Good afternoon, and welcome to the conference call of Fresenius Investor Relations, which is now starting. May I hand you over to Markus Georgi, Investor Relations.
Thank you, Helly. Good afternoon, and thanks, everybody, for joining us today. I would like to welcome all of you to our first quarter twenty twenty conference call. With me on the call today are Stefan and Rachel. So as always, I would like to start the call today by drawing your attention to the cautionary language that is included in our safe harbor statement on Page two of today's presentation.
With that, I hand it over to you. Stephane, the floor is yours.
Thank you, Markus. Good afternoon and good morning. A warm welcome. Thank you for joining us. And as always, we appreciate your interest in Fresenius.
Markus has pointed out the safe harbor language to you, so let's move right to Page three with an update on what is currently on all of our minds. The COVID-nineteen pandemic is unprecedented and poses significant challenges for all of us. Our mission here at Fresenius has never been more important. We are offering better and affordable health care to ever more people. In this truly challenging environment, Fresenius' unique spirit has become even more visible.
Our doctors, nurses and care staff around the globe are working with incredible motivation to combat the pandemic. I hope you don't mind me taking this opportunity to thank them for their tremendous efforts and their dedication. At the same time, all of our employees, be it in production, logistics or admin, are currently making an exceptional contribution to containing and fighting COVID. I am very grateful for their extraordinary commitment and immensely proud to see day in, day out the difference their work makes. Having said that, we are dedicated to safeguarding our employees' health.
And so we have implemented and we do enforce hygiene standards at even higher levels than before for the sake of our staff but also for the sake of our patients as we need to ensure steady operations at our manufacturing and service facilities. And thank God, we have seen only few and dispersed cases of infection among our staff. And hence, virtually none of our facilities has been facing a meaningful interruption. We're working hard to keep it that way. As a health care company, we have a special responsibility that we will live up to also during these testing times.
So we have not only undertaken comprehensive measures to combat the pandemic in our hospitals in Germany and Spain, we have also significantly scaled up our worldwide production to maximize the supply of drugs and devices for the treatment of COVID-nineteen patients. Moreover, in line with the purpose and mission of our company, we have committed ourselves to keeping prices for essential drugs for COVID-nineteen patients stable during this pandemic. With regards to the financial impact of COVID-nineteen, it is just too early to quantify the effects. We cannot and should not speculate on the magnitude and length of the pandemic and thus, what the global economic consequences and the impact on our business will be. But I think it is fair to say that we have proven resilient in this crisis in the first quarter.
I'd call it a very solid start to 2020 as the underlying business performance has been very strong indeed. COVID effects have varied quite meaningfully in timing, direction and magnitude across our four businesses. With all the uncertainties and gray zones when trying to quantify them, we still estimate that in Q1, the pandemic had an insignificant negative effect on sales growth, but a significant negative effect on net income growth. And thus, excluding COVID-nineteen, we probably would have been slightly above the upper end of our net income guidance range for the full year. Hence, I don't see a reason to remove or change our guidance from February, which, for good order, did not consider effects of the COVID-nineteen pandemic.
Much rather, we are maintaining our guidance and view that as a passive confirmation. Clearly, we are not able to forecast, let alone quantify future COVID-nineteen effects. And hence, the guidance from February is somewhat artificial. Please bear with us. We aim to provide you with a real life guidance incorporating a reliable assessment of COVID-nineteen effects when we communicate our Q2 results.
So Fresenius is in excellent shape to weather the storm, no pun intended. We operate a geographically well diversified and vertically integrated business in structurally growing markets. And we are, no doubt, part of the critical infrastructure in our global markets. And that provides us with sustainable access to liquidity and capital and hence, also during these exceptional times, with a rock solid financial position. On to Slide four and an update on Fresenius Kabi.
What you see is our attempt to comprehensively illustrate the major developments year to date and to get you a sense which dynamics need to be monitored in the remainder of 2020. As I said, COVID effects have varied quite meaningfully in timing, direction and magnitude. So as you would expect, take green as a more positive, red as a more negative and gray as a neutral. You see some expected fading, also some anticipated trend reversals. I don't want to comment on every single arrow, but the main takeaways are the anticipated softness in China, which lasted for most of Q1, driven by fewer elective surgeries and prolonged production shutdowns.
From late in the quarter, we have seen a gradual resumption towards normal operations. These headwinds were partially compensated by a spike in demand for drugs and devices for COVID-nineteen patients in Europe and North America. In particular, we have seen significantly increased demand for sedatives, painkillers and infusion pumps. Our supplies were not entirely utilized, and some of it clearly went into increased safety stock. So how should we think about the remainder of 2020?
I currently expect COVID-nineteen driven extra demand in Europe and North America to last into Q2. However, taking the patient numbers at our facilities, which I'm going to show you in a minute, if we take those as a proxy, the demand spikes for March should actually must not be extrapolated. At the same time, elective surgeries remain well below their normal levels And higher expenses for raw materials, logistics and staff protection are likely to stay for longer. Having said that, a healthy capacity utilization, in combination with SG and A savings, should help mitigate those. In total, my best guess right now is that Q2 financial performance at Kabi will be broadly in line with Q1.
Over to Slide five and a brief case study of the excellent crisis management of my colleagues at Fresenius Kabi. They reacted swiftly with lots of entrepreneurial spirit and managed to keep all plans going despite these unprecedented challenges. In particular, all our API plants continued uninterrupted operations. I know that there have been some market rumors about major production interruptions, especially with regard to our plant in Northern Italy, which you see top right on the slide. I want to take this opportunity to confirm that the early and proactive implementation of contingency measures, coupled with the outstanding engagement of our employees, secured the production of our vital products, which are now needed more than ever.
With that, let's turn to Slide six with an overview of the very different dynamics of the pandemic at our hospitals in Germany and Spain. We have deliberately used identical scales for both RAFs. Helios Germany on the left. Currently, only around three hundred COVID patients are treated in our 86 hospitals, down more than onethree from the peak mid April. Around twenty five percent of our COVID patients in Germany require ICU treatment.
So less than ten percent of our ICU beds have been and are occupied by them. Chironsalud in Spain on the right. From a peak of more than four thousand in late March, the number of daily COVID patients is down more than sixty percent. At the same time, our hospitals continue to be governed by the state of alarm regulations and hence are pretty much prohibited from performing elective surgery. Pretty much the same applies in Germany.
