AGM 2018

May 17, 2018

Slides

Dear fellow shareholders, it is my great pleasure to welcome you to the Annual General Meeting of Fresenius Medical Care. 2017 was a successful year for our company. Revenue of €17,800,000,000 7% more than in the previous year. 48,000,000 dialysis treatments, 1,000,000 more than in 2016. And we remain number one in dialysis. We can be very proud of 2017, but you might ask, how did we manage it? One clear answer: because we put our patients first. Patient welfare is at the top of our priorities. Our patients inspire us every day to become even better. And this focus will continue in the future. A clear focus creates added value for our patients and for you, our shareholders. You have accompanied us on our growth journey for many years. You hold our shares, and you are loyal to us. This is motivating for the company. It is reflected in our financial success in 2017. Net income, €1,300,000,000 up 12%, setting a new record. This equates to earnings per share of €4.17 an increase of 12%. Free cash flow, euros 1,400,000,000.0, up 33%. When Fresenius Medical Care grows, so does the dividend. You also benefit from this success. We are proposing a dividend increase to €1.06 per share, 10% more than last year, as well as being the twenty first consecutive dividend. It is also the highest dividend we have ever proposed. But my message is not just about numbers. I also want to talk with you about our patients. After all, they are our top priority. There are around three point two million dialysis patients worldwide. We expect this number to rise to four point nine million by 2025. Every single one of these patients, they need regular dialysis treatment in order to survive. We must help our patients. In doing so, we focus on the following aspects: How can we give our dialysis patients the best possible care with our products and improve their quality of life? How can we do this while countering the increasing cost pressure in the health care systems around the world? How can we care for patients in emerging economies with health care systems that are only just starting to develop? Dialysis at home is one answer to these questions. It offers many advantages. Nearly ninety percent of our dialysis patients have to go to a dialysis clinic for three to six hours, three times per week. And this affects their daily routine and the quality of their life. Home dialysis allows them to reconcile their individual lifestyle with therapy more effectively. Patients appreciate flexibility. They are more actively involved in their treatment at home. They're happier. They are healthier. And home dialysis reduces the overall cost of dialysis. But our aim is to offer more than just treatment. We are committed to giving patients a life worth living in addition to their dialysis. Eleven percent of our dialysis patients worldwide receive their care at home. We wish to change this. Our target is to exceed fifteen percent by 2022 in The United States alone. More to come on the growth in international markets in future meetings. To this end, we announced the acquisition of The U. S. Company Nextage in 2017. Nextage develops, produces, and markets dialysis equipment and other products for home dialysis and intensive care. Through this acquisition, we intend to generate further profitable growth in our core business. And we are placing our business on an even broader footing. Together, we will be able to offer treatments that correspond more to the changing needs of our patients. We put our patients first. Of course, we are also looking at solutions that are still in the early stages of development. At Fresenius Medical Care, our venture fund allows us to invest in the future. We are always on the lookout for fresh ideas with potential to improve our patients' care. We are continuously enhancing our own product portfolio. In doing so, we also have our patients in large emerging markets in mind, such as China. China is now our second largest market for dialysis products. Demand is very high. We are therefore investing to expand our product range and production capacities for the local market. This way, we can meet the rising demand faster and more efficiently. It also means we can care for dialysis patients with high quality products that are specifically adapted to that market. At the same time, we are gearing up and expect increasing local competition. This approach is paying off. Dialysis patients in around 150 countries worldwide trust in Fresenius Medical Care products. More than half of all the dialysis machines are made by Fresenius Medical Care. Our market share for dialyzers is around 50%. Fresenius Medical Care offers more than just dialysis products. We care for more than three and twenty thousand dialysis patients in around 3,800 clinics worldwide. Dialysis services account for 65% of our revenue. In China, we have achieved a further milestone in dialysis services. In 2017, we opened our first company owned dialysis clinic. The Chinese market remains heavily regulated, but nonetheless, we see that some regions in China will support collaboration with private companies in the health care sector. This is good news for us and you. We have been building and managing dialysis facilities in China for the government for several years now. We can use our experience to continue expanding and optimizing patient care. We see this as another source of potential further growth. Our first company owned dialysis clinic is a major step in the right direction. We operate our own Fresenius Medical Care dialysis clinics in 50 countries around the world. Some of these have