Fresenius Tops, Misses on Sales - Analyst Blog

Fresenius Medical Care (FMS) reported second-quarter earnings per ADS of 83 cents, beating the Zacks Consensus Estimate of 80 cents as well as the year-ago result of 74 cents.

 

 

The company reported net revenues of $2,946 million, up 7% on a reported basis as well as in constant currency, marginally missing the Zacks Consensus Estimate of $2,970 million. Organic revenue growth stood at 6% on a global basis.

 

Revenue from North American markets increased 8% in reported terms (7% on an organic basis) to $2,027 million. Overseas revenue increased 4% in reported terms (5% in constant currency and 3% organically) to $919 million.

 

 

Total dialysis services revenue increased 8% in reported terms (as well as in constant currency) to $2,224 million in the quarter. Domestic dialysis services revenue was $1,817 million, up 8%. Dialysis services revenue, ex-U.S., was $407 million, up 8% (9% in constant currency).

 

Average revenue per treatment for domestic clinics was $356 compared with $344 a year-ago and $355 in the preceding quarter. This improvement was attributable to growth in reimbursement and higher utilization of pharmaceuticals.

 

Total dialysis product revenue was $722 million, up 2% in reported terms (3% in constant currency). Dialysis product revenue in the domestic markets was $210 million, up 5%, due to higher sales of hemodialysis disposables and dialysis machines. Dialysis product revenue, ex-U.S., was stable in reported terms (up 2% in constant currency) at $512 million. Fresenius Medical benefited from higher sales of hemodialysis solutions, concentrates, dialyzers and bloodlines.

 

 

Fresenius Medical reported operating income of $465 million, up 11%. Operating margin in the reported quarter was 15.8%, higher than 15.1% in the year-ago quarter.

 

Operating margin in North America was 16.3%, an improvement from 15.9% a year ago. The margin development occurred due to an increase in revenue per treatment as well as better economies of scale.

 

Operating margin for overseas markets improved to 18.8% from 17.3% in the prior-year quarter. The increase resulted from improved economies of scale, favorable foreign exchange rates and lower bad debt expenses, partially offset by higher depreciation expense.

 

 

Fresenius Medical generated cash from operations of $294 million, representing about 10% of revenue. Cash flows were favorably impacted by improvements in working capital and higher earnings, partially offset by higher payments for income tax.

 

The company spent $119 million on capital expenditure in the quarter. Free cash flow, prior to acquisitions, was $175 million, higher than $143 million in the prior-year period. The company spent $68 million toward acquisitions, net of divestitures. Free cash flow, post acquisitions and divestitures, was $107 million compared with $98 million in the year-ago period.

 

 

Fresenius Medical expects revenues to grow to over $12 billion in 2010. It expects net income in the range of $950 million to $980 million for the current fiscal year. Further, it expects capital expenditure of about $550 million to $650 million for 2010 with an additional $500 million to be expended on acquisitions.