FMS - Fresenius Q1 operating income drop softened by easing labor shortage; deconsolidation on track

2023-05-09 05:46:53 ET

Fresenius Medical Care ( NYSE: FMS ) is trading in the green premarket after Q1 saw less than expected decline in operating income amid easing labor shortage in the U.S., and the company confirmed its FY23 outlook.

Meanwhile, FMS' parent company Fresenius SE noted that the deconsolidation of the dialysis provider was moving ahead as planned.

"While the results for the first quarter slightly exceeded our albeit low expectations formulated at the beginning of the year, we still expect 2023 to be a year of level-setting for Fresenius Medical Care," said FMS CEO Helen Giza.

The German dialysis care provider's Q1 Basic EPS (excl. special items) declined -45% Y/Y (-47% at constant currency - CC) to €0.29. Operating income excluding certain items and PRF (U.S. Provider Relief Funding) fell -9.4% Y/Y (-12.7% at cc) to €354M.

Meanwhile, revenue grew +3.4% (+1.7% at cc) to ~€4.70B.

"The first quarter confirmed the trends towards improving treatment volumes and towards a stabilizing labor environment in the U.S.," commented Giza.

Care Delivery revenue increased +3% (+1% at cc) to ~€3.76B.

The company said that in Care Delivery U.S. , growth was +2% (-2% at cc, -1% organic) was mainly driven by a positive exchange rate effect.

Despite reimbursement rate increases in 2023, organic growth in the U.S. was negatively affected due to the reconciliation of revenues recorded in 2022 for the final performance year of its ESRD Seamless Care Organizations, the company added.

In Care Delivery International, revenue grew +5% (+12% at cc, +12% organic).

Care Enablement revenue rose +3% (+3% at cc, +3% organic) to €1.31B . At cc, growth was mainly due to higher sales of critical care products in China and home hemodialysis products, according to the company.

Headcount : FMS has reduced ~5000 employees compared to year ago. As of March 31, the company had 125,231 employees globally, compared to 130,177 as of March 31, 2022.

FMS Outlook :

FMS confirmed its FY 2023 outlook and expects full year revenue to grow at a low to mid-single digit percentage rate (2022 basis: ~€19.4B.

The company expects operating income to remain flat or decline by up to a high-single digit percentage rate (2022 basis: €1.54B).

Fresenius SE Results :

Q1 EPS before special items fell -17% (-18% at cc) to €0.69. Meanwhile, reported EPS was €0.61, compared to €0.74 in Q1 2022, as per Fresenius SE.

Revenue grew +5% (+5% at cc) to €10.23B.

“Our Operating Companies Fresenius Kabi and Fresenius Helios both had strong first quarter performance. The deconsolidation of Fresenius Medical Care is on track and the turnaround is also progressing," said Fresenius SE CEO Michael Sen.

Fresenius SE expects to complete the deconsolidation of FMS by the end of 2023.

Cost Saving : Fresenius SE said that under its cost and efficiency program, ~€130M of structural cost savings at EBIT level were already achieved in Q1, which is ~25% of what is planned for 2023.

In Q1, one-time costs of ~€50M was incurred to achieve these savings. Thereof, Fresenius Medical Care invested €26M and realized ~€60M of cost savings, the company added.

Group Outlook :

Fresenius SE confirmed its outlook and expects  Group organic revenue to grow in a low- to mid-single-digit percentage range. Group constant currency EBIT is anticipated to remain broadly flat or fall up to a high-single-digit percentage rate.

FMS +1.85% to $23.63 premarket May 9

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