Fresenius with new strategy and clear focus

• Intention to deconsolidate Fresenius Medical Care by changing the legal form of FMC to a German Stock Corporation (“Aktiengesellschaft”)
• Focus on Operating Companies Fresenius Kabi and Fresenius Helios
• Active portfolio management for assets where Fresenius lacks best ownership
• New, more rigorous Fresenius Financial Framework with ambitious segment margin bands
• ~€1bn annual structural productivity improvement by 2025

Fresenius is moving ahead with a simplified structure, sharper focus and acceleration of performance. Through the planned deconsolidation of Fresenius Medical Care, the company will simplify its governance and group structure. The company will have a clear focus on therapy to advance patient care across the three platforms (Bio)Pharma, MedTech and Care Provision. Programs are in place to enhance profitability and for active portfolio management. Fresenius will increase the pace of annual structural productivity improvement to approximately 1 billion euros by 2025.

Intention to deconsolidate Fresenius Medical Care

The company plans to deconsolidate Fresenius Medical Care by changing Fresenius Medical Care’s legal form to a German Stock Corporation (“Aktiengesellschaft”). Subject to the necessary shareholder approvals and the registration with the commercial register, the conversion is expected to become effective by the end of the 2023 financial year at the latest. To this end, an Extraordinary General Meeting of Fresenius Medical Care is expected to be held in July to decide on the proposal to change the company into the legal form of an Aktiengesellschaft (“AG”). Following the planned change in its legal form, Fresenius Medical Care will no longer be part of the fully consolidated subsidiaries of Fresenius. Fresenius’ will continue to hold a 32 percent stake in the share capital of Fresenius Medical Care.

“After careful consideration and very constructive discussions with the Group’s key stakeholders, we are confident that the planned deconsolidation of Fresenius Medical Care is the best way forward to benefit both companies.” said Wolfgang Kirsch, Chairman of the Supervisory Board of Fresenius SE. “By converting Fresenius Medical Care to the legal form of an AG, both companies gain flexibility and can better advance their strategic priorities, positioning themselves in the best possible way for the future. Michael Sen and his management team, who have developed this new corporate structure, will lead Fresenius back to operational strength and sustainable growth. I am convinced that the new structure will enable Helen Giza as CEO to realize the full potential of Fresenius Medical Care, in which we continue to hold a significant stake.”

“This is an inflection point for Fresenius”, said Fresenius SE CEO Michael Sen. “I am pleased that our anchor shareholder, the Else Kröner-Fresenius Foundation, has expressed their support for our plans and I would like to thank them for their trust. The new structure will greatly benefit both companies: Fresenius Medical Care needs an operational turnaround, to improve its performance and focus on its core business. Fresenius needs to simplify its complex corporate structures and commit to its Operating Companies and to maximizing value from its investments.”

“Simplifying our governance structure is an important step towards more optionality for a successful future of Fresenius Medical Care”, said Helen Giza, CEO of Fresenius Medical Care.

“The new legal form will give us the flexibility and autonomy to focus all our efforts to unlock value as the leading kidney care company.”
Focus on Operating Companies Fresenius Kabi and Fresenius Helios

The Operating Companies Fresenius Kabi and Fresenius Helios are at the center of the Group’s ambitions under #FutureFresenius. They are both geared for significant value creation and catering to system-critical areas of healthcare. Building on a resilient global generics business, Fresenius Kabi will expand along the growth vectors Nutrition, Biopharma and MedTech. Helios Germany and Quirónsalud are already the leading private hospital providers in Germany and Spain, caring for more than 24 million patients every year. Fresenius Helios intends to leverage its market position to actively shape industry trends across digitalization and integrated care.

For the Investment Companies Fresenius Medical Care and Fresenius Vamed, there will be a strong focus on active financial value management. Across the Group, refining the company’s operating model and advancing its ESG agenda and roadmap for the best of patients will be central elements of the further journey towards #FutureFresenius.

~€1bn annual structural productivity improvement by 2025

Structural productivity improvements are moving forward. The new target is to achieve annual structural cost savings of around €1 billion at EBIT level by 2025. In order to reach this goal, Fresenius is running targeted programs across all business segments and the Corporate Center, with the oversight and steering of the Group. Key elements include measures to optimize procurement, processes, sales and administrative costs, as well as divesting from non-core assets.
Thanks to its cost and efficiency program, the company has already realized €152 million in savings after taxes and non-controlling interests in fiscal year 2022, offset by €260 million in one-time costs. In line with previous practice, these expenses are classified as special items.

Fresenius Medical Care has increased the savings target for its FME25 transformation program from €500 million to €650 million by 2025 and now expects to invest up to €650 million in the same period1. By the end of 2022, Fresenius Medical Care delivered €131 million (on EBIT level) of sustainable savings under the FME25 program, exceeding the original target of €40 to 70 million for the same period.

