Fresenius Medical Falls as Venezuela, U.S. Costs Trim ProfitNaomi Kresge
Fresenius Medical Care AG, the biggest provider of kidney dialysis, declined after turmoil in Venezuela and personnel costs in the U.S. led to first-quarter earnings that missed estimates.
The shares dropped 0.2 percent in Frankfurt after declining as much as 4.8 percent earlier in the day. Adjusted profit fell 8 percent to $225 million, missing the $262 million average estimate of nine analysts surveyed by Bloomberg.
A writedown of Venezuelan assets due to a drop in the bolivar isn’t expected to recur, and some of the U.S. costs were one-time items such as bonuses, Chief Executive Officer Rice Powell said in an interview today. The dialysis provider is cutting costs while ruling out reducing the nursing workforce, Powell said. The company is seeking efficiencies globally to help offset the effect of U.S. budget cuts, the CEO said.
“We’re comfortable,” Powell said. “We’re going to deliver what we say we’ll deliver this year.”
Fresenius Medical reiterated a forecast for sales to exceed $14.6 billion this year, compared with $13.8 billion last year. Net income will probably rise to $1.1 billion to $1.2 billion, from $1.05 billion, the Bad Homburg, Germany-based company said.
The company is continuing to seek acquisitions, Powell said, though there may not be a deal available that would match the size of its $1.7 billion purchase last year of Liberty Dialysis Holdings Inc. Fresenius is interested in purchases in product technology and care, he said.
“Over the next years we are still looking for the right types of acquisitions,” Powell said. “I don’t think there’s another Liberty out there, honestly. I think we’ve done all the big ones.”
Fresenius had a bigger workforce compared to a year ago because of the Liberty purchase, Powell said. Two fewer business days to provide dialysis in the first quarter also had an effect on results, he said.
A devaluation of the Venezuelan bolivar pushed the international operating margin to 15.7 percent in the first three months from 17.2 percent a year earlier. Venezuela’s economy has been hurt by accelerating inflation and slowing growth. The government in February devalued the bolivar by 32 percent against the dollar, and inflation in Venezuela accelerated to 25 percent in March, the fastest in the region.
Fresenius plans to stay in that market, Powell said. The company has hedged against currency fluctuations in Venezuela, he said, without giving specifics of Fresenius’s positions. Future quarters may see less impact because Fresenius wrote down its assets in the country, including buildings, at the beginning of the year, Powell said.
“These are volatile times, and this hurts, but we can’t accomplish our mission if we just walk out and leave people without a place to be treated,” Powell said. “I don’t think in good conscience that we would go right now.”
Powell said he’s not opposed to another share buyback after the completion of a 385 million-euro ($504 million) program announced this month.
Fresenius Medical’s shares have declined about 1 percent, including reinvested dividends, in the past 12 months, compared with a 17 percent gain in the DAX Index.
About 30 percent of the shares are owned by Fresenius SE. The Bad Homburg, Germany-based company said today its first-quarter profit climbed 12 percent, boosted by the performance of two units that manage hospitals and sell intravenous therapies.
Fresenius SE’s net income adjusted for some items rose to 224 million euros. The company reiterated a February forecast for 2013 profit to exceed 1 billion euros. Sales will rise 7 percent to 10 percent this year in constant currencies, it repeated, while adjusted net income is set to increase 7 percent to 12 percent.
Sales at the company rose 11 percent to 4.89 billion euros, compared with the 4.91 billion-euro average analyst estimate. The German health company’s Kabi unit sells therapies and drugs administered intravenously to hospital patients. Fresenius also owns the Helios hospital operator and health-care services unit Vamed.