Fresenius Medical Care, the world’s leading provider of products and services for individuals with renal diseases, has entered the Dow Jones Sustainability World Index. Additionally, the company has been included for the 13th time in the Dow Jones Sustainability Index (DJSI) Europe. Fresenius Medical Care achieved an improved rating in most of the evaluated categories, and was awarded maximum scores for its environmental and social reporting. The company was also awarded significantly higher scores in the areas of occupational health and safety, talent attraction and retention, and customer relationship management.

“To us, successful sustainability management means creating lasting economic, environmental and social value,” said Helen Giza, CEO of Fresenius Medical Care. “We are proud that the DJSI has recognized our efforts to integrate sustainable actions systematically into our company.”

To compile the Dow Jones Sustainability Indexes, the international financial services company S&P Global evaluates the environmental, social and economic performance of companies. The 10 percent of global companies with the highest evaluations form the DJSI World. The DJSI Europe index is composed of the top 20 percent of the companies headquartered in Europe.

You can find an overview of Fresenius Medical Care’s progress in sustainability here.
 

Helen Giza (54) has been appointed Chief Executive Officer of Fresenius Medical Care, the world's leading provider of products and services for individuals with renal diseases, with immediate effect. Previously, she was Deputy CEO of Fresenius Medical Care. The Supervisory Board of Fresenius Medical Care Management AG unanimously appointed her to succeed Dr. Carla Kriwet (51), who will leave the company at her own request and by mutual agreement due to strategic differences. Helen Giza will continue to serve as Chief Financial Officer of Fresenius Medical Care until a successor is appointed for this position.

In her capacity as CEO of Fresenius Medical Care, Ms. Helen Giza will also be a member of the Management Board of Fresenius Management SE. Dr. Carla Kriwet has resigned from her position as a member of the Management Board of Fresenius Management SE.

Michael Sen, Chairman of the Fresenius Medical Care Management AG Supervisory Board and CEO of Fresenius, said: “In a fundamentally sound industry Fresenius Medical Care now needs to sharpen its focus on the operational turnaround, further drive performance improvements, and focus on its core. We are delighted that Helen Giza will take over as CEO. She is ideally suited to lead Fresenius Medical Care for what lies ahead. During her tenure with the company, Helen Giza has gained thorough expertise in renal healthcare and has a deep understanding of the company. I am very much looking forward to continuing working with Helen Giza in her new role. On behalf of the Supervisory Board, I would like to thank Carla Kriwet, and we wish her all the best for the future.”

Helen Giza said: “I am honored by the appointment and trust the Supervisory Board has placed in me. The role comes with significant responsibility towards the patients we serve. With the knowledge gained as CFO and Chief Transformation Officer of the company, I feel well placed to sharpen the focus on operational turnaround. I truly believe in Fresenius Medical Care’s mission, its passionate employees and great potential.”

Carla Kriwet said: “In this short time, I have met a fascinating company with a very positive corporate culture that works every day to make patients' lives more worth living. The company has great growth potential and is about to undergo a major transformation. I thank my whole team for the great support and wish the company all the best!“

Helen Giza joined Fresenius Medical Care in 2019 as Chief Financial Officer and took on the additional roles of Deputy CEO and Chief Transformation Officer in 2022 heading the FME25 transformation program. Previously, she was Chief Integration and Divestiture Management Officer at Takeda Pharmaceuticals since 2018. Before joining the Takeda Corporate Executive Team, she served as Chief Financial Officer of Takeda’s U.S. business unit since 2008. Prior to that she held a number of key international finance and controlling positions, amongst others at TAP Pharmaceuticals and Abbott Laboratories. Helen Giza is a U.K. Chartered Certified Accountant and holds a Master of Business Administration from the Kellogg School of Management at Northwestern University in Evanston, Illinois, USA.

• Business development continues to be strongly impacted by highly uncertain macroeconomic environment driving wage and general cost inflation in all reporting segments
• Impacts of improvements in North American Health Care Services operations delayed
• COVID-19-related excess mortality in line with expectations
• Important step in value-based care achieved with closing of InterWell Health merger
• Management Team in the process of detailing broader turnaround plan
• Revised FY 2022 targets: 
  o    revenue growth still expected at a low-single digit percentage rate 
  o    income now expected to decline in the high teens to mid-twenties percentage range

Carla Kriwet, Chief Executive Officer of Fresenius Medical Care since 1st October, said: “I am excited having started to work for this great company. From the many visits and exchanges in my first month as CEO, I can witness the tremendous dedication of our employees to our patients around the world, under difficult macroeconomic circumstances. While the FME25 new operating model and savings provide an important foundation, there is also a clear urgency to turnaround our operational performance with bold interventions. We are defining a broader turnaround plan, which will also include a culture of performance and accountability.”

“Fresenius Medical Care continues to operate in a challenging and highly volatile macroeconomic and operational environment. As expected, inflationary developments persisted and weighed on our earnings. Open positions in our dialysis clinics were reduced but remained at an elevated level, impacting both costs and growth in Health Care Services. While it is disappointing that the execution against our North America recovery plan is delayed, we are confident that the intensified efforts will improve the performance. Against this backdrop, as a matter of caution, we revise our guidance for 2022 net income development.”, said Helen Giza, Chief Financial Officer of Fresenius Medical Care.

 

¹ Special items include costs related to the FME25 program, the impact of the war in Ukraine, the impact of hyperinflation in Turkiye, the remeasurement effect on the fair value of the investment in Humacyte, Inc. (Humacyte investment remeasurement), the net gain related to InterWell Health and other effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of giving guidance. These items are excluded to ensure comparability of the figures presented with the Company’s financial targets which have been defined excluding special items. For further details please see the reconciliation at the end of the Press Release.
² Attributable to shareholders of Fresenius Medical Care AG & Co. KGaA

Key priorities 
Given the operational environment and the likely headwinds for 2023, the Management Team is defining a broad turnaround plan. It will address performance issues in North American Health Care Services, the structural cost base of Health Care Products and an extended cost saving program.

Based on the Company’s new operating model, that will come to life in January 2023, Fresenius Medical Care will not only simplify its organization and significantly reduce overhead costs but rigorously optimize its portfolio in both – the future Care Delivery (Health Care Services) and Care Enablement (Health Care Products) segments. The subsequent capital allocation will focus on profitable growth businesses and improving operational leverage.

InterWell Health merger closed
With the closing of the three-way merger of Fresenius Health Partners, InterWell Health and Cricket Health, a premier value-based kidney care provider has been created in the U.S. This is an important step in the execution of Fresenius Medical Care’s strategy. The new company operates under the InterWell Health brand and will be fully consolidated by Fresenius Medical Care as the majority owner. The closing of the merger resulted in a net gain of EUR 56 million (on operating income level) in the third quarter, which is treated as a special item.

Improvements in North American Health Care Services delayed
Fresenius Medical Care continues to face an unprecedented labor market situation in the U.S., resulting in staff shortages, high turnover rates and meaningfully higher costs. This has continued to impact growth in U.S. Dialysis Services as well as in downstream assets and consequently affected operational leverage in both. Earnings effects were partially mitigated by income attributable to a consent agreement on certain pharmaceuticals in the third quarter.

The impacts of Fresenius Medical Care’s focused efforts to improve North American Health Care Services operations are delayed against the Company’s previous assumptions. Fresenius Medical Care now expects the related effects to materialize in 2023.

