Fresenius SE KGaA : Continued strong sales and net income growth – Fresenius raises Group earnings guidance for 2015 (for additional tables see PDF-file)

October 29, 2015
Bad Homburg v.d.H.

If no timeframe is specified, information refers to the first nine months of 2015.
For a detailed overview of special items please see the reconciliation tables in the pdf on pages 17-18.

Q3/2015:

• Sales: €6.9 billion (+16% at actual rates, +7% in constant currency)
• EBIT¹: €1,027 million (+25% at actual rates, +12% in constant currency)
• Net income²: €367 million (+31% at actual rates, +20% in constant currency)

Q1-3/2015:

• Sales: €20.4 billion (+22% at actual rates, +11% in constant currency)
• EBIT¹: €2.8 billion (+28% at actual rates, +14% in constant currency)
• Net income²: €1,009 million (+31% at actual rates, +19% in constant currency)

Ulf Mark Schneider, CEO of Fresenius, said: 'Our strong growth trend continued with double-digit constant currency sales and earnings growth in the first nine months. All business segments contributed to the excellent financial results. Fresenius Kabi in particular stood out, benefiting from drug shortages and new product launches in the U.S. market. We raise our Group earnings guidance for 2015 and remain optimistic about the positive fundamentals in our markets.'

¹Before special items
²Net income attributable to shareholders of Fresenius SE & Co. KGaA; before special items

2015 Group earnings guidance¹ raised
Based on the Group's excellent financial results in the first nine months of 2015 and strong prospects for the remainder of the year, Fresenius raises its 2015 Group earnings guidance. Net income² is now expected to grow by 20% to 22% in constant currency. Previously, Fresenius expected net income² growth of 18% to 21% in constant currency.
The company fully confirms its Group sales guidance. Sales are expected to increase by 8% to 10% in constant currency.

The net debt/EBITDA³ ratio is now expected to be below 3.0 at the end of 2015. Previously, Fresenius expected the ratio to be approximately 3.0.

¹Based on the average exchange rates through October 23 and the exchange rates of October 23 applied to the remainder of the year, this implies sales of ~€27.4 billion and net income of ~€1.42 billion, at the lower end of the respective guidance range.
²Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2015 before integration costs (€12 million before tax for hospitals acquired from Rhön-Klinikum AG), before costs for the efficiency program at Fresenius Kabi (~€100 million before tax), and before the disposal gains from the divestment of two HELIOS hospitals (€34 million before tax); 2014 before special items
³At average exchange rates for the last twelve months for both net debt and EBITDA; without major unannounced acquisitions; before special items

11% sales growth in constant currency
Group sales increased by 22% (11% in constant currency) to €20,369 million (Q1-3/2014: €16,711 million). Organic sales growth was 6%. Acquisitions contributed 5%. In Q3/2015, Group sales increased by 16% (7% in constant currency) to €6,940 million (Q3/2014: €5,978 million). Organic sales growth was 6%. Acquisitions contributed 2%, while divestitures reduced sales by 1%.

Group sales by region:

19% Group net income¹ growth in constant currency
Group EBITDA² increased by 26% (13% in constant currency) to €3,674 million (Q1-3/2014: €2,905 million). Group EBIT² increased by 28% (14% in constant currency) to €2,849 million (Q1-3/2014: €2,223 million). The EBIT margin² was 14.0% (Q1 3/2014: 13.3%). In Q3/2015 Group EBIT² increased by 25% (12% in constant currency) to €1,027 million (Q3/2014: €820 million), the EBIT margin² was 14.8% (Q3/2014: 13.7%).

Group net interest increased to -€476 million (Q1-3/2014: -€431 million). Interest rate savings were more than offset by interest on incremental debt for acquisitions completed in 2014 and by currency translation effects. In Q3/2015, Group net interest of -€146 million was slightly below the prior-year level (Q3/2014: €148 million). More favorable financing terms offset negative currency translation effects.

The Group tax rate² was 29.6% (Q1-3/2014: 29.5%). In Q3/2015, the Group tax rate was 29.7% (Q3/2014: 29.3%).

Noncontrolling interest was €661 million (Q1-3/2014: €495 million), of which 95% was attributable to the noncontrolling interest in Fresenius Medical Care.

