Fresenius Medical Care AG Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Overall Performance: First quarter showed strong organic revenue growth of 5%, with positive contributions from Care Delivery and Care Enablement. Operating income grew 11%, net leverage ratio improved to 2.8 times.
• Care Delivery: In U.S., stable volume despite severe flu season, with improving referrals offsetting flu-related missed treatments. Expected same market treatment growth of 0.5% plus in 2025. International markets had strong same market treatment growth of 2.5%.
• Care Enablement: Margin reached 8.3% entering target band, driven by volume growth, pricing momentum, and FME25 savings. Preparing for 5008x machine launch in U.S. by end of year.
• FME25 Transformation: Delivered €68M in additional sustainable savings towards targeted €180M for the year.

Segment Performance

• Care Delivery: Strong organic revenue growth of 4%, driven by both Care Delivery U.S. and International. In the U.S., growing value-based care and favorable rate/payer mix compensated for muted same market treatment growth due to flu season. International had accelerated same market treatment growth of 2.5%. Operating income contribution remained stable, with margin expanding to 9.3%. Revenue contribution from Care Delivery was slightly negative due to flu season and one less dialysis day.
• Care Enablement: Realized strong revenue growth of 5% organic, driven by solid volume growth in all regions and continued positive pricing momentum. Operating income increased 49%, with margin reaching 8.3% and entering the target band of 8% to 12%. This was due to FME25 transformation program execution and improved volume and price effects offsetting deflationary pressures.

Guidance

• Confirmed full year outlook. Expect positive to low single-digit percent revenue development. Operating income expected to grow by a high teens to high 20s percent rate compared to prior year. First quarter operating income developed in line with expectations, with lower contribution from Q1.

Risks

• Tariffs had limited impact in Q1 and expected limited full year impact, with U.S. local manufacturing and supply chain resilience. Severe flu season in U.S. caused missed treatments, impacting volume development but improving referral trends offset the impact.

Question and Answer

Q: Victoria from Berenberg asked about April trading in the U.S. and phosphate binders.

A: Helen Giza said underlying referrals are encouraging, expecting positive trajectory through year, and Martin Fischer noted phosphate binders had double-digit million effect in Q1, in line with full year €50M to €100M outlook.

Q: Veronika from Citi asked about RPT in U.S. and Care Enablement margin.

A: Helen Giza said RPT price and mix improvement continuing, Martin Fischer said Care Enablement growth was significant contributor, pricing developing in line with expectations with positive momentum.

Q: Graham from UBS asked about HDF launch and margins.

A: Helen Giza discussed HDF benefits including mortality improvement and operational benefits, and Martin Fischer talked about D&A and capital allocation priorities for profitability.

Q: Lisa from Societe Generale Bernstein asked about IT transformation and HDF launch.

A: Martin Fischer mentioned IT as focus for efficiency and revenue yield, Helen Giza said HDF rollout plan to be shared at Capital Markets Day.

Q: James from Jefferies asked about operating growth and HDF launch.

A: Martin Fischer discussed D&A and capital allocation, Helen Giza talked about HDF pilot with 11 patients and patient feedback.

Q: Oliver from ODDO BHF asked about flu impact and FX.

A: Helen Giza said flu impact on mortality too soon to tell, Martin Fischer said FX had €11M positive effect in Q1, with potential 2%-3% headwind if FX stays high.

Q: Hugo from BNP asked about tariffs, DaVita cyber-attack, and referrals.

A: Helen Giza said tariffs impact limited, DaVita cyber-attack had some referral benefit, 40 bps flu impact from missed treatments offset by referrals.

Q: Marianne from Bank of America asked about FME25 savings and divestitures.

A: Martin Fischer said FME25 savings phasing in line with expectations, Helen Giza said divestitures mostly complete, ongoing review of country portfolio.

Q: Richard from Goldman Sachs asked about referrals and Baxter sale.

A: Helen Giza said referrals improving, competitive dynamic with Baxter sale seen as positive for market.

Q: David from JPMorgan asked about phosphate binders and new U.S. administration.

A: Martin Fischer said phosphate binders had double-digit million effect in Q1, Helen Giza said new administration not expected to impact core kidney care programs.

Q: Robert from Morgan Stanley asked about Care Enablement margin and ROCE.

A: Helen Giza said Care Enablement margin expected to improve through year, Martin Fischer said ROCE improvement driven by operational transformation and capital management.

Q: Falko from Deutsche Bank asked about referral process, cost cutting, and share buybacks.

A: Helen Giza said referral process improving, cost cutting ongoing with focus on value creation, share buyback plans to be discussed at Capital Markets Day.