avatar Fresenius HemoCare Netherlands B.V. Manufacturing
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    Media Hub Fresenius Strategy Group in figures Key figures of the business segments Targets, results, and outlook Table of contents ANNUAL REPORT 2019


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    Front page Media Hub Fresenius Strategy Group in figures Key figures of the business segments Targets, results, and outlook Table of contents Fresenius is a global health care Group providing products and services for dialysis, hospitals, and outpatient medical care. In addition, Fresenius focuses on hospital opera- tions. We also manage projects and provide services for hospitals and other health care facilities worldwide. More than 290,000 employees have dedicated themselves to the service of health in over 100 countries worldwide. Fresenius | Annual Report 2019 Play Image Film 2


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    Front page Media Hub Fresenius Strategy Group in figures Key figures of the business segments Targets, results, and outlook Table of contents FRESENIUS STRATEGY Improve Drive Innovation Quality Employees Profitability Internationalization P R E CO M E T E N CI E CO S FOCUS Hospital Dialysis supplies & products & services services Hospital MISSION Hospital projects & operations services Better medicine and health care services for ever more people Fresenius | Annual Report 2019 PURPOSE Forward thinking health care to improve the lives of patients 3


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    Front page Media Hub Fresenius Strategy Group in figures Key figures of the business segments Targets, results, and outlook Table of contents GROUP IN FIGURES € in millions 2019 1 2018 2017 2016 2015 Sales and Earnings Sales 35,524 33,530 33,886 29,471 27,995 EBITDA 2 6,170 5,991 6,267 5,517 5,125 EBIT 2 4,599 4,561 4,830 4,302 4,001 Net income 3 1,915 1,871 1,816 1,560 1,436 Depreciation and amortization 1,571 1,430 1,437 1,215 1,124 Earnings per share in € 3 3.44 3.37 3.28 2.85 2.64 Cash flow and Balance sheet Operating cash flow 3,514 3,742 3,937 3,585 3,349 Operating cash flow in % of sales 9.9% 11.2% 11.6% 12.2% 12.0% Total assets 61,237 56,703 53,133 46,697 43,233 Non-current assets 45,973 41,913 40,529 34,953 32,800 Equity 4 26,836 25,008 21,720 20,849 18,453 Equity ratio 4 44% 44% 41% 45% 43% Net debt 19,579 16,275 17,406 13,201 13,725 Net debt / EBITDA 5, 6 3.14 2.71 2.84 2.33 2.65 Investments 7 5,086 3,249 8,680 2,559 2,051 Profitability EBIT margin 2 12.9% 13.6% 14.3% 14.6% 14.3% Return on equity after taxes (ROE) 3 11.3% 12.1% 13.3% 12.3% 12.9% Return on operating assets (ROOA) 5 8.2% 9.0% 9.4% 10.0% 10.2% Return on invested capital (ROIC) 5 7.4% 8.3% 8.0% 8.5% 8.4% Dividend per share in € 0.84 8 0.80 0.75 0.62 0.55 Employees (December 31) 294,134 276,750 273,249 232,873 222,305 1 Adjusted for IFRS 16 effect Fresenius | Annual Report 2019 2 Before special items 3 Net income attributable to shareholders of Fresenius SE & Co. KGaA; before special items 4 Including noncontrolling interest 5 Before special items; 2016, 2017, 2018, 2019 pro forma acquisitions 6 At LTM average exchange rates for both net debt and EBITDA 7 Investments in property, plant and equipment, and intangible assets, acquisitions 8 Proposal For a detailed overview of special items and adjustments please see the reconciliation tables on pages 56 to 61. Here you can find our interactive tool 4


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    Front page Media Hub Fresenius Strategy Group in figures Key figures of the business segments Targets, results, and outlook Table of contents KEY FIGURES OF THE BUSINESS SEGMENTS FRESENIUS MEDICAL CARE FRESENIUS KABI HEALTH CARE SERVICES (DIALYSIS SERVICES IV DRUGS, BIOSIMILARS, AND CARE COORDINATION), AND HEALTH CARE CLINICAL NUTRITION, INFUSION THERAPY, AND Seite PRODUCTS 65 Zahlen in Grafik korrigiert, Grafik MEDICAL DEVICES / TRANSFUSION TECHNOLOGY muss noch angepasst werden 2019 2018 2019 2018 € in millions € in millions Change € in millions € in millions Change Sales 17,329 3 16,026 3 8% 6,919 6,544 6% EBIT 2,296 3 2,292 3 0% 1,200 1, 2 1,139 2 5% Net income 4 1,369 3 1,341 3 2% 802 1, 2 742 2 8% Operating cash flow 1,947 1 2,062 - 6% 968 1 1,040 - 7% Capital expenditure / acquisitions 3,422 2,014 70% 812 615 32% R & D expenses 168 114 47% 507 2 534 2 - 5% Employees (December 31) 128,300 120,328 7% 39,627 37,843 5% FRESENIUS HELIOS FRESENIUS VAMED HOSPITAL OPERATION PROJECTS AND SERVICES FOR HOSPITALS AND OTHER HEALTH CARE FACILITIES 2019 2018 2019 2018 € in millions € in millions Change € in millions € in millions Change Sales 9,234 8,993 3% 2,206 1,688 31% EBIT 1,015 1 1,052 - 4% 131 1 110 19% Fresenius | Annual Report 2019 Net income 4 670 1 686 - 2% 85 1 72 18% Operating cash flow 683 1 554 23% - 46 1 106 - 143% Capital expenditure / acquisitions 693 501 38% 85 540 - 84% Order intake n/a n/a 1,314 1,227 7% Employees (December 31) 106,377 100,144 6% 18,592 17,299 7% 1 Adjusted for IFRS 16 effect 2 Before special items 3 On an adjusted basis 4 Net income attributable to the parent company of the respective business segments For a detailed overview of special items and adjustments please see the reconciliation tables on pages 56 to 61. 5


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    Front page Media Hub Fresenius Strategy Group in figures Key figures of the business segments Targets, results, and outlook Table of contents TARGETS, RESULTS, AND OUTLOOK TARGETS 2019 1 RESULTS 2019 OUTLOOK 2020 7 Fresenius Group Sales (growth, in constant currency) 4% – 7% 3 6% 3 4% – 7% Net income 2 (growth, in constant currency) ~ 0% 4 0% 4 1% – 5% Investments in property, plant and equipment ~ 7% of sales 5 7% of sales 5 6% – 7% of sales Financing Cash flow margin 10% – 12% 5 9.9% 5 12% – 14% Around the upper-end of the Towards the top-end of the original self-imposed target self-imposed target corridor of 2.5 x – 3.0 x corridor of 3.0 – 3.5 x excluding further potential excluding further potential Net debt / EBITDA acquisitions 6 3.14 5 acquisitions 8 Fresenius | Annual Report 2019 1 Updated July 2019 2 Net income attributable to shareholders of Fresenius SE & Co. KGaA 3 On a comparable basis: 2018 adjusted for divestitures of Care Coordination activities at FMC; 2019 adjusted for IFRS 16 effect 4 On a comparable basis: 2018 before special items and adjusted for divestitures of Care Coordination activities at FMC; 2019 before special items (transaction-related expenses, gain related to divestitures of Care Coordination activities at FMC, expenses associated with the cost optimization program at FMC, revaluation of contingent biosimilar purchase price liabilities), including NxStage operations, adjusted for IFRS 16 effect 5 Adjusted for IFRS 16 effect 6 Calculated at annual average exchange rates, for both net debt and EBITDA; including NxStage; excluding IFRS 16 effect; excluding further potential acquisitions 7 Before special items; including IFRS 16 including, NxStage operations 8 Calculated at expected annual average exchange rates, for both net debt and EBITDA; including contributions from signed, but not yet closed acquisitions; including IFRS 16 effects, excluding further potential acquisitions 6


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    Front page Media Hub Fresenius Strategy Group in figures Key figures of the business segments Targets, results, and outlook Table of contents TARGETS, RESULTS, AND OUTLOOK TARGETS 2019 1 RESULTS 2019 1 OUTLOOK 2020 4, 6 Business segments Fresenius Medical Care Sales Mid-to-high single-digit (growth, in constant currency) 3% – 7% 2, 5 5% 2, 5 %-range 7 Net income 3 on comparable basis 4 Mid-to-high single-digit (growth, in constant currency) - 2% – + 2% 2, 5 - 2% 2, 5 %-range 7 Fresenius Kabi Sales (growth, organic) 3% – 6% 4% 3% – 6% EBIT 4 (growth, in constant currency) 3% – 6% 3% - 4% – 0% Fresenius Helios Sales (growth, organic) 2% – 5% 5% 3% – 6% EBIT (growth) - 5% – - 2 % - 4% 3% – 7 % 8 Fresenius Vamed Sales (growth, organic) ~ 10% 16% 4% – 7 % EBIT (growth) 15% – 20% 19% 5% – 9% 8 Fresenius | Annual Report 2019 1 Adjusted for IFRS 16 effects 2 2018: adjusted for divestitures of Care Coordination activities 3 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA 4 Before special items 5 Excluding NxStage operations 6 Including IFRS 16 7 Including NxStage operations 8 In constant currency 7


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents TABLE OF CONTENTS 3 Fresenius Strategy 33 Group Management Report 70 Overall assessment of the 90 Separate 175 Notes 4 Group in figures 34 Fundamental information about business situation Group Non-Financial Report 176 General notes 5 Key figures of the the Group 70 Outlook 91 Our responsibility 195 Notes on the consolidated business segments 34 The Group’s business model 70 General and mid-term 94 Serving the well-being statement of income 6 Targets, results, and outlook 37 Goals and strategies outlook of the patient 199 Notes on the consolidated 38 Our core competencies 71 Future markets 109 Doing the right thing statement of financial 39 Corporate performance 72 Health care sector and 114 Being an attractive employer position 9 To our shareholders criteria markets 125 Protecting nature as the basis 225 Other notes 10 Letter to our shareholders 40 Research and development 74 Group sales and earnings for life 257 Notes in accordance with the 16 Management Board 43 Employees 75 Sales and earnings by 130 Caring for human rights German Commercial Code 17 Report of the Supervisory Board 45 Changes to the Management business segment 133 Responsibility in the supply chain 22 Business segments Board 75 Financing 134 Limited assurance report of the 22 Fresenius Medical Care 45 Procurement 76 Investments independent auditor 260 Auditor’s report 24 Fresenius Kabi 45 Quality management 76 Dividend 26 Fresenius Helios 45 Responsibility, environmental 76 Opportunities and risk report 28 Fresenius Vamed management, sustainability 76 Opportunities management 136 Corporate Governance 266 Further information 30 Fresenius share 46 Economic report 76 Risk management 137 Corporate Governance Declaration 267 Boards 46 Health care industry 78 Risk areas and Report 267 Supervisory Board 50 Overall business development 88 Assessment of overall risk 148 Further information on Fresenius SE & Co. KGaA 52 Results of operations, financial Corporate Governance 269 Management Board position, assets and liabilities Fresenius Management SE 164 Consolidated financial statements 270 Supervisory Board 165 Consolidated statement of income Fresenius Management SE Fresenius | Annual Report 2019 166 Consolidated statement of 271 Glossary comprehensive income 275 Imprint 167 Consolidated statement 276 Financial Calendar of financial position 276 Fresenius share / ADR 168 Consolidated statement 276 Contact of cash flows 170 Consolidated statement of changes in equity 172 Consolidated segment reporting 8


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments | Fresenius share TO OUR SHAREHOLDERS 10 Letter to our shareholders 16 Management Board 17 Report of the Supervisory Board 22 Business segments 22 Fresenius Medical Care 24 Fresenius Kabi 26 Fresenius Helios 28 Fresenius Vamed 30 Fresenius share Fresenius | Annual Report 2019 1 9


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments | Fresenius share LETTER TO OUR SHAREHOLDERS Play video statement Fresenius | Annual Report 2019 Stephan Sturm Chairman of the Management Board 10


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments | Fresenius share Media Hub Sustainability is a term that shapes many current debates like It is a huge responsibility. One that we can only meet if our perhaps no other. The medium- and long-term consequences success remains sustainable – not just today and tomorrow, of actions, whether those of individuals or organizations, are but also the day after tomorrow. For this reason, in all our being examined ever more closely. Short-term effects and activities and decisions we keep the future firmly in view. This success are becoming less important. More importance is was the case in the year we are reporting on today – 2019 being given to the long-term impact of decisions and acts – was a year of investments! We further increased our already on people, on the economy, and on the planet. significant investments in research and development, and in continuing to develop our business. Our goal is to prepare Sustainability is also a term that describes Fresenius’ approach Fresenius even better for the coming decade – in other and actions like perhaps no other. And not just recently. Sus- words, to remain sustainably successful. tainability is a defining characteristic of our company and has been for more than 100 years. Short-term success is very welcome when it happens, naturally, but for us it is not the Sustainability is deeply embedded in Fresenius‘ thoughts and actions. decisive thing. For us, what is decisive is medium- and long- » Sustainability is also a term This has been the case for more than 100 years, and this will continue. term success. In short: sustainable success. This is what has that describes Fresenius’ made us the globally active healthcare group that we are today. approach and actions like perhaps no other. And not also pay off financially, which means Fresenius will continue Sustainability is decisive in what we do: We help sick people, to be an attractive investment in the future. 2019 was not just and we help healthy people to stay healthy. We are not a just recently. « a year of investments, it was also a year of continued growth. startup, and we do not need to follow trends and fashions. Our task is different. We need to offer healthcare that is high We set new records in sales and earnings – for the 16th con- quality, yet affordable. Healthcare that is reliable over the long To achieve this, we are willing to accept a little less financial secutive year! Even though, due to our increased invest- Fresenius | Annual Report 2019 term, and yet is constantly analyzed and further developed success in the short term. Investments cost money, and when ments, our net income rose by only one-half percent. In con- to make it even better. As expressed in just a few words in our we invest more than usual it temporarily impacts our earn- trast, we were able to increase our sales – as expected, and motto: Forward-thinking healthcare. Millions of patients ings. But we are securing our continued growth and our future. also in constant currency – by 6 percent. The number of our around the world rely on us. Success will be measured, above all, in medical terms: Even greater numbers of patients, even better treatments, and even more forward-thinking healthcare. Success will, of course, 11


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments | Fresenius share Media Hub employees – the basis of our success – increased to more than also in other parts of the world. The integration is well 294,000. We are proposing the 27th consecutive increase in underway, and we are investing heavily in the infrastructure our dividend. That is also an expression of sustainability and needed to make home dialysis widely available. In addition, our long-term orientation. we launched the 4008A – a new dialysis machine developed especially for emerging markets – in more countries, includ- Those are the numbers. What we achieved in 2019 in con- ing China. In this way, in these countries, we are significantly crete terms, I would like to tell you about now, with the help improving chronic kidney disease patients’ access to life- of a few examples: saving dialysis. In Schweinfurt, Germany, our most important dialysis machine plant celebrated its 40th anniversary – every At Fresenius Medical Care, we closed the acquisition of second dialysis machine used worldwide comes from this NxStage. This was an important step in strengthening our facility! At the same time, we continued to expand our inter- position in home dialysis – a form of therapy that will grow national network of dialysis clinics, which now numbers steadily in importance, especially in the United States but almost 4,000 locations worldwide. Fresenius Kabi opened a new research and development center for biosimilars in Eysins, in the Swiss canton of Vaud. This strengthens Fresenius Kabi’s capability to develop new biosimilars, particularly Fresenius Kabi, meanwhile, put our first biosimilar on the in the areas of autoimmune diseases and oncology. market – Idacio, an imitation drug of the anti-inflammatory Humira for treating rheumatoid arthritis. In Eysins, Switzer- land, we opened a new research and development center for biosimilars. This is a new therapy area for which we have We also invested heavily in the expansion and modernization big expectations, and so far, there is every indication they will of our production facilities. The focus of this was the U.S., be fulfilled. but we also comprehensively expanded our clinical nutrition plant in Wuxi, China, for example, and will continue this in 2020. In the U.S. we faced greater pressure on prices and even Fresenius | Annual Report 2019 stronger competition. This resulted in a small sales decline in this market – one of Fresenius Kabi’s most important – that Fresenius Medical Care closed in 2019 the acquisition of NxStage Medical, Inc. – an important step in strengthening our position in home dialysis. 12