New, more rigorous Fresenius Financial Framework

To enable and accelerate performance, the Management Board set up a new, more rigorous Fresenius Financial Framework. The framework sets ambitious EBIT margin bands for the segments. They serve as a benchmark when reviewing businesses, measuring performance and planning for the future.

At group level, Fresenius will measure its future performance based on return on invested capital (ROIC), a leverage target band and the cash conversion rate (CCR), among others.

New progressive dividend policy – Stable dividend proposed

With the new Fresenius Financial Framework, Fresenius aims to generate attractive and predictable dividend yields. In line with its new progressive dividend policy, the Company aims to increase the dividend in line with constant currency earnings per share1 growth but at least maintain the dividend at the prior-year’s level. Therefore, the Management Board of Fresenius will propose to the Supervisory Board a stable dividend at the prior year level of €0.92 per share for FY/22 (FY/21: €0.92).

FY/23 Group guidance

For 2023, Fresenius expects Group organic revenue1 to grow in a low- to mid-single-digit percentage range. Group constant currency EBIT2 is expected to remain broadly flat or decline up to a high-single-digit percentage rate.

Excluding Fresenius Medical Care constant currency EBIT3 is expected to remain broadly flat or decline up to a mid-single-digit percentage rate.

Fresenius expects the net debt/EBITDA4 ratio to be slightly above the 2022 level by the end of 2023 (December 31, 2022: 3.65×5), depending on divestment activities. The self-imposed target corridor for the leverage ratio remains unchanged at 3.0x to 3.5x.

Assumptions for guidance FY/23

For 2023, Fresenius assumes no further escalations of geopolitical tensions and challenges from COVID-19, and supply chain constraints continuing to ease. Fresenius expects that the general cost inflation and labor shortages will have a more significant negative effect on its business than in 2022. This is due to the fact that H2/2022 showed stronger headwinds compared to H1/2022. Thus, Fresenius expects a marked annualization effect.

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

For Fresenius Medical Care’s contribution to the Group’s financial figures, the assumptions for Fresenius Medical Care’s FY/23 guidance are also fully applicable to Fresenius Group’s FY/23 guidance. In 2022, Fresenius Medical Care’s EBIT was supported by €277 million of Provider Relief Funding from the U.S. government (at current currency). There is no additional governmental support assumed for 2023.

All of these assumptions are subject to considerable uncertainty.

4% revenue increase in constant currency

Group revenue increased by 7% (4% in constant currency) to €10,643 million (Q4/21: €9,966 million). Organic growth was 3%. Acquisitions/divestitures contributed net 1% to growth. Currency translation increased revenue growth by 3%. Excluding estimated COVID-19 effects1, Group revenue growth would have been 4% to 5% in constant currency (Q4/21: 5% to 6%).

In FY/22, Group revenue increased by 9% (4% in constant currency) to €40,840 million (FY/21: €37,520 million). Organic growth was 3%. Acquisitions/divestitures contributed net 1% to growth. Currency translation increased revenue growth by 5%. Excluding estimated COVID-19 effects1, Group revenue growth would have been 4% to 5% in constant currency (FY/21: 5% to 6%).

16% net income2,3,4 decline in constant currency

Group EBITDA before special items decreased by 2% (-7% in constant currency) to €1,802 million (Q4/212: €1,846 million). Reported Group EBITDA was €1,513 million (Q4/21: €1,868 million).
In FY/22, Group EBITDA before special items decreased by 1% (-6% in constant currency) at €6,808 million (FY/212: €6,854 million). Reported Group EBITDA was €6,294 million (FY/21: €6,825 million).

Group EBIT before special items decreased by 10% (-14% in constant currency) to €1,052 million (Q4/212: €1,166 million). The decrease was mainly driven by ongoing inflation leading to cost increases including personnel costs, material prices, logistics, and energy costs as well as negative one-offs at Fresenius Vamed and Fresenius Kabi. The EBIT margin before special items was 9.9% (Q4/212: 11.7%). Reported Group EBIT was €687 million (Q4/21: €1,123 million).
In FY/22, Group EBIT before special items decreased by 6% (-11% in constant currency) to €4,004 million (FY/212: €4,252 million). The EBIT margin before special items was 9.8% (FY/212: 11.3%). Reported Group EBIT was €3,321 million (FY/21: €4,158 million).

Group net interest before special items was -€157 million (Q4/211: -€120 million) mainly due to financing activities, rising interest rates and currency translation effects. Reported Group net interest was -€132 million (Q4/21: -€122 million). In FY/22, Group net interest before special items was -€533 million (FY/211: -€504 million). Reported Group net interest was -€507 million (FY/21: -€506 million).

Group tax rate before special items was 24.4% (Q4/211: 23.2%) mainly due to an increase in the proportionate share of non-tax-deductible expenses compared to taxable income as well as tax law changes at Fresenius Medical Care. Reported Group tax rate was 27.4% (Q4/21: 24.2%). In FY/22, Group tax rate before special items was 23.7% (FY/211: 22.6%) while the reported Group tax rate was 24.8% (FY/2021: 22.8%).

