Fresenius Medical Care Corporation (FMS)

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Fresenius Medical Care AG & Co. KGAA (FMS)

Q3 2012 Earnings Call

October 31, 2012 10:30 am ET

Executives

Oliver Maier - Head of Investor Relations & Corporate Communications- Fresenius Medical Care Management Ag

Benjamin J. Lipps - Chairman of The Management Board of Fresenius Medical Care Management Ag and Chief Executive Officer of Fresenius Medical Care Management Ag

Robert Maurice Rice Powell - Vice Chairman of The Management Board of Fresenius Medical Care Management AG and Chief Executive Officer of North America of Fresenius Medical Care Management AG

Michael Brosnan - Chief Financial Officer of Fresenius Medical Care Management AG and Member of Management Board - Fresenius Medical Care Management

Analysts

Thomas M. Jones - Berenberg Bank, Research Division

Lisa Bedell Clive - Sanford C. Bernstein & Co., LLC., Research Division

Edward Ridley-Day - BofA Merrill Lynch, Research Division

Gary Lieberman - Wells Fargo Securities, LLC, Research Division

Christoph Gretler - Crédit Suisse AG, Research Division

Oliver Reinberg - CA Cheuvreux, Research Division

Veronika Dubajova - Goldman Sachs Group Inc., Research Division

Ingeborg Øie - Jefferies & Company, Inc., Research Division

Martin Wales - UBS Investment Bank, Research Division

Holger Blum - Deutsche Bank AG, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Fresenius Medical Care Q 2012 Conference Call. [Operator Instructions] I would now like to turn the conference over to Oliver Maier, Head of Investor Relations. Please go ahead, sir.

Oliver Maier

Great. Thank you so much, Jerry. Thank you, everybody for being back. I would like to welcome all of you to Fresenius Medical Care's Earnings Call for the third quarter and for the first 9 months of 2012.

Also a very warm welcome to everybody who joined us today out there on the Web. We very much appreciate your continued interest actually on the company.

With us today are Ben Lipps, our Chief Executive Officer and Chairman of the Management Board of Fresenius Medical Care; Rice Powell, Deputy Chairman of Fresenius Medical Care and Chief Executive Officer of Fresenius Medical Care North America; and Mike Brosnan, our Chief Financial Officer.

I would like to start presentation also by mentioning our cautionary language that is in our Safe Harbor statement of our presentations and the material we distributed today. For further details concerning risks and uncertainties, please refer to our filings including our SEC filings.

One more housekeeping item for today's call, because of the impact of Hurricane Sandy on the East Coast in the U.S., many analysts and investors are still without power or may not have reliable server access to join today's call online.

However, for fair disclosure considerations and that we are aware of the fact that we always have a big crowd joining us for our disclosure calls, I would like to ask those who have dialed in to limit their questions to just 2, absolutely max 3 questions per round, in an effort to give everyone an opportunity to participate in the Q&A portion. Obviously, absolutely feel free to reenter the queue if you wish. We will, of course, provide a playback with -- but we would appreciate everyone being considerate of our time constraint. That's it for my end, Ben, and the floor is yours.

Benjamin J. Lipps

Thank you, Oliver. Ladies and gentlemen, again, let me extend a warm welcome to you, our Board members, all of our employees, associates and people who've joined us on the Internet.

In terms of the agenda, I'll cover the global business update, Rice will cover our progress in North America, Michael with financials. Then we'll go into questions and answers.

Clearly, third quarter was a very challenging quarter yet we did make progress defining our going forward prospects with a number of focused projects that I believe will strengthen our business as we look ahead. In light of the negative implications from the difficult economic environment, the currency fluctuations, we did accomplish a good operating result with excellent cash flow for the third quarter.

Although the third quarter is my last quarter that I will report to you as a CEO and Chairman of the Management Board, I would like to point out that the CEO transition to Rice Powell continues on track with the appointment of Ron Kuerbitz as the new CEO for North America effective January 2013.

Working with Rice and the management Board, as we have done for the past 13 years, I believe that our prospects for continued growth remain very solid and excellent.

I would now like to turn to Chart 4 and talk about the numbers for third quarter.

As you can see, our revenue was approximately $3.4 billion, a 7% increase prior -- over prior year. This reflects an 11% constant currency increase. North America grew at 13%, impressive, and the growth in International was 7% at constant currency. Asia Pacific and Europe had seen weaker revenue growth in the -- than normal in the Services business, which I'll talk a little bit about as I get to talking about the services.

However, despite the challenges, our operating profit increased by 6% in dollars to approximately $570 million.

In North America, we saw strong development of our operating results in the high 18% range, which Rice will discuss as we go through later.

Now our net income attributable to shareholders however did decrease 3% in dollars, and in euros, it increased 9%.

So again, I'd like to thank all of the dedicated staff around the world, the management board, for their continued dedication to providing the highest quality products and services in our center as you'll see from the quality charts later in my presentation.

Turning now to Chart 5. We'll take a quick look at the 9 months. Obviously, I won't spend a lot of time on it. Rice -- Mike will cover more later. Our revenue for 9 months is approximately $10 billion, an 8% increase over last year, an 11% increase in constant currency.

Our operating profit is also increased by about 11% to approximately $1.65 million.

Our reported net income attributable to shareholders including the investment gain was 22% to approximately $930 million.

I would like to comment a little bit about this because this gain, which was a result of our minority investment programs in the U.S. in 2010, allows us the opportunity to execute some special projects this year, which Rice will talk about later and set the stage for future growth and future continued solid performance.

So I would like to -- Rice will talk about them, Mike will talk about them, but this is an opportunity that we clearly are focusing on in the fourth quarter.

Now excluding this investment gain, as we have during the year as we set our guidance, clearly, our net income grew by 4% in U.S. dollars for the 9 months and 14%, again, in euros because of the fluctuations between the Euro-Dollar.

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