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments | Fresenius share Media Hub our outstanding growth in the emerging markets could not patients comprehensive check-ups from a single source. fully offset. We are working intensively to create the basis for Long waiting times are avoided and, if medical treatment is new growth in the U.S. We will also continue to resolutely required, the patient has direct access to the Helios health- pursue our excellent growth opportunities in other markets. care network. Additionally, we pushed ahead with digitaliza- tion at our hospitals, and launched the Helios Patients Portal. This online platform offers the patient a range of functions, from making appointments online to accessing test results. Not » Additionally, we pushed ahead to be overlooked, we surpassed our goal of recruiting 1,000 with digitalization at our hos- nursing and care staff: We are delighted to welcome 1,300 new and dedicated colleagues to our company. pitals, and launched the Helios Patients Portal. « As expected, growth at Quirónsalud in Spain was strong again. We acquired another hospital, this one in Albacete, in the In Madrid, Quirónsalud completed work on Spain’s first proton beam the- southeast of the country. This is a superb addition to our exist- rapy center, investing about €40 million. The center‘s opening is planned for this year. ing network in the region. In Madrid, we completed work At Fresenius Helios, it was again a mixed picture last year. on the country’s first proton beam therapy center on schedule. In Germany, we continued to feel the impact of regulatory Proton beam therapy is a very advanced and much less inva- changes and the trend toward more outpatient care. At the sive form of cancer treatment. Trial operation of the center is At Fresenius Vamed, as well, 2019 was marked by excellent same time, measures we have implemented are beginning to now underway, and we want to officially open it this year. development. We successfully completed the integration of the have an effect. We have successfully started new business rehabilitation facilities transferred from Helios. Vamed is models, for example in occupational medicine. We have also We also substantially increased our presence in Colombia now one of the leading providers of post-acute care in Europe. significantly expanded our preventive medicine offering and with several acquisitions. Quirónsalud now operates five hos- We largely completed the modernization of University Hos- opened new Helios Prevention Centers in several major cities, pitals in the two major cities of Cali and Medellin. The acqui- pital Schleswig-Holstein (UKSH) with the opening of new main Fresenius | Annual Report 2019 including Berlin and Munich. At these centers we offer sition of CediMed gave us the country’s leading provider of clinic buildings in the German cities of Kiel and Lübeck. This medical diagnostic services. And in February of this year project encompassed renovations and new construction at we reached agreement on another acquisition, in the capital, Bogota. 13


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments | Fresenius share Media Hub their total of more than 750 workplaces, to our existing facili- This future continues to look good. We are needed – more ties, we have created a modern and interactive place to work. than ever! Demand for high-quality medicine continues to grow The new buildings also made it possible for us to end leasing around the world. We are in an excellent position to meet arrangements on various office spaces dispersed around the this demand and thereby remain successful. In 2020, we expect area. In my letter last year, I talked about our goal of increas- sales to increase by 4 to 7 percent. Net income should rise ing cooperation within our company. Here is one of many by 1 to 5 percent, an increase much more dynamic than was examples of how this is being realized. the case in the investment year 2019. We are, then, expect- ing another record year. » 2019 was another successful year for Fresenius. We continued Fresenius Vamed successfully completed the integration of the reha- bilitation facilities transferred from Fresenius Helios. This strengthened to grow, and we set important Fresenius Vamed’s position as one of Europe’s leading providers of post- acute care. markers for the future. « both UKSH locations. With a total cost of €1.7 billion, it is the In summary, 2019 was another successful year for Fresenius. largest public-private partnership project in the field of Euro- We continued to grow, and we set important markers for pean healthcare. Additional important projects are underway, the future. But 2019 also showed us that to remain success- or have been agreed, on nearly every continent. ful, we will have to do even more. Competition has become more intense; price pressures have increased. Regulation has The new Fresenius Campus in Bad Homburg was completed in 2019. Fresenius | Annual Report 2019 At our corporate headquarters in Bad Homburg, we cele- increased in some sectors. This means that we must do more Fresenius has invested a total of about €7 0 million in the expansion brated a milestone with the completion of our new Fresenius to be, and to remain, successful. For example, we must, as of the company’s headquarters. Campus. By connecting our two new office buildings, with described above, invest more. We did a lot this past year, and we achieved a lot. We will continue to emphasize this approach. At the same time, we must control our costs even more than before. This is the only way we will be able to retain the finan- cial maneuvering room to invest – investments for our future. 14


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments | Fresenius share Media Hub What the impact of the global spread of the coronavirus will it is sensible to expand the Fresenius Kabi portfolio. Entry To make this even clearer and more transparent, we will set be on these goals is something I cannot determine at this into a third hospital market in Europe is another interesting up this year a sustainability council at the corporate level, point. What I can say is this: We are doing everything we can option. If good opportunities arise, we will seize them. We which will report directly to me. This body will develop sus- to protect our employees, maintain production and deliver- are not dependent on acquisitions. We are capable of healthy tainability goals that we will present to you at the Annual ies, and ensure that our patients continue to receive the best and sustainable growth on our own power. And I am very General Meeting in May 2021. possible care. In this respect, we have a special responsibility confident that we will achieve this. because we are a healthcare company. And we must meet The guiding principle in all that we do is and remains the this responsibility. So far, we have had good success in doing well-being of our patients. We are committed to them, their so, within the framework of constantly changing eventuali- health and their lives. If we keep this goal in mind, not only ties. Accordingly, there is no reason currently for us to adjust » The guiding principle in all will our patients be well, but it will also ensure continued our 2020 guidance. that we do is and remains the success for Fresenius. We also confirm our medium-term outlook. Average annual well-being of our patients. « sales through 2023 should increase by 4 to 7 percent and net Yours sincerely, income by 5 to 9 percent. This means we expect another substantial growth acceleration through 2023. Sustainability is deeply embedded in our thoughts and actions, and it is there for all our shareholders to see. This has been As in past years, this forecast is wholly based on expectations the case for more than 100 years, and this will continue. Sus- for organic growth. When the small-to-medium acquisitions tainability applies to all levels of endeavor: Our pursuit of Stephan Sturm that we regularly pursue are included, both measures should ever better medicine for ever more people, our efforts to be a Chairman of the Management Board be about one percentage point higher. We also continue to reliable partner for the global health system, and our com- look out for larger acquisitions. For example, we still believe mitment to being a good employer for almost 300,000 people. To our continuing success and a growth strategy oriented Fresenius | Annual Report 2019 to the long term. And, of course, we underscore our commit- ment to the best possible use of this planet’s resources. 15


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders Management Board | Report of the Supervisory Board | Business segments | Fresenius share MANAGEMENT BOARD Fresenius | Annual Report 2019 Dr. Ernst Wastler Dr. Francesco De Meo Mats Henriksson Stephan Sturm Rachel Empey Dr. Jürgen Götz Rice Powell Business Segment Business Segment Business Segment Chairman of the Chief Financial Chief Legal and Business Segment Fresenius Vamed Fresenius Helios Fresenius Kabi Management Board Officer Compliance Officer, Fresenius Medical Care and Labor Relations 16 Director


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board Report of the Supervisory Board | Business segments | Fresenius share REPORT OF THE SUPERVISORY BOARD Fresenius | Annual Report 2019 Dr. Gerd Krick Chairman 17


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board Report of the Supervisory Board | Business segments | Fresenius share Media Hub REPORT OF THE SUPERVISORY BOARD and in its plenary meetings. The Management Board of the Board and the Audit Committee of Fresenius SE & Co. KGaA. In 2019, the Supervisory Board of Fresenius SE & Co. KGaA general partner discussed the Company’s strategic direction Thus, every member of the Supervisory Board of Fresenius fulfilled its obligations in accordance with the provisions of with the Supervisory Board. The Supervisory Board passed SE & Co. KGaA attended more than half of the Supervisory the law, the articles of association, and the rules of proce- resolutions within its legal and company statutory authority. Board Meetings and meetings of the committees to which dure. It regularly advised the Management Board of the gen- The Supervisory Board of Fresenius SE & Co. KGaA con- they belong in 2019. eral partner, Fresenius Management SE, regarding the man- vened for four regular meetings in 2019 – in March, May, Octo- Participation in meetings of the Supervisory Board and agement of the Company and supervised the management in ber, and December. Before the meetings, the Management the Audit Committee is reported individually for each member accordance with its Supervisory Board responsibilities. Board of the general partner sent detailed reports and com- on the Company’s website. Information on this can be found prehensive approval documents to the members of the under “Supervisory Board”. COOPERATION BETWEEN THE MANAGEMENT Supervisory Board. At the meetings, the Supervisory Board AND THE SUPERVISORY BOARD discussed in detail the sales and earnings growth, based MAIN FOCUS OF THE SUPERVISORY BOARD’S Carrying out its monitoring and advisory activities, the Super- on the reports provided by the general partner’s Management ACTIVITIES visory Board was regularly kept informed by the management Board. They also discussed significant company decisions. In 2019, the Supervisory Board mostly focused its monitoring in a timely and comprehensive oral and written manner about, All matters requiring Supervisory Board approval were and consulting activities on business operations and invest- among other things: submitted with sufficient time for proper scrutiny. After review- ments carried out by the business segments. The Supervisory ing the related approval documents and following detailed Board thoroughly reviewed and discussed all business activ- ▶ all important matters relating to business policy, consultation with the Management Board of the general part- ities of significance to the Company with the Management ▶ the course of business, ner, the Supervisory Board approved all matters submitted Board of the general partner. The Supervisory Board also ▶ profitability, to it. dealt with the following items: ▶ the situation of the Company and of the Group, The Supervisory Board was also informed about any ▶ corporate strategy and planning, important business events occurring between meetings. In ▶ 2020 budget ▶ the risk situation, addition, the Chairman of the general partner’s Management ▶ medium-term planning of the Fresenius Group ▶ risk management and compliance, and Board regularly informed the Chairman of the Supervisory ▶ business segment strategies (particularly the business Fresenius | Annual Report 2019 ▶ important business events. Board in separate meetings about the latest development of outlook for Fresenius Kabi and Fresenius Vamed) the business and forthcoming decisions and discussed them ▶ completion of the FCPA investigation at Fresenius Based on the reports provided by the Management Board of with him. Medical Care the general partner, the Supervisory Board discussed all With the exception of Prof. Dr. Löw-Friedrich and significant business transactions in both the Audit Committee Ms. Stars, both of whom were unable to attend the Super- visory Board meeting in December, all of the meetings of the Supervisory Board and the Audit Committee in 2019 were attended by all current members of the Supervisory 18


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board Report of the Supervisory Board | Business segments | Fresenius share At its meetings and within the Audit Committee, the Super- At the Supervisory Board meeting on October 11, 2019, the unjustified benefits on others. Any secondary activities or deal- visory Board also kept itself regularly informed about the members of the Supervisory Board were informed in detail ings with the Company by members of the corporate bodies Group’s risk situation and risk management activities as well about business performance from January through September must immediately be reported to, and approved by, the Super- as compliance. 2019. The focus was on the Fresenius Vamed business seg- visory Board. At the meeting on March 14, 2019, the Supervisory Board ment. The Management Board of the general partner reported There were no conflicts of interest of Supervisory Board dealt intensively with the audit and approval of the financial on the conclusion of the FCPA investigation at Fresenius members in 2019. statements, the consolidated financial statements (IFRS) as Medical Care, and compliance, regulatory topics, and legal There are regular separate preliminary meetings of the well as the management report and Group management report risks. Furthermore, as a precautionary measure to avoid employee representatives and consultations among the share- of Fresenius SE & Co. KGaA. The results for 2018 were dis- possible uncertainties in connection with the announced holder representatives. cussed on the basis of a detailed report provided by the Chair- amendment to the German Corporate Governance Code, a The members of the Supervisory Board independently take man of the Audit Committee and statements by the auditor. resolution was passed on the declaration of conformity with on necessary training and further education measures required At the same meeting, a resolution was passed on profit distri- the German Corporate Governance Code. for their tasks. They keep themselves regularly informed, bution proposed by the general partner, Fresenius Manage- The meeting of the Supervisory Board on December 5, through internal and external sources, about the latest require- ment SE, and the Group Non-financial Report for 2018. In addi- 2019, focused on the development of business in 2019. Plans ments with regard to their supervisory activities. The Super- tion, the business segments reported in detail on the course for the years 2020 to 2022 for the Group and separately for visory Board at all times ensures that its members are suitably of business in the first two months of the fiscal year. The all four segments were also presented. The Chairman of the qualified, keep their professional knowledge up to date, and focus was on Fresenius Kabi. The final planning for the years Audit Committee reported in detail on the status of prepa- further develop their judgment and expertise. Fresenius pro- 2019 to 2021 was also presented. Another item discussed ration of the financial statements. Furthermore, a resolution vides appropriate support in this regard. External experts as was the agenda of the Annual General Meeting of Fresenius was again passed on the declaration of conformity with the well as experts from the Company provide information about SE & Co. KGaA on May 17, 2019. Finally, the Supervisory German Corporate Governance Code. important developments, for example about relevant new Board conducted its annual efficiency review at this meeting. laws and precedents, or changes in the IFRS accounting and At its meeting on May 17, 2019, immediately following CORPORATE GOVERNANCE auditing standards. In addition, the Company holds an the Annual General Meeting, the Supervisory Board passed On October 29, 2019, and December 20, 2019, the Supervisory onboarding event for new members of the Supervisory Board. Fresenius | Annual Report 2019 resolutions on the appointment of the auditor of the annual Board and the Management Board of the general partner For more information on Corporate Governance at and consolidated financial statements as well as the auditor of jointly issued a Declaration of Conformity in accordance with Fresenius, please see the Corporate Governance Declaration the Group Non-financial Report for 2019. In addition, the the German Corporate Governance Code under Section 161 and Report on pages 136 to 163 of the Annual Report. Management Board reported on business performance for the of the German Stock Corporation Act (AktG). Fresenius has disclosed the information on related parties months January through April 2019. The Management Board of the general partner and the on page 256 of the Annual Report. Supervisory Board of Fresenius SE & Co. KGaA have a duty to act in the best interests of the Company. In performing their activities, they do not pursue personal interests or bestow 19