Group net income³ before special items increased by 31% (19% in constant currency) to €1,009 million (Q1-3/2014: €768 million). Earnings per share¹ increased by 31% (19% in constant currency) to €1.86 (Q1-3/2014: €1.42). In Q3/2015, Group net income3 before special items increased by 31% (20% in constant currency) to €367 million (Q3/2014: €281 million). Earnings per share¹ increased by 31% (19% in constant currency) to €0.68 (Q3/2014: €0.52).

Group net income³ including special items increased by 23% (12% in constant currency) to €999 million (Q1-3/2014: €810 million). Earnings per share³ increased by 23% (11% in constant currency) to €1.84 (Q1-3/2014: € 1.50). In Q3/2015, Group net income including special items increased by 29% (18% in constant currency) to €357 million (Q3/2014: €276 million). Earnings per share³ increased by 29% (18% in constant currency) to €0.66 (Q3/2014: €0.51).

A reconciliation to earnings according to U.S. GAAP can be found in the pdf on pages 17-18.

¹ Net income attributable to shareholders of Fresenius SE & Co. KGaA; before special items
² Before special items
³ Net income attributable to shareholders of Fresenius SE & Co. KGaA

Continued investment in growth
Spending on property, plant and equipment was €950 million (Q1-3/2014: €854 million), primarily for the modernization and expansion of dialysis clinics, production facilities and hospitals. Total acquisition spending was €272 million (Q1-3/2014: €1,861 million).

Strong cash flow development
Operating cash flow increased by 27% to €2,151 million (Q1-3/2014: €1,695 million) with a margin of 10.6% (Q1-3/2014: 10.1%). Operating cash flow in the prior-year period was reduced by the US$115 million¹ payment for the W.R. Grace bankruptcy settlement. Operating cash flow in Q3/2015 reached a very strong €900 million, but could not quite match the exceptional prior-year quarter (Q3/2014: €945 million). The same applies to the cash flow margin of 13.0% (Q3/2014: 15.8%).

Net capital expenditure increased to €932 million (Q1-3/2014: €848 million). Free cash flow before acquisitions and dividends improved to €1,219 million (Q1-3/2014: €847 million). Free cash flow after acquisitions and dividends increased to €574 million (Q1 3/2014: €1,154 million).

¹See Annual Report 2014, page 152 f.

Solid balance sheet structure
The Group's total assets increased by 6% (2% in constant currency) to €42,169 million (Dec. 31, 2014: €39,897 million). Current assets grew by 5% (3% in constant currency) to €10,550 million (Dec. 31, 2014: €10,028 million). Non-current assets increased by 6% (1% in constant currency) to €31,619 million (Dec. 31, 2014: € 29,869 million).

Total shareholders' equity increased by 11% (7% in constant currency) to €17,170 million (Dec. 31, 2014: €15,483 million). The equity ratio increased to 40.7% (Dec. 31, 2014: 38.8%).

Group debt decreased by 1% (5% in constant currency) to €15,237 million (Dec. 31, 2014: € 15,454 million). As of September 30, 2015, the net debt/EBITDA ratio was 2.93¹ (2.89¹ at LTM average exchange rates for both net debt and EBITDA).

¹Pro forma acquisitions; before special items

Increased number of employees
As of September 30, 2015, the number of employees increased by 2% to 220,853 (Dec. 31, 2014: 216,275).

Business Segments

Fresenius Medical Care
Fresenius Medical Care is the world's largest provider of products and services for individuals with renal diseases. As of September 30, 2015, Fresenius Medical Care was treating 290,250 patients in 3,402 dialysis clinics. Along with its core business, the company seeks to expand the range of medical services in the field of care coordination.

• Strong Q3 sales growth in North America
• Adverse currency developments and special items weigh on business outside North America
• 2015 outlook confirmed

Sales increased by 8% (13% in constant currency) to US$12,390 million (Q1-3/2014: US$11,511 million). Organic sales growth was 7%. Acquisitions contributed 7%, while divestitures reduced sales by 1%. Currency effects reduced sales by -5%. In Q3/2015, sales increased by 3% (9% in constant currency) to US$4,231 million (Q3/2014: US$4,113 million).

