Fresenius reports expected moderate Q1 2014, fully confirms FY 2014 outlook

Bad Homburg, (PresseBox) - .
Q1/2014:

- Sales €5.2 billion (+7% at actual rates, +11% in constant currency)
- EBIT[1] €643 million (-8% at actual rates, -6% in constant currency)
- Net income[2] €228 million (+2% at actual rates, +3% in constant currency)

Ulf Mark Schneider, CEO of Fresenius, said: "The moderate start into the year was expected. We are therefore fully on track to achieve our growth targets for 2014. The integration of the hospitals acquired from Rhön-Klinikum AG is progressing well. Our expansion in fast-growing emerging markets continues unabated."

Group outlook 2014[3] fully confirmed

Fresenius fully confirms its guidance for 2014. Sales are expected to increase by 12% to 15% in constant currency. Net income[4] is expected to increase by 2% to 5% in constant currency. The earnings forecast primarily reflects lower reimbursement rates for Medicare dialysis patients and substantial uncertainties regarding the IV drug shortage situation in the U.S. market.

The net debt/EBITDA ratio is expected to be in the range of 3.0 to 3.25.

11% sales growth in constant currency

Group sales increased by 7% (11% in constant currency) to €5,212 million (Q1/2013: €4,890 million). Organic sales growth was 2%. Acquisitions contributed 9%. Divestitures had a marginal effect on sales growth.

Organic sales growth was 3% in North America and 2% in Europe. In Asia-Pacific organic sales growth was 2% impacted by a slow start in China for Fresenius Medical Care and Fresenius Kabi. In Latin America organic sales growth was 8%. In Africa, the decline in sales is mainly due to fluctuations in the project business at Fresenius Vamed.

Adverse currency translation effects weighed on Group sales in all regions, particularly in Latin America (-21%), Asia-Pacific (-7%), Africa (-7%) and North America (-4%).

Group net income in line with guidance

Group EBITDA[5] decreased by 3% (-1% in constant currency) to €867 million (Q1/2013: €898 million). Group EBIT1 decreased by 8% (-6% in constant currency) to €643 million (Q1/2013: €696 million). This decrease is mainly attributable to the year-over-year comparison of issues at Fresenius Medical Care and Fresenius Kabi which occurred in 2013. The EBIT margin was 12.3% (Q1/2013: 14.2%).

Group net interest was -€138 million (Q1/2013: -€163 million). Improved financing terms as well as favorable currency effects contributed to the decrease. In addition, net interest in Q1/2013 included €14 million one-time costs resulting from the early redemption of a Senior Note.

The Group tax rate[6] improved to 26.3% (Q1/2013: 29.1%) due to a one-time effect at Fresenius Medical Care.

Noncontrolling interest was €144 million (Q1/2013: €154 million), of which 93% was attributable to the noncontrolling interest in Fresenius Medical Care.

Group net income[7] increased by 2% (3% in constant currency) to €228 million (Q1/2013: €224 million). Earnings per share3 increased by 1% to €1.27 (Q1/2013: €1.26).

Group net income attributable to shareholders of Fresenius SE & Co. KGaA including integration costs for Fenwal and a book gain from the divestment of two HELIOS hospitals increased by 13% (+14% in constant currency) to €248 million. Earnings per share increased by 12% (+13% in constant currency) to €1.38. There were no integration costs related to the newly acquired hospitals from Rhön-Klinikum AG in the first quarter.

A reconciliation to earnings according to U.S. GAAP can be found on page 14 of this Press Release.

Continued investment in growth

The Fresenius Group spent €234 million on property, plant and equipment (Q1/2013: €179 million). Investments were mainly used for the equipment of new, and the expansion of existing dialysis clinics as well as the modernization and expansion of production facilities and hospitals.

Acquisition spending was €924 million (Q1/2013: €79 million), thereof €759 million as a further payment for the acquisition of hospitals from Rhön-Klinikum AG.

Cash flow development influenced by one-time items

Operating cash flow was €140 million (Q1/2013: €444 million) with a margin of 2.7% (Q1/2013: 9.1%). The decrease was mainly attributable to the payment for the W.R. Grace bankruptcy settlement of US$115 million[8], increased working capital at Fresenius Medical Care and Fresenius Kabi as well as a change from annual to monthly upfront payments to Fresenius Vamed for a technical management contract.

Net capital expenditure increased to €243 million (Q1/2013: €188 million). Free cash flow before acquisitions and dividends was -€103 million (Q1/2013: €256 million). Free cash flow after acquisitions and dividends was -€1,006 million (Q1/2013: 229 million).

Solid balance sheet structure

The Group's total assets increased by 5% (at actual rates and in constant currency) to

€34,284 million (Dec. 31, 2013: €32,758 million). This increase is mainly attributable to the first-time consolidation of hospitals acquired from Rhön-Klinikum AG. Current assets grew by 9% to €8,656 million (Dec. 31, 2013: €7,972 million). Non-current assets increased by 3% to €25,628 million (Dec. 31, 2013: €24,786 million).

Total shareholders' equity increased by 3% to €13,619 million (Dec. 31, 2013: €13,260 million). The equity ratio was 39.7% (Dec. 31, 2013: 40.5%).

Group debt was €13,769 million (Dec. 31, 2013: €12,804 million). Net debt was €12,940 million (Dec. 31, 2013: €11,940 million).

As of March 31, 2014, the net debt/EBITDA ratio was 3.21[9] (Dec. 31, 2013: 2.51[10]). The increase is mainly due to the acquisition of hospitals from Rhön-Klinikum AG.

Number of employees increases

As of March 31, 2014, the number of employees increased by 13% to 201,924 (Dec. 31, 2013: 178,337). This is almost entirely due to the acquisition of hospitals from Rhön-Klinikum AG.

[1] 2014 before Fenwal integration costs (€1 million) and book gain from the divestment of two HELIOS hospitals (€22 million); 2013 before Fenwal integration costs (€7 million)
[2] Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before Fenwal integration costs (€1 million) and book gain from the divestment of two HELIOS hospitals (€21 million); including these effects, net income attributable to shareholders of Fresenius SE & Co. KGaA increased by 13% (+14% in constant currency) to €248 million. 2013 before Fenwal integration costs (€5 million)
[3] Includes contributions from the acquisition of hospitals from Rhön-Klinikum AG
[4] Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs for Fenwal (€30- 40 million) and the hospitals acquired from Rhön-Klinikum AG and net of book gain from the divestment of two HELIOS hospitals (€21 million); 2013 before Fenwal integration costs (€40 million)
[5] 2014 before Fenwal integration costs (€1 million) and book gain from the divestment of two HELIOS hospitals (€22 million); 2013 before Fenwal integration costs (€7 million)
[6] 2014 before book gain from the divestment of two HELIOS hospitals; 2013 before Fenwal integration costs
[7] Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before Fenwal integration costs (€1 million) and book gain from the divestment of two HELIOS hospitals (€21 million); 2013 before Fenwal integration costs (€5 million)
[8] see Annual Report 2013, page 150 f.
[9] Pro forma including acquired hospitals from Rhön-Klinikum AG; before Fenwal integration costs and book gain from the divestment of two HELIOS hospitals
[10] Pro forma excluding advances made for the acquisition of hospitals from Rhön-Klinikum AG; before Fenwal integration costs

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.

Fresenius AG (SE)

Fresenius is a global health care group, providing products and services for dialysis, hospital and outpatient medical care. In 2013, Group sales were €20.3 billion. On March 31, 2014, the Fresenius Group had 201,924 employees worldwide.

For more information visit the Company's website at www.fresenius.com.

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