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board Report of the Supervisory Board | Business segments | Fresenius share Media Hub GROUP NON-FINANCIAL REPORT WORK OF THE COMMITTEES This proposal was based on a recommendation to this effect KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, audited The Audit Committee held three meetings and four confer- by the Audit Committee. The Audit Committee also dealt with the Group Non-financial Report for 2019. This was done in ence calls in 2019. The main focus of its monitoring activities the following items in detail: accordance with a resolution of the Supervisory Board of was on the preliminary audit of the annual financial state- May 17, 2019, and the subsequent appointment. ments of Fresenius SE & Co. KGaA and the Group for 2018 and ▶ the 2019 quarterly reports, The Group Non-financial Report and the audit report of the discussions with the auditor about their reports and the terms ▶ monitoring reports on progress of acquisitions, appointed auditor were made available to each member of of reference of the audit. Another matter dealt with by the ▶ Compliance and Internal Audit with a focus on the the Supervisory Board of the Company in good time. At their Audit Committee was its recommendation to the Supervisory accounting-based internal control system of Fresenius meetings on March 11 and 12, 2020, the Audit Committee Board regarding which auditing firm to propose as auditor Medical Care, and then the Supervisory Board discussed all the documents for the annual financial statements and consolidated financial ▶ review of the risk management system, the internal in detail. statements for 2019. The Supervisory Board proposed to the control system, and the internal auditing system, and The auditor delivered a detailed report on the results of 2019 Annual General Meeting, ▶ approval of non-auditing services provided by KPMG AG the audit at each of these meetings. The Audit Committee Wirtschaftsprüfungsgesellschaft, Berlin. and the Supervisory Board approved the auditor’s findings. a) to elect KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, The Audit Committee’s and the Supervisory Board’s own as auditor of the annual financial statements and consoli- The Chairman of the Audit Committee reported regularly in review also found no objections to the Group Non-financial dated financial statements for the 2019 fiscal year and as subsequent Supervisory Board meetings on the work of the Report. At its meeting on March 12, 2020, the Supervisory auditor for the possible audit review of the half-yearly committee. Board approved the Group Non-financial Report presented financial report for the first half of 2019 and other interim The Chairman of the Audit Committee maintains a regular by the general partner. financial information within the meaning of Section dialog between the Supervisory Board and the Audit Commit- The Group Non-financial Report is published on pages 115 (7) WpHG for 2019, and tee, on the one hand, and auditors, on the other, even outside 91 to 135 of the Annual Report and the auditor’s findings are of meetings. published on page 134 f. of the Annual Report. b) to appoint PricewaterhouseCoopers GmbH Wirtschafts- The Company’s Nomination Committee did not meet in prüfungsgesellschaft, Frankfurt am Main, as auditors 2019. Fresenius | Annual Report 2019 for the possible review of interim financial information for the 2020 fiscal year prepared before the 2020 Annual General Meeting. 20


  • Page 21

    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board Report of the Supervisory Board | Business segments | Fresenius share Media Hub The Joint Committee is responsible for approving certain FINANCIAL STATEMENTS AND CONSOLIDATED the Company’s financial statements and management report or important transactions of Fresenius SE & Co. KGaA and cer- FINANCIAL STATEMENTS the consolidated financial statements and the Group manage- tain legal transactions between the Company and the Else KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, audited ment report. At its meeting on March 12, 2020, the Supervisory Kröner-Fresenius-Stiftung. In 2019, no transactions were the accounting records, the annual financial statements pre- Board approved the financial statements and management carried out that required its approval. For this reason, it pared in accordance with the accounting principles of the reports presented by the general partner and the statements did not meet in 2019. German Commercial Code (HGB), and the Company’s manage- contained therein with respect to future development. There is no Mediation Committee because the Supervisory ment report for 2019. The firm was elected as auditor in The Supervisory Board concurs with the general partner’s Board of Fresenius SE & Co. KGaA does not appoint the accordance with a resolution passed at the Annual General proposal for the 2019 profit distribution. Management Board members of Fresenius Management SE. Meeting of Fresenius SE & Co. KGaA on May 17, 2019, and The Supervisory Board would like to thank the members For more information about the committees, their com- was subsequently commissioned by the Supervisory Board. of the Management Board of the general partner and all position, and their work methods, please refer to the Corporate The Company’s financial statements, management report, employees for their achievements. Governance Declaration and Report on pages 136 to 163 and the consolidated financial statements were prepared in and page 267 f. of the Annual Report. accordance with IFRS accounting principles and with the regulations governing such statements under Section 315e of Bad Homburg v. d. H., March 12, 2020 PERSONNEL the German Commercial Code (HGB). The auditors of KPMG Dr. Karl Schneider resigned from the Joint Committee as of issued their unqualified audit opinion for these statements. The Supervisory Board of Fresenius SE & Co. KGaA December 31, 2019. Mr. Klaus-Peter Müller was appointed his The financial statements, the consolidated financial state- successor with effect from January 1, 2020. Otherwise, there ments, the management reports, and the auditor’s reports were no changes to the composition of the Management Board were submitted to each member of the Company’s Supervisory of the general partner Fresenius Management SE and the Board within the required time. At their meetings on March Supervisory Board of Fresenius SE & Co. KGaA and its com- 11 and 12, 2020, the Audit Committee and then the Supervi- Dr. Gerd Krick mittees in 2019. sory Board discussed all the documents in detail. Chairman The auditor gave a detailed report on the results of the Fresenius | Annual Report 2019 audit at each of these meetings. The auditor found no weak- nesses in the risk management system or the internal control system with regard to the accounting process. The auditor attended all meetings of the Supervisory Board and all meet- ings and conference calls of the Audit Committee. The Audit Committee and the Supervisory Board approved the auditor’s findings. Independent reviews by the Audit Committee and the Supervisory Board raised no objections to 21


  • Page 22

    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board Business segments | Fresenius share Media Hub FRESENIUS MEDICAL CARE. Fresenius Medical Care achieved solid growth in 2019. We are working successfully to offer even more patients even better and more individual treatment options. The inte- gration of the NxStage product line has led to record growth in the number of home dialysis patients. Fresenius Medical Care is the world’s leading provider of Our strategy is geared towards sustainable growth. We BUSINESS DEVELOPMENT products and services for people with chronic kidney failure. aim to continuously improve the quality of life of patients with Fresenius Medical Care’s sales increased by 6% (2% in con- Around 3.5 million patients with this disease worldwide kidney disease by offering innovative products and treatment stant currency) to € 17,477 million in 2019 (2018: € 16,547 regularly undergo dialysis treatment. When the kidney func- concepts of the highest quality. We have successfully launched million). Adjusted sales 1 increased by 8% (5% in constant tion of patients with this disease fails, dialysis takes over the our 4008A dialysis machine, specifically designed for emerg- currency) to € 17,329 million in 2019 (2018: € 16,026 million). vital task of cleansing the blood of toxins and surplus water. ing markets, in the important growth market of China. Organic sales growth was 5%. Currency translation effects Fresenius Medical Care offers products and services along increased sales by 3%. They resulted, in particular, from the the entire dialysis value chain from a single source. In our appreciation of the U.S. dollar against the euro. global network of 3,994 dialysis clinics, we care for more than 345,000 patients. At the same time, we operate 45 pro- SALES BY REGION % of total duction sites, to provide dialysis products such as dialysis Currency Fresenius Fresenius | Annual Report 2019 translation Medical Care machines, dialyzers, and related disposables. In addition, € in millions 2019 2018 Change effects sales Fresenius Medical Care offers non-dialysis services, among North America 12,195 11,570 5% 5% 69% others, in the field of Care Coordination. Europe / Middle East / Africa 2,693 2,587 4% 0% 16% Asia-Pacific 1,859 1,689 10% 3% 11% Latin America 709 686 3% - 18% 4% Corporate 21 15 37% 1% 0% Total 17,477 16,547 6% 4% 100% 1 2018 adjusted for divestitures of Care Coordination activities; 2019 adjusted for the adoption of IFRS 16 (“IFRS 16 effect”) and NxStage The key financial data is presented in accordance with the presentation of Fresenius Medical Care. For a detailed reconciliation please refer to the tables on page 59. 22


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board Business segments | Fresenius share Sales of health care services rose by 5% to € 13,872 million SALES BY SEGMENT ACQUISITIONS / DIVESTITURES (1% in constant currency). Sales of health care products rose In 2019, Fresenius Medical Care further expanded its clinical € in millions 2019 2018 Change by 10% to € 3,605 million (8% in constant currency). network, worldwide. We have further reinforced our activities Health care services 1 13,872 13,264 5% In 2019, the reported operating result (EBIT) decreased Health care products 2, 3 3,605 3,283 10% in China with new product launches. by 25% to € 2,270 million (- 28% in constant currency). This Total 17,477 16,547 6% With the acquisition of NxStage Medical, Inc. in 2019, we corresponds to an operating margin of 13.0% after 18.4% 1 Sales from dialysis services and Care Coordination have strengthened our vertically integrated dialysis business, 2 Sales from dialysis products such as dialysis machines, dialyzers, and related disposables, and in the previous year. Adjustments on accounts receivable in non-dialysis products improving quality of care and clinical outcomes for dialysis legal dispute paired with reduced patient attribution and a 3 Including sales generated by corporate functions of € 21 million in 2019 and patients. NxStage develops, produces, and markets an innova- € 15 million in 2018 decreasing savings rate for ESCOs weighed on earnings. These tive product portfolio of medical devices for use in home dial- effects were partially offset by the remeasurement effect of ysis as well as in the critical care setting. Fresenius Medical the fair value of the investment in Humacyte, Inc. The average revenue per treatment in the United States Care reported record growth in home dialysis and now treats Adjusted EBIT remained on the previous year’s level at 1 was US$ 352 in 2019, compared to US$ 354 in 2018. The more than 25,000 patients at home in North America. € 2,296 million (-4% in constant currency). On an adjusted average cost per treatment in the United States increased basis, the EBIT 1 margin fell from 14.3% to 13.2%. from US$ 289 in 2018 to US$ 296 in 2019. TREATMENT QUALITY Reported net income decreased by 39% (- 42% in con- 2 In 2019, the business development outside of North Amer- Again in 2019, physicians and clinical staff in our dialysis stant currency) to € 1,200 million (2018: € 1,982 million). The ica, in the business segments EMEA (Europe / Middle East / clinics offered patients the highest-quality treatment. Please adjusted net income 1, 2 decreased by 2% in constant cur- Africa), Asia-Pacific, and Latin America, was impacted by see page 95 ff. of the Group Non-financial Report for further rency. currency translation effects. Sales increased by 6% (8% in details on treatment quality. constant currency) to € 5,261 million (2018: € 4,962 million). REGIONAL DEVELOPMENT Reported EBIT increased by 12% to € 820 million (2018: North America remained Fresenius Medical Care’s largest € 732 million). The EBIT margin was 15.6% (2018: 14.7%). business region. In 2019, sales increased by 5% (0% in con- stant currency) to € 12,195 million (2018: € 11,570 million). Reported EBIT decreased by 33% to € 1,794 million (2018: FRESENIUS MEDICAL CARE BY REGION €2,665 million), with a reported EBIT margin of 14.7% (2018: Europe / Middle East / Total Change 23.0%). North America Africa Latin America Asia-Pacific 2019 2019 / 2018 Dialysis clinics (December 31) 2,579 781 234 400 3,994 2% Fresenius | Annual Report 2019 Dialysis patients (December 31) 211,064 66,217 34,810 33,005 345,096 4% Treatments 32,138,448 10,042,109 5,388,330 4,579,220 52,148,107 4% 1 On a comparable basis: 2018 before special items and after adjustments; 2019 before special items (transaction-related expenses, gain related to divestitures of Care Coordination activities, expenses associated with the cost optimization program), adjusted for IFRS 16 effect, excluding effects from NxStage transaction 2 Net income attributable to Fresenius Medical Care AG & Co. KGaA The key financial data is presented in accordance with the presentation of Fresenius Medical Care. For a detailed reconciliation please refer to the tables on page 59. 23


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board Business segments | Fresenius share Media Hub FRESENIUS KABI. In 2019, the excellent growth in the emerging markets was particularly note- worthy, partially offsetting the somewhat softer per- formance in North America. With organic sales growth of 4% and EBIT growth in constant currency of 3%, we achieved our 2019 financial outlook. Fresenius Kabi specializes in the therapy and care of chron- includes products used in the collection and processing of In Europe, we achieved organic sales growth of 2% based ically and critically ill people. The portfolio includes IV blood and cell components, as well as in transfusion medicine on the good development of the clinical nutrition product drugs, i.e., intravenously administered generic anesthetics, and cell therapy. segment. In North America, organic sales growth was - 2%. analgesics, anti-infectives, and drugs for the treatment of Intensifying competition on selected molecules, a further oncological and other critical diseases. We also develop bio- BUSINESS DEVELOPMENT easing of tailwinds from drug shortages as well as a shift in similars focusing on oncology and autoimmune diseases, In 2019, Fresenius Kabi increased sales by 6% to € 6,919 clinical practice towards non-opioids in hospital-based pain and we launched our first biosimilar product in Europe in million. Organic sales growth was 4%. Currency translation management weighed on the sales development. In the 2019. Another product segment is clinical nutrition. In this effects increased sales by 2%. This resulted from the emerging markets and developing countries, Fresenius Kabi segment, we are one of the few companies worldwide that appreciation of serveral currencies, mainly of the U.S. dollar achieved significant sales growth, especially with clinical offer both parenteral and enteral nutrition products. The against the euro. infusion therapy portfolio includes infusion solutions and Fresenius | Annual Report 2019 blood volume substitutes. In the medical devices / transfusion technology segment, we offer infusion and nutrition pumps, SALES BY REGION as well as consumables, for the administration of pharmaceu- Currency % of total translation Fresenius Kabi ticals and clinical nutrition products. Moreover, our portfolio € in millions 2019 2018 Change effects sales Europe 2,313 2,248 3% 0% 33% North America 2,424 2,359 3% 5% 35% Asia-Pacific 1,506 1,300 16% 2% 22% Latin America / Africa 676 637 6% - 8% 10% Total 6,919 6,544 6% 2% 100% 24


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board Business segments | Fresenius share Media Hub nutrition products. Organic sales growth in Latin America for Special Medical Purposes will be manufactured. At the SALES BY PRODUCT SEGMENT was 15%. In Asia-Pacific, we achieved organic sales growth of same time, Fresenius Kabi is expanding its enteral nutrition Organic € in millions 2019 2018 sales growth 14%. EBIT 1 improved by 5% to € 1,200 million. Currency research and development activities in Wuxi. IV drugs 2,939 2,874 - 1% translation effects increased EBIT 1 by 2%. Clinical nutrition 1,898 1,763 9% PRODUCT SEGMENTS Infusion therapy 834 796 3% ACQUISITIONS / INVESTMENTS In the segment of generic IV drugs, we have expanded our Medical devices / Transfusion technology 1,248 1,111 11% In the United States, Fresenius Kabi continued its extensive product portfolio to additional regional markets. There were Total 6,919 6,544 4% investment program at its manufacturing sites. The aim of more than 85 product launches of IV drugs worldwide. In these investments is, among other things, to further increase the area of biosimilars 2, we received marketing authorization the degree of modernization and automation and thus to from the European Commission in April for Idacio, an Adali- EARNINGS DEVELOPMENT make a significant contribution to the continuous increase in mumab biosimilar, for all indications of the reference medicine, € in millions 2019 2018 Change efficiency and to further raise our quality standards in these and were subsequently able to launch our first biosimilar in Europe 328 355 - 8% plants. In 2019, we made considerable progress with our Europe. In addition, the attending physicians and their patients North America 907 894 1% investment program and continued to work on equipping our can receive access to KabiCare, a program designed to train Asia-Pacific / Latin America / Africa 476 398 20% plants with state-of-the-art technologies for the manufacture and support physicians and patients with information material Administrative and of pharmaceutical products; the investment program will be on biosimilars, autoimmune diseases, and treatment with corporate R & D expenses - 511 - 508 1% continued over the coming years. Idacio. EBIT 1 1,200 1,139 5% We opened our new research and development center In clinical nutrition, we successfully further expanded the Net income 1, 2 802 742 8% for biosimilars in Eysins in the Swiss canton of Vaud. The new market presence of our products for parenteral nutrition. 1 2 On a comparable basis: before special items and adjusted for IFRS 16 effect Net income attributable to the shareholders of Fresenius SE & Co. KGaA development center is an important step in expanding our With our three-chamber bags, we are the global leader in the capacity to develop new biosimilar products. multi-chamber bag product segment for parenteral nutrition. Due to the demand for enteral products in China, we are New products enable us to offer our customers a comprehen- In infusion therapy, we worked on further expanding our expanding our production capacity there. In 2019, we com- sive range of therapies. In 2019, we started to launch our new infusion solutions business in the United States. pleted the planned expansion of the site at our plant in Wuxi product SmofKabiven Low Osmo Peripheral, for example, a In the medical devices product segment, we launched our to include additional production lines for our EasyBag tube three-chamber bag that provides patients with a time-efficient ProNeo product portfolio in Europe in 2019. The ProNeo feed. This makes it possible for us to supply the local market energy delivery. We also achieved growth in enteral nutrition, portfolio includes a comprehensive range of transnasal feed- with these products directly and efficiently. Fresenius Kabi is particularly in the Asia-Pacific and Latin America regions. In ing tubes and accessories that meet the specific requirements Fresenius | Annual Report 2019 also building a new production building on the Wuxi Campus, 2019, we moved ahead with the internationalization of our of enteral nutrition application in neonatal and pediatric where enteral nutrition products that have the status of Foods product portfolio and launched our Fresubin sip and tube wards. In the transfusion technology product segment, we feed products in South Korea and Australia. have begun to introduce the Amicus Blue cell separator in Europe. This cell separator can also be used for extracorpo- real photopheresis. 1 On a comparable basis: before special items and adjusted for IFRS 16 effect 2 For additional information on the biosimilars activities please see page 42 of the Group Management Report. For a detailed overview of special items please see the reconciliation table on page 61. 25