Health Care services sales (dialysis services and care coordination) increased by 11% (15% in constant currency) to US$9,929 million (Q1-3/2014: US$8,928 million). Dialysis product sales decreased by 5% (increased by 7% in constant currency) to US$2,461 million (Q1 3/2014: US$2,583 million).

In North America sales increased by 15% to US$8,730 million (Q1-3/2014: US$7,624 million). Health Care services sales grew by 15% to US$8,087 million (Q1-3/2014: US$7,015 million). Dialysis product sales increased by 6% to US$643 million (Q1-3/2014: US$609 million).

Sales outside North America decreased by 5% (increased by 12% in constant currency) to US$3,639 million (Q1-3/2014: US$3,843 million). Regional financial results were impacted by special items⁴. Health Care services sales decreased by 4% (increased by 15% in constant currency) to US$1,842 million (Q1-3/2014: US$1,913 million). Dialysis product sales decreased by 7% (increased by 8% in constant currency) to US$1,797 million (Q1-3/2014: US$1,930 million).

EBIT increased by 5% (10% in constant currency) to US$1,665 million (Q1-3/2014: US$1,591 million). The EBIT margin was 13.4% (Q1-3/2014: 13.8%). Adjusted for special items EBIT¹ increased by 5% to US$1,683 million. In Q3/2015, EBIT increased by 4% (8% in constant currency) to US$614 million (Q3/2014: US$590 million). The EBIT margin increased to 14.5% (Q3/2014: 14.3%). EBIT excluding special items² increased by 5% to $632 million.

Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA of US$713 million was at prior-year level (Q1-3/2014: US$710 million). Net income attributable to non-controlling interest increased by 41% to US$207 million, mainly due to the strong earnings development in North America. In constant currency net income increased by 6%. Net income excluding special items increased by 3% to US$735 million. In Q3/2015, net income decreased by 3% (-1% in constant currency) to US$262 million (Q3/2014: US$271 million). Net income excluding special items³ increased by 2% to US$284 million.

Operating cash flow increased by 11% to US$1,412 million (Q1-3/2014: US$1,274 million). Operating cash flow in the prior-year period was reduced by the US$115 million⁵ payment for the W.R.Grace bankruptcy settlement. The cash flow margin increased to 11.4% (Q1 3/2014: 11.1%). In Q3/2015, operating cash flow reached a very strong US$579 million, but could not match the exceptional prior-year quarter (Q3/2014: US$712 million). The same applies to the cash flow margin of 13.7% (Q3/2014: 17.3%).

Fresenius Medical Care confirms its outlook for 2015. The company expects sales to grow by 5% to 7%, which equals a growth rate of 10% to 12% in constant currency. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA is expected to increase by 0% to 5% in 2015.

The outlook is based on current exchange rates. Savings from the global efficiency program are included, while earnings contributions from potential acquisitions are not. The outlook reflects further operating cost investments within the Care Coordination segment.

For further information, please see Fresenius Medical Care's Press Release at www.freseniusmedicalcare.com.

¹2015 before divestiture of dialysis business in Venezuela (-US$26 million before tax) and European pharmaceutical business (US$8 million before tax); 2014 before closing of manufacturing plant (-US$11 million before tax)
²Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
³2015 before divestiture of dialysis business in Venezuela (-US$27 million after tax) and European pharmaceutical business (US$5 million after tax); 2014 before closing of manufacturing plant ( US$7 million after tax)
⁴Divestiture of dialysis business in Venezuela and European pharmaceutical business
⁵See Annual Report 2014, page 152 f.

Fresenius Kabi
Fresenius Kabi offers intravenously administered generic drugs, clinical nutrition and infusion therapies for seriously and chronically ill patients in the hospital and outpatient environments. The company is also a leading supplier of medical devices and transfusion technology products.