So for a while now, we have argued with the relevant officials that the guiding principle they have imposed on us needs to be reversed. When so far, we have been prohibited from performing elective surgeries in order to reserve capacities for COVID patients, we now need to get to an imperative that we can and should perform elective surgeries as long as we can provide sufficient capacities for COVID patients. We are backing this up, backing up our thesis by various initiatives: an independent COVID register jointly run with scientific partners, our own model to project the further spreading of the pandemic with daily updates. And as a founding partner of IQM, we have initiated a broad study involving approximately 400 hospitals on the collateral damage of delayed elective surgery. Germany's Federal Ministry of Health has recognized that, and we expect to see an initially cautious restart of elective procedures but with gradual step ups, obviously subject to constant monitoring.
Hence, on to Slide seven with an update on Helios Germany. Well, we had a strong start to the year. Our hospitals and outpatient centers showed healthy admission growth, testament to our significant investments in recent years and the various measures we initiated. But then came the coronavirus. And so since mid March, as requested by and in close cooperation with the German government, we have postponed surgical procedures whenever medically justifiable.
The freed up capacity has been reserved for the imminent treatment of COVID patients. And in parallel, Helios Germany has increased the number of ICU beds in its network by twothree from 900 to more than 1,500. The law to ease the financial burden on hospitals mitigated most of the negative sales and cost effects in Q1. And whilst we generally welcome this regulation, we also see some aspects that should be reconsidered. The government has mandated an expert panel to review the appropriateness of the current compensation scheme.
And we don't think improvements and an extension beyond the end of Q3 are highly likely, but at the same time, would not be surprised if those came about. On to Slide eight with an overview of the dynamics at Chironsalud. Just as for our German hospital business, we have seen a strong January and February. In case of Helios Spain, growth was additionally fueled by incremental contributions from our recent acquisitions in Latin America. And then March was significantly impacted by COVID.
Kyorin Salud has made an exceptional effort to fight the pandemic. Until the April, we have treated about fifteen thousand COVID inpatients in our hospital beds, including approximately fourteen hundred patients in ICU beds. This represents approximately thirteen percent of all of the Spanish inpatients. And this is then about 2.5x to 3x our overall bed share in Spain. In the Madrid region, through our network of 10 hospitals, we have treated about nineteen percent of total hospitalized COVID patients.
And in the Barcelona province, very similar, about eighteen percent through our seven hospitals. In order to do this, during the first weeks of the crisis, we increased capacity, adding more than 1,400 new beds, including another 400 ICU beds, doubling our initial ICU capacity in Spain. Chironsalud's commitment during this crisis has been widely appreciated, and we have received numerous external recognitions for our efforts, including from regional health care authorities, thanking Kyorin Salud for its full collaboration. Kyorin Salud Spain has also helped our colleagues in Peru and Colombia. At the April, our LatAm hospitals had about one hundred and twenty five COVID inpatients.
And since the pandemic wave arrived later to Latin America than to Spain, we have organized several calls and webinars to share experiences, medical protocols and best practices with them so that they can get prepared ahead of time. As I said earlier, we are expecting that the return to normal hospital operations will take a bit longer, but it will definitely come. And without any doubt, also in Spain, postponed elective surgeries need to be treated with the associated catch up effects. All of Pierron Salud's efforts, in particular, foregone elective treatments, unmitigated fixed costs and increased costs for the protection of our staff and medical devices have led to a very significant negative EBIT effect in Q1. In contrast to Germany, no financial aid program for hospitals has been agreed at this stage.
However, very recently, the Spanish government has announced a new program of €16,000,000,000 nonrefundable to be transferred to the 17 regions, of which €10,000,000,000 are to cover health care costs. Given its significant population and the fact that it has been the most affected area in Spain, Madrid should receive a relevant amount. And if that is the case, we should be compensated following the large proportion of patients treated by Chironsalud. Having said all that, it is still too early to know, and I really would not speculate at the moment. So the second quarter will be the most affected quarter by COVID.
It actually could be similar to a typical summer quarter, with April probably being at the bottom and hopefully, a gradual improvement from there. Our hospitals are most affected, ORP is less, and we would hope for some recovery in the third and fourth quarter, even recovering some of the activity lost during the COVID period following the lockdown and the need to treat non COVID patients. In summary, we would expect to get clarity, more clarity over the next few months and are hoping for a fair treatment. With that, over to Slide nine and an update on Resembius Vamed. To evaluate the impact of COVID-nineteen on Vamed's business, we should distinguish between the project and the service business.
Project business is marked by an increasing amount of uncertainty leading to delays, postponements as well as a few cancellations to date. These are accompanied by general execution delays due to the global COVID-nineteen related travel and quarantine restrictions as well as supply chain constraints. We would expect this trend to last long into the second half of this year, but obviously very much dependent on the further development of the pandemic. The service business is also severely impacted. We see, on the one hand, less demand for rehabilitation services due to postponed elective surgeries and health authority induced closures of selected rehabilitation facilities.
On the other hand, health authorities have enforced the closure of all our medical wellness resorts. For that foregone income, however, we expect to see at least a partial reimbursement, which may vary significantly dependent on which market we are talking about: Germany, Austria, Switzerland, The Czech Republic, etcetera. The Technical Services business is not significantly affected by COVID-nineteen, even though also there, we see some negative effects from postponed elective treatments. Taking that all together, COVID-nineteen weighs on nearly each stage of BaMed's value chain. And from the current perspective, And without being able to accurately quantify the COVID-nineteen effect, it may well be that Vamed shows the most significant negative impact on group net income this year.
On to Slide 10 and some operational highlights apart from all the dominant COVID-nineteen topic. Starting with Kabi. And on a positive note, we are making progress in our biosimilars business, in line with our expectations. Sales of our first product, Idasio, are developing in line or even slightly above our expectations. However, also here, COVID-nineteen has a specific impact on that business.
And even though we are successful in winning fairly meaningful tenders, for instance, in Italy and The U. K, we see that the coronavirus could potentially weigh on demand given the immune system suppressing pharmacological effects of adalimumab. And obviously, our sales reps cannot make all their visits as planned. For our biosimilar candidate of Neulasta, tegfilgrastim, we have, as expected, submitted the biologic license application to the FDA. And for Totelizumab, the biosimilar to Actemra, we are, to the best of our knowledge, the only company that has applied for both the IV and subcutaneous admin.
SubQ is, from the current perspective, the meaningfully larger opportunity for us. And our work with the regulators is ongoing, and we still expect to launch tocilizumab in The U. And in Europe 2023. Over to Kabi's North American business, where with two product launches year to date, we expect to see, as guided, 15 plus for the full year. And our pipeline is continuously strengthened.
As of the March, we've had 56 files pending with the FDA. Briefly on Aecon. And as you may have seen, we have already last year filed an action for damages and do expect the decision of the Delaware court imminently. Briefly on to our TCT business, where we've seen great growth momentum in the first quarter, a nice confirmation of our strategic decision to maintain that business in the Fresenius Group. At Helios, Kurali, Helios' digital company, acquired DGG Group February.