The challenging macroeconomic inflationary environment persists, resulting in higher logistics costs as well as raw material and energy prices. Due to this situation not easing, it is assumed to further significantly impact the earnings development, in particular in Health Care Products, for the remainder of the year.

COVID-19-related excess mortality in line with expectations
In the third quarter, COVID-19-related excess mortality among Fresenius Medical Care’s patients amounted to approximately 1,100 (Q1 2022: ~2,400; Q2 2022: ~800 ), in line with the Company’s expectations for the full year. Fresenius Medical Care carefully observes and assesses the development of infection rates in fall. Excess mortality accumulated to approximately 24,600 since the start of the pandemic.

The overall estimated adverse effect of accumulated excess mortality on organic growth in the Health Care Services business amounted to around 230 basis points in the third quarter.

Earnings impacted by higher labor costs and inflationary cost increases
Revenue increased by 15% to EUR 5,096 million (+3% at constant currency, +2% organic) in the third quarter.

Health Care Services revenue grew by 16% to EUR 4,082 million (+2% at constant currency, +2% organic). At constant currency, this was mainly driven by organic growth in EMEA, Asia-Pacific and Latin America, which was partially offset by negative organic growth in North America due to COVID-19 and capacity constraints in certain clinics.

Health Care Products revenue increased by 11% to EUR 1,014 million (+4% at constant currency, +4% organic). Constant currency growth was mainly driven by higher sales of in-center disposables and renal pharmaceuticals, partially offset by lower sales of machines for chronic treatment.

In the first nine months, revenue grew by 11% to EUR 14,401 million (+2% at constant currency, +1% organic). Health Care Services revenue increased by 12% to EUR 11,471 million (+2% at constant currency, +1% organic); Health Care Products revenue grew by 8% to EUR 2,930 million (+3% at constant currency, +3% organic).

Operating income decreased by 7% to EUR 472 million (-17% at constant currency) in the third quarter, resulting in a margin of 9.3% (Q3 2021: 11.4%). Operating income excluding special items¹ decreased by 8% to EUR 470 million (-18% at constant currency), resulting in a margin of 9.2% (Q3 2021: 11.6%). At constant currency, the decline was mainly due to higher labor costs as well as inflationary and supply chain cost increases. This was partially offset by EUR 80 million (Q3 2021: EUR 0.3 million) of Provider Relief Funding from the U.S. government to compensate for certain COVID-19-related costs.

³ Historical excess mortality updated for late entries
In the first nine months, operating income declined by 17% to EUR 1,160 million (-24% at constant currency), resulting in a margin of 8.1% (9M 2021: 10.8%). At constant currency, the development was supported by EUR 240 million (9M 2021: EUR 14 million) of Provider Relief Funding from the U.S. government to compensate for certain COVID-19-related costs. Excluding special items1, operating income decreased by 7% to EUR 1,322 million (-14% at constant currency), resulting in a margin of 9.2% (9M 2021: 11.0%).

Net income² decreased by 16% to EUR 230 million (-24% at constant currency) in the third quarter. Excluding special items, net income² declined by 17% to EUR 231 million (-25% at constant currency). Besides the above-mentioned effects on operating income, the constant currency decline was mainly due to an increase in the proportionate share of non-tax-deductible expenses compared to taxable income. Basic earnings per share (EPS) decreased by 16% to EUR 0.78 (-24% at constant currency). Excluding special items¹, EPS declined by 17% to EUR 0.79 (-25% at constant currency).

In the first nine months, net income² decreased by 28% to EUR 535 million (-34% at constant currency). Excluding special items¹, net income² declined by 13% to EUR 660 million (-18% at constant currency). EPS decreased by 28% to EUR 1.82 (-34% at constant currency). Excluding special items¹, EPS declined by 13% to EUR 2.25 (-19% at constant currency).

Regional developments
In North America, revenue increased by 15% to EUR 3,556 million (-1% at constant currency, -2% organic) in the third quarter. At constant currency, this was mainly due to a decline in organic growth in the Health Care Services business, which was due to COVID-19 and capacity constraints in certain clinics, as well as in the Health Care Products business due to lower sales of machines for chronic treatment including the effects the machine shipping hold, products for acute care treatments and in-center disposables. These effects were only partially offset by contributions from acquisitions. In the first nine months, revenue grew by 12% to EUR 10,021 million (stable at constant currency, -1% organic).

Operating income in North America increased by 5% to EUR 469 million (-8% at constant currency) in the third quarter, resulting in a margin of 13.2% (Q3 2021: 14.5%). At constant currency, the decline in operating income was mainly due to higher labor costs, the impact of COVID-19, as well as inflationary and supply chain cost increases. This was partially offset by provider relief funding from the U.S. government to compensate for certain COVID-19-related costs, the net gain related to InterWell Health and income attributable to a consent agreement on certain pharmaceuticals. In the first nine months, operating income declined by 10% to EUR 1,113 million (-20% at constant currency), resulting in a margin of 11.1% (9M 2021: 13.9%).

Revenue in the EMEA region increased by 7% to EUR 720 million in the third quarter (+8% at constant currency, +8% organic). At constant currency, this was mainly due to organic growth in Health Care Services and Health Care Products, both including the effects of hyperinflation in Turkiye. Organic growth in Health Care Products was also driven by higher sales of in-center disposables and renal pharmaceuticals, partially offset by lower sales of acute cardiopulmonary products. In the first nine months, revenue grew by 4% to EUR 2,121 million (+6% at constant currency, +6% organic).

Operating income in EMEA decreased by 40% to EUR 48 million (-41% at constant currency) in the third quarter, resulting in a margin of 6.6% (Q3 2021: 11.7%). At constant currency, the decline in operating income was mainly due to inflationary operational cost increases, costs associated with the FME25 program, and lower income from certain equity method investees. In the first nine months, operating income declined by 27% to EUR 169 million (-26% at constant currency), resulting in a margin of 8.0% (9M 2021: 11.4%).

In Asia-Pacific, revenue increased by 13% to EUR 565 million (+7% at constant currency, +7% organic) in the third quarter. At constant currency, this was mainly driven by organic growth in the Health Care Products business, which was primarily due to higher sales of in-center disposables, products for acute care treatments and machines for chronic treatment. In the first nine months, revenue increased by 9% to EUR 1,588 million (+4% at constant currency, +4% organic).

Operating income decreased by 1% to EUR 85 million (-2% at constant currency) in the third quarter, resulting in a margin of 15.1% (Q3 2021: 17.2%). At constant currency, the decline in operating income was mainly due to inflationary cost increases and higher bad debt expenses, almost offset by favorable foreign currency transaction effects and growth in certain business lines. In the first nine months, operating income was stable and amounted to EUR 255 million (-1% at constant currency), resulting in a margin of 16.1% (9M 2021: 17.5%).

Latin America revenue increased by 36% to EUR 243 million (+36% at constant currency, +37% organic) in the third quarter, mainly driven by organic growth in the Health Care Services business, as well as higher sales of machines for chronic treatment and in-center disposables. In the first nine months, revenue grew by 25% to EUR 633 million (+23% at constant currency, +24% organic).

Operating income increased to EUR 11 million in the third quarter, resulting in a margin of 4.5% (Q3 2021: 2.4%). At constant currency, the increase in operating income was mainly due to income from investments in debt securities, favorable foreign currency transaction effects and lower bad debt expense, partially offset by inflationary cost increases. In the first nine months, operating income grew by 17% to EUR 16 million (-6% at constant currency), resulting in a margin of 2.5% (9M 2021: 2.7%).

