The pandemic seems to have revealed all the oddities in FMC’s business model, which usually benefits from the continued inflow of new patients. Here we highlight that managerial skills could be improved here and there. And the same is true for communication and reporting.
The quite strong loss in profitability could not be fully explained by the lack of government compensation for higher costs.
FMC missed consensus at the EBIT level by €-11m, which does not look too meaningful to us.
Companies: Fresenius Medical Care AG & Co. KGaA
FMC’s management had spread a lot of confidence that there were signs that the worst should soon be over (see Latest of 06/05/2021), when it comes to excess mortality. Mr Powell was cited by a newspaper that the negative effect from the pandemic is now expected to last until mid-2022.
FMC has not given a profit warning, but we see an increasing likelihood of one. A perfect time for this would be the presentation of the efficiency programme in autumn 2021.
We see a certain decoupling, of which the one related to the COVID-19 cases of FMC patients to the global trend is very positive in our view. The reduction of transparency (Care Coordination is not reported separately), which makes it even more difficult to track reimbursement trends, seems to indicate some disconnection between investors’ and management’s ambitions.
The reported figures were better than feared, but met consensus.
FMC is currently undergoing an unexpected Litmus test. Management has taken the opportunity to dig deeper into its business, striving for more resilient profitability, which seems to foil our strong view on FMC’s business model. We are still struggling with management’s performance as this have been done on a regular basis. In our view, FMC’s equity story has not really changed, but we are not that excited by the current financials nor the guidance.
Expressing our deepest sympathy to those who have lost friends and relations, the pandemic has appeared in its deadly form. FMC appeared to have the right concept to cover pandemic-related challenges, still providing >105,000 treatments per day in the first nine months. But what went wrong since then? Basically, nothing. Or rather, the pandemic took its toll.
Having been quiet for two days, management gave a short presentation. In short, 2021 might become a ‘year of lost growth’.
FMC is expected to benefit from the rejection of a ballot measure in California. Additionally, CMS will increase the reimbursement for Medicare patients undergoing dialysis more stronger than expected.
Despite our strong belief in FMC’s robust business model and its ambition to help people with severe illnesses, we have the increasing impression that the company could be better run. Difficult to prove this but there seems to be a lot of talk and not much in the way of results. The disclosure is not always that good (e.g. p12 – Q3 presentation).
Q3 did not meet our expectations, but beat the street.
FMC’s Q2 figures were dominated by the strong US figures, which benefited from the governmental cheque. The normal business did well and both effects combined led to a strong set of results, beating both our own and consensus expectations. One outstanding question: what will happen if the US CARES Act is not prolonged or is replaced by another subsidy as the pandemic remains at high tide in the US.
FMC is doing quite well in the current environment. But this was due to the robust business model and not to excellent manoeuvres in a stormy sea. ON the contrary, it lowered transparency by another notch down.
However, reported figures were slightly below our expectations, but beat consensus (sales: €4,422m; EBIT: €543m). The confirmation of the given guidance still excludes any COVID-19-related impact.
FMC’s year-end profitability push came in rather unexpected. The gross profit margin moved into the right direction (down), but EBIT came in clearly above our expectations. The reasons therefore were not well explained (better performance of Care Coordination) and the set of figures provided was of no help. Nevertheless, the underlying business trend is intact.
Despite having reported mixed but good figures, North America, the largest segment (the company’s segment reporting is by regions), saw a strong top-line development (including the NxStage acquisition), but profitability suffered from various effects (e.g. lower revenue per treatment and higher costs per treatment). The other regions more than offset this.
The Q3 figures were above our expectations as well consensus.
FMC reported a mixed set of figures, which were impacted by various effects, of which the divestment of the Care Coordination activities was the largest. The ongoing discussions about the reconciliation of ESCO savings and faster growing costs in US weighed on profitability, which did not fully meet our expectations or those of consensus.
The US government’s announcement has brought some clarity about how care might be provided in the future. As administration is involved, it still seems to be a long time before implementation. The good news is that the announcement supports FMC’s strategy to increase its share in home haemodialysis.
FMC’s Q1 profitability in the US was dampened by rising costs as reimbursements were up more moderately, but the other regions, especially EMEA and Asia-Pacific, lifted profitability, but not fully based on the business. Reported figures were not as strong as we had expected, but broadly met consensus. Despite the confirmation of guidance, management failed to include all effects in the FY guidance, which makes it not easy to read.
FMC reported a more profitable Q4 without any restrucuring costs, which we had expected to clean up the company. The consensus was broadly met. However, 2019 will be a more challenging year due to investments in the future and the next cost-cutting programme kicking in into the one still running. The higher dividend and the share buyback programme make shareholders happy (Fresenius is the single largest one!) but leave us puzzled.
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In its first Litmus test after an ‘ambitious’ CMD in June 2021, the British giant has put up a decent show. The group witnessed recovery in the base business, particularly in vaccines which benefited from the sales of COVID-19 vaccine adjuvant. While the near term continues be tricky due to resurfacing COVID-19 concerns, encouraging trends on the COVID-19 vaccine / treatment front and growing HIV and oncology prowess should calm the nerves.
Companies: GlaxoSmithKline plc
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Smith & Nephew reported consensus beating Q2 21 sales growth of 40.3%, thanks to a strong recovery in Orthopaedics (+43.4%) and ‘sports medicine & ENT’ (+50.9%). Regionally, growth was driven by the established markets (+46.8%).
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Following the broadly in-line performance, we do not expect any significant ch
Companies: Smith & Nephew PLC
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Companies: Warpaint London PLC
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