And ever since, a full digital feature set is offered to treat chronically ill patients. So for instance, a video call, video chat, treatment plans, you name it. Given the current treatment restrictions and infection risks with regard to COVID-nineteen, there are significant challenges for the chronically ill to visit local medical practices. And particularly for these patients, digital health care offerings can and will be an attractive alternative. With regard to our expansion into Latin America, we successfully closed our most recent transaction, and IMBERNACO is consolidated from March 1 onwards.
Let me close with Slide 11 and a great example of the unique Fresenius spirit. Our employees acted with compassion, where help and support for those in need was called for. And for example, a team of German doctors and nurses volunteered to travel to Spain to help our colleagues in the darkest days of the crisis. And they were living up to our mission and are a great example of the spirit of all our doctors, nurses and frontline workers. And in these days, I received an e mail from one of these colleagues with a photo shown on the left hand side of this slide.
It shows a patient who's just released from the ICU and could be transferred to a normal ward. I think you you can see the relief in the eyes of the patient and the joy in the eyes of our employees even through the masks. I believe this is a great example of the dedication of our workforce, definitely our heroes of the hour. But frankly, this is also testament to what a global and integrated health care group can do. And I think it's going to show the way going forward, where a large group can transfer resources to where they are needed most.
With that, I'm happy to hand over to Rachel. Thank you for now.
Thank you, Stefan. A warm welcome to everyone also from me. In light of the unprecedented challenges presented by COVID-nineteen, I believe our Q1 results highlight the resilience of our businesses across the globe. We've also demonstrated financial strength with sustained excellent access to the capital and credit markets in these exceptional times. We can hence afford to continue to balance financial discipline with investments into growth.
Now with that, let's take a closer look at the Q1 results. The results for this quarter are shown on a reported basis, excluding special items. They include COVID-nineteen effects, and thus, they are not comparable with our guidance. We will give some indicative directional commentary on our estimates for the impact of the pandemic in Q1. However, in a very dynamic environment with direct but also many indirect operational, practical and wider financial consequences, we feel it is impossible to accurately categorize them all to give a precise financial impact on our reported or our forecasted figures.
A comprehensive overview of all special items is provided at the back of our Investor News and in the results center on our website. With all of that, let's switch to Page 13 and the key financials. Growth rates on this slide are on a constant currency basis. So we had a good start to the year with 7% sales growth. Our underlying business performance was strong.
Even in these challenging times, all our four business segments contributed to the growth. COVID-nineteen had only a slight negative effect on sales growth in the quarter. EBIT showed a decline of 2% in Q1 driven by negative COVID-nineteen effects. In general, the missing sales effects flowed through and were exacerbated by incremental COVID driven expenses, for example, in our production sites and supply chain. Interest decreased year on year by 4% in constant currency to €174,000,000 mainly driven by our successful refinancing activities.
That's in line with our expectations. But given the extra financing measures in light of COVID-nineteen uncertainties and increased interest rates, we now expect to see interest expenses for the full year to be roughly at the prior year level. The group tax rate before special items was 22.6% in Q1, broadly in line with our expectation. And for the full year, we're still expecting a tax rate between twenty three percent and twenty four percent. Moving on to net income.
We showed 1% growth in Q1. And in contrast to our expectations from the February, COVID had a significant negative effect on the net income growth. Thus, as you heard from Stephan, excluding our estimated COVID-nineteen effect, we would and could have even been slightly above the upper end of our guidance range. Having said that, Q1 is by no means a good proxy for the growth rate for the full year. In Q2, with probably the entire quarter affected in pretty much all of our geographies, we do expect to see an even more pronounced negative COVID-nineteen effect.
We do, however, expect a normalization and catch up effect, but when those will start is obviously heavily dependent on the magnitude and duration of the pandemic. So in a nutshell, a robust Q1, strong underlying performance. However, our current view on COVID-nineteen, we are expecting a weaker Q2. The pandemic is far from over, and we are facing many uncertainties during the coming quarters, which makes it impossible to give a reliable guidance for 2020 at this stage. Hence, we hope to have better visibility during the course of the coming months, and we'll revisit our guidance on the occasion of our Q2 results.
Let's move to Page 14, which illustrates the momentum of our four business segments in the first quarter. Starting with Kabi. Company had a good start to the year as far as the top line is concerned, showing 6% organic sales growth with a strong underlying performance across the region. The tailwinds from the spike in demand for drugs and devices to treat COVID patients was kicking in, in late Q1 in Europe and The U. S.
It was largely offset by the anticipated headwinds that we saw in China for most of Q1. Thus, COVID-nineteen had an insignificant effect on Kabi sales growth for the first quarter. Moving on to Kabi's EBIT, where we've seen a decline of 5%. COVID had a moderate negative effect on EBIT growth, so we probably would have been towards the top end of our full year guidance range without COVID effect. Those effects on the top line flowed through, of course, with a more pronounced percentage impact on EBIT, combined with additional COVID driven expenses in manufacturing and logistics.
The moderate positive COVID-nineteen effects in North America, coupled with significant positive effects in Europe, were more than outweighed by very significant negative EBIT effects in China, some of which fell in our JV with Cinepharm and hence led to a partially mitigated net income effect. Then Helios, which showed 5% organic sales growth in Q1 despite meaningful foregone revenue in March given our comprehensive efforts to combat the COVID-nineteen pandemic in Germany and Spain. The situation in Germany was mostly mitigated by the law to ease the burden for hospitals. Thus, COVID-nineteen had an insignificant effect on the eight percent organic sales growth we saw in Germany. Germany had a very strong start to the year with January and February showing excellent admissions growth, testament that our various initiatives over the last two years are materializing.
Strong year on year growth was also supported by price effects and a soft prior year comp. The soft 1% organic growth in Spain was, however, already significantly negatively affected by COVID-nineteen. In Spain, we also saw a strong January and February, but a March heavily impacted by the pandemic. Excluding our estimate of the COVID-nineteen effect, we would have been well above our historical organic sales growth range of four to 6%. Over to EBIT, where we saw a 2% increase for Fresenius Helios in Q1.
In Germany, we have seen also EBIT wise an insignificant COVID effect, whilst Spain showed very significant negative effects. Helios Spain operating leverage turned against us, fixed costs at underutilized facilities as we see in an average August. The excellent EBIT growth of 11% in Germany was driven by the top line and supported by the operating leverage effect and a soft prior year comp. The 7% EBIT decline in Spain was completely driven by COVID-nineteen given the state of alarm and enforcement of postponement of elective treatments in March. Excluding the estimated COVID effect, Helios Spain could have shown its normal healthy EBIT growth.
