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Fresenius' 1Q Mixed, Profit Up

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Fresenius Medical Care (FMS - Free Report) , the world's largest dialysis company, posted first-quarter 2012 earnings per share of 80 cents, beating the Zacks Consensus Estimate of 76 cents and the year-ago earnings of 73 cents per share. Adjusted income excludes gain from investments.

Net income (attributable to the company) shot up 68% year over year to $370 million on the back of one-time income.

Revenue Analysis

Net revenues rose 9% (up 10% at constant currency) year over year to $3,249 million, but missed the Zacks Consensus Estimate of $3,266 million. Organic revenue growth was 3% on a global basis.

Geographically, revenues from the North American markets moved up 9% to $2,105 million in the first quarter while overseas revenues increased 8% (up 12% at constant currency) to $1,136 million.

Dialysis services revenues increased 11% year over year to $2,478 million with domestic and international sales rising 11% each, to $1,918 million and $560 million, respectively. Average revenue per treatment for domestic clinics increased to $353 from $348 a year ago.

Consolidated dialysis product revenues were up 3% year over year to $771 million. Dialysis product sales in domestic markets dropped 4% to $187 million mainly on account of reduced prices for pharmaceuticals. International dialysis product sales rose 4% to $576 million, boosted by higher sales of dialysis machines.

Operating Statistics

Fresenius operated a network of 3,119 dialysis clinics (up 13% year over year) across North America and the overseas markets, as of March 31, 2012. It has provided dialysis treatment to 253,041 patients (up 17% year over year) worldwide as of March 31, 2012. During the first quarter, the company provided roughly 9.21 million dialysis treatments globally, up 13% year over year.


Operating margin rose to 15.5% from 14.9% a year ago. In North America, operating margin climbed to 16.5% from 16.2%. Operating margin for overseas markets increased to 17.2% from 16.2% helped by favorable currency exchange movements.

Cash Flows

Fresenius generated operating cash flows of $481 million (roughly 14.8% of sales) in the first quarter, a 174% year-over-year surge. The company spent $122 million on capital expenditure in the quarter. Free cash flow, prior to acquisitions, was $359 million versus $62 million a year ago. The company expended $1,526 million for investments and acquisitions. Free cash flow, post acquisitions, divestures and investments, was $(1167) million compared with $(277) million in the prior-year period.


Fresenius reiterated its forecast for 2012. The company continues to envision sales of roughly $14 billion for 2012. Net income for the year is expected at $1.3 billion and net income (attributable to shareholders) is pegged at $1.14 billion. Net income excludes gain on investments of about $127 million in the first quarter. The company expects capital expenditure of roughly $700 million and plans to spend around $1.8 billion on acquisitions.

Fresenius is the largest provider of products and services for patients undergoing dialysis treatment on the planet. The company’s principal competitor in the U.S. is DaVita Inc. (DVA - Free Report) , which provides dialysis services for patients suffering from chronic kidney failure or end stage renal disease.

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