Healthcare group: Fresenius separates from dialysis subsidiary FMC

At the troubled health care company Fresenius, the new CEO Michael Sen is looking for liberation in a corporate restructuring. “Fresenius needs a complete restart,” said Fresenius boss Sen at the balance sheet presentation in Bad Homburg.

In the future, Fresenius wants to focus on the Helios clinic division and the Kabi medicine division for infusions and clinical nutrition. “They cover system-critical areas of healthcare.” On the other hand, Fresenius wants to get rid of the ailing dialysis subsidiary FMC after a slump in profits in 2022 so that it no longer has to be taken into account in full in the balance sheet.

At an extraordinary general meeting in July, the resolution for a demerger is to be passed. This would also pave the way for a possible later sale of FMC.

Cancellation of big deals

Meanwhile, Sender said goodbye to the aggressive takeover course of his predecessor. “We’re not buying sales and growth anymore,” he said. He wants to lead Fresenius with a focus on strategy, not transactions. In any case, there is currently little space for big deals, he said with a view to the financial strength of the heavily indebted Dax group.

Under Sen’s predecessor Stephan Sturm, Fresenius had made a series of takeovers and boosted Fresenius’ growth – for example with the multi-billion dollar acquisition of the Spanish clinic chain Quironsalud in 2017. Later, Sturm’s luck ran out: the takeover of the US pharmaceutical company Akorn failed, followed by a series of profit warnings also because of the burden of the pandemic for the Fresenius clinics – the shares of the group crashed. Storm had to go in the fall.

In the past year, Fresenius suffered a slump in profits due to rising costs, staff shortages and supply chain problems. Although sales rose by nine percent year-on-year to EUR 40.8 billion, profit adjusted for special effects fell by seven percent to EUR 1.7 billion. The biggest burden was the dialysis subsidiary FMC, where profits dropped by ten percent in 2022.

Fresenius only holds around a third of the problem child FMC. Due to the organization of the two companies as limited partnerships on shares, however, the results of FMC are fully included in the Fresenius balance sheet. FMC are struggling with a nursing shortage in the US, supply chain issues and rising costs. In addition, many dialysis patients died from Corona.

problems at the dialysis subsidiary FMC

Now Fresenius is reacting to the daughter’s problems. With the conversion into a stock corporation, the group would be rid of this burden in the future, since it would no longer have to include FMC in its entirety in the balance sheet. A reduction in the stake in FMC and also in the clinic service provider Vamed is more likely in the future, said Florian Oberhofer, fund manager at Union Investment. Currently, however, a sale would not be a good deal for Fresenius, as FMC shares have fallen sharply in value.

The Fresenius Group also wants to reduce costs more, especially at FMC. From 2025, around one billion euros should be saved annually. To this end, Fresenius wants to make purchasing more efficient, reduce administration costs and part with smaller businesses. A new job cut was not announced.

The shareholders are also feeling the effects of the new course: For the first time in almost 30 years, they will not receive a dividend increase for 2022, but a distribution at the previous year’s level of 92 cents per share.

Fresenius has been in crisis for a long time. After several profit warnings, Sen followed Storm in the fall. At FMC, Carla Kriwet also took over the helm, but threw it down again in December – obviously in a dispute over strategy. She was succeeded by Helen Giza as the new head of FMC. Fresenius’ broad positioning with the pillars of dialysis, clinics, medicines and project business has long been criticized by investors. The US hedge fund Elliott is pushing for the complex structure to be split up.