Fresenius Medical Care : Press release (preliminary results)

Press Release

Media contact

Matthias Link

1. +49 6172 [e-mail]

Contact for analysts and investors

Dr. Dominik Heger

1. +49 6172 [e-mail]

www.freseniusmedicalcare.com

July 27th, 2022

Fresenius Medical Care cuts outlook for FY 2022 due to increased headwinds from U.S. labor market and global inflation, and withdraws 2025 targets

• Outlook:

1. 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.

• 1. Despite most burdens assumed to be temporary, 2025 targets withdrawn due to uncertainty of labor and macro-economic inflationary environment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

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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."

Preliminary Key figures (IFRS, unaudited)

	Q2 2022	Q2 2021	Growth	Growth	H1 2022	H1 2021	Growth	Growth
	EUR m	EUR m	yoy	yoy, cc	EUR m	EUR m	yoy	yoy, cc
Revenue	4,757	4,320	+10%	+1%	9,305	8,530	+9%	+2%
Operating income	341	424	-20%	-27%	688	898	-23%	-29%
excl. special items1	445	433	+3%	-6%	852	910	-6%	-13%
Net income2	147	219	-33%	-39%	305	468	-35%	-39%
excl. special items1	225	225	0%	-7%	428	476	-10%	-15%
Basic EPS (EUR)	0.50	0.75	-33%	-39%	1.04	1.60	-35%	-39%
excl. special items1	0.77	0.77	0%	-7%	1.46	1.62	-10%	-15%

yoy = year-on-year, cc = at constant currency, EPS = earnings per share

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

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

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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.

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

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

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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 items.4

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

• Macro-economicinflation 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

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

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.

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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

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