and redesigning training facilities, rolling out training courses, building up and scaling the home distribution infrastructure and optimizing facilities to meet increasing demand for home dialysis products and services. As a part of the home strategy Fresenius Medical Care is in the process of acquiring NxStage Medical, Inc., which produces and markets an innovative product portfolio of medical devices for use in home dialysis and in the critical care setting.

The second major focus of investment in 2019 will be developing economies such as China. Given the company’s more than 15 years of experience in China on the product side, the strong growth of chronic diseases and the current development of the Chinese healthcare market, Fresenius Medical Care will invest in response to the strong growth impulse there and to participate actively in the market opportunity. Our target is to build a network of more than 100 clinics and to invest in home dialysis in China in the coming years. Another example is the Indian market, where we grow our clinic network and have just launched our new 4008A machine, which is engineered for developing economies.  

Creating direct shareholder return
22nd consecutive dividend increase proposed
Based on the solid results for full year 2018, a new record dividend of EUR 1.17 per share, representing an increase of 10% will be proposed to the Annual General Meeting in May 2019. If approved, and based on dividend-entitled shares, the company would return a total of EUR 359 million to its shareholders.

Share buyback program
Fresenius Medical Care has decided to utilize its strong balance sheet to create additional shareholder return by buying back shares in a total aggregate amount of up to EUR 1 billion over the course of 2019 and 2020 in compliance with EU safe harbor provisions.

NxStage
On 29 January 2019 Fresenius Medical Care announced that the company has extended the end-date under the merger agreement with NxStage Medical, Inc. to account for the interruption of the U.S. Federal Trade Commission’s review of the transaction during the recent U.S. government shutdown. The merger agreement’s end-date has been extended to August 6, 2019, or such earlier date on which there has been 60 consecutive days of full funding of the U.S. Federal Trade Commission’s operations. The closing of the transaction is expected in the first quarter of 2019.  

Revenue development reflects portfolio divestitures
Revenue in the fourth quarter 2018 decreased by 3% at constant currency to EUR 4,300 million. On a comparable basis (excluding the effects from IFRS 15 and the H2 2017 contribution from the divested Sound Inpatient Physicians, Inc.) revenue rose 7% (+7% at constant currency). Health Care Services revenue decreased by 5% (-5% at constant currency) to EUR 3,413 million while Health Care Products revenue increased by 5% to EUR 887 million (+6% at constant currency).

Revenue for the full year 2018 decreased by 2% at constant currency to EUR 16,547 million (+4% at constant currency on a comparable basis). Health Care Services revenue decreased by 9% (-4% at constant currency) to EUR 13,264 million, mainly due to the divestitures in Q2 2018, with organic growth at a solid 4%. Health Care Products revenue increased by 1% (+5% at constant currency) to EUR 3,283 million, primarily driven by higher sales of chronic hemodialysis products and renal pharmaceuticals, as well as acute and peritoneal dialysis products.

Corporate cost in the fourth quarter 2018 amounted to EUR 67 million. The fourth quarter 2017 (EUR 289 million) included a EUR 200 million FCPA-related charge. Corporate costs for the full year 2018 declined from EUR 539 million to EUR 359 million, including a EUR 77 million FCPA-related charge.

Operating income (EBIT) in the fourth quarter 2018 rose 18% (+12% at constant currency) to EUR 613 million. On a comparable basis (excluding effects from the divestitures of Care Coordination activities, the H2 2017 contribution from Sound Physicians, the U.S. ballot initiatives and the 2018 FCPA-related charge), EBIT increased by 42% (+39% at constant currency) to EUR 648 million. For the full year 2018, EBIT was EUR 3,038 million, a strong increase of 29% (+33% at constant currency) on the previous year. On a comparable basis, EBIT increased by 3% (+6% at constant currency) to EUR 2,346 million, mainly due to the lower FCPA-related charge.

Net interest expense in the fourth quarter 2018 was EUR 58 million, compared to EUR 80 million in the fourth quarter 2017. For the full year 2018, net interest expense was EUR 301 million, a year-over-year reduction of 17%. This reduction was supported by the repayment of higher-interest-bearing instruments and their replacement mainly with a Euro bond at lower interest rates in July 2018, a lower debt level, interest income from investing the Sound Physicians sale proceeds, and lower interest on taxes.

Income tax expense in the fourth quarter 2018 benefited from prior year and audit impacts. For the full year 2018, income tax expense increased by 15% to EUR 511 million. On a reported basis, the tax rate was 18.7% (22.2% for the full year 2017), a reduction largely driven by the gain related to the divestitures of Care Coordination activities with a lower tax basis and favorable prior year tax effects.

Excluding (i) the impact from the gain (loss) related to divestitures from Care Coordination activities, (ii) the H2 2017 contribution from Sound Physicians, (iii) the U.S. ballot initiatives and (iv) the FCPA-related charge, the VA agreement and the Natural Disaster costs as well as the effects from the U.S. tax reform, the 2018 effective tax rate decreased by 70 basis points to 30.1%.

Net income¹ for the fourth quarter 2018 increased by 8% (+1% at constant currency) to EUR 425 million. On a comparable basis (excluding (i) the impact from the gain (loss) related divestitures from Care Coordination activities, (ii) the H2 2017 contribution from Sound Physicians, (iii) the U.S. ballot initiatives and (iv) the 2018 FCPA-related charge) net income for the fourth quarter of 2018 increased 13% to EUR 408 million (+9% at constant currency). Based on approximately 306.9 million shares (weighted average number of shares outstanding), basic earnings per share (EPS) improved by 8%, to EUR 1.38. Adjusted for the previously described effects, EPS rose 13% to EUR 1.33 (+9% at constant currency).

