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Fresenius Medical Care

In 2012, Fresenius Medical Care clearly exceeded strong previous year’s sales and EBIT levels. We strengthened our leading position in the global dialysis market through strong organic growth and acquisitions. Once again, we improved the treatment quality for our patients.

Fresenius Medical Care


  2012 US$ in millions 2011 US$ in millions Change
1 2011 sales were adjusted by -US$224 million according to a U.S. GAAP accounting change 2 Before special items 3 Net income attributable to the parent company of the respective business segment
Sales 13,800 12,5711 10%
EBIT 2,3292 2,075 12%
Net income3 1,1182 1,071 4%
Operating cash flow 2,039 1,446 41%
Capital expenditure/acquisitions 2,561 2,614 -2%
R & D expenses 112 111 1%
Employees (December 31) 90,866 83,476 9%

  2012 US$ in millions 2011 US$ in millions Change
1 2011 sales were adjusted by -US$224 million according to a U.S. GAAP accounting change 2 Before special items 3 Net income attributable to the parent company of the respective business segment
Sales 13,800 12,5711 10%
EBIT 2,3292 2,075 12%
Net income3 1,1182 1,071 4%
Operating cash flow 2,039 1,446 41%
Capital expenditure/acquisitions 2,561 2,614 -2%
R & D expenses 112 111 1%
Employees (December 31) 90,866 83,476 9%

Fresenius Medical Care is the world’s leading provider of dialysis services and dialysis products for patients with chronic kidney failure. When the kidney function of patients with this disease fails, dialysis takes over the vital task of cleansing the blood from toxins and surplus water.

In dialysis, two treatment methods are distinguished: hemodialysis (HD) and peritoneal dialysis (PD). With HD, the patient’s blood is cleansed with a dialyzer, or “artificial kidney,” a process that is controlled by a hemodialysis machine. In the case of PD, the patient’s peritoneum is used as a “filter” to cleanse the blood. Fresenius Medical Care treats dialysis patients and also manufactures the dialysis products. As a vertically integrated company, we offer our services and dialysis products along the entire dialysis value chain in over 120 countries. Fresenius Medical Care has a worldwide network of more than 40 production sites. Our largest plants are in the United States, Germany, and Japan.

As the table shows, we further expanded our leading market position in 2012: we treated 257,916 patients at 3,160 dialysis clinics worldwide and the number of treatments increased by 12% to 38.6 million.

FRESENIUS MEDICAL CARE BY REGION


  North America Europe/Middle
East/Africa
Latin America Asia-Pacific Total 2012 Change 2012/2011
Dialysis clinics (December 31) 2,082 608 225 245 3,160 9%
Dialysis patients (December 31) 164,554 48,902 26,956 17,504 257,916 11%
Treatments (in millions) 24.41 7.49 4.10 2.59 38.59 12%

  North America Europe/Middle
East/Africa
Latin America Asia-Pacific Total 2012 Change 2012/2011
Dialysis clinics (December 31) 2,082 608 225 245 3,160 9%
Dialysis patients (December 31) 164,554 48,902 26,956 17,504 257,916 11%
Treatments (in millions) 24.41 7.49 4.10 2.59 38.59 12%

BUSINESS DEVELOPMENT

Fresenius Medical Care sales increased by 10% to US$13,800 million in 2012 (20111: US$12,571 million). Organic growth was 5%. Acquisitions contributed a further 8%. Divestitures reduced sales growth by 1%. Currency translation had a negative effect of 2%.

Sales from dialysis services increased by 13% to US$10,492 million (20111: US$9,283 million). With 76%, dialysis services contributed the largest share to Fresenius Medical Care’s total sales.

Sales of dialysis products grew by 1% to US$3,308 million (2011: US$3,288 million). Dialysis products accounted for 24% of Fresenius Medical Care’s total sales.

In 2012, EBIT2 increased by 12% to US$2,329 million (2011: US$2,075 million). The EBIT margin improved to 16.9% (2011: 16.5%), primarily due to the EBIT margin improvement in North America.

Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 11% to US$1,187 million (2011: US$1,071 million). This includes a non-taxable investment gain of US$140 million related to the acquisition of Liberty Dialysis Holdings, Inc., as well as other one-time costs of US$71 million after tax. The latter comprises the effects regarding the amendment of the agreement for Venofer and a donation to the American Society of Nephrology. Excluding these effects, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 4% to US$1,118 million.

North America

Accounting for 65% of sales, North America remained Fresenius Medical Care’s largest business region. 2012 sales grew by 14% to US$9,031 million compared to US$7,926 million in 2011. Organic growth was 4%. Acquisitions contributed 11%, divestitures reduced sales growth by 1%.

