FMS - Fresenius Q3 net income falls amid labor market woes cuts FY22 outlook on slower recovery

Fresenius Medical Care ( NYSE: FMS ) on Sunday cut its net income outlook for 2022 amid higher labor costs and slower than expected recovery in North America business.

The German dialysis care provider's Q3 Basis EPS (excl. special items) declined -16.84% Y/Y (-25% at constant currency) to €0.79. Meanwhile, revenue grew +14.7% (+2.8% at cc) to €5.1B.

Net income attributable to shareholders fell -15.7% (-24.1% at cc) to €230M.

"As expected, inflationary developments persisted and weighed on our earnings. Open positions in our dialysis clinics were reduced but remained at an elevated level, impacting both costs and growth in Health Care Services. While it is disappointing that the execution against our North America recovery plan is delayed, we are confident that the intensified efforts will improve the performance," said Fresenius CFO Helen Giza.

Fresenius said the challenging macroeconomic inflationary environment resulted in higher logistics costs, raw material and energy prices. Due to this situation not easing, its is assumed to further significantly impact the earnings development, in particular in Health Care Products, for the rest of year, the company added.

Q3 Health Care Services revenue grew 15.7% (+2.4% at cc) to €4.08B (+2% organic). At cc, the increase was mainly driven by organic growth in EMEA, Asia-Pacific and Latin America, which was partially offset by negative organic growth in North America due to COVID-19 and capacity constraints in certain clinics, the company added.

Health Care Products revenue increased 11.4% (+4.3% at cc) to €1.01B (+4% organic). Fresenius noted that cc growth was mainly due to higher sales of in-center disposables and renal pharmaceuticals, partially offset by lower sales of machines for chronic treatment.

Q3 operating income excluding special items fell -8.5% (17.6% at cc) to €470M, resulting in a margin of 9.2% (Q3 2021: 11.6%).

Fresenius said that at cc, the decline was mainly due to higher labor costs and inflationary and supply chain cost increases.

The company noted that the target range of €40 - €70M set for 2022 as part of its FME25 transformation program has been reached with savings of €54M in the first nine months of the year.

Outlook :

Fresenius lowered its FY net income range and now expects a decline of high-teens to mid-twenties percentage range, from prior range of high-teens percentage .

The company, however, confirmed its target for revenue to grow at a low single digit percentage rate in full year 2022.

FMS +0.91% to $13.30 premarket Oct. 31

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