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board Business segments | Fresenius share Media Hub FRESENIUS HELIOS. We achieved our sales and earnings outlook. The investments made in connec- tion with regulatory requirements in Germany are showing positive effects. The business in Spain continues to grow dynamically. We have strength- ened our presence in Latin America. Fresenius Helios is Europe’s leading private hospital operator. BUSINESS DEVELOPMENT their medical documents such as doctor’s letters, medical 1 The company comprises Helios Germany and Helios Spain Fresenius Helios increased sales by 3% (5% ) to € 9,234 mil- reports, or laboratory results, and make appointments with (Quirónsalud); both are part of the holding company Helios lion in 2019. Organic sales growth was 5%. doctors, online. Health. Helios Germany operates 86 hospitals, around 125 Helios Germany’s sales declined by 1% (increased by outpatient clinics, and 8 prevention centers. The company is 3% 1) to € 5,940 million. Organic sales growth was 3%, posi- SALES AND EARNINGS DEVELOPMENT the largest provider of inpatient and outpatient care in Ger- tively influenced by price effects. The reclassification of € in millions 2019 2018 Change many. Helios Germany offers high-quality treatment across the nursing staff funding from other income to sales also contrib- Sales 9,234 8,993 3% entire range of medical services. Quirónsalud operates 47 uted to growth. The measures initiated in 2018 to increase Helios Germany 5,940 5,970 - 1% hospitals, 71 outpatient centers, and around 300 occupational sales and implement regulatory requirements were success- Helios Spain 3,292 3,023 9% EBIT 1 1,015 1,052 - 4% risk prevention centers. Quirónsalud is Spain’s largest pri- fully continued. For example, vacancies were filled in the Helios Germany 576 625 - 8% vate hospital operator with a comprehensive range of inpatient area of specialized medical personnel. In addition, the areas of Fresenius | Annual Report 2019 Helios Spain 434 413 5% and outpatient medical care. In addition, the company is prevention and occupational health care were expanded EBIT margin 1 in % 11.0 11.7 active in Latin America with 4 hospitals and as a provider of and digital services were developed, such as the Helios patient Helios Germany 9.7 10.5 medical diagnostics. portal. This platform allows patients in Germany to access Helios Spain 13.2 13.7 Net income 1, 2 670 686 - 2% 1 A djusted for IFRS 16 effect 2 Net income attributable to shareholders of Fresenius SE & Co. KGaA 1 Adjusted for the post-acute care business transferred from Fresenius Helios to Fresenius Vamed as of July 1, 2018. 26


  • Page 27

    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board Business segments | Fresenius share Media Hub In order to benefit from the continuing trend towards increas- ACQUISITIONS / NEW HOSPITAL BUILDINGS 2019 2018 Change ing outpatient treatment, Helios Germany restructured its In May 2019, Helios Spain acquired a hospital in Albacete that Acute clinics Germany 83 83 0% Beds 28,380 28,802 - 1% outpatient clinics and strengthened its patient service in 2019. is an excellent complement to the region’s existing network Acute clinics Spain 51 47 9% Helios Spain increased sales by 9% to € 3,292 million. of clinics. In addition, the company acquired Digest, an out- Beds 7,288 7,019 4% Organic sales growth was 7%. patient center in Badalona, and opened additional outpatient Patient numbers Germany 5,566,613 5,321,445 5% The EBIT 1 of Fresenius Helios decreased by 4% to €1,015 centers in Alicante, Algeciras, Bilbao, and Toledo. Patients treated in 2 1 hospital 1,206,654 1,218,199 - 1% million (- 3% ). The EBIT margin was 11.0%. The EBIT of In 2019, Helios Spain continuously expanded its presence Patients treated as 2 Helios Germany fell by 8% (- 6% ) to € 576 million, the EBIT in the attractive private hospital market in Colombia. In the outpatients 4,354,527 4,073,047 7% margin to 9.7%. The EBIT development was adversely affected metropolis of Medellín, the acquisition of Clínica Medellín was Patient numbers Spain 15,396,051 13,318,066 16% by investments in connection with regulatory requirements. completed in April. Clínica Medellín operates two hospitals Patients treated in hospital 845,560 437,855 93% 1 The EBIT of Helios Spain rose by 5% to € 434 million. with a total of about 185 beds. The total investment was more Patients treated as The EBIT margin was 13.2%. than € 50 million. The acquisitions of two further centrally outpatients 14,550,491 12,880,211 13% located hospitals in Medellín, Clínica Las Vegas and Clínica INVESTMENTS del Prado, were completed in December 2019, and January Investments in Germany focused on the construction and 2020, respectively. The hospitals have a total of around 300 REGULATORY CHANGES modernization of hospitals in Duisburg, Wuppertal, and Wies- beds. The total transaction volume amounted to approxi- The Act to Strengthen Nursing Staff (PpSG) entered into baden as well as digitalization projects such as the Helios mately € 50 million. force on January 1, 2019, in Germany, aiming to increase the patient portal. Helios Spain has also signed an agreement to acquire number of staff in the nursing professions. In contrast to In Spain, Fresenius Helios invested in building expan- Centro Médico Imbanaco (CMI), which is located in the 2018, in 2019, each additional or increased nurse position at sions, including the Sagrado Corazón hospital in Seville. The metropolis of Cali. The hospital has about 350 beds and is one the bed was completely refinanced by the health insurers. opening of the new facility is planned for 2021. The total of the most prestigious private hospitals in Latin America. Fresenius Helios was able to recruit additional nursing staff investment is approximately € 20 million. The total transaction volume amounts to approximately € 300 in all its hospitals as part of a large-scale campaign. From The construction of a proton therapy center in Madrid million. Closing is expected in the first quarter of 2020. A fur- 2020, nursing costs will be deducted from the standardized was completed on schedule and during an initial pilot phase ther agreement has been signed to acquire Clínica de la base rates and the costs for direct nursing patient care will a small number of selected patients have already been Mujer, located in Colombia’s capital city Bogotá. The hospital instead be fully reimbursed by the health insurance companies treated. It is the first center of its kind for cancer treatment has a special focus on gynecology, pediatrics and obstetrics, via separate care budgets at costs. in Spain. and generated sales of about € 20 million in 2019. The trans- In addition, since 2019, a regulation setting a minimum Fresenius | Annual Report 2019 action is expected to close in the second quarter of 2020. level for nursing staff has applied to hospitals in Germany for In addition, Helios Spain acquired CediMed, a leading the following areas: geriatrics, intensive care, cardiology, provider of medical diagnostics and laboratory services in and trauma surgery. In 2020, the areas of heart surgery, neu- Colombia. The transaction volume amounts to approximately rology, neurological stroke units, and early neurological € 40 million. rehabilitation will be added. 1 Adjusted for IFRS 16 effect 2 Adjusted for the post-acute care business transferred from Fresenius Helios to Fresenius Vamed as of July 1, 2018. 27


  • Page 28

    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board Business segments | Fresenius share Media Hub FRESENIUS VAMED. In 2019, we recorded excel- lent sales development of 31% and organic sales growth of 16%. The integration of post-acute care facilities in Germany has been successfully com- pleted and further strengthens our service business. A very strong order book secures future growth in the project business. Fresenius Vamed manages projects, provides services for hos- BUSINESS DEVELOPMENT SALES BY REGION 1 pitals and other health care facilities worldwide, and is a In 2019, Fresenius Vamed increased sales by 31% (19% ) % of total Fresenius leading post-acute care provider in Central Europe. Our port- to € 2,206 million. Organic growth was 16%. Currency trans- € in millions 2019 2018 Change Vamed sales folio ranges along the entire value chain: from project devel- lation effects had no major impact on sales. Europe 1,823 1,312 39% 83% opment, planning, and turnkey construction, via maintenance 2 1 EBIT grew by 19% (6% ) to € 131 million (2018: € 110 Africa 81 109 - 26% 3% Asia-Pacific 198 221 - 10% 9% and technical management, to total operational management, million). The EBIT margin decreased to 5.9% (2018: 6.5%). Latin America 104 46 126% 5% as illustrated in the diagram on page 29. Our offerings target EBIT 2 in the project business remained on the previous year’s Total 2,206 1,688 31% 100% different areas of health care, from prevention to acute care, level at €30 million. In the service business, EBIT 2 grew by rehabilitation, and nursing care. We are active in 95 countries 26% to € 101 million. Net income 2, 3 improved to € 85 million on 5 continents. This comprehensive range of competencies (2018: € 72 million). SALES BY BUSINESS SEGMENT enables us to support complex health care facilities efficiently Fresenius | Annual Report 2019 % of total and successfully at each stage of their life cycle. As a spe- Fresenius € in millions 2019 2018 Change Vamed sales cialist provider that can deliver the full spectrum of services Project business 807 712 13% 37% worldwide, we are in a unique position. We have thus far Service business 1,399 976 43% 63% successfully completed around 960 projects. 1 Adjusted for the post-acute care business transferred from Fresenius Helios to Fresenius Vamed as of July 1, 2018. 2 Adjusted for IFRS 16 effect 3 Net income attributable to VAMED AG 28


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board Business segments | Fresenius share Media Hub PROJECT BUSINESS VAMED VALUE CHAIN VAMED’s project business comprises consulting on projects, project development, planning, turnkey construction, and Project business Service business financing management of projects. VAMED responds flexibly to the local needs of clients, providing custom-tailored solutions Project development and Planning and financial Project management and Services Operational management consulting engineering construction ▶ technical ▶ technical management all from one source. We also carry out projects in cooperation ▶ commercial ▶ total operational ▶ infrastructural management with partners. With 26 implemented projects, VAMED is a pioneer in public-private partnership (PPP) projects. In Europe, VAMED has continued its positive development. Mozambique. In the Asia-Pacific region, new orders were In Austria, we continued the partnership we have maintained The modernization of the University Hospital Schleswig- received from India, Malaysia, Thailand, China, Laos, and Sri since 1986 with Vienna’s General Hospital (AKH). In Ger- Holstein (UKSH), the largest PPP project in the German health Lanka. In the Middle East, we received an expansion order many, amongst others, we have been providing technical ser- care sector, marks a major milestone: in 2019, the newly to supply medical technology to the United Arab Emirates and vices for UKSH since mid- 2015. In addition, we received built central clinics at the Kiel and Lübeck sites were handed a construction contract in Jordan. In Latin America, VAMED new orders in important European markets such as Germany, over. We were commissioned with the turnkey construction is responsible for new projects in Bolivia as well as Trinidad Austria, the United Kingdom, Croatia, and Spain. of hospitals in Velbert and Duisburg. and Tobago. The health care facilities that VAMED acquired from In Austria, VAMED is implementing numerous projects at Fresenius Helios with a focus on inpatient rehabilitation and Vienna’s General Hospital (AKH) until 2030. Modernization SERVICE BUSINESS care were successfully integrated. work is being carried out and new buildings erected without Modular in design, our service offering encompasses every This acquisition makes VAMED one of the leading private interrupting operations. We are also realizing other projects, in aspect of technical, commercial, and infrastructural facility providers of rehabilitation services in Europe. In Austria, Germany, Austria, Switzerland, the Netherlands, and Poland, management as well as the total operational management for we are the largest private provider of rehabilitation services amongst others. health care facilities. The service business includes building and have expanded our range to include new outpatient and equipment maintenance, medical technology management, rehabilitation facilities. In Switzerland, we are the second- ORDER INTAKE AND ORDER BACKLOG FOR PROJECTS and technical management. Our integrated portfolio of largest private rehabilitation provider. We also operate other services is aimed at the optimal operation of a health care well-known rehabilitation facilities in the Czech Republic and € in millions 2019 2018 Growth Order intake 1,314 1,227 7% facility. the United Kingdom. Order backlog In 2019, we provided services for about 890 health care (December 31) 2,865 2,420 18% facilities with 205,000 beds worldwide as part of the technical VAMED VITALITY WORLD Fresenius | Annual Report 2019 operational management. The acquisition of IHSS Limited, With the range of services offered by VAMED Vitality World, We have also obtained important contracts in Africa, includ- a leading provider of sterile services in the United Kingdom, we are building a bridge between preventive medicine and ing the turnkey construction of four general hospitals in strengthens the high-end services sector. health tourism in spa and health resorts. We are a leader in the Ivory Coast as well as construction contracts in Ghana and Austrian market and currently operate nine thermal and health care spa resorts. 29


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments Fresenius share FRESENIUS SHARE. In 2019, Fresenius increased its Group sales guidance and achieved its Group earnings guidance. This contributed to a significant recovery in the Fresenius share price of 18% during the year. Based on the healthy business development, we propose the 27th consecutive dividend increase. STOCK MARKETS AND DEVELOPMENT The market capitalization of Fresenius was € 28 billion as CAPITAL STRUCTURE OF THE FRESENIUS SHARE of December 31, 2019, an increase of 18% compared to the The total number of issued shares at the end of 2019 was After a volatile start to the year, which was marked by fears previous year. The average daily trading volume on Xetra 557,379,979 (December 31, 2018: 556,225,154 shares). The of recession and geopolitical risks, the financial markets rose increased by 3% to 1,693,849 Fresenius shares compared to increase is due to the exercise of options in accordance significantly as the year progressed. Furthermore, the slight the previous year (2018: 1,648,837). The DAX trading vol- with stock option plans. Information on stock option plans can improvement in the trade conflict between the United States ume decreased by 16% in the same comparison time period. be found on pages 248 to 256 of the Notes to this Annual and China towards the end of the year had a calming effect Fresenius shares remain an attractive investment. Anyone Report. on the markets. who invested €1,000 ten years ago and reinvested the divi- The DAX increased by 25%; the EURO STOXX 50 gained dends would have increased their capital to € 3,465 as of INVESTOR RELATIONS 25% for the year. The STOXX Europe 600 index ended the December 31, 2019. That is an average annual return of 15% Our investor relations activities are in accordance with the Fresenius | Annual Report 2019 year up by 23%. In this index, the subsector STOXX Europe (before expenses and taxes). transparency rules of the German Corporate Governance Code. 600 Health Care increased by 28%. The leading U.S. indices In the United States, Fresenius has a Sponsored Level I We communicate comprehensively, promptly, and openly performed as follows: the S & P 500 and the Dow Jones Indus- American Depositary Receipt (ADR) program. In this program, with private and institutional investors, as well as financial trial Average both increased, by 29% and 22%, respectively. four Fresenius ADRs correspond to one Fresenius share. The analysts. The equal treatment of all market actors is very The closing price for the Fresenius share on December 31, ADR s are traded in the OTCQX International Premier market important to us. 2019, was € 50.18 and thus 18% above the closing price of segment. We maintained our intense dialog with the capital mar- 2018. kets in 2019. In addition to its conference calls and web- casts, Fresenius gave presentations in major European, U.S., 30