Cash flow development
In the third quarter, Fresenius Medical Care generated EUR 658 million of operating cash flow (Q3 2021: EUR 692 million), resulting in a margin of 12.9% (Q3 2021: 15.6%). The decrease was mainly due to lower net income. In the first nine months, operating cash flow amounted to EUR 1,568 million (9M 2021: EUR 1,820 million), resulting in a margin of 10.9% (9M 2021: 14.0%).

Free cash flow⁴ amounted to EUR 501 million (Q3 2021: EUR 511 million) in the third quarter, resulting in a margin of 9.8% (Q3 2021: 11.5%). In the first nine months, free cash flow amounted to EUR 1,082 million (9M 2021: EUR 1,259 million), resulting in a margin of 7.5% (9M 2021: 9.7%).

Patients, clinics and employees
As of September 30, 2022, Fresenius Medical Care treated 344,593 patients in 4,153 dialysis clinics worldwide and had 122,758 employees (full-time equivalents) globally, compared to 123,528 employees as of September 30, 2021.

FME25 Savings generation on track
The target range of EUR 40-70 million set for 2022 as part of the FME25 transformation program has been reached with savings of EUR 54 million in the first nine months of the year. Fresenius Medical Care will continue to look for opportunities to extend FME25 initiatives to support the turnaround plan.

⁴ Net cash provided by / used in operating activities, after capital expenditures, before acquisitions, investments, and dividends

Outlook
Based on the delayed impacts of improvements in North American Health Care Services operations, the continuously challenging and uncertain macroeconomic environment, and the results for the third quarter, which had a more pronounced support by one-time effects, Fresenius Medical Care, as a matter of caution, extends its 2022 guidance range for net income decline from a high-teens to a high-teens to mid-twenties percentage range. The Company confirms its target for revenue to grow at a low single digit percentage rate in full year 2022. 

Revenue and net income guidance are both on a constant currency basis and excluding special items.⁵

Conference call
Fresenius Medical Care will host a conference call to discuss the results of the third quarter 2022 on October 31, at 3:30 p.m. CET / 10:30 a.m. EDT. Details will be available in the “Investors” section of the Company’s website. A replay will be available shortly after the call.

⁵ These targets are based on the 2021 results excluding the costs related to FME25 of EUR 49 million (for Net Income). They are in constant currency and exclude special items. Special items include further costs related to FME25, the impact of the war in Ukraine, the impact of hyperinflation in Turkiye, the Humacyte investment remeasurement, the net gain related to InterWell Health and other effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of giving guidance.

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Fresenius Medical Care, the world’s leading provider of products and services for individuals with kidney diseases, today successfully placed bonds with a volume of €750 million. The bonds with a 5-year maturity and a coupon of 3.875% were issued at a price of 99.635% resulting in a yield of 3.957%.

The proceeds will be used for general corporate purposes, including the refinancing of existing financial liabilities.

The bonds were drawn under the Debt Issuance Program (DIP) by Fresenius Medical Care. The Company has applied to the Luxembourg Stock Exchange to admit the bonds to trading on its regulated market.

The envisaged settlement date is September 20, 2022.

Fresenius Medical Care, the world's leading provider of products and services for individuals with kidney diseases, has closed the three-way merger including Fresenius Health Partners, the value-based care division of Fresenius Medical Care North America. The transaction, first announced in March 2022, has satisfied customary closing conditions and received regulatory clearance in the U.S. 

The new company, which will operate under the InterWell Health brand, brings together Fresenius Health Partners’ expertise in kidney care value-based contracting and performance, InterWell Health’s clinical care models and strong network of 1,700 nephrologists and Cricket Health’s tech-enabled care model that utilizes its proprietary informatics, StageSmart™️ and patient engagement platforms to create an innovative, stand-alone entity poised to transform kidney care. 

With the completion of the merger, the new company expects to engage and manage the care of more than 270,000 Americans living with kidney disease with more than $11 billion in costs under management by 2025, an increase from 100,000 covered lives and $6 billion currently under management. The strategic expansion along the Renal Care Continuum significantly expands InterWell Health’s total addressable market in the U.S. from approximately $50 billion to $170 billion.

Helen Giza, Deputy CEO of Fresenius Medical Care, said: “I am enthusiastic to see this merger being completed which will support our sustainable profitable growth. InterWell Health will be the premier value-based kidney care provider in the U.S., combining and leveraging innovative new tools, vast experience, and a deep nephrologist network. By further expanding into the strategically important chronic kidney disease stage-3-to-5-market, we will be able to support even more patients throughout the Renal Care Continuum, including earlier interventions to prevent disease prior to kidney failure. This is good for patients, the payers, and our shareholders.”

Bill Valle, CEO of Fresenius Medical Care North America and of the future Care Delivery segment for Fresenius Medical Care, said: “We are excited to see the transformative impact we will have on patient outcomes and kidney care delivery in the U.S. as we bring together three leading value-based kidney care entities. InterWell Health is well positioned to improve patient outcomes with fewer hospital admissions, slow disease progression, increase transplant referrals and rates, and continue our transition to home dialysis. We expect results to be a higher quality of life for patients, improved health equity, and lower total costs for the healthcare industry.”

Any potential book gains arising with closing of the transaction are not expected to be material on Fresenius Medical Care’s earnings and will be treated as a special item. 

• Results unchanged compared with preliminary figures published on July 27, 2022
• Business development impacted by unprecedented U.S. labor market situation and worsening macroeconomic environment driving cost inflation and supply chain disruptions
• Meaningful decline in COVID-19-related excess mortality
• Solid support by positive exchange rates
• FME25: transformation to new operating model and savings generation on track

Decline in COVID-19-related excess mortality

In the second quarter of 2022, COVID-19-related excess mortality among Fresenius Medical Care’s patients declined and amounted to approximately 300 (Q3 2021: ~2,900; Q4 2021: ~2,000; Q1 2022: ~2,400³). Thus, excess mortality accumulated to approximately 7,600 patients over the past twelve months and to approximately 23,000 since the start of the pandemic.

While excess mortality sequentially declined in line with the Company’s projections, infection rates remained on a high level resulting in a continued need and costs for isolation clinics and shifts as well as personal protective equipment.

The overall estimated adverse effect of accumulated excess mortality on organic growth in the Health Care Services business amounted to around 260 basis points in the second quarter.

¹ Special items include costs related to the FME25 program, the impact of the war in Ukraine, the impact of hyperinflation in Turkiye, the remeasurement effect on the fair value of the investment in Humacyte, Inc. (Humacyte investment remeasurement) and other effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of giving guidance. These items are excluded to ensure comparability of the figures presented with the Company’s financial targets which have been defined excluding special items.

² Attributable to shareholders of Fresenius Medical Care AG & Co. KGaA

³ Historical excess mortality updated for late entries
Increased headwinds from labor and inflation

The unprecedented U.S. labor market challenges materially worsened in the second quarter. For Fresenius Medical Care, this resulted in meaningfully higher than assumed wage inflation, surcharges, retention payments and additional costs for contract labor to contain the increasing staff shortages. Despite these additional investments in labor, including application of monies received from the U.S. government's Provider Relief Fund, staff shortages and turnover rates have continued to increase. The Company’s growth in the second quarter was affected by the number of clinics with constrained ability to accept new patients for treatment.