Having said that, Q1 is clearly not a good proxy for Q2 and the rest of the year. We expect Q2 to be COVID affected throughout the quarter. Nevertheless, we hope to see the resumption and partial catch up of elective procedures during the course of the rest of the year. In addition, I see it as only fair that we'll be able to agree on an appropriate reimbursement to compensate for the significant impact we have shouldered to ensure contribution to the Spanish national effort to combat this disease. Vamed showed a strong organic sales growth of 10% in Q1.
Both the project and service business contributed to the organic growth. And here, COVID had only a slight negative effect in Q1. However, on the EBIT line, there was a significant negative impact on growth despite being a predominantly March effect. Delays in both running projects but also in project development and order entry here giving us an indication for the months to come. We are anticipating ongoing COVID-nineteen trends, which are likely to very significantly impact Vamed's business in Q2 but also for the whole of 2020.
And as Stephan described earlier, a lot of uncertainties in the upcoming months and quarters. Let's turn to Slide 15 and a closer look at our investments into future growth. All our businesses continue to offer many opportunities for growth, and we will continue to invest to seize those. For example, Fresenius Kabi has made significant future orientated investments in recent years, investments that especially now are crucial. At Kabi, the increased level of automation and the expanded capacities have enabled an increased supply of essential drugs during the pandemic and for the treatment of more patients worldwide.
At Helios, the continuous investments into medical technology, process optimization and the strengthening of our staff are now paying off. Our hospitals remain at the forefront of combating the pandemic, and our doctors and nurses and care personnel are doing an extraordinary job. Due to the physical and practical constraints enforced because of the pandemic, we may see some CapEx projects delayed, for example, from this year into next. Nevertheless, we will return to our historical CapEx to sales ratio of 5% to 6% within the next couple of years. Let's move on to Slide 16 and to cash flow.
A good Q1 took the full year group operating cash flow to €878,000,000 We have seen a broad based positive development across most of the group. And although difficult to estimate, we believe that COVID-nineteen had an insignificant effect on cash flow in Q1. At Fresenius Medical Care, the strong year on year increase was mainly driven by good working capital development, particularly in collections. Kabi posted a strong Q1 cash flow of €174,000,000 With a healthy margin of 9.7%, it took the last twelve months margin to 15.1%, here again on the back of good working capital management. Helios also had a good cash flow in Q1, driven by a strong operating business in Germany and healthy underlying business performance in Spain.
Vamed cash flow is negative, mainly due to continuing phasing effects and some delays in the international project business as well as some working capital buildup. The expected positive cash flow for 2020 is now unlikely to materialize due to the ongoing pressure from COVID-nineteen. So for the group as a whole, Q1 performance took the group last twelve months margin to 13.5%. And if you deduct group CapEx of 7% in the middle column, you'll arrive at a free cash flow margin in the bottom right of 6.4%. And as I said, we do expect some delays in CapEx spending this year, so we will likely see some lower investment spending as we go through the year.
Let's turn to Page 17 for a view on a couple of points related to the group's financial position. With a combination of a globally diversified business in growing noncyclical markets and our proven track record of deleveraging, we feel very comfortable with our long standing net debt to EBITDA target range of three to 3.5x. We continue to be fully committed to that range also during these special times. Our strong financial position is supported by a long term, well balanced and diversified portfolio of debt instruments with maturities out to 2,032. We have a reported net debt position of around €28,600,000,000 of which around onefour are lease liabilities.
The average maturity of our debt book is around three point five years, taking into account the bonds that we issued in April. In the back up of our presentation, we've included a comprehensive overview of the FSE and Fresenius Medical Care maturities given some inaccuracies at some financial data providers. Our long term refinancing needs for 2020 are very limited. For the FSE, we have addressed all long term financing needs for 2020 with $2.07 €50,000,000 bond issuances so far this year, showing our ability to access markets also in difficult times. With some volatility in the commercial paper market, we have also thus shifted our mix towards longer maturities and enhanced our flexibility.
We further demonstrated Fresenius' excellent reputation and strong, reliable banking relationships by adding more than CHF 1,500,000,000.0 of committed bilateral credit lines since the March. We have taken a prudent approach to the current uncertainties and have thus further enhanced our already comfortable financial cushion for the group to more than €5,500,000,000 plus our available cash. With that, we feel well prepared and comfortable. Fresenius is rated investment grade by the three main agencies. In early April, Fitch affirmed our investment grade rating at BBB minus with a stable outlook, and they highlighted our well diversified business model of noncyclical and cash generating health care assets as well as our commitment to the leverage target.
We will continue to actively monitor any potential knock on financial impact of the pandemic, for example, changing currency movements, risk premia for emerging markets and the potential need for balance sheet revaluation, including looking at goodwill. The financial covenants in Fresenius Group's financing instruments are also continuously and closely monitored. We have ample headroom under the only meaningful covenant in our debt portfolio, which is that in the Fresenius credit agreement. In summary, I am very comfortable with our financial cushion, our maturity profile and our financing flexibility. Our position provides a very solid basis to support our successful organic and inorganic growth track record and to serve our patients around the globe.
With that, Stefan and I are very happy to take your questions. Thank you.
We are now starting the question and answer session. Operator will announce your name when it's your turn to ask a question. First question comes from the line of Veronica Duperjova of Goldman Please go ahead.
Good afternoon, Rachel, Stefan. Thank you for taking my questions. I have two, please. The first one is a big picture question on the guidance. Just curious, of course, there's a lot of uncertainties and moving parts when it comes to COVID.
But just curious, does COVID your thoughts on whether COVID completely prevents you from being in the one percent to five percent target range that you have? Or do you see possibility for delivering within that guidance range even with the impact of COVID-nineteen? That's my first question. And then I have a follow-up after that, if that's all right.
Veronika, there are, as we tried to illustrate, lots of puts and takes and very meaningful uncertainties, in particular with regard to unresolved reimbursement issues, in particular at Helios in Spain and also at Vamed. Do I you I think with quite some bigger accentuated completely in your question, and therefore, I want to take that up. And I want to say, no, I cannot completely rule it out. On the other hand, do I think it is likely and has the likelihood increased since we provided that guidance originally February, as you would expect, very obviously not. I think the coming weeks and months are going to be very telling.
We will have much more transparency. And I would like to ask you for your patience until the July, please.
Thank you, Stefan. And then my second question is on the increased demand that you're seeing for Kabi North America. Just curious if you have a sense for what proportion of the growth that you saw in March was stocking versus underlying demand? And maybe give us a little bit of insight into the trends that you've seen in April when it comes to that business?