• 10% organic sales growth in Q3
• 19% constant currency EBIT¹ growth in Q3
• 2015 outlook: organic sales growth of ~8% and constant currency EBIT¹ growth of 19% to 22% expected

Sales increased by 18% (8% in constant currency) to €4,431 million (Q1-3/2014: €3,760 million). Organic sales growth was 9%. Acquisitions contributed 1% while divestitures reduced sales by 2%. Positive currency translation effects (10%) were mainly related to the Euro's depreciation against the U.S. dollar and the Chinese yuan. In Q3/2015, sales increased by 16% (9% in constant currency) to €1,499 million (Q3/2014: €1,294 million). Organic sales growth was 10%.

Sales in Europe grew by 2% (organic growth: 4%) to €1,566 million (Q1-3/2014: €1,538 million). Sales in North America increased by 39% (organic growth: 16%) to €1,555 million (Q1-3/2014: €1,118 million). North American sales growth was driven by persisting IV drug shortages and new product launches. Asia-Pacific sales increased by 19% (organic growth: 4%) to €862 million (Q1-3/2014: €723 million). Sales in Latin America/Africa grew by 18% (organic growth: 12%) to €448 million (Q1-3/2014: €381 million).

EBIT¹ increased by 38% (19% in constant currency) to €872 million (Q1-3/2014: €634 million). The EBIT margin1 was 19.7% (Q1-3/2014: 16.9%). In Q3/2015, EBIT¹ increased by 35% (19% in constant currency) to €301 million (Q3/2014: €223 million). The EBIT margin¹ was 20.1% (Q3/2014: 17.2%).

Net income² increased by 42% (23% in constant currency) to €479 million (Q1-3/2014: €337 million). In Q3/2015, net income² increased by 42% (25% in constant currency) to €170 million (Q3/2014: €120 million).

Operating cash flow increased by 36% to €589 million (Q1-3/2014: €432 million) with a margin of 13.3% (Q1-3/2014: 11.5%). In Q3/2015, operating cash flow increased to €235 million (Q3/2014: €217 million) with a margin of 15.7% (Q3/2014: 16.8%).

Fresenius Kabi's initiatives to increase production efficiency and streamline administrative structures are well on track. Costs of €50 million before tax were incurred in the first nine months of 2015 (Q3/2015: €10 million). The remainder of approx. €50 million will be recorded in Q4/2015. These costs are reported in the Group segment Corporate/Other.

Fresenius Kabi raises its outlook³ for 2015 and now expects organic sales growth of ~8% and constant currency EBIT1 growth in the range of 19% to 22% with an implied EBIT margin¹ of approximately 20.0%. Previously, Fresenius Kabi projected organic sales growth of 6% to 8% and constant currency EBIT¹ growth in the range of 18% to 21% with an implied EBIT margin in the range of 19.0% to 20.0%.

¹Before special items
²Net income attributable to shareholders of Fresenius Kabi AG; before special items
³Based on the average exchange rates through October 23 and the exchange rates of October 23 applied to the remainder of the year, this implies sales of ~€5.9 billion (equivalent to 8% organic sales growth) and EBIT¹of ~€1.18 billion (equivalent to the lower end of the expected range)

 
Fresenius Helios
Fresenius Helios is Germany's largest hospital operator. HELIOS operates 111 hospitals, thereof 87 acute care clinics (including seven maximum care hospitals in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin, Wiesbaden and Wuppertal) and 24 post-acute care clinics. HELIOS treats more than 4.5 million patients per year, thereof more than 1.2 million inpatients, and operates more than 34,000 beds.

• 12% EBIT¹ growth in Q3
• 20 bps sequential EBIT margin¹ increase
• 2015 outlook confirmed

Sales increased by 7% to €4,167 million (Q1-3/2014: €3,883 million). Organic sales growth was 3% (Q1-3/2014: 4%). Acquisitions contributed 5% while divestitures reduced sales by 1%. In Q3/2015, sales increased by 2% to €1,393 million (Q3/2014: €1,362 million), organic sales growth was 2% (Q3/2014: 6%).

EBIT¹ grew by 19% to €472 million (Q1-3/2014: €397 million). The EBIT margin¹ increased to 11.3% (Q1-3/2014: 10.2%). In Q3/2015, EBIT¹ increased by 12% to €165 million (Q3/2014: €147 million). Sequentially, the EBIT margin¹ increased by 20 bps to 11.8%.