The already existing challenging macroeconomic environment has further significantly deteriorated in the second quarter as well, driving accelerated non-wage cost inflation. This has been exacerbated by the ongoing war in Ukraine and its global economic impact and results in higher logistics costs, raw material and energy prices as well as further supply chain disruptions.

Revenue increased by 10% to EUR 4,757 million (+1% at constant currency, +0% organic) in the second quarter.

Health Care Services revenue grew by 11% to EUR 3,782 million (+1% at constant currency, +0% organic). Growth at constant currency was mainly driven by contributions from acquisitions.
Health Care Products revenue increased by 6% to EUR 975 million (+1% at constant currency, +1% organic). Constant currency growth was mainly driven by higher sales of in-center disposables, partially offset by lower sales of acute cardiopulmonary products.

In the first half, revenue grew by 9% to EUR 9,305 million (+2% at constant currency, +1% organic). Health Care Services revenue increased by 10% to EUR 7,389 million (+2% at constant currency, +1% organic); Health Care Products revenue grew by 6% to EUR 1,916 million (+2% at constant currency, +2% organic).

Operating income decreased by 20% to EUR 341 million (-27% at constant currency) in the second quarter, resulting in a margin of 7.2% (Q2 2021: 9.8%). Operating income excluding special items, i.e. costs incurred for FME25, the impacts related to the war in Ukraine, the impact of hyperinflation in Turkiye, and the remeasurement effect on the fair value of the investment in Humacyte, Inc. (Humacyte investment remeasurement), increased by 3% to EUR 445 million (-6% at constant currency), resulting in a margin of 9.4% (Q2 2021: 10.0%). At constant currency, the decline was mainly due to higher labor costs as well as inflationary and supply chain cost increases. This was partially offset by Provider Relief Funding received from the U.S. government to compensate for certain COVID-19-related costs.

In the first half, operating income declined by 23% to EUR 688 million (-29% at constant currency), resulting in a margin of 7.4% (H1 2021: 10.5%). Excluding special items, operating income decreased by 6% to EUR 852 million (-13% at constant currency), resulting in a margin of 9.2% (H1 2021: 10.7%).

Net income² decreased by 33% to EUR 147 million (-39% at constant currency). Excluding special items, net income² was stable and amounted to EUR 225 million (-7% at constant currency). At constant currency, the decline was mainly due to the mentioned negative effects on operating income. Basic earnings per share (EPS) decreased by 33% to EUR 0.50 (-39% at constant currency). Excluding special items, EPS was stable and amounted to EUR 0.77 (-7% at constant currency).

In the first half, net income² declined by 35% to EUR 305 million (-39% at constant currency). Excluding special items, net income² decreased by 10% to EUR 428 million 
(-15% at constant currency). EPS decreased by 35% to EUR 1.04 (-39% at constant currency). Excluding special items, EPS declined by 10% to EUR 1.46 (-15% at constant currency).

Regional developments

In North America, revenue increased by 12% to EUR 3,294 million (-1% at constant currency, -2% organic) in the second quarter. At constant currency, this was mainly due to a decline in organic growth – which was driven by COVID-19 as well as by declines in co-insurance, increases in patient choice of higher deductibles plans, and lower than expected collections in aged accounts receivable in the Health Care Services business – and due to lower sales of in-center disposables, machines for chronic treatment, renal pharmaceuticals and home hemodialysis products. These effects were only partially offset by contributions from acquisitions. In the first half, revenue grew by 10% to 
EUR 6,464 million (+0% at constant currency, -1% organic).

Operating income in North America decreased by 14% to EUR 340 million (-24% at constant currency) in the second quarter, resulting in a margin of 10.3% (Q2 2021: 13.5%). At constant currency, the decline in operating income was mainly due to higher labor costs, the Humacyte investment remeasurement, declines in co-insurance, increases in patient choice of higher deductibles plans, and lower than expected collections in aged accounts receivable, the impact of COVID-19, as well as inflationary and supply chain costs. This was partially offset by provider relief funding received from the U.S. government to compensate for certain COVID-19-related costs. In the first half, operating income declined by 19% to EUR 644 million (-26% at constant currency), resulting in a margin of 10.0% (H1 2021: 13.6%).

Revenue in the EMEA region increased by 5% to EUR 727 million in the second quarter (+7% at constant currency, +6% organic). At constant currency, this was mainly due to organic growth in Health Care Services and Health Care Products, both including the effects of hyperinflation in Turkiye. Growth in Health Care Products was driven by higher sales of in-center disposables, machines for chronic treatment and renal pharmaceuticals, partially offset by lower sales of acute cardiopulmonary products. In the first half, revenue grew by 3% to EUR 1,401 million (+5% at constant currency, +4% organic).

Operating income in EMEA decreased by 19% to EUR 60 million (-18% at constant currency) in the second quarter, resulting in a margin of 8.2% (Q2 2021: 10.6%). At constant currency, the decline in operating income was mainly due to inflationary cost increases, the impact of hyperinflation in Turkiye and costs associated with the FME25 program, partially offset by favorable currency transaction effects. In the first half, operating income declined by 21% to EUR 121 million (-18% at constant currency), resulting in a margin of 8.6% (H1 2021: 11.2%).

In Asia-Pacific, revenue increased by 6% to EUR 516 million (+2% at constant currency, +2% organic) in the second quarter. At constant currency, this was mainly driven by organic growth in the Health Care Services business. In the first half, revenue increased by 7% to EUR 1,023 million (+3% at constant currency, +3% organic).

Operating income decreased by 16% to EUR 71 million (-16% at constant currency) in the second quarter, resulting in a margin of 13.8% (Q2 2021: 17.3%). At constant currency, the decline in operating income was mainly due to the unfavorable impact of growth in lower margin businesses and inflationary cost increases. In the first half, operating income was stable and amounted to EUR 170 million (-1% at constant currency), resulting in a margin of 16.6% (H1 2021: 17.7%).

Latin America revenue increased by 21% to EUR 207 million (+17% at constant currency, +18% organic) in the second quarter, mainly driven by organic growth in the Health Care Services business, as well as higher sales of in-center disposables and machines for chronic treatment. In the first half, revenue grew by 18% to EUR 391 million (+16% at constant currency, +17% organic).
Operating income decreased to EUR -6 million in the second quarter, resulting in a margin of -3.0% (Q2 2021: 1.5%). At constant currency, the decline in operating income was mainly due to inflationary cost increases and unfavorable foreign currency transaction effects, partially offset by lower bad debt expense. In the first half, operating income decreased by 46% to EUR 5 million (-71% at constant currency), resulting in a margin of 1.3% (H1 2021: 2.8%).

Cash flow development

In the second quarter, Fresenius Medical Care generated EUR 751 million of operating cash flow (Q2 2021: EUR 921 million), resulting in a margin of 15.8% (Q2 2021: 21.3%). The decrease was mainly due to an unfavorable development of days sales outstanding as well as a decrease in net income², partially offset by U.S. government relief funding. In the first half, operating cash flow amounted to EUR 910 million (H1 2021: EUR 1,129 million), resulting in a margin of 9.8% (H1 2021: 13.2%).

Free cash flow⁴  amounted to EUR 582 million (Q2 2021: EUR 720 million) in the second quarter, resulting in a margin of 12.2% (Q2 2021: 16.7%). In the first half, free cash flow amounted to EUR 581 million (H1 2021: EUR 749 million), resulting in a margin of 6.2% (H1 2021: 8.8%).

