On May 4, 2022 Stephan Sturm, CEO of Fresenius reported that We have made a solid start into 2022 – somewhat better, even, than expected at Fresenius Helios and Fresenius Kabi (Press release, Fresenius, MAY 4, 2022, View Source [SID1234613502]). The first quarter was burdened by the ongoing coronavirus pandemic, the war in Ukraine, supply chain bottlenecks and, above all, cost increases that are in some cases significant. We will have to watch all these factors very closely. Still, our businesses developed well. With the announced transactions at Fresenius Kabi and Fresenius Medical Care we’ve taken important steps in the realization of our growth strategy, thereby improving the foundations for our future business success. We therefore continue to expect overall healthy sales and earnings growth, and to look ahead with confidence to the rest of our business year and beyond."
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FY/22 Group guidance confirmed
For FY/22, Fresenius confirms its guidance and projects sales growth1 in a mid-single-digit percentage range in constant currency. Net income2,3 is expected to grow in a low-single-digit percentage range in constant currency. Implicitly, net income2 for the Group excluding Fresenius Medical Care is also expected to grow in a low-single-digit percentage range in constant currency.
Without further acquisitions4, Fresenius projects an improvement of the net debt/EBITDA5 ratio (December 31, 2021: 3.51×6) into the self-imposed target corridor of 3.0x to 3.5x by the end of 2022. Fresenius expects the net debt/EBITDA ratio to slightly increase once the acquisitions of Ivenix and the majority stake in mAbxience are closed.
The Group’s cost and efficiency program is evolving according to plan and Fresenius confirms its increased savings targets provided in February 2022 of at least €150 million p.a. after tax and minority interest in 2023. For the years thereafter, a further significant increase in sustainable cost savings is expected.
1 FY/21 base: €37,520 million
2 Net income attributable to shareholders of Fresenius SE & Co. KGaA
3 FY/21 base: €1,867 million; before special items; FY/22: before special items
4 Cut-off date 22 February 2022
5 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
6 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 18-19 in the PDF.
Assumptions for guidance FY/22
COVID-19 will continue to impact Fresenius’ operations in 2022. Fresenius expects COVID-19 case numbers to decline going forward and consequently the number of elective treatments and staff availability to improve. 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.
The war in Ukraine is affecting Fresenius Group’s operations. The adverse effect of the war amounted to €14 million at net income level of Fresenius Group in the first quarter and is treated as a special item. Fresenius will continue to monitor closely the potential effects of the war.
With the increased uncertainty and volatility related to the Ukraine war, Fresenius now expects more pronounced cost inflationary effects and supply chain disruptions in 2022.
The Management Board assumes an unchanged corporate tax rate in the United States.
Furthermore, 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 recently announced acquisitions of Ivenix and the majority stake in mAbxience as well as any further potential acquisitions are excluded from guidance.
5% sales increase in constant currency
Group sales increased by 8% (5% in constant currency) to €9,720 million (Q1/21: €8,984 million). Organic growth was 3%. Acquisitions/divestitures contributed net 2% to growth. Currency translation increased sales growth by 3%. Excluding estimated COVID-19 effects1, Group sales growth would have been 5% to 6% in constant currency (Q1/21: 4% to 5%).
3% net income2,3 growth in constant currency
Group EBITDA before special items increased by 2% (-2% in constant currency) to €1,658 million (Q1/212: €1,631 million). Reported Group EBITDA was €1,595 million (Q1/21: €1,628 million).
Group EBIT before special items decreased by 1% (-5% in constant currency) to €996 million (Q1/212: €1,009 million) driven by the COVID-19-related excess mortality among Fresenius Medical Care’s patients as well as elevated labor, material and logistic costs. The EBIT margin before special items was 10.2% (Q1/212: 11.2%). Reported Group EBIT was €902 million (Q1/21: €1,006 million).
Group net interest before special items improved to -€119 million (Q1/212: -€137 million) mainly due to successful refinancing activities. Reported Group net interest also improved to -€118 million (Q1/21: -€137 million).
Group tax rate before special items was 22.7% (Q1/212: 22.8%) while the reported Group tax rate was 23.6% (Q1/21: 22.8%).
Noncontrolling interests before special items were -€216 million (Q1/212: -€237 million) of which 88% were attributable to the noncontrolling interests in Fresenius Medical Care. Reported noncontrolling interests were -€186 million (Q1/21: -€236 million).