developed health care systems such as France, Germany, or Australia. But we also operate dialysis clinics in countries whose health care systems are just beginning to develop, such as India and Indonesia, or even in more remote locations, such as Curacao in The Caribbean and small countries such as Estonia in Eastern Europe. And as you know, the vast majority of our dialysis clinics are in The United States. Natural disasters that struck the North American coastal regions in 2017 were a major challenge for us. Streets were flooded. Water and electricity supplies were cut off in some areas. Patients in Texas, The Caribbean, Florida, and Puerto Rico were no longer able to reach their dialysis clinic. Dialysis centers had to close temporarily. Many of our employees were affected themselves. Some lost their homes. Even so, our employees were there for our patients, ensuring they continue to receive their life saving dialysis treatment. In Texas, for example, our crisis teams use so called duck boats to bring patients to dialysis. These amphibious vehicles can move both on water and land. Duck boats also enabled us to supply patients with food and other relief supplies. Our crisis teams worked tirelessly after the hurricanes in Florida and Puerto Rico, keeping clinics up and running and looking after our patients. We managed to evacuate and fly some S, to Miami. Others received care on-site in the affected regions under very challenging conditions. Our crisis teams did a fantastic job. This requires strength and endurance, but most importantly, great empathy. Our team showed outstanding commitment to our patients, to each other, and to Fresenius Medical Care. And I'm very proud of this, and I hope you are as well. These efforts are important to us, and of course, they cost money. But in such situations, we will refuse to compromise. We do what we have to do, and we concentrate on our patients and our employees. We ask ourselves each day, can we do more? To help both the patient and the employee. We are the world's largest provider of dialysis products. We run the largest, most international network of dialysis clinics. For the last few years, we have added an extra pillar to our business: care coordination. This is where we combine services for the holistic treatment of our patients above and beyond dialysis. As a result, we can give our patients even better care. At the same time, we are laying the foundation for further growth. This business now accounts for 17% of our total revenue. In 2016, Care Coordination represented a revenue share of 13%. Previously, our Care Coordination services were almost exclusively confined to The United States. This changed in 2017 when we acquired the CURE Group in Australia. CURE runs a total of 19 outpatient facilities. They offer various outpatient services including eye surgery as well as some minor orthopedic operations. This fits with our strategy of providing holistic care for patients. CURA demonstrates that care coordination is global. It does not only work in The United States, it is a key element of our worldwide growth strategy. However, The United States is a good example of why we offer care coordination. The health care system is moving away from payment for individual treatments and towards a holistic value based reimbursement structure. We want to give our patients comprehensive support. Only by doing so can we optimally align their treatment and coordinate their holistic care. This benefits patients and it saves cost in the health care system. This suits us perfectly as we not only have the requisite size but also the experience and network. We have the data and the know how to use that data. And as a result, we can give our patients holistic, better care. Because as you know, we always put our patients first. Last year, I explained exactly how we aim to deliver holistic care and advance the business, taking the example of the, so to speak, ESCOs. These organizations are part of a state run health care program in The United States. In selected dialysis centers, we coordinate patients' entire medical care. We take patients by the hand, so to say, and provide them with care that goes beyond dialysis. Many patients suffer from other chronic diseases, often requiring additional visits to physicians and stays in the hospital. We bring all of these threads together. We coordinate every step in the treatment process. And we do this both within and outside of our dialysis clinics. This makes it easier for patients to live with their condition. And it makes visits to physicians, treatment programs, and hospital stays more efficient. We receive a part of the savings for the patient's overall medical care is our remuneration. The results of the first pilot phase of ESCOs in 2016, in our first six locations with 9,000 patients, we saved more than $43,000,000 Overall, our patients were in better health. And this again led to a 9% decrease in hospital stays. The U. S. Health care system is also confident of the success of the ESCOs. A further 18 ESCO locations now have been launched by FMC. Since the beginning of the year, we are providing coordinated health care to some 40,000 dialysis patients in The United States. This example shows that we can help health care systems to save cost while benefiting the patient and you, the shareholder. It also enables us to respond to current and future changes in health care systems. We can even play an active role in shaping new health care systems. After all, we have extensive knowledge of dialysis, supplemented by our services and care coordination. And this also helps our patients because