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments Media Hub Fresenius share Canadian, and Asian financial markets. We expanded our RELATIVE SHARE PRICE PERFORMANCE 2015 – 2019 ABSOLUTE SHARE PRICE PERFORMANCE 2019 contacts with institutional investors and analysts at 33 inter- FRESENIUS SHARE VS. DAX FRESENIUS SHARE IN € national investor conferences, 21 roadshows, and in numerous % € 300 60.00 one-on-one meetings. We also organized field trips with banks, giving investors and analysts the opportunity to discuss 55.00 250 106 matters with the Management Board. The Fresenius investor relations team and the manage- 50.00 200 85 ment team were recognized in the results of the Extel Survey, 45.00 a broad survey conducted by the company Thomson Reuters, 150 64 which annually surveys some 15,000 investors and analysts 40.00 on various aspects of good investor relations. On this occasion, 100 43 the Fresenius investor relations team was honored, once 35.00 again, as the best in the MedTech sector in Europe. 50 21 30.00 In addition, Fresenius’ management and investor relations Dec. 2014 Dec. 2015 Dec. 2016 Dec. 2017 Dec. 2018 Dec. 2019 Dec. 18 Feb. 19 Apr. 19 June 19 Aug. 19 Oct. 19 Dec. 19 team leads the “Manager Magazin” long-term ranking for the Fresenius share in % DAX in % Fresenius high and low in € Fresenius share Monthly price range best average score over three years for the best financial communication of DAX companies. We also continued the dialog with our private inves- tors, especially via the Internet. Furthermore, we participate KEY DATA OF THE FRESENIUS SHARE in private shareholder events. At www.fresenius.com/ 2019 2018 2017 2016 2015 events-and-presentations our private shareholders can follow Number of shares 557,379,979 556,225,154 554,710,473 547,208,371 545,727,950 live webcasts of the conference calls and can make use of the Stock exchange quotation 1 in € continuously increasing range of information offered on our High 52.42 70.94 79.65 74.26 69.75 website and social media channels. Low 40.74 38.99 60.58 53.05 42.41 If you would like to contact us or find out about our 2020 Year-end quotation 50.18 42.38 65.07 74.26 65.97 Market capitalization 2 in million € 27,969 23,573 36,095 40,636 36,002 financial calendar, please take a look at the last page of Total dividend distribution in million € 468.0 3 445.0 416.0 343.1 300.2 this Annual Report. For additional information visit us at Dividend per share in € 0.84 3 0.80 0.75 0.62 0.55 Fresenius | Annual Report 2019 www.fresenius.com/investors. Earnings per share in € 4 3.37 3.37 3.28 2.85 2.64 1 Xetra closing price on the Frankfurt Stock Exchange 2 Total number of ordinary shares multiplied by the respective Xetra year-end quotation on the Frankfurt Stock Exchange 3 Proposal 4 Net income attributable to shareholders of Fresenius SE & Co. KGaA; before special items, incl. IFRS 16 31


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Letter to our shareholders | Management Board | Report of the Supervisory Board | Business segments Media Hub Fresenius share DEVELOPMENT OF DIVIDENDS IN € SHAREHOLDER STRUCTURE SHAREHOLDER STRUCTURE BY REGION The charts opposite show the shareholder structure at the end 0.84 0.80 of 2019. The Else Kröner-Fresenius-Stiftung was the largest Other regions 3% 0.75 shareholder of Fresenius SE & Co. KGaA, with 26.6% of the Not identified 6% shares. According to notifications pursuant to the German United Kingdom 10% 0.62 Securities Trading Act (WpHG), Allianz Global Investors Germany 44% 0.55 GmbH and BlackRock, Inc. each held about 5% of the shares. USA 17% For further information on notifications, please visit 0.44 www.fresenius.com/shareholder-structure. 0.42 Rest of Europe 20% 0.37 As of December 31, 2019, a shareholder survey identified 0.32 the ownership of about 94% of our subscribed capital. The 0.29 shareholder base of Fresenius is solid: a total of approximately 600 institutional investors held about 350 million shares or SHAREHOLDER STRUCTURE BY INVESTORS 62% of the subscribed capital; 29.9 million shares were iden- tified as retail holdings. The 10 largest investors held about Retail holdings 5% 23% of the share capital. Our shares were mostly held by inves- Not identified 6% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1 tors in Germany, the United States, and the United Kingdom. 1 Else Kröner- Institutional Proposal ANALYST RECOMMENDATIONS Fresenius-Stiftung 27% investors 62% The recommendations published by financial analysts are DIVIDEND an important guide for institutional and private investors when In 2019, Fresenius again delivered good financial results. For making investment decisions. According to our survey, as the 27th consecutive year, we are proposing to our share- of February 18, 2020, we were rated with 13 “buy”, 7 “hold”, holders to increase the dividend – by 5% per share, to € 0.84 and no “sell” recommendations. ANALYST RECOMMENDATIONS (2018: € 0.80). The proposed dividend distribution to the The list of banks that provide regular analyst coverage of shareholders of Fresenius SE & Co. KGaA will be € 468 million, Fresenius and their latest recommendations can be found at equivalent to 24% of Group net income. Based on the pro- www.fresenius.com/analysts-and-consensus. Fresenius | Annual Report 2019 Equal-weight / Hold / posed dividend and the closing price at the end of 2019, the Neutral 35% dividend yield is 1.7%. Accumulate / Add / Buy / Outperform / Overweight 65% 32


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub GROUP MANAGEMENT REPORT 34 Fundamental information about the 46 Economic report 70 Overall assessment of the business Group 46 Health care industry situation 34 The Group’s business model 46 The dialysis market 35 Important markets and competitive position 47 The market for generic IV drugs, biopharmaceuticals, clinical nutrition, infusion therapy, and medical devices / 35 External factors 70 Outlook 35 Management and control transfusion technology 70 General and mid-term outlook 36 Capital, shareholders, articles of association 48 The hospital market 71 Future markets 37 Goals and strategies 50 The market for projects and services for hospitals and 72 Health care sector and markets 38 Our core competencies other health care facilities 74 Group sales and earnings 39 Corporate performance criteria 50 Overall business development 75 Sales and earnings by business segment 40 Research and development 50 The Management Board’s assessment of the effect 75 Financing 43 Employees of general economic developments and those in the 76 Investments 45 Changes to the Management Board health care sector for Fresenius 76 Dividend 45 Procurement 50 The Management Board’s assessment of the 45 Quality management business results and significant factors affecting operating 45 Responsibility, environmental management, sustainability performance 76 Opportunities and risk report 51 Comparison of the actual business results with the forecasts 76 Opportunities management 52 Results of operations, financial position, assets and liabilities 76 Risk management 52 Results of operations 78 Risk areas 56 Reconciliation Fresenius Group 88 Assessment of overall risk 62 Financial position 67 Assets and liabilities 69 Corporate rating Fresenius | Annual Report 2019 2 33


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub GROUP MANAGEMENT REPORT. In 2019, Fresenius made significant investments in all business segments to lay the foundation for future growth. We achieved our targets for both Group sales and earnings in 2019. FUNDAMENTAL INFORMATION The operating business comprises four business segments, oncology and autoimmune diseases within the biosimilars ABOUT THE GROUP all of which are legally independent entities managed by the segment of Fresenius Kabi. operating parent company Fresenius SE & Co. KGaA. The ▶ Fresenius Helios is Europe’s leading private hospital THE GROUP’S BUSINESS MODEL business segments are organized on a regional level and have operator. The company comprises Helios Germany and Fresenius is a global health care Group in the legal form of a decentralized structure. Helios Spain (Quirónsalud). At the end of 2019, Helios an SE & Co. KGaA (a partnership limited by shares). We offer Germany operated a total of 86 hospitals, around 125 products and services for dialysis, hospitals, and outpatient ▶ Fresenius Medical Care offers services and products for outpatient clinics, and 8 prevention centers. In Spain, medical care. In addition, Fresenius focuses on hospital oper- patients with chronic kidney failure. As of December 31, Quirónsalud operated 47 hospitals, 71 outpatient centers, ations. We also manage projects and provide services for 2019, Fresenius Medical Care treated 345,096 patients at and around 300 occupational risk prevention centers hospitals and other health care facilities worldwide. 3,994 dialysis clinics. Dialyzers and dialysis machines at the end of 2019. In addition, Quirónsalud is active in are among the most important product lines. In addition, Latin America with 4 hospitals and as a provider of Fresenius | Annual Report 2019 GROUP STRUCTURE Fresenius Medical Care offers dialysis-related services, medical diagnostics. among others, in the field of Care Coordination. ▶ Fresenius Vamed manages projects and provides services Fresenius SE & Co. KGaA ▶ Fresenius Kabi specializes in intravenously administered for hospitals as well as other health care facilities world- generic drugs (IV drugs), clinical nutrition, and infusion wide and is a leading post-acute care provider in Central 32% 100% 100% 77% therapies. The company is also a supplier of medical Europe. The portfolio ranges along the entire value chain – Fresenius Fresenius Fresenius Fresenius devices and products for transfusion technology. In addi- Medical Care Kabi Helios Vamed tion, Fresenius Kabi develops products with a focus on 34


  • Page 35

    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub from project development, planning, and turnkey con- EXTERNAL FACTORS We carefully monitor and evaluate country-specific, political, struction, via maintenance and technical management, to Overall, the legal and economic factors for the Fresenius legal, and financial conditions. This also applies to the poten- total operational management. Group were largely unchanged in 2019. The life-saving and tial impact on our business of the United Kingdom’s decision life-sustaining products and therapies that the Group offers to leave the European Union and the ongoing uncertainty Fresenius has an international sales network and maintains are of intrinsic importance for people worldwide. Therefore, about the conditions of Brexit. We do not expect this to have more than 90 production sites. Large production sites are the business development of our company is fundamentally a material impact on our business at this time. The share of located in the United States, China, Japan, Germany, and stable and relatively independent of economic cycles. For sales generated in the United Kingdom is not material in rela- Sweden. detailed information on our markets, please see pages 46 ff. tion to Group sales. We do not expect any negative effects Furthermore, the diversification across four business seg- on our financing either, as only an immaterial portion of our IMPORTANT MARKETS AND ments and our global reach provide additional stability for the credit lines is provided by banks domiciled in the United COMPETITIVE POSITION Group. Kingdom. Project teams in all divisions concerned are identi- Fresenius operates in more than 90 countries through its Fluctuating exchange rates, particularly between the fying potential effects in terms of logistics, taxes, customs subsidiaries. The main markets are Europe with 43% and U.S. dollar and the euro, have an effect on the income state- duties, and potential regulations, among other things, and North America with 41% of sales, respectively. ment and the balance sheet. In 2019, the average annual initiating appropriate measures, if necessary. Fresenius Medical Care holds the leading position world- exchange rate between the U.S. dollar and the euro of 1.12 was wide in dialysis care as it serves about 10% of all dialysis below the 2018 rate of 1.18, and therefore had a positive MANAGEMENT AND CONTROL patients, as well as in dialysis products, with a market share currency translation effect on the income statement. Further- In the legal form of a KGaA, the Company’s corporate bodies of about 36%. Fresenius Kabi is among the leading compa- more, negative currency translation effects on the income are the General Meeting, the Supervisory Board, and the nies for large parts of its product portfolio in Europe and has statement resulted, in particular, from the depreciation of general partner, Fresenius Management SE. Fresenius Man- significant market shares in the growth markets of Asia-Pacific Latin American currencies (especially the Argentinian peso) agement SE is wholly owned by Else Kröner-Fresenius- and Latin America. In the United States, Fresenius Kabi is against the euro in the 2019 fiscal year. In particular, as a Stiftung. The KGaA has a two-tier management system – one of the leading suppliers of generic IV drugs. Further infor- result of the first time adoption of IFRS 16 and the exchange management and control are strictly separated. mation on the market position of Fresenius Kabi can be found rate changes (from 1.15 U.S. dollars on December 31, 2018, The general partner, represented by its Management in the market description on page 47 f. Fresenius Helios is to 1.12 U.S. dollars on December 31, 2019), the balance Board, conducts the business and represents the Company in Europe’s leading private hospital operator. Helios Germany and sheet total increased by 18% (17% in constant currencies). dealings with third parties. The Management Board generally Helios Spain are the largest private hospital operators in In 2019, the Fresenius Group was involved in various has seven members. According to the Management Board’s their respective home markets. Fresenius Vamed is one of legal disputes resulting from business operations. Although it rules of procedure, each member is accountable for his or Fresenius | Annual Report 2019 the world’s leading companies in its field. is not possible to predict the outcome of these disputes, none her own area of responsibility. However, the members have is expected to have a significant adverse impact on the assets and liabilities, financial position, and results of operations of the Group. Further information regarding legal matters can be found on pages 225 to 232 of the Notes. 35