Veronika, with the attempt being helpful, I still cannot, with any certainty, get you a quantified breakdown. The more qualitative remark that I made earlier that some of this some our supplies clearly went into enhanced safety stock, I think that is as far as I can go. We were seeing clearly a peak demand in the March. I would describe April with all cautiousness as being above what we had expected, but at the same time, below those elevated levels towards the end of Q1. Hence, also my carefully chosen remarks earlier.
Next question is from the line of Tom Jones of Berenberg. Please go ahead.
Good afternoon, Stefan and Rachel. I had two questions. The first, I just wanted to ask a little bit more about the situation in Spain regarding the additional money that's finding its way into the system. I may have misheard you, but I think I heard you say you treated or have currently so far treated about thirteen percent of the hospitalized COVID patients in The U. S.
Sorry, in Spain. It then
Before you go on thirteen, thirteen, not
certainly.
Would it be reasonable to expect at least a decent chunk of 13% of that £10,000,000,000 might find its way to you? Or is that way too an optimistic assumption? And if not, perhaps why not, given if you've treated 13% of the patients, you've probably incurred close to 13% of the costs. So some thoughts there would be helpful. And then a question for Rachel.
On Slide 17, you mentioned under the current covenants under the Fresenius credit agreement that you think you have sufficient headroom. May I be so cheeky as to ask sufficient for what? Sufficient for the situation as it sits today, a situation that resolves in the next month, an extended downturn, another spike in infections later in the year? Just some quantitative sorry, qualitative commentary around that would be helpful, I think.
Tom, with regard to your first question, the long and the short of it is I do not want to speculate. This is a very recent development. I am led to believe that there are also discussions between Madrid and Brussels. The number of 10,000,000,000 has been mentioned. I am working on the assumption that this would not only comprise treatment of COVID patients at hospitals, but also outpatient treatments and other forms of expenses that were incurred by the system.
But I can confirm the number of thirteen percent, I. E, substantially ahead of our market share. And I will not rely on being fairly treated. But very obviously, I think it would be absolutely appropriate.
Tom, thanks for the question on the financial position. Maybe as you asked, maybe a little bit more of a qualitative comment from me. I think we've demonstrated nicely in Q1 that we have a resilient business, a diversified business, a strong business model. We have a proven track record of being able to generate cash very well to delever and to manage our balance sheet position and to have access to the markets. And I think that backdrop is very important to my comments.
Clearly, I can't foresee what I don't know. But at the same time, you can imagine that we regularly and particularly in these times look at a variety of scenarios from moderate to more extreme scenarios. And that includes, in this instance, of course, potential outcomes of the COVID pandemic itself and also further knock on implications from a financial markets and capital markets perspective. And it is within that context that we feel comfortable with absolutely sufficient headroom in terms of the covenant position that we see. I don't see it as an issue in the context of any of those scenarios that we've considered.
Okay. That makes sense. And maybe just a sort of follow-up question on debt more generally. How has your experience over the last couple of months tempered, if at all, your views on using debt as a route of finance? It's been very cheap over the years, but debt has another cost, which a lot of companies are finding out now.
Fresenius has always been a company that's been an active user of the credit markets. Going forward, do you think this perhaps tempers your risk appetite for debt funded transactions a little bit? Or do you think it doesn't really change the overall landscape?
Tom, if I may, I would step in here because I sense that what is in the background to your question, and I just want to make it very clear that issuing equity is not an option that we are contemplating as much as we are growth orientated. I would say just as much I want to refer back to what Rachel was saying about delays, unfortunately, in CapEx spending. I think that goes hand in hand with a debt financing environment that has not been as accommodating as a little while back. And therefore, I would say the two phenomena go hand in hand. I want to use the opportunity to go back to your first question, Tom.
And I just would like to add that the entire focus of the company, be it at Chironsalut in Spain, be it at Helios and also at Fresenius, has been on doing the right thing at a time of crisis. And we were helping patients as best we could regardless of reimbursement and subsequent compensation. We are in this for the long term. We have a commitment. We have a responsibility.
And therefore, I want to ask for your understanding that whilst we recognize that we obviously also have a responsibility to our shareholders, deliberations, conversations, discussions with regard to what may be viewed as a fair treatment are only ever so gently starting now and will again take a back seat if, God forbid, the pandemic returns with more force. Sorry, but I wanted to add that to my earlier statements.
The next question is from Edward de Day of Redburn.
I'm happy to see everything that you're doing, particularly in Germany and Spain, to deal with this pandemic. My questions are on the encouraging performance at Helios. Rachel, you kindly gave a view on the underlying patient growth, as it were, in Q1. I'm sorry if I missed it, but could you give us a guide on the January, February underlying growth at your German hospitals? That would be helpful.
And also, what do you think the most important initiatives were in driving this improvement? And related to that, have you now refilled all the vacant doctor and nurse positions that you were looking to fill?
Ed, your line was a little bit unclear, but I think I got your question. So let me give it a go. Yes, in terms of underlying business performance, both in Germany and in Spain, I did make some commentary in terms of somehow where we would be. Firstly, for Germany, to be very clear, the underlying growth position in January and February was particularly strong in terms of admissions. We were expecting that to some extent.
The calendar effects year over year do support that. But at the same time, I think it is a combination of the persistence in the various areas that we've been working over the last couple of years that are coming together to really show some momentum in that business. The 8% revenue growth that we showed in the first quarter, I think, is a fair representation of how the underlying business looked for Q1 because as we discussed, the law to ease the burden on hospitals did a pretty good job of substituting the lost business that we believe we saw because of the COVID pandemic. So I think that, that is a fair representation in Germany. In Spain, January and February was looking pretty good.
And you're right, I did make some comments that says our estimates of how the underlying business would have looked without those cancellations of elective procedures in March. So I did say we would have been well above the usual organic growth rate we see in Spain of four percent to 6% if we had been able to continue March in the fashion that we had been starting January and February. So again, a very strong underlying position for the business in Spain.
That's great. And just a very quick follow-up, if I could. In terms of your German surgeons, we've seen from all the global health care companies that Germany has clearly prepared or perhaps has handled this pandemic better than pretty much anywhere else. And that surgery volumes have dropped off much less there than elsewhere. In your surgeons, moving away from the government position, how quickly do you think you could see volumes normalize year on year, perhaps by the fourth quarter or earlier?
Ed, it's Stephane. Thank you for your question. I believe earlier is highly unlikely. I believe that we're as I alluded to in my prepared remarks, we're going to see a step by step loosening of the restrictions where parts of the overall installed capacity are going to be freed up for elective surgery, however, subject to increased hygiene requirements. So as a rule of thumb, I would say, when we had a room with two beds so far, I would work on the assumption that we can only occupy that with one patient for meaningfully into the second half of this year.
