Fresenius Medical Care Corporation (FMS)

FMS 
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Fresenius Medical Care AG & Co. (FMS)

Q2 2010 Earnings Call

August 3, 2010 09:30 am ET

Executives

Oliver Maier - SVP, Head - IR

Ben Lipps - Chairman and CEO

Mike Brosnan - CFO

Analysts

Kevin Ellich - RBC Capital Markets

Andreas Dirnagl - Stevens Incorporated

Tom Jones - Berenberg Bank

Lisa Clive - Sanford Bernstein

Michael Jungling - Morgan Stanley

Ilan Chaitowitz - Redburn Partners

Stephan Gasteyger - Jefferies

Martin Wales - UBS

Ann Wireheim - Invesco

Justin Lake - UBS

Martin Whitbread - Credit Suisse

Rosanna Burcheri - FrontPoint Partners

Presentation

Oliver Maier

Good afternoon and good morning everybody. I would like to welcome you to our second quarter and first-half year results conference call. I am joined today by Ben Lipps our Chairman and CEO. Ben would address our strategic priorities and give us a general business update and our Chief Financial Officer; Mike Brosnan who will then discusses our second quarter and first-half results in greater detail and addresses our growth outlook for the full-year.

We will use slides for the presentations today which has been posted on our website and link will sent to you separately by e-mail. I would like to remind you that our comments today will be gathering to our Safe Harbor statement. So the course of our presentation today we make certain forward-looking statements and actual results could vary materially. We will use non-GAAP financial measures to help you to understand our underlying business performance although the GAAP reconciliations are provided in our investor news.

So with that actually I would like to turn the call over to Ben. Ben, it’s yours.

Ben Lipps

Thank you, Oliver. Ladies and gentlemen let me extend a warm welcome to you, our board members and all of our employees and associates around the world who have joined us today on the internet. Oliver has pretty much covered the agenda, so let me start right in by turning to chart 4.

We are very pleased to report an excellent quarter. We are fully on track to meet our full year guidance. Now before I start I would like to thank all of the management board members and the employees who put much extra effort into our activities this quarter. We really had a very challenging quarter in a number of areas but we accomplished all of our objectives as you will see both strategically and in terms of short-term objectives. So again thank you very much for all that effort and at the same time now we turn in revenues of around $2.95 billion for the quarter, a growth of 7% in both actual and constant currency, Mike will talk about the revenue, the EBIT margin development it was excellent. Therefore, on the net income line we turned in a 12% growth or $248 million for the quarter.

Turning now to page five, let’s look a little bit as a revenue breakout by regions. We saw solid revenue growth in all the regions especially in North America and Latin America where the actual growth rates, constant currency in Latin America actually in North America was 8% very, very good job. North America turned end around a little over $2 billion in revenue, international had about $920 million revenue at a constant currency growth of 5%. And again, Latin America grew at 8% constant currency Asia Pacific five and Europe at 4% constant currency.

Turning now to page six, chart six let’s look at the half year it’s really pretty much, pretty similar to what we saw for the second quarter. North America turned in just short of $4 billion in revenue, actual growth of 9%, international turned in $1.8 billion in revenue, constant currency growth of 6%. Again we saw Latin America turn in a growth rate of 9%, Europe 5% constant currency in Asia Pacific 7%.

Our organic growth was a little bit lower in international again, for a couple three reasons and we expect as we go through the back half of the year, we expect to see a rebound in that area and I’ll talk a little more about that when we get into some of the other discussions of this service area and the product area. But buy and large are very strong first half of the year we turn in $5.8 billion a revenue growth of 9%, 8% in constant currency.

Turning now to page 7, let's look at the dialysis services on a global basis. We had very strong revenue growth globally our focus has been on growing the service business. We now treat over 200,000 patients on a world wide basis. North America turned in an 8% in the second quarter basically very strong continued the momentum from first quarter and I will talk a little bit more about the revenue treatment that was also quite reassuring. If you look at international we turned in a 9% constant currency growth in the year dialysis services business very strong and so at the end if you take a look at the entire picture then for dialysis services we had an 8% constant currency growth or the second quarter basically treating about 200 to 2,000 patients.

Now in this area we saw a 12% growth in Europe in constant currency in the dialysis services area again pretty much following the focus that we’ve had during the past quarter and the past year and so if you look at it from an overall basis then we are very strong revenue growth in the dialysis services in the second quarter. Turning now to chart eight we looked at it through the full half year and again for the whole half year North America continued an excellent pace at 10% growth the dialysis care group and a group in North America doing outstanding job of growing their revenue and you’ll also see when Mike talked about it we are also growing the EBIT margin so very, very strong growth in to the US over the first half and they turned in about $3.6 billion revenue. We had also equally strong growth in your international area with a 9% constant currency growth. And so again, we basically are staying in the range of the high single digit, low double digit growth which gave us then a 10% constant currency growth in the dialysis services for the first half year 2010.

Now, let me turn to chart 9. Clearly, I think you all recognized that we have a clear and absolute commitment to quality, both in the products and the services. And so, let me take a couple of minutes to talk about what we’re doing in the quality area. Then again, this is one of my standard chart and we have some areas that we think we’re essentially getting a very good job and some other areas that we’d like to do better as we get some of the regulatory constraints off the table. Now first of all, when it comes to the treatments we deliver, over 95% of the time, we deliver the prescription therapy that the doctor orders.

And that’s both in North America and Europe, Middle East and Africa or EMEA. Therefore, you can see on the top line, we’re between 95 and 96%. Looking now at the anemia management part of it, in North America, we’ve been able to tighten our distribution and we now have about 68% of our patients between 10 and 12 gram per desolater hemoglobin. We have not made the progress yet in the nutritional area that we’d like too although we do expect that we see some early signs of that on the month-to-month basis by, with our new program where we’re actually allowed to provide supplements to patients that are below 3.5.

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