Fresenius Medical Care reports strong operating income margin growth in the third quarter of 2024
Organic revenue growth of +2% supported by Care Enablement and Care Delivery
Underlying U.S. dialysis treatment volume growth turns positive
Exceeding full year FME25 savings target, with additional EUR 64 million contribution in Q3
Both segments further increased operating income1 and operating income margin1
Net financial leverage ratio further improved to 2.8x
FY 2024 operating income1 growth outlook with 16-18% tightened toward the upper end of the previous range
BAD HOMBURG, Germany, Nov. 5, 2024 /PRNewswire/ -- "In the third quarter, we continued the improvement of our financial performance, recording a meaningful progress in the operating income margin towards our 2025 margin targets. The Care Delivery margin extended well into the 2025 margin target band while Care Enablement maintained the significant margin progress realized in the first half year. Our clear focus on improving operational performance and continued momentum of FME25 savings realization supported our progress in the third quarter", said Helen Giza, Chief Executive Officer of Fresenius Medical Care AG. "In Care Delivery, a very important and reassuring milestone was underlying U.S. same market treatment growth turning positive. Care Enablement recorded solid volume growth and continued positive pricing momentum outside China." Giza added: "In light of the developments in the first nine months, we confirm our revenue growth outlook and tighten our operating income1 growth outlook with 16-18% toward the upper end of the previous range for the full year 2024."
Key figures (unaudited)
Q3 2024
Q3 2023
Growth
Growth
9M 2024
9M 2023
Growth
Growth
EUR m
EUR m
yoy
yoy, cc
EUR m
EUR m
yoy
yoy, cc
Revenue
4,760
4,936
-4 %
-2 %
14,251
14,466
-1 %
-1 %
on outlook base1
4,820
4,855
-1 %
14,385
14,215
+1 %
Operating income
463
324
+43 %
+43 %
1,133
942
+20 %
+21 %
on outlook base1
474
430
+10 %
1,323
1,167
+13 %
Net income2
213
84
+153 %
+155 %
471
311
+51 %
+53 %
on outlook base1
242
168
+44 %
646
490
+32 %
Basic EPS (EUR)
0.73
0.29
+153 %
+155 %
1.61
1.06
+51 %
+53 %
on outlook base1
0.82
0.57
+44 %
2.20
1.67
+32 %
yoy = year-on-year, cc = at constant currency, EPS = earnings per share
Significant progress in the execution against the strategic plan
In the third quarter, the FME25 transformation program accelerated its momentum, delivering EUR 64 million additional sustainable savings while related one-time costs amounted to EUR 39 million. With continued momentum in the third quarter, Fresenius Medical Care delivered EUR 173 million additional sustainable savings year-to-date, well ahead of the targeted EUR 100 to 150 million by year end 2024. The company confirms its target of EUR 650 million sustainable savings by 2025.
Fresenius Medical Care continues the execution of its portfolio optimization plan to exit non-core and dilutive assets. During the third quarter, closed divestments included clinic operations in Curacao, Guatemala and Peru.
All transactions that are currently signed as part of Fresenius Medical Care's portfolio optimization plan are estimated to negatively impact operating income by around EUR 250 million in the full year 2024 and will be treated as special items. These transactions are expected to generate cash proceeds of around EUR 650 million upon closing, thereof around EUR 500 million have been received by the end of the third quarter.
Revenue development affected by divestments resulting from execution of the portfolio optimization
Revenue decreased by 4% to EUR 4,760 million in the third quarter (-2% at constant currency, +2% organic). Revenue on outlook base1 decreased by 1% compared to prior year due to divestitures realized as part of the portfolio optimization plan, negatively affecting the revenue development.
Care Delivery revenue decreased by 5% to EUR 3,770 million (-4% at constant currency, +1% organic) and by 2% on outlook base1.