  • Page 36

    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub joint responsibility for the management of the Group. In addi- representatives are elected by the Annual General Meeting Fresenius Management SE, as general partner, is authorized, tion to the Supervisory Board of Fresenius SE & Co. KGaA, of Fresenius SE & Co. KGaA. The European works council subject to the consent of the Supervisory Board of Fresenius Fresenius Management SE has its own Supervisory Board. The elects the employee representatives to the Supervisory Board SE & Co. KGaA: to increase the subscribed capital of Fresenius Management Board is required to report to the Supervisory of Fresenius SE & Co. KGaA. SE & Co. KGaA by a total amount of up to € 125 million, until Board of Fresenius Management SE regularly, in particular on The Supervisory Board must meet at least twice per cal- May 17, 2023, through a single or multiple issuance of new its corporate policy and strategies, business profitability, endar half-year. The Supervisory Board of Fresenius SE & Co. bearer ordinary shares against cash contributions and / or current operations, and any other matters that could be of sig- KGaA has two permanent committees: the Audit Committee, contributions in kind (Authorized Capital I). In principle, the nificance for the Company’s profitability and liquidity. The consisting of five members, and the Nomination Committee, shareholders shall be granted a subscription right. In certain Supervisory Board of Fresenius Management SE also advises consisting of three members. The members of the commit- cases, however, the right of subscription can be excluded. and supervises the Management Board in its management tees are listed on page 268 of this Annual Report. The Com- of the Company. It is prohibited from managing the Company pany’s annual corporate governance declaration pursuant In addition, there are the following Conditional Capitals: directly. However, the Management Board’s rules of proce- to Section 315d and Section 289f of the German Commercial dure require it to obtain the approval of the Supervisory Board Code (HGB) describes the procedures of the Supervisory ▶ The subscribed capital is conditionally increased by up of Fresenius Management SE for specific activities. Board’s committees on page 141 f. The declaration can also to € 4,735,083.00 through the issuance of new bearer The members of the Management Board are appointed be found on the website ordinary shares (Conditional Capital I). The conditional and dismissed by the Supervisory Board of Fresenius Manage- www.fresenius.com/corporate-governance. capital increase will only be executed to the extent that ment SE. Appointment and dismissal is in accordance with The description of both the compensation system and convertible bonds for ordinary shares have been issued Article 39 of the SE Regulation. The articles of association of individual amounts paid to the Management Board and Super- under the 2003 Stock Option Plan and the holders of Fresenius Management SE also provide that deputy members visory Board of Fresenius Management SE, and the Super- these convertible bonds exercise their conversion rights. of the Management Board may be appointed. visory Board of Fresenius SE & Co. KGaA , are included in the ▶ The subscribed capital is conditionally increased by up The Supervisory Board of Fresenius SE & Co. KGaA Compensation Report on pages 150 ff. of this Annual Report. to € 4,296,814.00 through the issuance of new bearer advises and supervises the management of the Company’s The Compensation Report is part of the Group’s Management ordinary shares (Conditional Capital II). The conditional business by the general partner, reviews and approves the Report. capital increase will only be executed to the extent that annual financial statements and the consolidated financial state- subscription rights have been issued under the 2008 Stock ments, and performs the other functions assigned to it by CAPITAL, SHAREHOLDERS, Option Plan, the holders of these subscription rights law and the Company’s articles of association. It is involved in ARTICLES OF ASSOCIATION exercise their rights, and the Company does not use its corporate planning and strategy, and in all matters of funda- The subscribed capital of Fresenius SE & Co. KGaA amounted own shares to service the subscription rights or does Fresenius | Annual Report 2019 mental importance for the Company. The Supervisory Board to 557,379,979 ordinary shares as of December 31, 2019 not exercise its right to make payment in cash. of Fresenius SE & Co. KGaA has six shareholder representa- (December 31, 2018: 556,225,154). ▶ The general partner is authorized, with the approval of tives and six employee representatives. A Nomination Commit- The shares of Fresenius SE & Co. KGaA are non-par-value the Supervisory Board, until May 17, 2023, to issue option tee of the Supervisory Board of Fresenius SE & Co. KGaA bearer shares. Each share represents € 1.00 of the capital bearer bonds and / or convertible bearer bonds, once or has been instituted for election proposals for the shareholder stock. Shareholders’ rights are regulated by the German Stock several times, for a total nominal amount of up to € 2.5 bil- representatives. Its activities are aligned with the provisions of Corporation Act (AktG – Aktiengesetz). lion. To fulfill the granted subscription rights, the sub- law and the Corporate Governance Code. The shareholder scribed capital of Fresenius SE & Co. KGaA was increased 36


  • Page 37

    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub conditionally by up to € 48,971,202.00 through issuance Article 17 (3) of the articles of association of Fresenius SE & Co. nities for individuals and societies. The extent to which these of new bearer ordinary shares (Conditional Capital III). KGaA. Unless mandatory legal provisions require otherwise, opportunities can be leveraged depends heavily on one The conditional capital increase shall only be implemented amendments to the articles of association require a simple factor: health. to the extent that the holders of convertible bonds issued majority of the subscribed capital represented in the resolution. In line with our corporate purpose “Forward thinking for cash, or of warrants from option bonds issued for cash, If the voting results in a tie, a motion is deemed rejected. health care to improve the quality of life of patients”, Fresenius exercise their conversion or option rights and as long as Furthermore, in accordance with Section 285 (2) sentence 1 develops profitable, innovative, and affordable solutions for no other forms of settlement are used. of the German Stock Corporation Act (AktG), amendments these megatrends. Our aspiration is to offer better medicine ▶ The share capital is conditionally increased by up to to the articles of association require the consent of the general and health care services to ever more people. Every business € 24,257,969.00 by the issuance of new ordinary bearer partner, Fresenius Management SE. The Supervisory Board decision we make is consistently guided by the well-being of shares (Conditional Capital IV). The conditional capital is entitled to make such amendments to the articles of associ- our patients. It is at the center of everything we do. How- increase will only be implemented to the extent that sub- ation that only concern their wording without a resolution ever, economic success is not an end in itself for Fresenius; it scription rights have been, or will be, issued in accor- of the General Meeting. rather enables us to keep investing in better medicine. dance with the Stock Option Program 2013 and the hold- Under certain circumstances, a change of control as the ers of subscription rights exercise their rights, and the result of a takeover bid would impact our major long-term OUR STRATEGIC FOCUS Company does not grant own shares to satisfy the subscrip- financing agreements, which contain customary change of con- Fresenius invests in and manages a diversified portfolio of tion rights. trol provisions that grant creditors the right to request early health care businesses that create value. With our four busi- repayments of outstanding amounts in case of a change of ness segments we focus on a defined number of health care The Company is authorized, until May 17, 2023, to purchase control. The majority of our financing arrangements, in par- areas. We continuously develop those business areas and and use its own shares up to a maximum amount of 10% ticular our bonds placed in the capital markets, however, strive to assume leading positions in the respective health care of the subscribed capital. In addition, when purchasing its own require that the change of control is followed by a decline or markets and segments. Fresenius has defined strategic prior- shares, the Company is authorized to use equity derivatives a withdrawal of the Company’s rating or that of the respec- ities to pursue its goal to strengthen the position of the with possible exclusion of any tender right. The Company had tive financing instruments. Company as a leading global provider of products and thera- not utilized these authorizations as of December 31, 2019. pies for critically and chronically ill patients: As the largest shareholder, Else Kröner-Fresenius-Stiftung, GOALS AND STRATEGIES Bad Homburg, Germany, informed the Company on Decem- Demographic change is posing fundamental challenges to ▶ Profit from megatrends: gearing businesses towards the ber 12, 2019, that it held 148,298,594 ordinary shares of societies. People worldwide are not only living longer, the megatrends health and demographics Fresenius SE & Co. KGaA. This corresponds to an equity inter- pace of population aging is also increasing significantly. Thus, Fresenius | Annual Report 2019 est of 26.6% as of December 31, 2019. countries around the world are facing major challenges with Amendments to the articles of association are made in respect to their health and social systems. As people across the accordance with Section 278 (3) and Section 179 (2) of the world get older, diminished well-being as well as chronically German Stock Corporation Act (AktG) in conjunction with ill and critically ill patients are becoming a major global public health challenge 1. A longer life, however, also offers opportu- 1 WHO 2018: “Ageing and health“ 37


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub ▶ Create value: long-term value creation by allocating capi- INNOVATION IMPROVE PROFITABILITY tal to profitable growth areas Fresenius’ goal is to continue building on its strength in tech- Fresenius is committed to continuously improving Group ▶ Act responsibly: commitment to responsible manage- nology, its competence and quality in patient care, and its profitability. We foster intragroup coordination and collabora- ment and ethical business principles ability to manufacture cost-effectively. Developing products tion, seeking both sales growth and efficiency. To contain ▶ Collaborate: fostering intragroup cooperation to leverage and systems that provide a high level of safety and user- costs, we particularly concentrate on making our production synergies friendliness and enable tailoring to individual patient needs is plants more efficient, exploiting economies of scale, leverag- an inherent part of our strategy of sustainable and profitable ing the existing marketing and distribution infrastructure OUR CORE COMPETENCIES growth. We will continue to develop ever more effective prod- more intensively, and practicing strict cost control. We con- ucts and treatment methods for critically and chronically ill tinue to identify specific measures that optimize our portfolio QUALITY patients to offer best-in-class medical standards. and make Fresenius an even more effective organization. At Fresenius, the patient always comes first. We commit our- In 2019, Fresenius Medical Care, for example, strength- By focusing on our operating cash flow and employing selves to strive for the highest quality in our products, ser- ened its position in home dialysis and became a world leader efficient working capital management, we will increase our vices, and therapies. All business segments make an overall by acquiring the U.S. -based medical technology and ser- investment flexibility and improve our balance sheet ratios. contribution to increasing the quality and efficiency of health vices company NxStage. Fresenius Medical Care also strives Another goal is to optimize our weighted average cost of care. This enables access to high-quality and affordable medical to identify new opportunities in value-added technologies capital (WACC ) by deliberately employing a balanced mix care for a growing number of people. and approaches on an ongoing basis, for example through the of equity and debt funding. For Fresenius Medical Care, customer health and product Fresenius Medical Care Ventures fund. Fresenius Kabi is In the present capital market conditions, we believe we safety mean creating a safe and healthy clinical environ- currently developing biosimilars with a focus on oncology and optimize our cost of capital if we hold the net debt / EBITDA ment. The quality and safety of its products and services are the autoimmune diseases, making affordable treatments accessi- ratio within a range of 3.0 to 3.5 (including IFRS 16 adoption). foundation of Fresenius Medical Care’s success. Fresenius ble for even more patients. Fresenius Helios’ goal is to foster Kabi’s corporate philosophy “caring for life” describes the com- knowledge sharing across its international hospital network DRIVE INTERNATIONALIZATION pany’s commitment to improving the quality of life of its and use innovation to develop the best health care services and Fresenius’ goal is to ensure and expand its long-term position patients. The quality and safety of its products and services is therapies for its patients. Moreover, Fresenius Helios is driv- as a leading international provider of products and services hence of paramount importance to Fresenius Kabi. Fresenius ing forward initiatives focused on occupational medicine for in the health care industry. To this end, and to geographically Helios places great importance on high standards of treatment employees, prevention programs, or the reduction of waiting expand our business, we plan to grow organically as well as quality, hygiene, patient safety, and care in its hospitals. Also times for appointments with specialists, for example by offer- through selective small to medium-sized acquisitions, comple- at Fresenius Vamed, quality processes are designed based on ing digital services. Fresenius Vamed’s goal is to realize menting our existing portfolio. We are constantly seeking Fresenius | Annual Report 2019 established standards. further projects in integrated health care services and to sup- new above-average growth opportunities in developing as well port patient-oriented health care systems more efficiently. as in emerging countries. Our aim is to strengthen our activities in these regions and successively introduce further products from our portfolio into these markets. 38


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub Fresenius Medical Care is the worldwide leader in dialysis, opportunities for cross-border synergies in areas such as lab- time models and incentive programs to ensure that our long- with a strong market position in the United States. Future oratory services and joint purchasing. The cross-border term needs for highly qualified employees are met. Further- opportunities in dialysis will arise from further expansion in exchange of experience and knowledge is gradually creating more, we offer our employees opportunities to develop their dialysis care and products worldwide. Fresenius Kabi is the economic prerequisites for the further internationaliza- careers in an international and dynamic environment. the market leader in infusion therapy in Europe and Latin tion of our hospital business. America. Fresenius Vamed will further expand its position as a global CORPORATE PERFORMANCE CRITERIA In Europe and the key markets in Asia-Pacific (including specialist for projects and services for hospitals and other The Management Board makes operational and strategic man- China) and Latin America, Fresenius Kabi is the leader in the health care facilities. With the integration of Fresenius Helios’ agement decisions based on our Group-wide performance clinical nutrition market. In the United States, Fresenius Kabi German inpatient rehabilitation business, Fresenius Vamed is indicators for growth, profitability, liquidity, capital efficiency, is one of the leading players in the market for generic IV strengthening its position as one of the leading providers of and capital management. The most important financial per- drugs. In addition, Fresenius Kabi is one of the most important private rehabilitation services in Europe. Furthermore, the col- formance indicators for us are explained below and a definition providers of transfusion technology. Fresenius Kabi plans laboration with Fresenius Helios will be further intensified. This is provided in the glossary of financial terms on pages 272 to roll out products from its existing portfolio to the United applies, for example, to technical services or purchasing, to 274. States and other growth markets. Market share is to be where Fresenius Helios is cooperating with Fresenius Vamed expanded further through the launch of new products in the for selected products. GROWTH field of IV drugs, infusion therapy, clinical nutrition, and In line with our growth strategy, sales growth (in constant medical devices / transfusion technology. EMPLOYEES currency) of the Group and, in our business segments, With 86 hospitals, Fresenius Helios operates in nearly all The commitment of our more than 290,000 employees world- organic sales growth in particular are of central importance. of Germany. Building on this, Fresenius Helios is now in the wide is key for the success and sustained growth of Fresenius. position to develop new patient care models. To benefit from We firmly believe in a culture of diversity, as we are convinced PROFITABILITY the trend towards outpatient treatment, Helios Germany that different perspectives, opinions, experiences, and values We use earnings before interest and taxes (EBIT) and EBIT has been expanding outpatient service offerings in a separate enable Fresenius to continue successfully growing as a global growth (in constant currency) to measure the profitability of division. Helios Spain has attractive growth opportunities health care company. To tackle the upcoming challenges, the segments. At Group level, we primarily use net income through the expansion and construction of hospitals, and attracting new employees is key for the growth of our company. and net income growth (in constant currency). In order to be potential for further consolidation in the highly fragmented We regularly participate in recruiting events and career fairs able to better compare the operating performance over sev- private hospital market in Spain. Helios exploits upcoming to attract new talent, and invite our management to meet future eral periods, the results are adjusted by special items if nec- Fresenius employees at “Meet the Board”. Not only do we essary. Fresenius | Annual Report 2019 try to attract new talent, we also want to retain and develop our people at Fresenius. We offer a variety of flexible working- 39


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub LIQUIDITY FINANCIAL PERFORMANCE INDICATORS At the corporate level, cash flow margin is used as the main liquidity indicator. In order to further analyze and optimize the Growth Profitability Liquidity Capital efficiency Capital management contributions of our business segments to operating cash flow, we also use the additional performance indicators DSO 1 Sales growth Operating income (EBIT) Operating cash flow EBIT Net debt (in constant currency) +/- Financial result ÷ Sales - Income taxes ÷ EBITDA (days sales outstanding) and SOI 1 (scope of inventory). These Sales growth - Income taxes = Cash flow margin = NOPAT = Leverage ratio - Minority interests (organic) ÷ Invested capital show the amount of receivables or inventories in relation = Net income = ROIC to the sales or costs of the services rendered during the past EBIT growth (in constant currency) EBIT reporting period. ÷ Operating assets Net income growth = ROOA (in constant currency) CAPITAL EFFICIENCY We work as profitably and efficiently as possible with the capital provided to us by shareholders and lenders. In order to INVESTMENT AND ACQUISITION PROCESS tion, research & development, quality, information technology, manage this, we primarily calculate the Return on Invested Our investments and acquisitions are carried out using a human resources, and the environment. Based on investment 2 2 Capital (ROIC ) and the Return on Operating Assets (ROOA ) . detailed coordination and evaluation process. As a first step, volume, a project is submitted for approval to the executive the Management Board sets the Group’s investment targets committees or respective managements of the business seg- CAPITAL MANAGEMENT and the budget based on investment proposals. In the next ments, to the Management Board of Fresenius Management We use the ratio of net debt and EBITDA as the key parameter step, the respective business segments and the internal SE, and / or its Supervisory Board. for managing the capital structure. This measure indicates Acquisition & Investment Council (AIC) determine the proposed the degree to which a company is able to meet its payment projects and measures, taking into account the overall strat- RESEARCH AND DEVELOPMENT obligations. Our business segments usually hold leading egy, the total investment budget, and the required and poten- Product and process development and the improvement of positions in growing and mostly non-cyclical markets. Since tial return on investment. We evaluate investment projects therapies are at the core of our growth strategy. Fresenius the majority of our customers are of high credit quality, they based on commonly used methods, such as internal rate of focuses its R & D efforts on its core competencies in the fol- generate mainly stable, predictable cash flows. According to return (IRR) and net present value (NPV). Within the frame- lowing areas: the management assessment, the Group is therefore able work of the due diligence process, opportunities and risks asso- to use debt to finance its growth to a greater extent than com- ciated with the potential acquisition target are analyzed and ▶ Dialysis panies in other industries. assessed. In addition to reviewing the business model, key ▶ Generic IV drugs Fresenius | Annual Report 2019 financial figures and tax issues, and the resulting company ▶ Biosimilars valuation, this also includes a comprehensive analysis of the ▶ Infusion and nutrition therapies market and competitive environment, regulatory framework ▶ Medical devices conditions, and legal aspects. Furthermore, the assessment also implies various issues relating to compliance, produc- 1 Does not reflect a core performance indicator 2 For a detailed calculation of ROIC and ROOA please see page 274 40


