Fresenius Medical Care

We achieved record sales and earnings and increased our profitability. We further expanded our worldwide leading position in dialysis and strengthened our business, especially in Europe and Asia-Pacific. We successfully continued to improve the quality of our medical outcome. This is especially important to us.

Key Figures of Fresenius Medical Care

  • Dialysis products, Dialysis care
US$ in millions 2010 2009 Change
1 Net income attributable to Fresenius Medical Care AG & Co. KGaA
Sales 12,053 11,247 7%
EBIT 1,924 1,756 10%
Net income1 979 891 10%
Operating cash flow 1,368 1,339 2%
Capital expenditure/acquisitions 1,314 766 72%
R & D expenses 97 94 3%
Employees (December 31) 77,442 71,617 8%

US$ in millions 2010 2009 Change
1 Net income attributable to Fresenius Medical Care AG & Co. KGaA
Sales 12,053 11,247 7%
EBIT 1,924 1,756 10%
Net income1 979 891 10%
Operating cash flow 1,368 1,339 2%
Capital expenditure/acquisitions 1,314 766 72%
R & D expenses 97 94 3%
Employees (December 31) 77,442 71,617 8%

Fresenius Medical Care is the world’s leading provider of dialysis care 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 2010: we treated 214,648 patients at 2,757 dialysis clinics worldwide. The number of treatments exceeded the 30 million mark for the first time.

Fresenius Medical Care by Region


  North America Europe/Middle East/Africa Latin America Asia-Pacific Total 2010 Change 2010/2009
Dialysis clinics (December 31) 1,823 499 193 242 2,757 8%
Dialysis patients (December 31) 137,689 38,061 22,471 16,427 214,648 10%
Treatments (in million) 20.85 5.45 3.39 1.97 31.67 8%

  North America Europe/Middle East/Africa Latin America Asia-Pacific Total 2010 Change 2010/2009
Dialysis clinics (December 31) 1,823 499 193 242 2,757 8%
Dialysis patients (December 31) 137,689 38,061 22,471 16,427 214,648 10%
Treatments (in million) 20.85 5.45 3.39 1.97 31.67 8%

BUSINESS DEVELOPMENT

Fresenius Medical Care increased its sales by 7% to US$12,053 million in 2010 (2009: US$11,247 million). Organic growth was 6%. Acquisitions accounted for 1% of the growth.

Sales from dialysis care increased by 9% to US$9,070 million (2009: US$8,350 million). This increase was driven by excellent organic growth of 7%. With 75%, dialysis care contributed the largest share to total sales.

Sales of dialysis products grew by 3% to US$2,983 million (2009: US$2,897 million). Including dialysis products applied in our own dialysis clinics, sales increased by 5% to US$4,098 million (2009: US$3,891 million). Dialysis products accounted for 25% of total sales.

EBIT increased by 10% to US$1,924 million (2009: US$1,756 million). The EBIT margin was improved to 16.0% (2009: 15.6%). Net income1 increased by 10% to US$979 million (2009: US$891 million).

NORTH AMERICA

Sales in North America, Fresenius Medical Care’s largest business region, increased by 7% to US$8,130 million (2009: US$7,612 million). Organic growth was 6%.

Sales from dialysis products rose to US$2,156 million (2009: US$2,079 million). Higher sales of dialyzers, solutions, and concentrates were offset by lower sales of renal pharmaceuticals.

Dialysis care was by far the largest contributor to sales, with a share of 90%. Sales from dialysis care increased by 7% to US$7,303 million (2009: US$6,794 million). Growth in the number of treatments and the higher revenues per treatment were the drivers for the positive business development. In 2010, the average revenue per treatment in the United States rose by 3% to US$356 (2009: US$347). The rise is largely due to an increase in reimbursement rates especially for privately insured patients.

Sales of dialysis products increased by 1% to US$827 million (2009: US$818 million). The growth drivers were bloodline systems, solutions, concentrates, and dialysis machines. This was partly offset by lower sales with renal pharmaceuticals.

EBIT increased by 11% to US$1,386 million (2009: US$1,250 million). The EBIT margin rose to 17.0% (2009: 16.4%). The improvement was due to higher average revenues per treatment and scale effects as well as a favorable cost structure for renal pharmaceuticals.