⁴ Net cash provided by / used in operating activities, after capital expenditures, before acquisitions, investments, and dividends

Patients, clinics and employees

As of June 30, 2022, Fresenius Medical Care treated 345,687 patients in 4,163 dialysis clinics worldwide and had 123,153 employees (full-time equivalents) globally, compared to 123,538 employees as of June 30, 2021.

FME25 update

With savings of EUR 26 million in the first half of the year, Fresenius Medical Care is on track to achieve its savings target of EUR 40-70 million in 2022 as part of the FME25 transformation program. Key achievements in the first half of the year include the announcement of the first two leadership levels below the Management Board and the corresponding organizational structure in line with the future operating model. The Company has also made significant progress in the transformation of global G&A functions. In addition to the ongoing and already identified FME25 measures, Fresenius Medical Care is currently in the process of reviewing potential additional initiatives in both designated operating segments (Care Delivery and Care Enablement) as part of the transformation program.

Outlook

As announced on July 27, 2022, Fresenius Medical Care expects revenue to grow at a low single digit percentage rate and net income² to decline at around a high teens percentage range. Revenue and net income guidance are both on a constant currency basis and before special items⁵. 

These targets are based on the following operating income relevant assumptions:

• Macro-economic inflation and supply chain costs of around EUR 220 million
• COVID-19: impact of accumulated excess mortality of around EUR 100 million 
• U.S. labor costs expected to be around EUR 100 million, net of support from U.S. Provider Relief Fund, in excess of the 3% base wage inflation assumption
• U.S. ballot initiative expense of EUR 20 to 30 million 
• Business growth of EUR 70 million
• Personal protective equipment cost reduction of around EUR 20 million
• FME25 savings of EUR 40 to 70 million 
• Remeasurement effects on the fair value of investments are expected to be volatile but neutral on a full year basis; for guidance relevant comparison, the Humacyte investment remeasurement is treated as special item
• No meaningful further impact from natural gas shortages or suspension of gas supply to affect manufacturing sites

⁵ These targets are based on the 2021 results excluding the costs related to FME25 of EUR 49 million (for Net Income). They are in constant currency and exclude special items. Special items include further costs related to FME25, the impact of the war in Ukraine, the impact of hyperinflation in Turkiye, the Humacyte investment remeasurement and other effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of giving guidance.

Please refer to our statement of earnings included in the attachments as separate PDF files for a complete overview of the results of the second quarter and first half of 2022. Our 6-K disclosure provides more details.
 

• Outlook:
  • Revised FY 2022 targets: revenue to grow at the low end of the previously guided low to mid-single digit percentage range and net income to decline around a high teens percentage range. 
  • Despite most burdens assumed to be temporary, 2025 targets withdrawn due to uncertainty of labor and macro-economic inflationary environment 
• Unprecedented U.S. labor market situation constraining capacity and accelerating wage inflation
• Worsening macroeconomic environment driving cost inflation and supply chain disruptions 
• FME25: Transformation to new operating model and savings generation on track
• Start date for Dr. Carla Kriwet as CEO advanced to October 1, 2022

Helen Giza, Deputy CEO and Chief Financial Officer of Fresenius Medical Care, said: “At the end of the first quarter we assumed extended labor shortages but clearly did not expect such a significant and rapid deterioration. Increased staff shortages, higher staff turnover rates and growing reliance on contract labor continue to increase our cost base, despite support received from the U.S. Provider Relief Fund. At the same time, these factors are constraining our capacity and hence our ability to deliver the volume recovery in Health Care Services that we had assumed for the back half of the year. The already challenging macroeconomic environment has significantly deteriorated – driving non-wage cost inflation and supply chain disruptions. Today we have to assume that these effects will have a very pronounced impact on our business development in the remainder of 2022. Even though most of the current burdens are assumed to be temporary, the uncertainty of these effects is widening the gap to our targets and making a potential catch-up unlikely. As a consequence, we have cut our financial targets for the fiscal year 2022 and feel it prudent to withdraw our 2025 targets. We continue to assess opportunities to accelerate and broaden our FME25 transformation program. We strongly believe our business model and the underlying growth drivers to be intact. Our strategy to drive growth in home dialysis and value-based care is more relevant than ever.”

Fresenius Medical Care, the world's leading provider of products and services for individuals with kidney diseases, has announced that revenue and net income² for the second quarter of 2022 are anticipated to come in below the Company’s expectations. Based on preliminary figures and at constant currency, Fresenius Medical Care expects revenue to increase year-on-year by 1%. For net income excluding special items³ and at constant currency the Company expects a decrease by 7% compared to the previous year’s quarter. Against the background of these preliminary results as well as the significantly changed developments and corresponding materially worsened assumptions for the remainder of the year outlined below, Fresenius Medical Care has cut its financial targets for FY 2022 and withdrawn its 2025 targets.

¹ Special items include costs related to the FME25 program, the impact of the War in Ukraine, the impact of hyperinflation in Turkiye, the remeasurement effect on the fair value of the investment in Humacyte, Inc. (Humacyte investment remeasurement) and other effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of giving guidance. These items are excluded to ensure comparability of the figures presented with the Company’s financial targets which have been defined excluding special items.

² Attributable to shareholders of Fresenius Medical Care AG & Co. KGaA

³ Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA | 2021 and 2022 figures exclude special items (2021: Costs related to the FME25 program; 2022: Costs related to the FME25 program, impact of the War in Ukraine, impact of Hyperinflation in Turkiye, Humacyte investment remeasurement
Increased headwinds from labor and inflation

The unprecedented U.S. labor market challenges materially worsened in the second quarter. For Fresenius Medical Care, this resulted in meaningfully higher than assumed wage inflation, surcharges, retention payments and additional costs for contract labor to contain the increasing staff shortages.

Despite these additional investments in labor, including application of monies received from the U.S. government's Provider Relief Fund, staff shortages and turnover rates have continued to increase. The Company’s growth in the second quarter was affected by the number of clinics with constrained ability to accept  new patients for treatment. Assuming that the unprecedented pressures from the U.S. labor market will persist in the second half of the year, Fresenius Medical Care no longer expects to achieve organic revenue growth in North American Health Care Services in 2022.

The already existing challenging macroeconomic environment has further significantly deteriorated in the second quarter, driving accelerated non-wage cost inflation. This has been exacerbated by the ongoing war in Ukraine and its global economic impact. These effects are expected to persist for the remainder of the year, resulting in higher logistics costs, raw material and energy prices as well as further supply chain disruptions. 

Based on preliminary figures, COVID-19-related excess mortality in the second quarter sequentially declined in line with the Company’s projections. However, infection rates remained on a high level resulting in a continued need and costs for isolation clinics and shifts as well as a higher than assumed spend for personal protective equipment.

In the second quarter, revenue in the Healthcare Services business was negatively impacted by meaningful yet unforeseen declines in co-insurance, increases in patient choice of higher deductibles plans, and lower than expected collections in aged accounts receivable.

Revised financial targets for FY 2022

Given the significantly increased headwinds outlined above, Fresenius Medical Care now expects revenue to grow at the low end of the previously guided low to mid-single digit percentage range. For net income² the Company now expects a decline of around a high teens percentage range compared to the previously guided growth of a low to mid-single digit percentage range. Revenue and net income guidance are both on a constant currency basis and before special items⁴. 

