DGAP-News: Fresenius Medical Care AG & Co. KGaA / Key word(s): Half Year Results
Fresenius Medical Care AG & Co. KGaA reports results in line with expectations for the second quarter and confirms 2021
2021-07-30 / 07:03
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. As assumed, COVID-19 pandemic continued to impact organic growth in dialysis and downstream businesses
. Patient excess mortality rates significantly reduced
. Negative exchange rate effects continue
. Earnings development impacted by phasing and strong prior-year base, as indicated
. Financial targets for FY 2021 confirmed
. FME25 program on track
Rice Powell, Chief Executive Officer of Fresenius Medical Care, said: "The fact that we saw further easing in
COVID-19-related excess mortality among our patients - both on a monthly basis and when looking at a rolling 12-month
period - is for sure the good news we hoped for and expected to share today. We are cautious and continue to watch the
Delta variant and the increasing macro-economic inflationary impacts.
COVID-19 continues to impact the number of treatments in our dialysis business, the development in our downstream
businesses and the speed of closing acquisitions. As indicated in May, we saw the expected significant earnings decline
in the second quarter. In addition to the current effects of the pandemic, this was due to the strong prior-year base
and the reversal of the favorable phasing of costs we saw in the first quarter. Based on our defined assumptions and
the business performance in the first half of the year, we confirm our outlook for the full year 2021."
Key figures (IFRS)
Q2 2021 Q2 2020 Growth Growth H1 2021 H1 2020 Growth Growth
EUR m EUR m yoy yoy, cc EUR m EUR m yoy yoy, cc
Revenue 4,320 4,557 -5% +2% 8,530 9,045 -6% +2%
Operating income 424 656 -35% -30% 898 1,211 -26% -20%
excl. special items^1 430 656 -34% -29% 907 1,211 -25% -19%
Net income^2 219 351 -38% -33% 468 634 -26% -21%
excl. special items^1 223 351 -37% -31% 474 634 -25% -20%
Basic EPS (EUR) 0.75 1.20 -38% -33% 1.60 2.15 -26% -20%
excl. special items^1 0.76 1.20 -37% -31% 1.62 2.15 -25% -19%
cc = at constant currency, EPS = earnings per share
COVID-19-related excess mortality declined, but continued to adversely affect the business
As expected, COVID-19 related incremental excess mortality among Fresenius Medical Care's patients has further declined - from 3,100 patients in the first to approximately 1,500 in the second quarter. Thus, it amounted to approximately 11,200 patients in the past 12 months (as of June 30, 2021) and approximately 15,000 since the start of the pandemic. The decrease on a quarterly basis is also a result of continued progress made in patient vaccination, which has led to a further decline in global infection rates. At the end of the second quarter, approximately 71% of Fresenius Medical Care's patients in the U.S. have received at least one dose, with a high proportion of them already fully vaccinated. On a global basis, also approximately 71% of Fresenius Medical Care's patients have received at least one vaccination.
Fresenius Medical Care continues to monitor closely the recent COVID-19-related developments, in particular regarding the global spread of the Delta variant and any potential new waves.
As expected, COVID-19-related excess mortality of dialysis patients not only led to an underutilization of Fresenius Medical Care's dialysis clinics, but also impacted downstream businesses in the first half of the year. Here, the U.S. Healthcare Products as well as the pharmacy business were affected by significantly lower than expected volumes.
The anticipated decline in incremental excess mortality has led to a smaller impact in Q2 than in Q1. The overall adverse COVID-19 impact from accumulated excess mortality on organic growth in the Health Care Services business amounted to around 240 basis points in the second quarter and 290 basis points in the first half of 2021.
Based on the results for the second quarter and first half, Fresenius Medical Care confirms its outlook for FY 2021 as outlined in February. The Company expects revenue to grow at a low- to mid-single digit percentage rate and net income to decline at a high-teens to mid-twenties percentage rate against the 2020 base.^3 This outlook is based on the assumption of a return to normalized mortality rates in the second half of 2021.
To support its 2025 strategy, further strengthen profitability and compensate for the negative earnings effects of the COVID-19 pandemic, Fresenius Medical Care has initiated the FME25 program. The Company reconfirms its targets and is on track with its work regarding the operating model transformation and efficiency measures. Fresenius Medical Care will provide an update in the fall.