In Care Delivery U.S., revenue decreased by 1% (0% at constant currency, 0% organic) and increased by 1% on outlook base1. Growth in the U.S. was supported by the value-based care business and an overall increase in treatment volumes, higher reimbursement rates and a favorable payor mix shift, partially offset by increased implicit price concessions. While U.S. same market treatment growth further improved sequentially, effects from elevated mortality continued to weigh on the development. Adjusted for the exit from less profitable acute care contracts (-0.2%), underlying U.S. same market treatment growth returned to positive growth (+0.2%).
In Care Delivery International, revenue decreased by 22% (-21% at constant currency, +4% organic) and by 16% on outlook base1. This negative development was driven by divestments realized as part of the portfolio optimization plan and was partially offset by organic growth. International same market treatment growth was positive at 2.9%.
Care Enablement revenue grew by 2% to EUR 1,359 million (+4% at constant currency, +4% organic) and by 4% on outlook base1, driven by volume growth in all geographical regions. Pricing momentum outside of China remained positive. In China, pricing was negatively impacted by the rollout of volume-based procurement, in line with expectations.
Within Inter-segment eliminations, revenue for products transferred between the operating segments at fair market value remained unchanged with a deduction of EUR 369 million (+1% at constant currency).3
In the first nine months, revenue decreased by 1% to EUR 14,251 million (-1% at constant currency, +3% organic) and increased by 1% on outlook base1. Care Delivery revenue decreased by 2% to EUR 11,330 million (-2% at constant currency, +3% organic), with Care Delivery U.S. growing by 1% (+1% at constant currency, +3% organic) and Care Delivery International decreasing by 16% (-14% at constant currency, +3% organic). Care Enablement revenue increased by 1% to EUR 4,020 million (+3% at constant currency, +3% organic). Inter-segment eliminations remained unchanged at a deduction of EUR 1,099 million (0% at constant currency).
Strong operating income growth supported by both segments
Operating income increased by 43% to EUR 463 million in the third quarter (+43% at constant currency), resulting in a margin of 9.7% (Q3 2023: 6.6%). Operating income on outlook base1 increased by 10% to EUR 474 million, resulting in a margin of 9.8% (Q3 2023: 8.9%). Divestitures realized as part of the portfolio optimization plan had a neutral effect on operating income margin in the third quarter.
Operating income in Care Delivery increased by 26% to EUR 419 million (+27% at constant currency), resulting in a margin of 11.1% (Q3 2023: 8.4%). Operating income on outlook base1 increased by 5%, resulting in a margin1 of 11.2% (Q3 2023: 10.5%). The growth was mainly driven by positive price and volume effects as well as the phasing of a consent agreement on certain pharmaceuticals. The positive development was partly offset by higher personnel expenses as anticipated, and negative contributions from the value-based care business.
Operating income in Care Enablement significantly increased to EUR 61 million (Q3 2023: EUR -1 million), resulting in a margin of 4.5% (Q3 2023: -0.1%). Operating income on outlook base1 almost quadrupled compared to prior year, resulting in a margin1 of 5.6% (Q3 2023: 1.5%). The strong increase was driven by savings from the FME25 program as well as positive volume and price effects, compensating inflationary cost increases, negative impacts from the rollout of volume-based procurement in China, as well as a negative impact from foreign currency transaction.
Operating income for Corporate amounted to EUR -13 million (Q3 2023: EUR -8 million). The decline was mainly driven by negative valuation effects of virtual power purchase agreements (EUR -24 million). Operating income on outlook base1 amounted to EUR ‑26 million (Q3 2023: EUR 1 million).
In the first nine months, operating income increased by 20% up to EUR 1,133 million (+21% at constant currency), resulting in a margin of 8.0% (9M 2023: 6.5%). Divestitures realized during the first nine months had a slightly positive impact on operating income margin. Operating income on outlook base1 increased by 13% to EUR 1,323 million, resulting in a margin of 9.2% (9M 2023: 8.2%). In Care Delivery, operating income declined by 6% to EUR 937 million (-6% at constant currency), resulting in a margin of 8.3% (9M 2023: 8.6%). Operating income margin on outlook base1 improved to 10.1% (9M 2023: 9.7%). In Care Enablement, ...
