Fresenius: A Solid Start to the Year, Spurred by Spain and Cost-Cutting Measures
Spain's rate of savings adjustments
The healthcare titan Fresenius kicks off 2023 with a robust performance, exceeding expectations in its pharmaceuticals division Kabi and subsidiary Helios, especially in Spain. CEO Michael Sen remains optimistic about meeting his annual targets, despite potential US tariffs.
Fresenius has compelling reasons to ward off heavy tariffs, according to Sen, since the majority of its production is domestic for the US market. The company is proactively engaging in dialogue to demonstrate its potential to alleviate the pharmaceutical shortage situation in the US. Sen estimates that about 10% of Fresenius's business comes from the US.
The company's adjusted operating profit (EBIT) saw a 4% increase to €654 million, surpassing analysts' estimates, while revenue grew by 7% to €5.6 billion. A substantial percentage of these gains stemmed from cost savings and an increase in constant currency. Net income jumped 12% year-on-year to €416 million.
In Europe's leading healthcare provider, Fresenius Helios, Spain contributed to offsetting losses in Germany following the expiration of energy cost subsidies. Helios's revenue increased by 8% to approximately €3.4 billion, although its EBIT fell by 4% to €333 million. This drop includes a 23% decline in EBIT in Germany to €157 million.
Fresenius Kabi, offering medications like artificial nutrition, displayed a 5% increase in revenue to €2.14 billion and a 16% increase in EBIT to €360 million.
By 2025, Fresenius aims to maintain its organic revenue growth of 4-6%, with an expected increase of 3-7% in adjusted operating profit in constant currency.
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Enrichment Insights:- Fresenius Medical Care has carried out various cost-cutting strategies, including its FME25 transformation program and portfolio optimization.- The FME25 program aims to deliver substantial cost savings, with a target of €180 million in incremental savings in 2025 and cumulative savings of €750 million by 2025.- Fresenius Medical Care has demonstrated operational efficiency through strong execution, achieving a 13% increase in adjusted operating profit in the first quarter of 2023.- Helios and Fresenius Medical Care may not be directly related since Helios is a different subsidiary under Fresenius SE & Co. KGaA, as opposed to Fresenius Medical Care's focus on dialysis services.
- Despite the potential US tariffs, Fresenius's CEO, Michael Sen, remains optimistic about meeting the company's annual targets due to the majority of its production being domestic for the US market.
- By 2025, Fresenius aims to maintain its organic revenue growth of 4-6%, with an expected increase of 3-7% in adjusted operating profit in constant currency, as part of their financial performance strategy.
- In an effort to alleviate the pharmaceutical shortage situation in the US, the company is proactively engaging in dialogue to demonstrate its potential contributions to the industry, addressing the US tariffs concern.
- A key subsidiary under Fresenius SE & Co. KGaA, Fresenius Kabi, offers medications like artificial nutrition and displayed a 5% increase in revenue to €2.14 billion in Q1 of 2023, while achieving a 16% increase in EBIT to €360 million.
