Frankfurt The expected unbundling is coming: The healthcare group Fresenius wants to complete the deconsolidation of its ailing dialysis subsidiary Fresenius Medical Care (FMC) this year. The company announced this on Tuesday evening.
In addition to the stock market announcement on the demerger, Fresenius also presented the latest business figures. They show that FMC was also a burden on the parent company’s balance sheet in 2022 due to ongoing cost increases and staff shortages.
Although Fresenius grew by four percent in constant currency in 2022, earnings fell by twelve percent. Including currency effects, Fresenius’ sales grew by nine percent to EUR 40.8 billion, while net income fell by seven percent to EUR 1.73 billion.
The Bad Homburg group currently controls the dialysis subsidiary via the structure of a partnership limited by shares (KGaA), but only holds around 32 percent of the shares. The deconsolidation would make Fresenius less complex and would no longer have to fully include the subsidiary in its own balance sheet.
>> Read also: Fresenius is considering separation from dialysis subsidiary FMC
The relevant supervisory bodies and the Else Kröner Fresenius Foundation, which also controls the healthcare group via a KGaA structure, have approved the project in the past few days.
In connection with the proposed change of legal form at FMC, the management structure is to be simplified and a two-tier system with a co-determined supervisory board and a management board is to be introduced. This structure corresponds to German standard.
Fresenius intends to retain its stake in FMC for the time being: “Fresenius will continue to be an active and supporting shareholder of Fresenius Medical Care without having to reduce its stake in Fresenius Medical Care as part of the planned deconsolidation of the company,” says the statement FMC.
Focus on drug subsidiary Kabi and hospital operator Helios
Following approval, the entire process of formally converting Fresenius Medical Care AG & Co. KGaA into a German stock corporation is expected to be completed by the end of this year. Both Fresenius and FMC are currently listed as stocks in the leading German index, the Dax.
“The new structure has enormous advantages for both companies: Fresenius Medical Care needs an operational turnaround, it needs to improve its performance and focus on its core business,” said Fresenius CEO Michael Sen.
Fresenius, in turn, can now simplify its complex corporate structures and in future will focus primarily on the two business segments Kabi and Helios. Kabi is the company’s drug subsidiary, Helios operates hospitals.
In the evening there was no specific information about the future of the small hospital service division Vamed in the Fresenius Group. In the industry, however, it has long been assumed that the company will part with the division in which it holds 77 percent. Vamed recently had to struggle with the effects of the corona pandemic and the difficult economic environment.
With the realignment, Sen, who has been in office since October, wants to lead Fresenius back to profitable growth. Further structural productivity improvements are planned. From 2025, Fresenius wants to save around one billion euros in structural costs at EBIT level.
The most important elements are measures to optimize processes, the reduction of sales, administration and procurement costs and the divestment of non-core activities.
FMC will probably burden the Fresenius balance sheet again in 2023
The latter could also help reduce the company’s high level of debt. Fresenius’ financial liabilities increased last year by two percent to 27.7 billion euros.
Fresenius expects the ratio of net debt to EBITDA at the end of 2023 to be slightly above the figure of 3.65 achieved at the end of 2022. According to the statement, this depends on divestment activities. Fresenius’ self-defined target corridor for gearing remains unchanged at three to three and a half times Ebitda – i.e. a little below.
>> Read also: Why FMC boss Carla Kriwet is really leaving
In 2023, Fresenius Medical Care will slow down the group again: Depending on the exact development at FMC, the parent company Fresenius expects at best a stable operating result (EBIT), but in the worst case it can also shrink by a high single-digit percentage, as Fresenius announced.
Excluding FMC, Fresenius expects a mid-single-digit percentage currency-adjusted decline in EBIT at worst. Overall, Fresenius expects organic growth in Group sales in the low to mid single-digit percentage range for the 2023 financial year.
More: How Fresenius Medical Care is preparing for a possible sale