Excellent sales and earnings growth - Earnings outlook raised
- Sales €7.7 billion, +11% at actual rates, +10% in constant currency
- EBIT €1.1 billion, +14% at actual rates, +12% in constant currency
- Net income1 €302 million, +26% at actual rates, +23% in constant currency
- Continued strong growth in all business segments
- Fresenius Kabi significantly exceeds expectations, primarily in North America
- All business segments raise or fully confirm 2010 guidance
- 2010 Group earnings outlook raised
Group net income1 of €302 million, announced on July 27, 2010, on a preliminary basis, remained unchanged.
Ulf Mark Schneider, CEO of Fresenius SE: "Our continued focus on revenue growth and the Group's operating margin proved to be successful. All business segments achieved excellent financial results. Fresenius Kabi significantly exceeded our expectations, primarily due to the successful sales and earnings development of APP Pharmaceuticals in North America. We are very confident about our prospects for the second half of 2010 and raise our earnings outlook for the Group."
Earnings outlook for 2010 raised
Based on the Group's excellent financial results in the first half, Fresenius now expects net income to increase by 10% to 15% in constant currency in 2010. Previously, the Company expected net income to increase by 8% to 10% in constant currency. Fresenius fully confirms its sales guidance of 7% to 9% in constant currency.
The improved earnings outlook already includes expected onetime expenses of €10 million to €20 million pretax which Fresenius Kabi plans to invest in further efficiency improvements in Europe in the second half of 2010.
The Group plans to invest approximately 5% of sales in property, plant and equipment.
The net debt/EBITDA ratio is expected to reach a level below 3.0.
Strong organic sales growth of 9%
Group sales increased by 11% at actual rates and by 10% in constant currency to €7,686 million (H1 2009: €6,895 million). Organic sales growth was 9%. Acquisitions contributed a further 1%. Currency translation had a positive effect of 1%.
In Europe, sales grew by 9% in constant currency with organic sales growth contributing 8%. In North America, sales grew by 11% in constant currency. Organic sales growth was 10%. Organic growth rates in the emerging markets reached 4% in Asia-Pacific and 12% in Latin America. Organic sales growth in Asia-Pacific was impacted by the volatility of Fresenius Vamed's project business.
Excellent earnings growth
Group EBITDA increased by 13% at actual rates and by 11% in constant currency to €1,425 million (H1 2009: €1,260 million). Group EBIT improved by 14% at actual rates and by 12% in constant currency to €1,118 million (H1 2009: €985 million). The EBIT margin increased to 14.5% (H1 2009: 14.3%). The excellent growth was mainly driven by Fresenius Kabi, especially in North America. In the first quarter of 2010, EBIT was impacted by the devaluation of the Venezuelan bolivar and related charges at Fresenius Medical Care.
Group net interest improved to -€281 million (H1 2009: -€294 million).
The other financial result was -€96 million and includes valuation changes of the fair redemption value of the Mandatory Exchangeable Bonds (MEB) of -€117 million and the Contingent Value Rights (CVR) of €21 million. Both are noncash items.
The Group tax rate was 32.0% (H1 2009: 30.5%). The tax rate in the first half of 2009 was influenced by a revaluation of a tax claim at Fresenius Medical Care.
Noncontrolling interest increased to €267 million (H1 2009: €240 million), of which 94% was attributable to the minority interest in Fresenius Medical Care.
Group net income increased by 26% at actual rates and by 23% in constant currency to €302 million (H1 20092: €240 million). Earnings per ordinary share increased to €1.86 and earnings per preference share to €1.87 (H1 2009: ordinary share €1.49; preference share €1.50). This represents an increase of 26% for both share classes.
Net income (including special items) was €240 million, or €1.48 per ordinary share and €1.49 per preference share.
Continued investments in growth
The Fresenius Group spent €320 million on property, plant and equipment (H1 2009: €283 million). Acquisition spending was €151 million (H1 2009: €156 million).
Strong cash flow
Operating cash flow increased by 34% to €805 million (H1 2009: €600 million), mainly driven by strong earnings growth and tight working capital management. The cash flow margin improved to 10.5% (H1 2009: 8.7%). Net capital expenditure was €320 million (H1 2009: €292 million). Free cash flow before acquisitions and dividends improved by 57% to €485 million (H1 2009: €308 million). Free cash flow after acquisitions and dividends2 was €58 million (H1 2009: -€76 million).
Solid balance sheet structure
The Fresenius Group's total assets grew by 14% to €23,907 million (Dec. 31, 2009: €20,882 million). In constant currency, the increase was 4%. Current assets increased by 21% at actual rates and by 11% in constant currency to €6,474 million (Dec. 31, 2009: €5,363 million). Noncurrent assets grew by 12% at actual rates and by 1% in constant currency to €17,433 million (Dec. 31, 2009: €15,519 million). The change at actual rates is mainly attributable to the 15% strengthening of the U.S. dollar against the euro since yearend 2009.
Total shareholders' equity increased by 13% at actual rates to €8,635 million (Dec. 31, 2009: €7,652 million). In constant currency, total shareholders' equity remained close to previous year's level. The equity ratio was 36.1% (Dec. 31, 2009: 36.6%).
Group debt grew by 13% at actual rates to €9,387 million (Dec. 31, 2009: €8,299 million). In constant currency, Group debt increased by 2%.
For the net debt/EBITDA leverage calculation, net debt is translated at the currency spot rates as of June 30, whereas EBITDA is translated at the average exchange rates of the last twelve months. Due to the strengthening of the U.S. dollar against the euro, the net debt/EBITDA ratio increased to 3.16 as of June 30, 2010 (Dec. 31, 2009: 3.01). At identical exchange rates for net debt and EBITDA, the ratio further improved to 2.92.
Number of employees increased
As of June 30, 2010, Fresenius employed 133,197 people (Dec. 31, 2009: 130,510). This is an increase of 2%.