Net income¹ for the full year 2018 increased by 55% (+60% at constant currency) to EUR 1,982 million. Excluding the four effects described in the previous paragraph ((i) EUR +673 million, (ii) EUR 38 million, (iii) EUR -40 million, and (iv) EUR -28 million), net income increased 11% to EUR 1,377 million (14% at constant currency). Based on approximately 306.5 million shares, basic EPS increased from EUR 4.17 to EUR 6.47 (+55%). Excluding the effects described above, EPS increased 11% (+14% at constant currency) to EUR 4.49. On an adjusted basis, net income and EPS increased by 4% at constant currency.

North America growth affected by divestitures
In the fourth quarter 2018, North America segment revenue declined 6% to EUR 2,981 million (-9% at constant currency), reflecting the divestiture of Care Coordination activities. On a comparable basis, excluding the effects caused by IFRS 15 and the revenue of Sound Physicians in the fourth quarter 2017, the segment grew by 8% (+5% at constant currency). Health Care Services revenue came in at EUR 2,746 million, of which Care Coordination contributed EUR 291 million. Dialysis Care revenue reached EUR 2,455 million, a strong increase of 10% (+7% at constant currency). Health Care Products revenue grew strongly by 10% to EUR 235 million (+7% at constant currency).

Operating income in North America in the fourth quarter 2018 was EUR 492 million, a decline of 19%. The operating income margin of 16.5% came in below 2017’s strong fourth quarter margin of 19.2%. The Dialysis EBIT in North America fell 4% to EUR 498 million.

For the full year 2018, North America revenue was at EUR 11,570 million, down by 10% (-6% at constant currency). On a comparable basis (excluding the effects from IFRS 15 and the H2 2017 impact from Sound Physicians), revenue fell by 2% (+ 2% at constant currency). Reflecting the divestiture of Care Coordination activities, Health Care Services revenue declined by 11% (-7% at constant currency) to EUR 10,725 million.

Dialysis Care revenue decreased by 2% (+3% at constant currency) to EUR 9,089 million, mainly due to increased organic revenue per treatment and growth in same-market treatments, partially offset by the effect caused by IFRS 15. Care Coordination revenue fell 42% to EUR 1,636 million (-39% at constant currency).

Health Care Products revenue grew by a solid 5% in constant currency to EUR 845 million, driven by higher sales of renal pharmaceuticals and products for peritoneal dialysis and hemodialysis.

Operating income increased by 28% to EUR 2,665 million (+33% at constant currency). The operating income margin reached 23.0% (FY 2017: 16.2%). While the Care Coordination margin was positively influenced by the divestiture of certain activities, the margin in the Dialysis business declined to 17.6% (FY 2017: 19.3%), primarily due to the effect from the prior-year agreement with the U.S. Department of Veterans Affairs, the move of calcimimetic drugs in dialysis services, and lower revenue from commercial payors.

At the end of 2018, 204,107 patients were being treated at the company’s 2,529 clinics in North America. Dialysis treatments increased by 3%.

At $354, revenue per treatment in the United States in 2018 was up by 4% due to the move of calcimimetic drugs, partially offset by lower revenue from commercial payors and higher implicit price concessions. Cost per treatment increased by 6% to $289, largely driven by the move of calcimimetic drugs and property-related costs, partially offset by lower costs for healthcare supplies.

Highest 5-Diamond Patient Safety results in the U.S. achieved
Nearly 100% of Fresenius Medical Care’s U.S. clinics achieved 5-Diamond status in the 5-Diamond Patient Safety Program, compared with 93% of all participating providers. Nearly 44% of all dialysis providers participated. Participation in the 5-Diamond Patient Safety Program is just one part of our commitment to delivering an exceptional patient experience.

Solid Health Care Services growth in EMEA
Revenue in the EMEA segment increased by 3% (+5% at constant currency) to EUR 679 million in the fourth quarter 2018. Health Care Services revenue increased by 6% (+9% at constant currency) to EUR 331 million, while Health Care Products revenue was flat at EUR 348 million (+2% at constant currency). Non-dialysis products contributed revenue of EUR 18 million (Q4 2017: EUR 20 million). Operating income in EMEA decreased by 12% (-11% at constant currency) to EUR 97 million in the fourth quarter 2018, while the operating income margin fell to 14.4% (Q4 2017: 16.7%).

For the full year 2018, EMEA revenue increased by 2% (+4% at constant currency) to EUR 2,587 million. Health Care Services revenue increased by 3% (+6% in constant currency), based on same-market treatment growth and contributions from acquisitions. Health Care Products revenue was stable at EUR 1,313 million (+2% at constant currency), driven by higher sales of machines, products for acute care, renal pharmaceuticals, bloodlines and concentrates, partially offset by lower sales of dialyzers as well as products for peritoneal dialysis. Operating income decreased by 10% to EUR 399 million (-10% at constant currency). The operating income margin fell to 15.4% (FY 2017: 17.4%), mainly due to an impairment of intangible assets and higher personnel costs in certain countries.

At the end of 2018, 65,061 patients were being treated at the company’s 776 clinics in EMEA. Dialysis treatments increased by 4%.

Strong year-end performance in Asia-Pacific
Asia-Pacific revenue grew strongly by 9% (+9% at constant currency) to EUR 454 million in the fourth quarter 2018. At EUR 207 million, Health Care Services revenue in the region increased by 8% (+7% at constant currency). The 9% (+11% constant currency) growth in Health Care Products revenue to EUR 247 million was mainly supported by higher sales of products for chronic hemodialysis and acute care treatments. Operating income climbed a strong 13% (+12% at constant currency) to EUR 86 million. The operating income margin rose to 18.8% (Q4 2017: 18.2%).