Again, I would work on the assumption that at least until the end of Q3, the law will offset meaningful parts of that foregone revenue. But if those restrictions remain in place also in the fourth quarter and beyond, we would expect that particular regulation then at least to be considered for an extension.
The next question is from Patrick Wood of Bank of America.
I'll keep it to two. The first, just more short term on the Kabi margin. You obviously mentioned mix within that and China, but also some of the production moving around and changes there. I guess that production size is going to be slightly less of a burden in the next quarter or am I misunderstanding it? So that's the first question.
The second is how do you guys think about sort of a little bit longer term governments putting more money into publicly run health care systems as a political response to what's going on now? And does that make the private providers less competitive? I mean how should we think about that risk?
Patrick, on your first question in terms of what are we expecting at for the coming quarters. Clearly, not to be too boring and reiterate the points we've made before. I mean clearly, the effects on the cost base for Kabi, the challenges in terms of managing the supply chain and managing the limitations within production, etcetera, are obviously dependent in terms of more broadly how the pandemic how it develops and how the restrictions in terms of movement evolve over the coming weeks and months. Clearly, we anticipate costs associated with personal protection equipment for our employees, potentially incremental costs associated with moving goods around and those kind of costs, to some degree, to continue definitely through Q2 and probably into the second half year. I think some other examples that are maybe worth mentioning, we have, of course, seen some FX volatility, as an example, in Q1.
And although these numbers are, of course, constant currency from a translation effect, from a transaction effect, that can sometimes have an effect. And I think that is clearly something that is also a knock on potential variable, which is also relatively difficult to call in this regard. So all in all, if you think about COVID having an Asian effect for Kabi in Q1 with only maybe a few weeks of a European and U. S. Effect in Q1, as we move into Q2, we clearly do see COVID as a European and U.
S. Phenomenon for the whole quarter with then potential easing as we go through into Q3 and Q4. I hope that gives you some kind of idea in terms of the shape of costs but with, of course, the associated uncertainties.
Patrick, with regard to your second question, let me answer with a very general statement again first. The first quarter, also the past month, has been dedicated to combat the pandemic. And I have been quoted elsewhere already that this is not the time to think about market share gains. This is the time to do the right thing. But look, I do appreciate your question.
And in trying to answer, I want to get back to my very closing remark as part of my prepared statements. If there has been a time to demonstrate the strength of a large supranational integrated hospital business than it is now. We have demonstrated our ability to shift resources within individual countries. The very same happened in Spain and in Germany, where we were shifting doctors' capacities from underutilized hospitals to those who had a larger need, but also across country borders. We have demonstrated that given our size, given our global reach, we had a superior access to needed medical equipment, also at a lower cost.
I was very consciously making the comment about the public recognition of Chironsalud's efforts in Spain. And as bad as this pandemic crisis is, I think it has done and it will do us quite some good as far as our reputation is concerned, as far as our visible recognition to the health care system. Maybe as a last remark, with all the money that is being pumped into the economy right now, including but to a very large degree, also excluding health care. There's little doubt in my mind that there is going to be a day of reckoning and a day of refinancing as far as public finances are concerned. When we specifically look at the German hospital environment, as you know, most of the public hospitals are owned by cities, municipalities, districts, who are largely dependent on trade tax income.
And so I would expect that their ability to further subsidize their hospitals at the time of need is going to be pretty meaningfully impaired. And I would like to leave it at this for now. Thank you, Patrick.
The next question is from Lisa Clive of Bernstein.
Two questions. First, on both Helios Germany and Spain, if you could comment separately. But when the situation does normalize, whether that's in a few quarters or frankly one years point from now, how much capacity do you have for catching up on elective procedures that have been deferred? Would doctors and nurses be working in the evenings, on weekends? I know in Spain, sort of fifteen, twenty years ago, they significantly brought down their waiting list on things like hip and knee replacements by paying private facilities to operate on weekends.
I mean that with those sorts of initiatives be in place, I'm just trying to understand how quickly that sort of bolus of untreated patients can be addressed.
Lisa, should I answer that question first?
Yes. And then I'll jump into my second one.
Okay. I would say in what applies to both countries capacity and that I am not extra capacity, I'm sorry, and that I am not working on the assumption that all of the treatments foregone now can be caught up later on. When I was making that conscious remark earlier that we have initiated this research study about the collateral damage, what we're also wondering about is that in quite a few indications that should not be subject to being an elective treatment. For instance, stroke or heart attack, we are recently seeing a meaningfully lower number of incidents. So we need to better understand where those patients are, what has happened to them and what is truly elective and what's going to come back to us later on.
I would work on the assumption that we have some capacity left. I think in earlier quarters, we were making reference to a capacity utilization over the course of a year somewhere between 7080%. But obviously, in peak times, substantially higher. And therefore, the assumption that I am working on, and that is probably more pronounced for Spain than for Germany, is that if everything goes well from here, which is a big if, but if everything went well from here, we may see a larger use of the traditional summer quarter for elective surgeries and that patients and doctors who otherwise would have spent their time on the beach in August may rather stay home and perform surgery. But that, again, is something where we're going to be a lot clearer in the coming weeks and months.
Bear with us.
Okay. That's very helpful. And then I actually have two high level questions. Stephane, you're in a very unique position given that you have one business unit that operates across The States and particularly heavily in the New York and Northeastern area, one of the hardest hit regions in the world. And you also operate the largest German hospital system, which seems to be leading in the lead tables in suppressing the outbreak.
So what are the sort of three or four key items that you think has contributed to the huge delta and the impact of the pandemic between the two ends of the spectrum? We're obviously still early in the evolution of this pandemic, seeing as I think antibody tests in both Germany and New York show that it's only about twenty percent, twenty five percent of people have been exposed. So how do you think this what's been the difference so far? And sort of how do you think we'll where do you think we'll be sort of a year from now? And then a follow-up to that is, if we do have a second wave in September, October sort of that coincides more with the regular flu season.
How can you be prepared for what could be a big squeeze on capacity?
Lisa, this is obviously a loaded question. I'm not sure rather than doing that comparison, I would refer to the differences that we have seen between Italy and Spain on the one hand and Germany on the other. Where very clearly here in Germany, we had the advantage of a time lag, and we could learn quite a lot from the developments in those two countries that were particularly hard hit. I do believe that cultural differences do play and have played a role, where there is hardly a household here in Germany with three generations where I believe in these Roman countries, is rather the norm. A physical distance of 1.5 meters or more is pretty normal for your average German.