Driving sustainability efforts
Sustainability is an integral part of Fresenius Medical Care's mission and vision and is reflected in the corporate strategy. The Company is committed to implementing global sustainability standards in its operations around the world. To this end, Fresenius Medical Care is further driving forward its Global Sustainability Program and ESG initiatives:
Fresenius Medical Care has recently joined econsense, a network of companies united in the goal of shaping the transformation to a sustainable economy and society. The dialogue and cross-industry exchange of practical expertise within econsense, which now counts 40 major companies as members, will further support Fresenius Medical Care's sustainability management.
In July, Fresenius Medical Care has further underlined its commitment to create value in ecological, social and economic terms by signing its first sustainability-linked financing instrument. The Company's new EUR 2 billion syndicated revolving credit facility includes a component that links its margin development to sustainability performance.
Earnings impacted by COVID-19, negative exchange rate effects and a high prior-year base
Revenue in the second quarter decreased by 5% to EUR 4,320 million (+2% at constant currency, +1% organic).
Health Care Services revenue in the second quarter declined by 6% to EUR 3,400 million (+2% at constant currency, +1% organic). The increase in organic growth in the international regions was more than offset by negative exchange rate effects in all regions as well as by the adverse COVID-19 impact and a lower reimbursement for Calcimimetics in North America.
Health Care Products revenue decreased by 2% to EUR 920 million (+2% at constant currency, +1% organic). The positive organic growth development was mainly driven by higher sales of in-center disposables in EMEA and Asia-Pacific, machines for chronic treatment and renal pharmaceuticals. This positive development was offset mainly by negative exchange rate effects and lower sales of acute care products compared to a strong prior-year base.
In the first half, revenue declined by 6% to EUR 8,530 million (+2% at constant currency, +1% organic). Health Care Services revenue decreased by 7% to EUR 6,726 million (+1% at constant currency, +1% organic); Health Care products revenue declined by 2% to EUR 1,804 million (+3% at constant currency, +3% organic).
Operating income decreased by 35% to EUR 424 million in the second quarter (-30% at constant currency), resulting in a margin of 9.8% (Q2 2020: 14.4%). Operating income excluding special items declined by 34% to EUR 430 million (-29% at constant currency), resulting in a margin of 10.0%. The decrease was mainly due to the adverse impact of the COVID-19 pandemic, including a high prior-year base as a result of government relief funding, the expected phasing and increase in Sales, General and Administrative expense, negative exchange rate effects and higher direct costs. These effects were partially offset in particular by an improved Medicare Advantage payor mix in the U.S.
In the first half, operating income decreased by 26% to EUR 898 million (-20% at constant currency), resulting in a margin of 10.5% (H1 2020: 13.4%). Operating income excluding special items declined by 25% to EUR 907 million (-19% at constant currency), resulting in a margin of 10.6%.
Net income^2 decreased by 38% to EUR 219 million in the second quarter (-33% at constant currency). Net income excluding special items declined by 37% to EUR 223 million (-31% at constant currency).
In the first half, net income decreased by 26% to EUR 468 million (-21% at constant currency). Net income excluding special items declined by 25% to EUR 474 million (-20% at constant currency).
Basic earnings per share (EPS) decreased by 38% to EUR 0.75 (-33% at constant currency) in the second quarter. EPS excluding special items declined by 37% to EUR 0.76 (-31% at constant currency).
In the first half, EPS decreased by 26% to EUR 1.60 (-20% at constant currency). EPS excluding special items declined by 25% to EUR 1.62 (-19% at constant currency).
Cash flow development
In the second quarter, Fresenius Medical Care generated EUR 921 million of operating cash flow (Q2 2020: EUR 2,319 million), resulting in a margin of 21.3% (Q2 2020: 50.9%). The decline was mainly due to the U.S. federal government's payments in the second quarter of 2020 under the CARES Act, the start of recoupment of these advanced payments in the second quarter of 2021 as well as the timing of certain other expense payments in 2021. In the first half, operating cash flow amounted to EUR 1,129 million (H1 2020: EUR 2,903 million), resulting in a margin of 13.2% (H1 2020: 32.1%).
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