Fresenius : reports another strong quarter and confirms guidance

If no timeframe is specified, information refers to Q1-3/2017

Q3/2017:

• Sales: €8.3 billion (+12%, +15% in constant currency)
• EBIT: €1,129 million (+5%, +9% in constant currency)
• Net income: (adjusted), €423 million (+11%, +14% in constant currency)
• Net income: €396 million (+4%, +7% in constant currency)

Q1-3/2017:

• Sales: €25.2 billion (+16%, +16% in constant currency)
• EBIT: €3,522 million (+15%, +15% in constant currency)
• Net income: (adjusted) €1,339 million (+20%, +20% in constant currency)
• Net income: €1,303 million (+17%, +17% in constant currency)

Stephan Sturm, CEO of Fresenius, said: 'We can report another very good quarter, once again boosted by strong sales and earnings growth. The prospects for our businesses remain excellent. We are therefore confirming our guidance and are heading towards yet another record year. From this position of strength, we intend to swiftly close and integrate our strategically important acquisitions. Thus, we are expanding our range of high-quality, affordable healthcare products and services for the benefit of our patients and our company.'

2017 Group guidance confirmed

Fresenius confirms its guidance for 2017. Group sales are expected to increase by 15% to 17% in constant currency. Group net income is expected to grow by 19% to 21% in constant currency.

Including the acquisition of Merck KGaA's biosimilars business and pro forma the acquisition of Akorn, the net debt/EBITDA ratio is expected to be approximately 3.3 at the end of 2017.

16% sales growth in constant currency

Group sales increased by 16% (16% in constant currency) to €25,191 million (Q1-3/2016: €21,651 million). Organic sales growth was 6% while acquisitions contributed 10%. In Q3/2017, Group sales increased by 12% (15% in constant currency) to €8,297 million (Q3/2016: €7,433 million). Negative currency translation effects (-3%) were mainly related to the devaluation of the US dollar. Organic sales growth was 6% while acquisitions contributed 9%.

20% adjusted net income growth in constant currency

Group EBITDA increased by 16% (16% in constant currency) to €4,579 million (Q1-3/2016: €3,959 million). Group EBIT increased by 15% (15% in constant currency) to €3,522 million (Q1-3/2016: €3,058 million) with an EBIT margin of 14.0% (Q1-3/2016: 14.1%). In Q3/2017, Group EBIT increased by 5% (9% in constant currency) to €1,129 million (Q3/2016: €1,071 million) with an EBIT margin of 13.6% (Q3/2016: 14.4%).

Group net interest reached -€484 million (Q1-3/2016: -€433 million). The increase is mainly driven by the financing of the Quirónsalud acquisition.

The Group tax rate was 28.1% (Q1-3/2016: 28.2%). In Q3/2017, the Group tax rate decreased to 27.4% (Q3/2016: 27.9%), mainly driven by a re-evaluation of estimated future tax payments at Fresenius Medical Care.

Noncontrolling interest increased to €854 million (Q1-3/2016: €768 million), of which 95% was attributable to the noncontrolling interest in Fresenius Medical Care.

Adjusted Group net income increased by 20% (20% in constant currency) to €1,339 million (Q1-3/2016: €1,118 million). Adjusted earnings per share increased by 19% (19% in constant currency) to €2.42 (Q1-3/2016: €2.04). In Q3/2017, adjusted Group net income increased by 11% (14% in constant currency) to €423 million (Q3/2016: €382 million). Adjusted earnings per share increased by 11% (14% in constant currency) to €0.77 (Q3/2016: €0.69).

Group net income before acquisition-related expenses increased by 19% (19% in constant currency) to €1,329 million (Q1-3/2016: €1,118 million). Earnings per share increased by 18% (18% in constant currency) to €2.40 (Q1-3/2016: €2.04). In Q3/2017, Group net income increased by 8% (11% in constant currency) to €413 million (Q3/2016: €382 million). Earnings per share increased by 8% (11% in constant currency) to €0.75 (Q3/2016: €0.69).

Group net income increased by 17% (17% in constant currency) to €1,303 million (Q1-3/2016: €1,118 million). Earnings per share increased by 15% (15% in constant currency) to €2.35 (Q1-3/2016: €2.04). In Q3/2017, Group net income increased by 4% (7% in constant currency) to €396 million (Q3/2016: €382 million). Earnings per share increased by 3% (6% in constant currency) to €0.71 (Q3/2016: €0.69).