It is obviously not for the population in Italy and Spain, and that has all contributed massively. Over and above that, I believe that the German government has been fairly good at going about testing pretty comprehensively and early, taking a cue from the Italian excuse me, from the South Korean example. And lastly, very obviously, we had here in Germany a hospital infrastructure that was well built out to start with, showed its flexibility. I think as soon as we got the alert that we were no longer meant to treat elective surgeries, it took us about four days to pretty much ramp down our hospitals to so that we had all the reserve all the capacity in reserve for corona patients. As far as a potential second wave is concerned, I am working on the assumption that with a much higher level of consciousness around the population, when it comes to hygiene and social distancing in general, the impact should not be as pronounced as that of a first one.
We are, on the other hand, as I alluded to earlier, running our own models with the specific input that we're getting from our own hospital chains, but also partners. We are working on the assumption that the pandemic is going to be with us for all of this year, yes? I don't need to speculate about the second wave, but there is going to be some COVID-nineteen effect, growth of potential reimbursement with us for all of 2020. I have little doubt about that. As far I'm not a doctor, but as far as I personally am concerned, for the first time in a long time, I will go for a regular flu shot this season.
That is not medical advice. That is just describing what I personally am doing. So to be better prepared for the potential onslaught of a regular flu plus COVID. I hope that was mildly
very helpful. And thank you to you and everyone in your organization for their very dedicated work during this tough time.
Thank you.
The next question is from Michael Jungling of Morgan Stanley. Please go ahead.
Michael, you may be on mute.
We will go to the next question. The next question comes from the line of James Van Tempest of Jefferies. I
have two, if I may. First one on Kabi. Stefan, I think you said that you anticipate 2Q performance to be broadly in line with Q1. I'm just curious if April was perhaps below the end of Q1, and I understand that there were some products in safety stock. Which parts of Kabi are giving you confidence on 2Q?
It's more so my understanding there's been less demand from Nutrition on with ventilated patients. And then the second question, just on Helios. I mean if underlying growth was above the 4% to 6% range, I'm assuming that includes Colombia. So please can you give me an indication of what the underlying growth is in Spain?
James, thank you. I am working on the assumption that we are through the worst in China and with that in the Asia Pacific region. So as you can see on our Slide four, that originally red arrow turns to green over the course of the second quarter. I would also work on the assumption that whatever we have seen in terms of extra demand for COVID-nineteen related drugs and devices can gradually be recovered. Also, that is something that we were trying to illustrate on this slide more towards the end of the second quarter, and that includes also blood consumption and plasma collection.
On
Yes. I'll take your So question, on Helios Spain, let me reiterate what I said and maybe try to clarify your question for you. So the traditional organic sales growth range I referred to is for Helios Spain, and it's 4% to 6%. And that is an organic growth. So when I said that the organic growth that we would have reported would have been above that range, that is excluding acquisitions.
And pretty much all of the Colombian acquisitions would not be inorganic growth because they were acquired more latterly in 2019 or 2020. So on top of that organic growth, which would have been above the 4% to 6% range, there is approximately four percentage points of acquisition growth in the reported Kirwan Salud number. I hope that helps you with the maths on that growth rate.
The
next question is from Michael Jungling of Morgan Stanley.
Yes, hi. Thank you. Have myself on mute. I have three questions, please. Firstly, on Helios Spain.
Can you comment on what COVID-nineteen means with respect to organic volume growth in the second quarter? And whether you intend to make some sort of accrual for the pending reimbursement benefits that you may get or whether you intend to defer that when these are actually made later on in the year? And question number two is on Akorn. What are you intending to achieve with respect to damages here? Because if you look at the balance sheet of Akorn, there is not much there.
And only in the early April, they defaulted on their term loan agreement. What is the point for shareholders here why you would pursue legal actions against Akorn? And then question number three is, in Helios Germany, what proportion of your bed days do you think in Q2 would be subject to the €560 of reimbursement the government is paying you for keeping beds empty for COVID-nineteen patients?
Michael, I will start and then hand over to Stephane. So your question in terms of Helios Spain, I think it is very difficult for us to estimate an organic volume growth of patients in our hospitals in Q2. Firstly, clearly, we have to look at the number of COVID patients that we currently see and we might see for the rest of the quarter. But much more trickily, as Stephane pointed out, the clarity of the path back to elective surgery activities is not yet clear in terms of timing or regulation around that and whether that will be different by region. So it is, I'm afraid, not possible right now for us to give you an estimate of that given those uncertainties.
In terms of potential reimbursement, clearly, there are different types of potential reimbursement that we could see. Specifically for treating COVID patients, we will make, I would say, reasonable estimates included within our numbers in accordance with the IFRS accounting standards because clearly, where we have treated patients and we are paid on a per activity basis, we are anticipating the appropriate reimbursement even if the exact value of that reimbursement is not in every region yet clear. A broader umbrella of a broader reimbursement for spare capacity or incremental costs is something that we would have to look at on a case by case basis given the clarity of such legislation or such funding programs at the appropriate time. I hope that's helpful for you, and I would hand back to Stefan for the Aecon question.
Michael, with regards to Aecon, what we're looking for is, at the very least, a moral victory. And that may not be that important for you or for our shareholders. For us, it is. And you will have seen that we have asked for damages in the low triple digit amount. Very obviously, your observation is correct.
Acorn has filed publicly that they may seek Chapter 11 protection, and our claim would be pretty behind in the overall chain. But I also, beyond the moral obligation, I do feel beyond the moral victory point, I do feel that I have an obligation vis a vis all our stakeholders to seek compensation for what has done. If we win in court and then may find that this is a Paris victory, so be it. For the avoidance of doubt, if we won in court and if there was an award, this would, just as the expenses in 2017 and 2018, be treated below the line and well outside our guidance. As far as the compensation for the health capacity in our German hospitals, Michael, it is very difficult to say because we're now looking at gradual step ups of releasing those capacity reserves that we were asked to hold.
At the risk of misinterpreting your question, but still for the avoidance of doubt, we will not turn down a single patient who wishes to be treated at a Helios hospital just because we may find out later on that we could have made more money by leaving the bed free. That is not what we at Fresenius are about.
Great. And a brief question about the ANDA pipeline for The U. S. Do you believe that the COVID-nineteen pandemic will cause several quarters of delayed ANDA approvals? Is that something that you've been able to evaluate with the FDA?
Michael, no. And frankly, I would be surprised. I was making a conscious remark with regard to the immunosuppressive effects of our biosimilars. And therefore, clinical research for the approval there may be delayed for the duration of COVID-nineteen. I have not heard from the FDA that they are looking at extended working loops.
Great. Thank you.
The next question is from Hassan Albaqeel of Barclays.
