World's largest dialysis company
Fresenius Medical Care
) announced third quarter 2012 earnings per ordinary share of 88
cents which surpassed the year-ago earnings of 92 cents per
ordinary share. The Zacks Consensus Estimate was 97 cents for the
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Net income (including investment gain) attributable to the
company improved 3% year over year to $270 million in the
Quarter in Detail
Net revenues edged up 7% (up 11% in terms of constant currency)
year over year to $3,418 million, trailing the Zacks Consensus
Estimate of $3,576 million. Organic revenue growth was 4% on a
On a geographic basis, revenues from the North American markets
soared 13% to $2,249 million in the quarter while overseas
revenues decreased 2% (up 7% in terms of constant currency) to
Dialysis services revenues increased 10% (up 12% in terms of
constant currency) year over year to $2,605 million with U.S.
sales spurting 15% year over year to $2,047 million and
international sales descending 4% (up 6% in terms of constant
currency) year over year to $558 million. Average revenue per
treatment for U.S. clinics grew to $349 from $345 a year ago.
Consolidated dialysis product revenues declined 1% (up 7% in
terms of constant currency) year over year to $813 million.
Revenues from this segment improved 2% after accounting for the
Liberty acquisition. Dialysis product sales in the U.S. market
decreased 1% to $202 million. International dialysis product
sales also decreased 1% (up 9% in terms of constant currency) to
Fresenius operated a network of 3,135 dialysis clinics (up 9%
year over year) across North America and the overseas markets, as
of September 30, 2012. The number of clinics increased 12% in
North America while offshore dialysis clinics increased 4% year
It has provided dialysis treatment to 256,521 patients (up 12%
year over year) on a global scale, as of September 30, 2012.
Patients in North America increased 16% whereas number of
patients in international markets ascended 6% year over year.
The company provided 28.6 million dialysis treatments (up 12%
year over year) globally, as of September 30, 2012. Fresenius'
North American franchise soared 12% while the international
segment improved 13% year over year.
Operating margin declined to 16.6% from 16.8% in the prior year
quarter. In North America, operating margin was down marginally
to 18.7% from 18.8% a year ago while operating margin for
overseas markets decreased to 16.8% from 17.3% in the year-ago
Fresenius concluded the third quarter with cash (from operations)
of $535 million (15.7% of sales) representing 16% year over year
surge. The cash flow generation was helped by improvement in
inventory and other working capital items.
The company spent $164 million on capital expenditures in the
quarter. Free cash flow, prior to acquisitions, was $371 million
versus $313 million a year ago. The company spent $37 million on
acquisitions and investments, net of divestitures. Free cash
flow, post acquisitions, divestures and investments, was $334
million compared with $264 million in the prior-year period.
Fresenius reaffirmed its forecast for 2012. The company continues
to envision sales of roughly $14 billion for 2012. Expected net
income for 2012 remains unchanged at $1.3 billion and net income
(attributable to shareholders) is pegged at $1.14 billion. Net
income excludes gain on investments of about $140 million for the
first half of the year. The company expects capital expenditure
of roughly $700 million and plans to spend around $1.8 billion on
Fresenius is the largest provider of products and services for
patients undergoing dialysis treatment on the planet. The
company's principal competitor in the U.S. is
), which provides dialysis services for patients suffering from
chronic kidney failure or end stage renal disease. Fresenius also
) in certain niches such as the peritoneal dialysis products.
The company continues to register strong operating results in the
North American as well as overseas markets. The integration of
recent acquisitions is also expected to be accretive to
Fresenius' earnings in the near term. However, the contagion of
economic problems remains a matter of concern.
The stock carries a Zacks #4 Rank, which translates into a
short-term Sell rating.