Fresenius Medical Care Ag · XETR:FME
Fresenius Medical Care — Q4 2018 Earnings Presentation
39 slides from Fresenius Medical Care's earnings presentation, Feb 20, 2019
Slide 1: Q4 2018 Conference Call
Q4 2018 CONFERENCE CALL FEBRUARY 20, 2019 Rice Powell – CEO Mike Brosnan – CFO © Copyright
Slide 2: Safe harbor statement
Safe harbor statement: This presentation includes certain forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Act of 1934, as amended. Forward-looking statements are inherently subject to risks and uncert
Slide 3: Global Market Leader in Dialysis
GLOBAL MARKET LEADER IN DIALYSIS ▪ Innovate for enhancing patient care Pharmacy Rx ▪ Market leading high quality products ▪ Solution selling (Cardio-) Vascular Access ▪ Standardized medical procedures Outpatient facilities ▪ Enable best treatment outcomes DIALYSIS CARE PRODUCTS SERVICES COORDINATION
Slide 4: Delivering on Our Home Strategy
DELIVERING ON OUR HOME STRATEGY SPLIT OF Home In-center TOTAL 2018 88% TREATMENTS Growth: 12% ▪ Target 2022: U.S. 2018 +4% 15%+ of treatments performed in a home setting ▪ Investing into expansion of home treatments – patient education – home training clinics SPLIT OF – distribution infrastructure H
Slide 5: Capture Growth in Developing Economies
CAPTURE GROWTH IN DEVELOPING ECONOMIES DEVELOPING ECONOMIES – EXAMPLE CHINA ▪ Early mover in developing economies with products first HEALTHCARE EXPENDITURE ▪ Leverage experience from the 6% products business into the service IN % GDP $12.3tr business – e.g. advancing in the 2017 Chinese market with
Slide 6: Agenda
1 BUSINESS UPDATE AGENDA 2 FINANCIALS & OUTLOOK 3 Q&A
Slide 7: YTD 2018: Growth Continued
YTD 2018: GROWTH CONTINUED +5% Clinics +4% Patients 3,928 333,331 Quality remains +4% Treatments on a consistently 50,027,579 high level © │ Conference Call │ Q4 2018 2/20/2019 Page 7
Slide 8: Q4 2018: Quality Outcomes Remain on High Level
Q4 2018: QUALITY OUTCOMES REMAIN ON HIGH LEVEL1 NORTH AMERICA EMEA LATIN AMERICA ASIA-PACIFIC % of patients Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Kt/V ≥ 1.2 97 97 95 95 91 93 96 96 Hemoglobin = 10–12 g/dl 72 73 83 83 53 52 58 58 Calcium = 8.4–10.2 mg/dl 86 85 81 80 75 77 74
Slide 9: FY 2018: Update
FY 2018: UPDATE Very solid Q4 performance Revised full year guidance achieved GEP II ahead of schedule Dividend increase of 10% proposed NxStage closing expected in the next couple of days © │ Conference Call │ Q4 2018 2/20/2019 Page 9
Slide 10: 2018: Revised Full Year Guidance Achieved
2018: REVISED FULL YEAR GUIDANCE ACHIEVED1 2018 2017 Growth Growth Guidance 2018 € million € million in % in %cc in %cc Revenue 16,547 17,784 (7) (2) Revenue on a comparable basis 16,547 16,739 (1) 4 2-3 Operating income (EBIT) 3,038 2,362 29 33 EBIT on a comparable basis 2,346 2,278 3 6 Net income
Slide 11: Q4 2018: Delivered Strong Results
Q4 2018: DELIVERED STRONG RESULTS1 Q4 2018 Q4 2017 Growth Growth € million € million in % in %cc Revenue 4,300 4,429 (3) (3) ▪ Revenue impacted Revenue on a comparable basis 4,300 4,024 7 7 by divestiture of Sound and IFRS 15 implementation Operating income (EBIT) 613 519 18 12 ▪ Net income impacted
