02.1Operations and Business Environment

Corporate Performance Measures, Objectives and Strategy


The Management Board operates the Company using various key financial ratios and follows its growth strategy GOAL 10, which Fresenius Medical Care has been pursuing since the spring of 2005.

In our view, EBIT (earnings before interest and taxes) is one of the most useful yardsticks for measuring the profitability of the Company. Consequently, we control the activities of our business segments based on their. EBITDA (earnings before interest, taxes, depreciation and amortization) is another good indicator of Fresenius Medical Care’s ability to achieve positive financial results.

Financing is in our opinion a central function on which the business segments have no control. Therefore, neither interest expenses resulting from financing activities nor tax expenses are included in the financial targets for the business segments.

Fresenius Medical Care evaluates its operating cash flow based on days sales outstanding (DSO). A high operating cash flow, for example, indicates that our customers are paying our invoices within a short period of time.

The debt / EBITDA ratio is another important criterion for assessing corporate performance. This ratio compares the Company’s debt to our EBITDA and other non-cash charges. A low or decreasing debt /EBITDA ratio indicates that we are in a position to service debt or to increase EBITDA. Fresenius Medical Care is active in the dialysis industry and has a strong position in global, growing, and non-cyclical markets. The dialysis industry is characterized by stable cash flows, as most customers of the company have a high credit rating. As a result, high and sustained cash flows that can be reliable calculated are generated. They permit an appropriate share of debt capital, that is, the use of a comprehensive mix of liabilities.

Details on the development of these financial indicators as well as other financial figures can be found in the ”Results of Operations, Financial Situation, Assets and Liabilities” section.

In addition, we gear our corporate management toward operational ratios such as the ROIC (return on invested capital) and the ROOA (return on operating assets). The ROIC rose from 7.4% in 2006 to 8.4% in 2007. The ROOA also grew in the same period from 11.3% to 12.5%. Further operating ratios can be found in the ”5-Year Summary”.


GOAL 10 is the name of Fresenius Medical Care’s strategy for sustained growth until 2010. The strategy was put into place in the spring of 2005. GOAL 10 defines four paths that we intend to follow in order to boost our success across a broader spectrum of the global dialysis market and achieve our growth objectives. As the market leader, we aim to continue to grow more strongly than the dialysis industry as a whole.

The following paths should lead us to sustained growth:

PATH 1: ORGANIC GROWTH. In the coming years, we intend to achieve an annual organic revenue growth in dialysis care of 5% to 6%. To meet this goal, we are planning to open 70 to 80 dialysis clinics annually in the U.S. alone over the next three years. At the same time, we aim to boost our range of integrated, innovative treatment concepts such as UltraCare and Cardioprotective Hemodialysis and combine them with dialysis drugs, for example. In this way, we want to make our portfolio stand out against the competition and offer the best possible services. In addition, we plan to raise revenue by opening new dialysis clinics and further increasing the number of patients whose treatments are covered by private health insurance. Dialysis products will also make a substantial contribution to our organic revenue growth. Innovative, high-quality products such as the 5008 therapy system and cost-effective production will play a key role. Detailed information on our worldwide network of production sites can be found in the ”Production” section.

PATH 2: ACQUISITIONS. To increase our future profitability and optimize our global and regional presence, we are continuing to broaden our network of dialysis clinics by means of attractive acquisitions. The acquisition of Renal Care Group in North America was a major step in this direction. We plan to expand our clinic network in particularly promising regions, although investments in future acquisitions in North America should be on a smaller scale.

Outside North America, too, we want to partake in the privatization process of healthcare systems and continue our above-average growth in Eastern Europe and Asia, for example. In future, the number of dialysis clinics in Europe, the Middle East, and Africa should increase from 362 today to more than 500 in 2010. Acquisitions should play a supportive role here. We plan to provide care for more than 40,000 dialysis patients in this business region by 2010, compared to some 27,000 patients in 2007.

PATH 3: HORIZONTAL EXPANSION. Dialysis drugs are the logical extension of our product portfolio, supplementing our dialysis services and products. Initially, we will focus on drugs that regulate the patients’ mineral and blood levels, including phosphate binders, iron and vitamin D preparations, as well as calcimimetics. So far, we have mainly been involved in the area of phosphate binders and have integrated PhosLo into our product portfolio. As part of GOAL 10, we intend to tap further growth opportunities in other dialysis drug segments. A detailed report on our dialysis drugs activities can be found in the ”Renal Pharmaceuticals” section.

PATH 4: HOME THERAPIES. A relatively small percentage (11%) of dialysis patients performs dialysis at home. Most patients (about 89%) receive their treatments in dialysis clinics.

Nevertheless, we aim to assume a more important global position in the home therapies market in the long-term, including peritoneal dialysis and home hemodialysis. To achieve this goal, we intend to combine our comprehensive and innovative product portfolio with our expertise in patient care. In addition, we acquired Renal Solutions, Inc. More information on this acquisition and on our activities in home dialysis can be found in the ”Home Dialysis” section.

Our strategy encompasses concrete and measurable growth objectives. At the same time, it takes into account long-term trends that we forecast for the dialysis market. In addition to a growth in patient numbers, we expect the quality of dialysis services and available products to become more important in future. Thus, compensation for dialysis care could depend in part on certain quality criteria being achieved. More information on this can be found in the ”Quality and Environmental Management” section.

Moreover, we are convinced that in future there will be a growing need for integrated care of kidney patients. As a result, our business in not only focusing on individual services and dialysis products, but we are also aiming to combine the different areas of application in the field of dialysis. For more details, see the ”Disease Management” section.


On our Capital Market Day in September 2007, we confirmed and specified our GOAL 10 objectives. Overall, through these strategic measures - the horizontal expansion of our product portfolio through dialysis drugs, the further development of our home therapies, and organic growth - we expect to boost our revenue by 7% to 9% on average per year to about $ 11.5 billion in 2010. Net income should increase by over 10% a year.

Financial prudence will guide us along all four paths of GOAL 10 to enable us to service our debt and make investments. The operating cash flow should comprise at least 10% of revenue. A continued increase in earnings and improved management of our current assets should contribute to this development. Furthermore, we are striving for a tax rate of less than 38% by 2010. Expenditures for investments and acquisitions as part of ordinary operating activities should be in the range of 7% to 10% of revenue.


Goal 10 Objectives

  GOAL 10 2007
2006 2005 2004
Revenue (in $ millions) ~11,500 9,720 8,499 6,772 6,228
Annual revenue growth at constant currency ~7-9% 12 % 25 % 8% 10 %
Share of dialysis market 1 ~18 % 16.8 % 15.5 % 12.9 % ~12 %
Market volume 1 ($ in billions) ~67 ~58 ~55 ~52.5 ~50
Annual net income growth 2 >10%
25 %
24 % 17 % 21 %
1) Company estimates
2) 2005 excluding one-time effects, 2006 excluding one-time effects and effects from SFAS 123R and 2007 excluding one-time effects


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