February 20, 2019 / 6:27 AM / 4 months ago

Fresenius flags faster earnings growth from 2020 after investment

BERLIN (Reuters) - Fresenius expects earnings to grow faster than sales from 2020 after investments to improve its German hospitals and scale up its home dialysis business eat up profit this year, the German healthcare group said on Wednesday.

FILE PHOTO - Fresenius headquarters in Bad Homburg near Frankfurt, Germany, February 27, 2018. REUTERS/Ralph Orlowski/File Photo

Fresenius, which makes generic infusion drugs and operates hospitals and dialysis clinics, expects sales to rise between 3 and 6 percent this year compared with 6 percent last year, while profit should stay around the same level as 2018.

“2019 will be a year of investment in growth areas such as home dialysis, biosimilars and new hospital services and therapies,” Chief Executive Stefan Sturm said in a statement.

From 2020-2023, Fresenius is targeting a compound annual organic sales growth rate of 4-7 percent while net income should grow at a faster rate, in a range of 5-9 percent.

Fresenius shares lost over a third of their value in 2018 as investors were rattled by operating problems at its U.S. dialysis business and its German hospitals.

The hospitals are facing uncertainty around new minimum staffing laws, a shift to more outpatient treatments and disruption caused by their move to develop clusters for procedures.

Sales at the hospitals unit fell 5 percent in the fourth quarter, hurt by a fall in patient admissions and unexpectedly high staff turnover, while net income dropped 16 percent.

At the same time, the company’s separately-listed dialysis business, Fresenius Medical Care (FMC), is grappling with a slowdown in North America, its most important market, and a lower percentage of patients on higher paying insurance schemes.

FMC plans to spend money scaling up its business in China this year, as well as building training facilities and home dialysis infrastructure to meet demand from patients.

Its planned $2 billion acquisition of NxStage, a maker of home dialysis machines, which most recently has been delayed by the U.S. government shutdown, is expected to close in the first quarter.

FMC also announced a 1 billion euro ($1.1 billion) share buyback over the next two years and said it would pay a dividend of 1.17 euros per share, up 10 percent on the previous year.

Fresenius’ sales in the fourth quarter rose 7 percent to 8.8 billion euros, as a strong performance at its Kabi generics unit offset declines at its Helios hospitals business and FMC.

Adjusted net income increased 6 percent to 504 million euros, in line with expectations.

It proposed a dividend of 0.80 euros per share, up 7 percent.

Reporting by Caroline Copley; Editing by Thomas Seythal and Mark Potter

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