Slide 12: Q4 2018: Growth Trend – Organic and Volume
Q4 2018: GROWTH TREND – ORGANIC AND VOLUME (%) DIALYSIS SERVICES ORGANIC GROWTH SAME MARKET TREATMENT GROWTH DIALYSIS PRODUCTS ORGANIC GROWTH 12 4 15 12 9 9.2 10.8 7.9 9 3.2 3.0 6.7 6 3 6 3 3.0 3 2.4 0 0 2 -3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Group North America North America ex Calcimimetics EMEA
Slide 13: Q4 2018: Organic Growth in All Regions
Q4 2018: ORGANIC GROWTH IN ALL REGIONS NORTH AMERICA € million Latin America 4% Revenue 2,981 (9)%cc Organic growth +4% Asia-Pacific 11% North America EMEA € million €m 69% Revenue 679 +5%cc 4,300 EMEA 7%cc1 Organic growth +4% 16% ASIA-PACIFIC € million Revenue 454 +9%cc Organic growth +9% ▪ Organic
Slide 14: Q4 2018 Services: Organic Growth Continued
Q4 2018 SERVICES: ORGANIC GROWTH CONTINUED Organic Same market Q4 2018 Q4 2017 Growth Growth growth growth ▪ North America € million € million in % in %cc in % in %cc growth impacted by Care Coordination Total 3,413 3,581 (5) (5) 6 3 divestiture and IFRS North America 2,746 2,950 (7) (10) 4 3 15 of
Slide 15: Q4 2018 Products: Organic Growth in All Regions
Q4 2018 PRODUCTS: ORGANIC GROWTH IN ALL REGIONS Organic Q4 2018 Q4 2017 Growth Growth € million € million in % in %cc growth in % PRODUCT REVENUE Total Health Care Products 887 848 5 6 6 DRIVEN BY Dialysis Products 869 828 5 6 7 ▪ EMEA North America 235 214 10 7 7 renal drugs, bloodlines, products E
Slide 16: Dividend Increase and Share Buyback Proposed
DIVIDEND INCREASE AND SHARE BUYBACK PROPOSED DIVIDEND PER SHARE IN EUR 1.171 DIVIDEND PROPOSAL 2018 +10% ▪ 22nd consecutive dividend increase proposed ▪ Dividend proposal reflects investments in future 1.06 growth 0.96 SHARE BUYBACK ▪ Volume: up to EUR 1bn ▪ Time horizon: 2019-2020 2016 2017 2018 1
Slide 17: 2019 Will Be an Investment Year
2019 WILL BE AN INVESTMENT YEAR FOCUS ON ▪ Resolving identified operational issues OPPORTUNITIES ▪ Invest around €100 million in 2019 cost optimization program ▪ Higher contributions from GEP II – Further steps to improve cost base ▪ Faster recovery of commercial volumes ▪ Higher contribution from e
Slide 18: Agenda
1 BUSINESS UPDATE AGENDA 2 FINANCIALS & OUTLOOK 3 Q&A
Slide 19: 2018: Revenue Growth
2018: REVENUE GROWTH REVENUE ON A COMPARABLE BASIS, € MILLION – TARGET: 2-3%CC GROWTH 4%cc 17,784 559 17,393 654 486 846 16,739 16,547 2017 Sound 2017 IFRS 15 2017 on a Business 2018 cc on a FX 2018 reported reported comparable basis growth cc comparable basis © │ Conference Call │ Q4 2018 2/20/2019
Slide 20: 2018: Net Income Growth
2018: NET INCOME GROWTH NET INCOME ON A COMPARABLE BASIS, € MILLION – TARGET: 11–12%CC GROWTH 28 1,982 14%cc 40 673 1,413 36 1,242 171 2017 Business growth cc 2018 cc FX Gain related to FCPA related charge U.S. Ballot Initiatives 2018 reported comparable basis on a comparable divestures of Care basi
Slide 21: Q4 2018: Revenue Growth
