Fresenius Medical Care Corporation (FMS)

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Fresenius Medical Care AG & Co. (FMS)

Q4 2010 Earnings Call

February 23, 2011 9:15 AM ET

Executives

Oliver Maier – SVP, IR

Ben Lipps – Chairman and CEO

Mike Brosnan – CFO

Rice Powell – CEO, North America and Deputy Chairman

Analysts

Holger Blum – Deutsche Bank

Marcus Wieprecht – Main First Bank

Martin Whitbread – Credit Suisse

Florian [ph]

Ilan Chaitowitz – Redburn Partners

Kevin Ellich – Collin Stewart

Frank Morgan – RBC Capital Markets

Lisa Clive – Sanford Bernstein

Martin Wales – UBSaG

Tom Jones – Berenberg Bank

Presentation

Oliver Maier

Okay everybody, I think it’s time to continue. Also from my end I would also like to welcome all of you here for the Fresenius Medical Care Q4 and full year 2010 meeting. A warm welcome also from our end to everybody I see on the web. We much appreciate your continued interest in our company.

With us today here in the room are Ben Lipps, our Chief Executive Officer and Mike Brosnan, our Chief Financial Officer. I would like to start our presentation also by mentioning our cautionary language mentioned in our safe harbor statement at the end of the presentation. For further details concerning risks and uncertainties, please refer to our filings including our SEC filings.

Now with that it’s my sincere pleasure to turn over the presentation to Ben. So, Ben, the floor is yours.

Ben Lipps

Thank you Oliver. Ladies and gentlemen, all of our employees, management board and our associates around the world and those who have joined us on the internet, welcome. We’re glad you could join us and we also appreciate very much your interest in Fresenius Medical Care. As Oliver said, I’ll cover the business outlook, Mike will cover the finance and then we’ll open it for questions and answers.

I also have the privilege that Rice Powell, the CEO of North America and the Deputy Chairman will be available to us by audio. He’s in the US to answer questions at the end of the session here. So we’ll be able to hopefully handle your questions on a global basis.

All right, first slide, as you know we’re very pleased with our performance for the year and the performance of our employees. It was a difficult year because we had two balances here, one of them is obviously to continue to grow the business in, as it was mentioned earlier, an interesting economic situation but at the same time we continued to move forward our strategic objectives. We expanded our service network in international, I’ll talk about it a little later, significantly this year. You’ll see it as it rolls in in 2011. And at the same time the actual performance in North America was very satisfying, North America did very well this year with respect to the financial and also the quality metrics.

Now as you have seen from all the press releases, revenue a little over $12 billion and net income around $980 million, a gross of 10% for the year. We basically spent a little bit less in acquisitions that we had planned. You’ll see later we’re getting some real traction with our new Cyclers in terms of home treatments and [inaudible] dialysis and it stays a little bit in terms of some of the clinics. And at the same time we had excellent acquisition opportunities so we spent a little more than what we had talked about in the acquisition area.

Looking at the revenue by region; all of the regions did very well this year. North America turned in $8.1 billion in revenue, 7% growth for the year. International turned in almost $4 billion in revenue, a growth of 8% in constant currency. Asia-Pacific was a stand out again approaching $800 million in Asia-Pacific with a 15% constant currency growth. Followed, growth wise, by Latin America who continues to do very well and again turned in almost $600 million of revenue. We reached the $2.5 billion mark in Europe and again constant currency growth of around 6%. So all in all, each of the regions contributed and we’re very pleased with the performance and the growth in all the regions.

Looking now at Q4 briefly. I think, again this has been in the press release. We saw about $3.1 billion of revenue. We saw strong operating performance for the year driven by North America and we also saw net income up by 10%.

Now as you look at the revenue for the year as I go forward here I’ll talk a little bit about some of the things that we’re doing to get ready for the bundle, which impacted the revenue in North America. But basically we had a revenue growth of 5% constant currency for the quarter, which essentially would have been up by about another 2% considering some of the things we are doing in Q4 North America.

Looking now at the Q4 numbers, you can see that again North America grew at about 3% in terms of revenue as we moved into preparing for the bundle we essentially have done a number of things in terms of protocols and with our physicians which essentially you’ll see later drop the revenue for treatment if we looked at putting that aside or correcting for it, the revenue growth for North America would have been about 5% but as we look at the quarter, still a very strong quarter.

Europe grew or international grew at 10%, Asia-Pacific continued to grow at 21%, the acquisitions were kicking in, the organic growth, solid growth in China and India and Latin America double digited 14% growth. So Q4 was a very strong quarter as we completed the year in all of our regions and essentially financially it also met or exceeded our plans for the year.

Looking now at dialysis services. As you can see, Q4 dialysis services we did about $2.3 billion in revenue. We have about a $9 billion operation now and dialysis services is three-fourths of our revenue around the world and we had a very, very strong year in this area. And if you go over here and look at, for Q4, we had 8% organic growth in basically international and a very strong same market growth of 6% and we were able to add 2% in terms of revenue pretreatment.

Now again, if you look at North America there’s two parts to this. Again, our same market growth was very strong at 4.4%, basically a little bit above what we think the market is. The organic growth was less by, it was 3.3% because of Q4 so if you add a couple percent to that, which essentially I’ll show you why, then you’re in the range of 5% to 6% organic growth. Again, where we’ve been for the year and we’re quite pleased.

So if you look at our service area right now, we operate about almost 2800 clinics, 2760 clinics. We’ve got almost 1800 in the US and we’re treating about 215,000 patients or about 10% of the population. So by and large we had a very strong Q4.

We did spend, I’ll show you in the US preparing for the bundle in terms of introducing some of the protocols and running some of the pilots and so I think we prepared ourselves for 2011. And again, if you’ll think about it, Asia-Pacific grew almost 40% when it came to service growth in Q4, again, because adrenal care and the acquisitioners are kicking in and the programs around the international area, especially Asia-Pacific are growing strong and Latin America grew to about 13%. So our service part of the business is growing very strongly and at the same time we now have expanded into the international as well as the North America in a major way.

Looking at the year it’s almost the same. Again, as I mentioned, we did about $9 billion worth of revenue. We see 9% growth in constant currency for the year. And you can look again at the organic growth, it’s around 6.6% and again, what’s very encouraging is our same market growth is 4.5% and again in Europe over 5% which in the countries that we’re operating in, this is above market and in the US we averaged slightly above the market at 4.3%.

So anyhow, we’re pretty much in line with what we expected for the year and our service business then grew at about 9% and we will expect that to continue as we go into 2011.

Looking now at quality. And I think I’ve been here many times have talked about it, quality is number one. It is clearly something that we are in an industry that basically depends on providing life-saving support to patients who are very ill. And I have to say, I have here both the European data and the US data and I’m extremely proud of what our groups have accomplished around the world. And if you look at it, first of all as I mentioned, the KT/V is just a measure of how well we match the physician’s prescriptions and you can see both in Europe and in the US we’re doing 95% of the time we deliver what is being prescribed and that is really quite significant.

Read the rest of this transcript for free on seekingalpha.com