Despite being mixed, Fresenius’ Q1 report looks a bit uninspiring, which is not bad as the world creaks under the weight of the virus. But not very things is running perfectly. Kabi’s issues seem to have worsened, which legitimises the CEO change ex-post. Unfortunately, management was not too good at providing many details about the cost-cutting programme.
Figures were a notch above our expectations and slightly above street expectations (top line: +1%; adjusted EBITDA: +2%).
Companies: Fresenius SE & Co. KGaA
As we had already speculated at a recent target price change (on 05/02/2021), the announced departure of Dr Krick, Fresenius’ dinosaur, could trigger some changes. The first ‘victim’ may be the head of Kabi and we clearly expect more to come. In essence, this could signal to the capital markets that there is something already set in motion. This might change sentiment towards Fresenius as we still see the share is clearly undervalued.
We had been really surprised by the announcement of a cost-cutting programme, which is expected to give Fresenius a nice profitability push by the end of 2023. This is earlier than FMC’s. However, we do not really believe in a coincidence as Fresenius’ management should be the master of the ceremonies but, interestingly, it could be able to achieve this.
The Q4 figures have beaten our cautious expectations as we had taken some provisions into account. Updated consensus was unavailable.
Fresenius’ broad portfolio stabilised the top-line and earnings but the picture has been mixed not just among the divisions. Interestingly this has also proved true on an intra-divisional basis in that the trends have followed the pandemic. The Q3 figures showed some relief, especially in Helios Spain.
The reported figures were a notch weaker than expected, but broadly met consensus.
Fresenius’ business model has shown to be quite resilient, but some businesses did better than others, which looks quite normal to us. However, Helios’ Spanish business seems to have a bit of a cold as its profitability has substantially deteriorated. This could be a communication issue, but we do not fully understand the reason.
Reported figures were a notch better than expected, but consensus was beaten (+3% to 5%). Adjusted for potential pandemic-related effects, FY guidance was lowered.
Despite the unquantified pandemic related costs, Fresenius was able to protect earnings (not margin). This was a bit unexpected as we had factored in some higher extra costs, especially in the clinics’ business and at Kabi. The latter also did better. All in all, the reported figures were stronger than expected.
We appreciate management’s qualitative approach to clarify potential impacts unless figures are available.
Fresenius’ figures were characterised by the mixed developments at FMC and Kabi. The latter division started to face a stronger impact from intensifying competition in North America. This had been expected, but kicked in more strongly than expected. Helios’ performance was in line. All in all, the figures were above our expectations, whereas consensus was broadly met.
We have envisaged for quite a while that Kabi will have to leave its IV drug Shangri La. This has now happened. Should one worry about this? The Q3 figures show that other segments could cushion the effects of greater competition in this segment to a certain extent. What looks more interesting is what is going on in the clinic business where some clouds are gathering over the sun (Helios). Or is it just a penumbral solar eclipse?
Fresenius’ Q2 figures benefited from good organic growth across all divisions, but profitability development showed a mixed picture. Kabi was a (still) positive surprise, Helios moderated as expected and FMC was hit by various expected as well as unexpected issues. Vamed became a small but shining star. Reported figures were more or less in line with our expectations and consensus was also broadly met. The higher top-line guidance is quite nice, but profitability is barely expected to follow.
Fresenius reported a strong set of figures, which confirmed our view. Consensus was beaten. Kabi continued to generate profitable growth and Helios signalled some positive developments in Germany and strong organic sales growth in Spain.
Fresenius’s Q4 figures were pretty much in-line with our expectations adjusted for our too low assumption on FMC, as Helios came in stronger than expected, but Kabi a notch weaker. Consensus was also broadly met.
US pharma giant Pfizer announced that the issues at its sterile injectables plan in Kansas could be solved by the end of 2019 as constant supply could not be maintained after a warning letter from the FDA in 2017.
Fresenius could not re-switch the light of strong growth. The full Q3 figures did nothing to change our past view on the company’s strong growth, but was good enough to light a candle. The increased detail was helpful in gaining a better understanding of the potential Q4 outcome, which we expect to be fairly positive.
The released preliminary Q3 did not fully match our expectations but neither did it destroy our view of the company. However, Fresenius reported some internal issues (e.g. Helios), which caused management to narrow its previously-given guidance to the lower end. The full set of figures will be reported on 30 October 2018.
Today the Delaware court upheld the termination of the merger agreement with Akorn.
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