SALES BY SEGMENT


US$ in millions 2010 2009 Change
North America      
Dialysis care 7,303 6,794 7%
Dialysis products 827 818 1%
Total 8,130 7,612 7%
International      
Dialysis care 1,767 1,556 14%
Dialysis products 2,156 2,079 4%
Total 3,923 3,635 8%
Worldwide      
Dialysis care 9,070 8,350 9%
Dialysis products 2,983 2,897 3%
Total 12,053 11,247 7%

US$ in millions 2010 2009 Change
North America      
Dialysis care 7,303 6,794 7%
Dialysis products 827 818 1%
Total 8,130 7,612 7%
International      
Dialysis care 1,767 1,556 14%
Dialysis products 2,156 2,079 4%
Total 3,923 3,635 8%
Worldwide      
Dialysis care 9,070 8,350 9%
Dialysis products 2,983 2,897 3%
Total 12,053 11,247 7%

INTERNATIONAL

The International segment comprises the business regions Europe/Middle East/Africa, Asia-Pacific, and Latin America. In 2010, we derived about 33% of Fresenius Medical Care’s total sales from these regions.

Sales in the International segment increased by 8% to US$3,923 million (2009: US$3,635 million). Organic growth was 5%, while net acquisitions contributed 3%.

Sales from dialysis care increased by 14% to US$1,767 million (2009: US$1,556 million). Acquisitions contributed 8%; organic growth was 6%.

Sales from dialysis products rose to US$2,156 million (2009: US$2,079 million). Higher sales of dialyzers, solutions, and concentrates were offset by lower sales of renal pharmaceuticals.

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

EBIT in the International segment rose by 6% to US$678 million (2009: US$637 million). The operating margin was 17.3% (2009: 17.5%). Scale effects as a result of the sales growth and favorable currency translation had a positive effect on EBIT. These effects were neutralized by expenses as a result of the depreciation of the Venezuelan bolivar and lower profit margins at newly acquired dialysis clinics.

EXPANSION OF THE INTERNATIONAL BUSINESS

Fresenius Medical Care considerably strengthened its business in both dialysis products and dialysis care through acquisitions and alliances in 2010:

Fresenius Medical Care acquired KNC, an operator of dialysis clinics in the Krasnodar region of Russia. KNC, the region’s only provider, treats over 1,000 patients at five clinics. Prior to the acquisition, Fresenius Medical Care had operated five dialysis clinics with about 570 patients. With this acquisition, we have further strengthened our presence in the growing Russian market for dialysis care and have become the leading provider in the country, where there are currently over 20,000 patients receiving dialysis treatment.

In December 2010, Fresenius Medical Care acquired Gambro’s global peritoneal dialysis business. A key element of our growth strategy is to expand our position in home dialysis, where peritoneal dialysis plays an important role. Gambro was the world’s third largest provider of peritoneal dialysis and treated over 4,000 patients in more than 25 countries. With this acquisition, we have expanded our activities, especially in Europe and the Asia-Pacific region. The acquisition is expected to add approximately US$60 million to Fresenius Medical Care’s annual sales.

The Asia-Pacific region, where the number of dialysis patients is rising at an above-average rate, is a growth market for Fresenius Medical Care. In July 2010, we acquired Asia Renal Care Ltd. The company treats approximately 6,200 patients at about 100 clinics throughout Asia and was the second largest provider of dialysis care in the Asia-Pacific region after Fresenius Medical Care. Asia Renal Care is expected to add about US$80 million to Fresenius Medical Care’s annual sales. This considerably expands Fresenius Medical Care’s leading position in dialysis care in the Asia-Pacific region, where there are over 680,000 long-term patients who rely on life-sustaining dialysis. This number is expected to rise to over one million in the next five years.

In Japan, we signed a distribution agreement with Nikkiso Co. Ltd. for hemodialysis and peritoneal dialysis products. Through the combination of Fresenius Medical Care’s efficient manufacturing operations and Nikkisos’ powerful sales organization, the two companies want to further expand their share of the Japanese market, especially for dialyzers and peritoneal dialysis products. With the acquisition of Nikkiso Medical Korea Co. Ltd., a subsidiary of Nikkiso Co. Ltd., Fresenius Medical Care is also expanding its leading position in the dialysis products business in the Republic of Korea. The acquisition adds about US$15 million to Fresenius Medical Care’s annual sales.