Q4 2018: REVENUE GROWTH REVENUE ON A COMPARABLE BASIS, € MILLION 7%cc 4,429 4,286 4,300 14 305 262 100 4,024 Q4 2017 Sound Q4 2017 IFRS 15 Q4 2017 on a Business Q4 2018 cc on a FX Q4 2018 reported comparable basis growth cc comparable basis reported © │ Conference Call │ Q4 2018 2/20/2019 Page 21
Slide 22: Q4 2018: Net Income Growth
Q4 2018: NET INCOME GROWTH NET INCOME ON A COMPARABLE BASIS, € MILLION 9%cc 425 395 13 47 17 361 34 13 Q4 2017 Business Q4 2018 cc FX Gain related U.S. Ballot 2018 FCPA Q4 2018 on a comparable growth cc on a comparable to divestures Initiatives related charge reported basis basis of Care Co. activit
Slide 23: Q4 2018: Regional Margin Profile
Q4 2018: REGIONAL MARGIN PROFILE NORTH AMERICA (72% OF EBIT1) DIALYSIS BUSINESS MARGIN OF 18.5% 608 ▪ Positive: Gain from decreased compensation expense, decreased personnel expense and the implementation of IFRS 15 492 ▪ Negative: Discontinuation of non-IFRS-policy, shift of calcimimetics to the di
Slide 24: Q4 2018: Regional Margin Profile
Q4 2018: REGIONAL MARGIN PROFILE Operating income margin development reflects 110 97 ▪ Impairment of intangible assets, the release of accruals EMEA as a result of favorable court settlements related to VAT 16.7% 14.4% (14% of EBIT1) in 2017, higher personnel costs and unfavorable foreign currency t
Slide 25: 2018: Cash Flow, Net Leverage Ratio & Current Ratings
2018: CASH FLOW, NET LEVERAGE RATIO & CURRENT RATINGS Q4 2018 Q4 2017 2018 2017 € million € million € million € million Operating cash flow 698 528 2,062 2,192 in % of revenue 16.2 11.9 12.5 12.3 Capital expenditures, net 301 227 1,003 841 Free cash flow 397 301 1,059 1,351 Free cash flow, after net
Slide 26: Global Efficiency Program II
GLOBAL EFFICIENCY PROGRAM II SUSTAINED SAVINGS 2018 - 2020 150 - 200 ~60% EUR m 2018 AHEAD OF SCHEDULE 20% Procurement ▪ Projects already 5% Supply Chain Management positively contributed in 25% Shared Services the first year of the program ▪ 15% sustained ~25% savings generated 40% Operational Exce
Slide 27: Basis for Adjusted Growth 2019 Higher Than Assumed
BASIS FOR ADJUSTED GROWTH 2019 HIGHER THAN ASSUMED REVENUE (€M) NET INCOME (€M) 76 16,026 24 ▪ 2018 revenue 1% ahead of line +1% +2% anticipated mid-point 1,357 40 range mid-point ▪ 2018 net income 15,950 exceeded 1,341 anticipated range by 2% Anticipated outperformance 2018 adjusted Anticipated 201
Slide 28: Outlook
OUTLOOK1 TARGETS 2019 2018 BASE (cc) (in € million) Revenue growth adjusted 3 to 7% 16,026 Net income growth adjusted (2) to 2% 1,341 (cc) TARGETS 2020 Revenue growth adjusted Mid to high single digit growth rate Net income growth adjusted Mid to high single digit growth rate 1 Targets for 2019 and
Slide 29: Agenda
1 BUSINESS UPDATE AGENDA 2 FINANCIALS & OUTLOOK 3 Q&A
Slide 30: Q4 2018: Profit and Loss
Q4 2018: PROFIT AND LOSS1 Q4 2018 Q4 2017 Growth Growth € million € million in % in %cc Revenue 4,300 4,429 (3) (3) Revenue on a comparable basis 4,300 4,024 7 7 Revenue adjusted 4,300 4,025 7 6 EBIT 613 519 18 12 EBIT margin in % 14.3 11.7 2.6pp 1.8pp EBIT on a comparable basis 648 456 42 39 EBIT a
Slide 31: 2018: Profit and Loss
