December 7, 2018 / 9:13 AM / 7 months ago

UPDATE 2-Fresenius plunges as health firm warns investment to hit profit

* Sees flat 2019 profit, citing investment needs

* Drops 2020 targets

* Shares plunge 18 percent, poised for biggest one-day drop (Adds analyst comment, loss in market value)

By Arno Schuetze and Ludwig Burger

FRANKFURT, Dec 7 (Reuters) - Fresenius lost 4.7 billion euros in market value on Friday after the healthcare group warned of stagnant profits next year and abandoned its 2020 targets, saying it needed to invest more money in its hospitals and other businesses.

Among its projects, the German company is developing copies of off-patent biotech drugs known as biosimilars, and is also increasing output capacity in its infusions business to try to capitalise on industry-wide supply shortages.

“There are market opportunities that present themselves that we need to capture for the long-term wellbeing of the group,” Chief Executive Stephan Sturm told analysts on a conference call.

New German healthcare rules have also required Fresenius’ Helios division, Europe’s largest hospitals operator, to increase staffing.

At 1515 GMT, Fresenius shares were down 18 percent, hitting their lowest in more than four years, and were poised to mark their biggest ever one-day loss.

“I viewed it as a coincidence and I rule out under-investment,” Sturm said, when asked whether several businesses had been neglected in the past.

“Given its current expectations for 2018 and 2019, Fresenius now believes its ambitious group targets for 2020 will not be met,” the company said in a statement.

It added however, that dividends would continue to grow.

“We believe consensus estimates for 2021 are likely to fall 10-15 percent,” UBS analysts said.

“Investors are likely to be concerned about the growth rate at all three of Fresenius’s major divisions,” they added.

For 2019, Fresenius now expects sales growth in the mid-single digits and flat adjusted net profit. Previously, it had forecast sales growth of 7.1-10.3 percent and earnings growth of 8.3-12.6 percent.

From 2020 onwards, Fresenius now expects sales growth in the mid-single digits and net income to grow slightly faster than sales.

Any takeover deals, which remain on the cards for Fresenius, would come on top of the goals, it added.

Separately-listed subsidiary Fresenius Medical Care , the world’s largest kidney dialysis company, also said 2019 net income would stagnate. It is investing in home dialysis, as an alternative for some patients to the standard way of having their blood cleansed at a dialysis centre.

Parent Fresenius bought Spanish hospital chain Quironsalud in 2016 and the biosimilars arm of Germany’s Merck KGaA in 2017. It had agreed to take over Akorn, a U.S. maker of liquid generic drugs but walked away from the deal this year, citing regulatory breaches. (Editing by Jason Neely, Mark Potter and Douglas Busvine)

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