Firstly, what was the magnitude of the impact coming out of Q1 at Clear Ansalud or the run rate here? And how should we think about margins in Q2? Secondly, could you talk about the Kabi business in Asia Pac and how this recovered in April? Do you expect to grow this business in Q2 and to recover much of the lost margin that was lost in Q1? And then finally, could you talk about the kind of elective procedures or specialties you would expect to be unwound first?
And which types of specialties that may take longer to come back? And how this compares to your procedural mix?
Joaquin, it's Rachel. Trying to understand and address your question in terms of a run rate for Kiel and Salud. I mean I think Stephane made reference to it, and I did to some extent already. We clearly expect Q2 to be a full COVID quarter, if you like, in Spain, whereas we only saw two, two point five weeks or so within March. And we, if you like, see that as more akin to a quarter that has months that look more like an August than a standard month.
So in terms of a shape and a profile, we would anticipate a Q2 that is, if we see the expected normalization later in the year or at least a partial recovery, is the weakest quarter of the year and has a run rate, if you like, that is somehow reflecting significantly lower activity levels, not totally dissimilar to what you might anticipate from an extrapolated August. I hope that gives you some kind of indication without clearly being able to be specific given the uncertainties we've described in terms of what the ramp up of potential elective procedures in Spain could look like and how the reimbursement environment will finally pan out. Stephane, I'll hand back to you for a comment on Kabi.
Hafman, I appreciate you need to ask the question, but please forgive me. I really want to stay away from a detailed guidance per quarter, in this particular case, even on an individual country. What we're trying to illustrate on this Page four and what we have also talked about is a gradual normalization. As far as manufacturing is concerned, we are back to normal. As far as moving within the country, we are close to being back to normal.
Sales rep activity is not quite back to normal, but gradually getting there. The experience from the SARS pandemic tells us that it takes a while for the average Chinese patient to regain confidence to visit a hospital for a truly elective surgery. And therefore, I would work on the assumption that Q2 is still going to be impacted, but very obviously substantially less than Q1. That is as far as I would like to go on this one. As far as your question on indications is concerned for our German hospital business, I would say that there are a few indications where there is a particular small zone between what is elective and what is medically required.
And there are certain parts of and those where it is particularly tricky. I would then also expect to return to normal first. And I would say that these are, in particular, certain parts of oncology, but also cardiology. I would also expect that maybe with a bit of a time lag, we're going to see a pickup in orthopedics. As you know, we are a fully fledged hospital operator across Germany.
I think the only indication that we're not offering is transplantation, which is truly a niche. And therefore, I would expect that we proportionately participate in any recovery. The
next question is from Sebastian Walker of UBS.
I've got one short term and one longer term question on Helios Germany. So we're thinking about this government support. Does it come with any concessions on your side? And then secondly, just to confirm, there was a benefit I haven't understood correctly, there was a benefit which was booked in the first quarter to help offset the lower volumes. I'll then ask my second one.
On the first one, we are not seeing any strings attached. The way that we and for the others are viewing this is that the government has asked us to reserve capacity and that we are being compensated for that. So when you're probably alluding to dividend payments or so, I do not see any impact on this one.
Sebastian, on your second question, yes, you are correct. As I alluded to in my comments earlier, we obviously stopped the elective procedures as requested in Germany, and we have been compensated through that law to release the burden on us, and that has mostly compensated for the revenues that we have lost. And that has been booked in both revenue and EBIT in the first quarter. And hence, why I described that I see the nine sorry, the 8% revenue growth in Germany and the 11% EBIT growth that we have as a representative figure is because it includes the relevant compensation from the laws that were applicable for those weeks in March.
Got it.
Very clear. And then the longer term question was beyond immediate COVID concerns, how do you think this changes your German hospital business structurally in terms of the level of investment required, the protocols that you have to take in between surgeries? And therefore, what kind of profitability can be achieved in longer term?
Sebastian, that is something that we started to analyze, but I'm asking for your understanding that this analysis is by no means complete. I would also go back to my answer to, I believe, it was Patrick's question about the implications, potential implications on the hospital structure. And that, I believe, should and would have to be seen as an overlay. From today's vantage point, I would work on the assumption that there are no structural impacts on our margin profile compared to the situation earlier this year. If there were, then I would also work on the assumption that we will be in best position to offset them and that, therefore, we may find an opportunity to further enhance our profitability by driving our market share.
We
have time for one more question. The last question is from Fako Friedrichs of Deutsche Bank.
Two questions, please. Firstly, on Helios. Did I understand it correctly that you don't really expect a negative margin effect in Germany in Q2, thanks to the government reimbursement? And then secondly, the pandemic has obviously shown that many European countries have had a few problems with their hospital infrastructure. Has that shied you somewhat away from potentially entering a third hospital market in Europe over the next years?
Or has it done quite the opposite and you now see an even bigger potential for meaningful expansion in certain countries?
So I'll take your first question very briefly. I mean I think we've been quite clear, and I would reiterate the point, that we see that the law that is releasing the burden on hospitals in Germany does a good job to address the situation that we see with the assumptions that we have, but nevertheless, does not necessarily fully compensate us for how our business may have developed. And clearly, there are some significant uncertainties in that based on all of the discussions that we've had today in terms of the potential development of the pandemic, the rules and regulations around elective surgeries and how patients come back to the hospitals. But net net, I would say that we still do anticipate that in some scenarios with some assumptions, there could be some negative impact despite the law to compensate us being in place. Exactly what that may look like in terms of an estimate on margin, I think you can appreciate it's too difficult to say.
But nevertheless, as we've said before, we don't think it is a very significant impact overall for the full year if our assumptions that we've made ring true.
Falco, I appreciate your second question, but please bear in mind, over the last weeks and months, we have kept our head down and have been truly in operating mode, trying to bake ends meet for our staff and for our patients. And therefore, further strategic expansion has somewhat taken a back seat. And it will continue to do so at least in the coming months. Having said that, I also want to refer back to what I was saying as part of my prepared remarks, the very closing remark. If there was a situation to demonstrate the extra capabilities, the extra resources of an international integrated group than it is now.
And we will continue to play to our strength. So the long and the short of it, it has this is not something that I have spent a lot of time on recently, but that should also tell you that what has been going on recently has not and will not deter me from doing the right thing for our hospital business. Thank you. To all the participants on this call, Thank you very much for bearing with us. I hope this was instructive, by no means a normal quarter, and therefore, also by no means a normal commentary on a quarter.
Bear with us. We will try to make this work over the course of Q2, in particular, but also thereafter. We hope to shed some additional transparency on our financial situation as part of our Q2 results. We will see some of you, if only virtually, between now and then. And first and foremost, stay safe, stay healthy.
Talk to you soon. Thank you.
We want to thank Husanias and all the participants for taking part on this conference call.
Goodbye.