Business performance of Fresenius Medical Care in 2011 and 2012
Exchange rate relations
Fresenius Medical Care’s outlook for 2011 is based on an exchange rate of $1.3326 to the euro. This value represents the closing rate on December 31, 2010. As mentioned in the “Economic environment” section, the relationship of the U.S. dollar to the euro is especially important for Fresenius Medical Care. In its forecasts, Fresenius Medical Care also takes account of other relevant exchange rates, particularly for the economic development of subsidiaries, such as the Taiwanese dollar against the U.S. dollar or the Chinese Yuan against the euro. Volatile exchange rates affect the forecast results of the subsidiaries, as well as the conversion of these results into U.S. dollars.
We aim to further increase our revenue in 2011 by between 6 and 8% to more than $12.8 BN to $13.0 BN. We intend to continue this positive development in 2012 to achieve revenue growth of again between 6 and 8% based on constant exchange rates.
In 2011, we aim to generate a net income (attributable to Fresenius Medical Care AG & Co. KGaA) of between $1.035 BN and $1.055 BN. In 2012 we expect net income to grow faster than revenue. At the time when this annual report went to press, no one-time effects that might have a significant impact on net income in 2011 were anticipated.
Earnings per share
For 2011 and 2012, we expect earnings per shares to grow in parallel with net income.
The Company pursues a long-term profit-oriented dividend policy. The dividend has increased 14 times consecutively (subject to the approval of the Annual General Meeting on May 12, 2011). Over this period, the dividend has risen from €0.17 (on a comparable basis) to €0.65 in 2010. We intend to continue this trend in 2011 and 2012. Over these two years, the aim is to keep the dividend payout ratio at almost one third of net income. Information on the proposed dividend increase can be found in the “Dividend” section.
Capital expenditures and acquisitions
In 2011 we intend to spend around 14% of revenue on capital expenditures and acquisitions. Around 5% of this will relate to capital expenditures; 9% will relate to acquisitions and shareholdings corresponding to a total of some $1.2 BN in 2011. We aim to spend around 7% of revenue on capital expenditures and acquisitions in 2012.
In addition to the ongoing modernization of our dialysis clinics and production facilities, capital expenditures will be primarily used to open new dialysis clinics, expand our worldwide production capacities, and on dialysis machines within the framework of long-term supply contracts. Additionally, capital expenditures will be used to further rationalize production processes and to improve patient data management and billing. Furthermore, the Group is planning to continue to make selective acquisitions, including shareholdings, and thus further consolidate the global business. The focus here lies on expanding our dialysis clinic network and our cooperation with manufacturers of drugs for dialysis patients.
For 2011 we expect the effective tax rate to be between 34.5 and 35.0% and for 2012 between 35 and 36%.
In 2011 and 2012, the operating cash flow is again expected to account for more than 10% of revenue. As in the previous year, we anticipate a slight rise in days sales outstanding in the countries affected most severely by the current global financial crisis. The introduction of the new reimbursement system in the U.S. may also result in an increase in days sales outstanding. To ensure that cash flow targets are met, the emphasis will continue to be on the management of current assets. With revenue forecast at $12.8 BN to $13 BN, this would result in an operating cash flow of at least around $1.28 BN to $1.3 BN in 2011.
Fresenius Medical Care takes the debt/EBITDA ratio as its guideline for long-term financial planning. This ratio was 2.38 at the end of 2010. Due to the increased volume of acquisitions, we are expecting this ratio to rise to 2.8 as at the end of 2011, although we are not expecting a further increase in 2012.
Top priority is given to ensuring our financial flexibility in the Company’s financing strategy. We will also focus our financing activities on reducing subordinated financing instruments in the coming years and replacing these with senior notes if necessary. We still regard our refinancing possibilities as being very stable and flexible and intend to continue our scheduled investments. In addition to the instruments it uses, Fresenius Medical Care has a sufficient financial cushion in the form of a syndicated credit facility, which can be used on a revolving basis if need be. Our mid-term target is to create a financing portfolio containing only first-rate and unsecured debt instruments. Fresenius Medical Care has sufficient financial resources which we intend to preserve in the next few years. These consist of only partly drawn credit facilities and our accounts receivable facility. We are aiming for secured and unutilized credit facilities to the value of at least $300 M to $500 M.
Our short-term refinancing requirements are limited to paying €485 M for our acquisition of International Dialysis Centers, paying dividends to the amount of approximately €197 M in May 2011, repaying the trust preferred securities of $225 M and €300 M in June 2011, and extending the accounts receivable facility in October 2011.
For further information see the “Financial situation” section.
|1Net income attributable to Fresenius Medical Care AG & Co. KGaA. 2Proposal to be approved by the Annual General Meeting on May 12, 2011. 3Based on capital expenditures and acquisitions. 4Full-time equivalents.|
|Revenue||$12.05 BN||$12.8 – 13.0 BN||Increase of 6 – 8%
in constant currency
|Net income1||$979 M||$1.035 – 1.055 BN||Increase > revenue growth|
|Earnings per share||$3.25||Increase > revenue growth||Increase > revenue growth|
|Dividende||€ 0.65 per ordinary share2||continuous increase||continuous increa|
|Capital expenditures, net||$507 M||~ 5% of revenue||~ 7% of revenue3|
|Acquisitions, net||$486 M||~ $1.2 BN||~ 7% of revenue3|
|Tax rate||35.2%||34.5 – 35.0%||35 – 36%|
|Debt/EBITDA ratio||2.38||< 2.8||< 2.8|
|Employees4||73,452||> 78,000||> 82,000|
|Research and development expenditures||97 MIO US $||~ $105 M||~ $115 M|
|Product innovations||dialysis machine 2008T, amongst others||further expansion of product and service range||further expansion of product and service range|