For the full year 2018, Asia-Pacific revenue grew by 4% (+8% at constant currency) to EUR 1,689 million, mainly driven by same-market treatment growth and acquisitions. Health Care Services contributed EUR 776 million. Health Care Products revenue of EUR 913 million was mainly supported by higher sales of products for chronic hemodialysis and acute care treatments. Operating income declined by 3% (-1% at constant currency) to EUR 304 million, while the operating income margin was 18.0% (FY 2017: 19.3%).
This development was primarily driven by unfavorable currency transaction effects, partially offset by business growth in certain countries in the region.

At the end of 2018, 31,476 patients were being treated at the company’s 394 clinics in Asia-Pacific. Dialysis treatments increased by 3%.

Lower contribution from Latin America
Latin America revenue was EUR 182 million in the fourth quarter 2018, a decrease of 2% (and a strong increase of 33% at constant currency). Health Care Services revenue was flat at EUR 129 million (+44% at constant currency). Health Care Products revenue decreased by 5% (+8% at constant currency) to EUR 53 million. Operating income came in at EUR 5 million, 63% below 2017’s fourth quarter (-93% at constant currency). The operating margin was 2.8% (Q4 2017: 7.4%).

For the full year 2018, Latin America revenue decreased by 5% (+22% at constant currency) to EUR 686 million. Revenue in Health Care Services was EUR 489 million, a decrease of 5% (+27% at constant currency) due to organic revenue increase driven by hyperinflation in Argentina, contributions from acquisitions, and same-market growth. Health Care Products revenue of EUR 197 million decreased by 4% (+11% at constant currency), driven by higher sales of machines and acute and peritoneal dialysis products, partially offset by lower sales in dialyzers. Operating income decreased by 51% (-65% at constant currency) to EUR 29 million. The operating income margin was 4.2% (FY 2017: 8.1%), mainly impacted by hyperinflation in Argentina and unfavorable currency transaction effects.

At the end of 2018, Fresenius Medical Care treated 32,687 patients at 229 clinics in Latin America. Dialysis treatments increased by 4%.

Solid operating cash flow
In the fourth quarter 2018, the company generated net cash provided by operating activities of EUR 698 million, representing 16.2% of revenue (Q4 2017: EUR 528 million). The increase was primarily attributable to a favorable development of trade accounts receivables due to a positive development of DSO and lower income tax payments.

In the full year 2018, the company generated net cash provided by operating activities of EUR 2,062 million, compared with EUR 2,192 million for the full year 2017. This represents 12.5% of revenue, clearly exceeding our 2018 target of more than 10%. The slight decrease in net cash provided by operating activities was largely driven by the 2017 payment under the VA agreement, increased inventory levels and a discretionary contribution to plan assets in the U.S., partially offset by lower income tax payments. Free cash flow reached EUR 1,059 million (FY 2017: EUR 1,351 million). DSO as of December 31, 2018 was 75 days, the same level as at the end of 2017.

¹Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
²Numbers at constant currency
³Reported revenue 2018 of EUR 16,547 million adjusted for Sound H1 2018; reported net income 2018 of EUR 1,982 million adjusted for Sound H1 2018, the gain (loss) related to divestitures of Care Coordination activities and the 2018 FCPA related charge (for details see reconciliation at the attached tables)

Press Conference
Fresenius Medical Care will hold a press conference at its headquarters in Bad Homburg, Germany to discuss the results of the fourth quarter and full year 2018 on Wednesday, February 20, 2018, at 10 a.m. CET. The press conference will be webcast in the media center of the company's website www.freseniusmedicalcare.com. A replay will be available shortly after the conference.

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Fresenius Medical Care, the world’s largest provider of dialysis products and services, today announced that the company has extended the end-date under the merger agreement with NxStage Medical, Inc. (“NxStage”) to account for the interruption of the Federal Trade Commission’s (“FTC”) review of the transaction during the recent U.S. government shutdown. The merger agreement’s end-date has been extended to August 6, 2019, or such earlier date on which there has been 60 consecutive days of full funding of the FTC’s operations.

Fresenius Medical Care has already signed a consent decree that was proposed by the Staff of the FTC and that remains subject to approval by the FTC Commissioners. Under the terms of the consent decree, Fresenius Medical Care would divest the NxStage bloodlines business to B. Braun Medical to address the comments from FTC Staff.

Fresenius Medical Care, the world’s largest provider of dialysis products and services, today announced the launch of its 4008A dialysis machine, which was especially designed to meet the needs of emerging markets. With the launch of the 4008A, the company is aiming to improve accessibility to life-sustaining dialysis treatment for patients in these countries who are living with end-stage renal disease (ESRD).

The 4008A dialysis machine incorporates Fresenius Medical Care’s high therapy standards while minimizing costs for health care systems. It has primarily been deployed in India, with other countries across the Asia-Pacific region to follow. Worldwide, there is an urgent and growing need for patients with ESRD to receive access to dialysis. A systematic review of worldwide access to treatment estimated that almost two million people in Asia with ESRD who needed dialysis were not receiving it – a treatment gap that is double the number of patients actively being treated. Worldwide use of dialysis is projected to more than double by 2030, with the most growth in Asia, but the number of people without access to dialysis is expected to remain substantial.¹

In response to this need, Fresenius Medical Care has developed the 4008A, which provides life-sustaining medical benefits and safety standards at a cost-effective price. Dr. Olaf Schermeier, Chief Executive Officer for Global Research and Development at Fresenius Medical Care, emphasized the importance of the 4008A launch: “Our global Research and Development team is in constant dialogue with physicians, nursing staff and patients. We put the benefit for our patients at the center of any new development. That is why we have developed this new high-quality dialysis platform that may allow for better cost effectiveness, and brought it to the market in record time.”     

