08.06.15
Fresenius Medical Care AG & Co. KGaA's second-quarter earnings report came with an added bonus last month: A snappy (but wordy) header, written by CEO Rice Powell.
"My headline for the quarter is that the underlying performance of the business is quite strong and we're very pleased with what we’ve been able to accomplish in the second quarter," he said.
Not the most gramatically pleasing banner, but it adequately summarizes the company's performance in the three-month period ended June 30. Revenue rose 9 percent (15 percent at constant currency) to $4.2 billion, net income climbed 3 percent to $241 million and basic earnings per share increased 2 percent to 79 cents.
Worldwide organic revenue growth was 8 percent. Net Healthcare revenues grew 13 percent (18 percent at constant currency) to $3.35 billion, with a significant contribution from the North American market, according to the firm's latest earnings results. Dialysis product revenues decreased 4 percent to $854 million, primarily due to unfavorable foreign exchange rates. On a constant currency basis, revenues generated from dialysis products increased 8 percent.
"Our second quarter 2015 results showed a positive underlying performance," Powell said. "We are pleased with our revenue and earnings growth considering the negative currency impact on our International operations in the second quarter. We have made further progress with the integration of our Care Coordination operations. Our performance is in line with our full-year guidance for 2015 and we are confident to achieve our long-term targets for 2020."
North America revenues rose 16.8 percent year over year to $2.95 billion, achieving organic revenue growth of 7 percent. Net Health Care sales spiked 17 percent to $2.72 billion, driven by gains in all product segments. Net Dialysis Care proceeds rose 6 percent to $2.25 billion while Care Coordination sales skyrocketed 149 percent to $468 million (obtaining organic growth of 24 percent. Dialysis product revenue swelled 9 percent to $224 million.
International revenues decreased 4 percent (up 14 percent at constant currency) compared with Q2 2014 to $1.25 billion, due mainly to losses in both net Health Care and Dialysis product sales. The company reported a 1 percent decrease in Health Care revenue to $623 million and a 6 percent slip in Dialysis product sales to $624 million. Europe, Middle East and Africa proceeds fell 15 percent to $668 million (up 4 percent at constant currency), with net Health Care revenue plummeting 17 percent to $309 million and Dialysis product sales dropping 14 percent to $359 million.
Asia-Pacific revenue grew 22 percent to $376 million (up 32 percent at constant currency); Health Care and Dialysis proceeds both reported gains, climbing 37 percent and 12 percent respectively.
Latin American revenue increased 2 percent to $203 million. Health Care proceeds rose 6 percent to $150 million but that gain was somewhat offset by a 12 percent drop in Dialysis sales (to $212 million).
Gross margin contracted 70 basis points to 30.9 percent compared with the second quarter of 2014. Selling, general and administrative expenses increased 14.6 percent on a year-over-year basis to $723 million. Research and development (R&D) expenses spiked 12.3 percent to $34 million.
Operating income declined 1.7 percent to $547 million due to higher operating expense. Operating margin contracted 150 basis points to 13 percent compared with Q2 2014.
Net cash provided by operating activities in the second quarter of 2015 was $385 million, compared with $447 million in the preceding quarter. Free cash flow was $171 million in, compared with $250 million in the first quarter of 2015.
Fresenius executives reaffirmed the company's financial guidance for 2015, estimating revenue growth to fall between 5 percent and 7 percent (10 percent to 12 percent at constant currency). Net income attributable to shareholders of the company is anticipated to increase 0 to 5 percent in 2015.
The company expects to incur approximately $1 billion in capital expenditure and about $400 million on buyout-related activities in 2015. The debt/EBITDA ratio is expected to be around 3.0 by the end of the year.
Fresenius' 2016 revenue now is expected to increase 7 percent to 10 percent compared with the previous range of 9 percent to 12 percent. Net income attributable to shareholders in 2016 is estimated to grow by 15 percent to 20 percent.
