Comparison of the Actual Business Results with Forecasts
We forecast revenue of more than $12 BN for the year under review. In fact, it grew by 7% to $12.05 BN. In constant currency terms, too, revenue increased by 7%, in line with our expectations. Our mid-term targets envisage an average yearly revenue growth at constant currency of 6 to 8%; see also “Growth strategy” section. Both the North America and the International segment contributed in equal measure to the boost in revenue in 2010; information on the development of revenue in the individual regions and company segments can be found in the “Results of operations” chapter.
At the beginning of the past financial year, we predicted a net income of between $950 M and $980 M for 2010. In November we increased our target to between $960 M and $980 M. Ultimately, the net income in the previous financial year amounted to $979 M (+ 10%) and was therefore at the upper end of the target range. The Company’s business developed especially well in North America, raising the operating margin to 16% in the year under review. Initially, we expected the operating margin to be at the previous year’s level of 15.6%.
In the year under review, the effective tax rate amounted to 35.2%, in line with our forecast of between 34.5 and 35.5% at the beginning of the financial year.
The continued growth of the dividend as expected is reflected in our dividend proposal: Pending approval by the General Meeting, the dividend per ordinary share will increase by 7% to €0.65 (2009: €0.61). More information on this can be found in the “Dividend” section.
At the beginning of the year, we set aside between $550 M and $650 M for investments and up to $400 M for acquisitions. In August, we increased our budget for acquisitions to $500 M. We remained almost completely within our target and utilized $507 M for investments (net) and $618 M for acquisitions net of divestitures. Further information can be found in the “Financial situation” chapter.
The operating cash flow, driven by earnings performance and ongoing good management of accounts receivable, was within the target range of 10% of revenue. In 2010, the operating cash flow totaled $1.368 BN, corresponding to 11% of revenue.
According to our forecast, the debt/EBITDA ratio should have dropped to below 2.5 by the end of 2010. The actual debt/EBITDA ratio as of the reporting date was 2.38, and therefore in line with our expectations.
The number of employees at Fresenius Medical Care (full-time equivalents) increased from 67,988 at the end of 2009 to 73,452 at the end of 2010, reaching our forecast figure of more than 70,000. The Company’s continued strong organic growth and acquisitions in all regions were key contributing factors.
Targets and results for 2010
after increase in November
|1Net income attributable to Fresenius Medical Care AG & Co. KGaA. 1Proposal to be approved by the Annual General Meeting on May 12, 2011.|
|Revenue||+7% to $12.05 BN||> $12 BN|
|Net income1||+10% to $979 M||$960 – $980 M|
|Dividend2||+7% per ordinary share to € 0.65||continuous rise|
|Investments, net||$507 M||$550 – $650 M|
|Acquisitions, net||$618 M||up to $500 M|
|Tax rate||35.2%||34.5 – 35.5%|
|Debt/EBITDA ratio||2.38||< 2.5|
|Number of employees||73,452||> 70,000|
|Research and development expenses||$97 M||~ $95 M|
|Product innovations||e.g. dialysis machine 2008T||further expansion of product and service range|
Research and development expenditures – aimed at boosting and enhancing Fresenius Medical Care’s ability to adapt to future requirements – were around $97 M and therefore within our target of $95 M. The focus is on further developing existing product groups. Details can be found in the “Research and development” section.
The general economic development was marked by a sharp upswing in the period under review. On balance, all important regions posted increases in their gross domestic product in 2010 compared to the previous year, as we had expected. The economies of some emerging markets grew faster than that of the U.S. and Europe, our most important markets in terms of their contribution to revenues. However, Fresenius Medical Care’s dialysis business is less dependent on economic cycles than other industries. For further information on economic development see the “Economic environment” section.
The dialysis market developed positively as we had predicted: Market volume was up by approximately 4%, and the number of patients worldwide grew by around 7%. Concerning the allocation of dialysis patients to different treatment methods, there were no significant changes over the previous year. Hemodialysis continued to be by far the most important method used to treat chronic kidney failure in 2010.