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Fresenius Medical Quarterly Operating Profit Rose on Volume

Fresenius Medical Care AG, the world’s biggest provider of kidney dialysis, said third-quarter operating profit increased as it boosted volume and improved cost management to offset lower prices in the U.S.

Earnings before interest and taxes rose 8 percent to $534 million from $493 million a year earlier, the Bad Homburg, Germany-based company said in a statement today. That missed the $547.7 million estimate of 17 analysts surveyed by Bloomberg. Net income gained 13 percent to $279 million, beating the $277.3 million average estimate of 9 analysts surveyed by Bloomberg.

Fresenius Medical has benefited from the new “bundled” Medicare reimbursement system in the U.S., which aims to cut down on the overuse of drugs. While revenue per treatment is declining, chains such as Fresenius Medical can deliver care more cheaply by having a higher volume of business and offering multiple services in a single setting.

Revenue per treatment, a measure of profitability, fell during the quarter to $345 in U.S. clinics from $359 in the year-earlier period. The figure was lower than expected, Lisa Clive, an analyst with Sanford C. Bernstein Ltd., said by phone.

Top Line ‘Weak’

“Overall, I’m not concerned because on an operating profit basis, they have enough private patients who are bundled to offset the remaining private cost-plus patients,” Clive said, referring to patients for whom services and drugs are billed separately. “But it does make the top line look weak.” She rates the stock “outperform.”

Fresenius Medical shares rose 0.2 percent to 50.49 euros in Frankfurt.

Sales rose 6 percent to $3.24 billion from $3.06 billion a year earlier, below the $3.32 billion average estimate of 22 analysts. International revenue increased 13 percent in constant currency to $1.19 billion, driven by higher sales of dialysis machines and products.

The company aims to make more acquisitions next year to increase volume and offset lower U.S. reimbursements. Fresenius Medical sees opportunities for expansion in eastern Europe, Asia and Latin America, Chief Executive Officer Ben Lipps said in an interview today.

“We are selective about where we grow, but there’s a lot of opportunity in the world,” he said.

Acquisition Strategy

Fresenius Medical will likely spend as much as $300 million on deals next year, once it completes the purchase of Liberty Dialysis Holdings Inc. in the U.S. for $1.7 billion, Chief Financial Officer Michael Brosnan said today.

The company repeated its forecast for total 2011 revenue of more than $13 billion and net income of $1.07 billion to $1.09 billion.

Fresenius SE, which owns about 30 percent of Fresenius Medical, said third-quarter net income rose to 202 million euros ($278.5 million).

Fresenius SE, also based in Bad Homburg, runs private-hospital operator Helios, the Vamed health-care services unit and Fresenius Kabi, which sells infusion therapies and clinical nutrition products.

The parent company improved its earnings outlook for the year and lowered its sales forecast. Fresenius SE now expects net income growth in the upper half of its previous forecast range of 15 percent to 18 percent this year, and revenue growth of 6 percent in constant currency, compared with 7 percent to 8 percent previously.

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