Harry de Wit, CEO of Fresenius Medical Care Asia–Pacific, said: “At Fresenius Medical Care, we are proud of the work we do every day to improve the lives of people living with chronic kidney disease. The launch of the 4008A is a demonstration of our continuing commitment to help ensure that life-changing dialysis is brought within reach of the increasing number of patients who need urgent access to this treatment.”

Importantly, the 4008A offers a high level of safety and handling standards, including essential cleaning functions and battery back-up. The machine is designed to be robust and easily handled, making it ideal for demanding infrastructure and remote locations.

The use of ultrapure dialysis fluid is standard in all treatments with the 4008A machine. Evidence suggests that using ultrapure dialysis fluid provides significant medical benefits to patients – for example, through better preservation of residual renal function, which is the ability of the patient’s own kidneys to eliminate water and uremic toxins.² This has been shown to lower mortality and potentially improve quality of life in people with ESRD.^3,4,5 In addition, the use of ultrapure dialysis fluid could also contribute to reduced inflammation for dialysis patients, potentially helping to reduce their cardiovascular risk and morbidity.^6,7

The dialysis machine and the dialyzer are the two most important products in hemodialysis. While the dialyzer filters the patient’s blood, the dialysis machine pumps it and monitors its circulation outside the body. The machine is also used to maintain the composition of the dialysis solution and introduce anticoagulants into the blood. Dialysis treatments generally last three to six hours, and are commonly carried out three times a week.

More than half of all dialysis machines used worldwide are made by Fresenius Medical Care.

References
¹ Liyanage T et al. Worldwide access to treatment for end-stage kidney disease: a systematic review. www.thelancet.com Published online March 13, 2015 http://dx.doi.org/10.1016/S0140-6736(14)61601-9.
² Schiffl H et al. Ultrapure dialysis fluid slows loss of residual renal function in new dialysis patients. Nephrol Dial Transplant 2002;17: 1814–1818.
³ Shafi T., Jaar B., Plantinga L. Association of Residual Urine Output With Mortality, Quality of Life, and Inflammation in Incident Hemodialysis Patients: The Choices for Healthy Outcomes in Caring for End-Stage Renal Disease (CHOICE) Study. Am J Kidney Dis 2010; 56:348-358.
⁴ Termorshuizen F., Dekker F.Van Manen J. Relative Contribution of Residual Renal Function and Different Measures of Adequacy to Survival in Hemodialysis Patients: An analysis of the Netherlands Cooperative Study on the Adequacy of Dialysis (NECOSAD)-2. J Am Soc Nephrol 2004; 15: 1061–1070.
⁵ Obi Y., Rhee C., Mathew A. Residual Kidney Function Decline and Mortality in Incident Hemodialysis Patients. J Am Soc Nephrol 2016; 27: 3758–3768.
⁶ Sitter Tet al. Dialysate related cytokine induction and response to recombinant human erythropoietin in haemodialysis patients.Nephrol Dial Transplant 2000; 15: 2107–1211.
⁷ Lederer SR, Schiffl H. Ultrapure Dialysis Fluid Lowers the Cardiovascular Morbidity in Patients on Maintenance Hemodialysis by Reducing Continuous Microinflammation. Nephron 2002; 91: 452–455.

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Fresenius Medical Care, the world’s largest provider of dialysis products and services, is still in the process of seeking approval by the U.S. Federal Trade Commission (FTC) for its acquisition of NxStage Medical, Inc. (“NxStage”) and therefore now expects the transaction to close in early 2019.

NxStage, which like Fresenius Medical Care North America is headquartered in the Boston, Massachusetts area, was founded in 1998 and has approximately 3,800 employees worldwide. In 2017, NxStage delivered USD 394 million in revenue.

Unicyte AG, a subsidiary of Fresenius Medical Care, has initiated a long-term research collaboration with Prof. Dr.  Tobias B. Huber of Germany’s Medical Center Hamburg-Eppendorf (UKE) to explore the molecular and cellular mechanisms of kidney diseases.

Prof. Huber, Chair of the III. Department of Medicine at UKE, a major university hospital, is a leading expert on glomerular diseases. He will direct the research program, which aims to address various forms of kidney disease including diabetic nephropathy. The goals of the collaboration are to gain further insights into the process leading to the gradual decline in renal function and to identify genetic, signaling and soluble factors involved in the underlying mechanisms.

Unicyte, a leading regenerative medicine company with translational programs in the field of kidney disorders and other illnesses, is building on successful partnerships with other academic partners. These include a collaboration of 15 years’ standing with the University of Torino in Italy.

Dr. Olaf Schermeier, Fresenius Medical Care’s CEO for Global Research and Development, said: “As Unicyte’s organizational structure is designed to leverage the benefits of academia-industry partnerships, the collaboration with Prof. Huber offers a unique opportunity to help patients with kidney disorders by developing innovative treatment options based on a holistic understanding of renal dysfunction. I’m very excited about this collaboration with one of the leading hospitals in Europe, as it could lead to new treatment options that will complement current kidney care.”

Prof. Tobias B. Huber stated: “Because fundamental scientific questions concerning the pathomechanisms of kidney diseases remain to be answered, we will further explore the potential of new options for the treatment of kidney patients in pre-dialysis stages. The collaboration with Unicyte as industry partner will be fruitful in developing a therapy from pre-clinical research through to clinical practice. Our goal is to provide excellent new therapies, reduce the burden of disease, and significantly improve the lives of our patients.”