The company expects revenue to increase at an average annual growth rate of about 10 percent through 2020 and net income in the high single digits.
"My headline for the quarter is that the underlying performance of the business is quite strong and we're very pleased with what we’ve been able to accomplish in the second quarter," he said.
Not the most gramatically pleasing banner, but it adequately summarizes the company's performance in the three-month period ended June 30. Revenue rose 9 percent (15 percent at constant currency) to $4.2 billion, net income climbed 3 percent to $241 million and basic earnings per share increased 2 percent to 79 cents.
Worldwide organic revenue growth was 8 percent. Net Healthcare revenues grew 13 percent (18 percent at constant currency) to $3.35 billion, with a significant contribution from the North American market, according to the firm's latest earnings results. Dialysis product revenues decreased 4 percent to $854 million, primarily due to unfavorable foreign exchange rates. On a constant currency basis, revenues generated from dialysis products increased 8 percent.
"Our second quarter 2015 results showed a positive underlying performance," Powell said. "We are pleased with our revenue and earnings growth considering the negative currency impact on our International operations in the second quarter. We have made further progress with the integration of our Care Coordination operations. Our performance is in line with our full-year guidance for 2015 and we are confident to achieve our long-term targets for 2020."
North America revenues rose 16.8 percent year over year to $2.95 billion, achieving organic revenue growth of 7 percent. Net Health Care sales spiked 17 percent to $2.72 billion, driven by gains in all product segments. Net Dialysis Care proceeds rose 6 percent to $2.25 billion while Care Coordination sales skyrocketed 149 percent to $468 million (obtaining organic growth of 24 percent. Dialysis product revenue swelled 9 percent to $224 million.
International revenues decreased 4 percent (up 14 percent at constant currency) compared with Q2 2014 to $1.25 billion, due mainly to losses in both net Health Care and Dialysis product sales. The company reported a 1 percent decrease in Health Care revenue to $623 million and a 6 percent slip in Dialysis product sales to $624 million. Europe, Middle East and Africa proceeds fell 15 percent to $668 million (up 4 percent at constant currency), with net Health Care revenue plummeting 17 percent to $309 million and Dialysis product sales dropping 14 percent to $359 million.
Asia-Pacific revenue grew 22 percent to $376 million (up 32 percent at constant currency); Health Care and Dialysis proceeds both reported gains, climbing 37 percent and 12 percent respectively.
Latin American revenue increased 2 percent to $203 million. Health Care proceeds rose 6 percent to $150 million but that gain was somewhat offset by a 12 percent drop in Dialysis sales (to $212 million).
Gross margin contracted 70 basis points to 30.9 percent compared with the second quarter of 2014. Selling, general and administrative expenses increased 14.6 percent on a year-over-year basis to $723 million. Research and development (R&D) expenses spiked 12.3 percent to $34 million.
Operating income declined 1.7 percent to $547 million due to higher operating expense. Operating margin contracted 150 basis points to 13 percent compared with Q2 2014.
Net cash provided by operating activities in the second quarter of 2015 was $385 million, compared with $447 million in the preceding quarter. Free cash flow was $171 million in, compared with $250 million in the first quarter of 2015.
Fresenius executives reaffirmed the company's financial guidance for 2015, estimating revenue growth to fall between 5 percent and 7 percent (10 percent to 12 percent at constant currency). Net income attributable to shareholders of the company is anticipated to increase 0 to 5 percent in 2015.
The company expects to incur approximately $1 billion in capital expenditure and about $400 million on buyout-related activities in 2015. The debt/EBITDA ratio is expected to be around 3.0 by the end of the year.
Fresenius' 2016 revenue now is expected to increase 7 percent to 10 percent compared with the previous range of 9 percent to 12 percent. Net income attributable to shareholders in 2016 is estimated to grow by 15 percent to 20 percent.
The company expects revenue to increase at an average annual growth rate of about 10 percent through 2020 and net income in the high single digits.