Continued investment in growth

Spending on property, plant and equipment was €1,137 million (Q1-3/2016: €1,059 million), primarily for the modernization and expansion of dialysis clinics, production facilities as well as hospitals and day clinics. Total acquisition spending of €6,662 million (Q1-3/2016: €592 million) was mainly related to the acquisitions of Quirónsalud and Merck KGaA's biosimilars business.

Strong operating cash flow

Operating cash flow increased by 24% to €2,821 million (Q1-3/2016: €2,273 million). The cash flow margin increased to 11.2% (Q1-3/2016: 10.5%). In Q3/2017, operating cash flow increased by 21% to €1,138 million (Q3/2016: €940 million), with a margin of 13.7% (Q3/2016: 12.6%).

Free cash flow before acquisitions and dividends increased by 41% to €1,705 million (Q1-3/2016: €1,206 million). Free cash flow after acquisitions and dividends was -€5,233 million (Q1-3/2016: €252 million).

Solid balance sheet structure

The Group's total assets increased by 14% (20% in constant currency) to €53,097 million (Dec. 31, 2016: €46,697 million), mainly due to the acquisition of Quirónsalud. Current assets grew by 10% (16% in constant currency) to €12,870 million (Dec. 31, 2016: €11,744 million). Non-current assets increased by 15% (22% in constant currency) to €40,227 million (Dec. 31, 2016: € 34,953 million).

Total shareholders' equity grew by 2% (10% in constant currency) to €21,167 million (Dec. 31, 2016: €20,849 million). The equity ratio was 39.9% (Dec. 31, 2016: 44.6%).

Group debt increased by 32% (37% in constant currency) to €19,496 million (Dec. 31, 2016: € 14,780 million), mainly driven by the acquisition financing of Quirónsalud. As of September 30, 2017, the net debt/EBITDA ratio was 2.97 (Dec. 31, 2016: 2.331; pro forma Quirónsalud 3.091).

Business Segments

Fresenius Medical Care

Fresenius Medical Care is the world's largest provider of products and services for individuals with chronic kidney failure. As of September 30, 2017, Fresenius Medical Care was treating 317,792 patients in 3,714 dialysis clinics. Along with its core business, the company seeks to expand the range of medical services in the field of care coordination.

• Solid Q3 despite impact from natural disasters in North America
• 8% constant currency sales growth in Q3
• 2017 outlook confirmed

Sales increased by 10% (10% in constant currency, 7% organic) to €13,355 million (Q1-3/2016: €12,153 million). Acquisitions and the agreement with the United States Departments of Veterans Affairs and Justice (VA agreement) contributed 3% in total. In Q3/2017, sales increased by 3% (8% in constant currency, 6% organic) to €4,336 million (Q3/2016: €4,211 million).

Health Care Services sales (dialysis services and care coordination) increased by 11% (10% in constant currency) to €10,950 million (Q1-3/2016: €9,910 million). Product sales increased by 7% (7% in constant currency) to €2,404 million (Q1-3/2016: €2,244 million).

In North America, sales increased by 10% (10% in constant currency) to €9,715 million (Q1-3/2016: €8,828 million). Health Care Services sales grew by 10% (10% in constant currency) to €9,086 million (Q1-3/2016: €8,224 million). Product sales increased by 4% (4% in constant currency) to €629 million (Q1-3/2016: €604 million).

Sales outside North America increased by 9% (10% in constant currency) to €3,628 million (Q1-3/2016: €3,315 million). Health Care Services sales increased by 11% (11% in constant currency) to €1,864 million (Q1-3/2016: €1,686 million). Product sales increased by 8% (8% in constant currency) to €1,764 million (Q1-3/2016: €1,630 million).

EBIT increased by 10% (10% in constant currency) to €1,843 million (Q1-3/2016: €1,679 million). The EBIT margin was 13.8% (Q1-3/2016: 13.8%). In Q3/2017, EBIT was on the prior-year level (increased by 4% in constant currency) at €608 million (Q3/2016: €611 million). Foreign currency effects, lower contributions from the vascular business, higher costs in the pharmacy services business and natural disaster costs in North America negatively impacted EBIT, while organic growth and lower research and development expenses contributed positively. The EBIT margin was 14.0% (Q3/2016: 14.5%).

Net income increased by 13% (14% in constant currency) to €886 million (Q1-3/2016: €781 million). Consistent with the original scope of guidance, i.e. excluding the effects of the VA agreement and natural disaster costs, net income increased by 8% in constant currency. In Q3/2017, net income1 grew by 2% (6% in constant currency) to €309 million (Q3/2016: €304 million). Excluding the effects of the VA agreement and natural disaster costs, net income increased by 5% (8% in constant currency).