In January 2011, Fresenius Medical Care signed an agreement to acquire International Dialysis Centers (IDC), the dialysis care business of Euromedic International. With this acquisition, Fresenius Medical Care especially wants to expand its dialysis care activities in Eastern Europe, where IDC is market leader. IDC operates 70 dialysis clinics in nine countries and treats over 8,200 hemodialysis patients, largely in Central and Eastern Europe. When the acquisition is completed, IDC will add annual sales of about US$180 million. The acquisition price of €485 million was initially financed from cash flow and available credit lines. In February 2011, the transaction was refinanced by placing senior notes.

SALES BY REGION


US$ in millions 2010 2009 Change Currency translation effects % of total sales
North America 8,130 7,612 7% 0% 67%
Europe/Middle East/Africa 2,549 2,479 3% -3% 21%
Asia-Pacific 777 639 22% 7% 7%
Latin America 597 517 16% 7% 5%
Total 12,053 11,247 7% 0% 100%

US$ in millions 2010 2009 Change Currency translation effects % of total sales
North America 8,130 7,612 7% 0% 67%
Europe/Middle East/Africa 2,549 2,479 3% -3% 21%
Asia-Pacific 777 639 22% 7% 7%
Latin America 597 517 16% 7% 5%
Total 12,053 11,247 7% 0% 100%

RENAL PHARMACEUTICALS

Renal pharmaceuticals broaden the portfolio vertically beyond our offering of dialysis products and dialysis care. 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 (EPO), phosphate binders, iron preparations, vitamin D preparations, and so-called calcimimetics.

Broadening the portfolio of renal pharmaceuticals is an integral part of Fresenius Medical Care’s growth strategy. In 2010, Fresenius Medical Care announced its intention to set up a joint venture with Galenica Ltd. – Vifor-Fresenius Medical Care Renal Pharma Ltd. – for the development and worldwide distribution of drugs for kidney patients. The products distributed by this joint venture serve to treat anemia and to regulate the bone metabolism of dialysis patients and patients suffering from chronic kidney failure who do not yet need dialysis treatment. Fresenius Medical Care will own 45% of the new joint venture.

PARADIGM CHANGE IN REIMBURSEMENT

Fundamental changes in the reimbursement of dialysis treatment for patients in the United States covered by the public health care program were passed in 2010 and apply as from 2011. 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 bundled rate takes individual patient parameters, such as age and weight, into account. Adjustments are also provided for patients who require exceptional medical care, with correspondingly high costs. Besides being inflation-linked, another special feature of the new reimbursement scheme is its orientation to certain quality parameters.

For Fresenius Medical Care, this changed reimbursement structure presents advantages, opportunities, and challenges. Thanks 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.

For further information on reimbursement, please see here.

TREATMENT QUALITY

Our central concern is the health of our patients. Our long-term mission is to improve their quality of life by continuously optimizing their dialysis treatment.

As shown by the various quality indicators in the table below, we were able to further improve the quality of our dialysis treatment in 2010. This applies for instance for the hemoglobin value as well as the Kt/V value, which gives an indication of the filtering performance of a treatment by establishing the ratio of the length of treatment and the filtration rate of certain toxic molecules. Albumin, a protein, is one quality parameter used to monitor a patient’s general nutritional condition.

For further information, please see Fresenius Medical Care’s Annual Report 2010 or visit the website at www.fmc-ag.com. Please see here for the 2011 outlook of Fresenius Medical Care.

QUALITY INDICATORS OF FRESENIUS MEDICAL CARE PATIENTS1


  USA EMEA
  2010 2009 2010 2009
1 Data refer to the last quarter
2 International standard BCR CRM470
Kt/V > 1,2 97% 96% 95% 95%
Hemoglobin = 10 -12 g/dl 71% 64% 54% 52%
Albumin > 3,5 g/dl2 84% 83% 86% 86%
Phosphate 3,5 -5,5 mg/dl2 57% 55% 59% 61%

  USA EMEA
  2010 2009 2010 2009
1 Data refer to the last quarter
2 International standard BCR CRM470
Kt/V > 1,2 97% 96% 95% 95%
Hemoglobin = 10 -12 g/dl 71% 64% 54% 52%
Albumin > 3,5 g/dl2 84% 83% 86% 86%
Phosphate 3,5 -5,5 mg/dl2 57% 55% 59% 61%

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