These targets are based on the following operating income relevant assumptions:

• Macro-economic inflation and supply chain costs of around EUR 220 million instead of EUR 50 million previously assumed
• COVID-19: Impact of accumulated excess mortality of around EUR 100 million 
• U.S. labor costs expected to be around EUR 100 million, net of support from U.S. Provider Relief Fund, in excess of the 3% base wage inflation assumption
• U.S. ballot initiative expense of EUR 20 to 30 million 
• Business growth of EUR 70 million instead of EUR 250 million previously assumed
• Personal protective equipment cost reduction to be around EUR 20 million instead of  EUR 50 million previously assumed
• FME25 savings of EUR 40 to 70 million 
• Remeasurement effects on the fair value of investments are expected to be volatile but neutral on a full year basis; for guidance relevant comparison, the Humacyte investment remeasurement is treated as special item
• No meaningful further impact from natural gas shortages or suspension of gas supply to affect manufacturing sites

⁴ These targets are based on the 2021 results excluding the costs related to FME25 of EUR 49 million (for Net Income). They are in constant currency and exclude special items. Special items include further costs related to FME25, the impact of the War in Ukraine, the impact of Hyperinflation in Turkiye, the Humacyte investment remeasurement and other effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of giving guidance.

Most of the unprecedented challenges outlined above are assumed to be temporary. However, given the uncertain labor situation and macro-economic inflationary environment and the substantially reduced earnings base compared to 2020, Fresenius Medical Care does not expect today to be able to achieve the meaningfully higher compounded annual average increases that would now be needed to accomplish its 2025 targets. Fresenius Medical Care remains committed to its growth strategy and will consistently pursue the initiatives defined therein.

Preliminary consolidated figures

Revenue increased by 10% to EUR 4,757 million (+1% at constant currency, +0% organic) in the second quarter.

Health Care Services revenue grew by 11% to EUR 3,782 million (+1% at constant currency, +0% organic). Growth at constant currency was mainly driven by contributions from acquisitions.

Health Care Products revenue increased by 6% to EUR 975 million (+1% at constant currency, +1% organic). Constant currency growth was mainly driven by higher sales of in-center disposables, partially offset by lower sales of acute cardiopulmonary products.

In the first half, revenue grew by 9% to EUR 9,305 million (+2% at constant currency, +1% organic). Health Care Services revenue increased by 10% to EUR 7,389 million (+2% at constant currency, +1% organic); Health Care Products revenue grew by 6% to EUR 1,916 million (+2% at constant currency, +2% organic).

Operating income decreased by 20% to EUR 341 million (-27% at constant currency) in the second quarter, resulting in a margin of 7.2% (Q2 2021: 9.8%). Operating income excluding special items, i.e. costs incurred for FME25, the impacts related to the war in Ukraine, the impact of hyperinflation in Turkiye, and the remeasurement effect on the fair value of the investment in Humacyte, Inc. (Humacyte investment remeasurement), increased by 3% to EUR 445 million (-6% at constant currency), resulting in a margin of 9.4% (Q2 2021: 10.0%). At constant currency, the decline was mainly due to higher labor costs as well as inflationary and supply chain cost increases. This was partially offset by Provider Relief Funding received from the U.S. government to compensate for certain COVID-19-related costs.

In the first half, operating income declined by 23% to EUR 688 million (-29% at constant currency), resulting in a margin of 7.4% (H1 2021: 10.5%). Excluding special items, operating income decreased by 6% to EUR 852 million (-13% at constant currency), resulting in a margin of 9.2% (H1 2021: 10.7%).

Net income² decreased by 33% to EUR 147 million (-39% at constant currency). Excluding special items, net income2 was stable and amounted to EUR 225 million (-7% at constant currency). At constant currency, the decline was mainly due to the mentioned negative effects on operating income. Basic earnings per share (EPS) decreased by 33% to EUR 0.50 (-39% at constant currency). Excluding special items, EPS was stable and amounted to EUR 0.77 (-7% at constant currency).

In the first half, net income² declined by 35% to EUR 305 million (-39% at constant currency). Excluding special items, net income2 decreased by 10% to EUR 428 million 
(-15% at constant currency). EPS decreased by 35% to EUR 1.04 (-39% at constant currency). Excluding special items, EPS declined by 10% to EUR 1.46 (-15% at constant currency).

Regional developments⁵

⁵ Based on preliminary figures 

In North America, revenue increased by 12% to EUR 3,294 million (-1% at constant currency, -2% organic) in the second quarter. At constant currency, this was mainly due to a decline in organic growth – which was driven by COVID-19 as well as by declines in co-insurance, increases in patient choice of higher deductibles plans, and lower than expected collections in aged accounts receivable in the Health Care Services business – and due to lower sales of in-center disposables, machines for chronic treatment, renal pharmaceuticals and home hemodialysis products. These effects were only partially offset by contributions from acquisitions. In the first half, revenue grew by 10% to 
EUR 6,464 million (+0% at constant currency, -1% organic).

Operating income in North America decreased by 14% to EUR 340 million (-24% at constant currency) in the second quarter, resulting in a margin of 10.3% (Q2 2021: 13.5%). At constant currency, the decline in operating income was mainly due to higher labor costs, the Humacyte investment remeasurement, declines in co-insurance, increases in patient choice of higher deductibles plans, and lower than expected collections in aged accounts receivable, the impact of COVID-19, as well as inflationary and supply chain costs. This was partially offset by provider relief funding received from the U.S. government to compensate for certain COVID-19-related costs. In the first half, operating income declined by 19% to EUR 644 million (-26% at constant currency), resulting in a margin of 10.0% (H1 2021: 13.6%).

Revenue in the EMEA region increased by 5% to EUR 727 million in the second quarter (+7% at constant currency, +6% organic). At constant currency, this was mainly due to organic growth in Health Care Services and Health Care Products, both including the effects of hyperinflation in Turkiye. Growth in Health Care Products was driven by higher sales of in-center disposables, machines for chronic treatment and renal pharmaceuticals, partially offset by lower sales of acute cardiopulmonary products. In the first half, revenue grew by 3% to EUR 1,401 million (+5% at constant currency, +4% organic).

Operating income in EMEA decreased by 19% to EUR 60 million (-18% at constant currency) in the second quarter, resulting in a margin of 8.2% (Q2 2021: 10.6%). At constant currency, the decline in operating income was mainly due to inflationary cost increases, the impact of hyperinflation in Turkiye and costs associated with the FME25 program, partially offset by favorable currency transaction effects. In the first half, operating income declined by 21% to EUR 121 million (-18% at constant currency), resulting in a margin of 8.6% (H1 2021: 11.2%).

In Asia-Pacific, revenue increased by 6% to EUR 516 million (+2% at constant currency, +2% organic) in the second quarter. At constant currency, this was mainly driven by organic growth in the Health Care Services business. In the first half, revenue increased by 7% to EUR 1,023 million (+3% at constant currency, +3% organic).

Operating income decreased by 16% to EUR 71 million (-16% at constant currency) in the second quarter, resulting in a margin of 13.8% (Q2 2021: 17.3%). At constant currency, the decline in operating income was mainly due to an unfavorable impact from growth in lower margin businesses and inflationary cost increases. In the first half, operating income was stable and amounted to EUR 170 million (-1% at constant currency), resulting in a margin of 16.6% (H1 2021: 17.7%).

Latin America revenue increased by 21% to EUR 207 million (+17% at constant currency, +18% organic) in the second quarter, mainly driven by organic growth in the Health Care Services business, as well as higher sales of in-center disposables and machines for chronic treatment. In the first half, revenue grew by 18% to EUR 391 million (+16% at constant currency, +17% organic).