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Apart from new products, we are concentrating on developing Our main research sites are in Europe, the United States, and R & D EXPENSES BY SEGMENT 1 optimized or completely new therapies, treatment methods, India. Product-related development activities are also carried and services. out in China. As part of the 2019 investment year, research and devel- Fresenius Medical Care 25% opment activities were intensified and additional investments FRESENIUS MEDICAL CARE Fresenius Kabi 75% made in our research and development centers. Health care systems face major financial challenges not only We opened our new research and development center for at present, but also in the long term. With regard to our R & D biosimilars in Eysins in the Swiss canton of Vaud. The new activities, this confirms our intention to develop innovative development center is an important step in expanding our products that both meet high quality standards and are also 2019: € 677 million capacity to develop new biosimilar products. At the same affordable. From our experience in operating our own dial- time, Fresenius Kabi is also expanding its enteral nutrition ysis centers and the care of patients at home, we know that research and development activities in Wuxi. these are not incompatible goals. Research and development expenses 1 were € 677 million Our R & D strategy is globally oriented. This will enable us include numerous academic institutions, such as research (2018: € 649 million), approximately 6.8% of our product to respond even better to the growing global demand for institutes at prestigious universities in the United States. sales (2018: 6.7%). Research services provided by third par- high-quality and cost-efficient treatment methods. However, Another partner is the Renal Research Institute (RRI) in New ties are mainly used by Fresenius Kabi, especially in the field we also take regional market conditions into account and York. This subsidiary of Fresenius Medical Care North of biosimilars. Detailed figures are included in the segment offer a diverse product portfolio. In the future, we want to pro- America is a renowned institution in the field of clinical reporting on page 172 f. vide innovative, competitive products even more efficiently research into chronic kidney failure. Together we are working As of December 31, 2019, there were 3,412 employees and focus more strongly on developing countries. on fundamental issues relating to dialysis treatment. We are in research and development (2018: 3,042). Of that number, In addition to R & D activities carried out at our company, we increasingly collaborating with start-ups to support an open 1,200 were employed at Fresenius Medical Care (2018: 970) collaborate with external partners with the aim of building culture that promotes innovation and to gain access to the and 2,200 at Fresenius Kabi (2018: 2,072). a comprehensive innovation and technology network. These latest technologies both in our core business and in adjacent areas that are of future strategic interest to us. We are also developing a portfolio of products that meet KEY FIGURES RESEARCH AND DEVELOPMENT the strictest requirements in terms of quality and efficiency, especially for the emerging markets. 2019 2018 2017 2016 2015 Fresenius | Annual Report 2019 R & D expenses, € in millions 1 677 649 538 515 438 as % of product sales 1, 2 6.8 6.7 5.7 5.5 5.0 R & D employees 3,412 3,042 2,772 2,770 2,247 1 2019 and 2018 before revaluations of biosimilars contingent purchase price liabilities 2 2015, 2016, 2018, 2019 excluding impairment losses from capitalized in-process R & D activities 1 Before revaluations of biosimilars contingent purchase price liabilities 41


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub FRESENIUS KABI Thus, we develop ready-to-use products that are especially such as rheumatoid arthritis, Crohn’s disease, and psoriasis Fresenius Kabi’s research and development activities concen- convenient and safe and help to prevent application errors in (skin disease). We launched Idacio in 2019 on important trate on products for the therapy and care of critically and day-to-day medical care. These are, for example, ready-to-use European markets and submitted it for marketing authorization chronically ill patients. Our products help to support medical solutions in our freeflex infusion bags and pre-filled syringes. in several more countries outside of Europe. advancements in acute and post-acute care and improve the Drugs in pre-filled syringes are simpler and safer to use than The clinical development of MSB 11455, a biosimilar patients’ quality of life. At the same time, our products are help- traditional applications. In 2019, we introduced several prod- candidate of Pegfilgrastim 4, has already been successfully final- ing to ensure that an increasing number of people world- ucts in pre-filled syringes, including the cytostatic drug ized and the preparation of the submission for marketing wide have access to high-quality, modern therapies. Fulvestrant, which we introduced in the United States as a authorization is underway. Pegfilgrastim stimulates the for- Our development expertise includes all the related com- pre-filled, ready-to-use syringe. This type of application mation of white blood cells (leukocytes) in certain cancer ponents, such as the drug raw material, the pharmaceutical helps to increase safety in everyday medical life. treatments. MSB 11456 5, a biosimilar candidate of Tocilizumab, formulation, the primary packaging, the medical device In the biosimilars business, we have a pipeline of mole- which is used in chronic inflammatory diseases such as needed for application of drugs and infusions, and the produc- cules at different stages of development, with a focus on rheumatoid arthritis, is in the clinical phase of development. tion technology. In the area of biosimilars, we have special- autoimmune and oncology diseases. A biosimilar is a biolog- Clinical nutrition provides care for patients who cannot ized in the development of products for the treatment of oncol- ical medicine highly similar to another already approved nourish themselves normally or sufficiently. This includes, ogy and autoimmune diseases. biological medicine (which is called the “reference medicinal for example, patients in intensive care and those who are seri- In the area of IV drugs, we are continuously working on the product”). The development of a biosimilar is different from ously or chronically ill or malnourished. Early and correct extension of our drug portfolio. What matters most to us here the development of new drugs. For example, there is no need intervention can help prevent malnutrition and its conse- is that we launch new generic drug formulations directly after for basic research to prove the mechanism of action, or for quences. the patents of the branded products expire. In addition, we are extended toxicity or dose-finding studies, since this has already In parenteral nutrition, we focus on products that make working on the continuous improvement of non-patented IV been established for the reference medicinal product. The a significant contribution to improving clinical treatment and drugs already on the market, such as new formulations and focus is instead on similarity to the reference medicinal prod- the nutritional condition of patients, and on innovative con- dosage forms, as well as primary packaging. In 2019, we had uct, to ensure efficacy and safety. tainers such as our multi-chamber bags that are safe and con- more than 100 projects in the area of generics. We focus, On April 3, 2019, we received the European marketing venient in everyday use. among other things, on complex formulations such as active authorization from the European Commission 3 for Idacio, an ingredients in liposomal 1 solutions and product improvements adalimumab 2 biosimilar, for all indications of the reference that bring added value to both medical staff and patients. medicine, which can be used for chronic inflammatory diseases Fresenius | Annual Report 2019 1 Liposomes are tiny capsules used as a vehicle for active pharmaceutical ingredients. They allow for a targeted transportation of these ingredients to the location where they are needed within an organism. 2 Idacio is a biosimilar of Humira ® and has not yet been approved by all relevant health authorities. Humira ® (Adalimumab) is a registered trademark of AbbVie Biotechnology Ltd. 3 The decision of the European Commission is valid in all the 28 member countries of the European Union plus in the European Economic Area (EEA) countries Norway, Iceland, and Liechtenstein. 4 MSB 11455 is developed as a biosimilar candidate of Neulasta ® and has not yet been approved by the relevant health authorities. Neulasta ® (Pegfilgrastim) is a registered trademark of Amgen Inc. 5 MSB 11456 is a biosimilar candidate of Tocilizumab and has not yet been approved by the relevant health authorities. Actemra ® / RoActemra ® (Tocilizumab) are registered trademarks of Chugai Seiyaku Kabushiki Kaisha. 42


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub In addition to our own research, Fresenius Kabi also supports higher concentration of nutrients to facilitate the intake of In transfusion technology, we are working intensively on prod- external research projects that contribute to improving the the necessary amount thereof. In our development work, ucts for use in extracorporeal photopheresis. In this therapy nutritional care of critically ill patients. As part of this approach, we also work continuously to adapt the formulations of our method, certain blood cells outside the body are treated with in 2019, we developed “Jumpstart”, a funding program to products to regional and local requirements. ultraviolet light (phototherapy). This method is used to treat support research by young scientists on parenteral nutrition In the area of infusion solutions, we are continuously various immunological diseases, among others to kill malig- for critically ill patients and to give them the opportunity working on improved and new primary containers with the aim nant immune cells (lymphocytes) outside the body. In 2019, to receive a research prize to support their research work. An of increasing the efficiency and safety in the daily hospital we received the CE mark for our Amicus cell separator for use independent jury, consisting of internationally renowned routine. These include, for example, port systems that do not in extracorporeal photopheresis. scientists in the area of clinical nutrition, is responsible for require the use of needles and thus reduce the risk of injury We are working intensively on further product devel- selecting the fellows. The first Jumpstart Research Prize and the number of steps involved in their application. We are opments in the area of apheresis. In 2019, for example, we was awarded at this year’s congress of the European Society also continuously working on our product range and open- updated our software in order to increase the volume of for Parenteral and Enteral Nutrition (ESPEN). ing up new markets or expanding our product range in estab- plasma collected during the donation process when using In 2019, we continued the development of parenteral for- lished markets. our Amicore apheresis device. mulations. We are concentrating on formulations that are In our work in medical devices, we are constantly work- tailored to the needs of individual patient groups. In addition ing on further developing our existing portfolio, as well as on EMPLOYEES to global development projects, we are working on products new products. Particularly in the field of infusion technology, The knowledge, experience, and commitment of our employ- for specific markets such as the United States, China, and new software connections can contribute to simplifying daily ees are critical to our success. For this reason, Fresenius Europe. work in hospitals. In 2019, we completed the development values a culture of diversity. The interplay of a wide range of In the development of our enteral nutrition, we are work on our new Vigilant Software Suite and began to intro- views, opinions, cultural backgrounds, experiences, and focusing our research and development activities on product duce it in the market. The Vigilant Software Suite enables values helps us to achieve our full potential and contributes concepts that support therapeutic compliance and thus the all software solutions used in hospitals in our infusion pump to our success. success of therapy. In our development work, it is important system Agilia Connect to be combined into one therapy infor- The number of employees increased by 6% to 294,134 to us that we develop products that can optimally satisfy the mation system, thus creating more data and license security. employees at the end of 2019. needs of special patient groups. These include, for example, In 2019, we received the CE mark for the Vigilant Software Personnel expenses for the Fresenius Group were developing products with a wide variety of flavors to offer Suite. € 14,355 million in 2019 (2018: € 13,426 million), equivalent a wide choice of daily treatments, as well as products with a In addition, development work on our new infusion man- to 40.5% of sales (2018: 40.0%). Personnel expenses agement system is almost complete. This system features are above the previous year’s level. Personnel expenses per Fresenius | Annual Report 2019 modern operating systems and will enable new therapy and treatment procedures in the intensive care unit and operat- ing room. 43


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report employee were at € 49.5 thousand (2018: € 48.6 thousand) EMPLOYEE RECRUITMENT AND EMPLOYEES BY REGION and at € 48.7 thousand in constant currency. In Germany, PERSONNEL DEVELOPMENT Fresenius companies have signed tariff agreements with IG In order to ensure that our long-term needs for highly quali- Latin America and other regions 9% BCE, Marburger Bund, and ver.di (labor union for services). fied employees are met, and to recruit new employees, we Asia-Pacific 9% There were no significant structural changes to compensation make use of online personnel marketing, regularly participate or employment agreements in 2019. in recruiting events and careers fairs, and organize our own Europe 56% recruiting events. In addition, we try to encourage long-term (thereof Germany 31%) North America 26% PERSONNEL EXPENDITURE retention with attractive development programs. The approaches and measures for employee recruitment and € in millions 2019 2018 2017 personnel development in the business segments are based 2019: 294,134 Fresenius Medical Care 6,800 6,440 6,898 Fresenius Kabi 1,754 1,506 1,443 on the market requirements of each segment. They are coor- Fresenius Helios 4,878 4,815 4,672 dinated, developed, and realized independently for each busi- Fresenius Vamed 774 545 358 ness segment. men in management positions is available within the Corpo- Corporate / Others 149 120 125 At Fresenius, qualifications and experience are the only rate Governance Declaration pursuant to Section 315d and Total 14,355 13,426 13,496 things that matter in the selection of personnel. Consequently, Section 289f of the German Commercial Code (HGB) on our at Fresenius we have the aspiration that women and men website, see www.fresenius.com/corporate-governance, as well HUMAN RESOURCES MANAGEMENT with comparable qualifications will continue to have the same as on page 144 f. of the Annual Report. We are constantly adapting our human resources tools to career opportunities. As of December 31, 2019, the propor- You can visit our award-winning careers portal at meet new requirements arising from demographics, the trans- tion of female employees within the Fresenius Group was 68%. www.career.fresenius.com. formation to a service economy, skills shortages, and the Women also held 32% of senior management positions, compatibility of job and family life. For example, we offer based on the number of worldwide participants in the Long Further information on employment management can be flexible working hours. Term Incentive Plan 2018 (LTIP 2018). Detailed information found in our Group Non-financial Report on pages 114 ff. of on the statutory targets for the participation of women and our Annual Report. NUMBER OF EMPLOYEES Fresenius | Annual Report 2019 % of total Change as of Dec. 31, 2019 Dec. 31, 2018 Dec. 31, 2017 2019 / 2018 Dec. 31, 2019 Fresenius Medical Care 128,300 120,328 121,245 7% 44% Fresenius Kabi 39,627 37,843 36,380 5% 14% Fresenius Helios 106,377 100,144 105,927 6% 36% Fresenius Vamed 18,592 17,299 8,667 7% 6% Corporate / Other 1,238 1,136 1,030 9% 0% Total 294,134 276,750 273,249 6% 100% 44