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• For 2019, an indicative and preliminary assumption of
  • solid revenue growth on a comparable basis¹
  • net income² at around the FY 2018 level on a comparable basis¹
• Use of cash currently under evaluation

Fresenius Medical Care, the world’s largest provider of dialysis products and services, has decided to update the market early by providing its indicative preliminary assumptions for the business development in 2019.

“With the pending acquisition of NxStage Medical Inc., the corresponding build out of our home dialysis services infrastructure in the United States as well as investments in future growth markets in the Products as well as the Services business such as China, we have an investment year ahead of us,” said Rice Powell, Chief Executive Officer of Fresenius Medical Care. ”We would like to share as an early indication that 2019 will have a clear focus on preparing the company for future sustainable, profitable growth. For 2019, we currently broadly assume solid comparable¹ revenue growth and the comparable¹ net income to be around the level of FY 2018.”

Fresenius Medical Care remains committed to a continuous optimization of its business, weighing future sustainable, profitable growth opportunities of potential investments and implied risks. From a global perspective, Fresenius Medical Care invests in new products as well as growth markets such as China. From an operational perspective, the company invests to increase the global home dialysis penetration and from an innovation perspective, the company makes investments such as in Humacyte Inc. to meet unmet medical needs.

Fresenius Medical Care is reviewing all factors as part of its budgeting process and plans to publish the guidance for 2019, at the usual level of detail, along with the company’s fiscal year 2018 results, which are planned to be released on February 20, 2019.

Targets 2020
Fresenius Medical Care intends to reset its 2020 constant currency targets to also reflect the IFRS accounting changes, the divestiture of Sound Inpatient Physicians Holdings and the pending acquisition of NxStage Medical Inc., all as highlighted in the previous quarter. The reset targets are scheduled to be published along with the company’s fiscal year 2018 results, which are planned to be released on February 20, 2019.

Conference call
Fresenius Medical Care will host a conference call on December 7, 2018, at 9:00 a.m. CET / 3:00 a.m. EST. Details will be available on the company’s website www.freseniusmedicalcare.com in the “Investors/Events” section. A replay will be available on the same day of the call.

¹“comparable” is on a constant currency basis and reflects an adjustment for those effects that are as per the company´s view not related to the company´s operating business performance such as, for example, the effects of IFRS 16, sizeable portfolio changes like the divestiture of Sound Inpatient Physicians Holdings or the pending acquisition of NxStage Medical Inc. or other effects of one-time nature like FCPA-related charges or the cost of the 2018 U.S. ballot initiatives. For the preliminary indicative 2019 guidance the “comparable” 2018 basis translates roughly at current currencies for revenue in a range of 15,850 – 16,050 EUR million and for net income in a range of 1,350 – 1,365 EUR million. This is subject to fluctuations in the currency rates in the fourth quarter of 2018.
²Net income attributable to shareholders of FMC AG & Co. KGaA

Fresenius Medical Care, the world’s largest provider of dialysis products and services, continues to expand its dialysis care network through the acquisition of further dialysis centers and renal hospitals in China. The company acquired a 70% share of Guangzhou KangNiDaiSi Medical Investment Co., Ltd, which focuses on dialysis and related chronic disease services. KangNiDaiSi has three independent hemodialysis centers under construction in the cities of Guangzhou and Zhaoqing in Guangdong province, which borders Hong Kong in southeast China. A proposed fourth center in Guangzhou awaits government approval.

Fresenius Medical Care also acquired 55% stakes in Henan Aishen Hospital Management Co. Ltd (Henan Aishen) and Aishen Beijing Hospital Management Co., Ltd (Aishen Beijing). Henan Aishen and Aishen Beijing are building 13 dialysis centers and a grade I renal hospital to complement the dialysis care network that will cover Henan, Shandong, Guangdong and Hainan provinces. There are further plans to expand into new locations in the future. In addition, the company has taken a 60% share of Daqing Kangda Dialysis Center Co., Ltd in Heilongjiang province.

The acquisitions follow the purchase of Yunnan Kunming Wuhua Healthcare Hospital in April 2017, and the acquisition of a 70% share of Sichuan Hejiang Kangcheng Renal Hospital in June 2018 as well as the acquisition of a 70% share of Sichuan Ziyang Zhongxin Hospital, both located in the Sichuan province.

Rice Powell, CEO of Fresenius Medical Care, said: “Fresenius Medical Care is committed to improving access to world-leading dialysis technology and chronic disease management services for the more than 120 million people in China who are living with chronic kidney disease. These acquisitions mark an important strategic step in our business development in China. As the second largest product market, China is already today an important business growth driver for Fresenius Medical Care. We have been continuously investing in enhancing our product range within the local market. We have also started to enter the provider business to introduce advanced dialysis services and operations management in China.”

“As a leading provider of dialysis products and services in China, we are eager to work with other companies that are dedicated to elevating the treatment of kidney disease in this huge country. In particular, we focus on increasing access to treatment in rural areas, where there have traditionally been fewer options for patients,” said Harry de Wit, CEO of Fresenius Medical Care Asia-Pacific. “We strive to introduce our world-leading chronic disease management system and high-quality dialysis treatment services throughout the country. And we will continue to search for opportunities to partner with institutions from the public and private sectors and invest in new dialysis centers and renal hospitals.” 

The prevalence of chronic kidney disease (CKD) in China is 10.8% of the adult population, which equates to more than 120 million people. According to research conducted by the Chinese Society of Nephrology, there currently are one million ESRD patients registered in China, but only around 500,000 receive dialysis treatment. 

