On October 30, 2022 Fresenius reported taht Over the past month, I’ve met with many of my Fresenius colleagues (Press release, Fresenius, OCT 30, 2022, View Source [SID1234622595]). Like me, they have tremendous passion and commitment to patients, physicians and health care professionals. What we do is life-saving."

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Sen continued, "Everyone at Fresenius knows we must improve on what we do. My priorities are clear: Reset the company aiming at becoming a stronger company and delivering value for our shareholders. Our businesses are growing yet in a more challenging environment. Now we sharpen our focus on structural productivity. More fundamentally, we have embarked on a top-to-bottom review of every business activity, looking at the entire corporate portfolio. The focus is on returns. This will not happen overnight, but we will move at a faster pace and more decisively than ever before. This will benefit all our stakeholders. This is #FutureFresenius."

Sen concluded, "Fresenius is a strong company, with great products, great market positions. Now we have to make it stronger."

FY/22 Group guidance
Since Fresenius Medical Care continues to operate in a challenging environment, the impacts of the Company’s focused efforts to improve North American Health Care Services operations are delayed against previous assumptions. Therefore, Fresenius Medical Care now assumes lower contributions in the financial year 2022.
Consequently, Fresenius Medical Care now expects net income (attributable to shareholders of Fresenius Medical Care AG & Co. KGaA) for the financial year 2022 to decline in the high teens to mid-twenties percentage range. The Company continues to anticipate revenue to grow at a low-single digit percentage range in the financial year 2022. These targets are in constant currency and exclude special items.

All other business segments of the Fresenius Group, in particular Vamed, are also affected by a challenging overall economic environment. Thus, there are increased uncertainties, inflation-related cost increases, staff shortages, disruptions in supply chains, and increased energy costs. This has a direct impact on customer and patient behavior.

However, as a consequence of the development at Fresenius Medical Care, Fresenius Vamed, and in view of increasing indications of a persistent unfavorable development of these and other factors for the further course of the financial year, the Management Board has changed its risk assessment and consequently also adjusted the Group outlook for FY/22.

At constant currency, the Company now anticipates Group net income1,2 to decline around ten percent (previously: decline in a low-to-mid single-digit percentage range). Group sales3 in constant currency continue to be expected to grow in a low-to-mid single-digit percentage range.

Without the closed acquisition of Ivenix and the completed acquisition of a majority stake in mAbxience as well as any further potential acquisitions, Fresenius expects the net debt/EBITDA4 ratio to be roughly on the same level as in Q3/22 (3.64×5) by the end of 2022 (December 31, 2021: 3.51×5).

1 Net income attributable to shareholders of Fresenius SE & Co. KGaA
2 FY/21 base: €1,867 million, before special items; FY/22: before special items
3 FY/21 base: €37,520 million
4 At LTM average exchange rates for both net debt and EBITDA; pro forma closed acquisitions/divestitures; excluding further potential acquisitions; before special items; including lease liabilities
5 At LTM average exchange rates for both net debt and EBITDA; pro forma closed acquisitions/divestitures;
before special items; including lease liabilities

For a detailed overview of special items please see the reconciliation tables on pages 22-25 in the PDF.

Assumptions for guidance FY/22
For 2022 and beyond, Fresenius expects that the current challenging market environment and the global macro-economic headwinds will remain. In particular, the general cost inflation, labor shortages, meaningful uncertainty with regard to the future development of energy prices, burdens from supply chain disruptions and ongoing impacts of the COVID-19 pandemic are expected to continue. The guidance does not consider a significant disruption of gas or electricity supplies in Europe.

Fresenius will continue to closely monitor the potential further consequences of the overall heightened volatility and muted visibility, including balance sheet valuations.

The war in Ukraine is directly and indirectly affecting Fresenius Group operations. The direct adverse effects of the war amounted to €24 million at net income1 level of Fresenius Group in Q1-3/22 and are treated as a special item.

