• Organic Revenue Growth: 2% growth supported by both Care Delivery and Care Enablement.

• Operating Income Margin: Increased to 9.8%, approaching the 2025 target margin band of 10% to 14%.

• FME25 Savings: EUR64 million in additional savings, totaling EUR173 million by the end of Q3.

• Net Leverage Ratio: Improved to 2.8, below the target corridor of 3 to 3.5 times net debt to EBITDA.

• Care Delivery Revenue: 2% decline due to a negative 330 basis points impact from divestitures.

• Care Enablement Organic Revenue Growth: 4% growth driven by solid volume development.

• Operating Cash Flow: Increased due to recovery from the Change Healthcare cyber incident.

• 2024 Operating Income Growth Outlook: Heightened to 16% to 18% for the full year.

• Warning! GuruFocus has detected 6 Warning Signs with FMS.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fresenius Medical Care AG (NYSE:FMS) achieved organic revenue growth of 2% in the third quarter, supported by both Care Delivery and Care Enablement segments.

• The company recorded a significant improvement in operating income margins, with Care Delivery reaching a margin of 11.2%, well within the 2025 target margin band.

• FME25 program contributed EUR64 million in additional savings, with expectations to achieve around EUR200 million in savings for 2024, ahead of the targeted EUR100 million to EUR150 million.

• The company successfully reduced its net financial debt and improved its net leverage ratio to 2.8, below the target corridor of 3 to 3.5 times net debt to EBITDA.

• Fresenius Medical Care AG (NYSE:FMS) demonstrated strong disaster preparedness, minimizing the impact of hurricanes on treatment volumes to just 5 basis points.

Negative Points

• Despite positive volume development, the US market remains muted due to elevated mortality rates, impacting overall growth.

• The value-based care business experienced unfavorable financial developments, resulting in a negative contribution to operating income of EUR20 million to EUR40 million for the year.

• The implementation of volume-based procurement in China negatively impacted pricing development, aligning with expectations but still posing a challenge.

• The CMS announced a 2.7% reimbursement increase for 2025, which is below the company's expectations given inflationary pressures.

• The company faces ongoing volatility in the value-based care industry, with lumpy and at times unpredictable financial returns.

Q & A Highlights

Q: On the medium-term margin guidance, should we assume that the decision not to narrow the range indicates a path to the upper half of the 10% to 14% range? Also, what are the levers for margin progression in the Care Enablement business? A: Helen Giza, CEO, explained that there are still many moving parts, such as volume and mortality, which will be clearer by February. For Care Enablement, progress is being made, and the focus is on back-end loaded initiatives like manufacturing footprint optimization, with continuous progress expected through 2025.