Fresenius Medical Care : continues solid revenue and strong earnings growth in the third quarter

Press Release

Media Contact

Matthias Link

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Contact for analysts and investors

Dr. Dominik Heger

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www.freseniusmedicalcare.com

October 29, 2020

Fresenius Medical Care continues solid revenue and strong earnings growth in the third quarter

• Operations maintained despite COVID-19, impact on patients minimized
• Q3 development impacted by currency headwinds and expected lower reimbursement for calcimimetics
• Financial targets for FY 2020 confirmed inclusive of anticipated COVID-19 effects

"The global COVID-19 pandemic has posed further challenges to us in the third quarter; and it will be a sizable challenge to be managed also in the months to come", said Rice Powell, Chief Executive Officer of Fresenius Medical Care. "It is at times like these that the value of our strong network, of our vertically integrated, resilient business model and of the commitment of our entire Fresenius Medical Care team becomes evident - and proves to be decisive for fostering the wellbeing of our patients as well as creating value for our shareholders. On the back of our strong earnings development in the first nine months, we confirm our outlook for the financial year 2020. Thanks to the lessons learned from the first phase of the pandemic and our highly committed team, I am very confident that our company will successfully cope with COVID-19."

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Key figures (IFRS)

	Q3 2020	Q3 2019	Growth	Growth	9M 2020	9M 2019	Growth	Growth
	EUR m	EUR m	yoy	yoy, cc	EUR m	EUR m	yoy	yoy, cc
Revenue	4,414	4,419	+/- 0%	+ 6%	13,459	12,897	+ 4%	+ 6%
Operating income	632	595	+ 6%	+ 11%	1,843	1,653	+ 11%	+ 12%
Net income1	354	333	+ 6%	+ 11%	987	857	+ 15%	+ 15 %
Net income adjusted1,2	354	332	+ 7%	+ 11%	987	868	+ 14%	+ 14 %
Basic EPS (EUR)	1.21	1.10	+ 9%	+ 14%	3.35	2.82	+ 19%	+ 19%

cc = at constant currency, EPS = earnings per share

2020 targets confirmed: mid to high single digit growth rates

Fresenius Medical Care continues to expect both revenue and net income to grow at a mid to high single digit rate in 2020. These targets are inclusive of anticipated COVID- 19 effects, in constant currency and exclude special items3. They are based on the adjusted results 2019, including the effects of the operations of the NxStage acquisition and the IFRS 16 implementation.

COVID-19 continues to affect dialysis business

As in previous months - and thanks to the comprehensive protective measures initiated at the beginning of the pandemic - Fresenius Medical Care was able to minimize the impact on patients and to maintain operations in its more than 4,000 dialysis centers worldwide without significant interruptions.

However, the COVID-19 pandemic continued to affect people with advanced kidney disease and the resulting severity of illness generated an increase in hospitalization and mortality rate. The resulting increase in missed treatments and, in addition, delayed referrals of patients with late stage chronic kidney disease, slowed down the organic growth in the

1. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
2. For a reconciliation of adjusted figures, please refer to the table at the end of the press release
3. Special items are 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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third quarter to 3%. In the first nine months the COVID-19 related net effect on operating income was neutral.

Patients, Clinics and Employees

As of September 30, 2020, Fresenius Medical Care treated 349,167 patients in 4,073 dialysis clinics worldwide. At the end of the third quarter, the Company had 126,463 employees (full-time equivalents) worldwide, compared to 120,734 employees as of September 30, 2019.

Solid net income growth despite headwinds from exchange rates

Despite a sizable headwind from exchange rates, revenue was stable and amounted to EUR 4,414 million (+6% at constant currency). Organic growth of 3% was realized including the expected negative impacts from lower reimbursement for calcimimetics and COVID-19 related slower growth in the number of treatments.

Health Care Services revenue remained stable despite the negative effects from exchange rates and amounted to EUR 3,499 million (+6% at constant currency). On a constant currency basis, growth was driven by negative prior year revenue effects ("prior year revenue effects")4, contributions from acquisitions and was achieved despite the lower reimbursement for calcimimetics as well as COVID-19 related slower growth of the number of treatments.

Health Care Products revenue was negatively impacted by exchange rates as well and decreased by 1% to EUR 915 million (+4% at constant currency). On a constant currency basis, growth was driven by higher sales of products for acute care treatments, machines for chronic treatment and peritoneal dialysis products.

In the first nine months of 2020 revenue increased by 4% to EUR 13,459 million (+6% at constant currency), with organic growth of 4%. Health Care Services revenue grew by 4% to EUR 10,708 million (+6% at constant currency). Health Care Products revenue rose by 5% to EUR 2,751 million (+7% at constant currency).

4 Prior year revenue effects: revenue recognition adjustment for accounts receivable in legal dispute (- EUR 84 million), reduction in patient attribution and a decreasing savings rate for ESCOs (- EUR 46 million)

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Operating income increased by 6% to EUR 632 million (+11% at constant currency), resulting in a margin of 14.3% (Q3 2019: 13.5%). The margin increase was driven by negative prior year earnings effects ("prior year earnings effects")5, an increase in commercial revenue and favorable cost management of pharmaceuticals, offsetting the lower reimbursement for calcimimetics, all in the North America region.

Operating income for the first nine months increased by 11% to EUR 1,843 million (+12% at constant currency), resulting in a margin of 13.7% (9M 2019: 12.8%).

Net income1 grew by 6% to EUR 354 million (+11% at constant currency), driven by the earnings effects described above and lower refinancing cost in light of favorable market conditions. Basic earnings per share (EPS) rose by 9% to EUR 1.21 (+14% at constant currency), supported by the Company's completed share buyback program decreasing the average weighted number of shares outstanding.

In the first nine months of 2020, net income increased by 15% to EUR 987 million (+15% at constant currency). EPS rose by 19% to EUR 3.35 (+19% at constant currency).

Exceptional cash-flow development in the first nine months

Fresenius Medical Care generated EUR 746 million of operating cash flow (Q3 2019: EUR

868 million), resulting in a margin of 16.9% (Q3 2019: 19.7%). For the first nine months

of 2020, operating cash flow increased to EUR 3,649 million (9M 2019: EUR 1,796 million). This increase was mainly due to U.S. federal relief funding and advanced payments under the CARES Act, other COVID-19 relief, as well as working capital improvements driven by cash collections.

Free cash flow (net cash used in operating activities, after capital expenditures, before acquisitions, investments and dividends) amounted to EUR 507 million (Q3 2019: EUR 584 million), resulting in a margin of 11.5% (Q3 2019: 13.2%). In the first nine months of 2020, the Company generated a free cash flow of EUR 2,913 million (9M 2019: EUR 1,019 million).

5 Prior year earnings effects: revenue recognition adjustment for accounts receivable in legal dispute (- EUR 84 million), reduction in patient attribution and a decreasing savings rate for ESCOs (- EUR 46 million) as well as a remeasurement effect of the fair value of the Humacyte investment (EUR 76 million).

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