An unlikely but possible significant deterioration of the situation triggering containment measures that could have a significant and direct impact on the health care sector without any appropriate compensation is not reflected in the Group’s FY/22 guidance.

For Fresenius Medical Care‘s contribution to the Group’s financial figures, the assumptions for Fresenius Medical Care’s FY/22 guidance are also fully applicable to Fresenius Group’s FY/22 guidance.

All of these assumptions are subject to considerable uncertainty.

The acquisitions of Ivenix and of the majority stake in mAbxience as well as any further potential acquisitions remain excluded from guidance.

1 Net income attributable to shareholders of Fresenius SE & Co. KGaA

5% sales increase in constant currency
Group sales increased by 12% (5% in constant currency) to €10,459 million (Q3/21: €9,324 million). Organic growth was 4%. Acquisitions/divestitures contributed net 1% to growth. Currency translation increased sales growth by 7%. Excluding estimated COVID-19 effects1, Group sales growth would have been 4% to 5% in constant currency (Q3/21: 7% to 8%).

In Q1-3/22, Group sales increased by 10% (4% in constant currency) to €30,197 million (Q1-3/21: €27,554 million). Organic growth was 3%. Acquisitions/divestitures contributed net 1% to growth. Currency translation increased sales growth by 6%. Excluding estimated COVID-19 effects1, Group sales growth would have been 3% to 4% in constant currency (Q1-3/21: 5% to 6%).

19% net income2,3,4 decline in constant currency
Group EBITDA before special items decreased by 2% (-10% in constant currency) to €1,662 million (Q3/212: €1,703 million). Reported Group EBITDA was €1,658 million (Q3/21: €1,667 million).

In Q1-3/22, Group EBITDA before special items remained nearly unchanged (-6% in constant currency) at €5,006 million (Q1-3/212: €5,008 million). Reported Group EBITDA was €4,781 million (Q1-3/21: €4,957 million).

Group EBIT before special items decreased by 9% (-17% in constant currency) to €949 million (Q3/212: €1,044 million). The decrease was mainly driven by higher labor costs at Fresenius Medical Care in the U.S., general cost inflation, revaluation of contract assets in the international service and project business at Fresenius Vamed as well as higher costs in the Corporate segment. The EBIT margin before special items was 9.1% (Q3/212: 11.2%). Reported Group EBIT was €887 million (Q3/21: €1,008 million).

In Q1-3/22, Group EBIT before special items decreased by 4% (-10% in constant currency) to €2,952 million (Q1-3/212: €3,086 million). The EBIT margin before special items was 9.8% (Q1-3/212: 11.2%). Reported Group EBIT was €2,634 million (Q1-3/21: €3,035 million).

1 For estimated COVID-19 effects please see table on page 20.
2 Before special items
3 Net income attributable to shareholders of Fresenius SE & Co. KGaA
4 Excluding Ivenix and mAbxience acquisitions

For a detailed overview of special items please see the reconciliation tables on pages 22-25 in the PDF.

Group net interest before special items was -€141 million (Q3/211: -€126 million) mainly due to currency translation effects and overall higher interest rates. Reported Group net interest decreased to -€141 million (Q3/21: -€126 million).

In Q1-3/22, Group net interest before special items improved to -€376 million (Q1-3/211: -€384 million). Reported Group net interest improved to -€375 million (Q1-3/21: -€384 million).

Group tax rate before special items was 25.0% (Q3/211: 22.9%) mainly due to an increase in the proportionate share of non-tax-deductible expenses compared to taxable income at Fresenius Medical Care. Reported Group tax rate was 26.1% (Q3/21: 22.8%). In Q1-3/22, Group tax rate before special items was 23.5% (Q1-3/211: 22.4%) while the reported Group tax rate was 24.1% (Q1-3/21: 22.3%).