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Fresenius Medical Care, the world’s largest provider of dialysis products and services, today released the following statement in response to the defeat of the ballot initiative Proposition 8 in California.

“We are pleased that California voters have rejected Proposition 8 in yesterday’s ballot election. This is a big win for California dialysis patients,” said Rice Powell, CEO of Fresenius Medical Care. “Proposition 8 was a deeply flawed measure that would have dangerously reduced access for dialysis patients in California by setting arbitrary limits on what insurance companies are required to pay for dialysis care. We at Fresenius Medical Care are committed to offering high-quality products and services to our patients and will continue to do so in California and around the world.”

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Head of Corporate Communications
T +49 (0) 6172 608-96008
pr-fre@fresenius.com

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• Patient growth continues across all regions
• Operating margin in North America improved to 18.5% in the third quarter
• Dialysis Care revenue growth in North America of 6% (+5% at constant currency)
• Decline in Care Coordination revenue following Sound divestiture
• Outlook 2018 reflects lower than expected growth acceleration in Q3 and anticipation of soft business development in Q4 2018

¹ For a detailed reconciliation, please refer to the table at the end of the press release
² Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA

Rice Powell, Chief Executive Officer of Fresenius Medical Care, said: “Our third quarter was affected by several developments whose combined impact on our results was greater than expected. Growth did not accelerate to the extent previously projected. We anticipate the impact from the current level of growth and less acquisitions to continue in the fourth quarter. We have identified countermeasures and have begun implementation. Fresenius Medical Care’s growth will continue.”

Growth in Dialysis Care revenue

Revenue in the third quarter 2018 decreased by 6% to EUR 4,058 million (-6% at constant currency), mainly driven by the higher comparable base which included the Q3 2017 revenue contribution from Sound Inpatient Physicians (“Sound”) of EUR 253 million as well as the impact from the IFRS 15 implementation (“IFRS 15”) of EUR 117 million. Excluding these two effects, revenue increased by 2% on a comparable basis (+3% at constant currency), mainly driven by an increase in same market treatments in North America of 3%.

Health Care Services revenue decreased by 8% to EUR 3,258 million (-8% at constant currency), primarily driven by the two effects described above (Sound and IFRS 15). On a comparable basis, Health Care Services revenue increased by 3%, mainly driven by organic growth in Dialysis Care revenue resulting from higher volumes, partly offset by the largely anticipated revenue decline in Care Coordination. Care Coordination revenue declined by 53% to EUR 354 million (-56% at constant currency), mainly resulting from the sale of Sound and the IFRS 15 implementation. On a comparable basis, Care Coordination revenue declined by 22% (-27% at constant currency). This decline was mainly the result of the shift of calcimimetic drugs into the clinical environment and a higher prior-year revenue contribution due to the initial revenue recognition for the new 2017 ESCOs. Health Care Products revenue was flat at EUR 800 million (+1% at constant currency), mainly impacted by the difficult economic environment in certain emerging countries in the EMEA and Latin America regions. At constant currency, Dialysis Products revenue increased by 2% driven by higher sales of renal pharmaceuticals and products for acute care treatments, partially offset by lower sales of chronic hemodialysis products.

In the first nine months of 2018, revenue decreased by 8% to EUR 12,247 (-2% at constant currency), mainly driven by the effects of Sound and IFRS 15. On a comparable basis, revenue decreased by 4%, impacted by negative foreign currency effects (+3% at constant currency).

Operating income (EBIT) impacted by one-time effects

Total EBIT reached EUR 527 million in the third quarter of 2018, a decrease of 13% (-20% at constant currency). The strong decrease was mainly attributable to the higher comparable base which included the EBIT contribution from Sound of EUR 20 million. In addition, the increased provision for the FCPA related charge in the amount of EUR 75 million and the contributions to the opposition to the ballot initiatives in the U.S. of EUR 23 million (both not tax effected) as well as a EUR 10 million favourable foreign currency translation effect related to the divestitures of Care Coordination activities affected the EBIT growth. The increase of the FCPA provision reflects an understanding with the U.S. Government on the financial aspects of a potential settlement and an update of ongoing legal costs to continue settlement discussions. However, significant non-financial matters are still under discussion with the government and must be resolved to the company’s satisfaction for a settlement to occur. In addition, EBIT was negatively impacted by the difficult economic situation in certain emerging countries, including hyperinflation in Argentina. On a comparable basis, EBIT increased by 5% (+4% at constant currency).

In the first nine months of 2018, EBIT increased by 32% (+39% at constant currency). The strongest contributor to this increase was the gain related to the divestitures of Care Coordination activities. On a comparable basis, EBIT decreased by 7% (-2% at constant currency).

Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA decreased by 8% to EUR 285 million in the third quarter of 2018 (-17% at constant currency). On a comparable basis net income increased by 20% to EUR 364 million (+19% at constant currency). Based on the number of approximately 306.5 million shares (weighted average number of shares outstanding), basic earnings per share (EPS) amounted to EUR 0.93 (-8%). On a comparable basis the company generated an EPS of EUR 1.19, representing an increase of 20% (+19% at constant currency).

In the first nine months of 2018, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 76% (+86% at constant currency) to EUR 1,557 million, mainly driven by the gain related to the divestitures of Care Coordination activities. On a comparable basis, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA reached EUR 969 million, an increase of 10% (+16% at constant currency).

Patient growth continues across all regions

North America revenue, which represents 70% of total revenue in the third quarter of 2018, decreased by 9% to EUR 2,843 million (-11% at constant currency) and increased by 4% on a comparable basis (+1% at constant currency). Organic growth in North America was 2%.