As in the previous years dialysis services was by far the largest contributor to sales, with a share of 91%. Sales grew by 16% to US$8,230 million (20111: US$7,113 million), primarily driven by acquisitions. In 2012, the average revenue per treatment in the United States increased to US$355 compared to US$348 in 2011.

Dialysis product sales were US$801 million (2011: US$813 million).

EBIT2 grew by 19% to US$1,715 million compared to US$1,435 million in 2011, partially due to special collection efforts for dialysis services performed in prior years. The EBIT margin increased 90 basis points to 19.0% (2011: 18.1%). The average cost per treatment in the United States was US$283 in 2012, compared to US$282 in 2011.

SALES BY SEGMENT


US$ in millions 2012 2011 Change
1 2011 sales were adjusted by -US$224 million according to a U.S. GAAP accounting change. This applies solely to Fresenius Medical Care North America. 2 2012 adjusted for other one-time costs of US$110 million related to the amendment of the agreement Venofer and a donation to the American Society of Nephrology 3 Including sales generated by corporate functions of US$29 million in 2012 and US$17 million in 2011
North America
Dialysis services1 8,230 7,113 16%
Dialysis products 801 813 -1%
Total 9,031 7,926 14%
International      
Dialysis services 2,262 2,170 4%
Dialysis products 2,478 2,458 1%
Total 4,740 4,628 2%
Worldwide      
Dialysis services1 10,492 9,283 13%
Dialysis products3 3,308 3,288 1%
Total1 13,800 12,571 10%

US$ in millions 2012 2011 Change
1 2011 sales were adjusted by -US$224 million according to a U.S. GAAP accounting change. This applies solely to Fresenius Medical Care North America. 2 2012 adjusted for other one-time costs of US$110 million related to the amendment of the agreement Venofer and a donation to the American Society of Nephrology 3 Including sales generated by corporate functions of US$29 million in 2012 and US$17 million in 2011
North America
Dialysis services1 8,230 7,113 16%
Dialysis products 801 813 -1%
Total 9,031 7,926 14%
International      
Dialysis services 2,262 2,170 4%
Dialysis products 2,478 2,458 1%
Total 4,740 4,628 2%
Worldwide      
Dialysis services1 10,492 9,283 13%
Dialysis products3 3,308 3,288 1%
Total1 13,800 12,571 10%

International

In 2012, the International segment, comprising the business regions Europe/Middle East/Africa, Asia-Pacific, and Latin America, achieved excellent results. About 35% of Fresenius Medical Care’s total sales were derived from these regions. Sales in the International segment increased by 2% to US$4,740 million (2011: US$4,628 million) and 9% in constant currency. Organic growth was 6%, acquisitions contributed 3%. Currency translation had a negative effect of 7%.

Sales from dialysis services increased by 4% (11% in constant currency) to US$2,262 million compared to US$2,170 million in 2011. Acquisitions contributed 7%; organic growth was 6%. Divestitures reduced sales by 2%, currency translation had a negative effect of 7%.

Sales from dialysis products grew by 1% (7% in constant currency) to US$2,478 million (2011: US$2,458 million).

EBIT in the International segment was US$809 million (2011: US$807 million). The EBIT margin was 17.1% (2011: 17.4%).

The table below shows the development of sales by business region.

SALES BY REGION


US$ in millions 2012 2011 Change Currency translation effects % of total sales
North America 9,031 7,926 14% 0% 65%
Europe/Middle East/Africa 2,893 2,948 -2% -8% 21%
Asia-Pacific 1,043 980 6% -1% 8%
Latin America 804 700 15% -9% 6%
Corporate 29 17 71% - -
Total 13,800 12,571 10% -2% 100%

US$ in millions 2012 2011 Change Currency translation effects % of total sales
North America 9,031 7,926 14% 0% 65%
Europe/Middle East/Africa 2,893 2,948 -2% -8% 21%
Asia-Pacific 1,043 980 6% -1% 8%
Latin America 804 700 15% -9% 6%
Corporate 29 17 71% - -
Total 13,800 12,571 10% -2% 100%

Business expansion

In February 2012, Fresenius Medical Care closed the acquisition of Liberty Dialysis Holdings, Inc. The closing follows the completion of the review of the transaction by the United States’ Federal Trade Commission. The acquisition adds approx. 200 clinics to Fresenius Medical Care’s renal care network in North America.

RENAL PHARMACEUTICALS

Renal pharmaceuticals vertically broaden the portfolio beyond our offering of dialysis products and dialysis services. Patients receiving dialysis treatment also usually have to take drugs, for instance to maintain the right balance of minerals in the body or to prevent anemia. The spectrum of renal pharmaceuticals includes erythropoiesis-stimulating agents (ESA), phosphate binders, iron preparations, vitamin D preparations, and so-called calcimimetics.