Noncontrolling interests before special items were -€235 million (Q3/211: -€273 million) of which 90% were attributable to the noncontrolling interests in Fresenius Medical Care. Reported noncontrolling interests were -€230 million (Q3/21: -€268 million).
In Q1-3/22, Noncontrolling interests before special items were -€686 million (Q1-3/211: -€751 million) of which 89% were attributable to the noncontrolling interests in Fresenius Medical Care. Reported noncontrolling interests were -€597 million (Q1-3/21: -€741 million).

Group net income2 before special items decreased by 15% (-22%/-19%3 in constant currency) to €371 million (Q3/211: €435 million). The decrease was mainly driven by higher labor costs at Fresenius Medical Care in the U.S., general cost inflation, revaluation of contract assets in the international service and project business at Fresenius Vamed as well as higher costs in the Corporate/Other segment. Moreover, increased interest expenses and a higher tax rate had a negative effect on Group net income. Excluding estimated COVID-19 effects4, Group net income2 before special items was -26% to -22% in constant currency (Q3/21: 12% to 16%). Reported Group net income2 decreased to €321 million (Q3/21: €413 million).

In Q1-3/22, Group net income2 before special items decreased by 5% (-10%/-8%3 in constant currency) to €1,284 million (Q1-3/211: €1,346 million). Excluding estimated COVID-19 effects4, Group net income2 before special items was -15% to -11% in constant currency (Q1-3/21: 7% to 11%). Reported Group net income2 decreased to €1,117 million (Q1-3/21: €1,319 million).

1 Before special items
2 Net income attributable to shareholders of Fresenius SE & Co. KGaA
3 Excluding Ivenix and mAbxience acquisitions
4 For estimated COVID-19 effects please see table on page 20

For a detailed overview of special items please see the reconciliation tables on pages 22-25 in the PDF.

Earnings per share1 before special items decreased by 15% (-22% in constant currency) to €0.66 (Q3/212: €0.78). Reported earnings per share1 were €0.57 (Q3/21: €0.74).

In Q1-3/22, earnings per share1 before special items decreased by 5% (-10% in constant currency) to €2.29 (Q1-3/212: €2.41). Reported earnings per share1 were €1.99 (Q1-3/21: €2.36).

Continued investment in growth
Spending on property, plant and equipment was €416 million corresponding to 4% of sales (Q3/21: €449 million; 5% of sales). These investments served primarily for the modernization and expansion of dialysis clinics, production facilities as well as hospitals and day clinics. In Q1-3/22, spending on property, plant and equipment was €1,173 million corresponding to 4% of sales (Q1-3/21: €1,342 million; 5% of sales).

Total acquisition spending was €502 million (Q3/21: €167 million), mainly for the majority stake in mAbxience by Fresenius Kabi. In Q1-3/22, total acquisition spending was €955 million (Q1-3/21: €807 million).

Cash flow development
Group operating cash flow increased to €1,256 million (Q3/21: €1,226 million) with a margin of 12.0% (Q3/21: 13.1%). Free cash flow before acquisitions and dividends increased to €876 million (Q3/21: €793 million). Free cash flow after acquisitions and dividends decreased to €388 million (Q3/21: €594 million).

In Q1-3/22, Group operating cash flow decreased to €2,374 million (Q1-3/21: €3,329 million) with a margin of 7.9% (Q1-3/21: 12.1%). Free cash flow before acquisitions and dividends decreased to €1,202 million (Q1-3/21: €1,986 million). Free cash flow after acquisitions and dividends decreased to -€406 million (Q1-3/21: €352 million).

Solid balance sheet structure
Group total assets increased by 12% (4% in constant currency) to €80,328 million (Dec. 31, 2021: €71,962 million) given currency translation effects, acquisitions and the expansion of business activities. Current assets increased by 11% (6% in constant currency) to €19,443 million (Dec. 31, 2021: €17,461 million), mainly driven by the increase of trade accounts receivables and inventories. Non-current assets increased by 12% (4% in constant currency) to €60,885 million (Dec. 31, 2021: €54,501 million).