Operating cash flow increased by 43% to €1,664 million (Q1-3/2016: €1,160 million). The cash flow margin increased to 12.5% (Q1-3/2016: 9.5%). In Q3/2017, operating cash flow increased by 56% to €612 million (Q3/2016: €393 million) with a cash flow margin of 14.1% (Q3/2016: 9.3%). The increase is primarily attributable to last year's cash contribution to a pension plan in the United States as well as other working capital items.

Fresenius Medical Care confirms its outlook for 2017. The company expects sales to grow by 8% to 10% in constant currency. Net income is expected to increase by 7% to 9% in constant currency.

For further information, please see Fresenius Medical Care's Investor News at www.freseniusmedicalcare.com.

Fresenius Kabi

Fresenius Kabi offers intravenously administered generic drugs, clinical nutrition and infusion therapies for seriously and chronically ill patients in the hospital and outpatient environments. The company is also a leading supplier of medical devices and transfusion technology products.

• 7% organic sales growth in Q3; positive contributions from all regions
• 11% adjusted EBIT growth in constant currency in Q3
• 2017 outlook confirmed

Sales increased by 7% (7% in constant currency, 7% organic) to €4,764 million (Q1-3/2016: €4,457 million). Acquisitions/divestitures had no meaningful impact on sales. In Q3/2017, sales increased by 3% (7% in constant currency, 7% organic) to €1,562 million (Q3/2016: €1,511 million). Negative currency translation effects (-4%) were mainly related to the devaluation of the US dollar and the Chinese yuan against the Euro.

Sales in Europe increased by 4% (5% organic) to €1,635 million (Q1-3/2016: €1,569 million). In Q3/2017, sales increased by 3% (4% organic) to €538 million (Q3/2016: €521 million).

Sales in North America increased by 7% (6% organic) to €1,736 million (Q1-3/2016: €1,628 million). In Q3/2017, sales increased by 1% (7% organic) to €549 million (Q3/2016: €542 million).

Sales in Asia-Pacific increased by 9% (11% organic) to €894 million (Q1-3/2016: €821 million). In Q3/2017, sales increased by 8% (12% organic) to €312 million (Q3/2016: €290 million).

Sales in Latin America/Africa increased by 14% (10% organic) to €499 million (Q1-3/2016: €439 million). In Q3/2017, sales increased by 3% (8% organic) to €163 million (Q3/2016: €158 million).

Adjusted EBIT increased by 6% (7% in constant currency) to €919 million (Q1-3/2016: €863 million). The adjusted EBIT margin was 19.3% (Q1-3/2016: 19.4%). In Q3/2017, adjusted EBIT increased by 6% (11% in constant currency) to €297 million (Q3/2016: €281 million), despite expenses related to hurricane Maria on Puerto Rico. The adjusted EBIT margin increased to 19.0% (Q3/2016: 18.6%).

EBIT increased by 5% (6% in constant currency) to €905 million (Q1-3/2016: €863 million). The EBIT margin was 19.0% (Q1-3/2016: 19.4%). In Q3/2017, EBIT increased by 1% (6% in constant currency) to €283 million (Q3/2016: €281 million). Given the €14 million expenditure for the further development of the biosimilars business, the EBIT margin decreased to 18.1% (Q3/2016: 18.6%).

Adjusted net income, increased by 13% (14% in constant currency) to €554 million (Q1-3/2016: €491 million). In Q3/2017, adjusted net income increased by 13% (19% in constant currency) to €175 million (Q3/2016: €155 million).

While operating cash flow reached a very strong €640 million, it could not match the exceptional prior-year figure (Q1-3/2016: €661 million). The same applied to the strong margin of 13.4% (Q1-3/2016: 14.8%). In Q3/2017, operating cash flow reached a healthy €245 million (Q3/2016: €322 million) despite a cash prepayment for the biosimilars business and adverse currency translation effects. The cash flow margin was 15.7% (Q3/2016: 21.3%). Excluding the prepayment, operating cash flow was €290 with a margin of 18.6%.

Fresenius Kabi confirms its outlook for 2017 and expects 5% to 7% organic sales growth and EBIT growth in constant currency of 6% to 8%.