REIMBURSEMENT

In 2011, the Medicare end-stage renal disease prospective payment system for the reimbursement of dialysis treatment for patients in the United States covered by the public health care program was implemented. Products and services previously reimbursed at a composite rate, and other services, such as the administration of certain drugs and the performance of diagnostic laboratory tests, are now reimbursed at a single flat-rate payment (bundled rate). The reimbursement scheme features an annual inflation update mechanism. In 2013, the increase is 2.3% compared to 2.1% in 2012.

Pursuant to the American Taxpayer Relief Act, automatic across-the-board spending cuts are scheduled to go into effect on March 1, 2013, unless the law is further changed. Medicare payments to providers and suppliers would be subject to these reductions, but these reductions would be limited to one adjustment of no more than 2%. The Medicare reimbursement reduction would be independent of annual inflation update mechanisms.

Another feature of the reimbursement scheme is its orientation to certain quality parameters, such as the regulation of the hemoglobin content of the blood or the bone metabolism.

Due to its integrated business model, Fresenius Medical Care is not only in a position to offer all products and services at the required standard of quality, but also to work in an even more focused way on the further development of products and services.

500,000 dialysis machines

Fresenius Medical Care produced its 500,000th dialysis machine in 2012. The machine, from the multiple prize-winning 5008 series, came off the production line at the Schweinfurt, Germany plant and was donated to the Deutsche Nierenstiftung, a German non-profit organization for dialysis and kidney transplants.

Fresenius Medical Care began developing its own dialyzers and dialysis machines in the mid-1970s, with serial production of the company’s first dialysis machine starting in 1979. The first model, the A2008, became the world’s best seller, and successor models have enabled Fresenius Medical Care to maintain its market-leading position until today. Fresenius Medical Care currently produces dialysis machines at the German plant in Schweinfurt, and at a sister plant in Walnut Creek, in the U.S.

TREATMENT QUALITY

Holistic care of patients with chronic kidney disease is an important factor in achieving the highest-quality treatment possible. Therefore, we consider all aspects of treatment: from vascular access in the patient’s arm to high-quality dialysis treatment, individually adapted diets, and the provision of supplementary services. Our brands, UltraCare in North America and NephroCare in the International segment, have made the integrated therapy concept the standard in our clinics as well as for home dialysis. Our aim is to sustainably improve patients’ quality of life while reducing the cost for the health care system.

In 2012, physicians and dialysis clinical staff again offered our patients the highest-quality treatment based on clinical quality parameters (please see table below). For example, a Kt/V value exceeding 1.2, as recommended in general guidelines and standards, was achieved again in almost 100% of cases in our clinics. We were also able to improve treatment quality with respect to other quality parameters, such as hemoglobin and phosphates.

We also record the number of patients for whom a hemodialysis catheter is used as vascular access during the dialysis treatment. The reasoning is that catheters are associated with severe inflammation and additional days spent in hospital.

The number of days patients spend in hospital for reasons other than dialysis is also an important indicator for us, because they considerably reduce the quality of life of dialysis patients.

Furthermore, we launched additional home therapy patient programs in 2012. In order to provide our home dialysis patients with the highest level of safety, we introduced a very powerful monitoring system on the North American market. This transmits data about the patient’s vital functions and data from the dialysis machine to the dialysis support team, and reports potential abnormalities immediately. Thereby dialysis treatments can be even better adjusted to the individual patients’ needs.

For further information, please see Fresenius Medical Care’s Annual Report 2012 or visit the website at www.fmc-ag.com.

Please see the Management Report for the 2013 outlook of Fresenius Medical Care.

QUALITY PARAMETERS OF FRESENIUS MEDICAL CARE PATIENTS1


  USA EMEA AP
  2012 2011 2012 2011 2012 2011
1 Data refer to the last quarter 2 International standard BCR CRM470
Kt/V ≥ 1.2 97% 97% 97% 95% 97% 97%
Hemoglobin = 10 – 12 g/dl 75% 78% 58% 57% 59% 58%
Hemoglobin = 10 – 13 g/dl 82% 88% 78% 78% 67% 66%
Albumin ≥ 3.5 g/dl2 85% 85% 86% 88% 89% 90%
Phosphate ≤ 5.5 mg/dl2 66% 64% 79% 76% 71% 73%

  USA EMEA AP
  2012 2011 2012 2011 2012 2011
1 Data refer to the last quarter 2 International standard BCR CRM470
Kt/V ≥ 1.2 97% 97% 97% 95% 97% 97%
Hemoglobin = 10 – 12 g/dl 75% 78% 58% 57% 59% 58%
Hemoglobin = 10 – 13 g/dl 82% 88% 78% 78% 67% 66%
Albumin ≥ 3.5 g/dl2 85% 85% 86% 88% 89% 90%
Phosphate ≤ 5.5 mg/dl2 66% 64% 79% 76% 71% 73%

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