February 20, 2019 / 7:24 AM / 7 months ago

UPDATE 2-Fresenius flags faster earnings growth from 2020 after investment

* Sees 2019 sales growth of +3-6 pct, net income to stagnate

* Expects profit to grow faster than sales from 2020

* Announces 1 bln euros share buyback at Fresenius Medical Care

* Shares in Fresenius rise over 5 pct, FMC up 6.6 pct (Adds shares, writes through)

By Caroline Copley

BERLIN, Feb 20 (Reuters) - Fresenius expects earnings to grow faster than sales from 2020 after investments to improve its German hospitals and scale up its home dialysis business eat up profit this year, the German healthcare group said on Wednesday.

Investors, who were disappointed last year after the company trimmed its guidance in October and abandoned in 2020 targets in December, were heartened by the outlook and the prospect of a 7 percent increase in the dividend to 0.80 euros per share.

The stock surged more than 6 percent to trade at 49.5 euros - almost back at the price last seen in December before the healthcare group unsettled the market with a forecast for profit to stagnate this year.

“2019 will be a year of investment in growth areas such as home dialysis, biosimilars and new hospital services and therapies,” Chief Executive Stefan Sturm said in a statement.

Fresenius, which makes generic infusion drugs and operates hospitals and dialysis clinics, has been grappling with operating issues at two of its three major businesses.

Sales in the fourth quarter rose 7 percent to 8.8 billion euros, as a strong performance at its Kabi generics unit offset declines at its Helios hospitals business and separately-listed dialysis business, Fresenius Medical Care (FMC).

The company expects currency-adjusted sales to rise between 3 and 6 percent this year compared with 6 percent last year, while profit should stay around the same level as 2018.

From 2020-2023, Fresenius is targeting a compound annual organic sales growth rate of 4-7 percent while net income should grow at a faster rate, in a range of 5-9 percent.


Preparations to cope with new minimum staffing laws, a shift to more outpatient treatments and disruption caused by their move to develop clusters have hit the group’s German hospitals business.

Revenues from its German hospitals fell 5 percent in the fourth quarter, hurt by a fall in patient admissions and unexpectedly high staff turnover and a shortage of nurses.

At the same time, FMC is grappling with a slowdown in North America, its most important market, and a lower percentage of dialysis patients on higher paying insurance schemes.

Fourth-quarter sales at the unit fell 3 percent to 4.3 billion euros, slightly ahead of the Reuters consensus forecast, while adjusted net income rose 8 percent to 353 million euros, compared to an average forecast of 378 million.

FMC is banking on its planned $2 billion acquisition of NxStage to drive growth in the future and will spend money this year building training facilities and home dialysis infrastructure.

Chief Executive Rice Powell told reporters the company expected the NxStage deal - which most recently has been delayed by the U.S. government shutdown - will close in the next few days.

The company will also invest in emerging markets, where dialysis is expected to grow due to rising numbers of people with chronic disease, and plans to build over 100 clinics in China over the next few years and to grow its clinic network in India.

A 10 percent hike in the dividend to 1.17 euros per share and the announcement of a 1 billion euro ($1.1 billion) share buyback over the next two years cheered investors.

Shares in FMC surged 6.4 percent to 71.8 euros, making them the top gainer on Germany’s DAX index.

$1 = 0.8821 euros Reporting by Caroline Copley; editing by Mark Potter and Jason Neely

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