Noncontrolling interests before special items were -€232 million (Q4/211: -€282 million) of which 97% were attributable to the noncontrolling interests in Fresenius Medical Care. Reported noncontrolling interests were -€148 million (Q4/21: -€260 million). In FY/22, Noncontrolling interests before special items were -€918 million (FY/211: -€1,033 million) of which 91% were attributable to the noncontrolling interests in Fresenius Medical Care. Reported noncontrolling interests were -€745 million (FY/21: -1,001 million).

Group net income2 before special items decreased by 15% (-19%/-16%3 in constant currency) to €445 million (Q4/211: €521 million). The decrease was driven by the challenging macroeconomic environment with increased uncertainties, general cost inflation, staff shortage, disruptions in supply chains, and increased energy costs. Moreover, rising interest costs and negative one-off items at Fresenius Vamed and Fresenius Kabi as well as a higher tax rate weighed on the net income development. Excluding estimated COVID-19 effects4, Group net income2 before special items was -19% to -15% in constant currency (Q4/21: 3% to 7%). Reported Group net income2 decreased to €255 million (Q4/21: €499 million).

In FY/22, Group net income2 before special items decreased by 7% (-12%/-10%3 in constant currency) to €1,729 million (FY/211: €1,867 million). Excluding estimated COVID-19 effects4, Group net income2 before special items was -16% to -12% in constant currency (FY/21: 6% to 10%). Reported Group net income2 decreased to €1,372 million (FY/21: €1,818 million).

Earnings per share1 before special items decreased by 16% (-20% in constant currency) to €0.79 (Q4/212: €0.94). Reported earnings per share1 were €0.45 (Q4/21: €0.90). In FY/22, earnings per share1 before special items decreased by 8% (-13% in constant currency) to €3.08 (FY/212: €3.35). Reported earnings per share1 were €2.44 (FY/21: €3.26).

Investments

Spending on property, plant and equipment was €713 million corresponding to 7% of revenue (Q4/21: €690 million; 7% of revenue). These investments served primarily for the modernization and expansion of dialysis clinics, production facilities as well as hospitals and day clinics. In FY/22, spending on property, plant and equipment was €1,886 million corresponding to 5% of revenue (FY/21: €2,032 million; 5% of revenue).
Total acquisition spending was €43 million (Q4/21: €278 million) mainly for dialysis clinics at Fresenius Medical Care. In FY/22, total acquisition spending was €1,579 million (FY/21: €1,085 million).

Cash flow development

Group operating cash flow increased to €1,824 million (Q4/21: €1,749 million) with a margin of 17.1% (Q4/21: 17.5%). The strong development was driven by better cash collections and improved working capital management. Free cash flow before acquisitions and dividends increased to €1,219 million (Q4/21: €1,075 million). Free cash flow after acquisitions and dividends increased to €1,107 million (Q4/21: €841 million).

In FY/22, Group operating cash flow decreased to €4,198 million (FY/21: €5,078 million) with a margin of 10.3% (FY/21: 13.5%). The decrease was mainly due to lower net income and higher inventories. Free cash flow before acquisitions and dividends decreased to €2,421 million (FY/21: €3,061 million). Free cash flow after acquisitions and dividends decreased to €701 million (FY/21: €1,193 million).

Solid balance sheet structure

Group total assets increased by 6% (4% in constant currency) to €76,415 million (Dec. 31, 2021: €71,962 million) given currency translation effects, acquisitions and the expansion of business activities. Current assets increased by 5% (4% in constant currency) to €18,279 million (Dec. 31, 2021: €17,461 million), mainly driven by the increase of inventories and other current assets. Non-current assets increased by 7% (4% in constant currency) to €58,136 million (Dec. 31, 2021: €54,501 million).

Total shareholders’ equity increased by 10% (7% in constant currency) to €32,218 million (Dec. 31, 2021: €29,288 million). The equity ratio was 42.2% (Dec. 31, 2021: 40.7%).

Group debt increased by 2% (1% in constant currency) at €27,763 million (Dec. 31, 2021: € 27,155 million). Group net debt increased by 3% (1% in constant currency) to € 25,014 million (Dec. 31, 2021: € 24,391 million).

As of December 31, 2022, the net debt/EBITDA ratio was 3.65×1,2 (Dec. 31, 2021: 3.51×1,2) mainly driven by lower EBITDA contribution as well as acquisition spending. The net debt/EBITDA as of December 31, 2022 excluding the closed acquisition of Ivenix and the completed acquisition of a majority stake in mAbxience was 3.581,2.

Number of employees
As of December 31, 2022, the Fresenius Group had 316,920 employees worldwide (September 30, 2022: 319,691).