Operating income decreased to EUR -6 million in the second quarter, resulting in a margin of -3.0% (Q2 2021: 1.5%). At constant currency, the decline in operating income was mainly due to inflationary cost increases and unfavorable foreign currency transaction effects, partially offset by lower bad debt expense. In the first half, operating income decreased by 46% to EUR 5 million (-71% at constant currency), resulting in a margin of 1.3% (H1 2021: 2.8%).

Patients, clinics and employees⁵

As of June 30, 2022, Fresenius Medical Care treated 345,687 patients in 4,163 dialysis clinics worldwide and had 123.153 employees (full-time equivalents) globally, compared to 123,538 employees as of June 30, 2021. 

FME25 update

With savings of EUR 26 million in the first half of the year, Fresenius Medical Care is on track to achieve its savings target of EUR 40-70 million in 2022 as part of the FME25 transformation program. Key achievements in the first half of the year include the announcement of the first two leadership levels below the Management Board and the corresponding organizational structure as well as the finalization of country governance in line with the future operating model. The Company has also made significant progress in the transformation of global functions such as Finance, Digital Technology & Innovation as well as Procurement. In addition to the ongoing and already identified FME25 measures, Fresenius Medical Care is currently in the process of reviewing potential additional initiatives in both designated operating segments (Care Delivery and Care Enablement) as part of the transformation program.

New CEO start advanced

The start of Dr. Carla Kriwet as CEO of Fresenius Medical Care has been advanced to October 1, 2022. Rice Powell will step down as CEO effective September 30, 2022.

Conference call

Fresenius Medical Care will host a conference call on July 28, 2022 at 9:00 a.m. CEST to discuss the preliminary results for the second quarter and first half of 2022. This conference call will replace the earnings call originally scheduled for August 2, 2022. Details will be available on www.freseniusmedicalcare.com in the “Investors/Publications” section. A replay will be available shortly after the call. The Company will publish its full results for the first quarter and second half of 2022 on August 2, 2022.
 

Fresenius Medical Care, the world's leading provider of products and services for individuals with renal diseases, is returning to a growth path after the significant burdens of the COVID-19 pandemic. At today’s Annual General Meeting, Chief Executive Officer Rice Powell confirmed the company’s outlook for 2022: Revenue and net income are expected to grow at low to mid-single digit percentage rates.

“We obviously had to overcome some challenges. Despite the unprecedented effects of COVID-19, we believe that the fundamental drivers of our business and growth remain unchanged,” Powell said in his speech to shareholders. “People across the world are living longer. As the population continues to age, we estimate that more than six million people will require dialysis by 2030 – a 460 percent increase compared to 2000. Our Strategy 2025 puts the company in a position to leverage the opportunities these developments bring and guarantee sustainable profitable growth in the future.”

Strategy 2025 aims at Fresenius Medical Care’s expansion along the renal care continuum. Powell said value-based care programs, in particular, are an important step toward success: “They allow us to keep costs affordable for payors in private and public settings, while improving our patients’ quality of life with ever better products and services.” In addition, the rollout of the company’s new operating model is on track: The FME25 transformation program is set to achieve its first sustained savings this year. After a one-time investment of EUR 450 to 500 million, most cost-saving measures will be implemented by 2024, reducing the annual cost base by EUR 500 million by the end of 2025.

It was the last Annual General Meeting for Rice Powell as CEO of Fresenius Medical Care. As the company announced earlier this month, he will enter retirement when his contract expires on December 31, 2022 and be succeeded as CEO by Dr. Carla Kriwet, who introduced herself personally to the shareholders at today's Annual General Meeting.  

A large shareholder majority of 99.49 percent approved the company’s 25th consecutive dividend increase. The dividend will be raised from €1.34 to €1.35 per share.

By another large majority of 94.87 percent, the shareholders approved the compensation report for fiscal year 2021.

Shareholder majorities of 97.65 and 91.69 percent, respectively, approved the actions of the General Partner and the Supervisory Board in 2021.

At the Annual General Meeting, 80.76 percent of the registered capital was represented. Because of the pandemic, the meeting again was held as a purely virtual event in order to protect the health of everyone involved.

• Higher than anticipated COVID-19-related excess mortality, but declining throughout the quarter
• Earnings development affected by ongoing significantly elevated labor costs compounded by effects from Omicron in Health Care Services and by increased material and logistics costs in Health Care Products 
• Earnings development in EMEA additionally impacted by the war in Ukraine
• Financial targets for FY 2022 confirmed 

Rice Powell, Chief Executive Officer of Fresenius Medical Care, said: “When we see what is happening in Ukraine, it is again above all the human tragedy that leaves us deeply saddened. I am incredibly thankful and proud of all who continue to work tirelessly to ensure patient care and the holding up of our local operations under these outstandingly difficult circumstances. Although it is difficult to talk about numbers with these images in mind, I have to say that in addition, Omicron has affected the quarter heavily. This resulted in high excess mortality among our patients and significantly elevated labor costs in the U.S. to manage isolation clinics and shifts. We were able to compensate this and delivered the quarter in line with our expectations. Based on a strong decline in excess mortality in February and March, we confirm our financial targets for 2022.”

Higher than expected COVID-19-related excess mortality at the beginning of the year

COVID-19-related excess mortality among Fresenius Medical Care’s patients amounted to approximately 2,310 in the first quarter of 2022 (Q1 2021: ~3,200; Q2 2021: ~1,900; 
Q3 2021: ~2,900; Q4 2021: ~2,000³). It significantly declined in February and March in line with infection rates, but on a quarterly basis still exceeded the originally anticipated level. This resulted in an increased need for isolation clinics and shifts and limited the Company’s ability to mitigate the impacts from labor shortage and wage inflation in the U.S. market.
COVID-19-related excess mortality accumulated to approximately 9,000 patients over the past twelve months and to approximately 22,600 since the start of the pandemic. 
The overall estimated adverse effect of accumulated COVID-19-related excess mortality on organic growth in the Health Care Services business amounted to around 290 basis points in the first quarter. 
 

 ¹ 2021: costs related to the FME25 program; 2022: costs related to the FME25 program and impacts related to the war in Ukraine
 ² Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
 ³ Historical excess mortality updated for late entries

War in Ukraine impacting business development

The war in Ukraine is affecting Fresenius Medical Cares' dialysis operations and patient care in the country itself, but also caused higher bad debt expenses in Russia and Ukraine. The direct adverse effect of the war in Ukraine amounted to EUR 22 million at operating income level in the first quarter and is treated as a special item. Fresenius Medical Care will continue to monitor closely the potential effects of the war as well as the general impact of the challenging inflationary macroeconomic environment.

First quarter earnings development in line with expectations

Revenue increased by 8% to EUR 4,548 million (+3% at constant currency, +2% organic).

Health Care Services revenue increased by 8% to EUR 3,607 million (+3% at constant currency, +1% organic). At constant currency, this was mainly driven by organic growth, which was achieved despite the adverse impact of COVID-19, the partial reversal of an accrual related to a revenue recognition adjustment for accounts receivable in legal dispute and contributions from acquisitions.

Health Care Products revenue increased by 6% to EUR 941 million (+3% at constant currency, +3% organic). Constant currency growth was mainly driven by higher sales of in-center disposables and renal pharmaceuticals. This was partially offset by lower sales of machines for chronic treatment.

