P&L Check

Fresenius Goes For High Debt, High Growth

main 2Reuter Fresenius CEO Stephan Sturm
Fresenius CEO Stephan Sturm is going for growth. Source: Reuters.

Stephan Sturm, the new chief executive of healthcare company Fresenius, will announce plans to continue the company’s proven strategy — a combination of organic growth plus acquisitions — at his first AGM this Friday.

Mr. Sturm took up the top job in mid-2016. Only a few weeks later, he announced the largest takeover in the history of the company: the purchase of the Spanish hospital chain Quironsalud for €5.8 billion ($6.3 billion).

He also announced plans to take over US drug maker Akorn for the equivalent of €4.4 billion. And Fresenius is investing up to €670 million in the acquisition of Merck’s biosimilar drugs division.

Even if the high pace of expansion raises some questions among shareholders, the acquisitions do not affect the company’s 2016 balance sheet. Bridge financing was agreed to in 2016 for the purchase of Quironsalud, but the purchase was not concluded until January 2017.

Fresenius’ 2016 financial statement is characterized once again by growing revenues and profits. The company is increasing its dividend for the 24th time in a row. It’s comforting business as usual for the shareholders of the DAX-listed company, who will be asked to approve a 13-percent dividend increase to 62 cents at the shareholders’ meeting. In addition, the Fresenius share has outperformed the DAX in a volatile environment in 2016. While Germany’s benchmark index rose by 7 percent, Fresenius shares gained 13 percent. The healthcare group benefits from the fact that it operates in fields that are mostly unrelated to the economy.

Its Fresenius Medical Care subsidiary, which is also listed on the DAX, accounts for more than half of Fresenius’ sales and operating result. The Kabi and Helios divisions are each responsible for one-fifth of sales. Kabi sells nutritional solutions and liquid generic drugs worldwide, and Helios is the largest operator of private hospitals in Germany. Finally, the small Vamed division plans, develops and manages healthcare facilities.

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