Fresenius Medical Care Corporation (FMS)

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Fresenius Medical Care AG & Co. KGaA (FMS)

Q3 2007 Earnings Call

October 31, 2007, 10:15 AM ET

Executives

Oliver Maier - Sr. VP IR

Dr. Ben Lipps - CEO and Chairman

Lawrence A. Rosen - CFO

Analysts

Andreas Schmidt - Merrill Lynch

Holger Blum - Deutsche Bank

Martin Wales - UBS

Ilan Chaitowitz - Redburn Partners

Jack Scannell - Stanford Bernstein

Thomas Jones - JPMorgan

Hans Boström - Goldman Sachs

Presentation

Oliver Maier - Senior Vice President Investor Relations

I think we can start to stick with the schedule. Good afternoon, good morning ladies and gentlemen and the audience as well as everybody who are joining us on the web. Thank you for joining us for Fresenius Medical Care's meeting today which will cover our Q3 and nine months 2007 results and achievements. By now you should have received all the respective material.

With us today as Fred [ph] mentioned at the beginning is Ben Lipps, our Chief Executive Officer, Fresenius Medical Care who will give you a business update on Q3 and the first nine months of Fresenius Medical Care, and Larry Rosen, our Chief Financial Officer who will brief you in more detail on the results for Q3 and the nine months.

As my duty I would like to comment on the Safe Harbor statement. As you can see the same applies actually as you've seen before. The presentation includes certain forward-looking statements. Actual results could differ materially from those included in the forward-looking statements due to various risk factors and uncertainties. All the risks factors and uncertainties are described in detail in the SEC flings and the filings with the Deutsche Börse. So, please have a look at it.

In compliance, as in the past with Section 401 of Sarbanes-Oxley, we have provided a reconciliation for any non-US GAAP measure that we utilize. So, please make use of the reconciliations which we provided.

So, that's it from my end. Ben, so let met turn it over to you for the presentation. Thank you.

Dr. Ben Lipps - Chief Executive Officer and Chairman

Thank you, Oliver. It is a pleasure to be here. I'd like to extend a warm welcome to everyone joining us here today. Our employees and associates around the world and those who have joined us on the Internet.

As you see from the financial statements for the third quarter we are very proud of and pleased with our results in the third quarter and for the nine months year-to-date. Our operating progress has continued. What I will cover today is the business update, Larry will cover the financials and the outlook and then we will open for question and answers.

Again before I start, I would like to thank the management board, all of our employees and associates for their continued dedication to producing the best quality products and services on a worldwide basis.

Also as I start here I would like to give you a little view of our footprint. You can see on the top of the slide that we produced our products in all of the three major businesses that we are... regions that we are in, North America, Europe and Asia-Pacific. This is particularly important to us because of the currency movements around the world and also because of our activities in those areas we tailor the products for the individual reimbursement or needs in those areas.

Now as you look at the bottom of the slide, you will see that we treat about 172,000 patients today on a worldwide basis. This is in 2,200 clinics. However, we also manage another 73 clinics and treat almost 175,000 patients on a worldwide basis. That means we treat about 175,000, we produced and sold products another 500,000. So it's very important that we continue to focus on our quality and our quality systems because we clearly provide life saving products to over 700000 dialysis patients on a worldwide basis.

Also we are very proud of the fact that we have now the leading position in each one of the areas in our patient care, areas of the world, regions of the world, the U.S., Latin America, Europe and also now Asia-Pacific where we treat about 11,000 patients.

Looking now at third quarter, clearly we continue to have strong momentum and earnings growth. Larry will talk about the actual details here. Our revenue growth was 9% in actual currency, 6% in constant currency and our earnings net income grew by about 27%. We are clearly on track to achieve or exceed the top end of our guidance. So we feel very comfortable about 2007 and achieving basically our goals for 2007.

Now, let's look at the revenue split. We have for the quarter around $2.4 billion in revenue. The U.S. turned in about $1.66 billion, they showed a growth rate of 3% that really understates the growth we have in the U.S. with one less day in this quarter compared to last year. And also we lost about 2% in terms of the EPO studies which I will show here later, EPO activities in the U.S. So organically we are growing about 4% but actually it's closer to 6% looking at the EPO effect.

Turning now to international, we had $760 million with revenue. It grew very impressively at 14% constant currency, 23% actual currency. Drilling a little deeper into international, Europe is about 70% of international. It grew at 9% constant currency. The services were about 10 and the products were about 8. Our growth driver or our growth achiever this quarter was Asia-Pacific with 43% growth in Asia-Pacific in constant currency. And it now has moved to about 6% of our total revenue on a worldwide basis. And Latin America continues to do very well. They continue to grow at double digit around 14%. So basically if you look at the world, our underlying growth then is quite good in each of the areas and we are very pleased with the revenue growth on a global basis.

Let's look at Dialysis Services on a global basis. Again I talked about the 3% in North America. I want to have your focus here on the international. We had a 32% growth in services in international and clearly if you look at that even in constant currency that's 23%. Now this fits with our strategy. I think you basically got to see the strategy last year in great detail at our Capital Markets Day here in September. We really are quite excited about the growth opportunities in Europe and Asia-Pacific and in many ways the service opportunity growth in those areas. And you can see here that in Europe we are growing basically at 9%... continue to grow at strong 9% or 10% in constant currency, services double-digit, in Asia-Pacific organically we're drawing about 19%. So we are doing very well. We are very, very pleased with the results in that area and there's tremendous upside in that area with respect to opportunities. Within the next five years both of those regions will be $15 billion plus in terms of market potential for us.

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