Operating income decreased by 27% to EUR 348 million (-30% at constant currency), resulting in a margin of 7.6% (Q1 2021: 11.3%). Operating income excluding special items, i.e. costs incurred for FME25 and the impacts related to the war in Ukraine, declined by 15% to EUR 403 million (-19% at constant currency), resulting in a margin of 8.9% (Q1 2021: 11.3%). At constant currency, the decline was mainly due to higher labor costs, adverse COVID-19-related effects, as well as inflationary and supply chain cost increases. These effects were only partially mitigated by the partial reversal of an accrual related to a revenue recognition adjustment for accounts receivable in legal dispute.

Net income² decreased by 37% to EUR 157 million (-39% at constant currency). Excluding special items, net income declined by 20% to EUR 200 million (-23% at constant currency), mainly due to the mentioned negative effects on operating income.

Basic earnings per share (EPS) decreased by 37% to EUR 0.54 (-39% at constant currency). EPS excluding special items declined by 20% to EUR 0.68 
(-23% at constant currency).

Cash flow development

In the first quarter, Fresenius Medical Care generated EUR 159 million of operating cash flow (Q1 2021: EUR 208 million), resulting in a margin of 3.5% (Q1 2021: 4.9%). The decrease was mainly due to continued recoupment of the U.S. government’s payments received in 2020 under the CARES Act and a decrease in net income, partially offset by a favorable impact from trade accounts and other receivables.

Free cash flow⁴  amounted to EUR -1 million (Q1 2021: EUR 29 million) in the first quarter, resulting in a margin of 0.0% (Q1 2021: 0.7%).

Regional developments

In North America, revenue increased by 9% to EUR 3,171 million (+2% at constant currency, +0% organic). At constant currency, this was mainly driven by organic growth in the Health Care Product business and the reversal of an accrual related to a revenue recognition adjustment for accounts receivable in legal dispute. This was partially offset by the adverse COVID-19 impact on the Health Care Services business.

Operating income in North America decreased by 24% to EUR 304 million (-29% at constant currency), resulting in a margin of 9.6% (Q1 2021: 13.7%). At constant currency, the decline in operating income was mainly due to higher labor costs, the adverse impact of COVID-19, inflationary and supply chain cost increases as well as costs related to FME25. This was only partially offset by the partial reversal of an accrual related to a revenue recognition adjustment for accounts receivable in legal dispute.

Revenue in the EMEA region increased by 1% to EUR 674 million in the first quarter (+3% at constant currency, +2% organic). At constant currency, this was mainly due to organic growth in the Health Care Services business, which was achieved despite the negative impact of COVID-19.

Operating income in EMEA decreased by 23% to EUR 61 million (-19% at constant currency), resulting in a margin of 9.1% (Q1 2021: 11.9%). The decline was mainly due to the impact related to the war in Ukraine.

⁴ Net cash provided by / used in operating activities, after capital expenditures, before acquisitions, investments, and dividends

In Asia-Pacific, revenue increased by 8% to EUR 507 million (+4% at constant currency, +4% organic). At constant currency, this was mainly driven by organic growth in the Health Care Products business.

Operating income increased by 16% to EUR 99 million (+14% at constant currency), resulting in a margin of 19.5% (Q1 2021: 18.1%). At constant currency, this was mainly due to a gain from the sale of clinics, favorable currency transaction effects and growth in the Health Care Products business.

Latin America revenue increased by 15% to EUR 183 million (+15% at constant currency, +16% organic), mainly driven by strong organic growth in both the Health Care Services and Health Care Products business.

Operating income improved by 68% to EUR 11 million (+51% at constant currency), resulting in a margin of 6.1% (Q1 2021: 4.2%). This was mainly due to a favorable currency transaction effect, which was partially offset by inflationary cost increases.

Patients, clinics and employees

As of March 31, 2022, Fresenius Medical Care treated 343,493 patients in 4,153 dialysis clinics worldwide and had 122,635 employees (full-time equivalents) globally, compared to 124,995 employees as of March 31, 2021.

Outlook

Based on the results for the first quarter, which were in line with the Company’s expectations, Fresenius Medical Care confirms its financial targets for 2022. The earnings improvement will be driven by expected business growth, PPE cost reduction and FME25 savings. The Company expects revenue and net income to grow at low to mid-single digit percentage rates in FY 2022.⁵  

⁵ These targets are based on the 2021 results excluding the costs related to FME25 of EUR 49 million (for Net Income). They are based on the assumptions outlined in the Press Release on the Q4 and FY 2021 results (Feb. 22, 2022), in constant currency and exclude special items. Special items include further costs related to FME25, the impacts related to the war in Ukraine, and other effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of giving guidance.

Conference call

Fresenius Medical Care will host a conference call to discuss the results of the first quarter 2022 on May 4, 2022 at 3:30 p.m. CEST / 9:30 a.m. EDT. Details will be available on the Fresenius Medical Care website in the “Investors” section. A replay will be available shortly after the call.

Please refer to our statement of earnings included at the end of this news and to the attachments as separate PDF files for a complete overview of the results of the first quarter 2022. Our 6-K disclosure provides more details.

Fresenius Medical Care, the world's leading provider of products and services for individuals with renal diseases, announced today that the U.S. Food and Drug Administration (FDA) has awarded 510(k) clearance to the Versi™PD Cycler System¹. This next-generation portable automated peritoneal dialysis system from Fresenius Medical Care North America is the lightest, smallest and quietest dialysis cycler in the United States.

As the leading provider of kidney care products in the U.S., Fresenius Medical Care is developing new, innovative technologies designed to accelerate the growth of home therapies by making home dialysis systems smarter, more intuitive and easier to use for people living with kidney failure. VersiPD is simple, quiet, portable and advanced. VersiPD is also designed to improve health equity by making home therapy a more feasible option for a broader population of dialysis patients. 

Designed from the ground-up to enhance the patient experience, VersiPD will allow patients to enjoy restful sleep through its almost silent operation, fewer disruptive alarms and night mode. The cycler has the capability of more personalized prescription programming to meet the individual needs of a broad range of patients. VersiPD offers a large, intuitively designed touchscreen as well as embedded videos with audio guidance to assist patients step-by-step through setup and treatment. The cycler battery and custom cart facilitate mobility around the home, which can further improve the patient’s quality of life.

VersiPD is supported by the Kinexus™ Therapy Management Platform, a connected health system that aims to improve patient outcomes and nurses’ productivity through remote therapy monitoring and programming capabilities. The Kinexus platform is also available with the Liberty® Select Cycler and is designed to be fully compatible with the company’s future portfolio of home dialysis machines. Connected health is associated with reduced rates of hospitalization, technique failure and patient dropout, and an increased average patient length of stay on peritoneal dialysis.^2,3  

A limited rollout of VersiPD will begin this year, with wider availability planned in 2023 and beyond. The company also plans to roll out VersiPD in other regions around the world in the future.

 

¹ Previously known as Lilliput™ APD System
2 Chaudhuri S, Han H, Muchiutti C, et al. Remote Treatment Monitoring on Hospitalization and Technique Failure Rates in Peritoneal Dialysis Patients. Kidney360. 2020;1(3):191 LP - 202. doi:10.34067/KID.0000302019
³ Giles H, Ficociello L, Li Y, Ofsthun N, Kossmann R. Remote Patient Monitoring and Longevity on Peritoneal Dialysis [Abstract presented at 39th Annual Dialysis Conference]. Perit Dial Int. 2019;39(1_suppl): S4. doi:10.1177/089686081903901s01