1 For estimated COVID-19 effects in Q1/22 and Q1/21 please see table on page 16 in the PDF.
2 Before special items
3 Net income attributable to shareholders of Fresenius SE & Co. KGaA
For a detailed overview of special items please see the reconciliation tables on pages 18-19 in the PDF.
Group net income1 before special items increased by 6% (3% in constant currency) to €462 million (Q1/212: €436 million). Excluding estimated COVID-19 effects3, Group net income1 before special items would have been broadly stable (-2% to 2% in constant currency (Q1/21: 0% to 4%)). Reported Group net income1 decreased to €413 million (Q1/21: €435 million).
Earnings per share1 before special items increased by 6% (3% in constant currency) to €0.83 (Q1/212: €0.78). Reported earnings per share1 were €0.74 (Q1/21: €0.78).
Continued investment in growth
Spending on property, plant and equipment was €338 million corresponding to 3% of sales (Q1/21: €384 million; 4% of sales). These investments served primarily for the modernization and expansion of dialysis clinics, production facilities as well as hospitals and day clinics.
Total acquisition spending was €162 million (Q1/21: €149 million), mainly for the acquisition of dialysis clinics by Fresenius Medical Care and hospitals by Helios Spain.
Cash flow development
Group operating cash flow decreased to €101 million (Q1/21: €652 million) with a margin of 1.0% (Q1/21: 7.3%), mainly driven by working capital build-up from higher raw material inventories and receivables, among others, as well as phasing effects. Free cash flow before acquisitions and dividends decreased to -€255 million (Q1/21: €241 million). Free cash flow after acquisitions and dividends decreased to -€403 million (Q1/21: €117 million).
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA
2 Before special items
3 For estimated COVID-19 effects in Q1/22 and Q1/21 please see table on page 16 in the PDF.
For a detailed overview of special items please see the reconciliation tables on pages 18-19 in the PDF.
Solid balance sheet structure
Group total assets increased by 2% (0% in constant currency) to €73,114 million (Dec. 31, 2021: €71,962 million) given currency translation effects and the expansion of business activities. Current assets increased by 3% (2% in constant currency) to €18,002 million (Dec. 31, 2021: €17,461 million), mainly driven by the increase of trade accounts receivables. Non-current assets increased by 1% (0% in constant currency) to €55,112 million (Dec. 31, 2021: €54,501 million).
Total shareholders’ equity increased by 4% (3% in constant currency) to €30,584 million (Dec. 31, 2021: €29,288 million). The equity ratio was 41.8% (Dec. 31, 2021: 40.7%).
Group debt remained stable (0% in constant currency) at €27,211 million (Dec. 31, 2021: € 27,155 million). Group net debt increased by 3% (2% in constant currency) to € 25,134 million (Dec. 31, 2021: € 24,391 million).
As of March 31, 2022, the net debt/EBITDA ratio increased to 3.60×1,2 (Dec. 31, 2021: 3.51×1,2) mainly driven by COVID-19 effects weighing on operating cash flow.
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 18-19 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 March 31, 2022, Fresenius Medical Care was treating 343,493 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.
• 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 logistic costs in Health Care Products
• Earnings development in EMEA additionally impacted by the war in Ukraine
Sales increased by 8% (3% in constant currency) to €4,548 million (Q1/21: €4,210 million). Organic growth was 2%. Currency translation increased sales growth by 5%.
EBIT decreased by 27% (-30% in constant currency) to €348 million (Q1/21: €474 million) resulting in a margin of 7.6% (Q1/21: 11.3%). EBIT before special items, i.e. costs incurred for FME25 and the impact related to the war in Ukraine, decreased by 15% (-19% in constant currency) to €403 million (Q1/21: €477 million), resulting in a margin1 of 8.9% (Q1/21: 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.
1 Before special items
2 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
For a detailed overview of special items please see the reconciliation tables on pages 18-19 in the PDF.
Net income1 decreased by 37% (-39% in constant currency) to €157 million (Q1/21: €249 million). Net income1 before special items decreased by 20% (-23% in constant currency) to €200 million (Q1/21: €251 million) mainly due to the mentioned negative effects on operating income.
Operating cash flow was €159 million (Q1/21: €208 million) with a margin of 3.5% (Q1/21: 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.
For FY/22, Fresenius Medical Care confirms its outlook and expects revenue2 and net income1,3 to grow at low- to mid-single-digit percentage rates in constant currency4.
For further information, please see Fresenius Medical Care’s press release at View Source
1 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
2 FY/21 base: €17,619 million
3 FY/21 base: €1,018 million, before special items; FY/22 before special items
4 These targets are based on the 2021 results excluding the costs related to FME25 of €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.