Problems at the Fresenius Medical Care subsidiary in North America have resulted in a profit warning for the health care group.
(Photo: Fresenius)
Frankfurt The shares of the healthcare group Fresenius and its dialysis subsidiary Fresenius Medical Care (FMC) are rising after the renewed profit warning. While FMC’s shares fell by 1.6 percent after the stock market opened, the parent company’s shares rose slightly.
On Sunday evening, the companies lowered their profit target for 2022 for the second time this year. Personnel bottlenecks and higher costs are having a greater impact on Fresenius Medical Care in the USA than previously expected. This also affects the parent company, to whose sales Fresenius Medical Care contributes almost half.
Fresenius and the dialysis subsidiary have had new CEOs since the beginning of October. At Fresenius, Michael Sen, the previous head of the Kabi drug division, has been promoted to CEO. Fresenius Medical Care is managed by long-standing Philips manager Carla Kriwet.
Both executives reiterated their intention to get the companies back on track. It is necessary to improve operational business development, said FMC boss Carla Kriwet: “We have already started to work out a comprehensive turnaround plan.”
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The parent company Fresenius also wants to focus on increasing productivity. “We have started to scrutinize all business activities, looking at the entire portfolio. The focus is on profitability,” announced company boss Sen.
Fresenius and FMC suffered from pandemic
With the profit forecast lowered again, Fresenius and FMC have reacted to the worsening economic situation such as rising inflation, staff shortages and disrupted supply chains. Fresenius Medical Care now expects up to 25 percent less profit. So far, the company had expected a drop in the high teens percentage range.
Parent company Fresenius is assuming a decline in consolidated earnings of around ten percent, after a drop in the low to mid-single-digit percentage range had previously been promised. Earnings targets are currency adjusted and before special items. Possible gas or power outages in Europe are not included in the forecast.
Fresenius and FMC have suffered greatly from the consequences of the corona pandemic in the past two years. A disproportionately large number of dialysis patients have died as a result of infection with the Sars-CoV-2 virus. Many interventions and operations in the hospitals have been postponed. In addition, there were rising costs for hygiene measures and staff shortages due to the pandemic.
FMC is currently suffering from a lack of nursing staff in what is by far its largest market, the USA. Fluctuation is high, many specialists have reduced their working hours after the stresses of the pandemic or have switched to other industries.
FMC competitor DaVita had already reduced its profit forecast for the current year last week, citing the difficult personnel situation as the reason for this.
FMC shrinks organically
Organically, FMC in the US even shrank by two percent in the third quarter. The effect was more than compensated for by growth in the other regions, so that the company was able to grow by two percent under its own steam.
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High exchange rate effects ensured that FMC was able to increase sales in the third quarter by a total of 15 percent to 5.1 billion euros. The result adjusted for special effects shrank by 17 percent to 231 million euros. Here, too, the company benefited significantly from the weak euro against the US dollar. Adjusted for currency effects, profits fell by 25 percent.
The weak numbers of the dialysis subsidiary also slowed Fresenius significantly in the third quarter. In addition, business at the service subsidiary Vamed was worse. Overall, Fresenius grew in the third quarter by twelve percent to 10.46 billion euros in sales.
Adjusted for positive exchange rate effects, growth was five percent. Consolidated earnings before special items fell by 15 percent to 371 million euros – adjusted for currency effects, it was minus 22 percent. The realignment of Fresenius will not be implemented overnight, said CEO Sen. “But we will act faster and more decisively than before,” he announced.
More: “Mr. Sen can’t do magic” – What investors expect from the new management at Fresenius and FMC.