Net income² increased by 23% to €352 million (Q1-3/2014: €286 million). In Q3/2015, net income² increased by 18% to €126 million (Q3/2014: €107 million).
Sales of the established hospitals, including the former Rhön-Klinikum facilities consolidated for more than one year, grew by 3% to €3,970 million (Q1-3/2014: €3,861 million). EBIT¹ increased by 17% to €463 million (Q1-3/2014: €395 million). The EBIT margin¹ increased to 11.7% (Q1-3/2014: 10.2%). Sales of the acquired hospitals consolidated for less than one year were €197 million. EBIT¹ was €9 million with a margin of 4.6%.

The integration of the hospitals acquired from Rhön-Klinikum AG remains well on track. Integration costs were €12 million in the first nine months of 2015 (Q3/2015: €4 million) taking the total to date to €63 million. Fresenius Helios does not expect any further integration costs. Amount (€85 million p.a.) and timing (spring 2016) of targeted near-term cost synergies are confirmed.

Fresenius Helios confirms its outlook for 2015, projecting organic sales growth of 3% to 5% and reported sales growth of 6% to 9%. EBIT¹ is expected to increase to €630 to €650 million.

Fresenius Helios' outlook excludes integration costs for the hospitals acquired from Rhön-Klinikum AG (€12 million before tax) and the disposal gains from the divestment of two HELIOS hospitals (€34 million before tax). For segment reporting purposes, these items will not be reported in the Fresenius Helios segment, but as special items in the Group segment Corporate/Other.

¹Before special items
²Net income attributable to shareholders of HELIOS Kliniken GmbH; before special items

Fresenius Vamed
Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide. The portfolio ranges along the entire value chain: from project development, planning, and turnkey construction, via maintenance and technical management, to total operational management.

• Q3 organic sales growth driven by strong service business
• Q3 order intake €192 million
• 2015 outlook: organic sales growth now projected to reach 5% to 10%, EBIT growth expectation of 5% to 10% confirmed

Sales increased by 12% (11% in constant currency) to €731 million (Q1-3/2014: €655 million). Organic sales growth was 9%. Acquisitions contributed 2%. Sales in the project business increased by 9% to €333 million (Q1-3/2014: €306 million). Sales in the service business grew by 14% to €398 million (Q1-3/2014: €349 million). In Q3/2015, sales increased by 4% to €268 million (Q3/2014: €257 million). Organic sales growth was 4%.

EBIT grew by 11% to €30 million (Q1-3/2014: €27 million). The EBIT margin remained unchanged at 4.1% (Q1-3/2014: 4.1%). In Q3/2015, EBIT increased by 17% to €14 million (Q3/2014: €12 million). Sequentially, the EBIT margin increased by 170 bps to 5.2%.

Net income grew by 11% to €20 million (Q1-3/2014: €18 million). In Q3/2015, net income¹ increased by 25% to €10 million (Q3/2014: €8 million).

Order intake reached a very strong €476 million (Q1-3/2014: €678 million). The prior-year period was boosted by the major project for the modernization of the University Hospital of Schleswig-Holstein/Germany. As of September 30, 2015, order backlog was €1,528 million (Dec. 31, 2014: €1,398 million).

Based on the strong sales development in the first nine months of 2015, Fresenius Vamed narrows its 2015 organic sales growth outlook to a range of 5% to 10%. Previously, Fresenius Vamed expected single-digit organic sales growth. Fresenius Vamed fully confirms its EBIT outlook and projects EBIT growth of 5% to 10%.

¹Net income attributable to shareholders of VAMED AG

Conference Call
As part of the publication of the results for the first nine months of 2015, a conference call will be held on October 29, 2015 at 2 p.m. CET (9 a.m. EDT). You are cordially invited to follow the conference call in a live broadcast over the Internet at www.fresenius.com, see Press, Audio/Video-Service. Following the call, a replay will be available on our website.

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This release contains forward-looking statements that are subject to various risks and uncertainties. Future results could differ materially from those described in these forward-looking statements due to certain factors, e.g. changes in business, economic and competitive conditions, regulatory reforms, results of clinical trials, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, and the availability of financing. Fresenius does not undertake any responsibility to update the forward-looking statements in this release.

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