at the same time, we are extremely well placed to provide patients with holistic and value based care. Health care systems are constantly changing. If we want to be the first to find solutions, we need to be flexible, and we believe that we are. We also have to be inquisitive. We take decisions that guarantee future success. In doing so, we follow our own path. We're always on the lookout for opportunities to make our core business and care coordination even stronger. One possible solution is letting go in order to be more focused for the future. Both in 2017 and last month, we made further adjustments to our care coordination portfolio. First, we sold the non dialysis related part of our laboratory business in The United States. Secondly, we announced that we would be divesting Sound Physicians. Sound is a network of physicians and nursing staff for the hospitals in The U. S. Sound helped us to develop and expand our knowledge and experience for successful holistic health care. We have now applied this in our core business. This was therefore a key step on the way to further enhancing and developing a very focused care coordination strategy. External factors also affected our business in 2017, both positively and negatively. The beginning of the year was marked by uncertainty surrounding the change of government in The U. S. At the end of the year, the tax reform in The United States was approved, and this had a positive impact on our business. As a result, our net profit increased by approximately €240,000,000 in 2017. Ladies and gentlemen, in the past few minutes, I've talked to you about our products, new innovations, dialysis services, and ideas on how we can enhance our patients' lives. We must create a future worth living for our patients. Yet this future is not only built on products and services. It is shaped first and foremost by the people behind them. At Fresenius Medical Care, there are 114,000 people who give their all each day. It is our employees who make the company's success possible. And with this in mind, I'd like to express my huge thanks to all of the employees of Fresenius Medical Care. Fresenius Medical Care is a global company. Our employees work in more than 50 countries. We are always close to our patients, around 7,000 colleagues with a total of 65 different nationalities work here in Germany. And this figure continues to go up every year by approximately seven percent. They work at one of our research and development sites or in our manufacturing facilities or they work directly with patients at one of our dialysis clinics or perhaps in administration. But they are actively involved in shaping the future of Fresenius Medical Care. Speaking of the future, let's turn to the future together and look ahead to 2018 and our medium term targets for 2020. We are successful because we set challenging goals and we have dedicated employees. We intend to continue growing in 2018. We aim to increase our revenue by 5% to 7% on a constant currency basis this year. However, at the beginning of the year, our expectations were somewhat higher. Dialysis patients require many medications in addition to their treatments. A new version of one of these medications has come to The U. S. Market with a different dosing experience and a change in reimbursement. We are seeing an impact to our revenue expectations. Thus, we lowered them ever so slightly. However, this will not have a negative impact on our profit, which is why we still aim to increase our net income by 13% to 15%. And yes, U. S. Tax reform will contribute to some of this unusually strong increase. We want to become more efficient. We want to become more competitive. This is why we are launching the second phase of our global efficiency program in 2018. This will help us achieve sustaining net savings of up to 100,000,000 to €200,000,000 per year by 2020. Our ambitions are also reflected in our medium term targets. We aim to generate revenue of €24,000,000,000 in 2020. This equates to an average annual growth rate of around 10%. We also expect high single digit average growth in net income for this same period. However, this does not take into account the planned transactions that I mentioned to you earlier. Ladies and gentlemen, as you can see, we are successfully implementing our strategy. We are continuing to gain experience and operate successfully in a constantly evolving environment. We are improving our existing products and services. We're branching out in new directions. Your trust gives us the strength to do this. As a result, we are growing and creating further added value for health care systems, for employees, for you, our shareholders, and especially for our patients. Thank you. Mr. Paul, I thank you very much for your very interesting and comprehensive statements. Your strategically oriented outlook for the coming years is surely of particular interest to all of our shareholders. Ladies and gentlemen, I am confident that I'm also acting on your behalf if I now congratulate the management board of the Fresenius Medical Care AG and Kocheti and all of the employees who work worldwide around for ZYN and Milkare, and if I thank them for all of their activities in fiscal year two thousand seventeen. Ladies and gentlemen, today, there's a very special reason and after another record year that Fresenius Medical Care has shown us in both earnings and in results and revenues, it is very important to me to briefly explain to you how this company that is the Fresenius Medical Care came about. At the beginning of this company, and that was in the years '19, '75 and 1976, there were two names.