2018: PROFIT AND LOSS1 2018 2017 Growth Growth € million € million in % in %cc Revenue 16,547 17,784 (7) (2) Revenue on a comparable basis 16,547 16,739 (1) 4 Revenue adjusted 16,547 16,645 (1) 4 EBIT 3,038 2,362 29 33 EBIT margin in % 18.4 13.3 5.1pp 4.8pp EBIT on a comparable basis 2,346 2,278 3 6
Slide 32: 2018: Reconciliation Adjustments
2018: RECONCILIATION ADJUSTMENTS RECONCILIATION OF NON-IFRS FINANCIAL MEASURES TO THE MOST DIRECTLY COMPARABLE IFRS FINANCIAL MEASURES Q4 2018 Q4 2017 2018 2017 € million € million € million € million Revenue 4,300 4,429 16,547 17,784 IFRS 15 Implementation (100) (486) Sound H2 20171 (305) (559) Rev
Slide 33: Debt and EBITDA
DEBT AND EBITDA RECONCILIATION OF NON-IFRS FINANCIAL MEASURES TO THE MOST DIRECTLY COMPARABLE IFRS FINANCIAL MEASURES € million 2018 2017 2016 Debt Short term debt 1,205 760 572 + Short term debt from related parties 189 9 3 + Current portion of long-term debt and capital lease obligations 1,107 884
Slide 34: Acquisitions & Investments and Capital Expenditures
ACQUISITIONS & INVESTMENTS AND CAPITAL EXPENDITURES RECONCILIATION OF NON-IFRS FINANCIAL MEASURES TO THE MOST DIRECTLY COMPARABLE IFRS FINANCIAL MEASURES € million Q4 2018 2017 2018 2017 Acquisitions and investments Acquisitions, investments and net purchases (117) (138) (925) (566) of intangible as
Slide 35: Return on Invested Capital (ROIC)
RETURN ON INVESTED CAPITAL1 (ROIC) 12.4% ROIC ▪ Long-term value creation based on accretive acquisitions and organic growth 8.6% ~8% ▪ ROIC adjusted2 7.8% 7.8% adjusted2 (esp. for divestitures 6.9% 7.1% of Care Coordination activities): around 8.0% 2013 2014 2015 2016 2017 2018 1 Based on net operat
Slide 36: Estimated Effects According to IFRS 16
ESTIMATED EFFECTS ACCORDING TO IFRS 16 ESTIMATED EFFECTS EXCLUDING NXSTAGE Impact 2019e Impact 2019e Impact 2019e Balance Sheet € million Profit and loss statement € million Cash flow statement € million Assets Revenue ~(100) Cash provided by ~600 operating activities Right-of-use assets ~3,900 Prof
Slide 37: Exchange Rates, U.S. Dialysis Days per Quarter, Definitions
EXCHANGE RATES, U.S. DIALYSIS DAYS PER QUARTER, DEFINITIONS EXCHANGE RATES U.S. DIALYSIS DAYS PER QUARTER Euro vs. 2018 9m 2018 2017 Q1 Q2 Q3 Q4 Full year €:$ Period end 1.145 1.158 1.199 2019 76 78 79 80 313 Average 1.181 1.194 1.130 2018 77 78 78 80 313 2017 77 78 79 79 313 €:CNY Period end 7.875
Slide 38: Financial Calendar 2019
FINANCIAL CALENDAR 20191 REPORTING DATES & AGM May 2 Report on 1st quarter 2019 May 16 Annual General Meeting, Frankfurt CONFERENCES March 6 Credit Suisse Healthcare Conference, London March 12-13 Barclays Global Healthcare Conference, Miami 1 Please note that dates and/or participation might be sub
Slide 39: Contacts
CONTACTS DR DOMINIK HEGER ROBERT ADOLPH FME INVESTOR Head of Investor Relations and Senior Director RELATIONS Corporate Communications Investor Relations Else-Kröner-Str. 1 61352 Bad Homburg v.d.H. +49(0) 6172–609–2601 +49(0) 6172–609–2477 Germany dominik.heger@fmc-ag.com robert.adolph@fmc-ag.com TI
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