Dialysis Care revenue increased by 6% to EUR 2,328 million (+5% at constant currency). This increase was mainly driven by an increase in organic revenue per treatment, same market treatment growth of 3% in the U.S. and contributions from acquisitions, to some extent diluted by the implementation of IFRS 15 and the effect of 1 less dialysis day. Volume growth in North America was positively impacted by a strong increase in home dialysis in the third quarter, leading to a home penetration rate in the U.S. of 12.4%. On a comparable basis, Dialysis Care revenue increased by 9%, partly compensated by negative growth in the acute services business following the termination of unprofitable contracts as well as the delay of certain de novo clinics. Care Coordination revenue decreased by 57% to EUR 300 million (-61% at constant currency), mainly driven by the prior-year revenue contribution from Sound as well as the implementation of IFRS 15. On a comparable basis, Care Coordination revenue decreased by 25% (-32% at constant currency). This decrease was mainly driven by the shift of calcimimetic drugs into the clinical environment as well as a higher prior-year revenue contribution due to the initial revenue recognition for the new 2017 ESCOs.

In the U.S., the average revenue per treatment, adjusted for the implementation of IFRS 15 and excluding the 2017 impact of the VA Agreement, increased by USD 15 from USD 341 to USD 356. The increase was mainly driven by the shift of calcimimetic drugs into the clinical environment, partially offset by lower revenue from commercial payors.

Cost per treatment in the U.S., adjusted for the implementation of IFRS 15 and prior-year natural disaster cost, increased by USD 19 from USD 271 to USD 290. This increase was largely a result of the introduction of calcimimetic drugs in the clinical environment, increased property and other occupancy related costs as well as the impact from one less dialysis day.

Dialysis Products revenue in North America increased by 2% to EUR 215 million (+1% at constant currency) due to higher sales of renal pharmaceuticals, peritoneal dialysis products, partially offset by lower sales of chronic hemodialysis products.

Total EBIT for the North America segment was EUR 525 million in the third quarter, an increase of 9% (+2% at constant currency). On a comparable basis, EBIT was EUR 538 million, an increase of 16%. The EBIT margin increased to 18.5% (18.9% on a comparable basis). The increase in EBIT margin on a comparable basis was mainly due to lower personnel expenses and the positive impact from income attributable to a consent agreement on certain pharmaceuticals.

In the first nine months of 2018, North America revenue decreased by 12% to EUR 8,589 million (-5% at constant currency). On comparable basis, revenue decreased by 5% (+1% at constant currency). Mainly driven by the gain related to divestitures of Care Coordination activities, EBIT went up by 47% (+57% at constant currency) to EUR 2,173 million in the first nine months of 2018.

As of the end of September 2018, the company was treating 201,220 patients (+3%) at its 2,486 clinics (+5%) in North America. Dialysis treatments increased by 3%.

EMEA revenue decreased by 2% (+1% at constant currency) to EUR 620 million in the third quarter of 2018, mainly driven by the positive development in Health Care Services revenue which increased by 4% at constant currency. The increase in Health Care Services revenue was driven by same-market treatment growth (+3%) and acquisitions, partially offset by the effect of sold and closed clinics as well as one less dialysis day. Health Care Products revenue decreased by 5% (-3% at constant currency) to EUR 306 million. Dialysis Products revenue decreased by 5% (-2% at constant currency), mainly due to lower sales of dialyzers, partially offset by higher sales of machines.

EBIT was EUR 88 million in the third quarter of 2018, a decrease of 18% (-16% at constant currency). The EBIT margin decreased from 16.8% to 14.1%, mainly due to the favorable prior-year impact from a legal settlement, higher personnel costs in certain countries, the impact of one less dialysis day and unfavorable foreign currency translation effects.

In the first nine months of 2018, EMEA revenue increased by 1% to EUR 1,908 million (+4% at constant currency), while EBIT of EUR 302 million was 10% below the prior year´s level (-9% at constant currency).

As of the end of September 2018, the company had 64,539 patients (+4%) being treated at 769 clinics (+5%) in the EMEA region. Dialysis treatments increased by 4%.

Asia-Pacific revenue grew by 3% to EUR 421 million (+4% at constant currency) in the third quarter of 2018. Dialysis Products showed again a solid business performance, with revenue growing 4% to EUR 227 million (+6% at constant currency). This growth was mainly driven by higher sales of hemodialysis products and products for acute care, particularly in China and Indonesia. Health Care Services revenue in the region increased by 1% to EUR 194 million (+1% at constant currency). Care Coordination revenue increased by 4% to EUR 54 million (+7% at constant currency). The growth in Care Coordination revenue in Asia Pacific was mainly related to a strong organic revenue growth and acquisitions. EBIT decreased by 14% to EUR 66 million (-14% at constant currency). The EBIT margin decreased to 15.7%, driven by unfavorable foreign currency transaction effects and increased costs for business growth.

In the first nine months of 2018, Asia-Pacific revenue increased by 2% to EUR 1,235 million (+8% at constant currency). EBIT decreased by 8% to EUR 218 million (-5% at constant currency).

As of the end of September 2018, the company had 31,152 patients (+3%) being treated at 390 clinics in Asia-Pacific (0%). Dialysis treatments increased by 2%.

Latin America delivered revenue of EUR 171 million in the third quarter of 2018, a decrease of 2%, but an increase of 27% at constant currency. The growth at constant currency was mainly due to a strong growth in Health Care Services (+34% at constant currency) driven by an increase in organic revenue per treatment mainly due to hyperinflation in Argentina, acquisitions and growth in same market treatments (+1%). Health Care Products revenue in Latin America decreased by 5% to EUR 49 million, but increased by 9% at constant currency. The increase in constant currency was due to higher sales of machines and products for acute care. EBIT in the third quarter was negative at EUR -1 million following the effects of hyperinflation in Argentina as well as unfavorable foreign currency transaction effects and higher bad debt expense. The EBIT margin was therefore also negative (-1%).