Fresenius Helios

Fresenius Helios is Europe's leading private hospital operator. The company comprises Helios Kliniken in Germany and Quirónsalud in Spain. Helios Kliniken operates 111 hospitals, thereof 88 acute care clinics and 23 post-acute care clinics, and treats more than 5.2 million patients annually. Quirónsalud operates 44 hospitals, 44 outpatient centers and around 300 occupational risk prevention centers, and treats approximately 9.7 million patients per year.

• 47% sales growth (4% excluding Quirónsalud) in Q3
• 33% EBIT increase (9% excluding Quirónsalud) in Q3
• 2017 outlook confirmed

Fresenius Helios increased sales by 47% (4% organic) to €6,422 million (Q1-3/2016: €4,382 million). Acquisitions, mainly Quirónsalud, increased sales by 43%. In Q3/2017, sales increased by 47% (4% organic) to €2,166 million (Q3/2016: €1,470 million).

Sales of Helios Kliniken increased by 4% (4% organic) to €4,562 million (Q1-3/2016: €4,382 million). In Q3/2017, sales increased by 4% (4% organic) to €1,524 million (Q3/2016: €1,470 million). Quirónsalud has been consolidated since February 1, 2017 and generated sales of €1,860 million (thereof €642 million in Q3/2017).

Fresenius Helios grew EBIT by 52% to €769 million (Q1-3/2016: €507 million). The EBIT margin increased to 12.0% (Q1-3/2016: 11.6%). In Q3/2017, EBIT increased by 33% to €232 million (Q3/2016: €175 million). The EBIT margin decreased to 10.7% (Q3/2016: 11.9%) due to the anticipated lower contribution of Quirónsalud during the summer months.

EBIT of Helios Kliniken increased by 8% to €549 million (Q1-3/2016: €507 million) with a margin of 12.0% (Q1-3/2016: 11.6%). In Q3/2017, EBIT of Helios Kliniken increased by 9% to €190 million (Q3/2016: €175 million) with a margin of 12.5% (Q3/2016: 11.9%). EBIT of Quirónsalud was €220 million (thereof €42 million in Q3/2017) with a margin of 11.8% (Q3/2017: 6.5%).

Fresenius Helios increased net income by 31% to €526 million (Q1-3/2016: €402 million). In Q3/2017, net income increased by 9% to €153 million (Q3/2016: €140 million).

Operating cash flow increased by 28% to €560 million (Q1-3/2016: €437 million) driven by the first-time consolidation of Quirónsalud. The margin was 8.7% (Q1-3/2016: 10.0%).

Fresenius Helios confirms its outlook for 2017 and projects organic sales growth of 3% to 5% and sales of ~€8.6 billion (thereof Quirónsalud ~€2.5 billion). EBIT is expected to increase to €1,020 to €1,070 million (thereof Quirónsalud €300 to 320 million).

Fresenius Vamed

Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide. The portfolio ranges along the entire value chain: from project development, planning, and turnkey construction, via maintenance and technical management, to total operational management.

• 9% sales growth in service business in Q3
• Project business with strong order intake of €285 million in Q3
• 2017 outlook confirmed

Sales increased by 1% (1% organic) to €748 million (Q1-3/2016: €740 million). Sales in the project business decreased by 7% to €301 million (Q1-3/2016: €325 million). Sales in the service business grew by 8% to €447 million (Q1-3/2016: €415 million). In Q3/2017, sales remained stable at €267 million (Q3/2016: €268 million).

EBIT increased by 3% to €32 million (Q1-3/2016: €31 million). The EBIT margin increased to 4.3% (Q1-3/2016: 4.2%). In Q3/2017, EBIT of €15 million (margin 5.6%) remained unchanged from previous year's quarter.

Net income remained stable at €21 million (Q1-3/2016: €21 million). In Q3/2017, net income remained unchanged at €10 million (Q3/2016: €10 million).

Order intake reached a strong €697 million (Q1-3/2016: €674 million). In Q3/2017 order intake increased by 36% to €285 million. As of September 30, 2017, order backlog grew to an all-time high of €2,345 million (December 31, 2016: €1,961 million).

Fresenius Vamed confirms its outlook for 2017 and expects both organic sales growth and EBIT growth in the range of 5% to 10%.

Conference Call

As part of the publication of the results for the first nine months of 2017, a conference call will be held on November 2, 2017 at 2 p.m. CET (9 a.m. EDT). All investors are cordially invited to follow the conference call in a live broadcast over the Internet at www.fresenius.com/media-calendar. Following the call, a replay will be available on our website.

For additional information on the performance indicators, please refer to our website www.fresenius.com/alternative-performance-measures.