Total shareholders’ equity increased by 17% (6% in constant currency) to €34,156 million (Dec. 31, 2021: €29,288 million). The equity ratio was 42.5% (Dec. 31, 2021: 40.7%).

Group debt increased by 5% (1% in constant currency) at €28,607 million (Dec. 31, 2021: € 27,155 million). Group net debt increased by 9% (4% in constant currency) to € 26,479 million (Dec. 31, 2021: € 24,391 million).

As of September 30, 2022, the net debt/EBITDA ratio was 3.74×1,2 (Dec. 31, 2021: 3.51×1,2) mainly driven by lower EBITDA contribution as well as acquisition spending. The net debt/EBITDA as of September 30, 2022 excluding the closed acquisition of Ivenix and the completed acquisition of a majority stake in mAbxience was 3.641,2.

1 At LTM average exchange rates for both net debt and EBITDA; pro forma closed acquisitions/divestitures
2 Before special items

For a detailed overview of special items please see the reconciliation tables on pages 22-25 in the PDF.

Business Segments

Fresenius Medical Care
(Financial data according to Fresenius Medical Care press release)

Fresenius Medical Care is the world’s largest provider of products and services for individuals with renal diseases. As of September 30, 2022, Fresenius Medical Care was treating 344,593 patients in 4,153 dialysis clinics. Along with its core business, the Renal Care Continuum, the company focuses on expanding in complementary areas and in the field of critical care.

Business development continues to be strongly impacted by uncertain inflationary macroeconomic environment
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
Sales increased by 15% (3% in constant currency) to €5,096 million (Q3/21: €4,441 million). Organic growth was 2%. Currency translation increased sales growth by 12%. In Q1-3/22, sales increased by 11% (2% in constant currency) to €14,401 million (Q1-3/21: €12,972 million). Organic growth was 1%. Currency translation increased sales growth by 9%.

EBIT decreased by 7% (-17% in constant currency) to €472 million (Q3/21: €505 million) resulting in a margin of 9.3% (Q3/21: 11.4%). EBIT before special items decreased by 8% (-18% in constant currency) to €470 million (Q3/21: €513 million), resulting in a margin1 of 9.2% (Q3/21: 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 €80 million (Q3 2021: €0.3 million) of Provider Relief Funding from the U.S. government to compensate for certain COVID-19-related costs. In Q1-3/22, EBIT decreased by 17% (-24% in constant currency) to €1,160 million (Q1-3/21: €1,403 million) resulting in a margin of 8.1% (Q1-3/21: 10.8%). EBIT before special items decreased by 7% (-14% in constant currency) to €1,322 million (Q1-3/21: €1,423 million), resulting in a margin1 of 9.2% (Q1-3/21: 11.0%).

Net income2 decreased by 16% (-24% in constant currency) to €230 million (Q3/21: €273 million). Net income2 before special items decreased by 17% (-25% in constant currency) to €231 million (Q3/21: €280 million). 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.

In Q1-3/22, net income2 decreased by 28% (-34% in constant currency) to €535 million (Q1-3/21: €741 million). Net income2 before special items decreased by 13% (-18% in constant currency) to €660 million (Q1-3/21: €756 million).

Operating cash flow was €658 million (Q3/21: €692million) with a margin of 12.9% (Q3/21: 15.6%). The decrease was mainly due to lower net income. In Q1-3/22, operating cash flow was €1,568 million (Q1-3/21: €1,820 million) with a margin of 10.9% (Q1-3/21: 14.0%).

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 income2,3 decline from a high-teens to a high-teens to mid-twenties percentage range. The Company confirms its target for revenue4 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 items5.

1 Before special items
2 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
3 FY/21 base: €1,018 million, before special items; FY/22 before special items
4 FY/21 base: €17,619 million
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.

For a detailed overview of special items please see the reconciliation tables on pages 22-25 in the PDF.

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 €56 million (on EBIT level) in the third quarter, which is treated as a special item.