In the first nine months of 2018, Latin America revenue decreased by 6% to EUR 505 million, but increased by 18% at constant currency. EBIT was EUR 24 million, a decrease of 47% (-56% at constant currency).

As of the end of September 2018, the company was treating 32,174 patients (+5%) at 227 clinics in Latin America (-1%). Dialysis treatments increased by 4%.

Corporate cost in the third quarter were EUR 76 million on a comparable basis (flat at constant currency). Including the increased provision for the FCPA related charge in the amount of EUR 75 million, corporate cost amounted to EUR 151 million.

Net interest expense was EUR 74 million compared to EUR 86 million in the third quarter of 2017, a decrease of 14% (-14% at constant currency). The decrease was driven by a decreased debt level and interest income from the investment of the Sound proceeds. Income tax expense was EUR 104 million in the third quarter of 2018, which translates into an effective tax rate of 22.9%, compared to last year’s Q3 tax rate of 29.0%. The strong reduction was largely driven by the U.S. Tax Reform and the gain related to divestitures of Care Coordination activities, partly offset by non-tax-deductible expenses (mainly 2018 FCPA related charges and U.S. ballot initiatives).

Cash flow

In the third quarter of 2018, the company generated EUR 609 million of operating cash flow, compared to EUR 612 million in the previous year’s third quarter. This slight decrease was mainly driven by higher tax payments and discretionary contributions to pension plan assets in the U.S., almost fully offset by decreases in accounts receivable. Operating cash flow in percent of revenue was 15.0% in the third quarter of 2018. The number of days sales outstanding decreased sequentially by five days compared with Q2 2018 to reach 77 days. Free cash flow (Net cash used in operating activities, after capital expenditures, before acquisitions and investments) amounted to EUR 352 million for the three months ended September 30, 2018 compared to EUR 386 million for the same period of 2017. Free cash flow in percent of revenue was 8.7% and 8.9% for the three months ended September 2018 and 2017, respectively.

Outlook 2018

The company expects revenue³ growth between 2% and 3% at constant currency. Net income on a comparable basis⁴ is expected to increase by 11% to 12% at constant currency and on an adjusted basis^4,5  to increase by 2% to 3% at constant currency.

The targets exclude the effect from the planned acquisition of NxStage Medical.

³ 2017 adjusted for the effect of IFRS 15 implementation and the contribution of Sound Physicians in H2 2017
⁴ Attributable to shareholders of Fresenius Medical Care AG & Co. KGaA, adjusted for the contribution from Sound Physicians in H2 2017 and gain/loss related to divestitures of Care Coordination activities, 2018 FCPA related charge and U.S. Ballot Initiatives.
⁵ VA Agreement, Natural Disaster Costs, 2017 FCPA related charge, U.S. Tax Reform

Other updates

Regarding the planned acquisition of NxStage Medical, Inc. the parties have agreed to extend their closing deadline to February 5, 2019, but continue to expect closing within this year.

As of September 30, 2018, Fresenius Medical Care had 112,134 employees (full-time equivalents) worldwide, compared to 113,648 employees at the end of September 2017. This decrease was mainly attributable to the divestiture of Sound.

There will be a change to the composition of the Supervisory Board. Deborah Doyle McWhinney will resign effective November 1, 2018 due to private reasons. A replacement process has been initiated.

Conference call

Fresenius Medical Care will host a conference call to discuss the results of the third quarter on October 30, 2018, at 3:30 p.m. CET / 10:30 a.m. EDT. Details will be available on the company’s website www.freseniusmedicalcare.com in the “Investors/Events” section. A replay will be available shortly after the call.

Contact

Head of Corporate Communications
T +49 (0) 6172 608-96008
pr-fre@fresenius.com

Documents

Text as PDF document (PDF, 77 KB)

Fresenius Medical Care, the world’s largest provider of dialysis products and services, today announced that the request of Fresenius Medical Care to appoint Prof. Dr. Gregor Zünd as new member of the Supervisory Board of Fresenius Medical Care AG & Co. KGaA has been granted by the responsible court. As requested, the term of office of Professor Zünd is limited until the end of the next ordinary Annual General Meeting in May 2019. The Supervisory Board of Fresenius Medical Care AG & Co. KGaA believes that his extensive experience and outstanding expertise qualify Professor Zünd for this position and will propose the next Annual General Meeting to approve his appointment to the Supervisory Board. 

Professor Zünd, 59, is Chief Executive Officer of the University Hospital of Zürich since 2016. As Director of Research and Education he has been member of the hospital’s Executive Board since 2008. In parallel, he has been Managing Director of the Center for Clinical Research and Head of the Surgical Research department at University Hospital Zurich. Until 2001, Professor Zünd was Senior Physician at the Clinic for Cardiovascular Surgery at University Hospital Zurich. He spent several years at Texas Medical Center, Houston, and at Harvard Medical School, Boston. Gregor Zünd is Professor ad personam at the University of Zurich. 

The special election became necessary after the previous Chairman of the Supervisory Board of Fresenius Medical Care & Co. KGaA, Dr. Gerd Krick, stepped down from the Supervisory Board at the end of this year’s Annual General Meeting. The Supervisory Board subsequently elected Dr. Dieter Schenk, previously the Deputy Chairman of the Supervisory Board, as Chairman.