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group | Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report CHANGES TO THE MANAGEMENT BOARD COST OF MATERIAL BY BUSINESS SEGMENT 1 RESPONSIBILITY, ENVIRONMENTAL Dr. Jürgen Götz, Chief Legal and Compliance Officer, and MANAGEMENT, SUSTAINABILITY Labor Relations Director, has asked the Supervisory Board of Fresenius Vamed 9% We orient our activities within the Fresenius Group to long- Fresenius Management SE not to renew his current contract term goals, and thus ensure that our work is aligned to the Fresenius Helios 21% after the end of the appointment period. He will therefore needs of patients and employees, as well as shareholders and leave the Management Board of Fresenius Management SE Fresenius Medical Care 46% business partners, in a sustainable manner. Our responsibility at his own request on June 30, 2020. as a health care Group goes beyond our business opera- Fresenius Kabi 24% tions. We are committed to protecting nature as the basis of PROCUREMENT life and using its resources responsibly. It is our mission to In 2019, the cost of raw materials and supplies and of pur- 2019: € 9,073 million constantly improve our performance in the areas of environ- chased components and services was € 9,073 million mental protection, occupational health and technical safety, (2018: €8,135 million) and increased by 12% due to business 1 Before consolidation and product responsibility and logistics, and to comply with expansion. legal requirements. An efficient value chain is important for our profitability. In an environment characterized by ongoing cost-containment QUALITY MANAGEMENT Further information can be found in our Group Non-financial pressure from health insurers, as well as price pressure, The quality of our products, services, and therapies is the Report on pages 125 ff. of our Annual Report. security and quality of supply play an important role. Within basis for optimal medical care. All processes are subject to the each business segment of the Fresenius Group, procurement highest quality and safety standards, for the benefit of the processes are coordinated centrally, enabling us to bundle patients and to protect our employees. Our quality manage- similar requirements, negotiate global framework agreements, ment has the following three main objectives: constantly monitor market and price trends, and ensure the safety and quality of materials. ▶ to identify value-enhancing processes oriented toward efficiency and the needs of our customers € in millions 2019 2018 ▶ to monitor and manage these processes on the basis of Cost of raw materials and supplies 7,545 6,895 performance indicators Write-downs of raw materials, supplies, and ▶ to improve procedures purchased components 0 0 Fresenius | Annual Report 2019 Cost of purchased components and services 1,528 1,240 Total 9,073 8,135 Further information on quality management at Fresenius can be found in our Opportunities and Risk Report on page 81 f. as well as our Group Non-financial Report on pages 94 ff. of our Annual Report. 45


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub ECONOMIC REPORT As in previous years, the United States had the highest per Our most important markets developed as follows: capita spending (US$ 10,586). Germany ranked fourth among HEALTH CARE INDUSTRY the OECD countries with US$ 5,986. THE DIALYSIS MARKET The health care sector is one of the world’s largest industries In Germany, 85% of health spending was funded by In 2019, the global dialysis market (products and services) and we are convinced that it shows excellent growth oppor- public sources in 2018, above the average of 74% in the was worth approximately € 80 billion. In constant currency, tunities. OECD countries. the global dialysis market grew by about 4%. Most of the OECD countries have enjoyed large gains in Worldwide, approximately 4.3 million patients with The main growth factors are: life expectancy over the past decades, thanks to improved chronic renal failure were treated in 2019. Of these patients, living standards, public health interventions, and progress in around 3.5 million received dialysis treatments and about ▶ rising medical needs deriving from aging populations, medical care. In 2017, average life expectancy in the OECD 815,000 were living with a transplanted kidney. About 89% ▶ the growing number of chronically ill and multimorbid countries was 80.7 years. were treated with hemodialysis and 11% with peritoneal patients, Health care structures are being reviewed and cost-cutting dialysis. Fresenius Medical Care reported strong growth in ▶ stronger demand for innovative products and therapies, potential identified in order to contain the steadily rising home hemodialysis and now treats more than 25,000 patients ▶ advances in medical technology, and health care expenditures. However, such measures cannot at home in North America. ▶ the growing health consciousness, which increases the compensate for the cost pressure. Market-based elements The major growth driver is the growing number of patients demand for health care services and facilities. are increasingly being introduced into the health care system suffering from diabetes and high blood pressure, two dis- to create incentives for cost- and quality-conscious behavior. eases that often precede the onset of chronic kidney failure. In the emerging countries, additional drivers are: Overall treatment costs will be reduced through improved The number of dialysis patients worldwide increased quality standards. In addition, ever-greater importance is being by 6% in 2019. In the United States, Japan, and Western and ▶ expanding availability and correspondingly greater placed on disease prevention and innovative reimbursement demand for basic health care, and models linked to treatment quality standards. ▶ increasing national incomes and hence higher spending on health care. HEALTH CARE SPENDING AS % OF GDP At the same time, the cost of health care is rising and claim- in % 2018 2010 2000 1990 1980 1970 ing an ever-increasing share of national income. Health care USA 16.9 16.4 12.5 11.3 8.2 6.2 spending averaged 8.8% of GDP in the OECD countries in France 11.2 11.2 9.5 8.0 6.7 5.2 Fresenius | Annual Report 2019 2018, with an average of US$ 3,994 spent per capita. Germany 11.2 11.0 9.8 8.0 8.1 5.7 Switzerland 12.2 10.7 9.8 7.9 6.6 4.9 Spain 8.9 9.0 6.8 6.1 5.0 3.1 China 5.0 4.4 4.5 - - - Source: OECD Health Data 2019; data on the dialysis market is based on company research, Database for China 2016 46


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    Media Hub To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Central Europe, patient growth was slower than in economically Dialysis reimbursement systems differ from country to A reasonable estimate of the market volume of coordinated weaker regions, where growth is mostly above 6%. country and often vary even within individual countries. The care is not possible due to the large number of different ser- The prevalence rate, which is the number of people with public health care programs, the Centers for Medicare & vices. We currently offer coordinated care services mainly in terminal kidney failure treated per million population, differs Medicaid Services (CMS), cover the medical services for the North America and Asia-Pacific. Our services in Care Coordina- widely from region to region. The significant divergence in majority of all dialysis patients in the United States. tion are adapted to the requirements of these markets. The prevalence rates is due, on the one hand, to differences in spectrum of our coordinated care services may vary across age demographics, incidence of renal risk factors, genetic pre- Dialysis products countries and regions, depending on the particular reim- disposition, and cultural habit, such as nutrition. On the In 2019, the global dialysis products market was worth bursement system or market specifics. other hand, access to dialysis treatment is still limited in many around € 14 billion. countries. A great many individuals with terminal kidney Fresenius Medical Care is the leading provider of dialysis THE MARKET FOR GENERIC IV DRUGS, failure do not receive treatment and are therefore not included products in the world, with a market share of 36%. BIOPHARMACEUTICALS, CLINICAL NUTRITION, in the prevalence statistics. Fresenius Medical Care is the leading supplier worldwide INFUSION THERAPY, AND MEDICAL DEVICES / of hemodialysis products, with a market share of 41%, and TRANSFUSION TECHNOLOGY 1 Dialysis care has a market share of approximately 16% in the worldwide The global market for generic IV drugs, biopharmaceuticals, In 2019, the global dialysis care market (including renal market of products for peritoneal dialysis. clinical nutrition, infusion therapy, and medical devices / pharmaceuticals) was worth around € 66 billion. transfusion technology was worth about € 97 billion in 2019. About 10% of worldwide dialysis patients were treated Care Coordination Thereof, the global market for generic IV drugs was worth by Fresenius Medical Care. With 3,994 dialysis clinics and The field of Care Coordination currently includes health about € 38 billion 2. Fresenius Kabi was able to enter addi- 345,096 dialysis patients in around 50 countries, Fresenius services relating to vascular surgery, coordinated delivery of tional market segments of the global addressable market due Medical Care operates by far the largest and most inter- pharmacy services, and outpatient care, for example. to targeted investments and the expansion of our product national network of clinics. In the United States, Fresenius Chronic diseases such as diabetes or cardiovascular portfolio, in the areas of complex formulations, liposomal solu- Medical Care treated approximately 38% of dialysis patients diseases are steadily increasing, and account for more than tions, and pre-filled syringes, among other items. in 2019. The market for dialysis care in the United States is two-thirds of all deaths worldwide. In many countries, the The market for IV drugs grew by 2% worldwide and by already highly consolidated. majority of the health expenditure is spent on the treatment 3% in the important European market. The market growth Outside the United States, the market for dialysis care of chronic diseases. To counteract the increasing cost pres- is mainly achieved through products that are brought to mar- is much more fragmented. Here, Fresenius Medical Care sure, more and more health care systems – such as that in the ket when the original drug goes off patent, as well as through competes mainly with clinic chains, independent clinics, and largest market for Fresenius Medical Care, the United States – Fresenius | Annual Report 2019 with clinics that are affiliated with hospitals. are no longer compensating for individual services, but rather for holistic and coordinated care. 1 Market data based on company research and refers to Fresenius Kabi’s relevant markets. This is subject to annual volatility due to currency fluctuations and patent expiries of original drugs in the IV drug market, among other things. 2 Market definition adjusted as in prior year: among other items, sales volume of non-patented branded drugs is included. 47


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub original off-patent products that are offered at steady prices hospital costs through shorter stays and less nursing care. leading suppliers worldwide. International competitors due to a unique selling proposition. Additionally, market growth In the market for clinical nutrition, Fresenius Kabi is one of the include Baxter, B. Braun, and Becton, Dickinson and Company, is based on price increases for single molecules by individual leading companies worldwide. In parenteral nutrition, the as well as ICU Medical. competitors. In the United States, the most important generic company is the leading supplier worldwide. In the market for In 2019, the global market for transfusion technology IV drug market for Fresenius Kabi, the company is one of the enteral nutrition, Fresenius Kabi is one of the leading sup- was worth about € 3 billion and grew by about 4%. In the leading suppliers. Competitors include Pfizer, Sanofi, Sandoz, pliers in Europe, Latin America, and China. In parenteral nutri- transfusion technology market, the areas of plasma collection, Teva Pharmaceutical Industries, and Hikma. tion, competitors include Baxter, B. Braun, JW Pharma, and therapeutic apheresis, and cell therapy are experiencing The biopharmaceutical market segment is one of the Kelun Pharma. In the market for enteral nutrition, Fresenius positive growth. The decline in the demand for blood bags trig- fast-growing segments in the health care business. The rele- Kabi competes with, among other companies, Abbott, Nestlé, gered by new treatment methods in Europe and the United vant market for the targeted original biopharmaceuticals, and Danone. States in recent years is coming to an end. In transfusion tech- all in the therapeutic areas of oncology and autoimmune dis- In 2019, Fresenius Kabi considers its global market for nology, Fresenius Kabi is one of the world’s leading com- eases, is worth about € 37 billion and grew by 13%. infusion therapy to have been worth about € 6 billion. In panies. Competitors include Haemonetics, Macopharma, and In 2019, the global market for clinical nutrition was Europe, the market for infusion therapies grew by around 1%, Terumo. worth about € 9 billion. In Europe, the market grew by about with growth in Latin America, Africa, and Asia-Pacific of up 4%. In Latin America, the clinical nutrition market saw to 5% in individual regions. After the strong growth in 2018 THE HOSPITAL MARKET 1 growth of up to 10%. In Asia-Pacific, the market for enteral due to the recovery of the previous supply shortages, the In 2017, the market of acute care hospitals in Germany was nutrition grew by about 10%. In the area of parenteral U.S. market showed a slight decline in 2019. Infusion therapies about € 102 billion 2, as defined by total costs of the German nutrition, Fresenius Kabi’s important market for three-chamber (e.g., electrolytes) are part of the medical standard in hospi- acute care hospitals (gross). Personnel expenses accounted bags grew by 10% in Asia-Pacific. In Africa, these two seg- tals worldwide. Market growth is mainly driven by increasing for about 62% of hospital costs, and material costs for 38%. ments also showed positive growth. There is growth potential product demand in emerging markets. Fresenius Kabi is the Personnel and material expenses rose by 5% and 3%, in clinical nutrition worldwide, because nutrition therapies market leader in infusion therapy in Europe and Latin America. respectively. are often not yet sufficiently used in patient care, although Competitors include B. Braun and Baxter. The admissions in the acute care hospital market studies have proven their medical and economic benefits. In 2019, the global market for medical devices was worth decreased by 0.5% in 2017. In cases of health- or age-induced nutritional deficiencies, for about € 4 billion and grew by 4%. In the medical devices The economic situation of the German hospitals wors- example, the administration of clinical nutrition can reduce market, the main growth drivers are IT-based solutions that ened compared with the previous year. In 2018, about 40% focus on application safety and therapy efficiency. In the of the hospitals recorded losses. A further 9% broke even, medical devices segment, Fresenius Kabi ranks among the Fresenius | Annual Report 2019 1 Most recent market data available: German Federal Statistical Office, 2017 data; German Hospital Institute (DKI), Krankenhaus Barometer 2019 2 The market is defined by total costs of the German acute care hospitals (gross), less academic research and teaching. 48


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub and 51% were able to generate a profit for the year. In 2017, ations. Among private hospital chains, our main competitors HOSPITAL BEDS BY OPERATOR about 30% recorded losses and about 60% were profitable. are Asklepios, Rhön-Klinikum, and Sana Kliniken. The often difficult economic and financial situation of the The so-called change in value figure is relevant for the Private hospitals 19% hospitals is accompanied by significant investment needs increase in the reimbursement of hospital treatments. It is driven by medical and technological advances, higher quality used to compensate for rising costs in the hospital market, requirements, and necessary modernizations. Moreover, particularly with regard to personnel and material costs. The Public hospitals 48% the federal states failed to meet their statutory obligation change in value figure is redetermined each year for the Independent non-profit to provide sufficient financial resources in the past. This following year. For 2019 it was 2.65% (2018: 2.97%). hospitals 33% results into a continuously increasing investment backlog. The On January 1, 2019, the Act to Strengthen Nursing Staff 1 German Hospital Institute (DKI) estimates that the annual (PpSG) entered into force. In contrast to 2018, in 2019, each 2017: 497,182 investment requirement at German hospitals is at least €6.8 additional or increased nurse position at the bed was com- Source: German Federal Statistical Office, 2017 data billion. This is about two and a half times the funding for pletely refinanced by the health insurers. In addition, since investment currently being provided by the federal states. 2019, a regulation setting a minimum level for nursing staff Helios Germany is the country’s leading hospital operator has applied to hospitals in Germany for the following areas: privately insured patients is opening up growth opportunities 2 in terms of sales, with a share of about 5.4% in the acute geriatrics, intensive care, cardiology, and trauma surgery. for private operators. Private supplemental insurance in Spain care market. The hospitals of Helios Germany compete mainly The private Spanish hospital market volume was about is relatively inexpensive. It is required in order to make use with individual hospitals or local and regional hospital associ- €15 billion 3 in 2018. In particular, the increasing number of of services in private hospitals. Among other factors, the com- paratively short waiting times for scheduled treatments make private hospitals attractive. KEY FIGURES FOR INPATIENT CARE IN GERMANY The opportunity for private hospital operators to expand Change their networks by building additional new hospitals opens up 2017 2016 2015 2014 2013 2017 / 2016 further potential. Since the Spanish market is highly frag- Hospitals 1,942 1,951 1,956 1,980 1,996 - 0.5% Beds 497,182 498,718 499,351 500,680 500,671 - 0.3% mented, it has consolidation potential. Length of stay (days) 7.3 7.3 7.3 7.4 7.5 -- Quirónsalud is the market leader in Spain, with a market Number of admissions (millions) 19.44 19.53 19.24 19.15 18.79 - 0.5% share of approximately 12% in the private hospital market in Average costs per admission in € 1 5,439 5,205 5,060 4,893 4,792 4.5% terms of sales. Quirónsalud competes with a large number of 1 Total costs, gross stand-alone private hospitals, as well as with smaller regional Fresenius | Annual Report 2019 Source: German Federal Statistical Office, 2017 data hospital chains such as Asisa, HM Hospitales, Hospiten, Ribera, Salud Sanitas, and Vithas. 1 German Hospital Institute (DKI), Krankenhaus Barometer 2019 2 Measured by 2018 sales in relation to gross total costs of acute care hospitals minus scientific research and teaching in Germany (latest available data: Federal Statistical Office, 2017 data) 3 Market data based on company research and refers to the addressable market of Quirónsalud. Market definition includes neither public-private partnership (PPP) nor occupational risk prevention centers (ORP). The market definition may differ from the definition in other contexts (e.g., regulatory definitions). 49


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    To our shareholders Group Management Report Group Non-Financial Report Corporate Governance Consolidated financial statements Further information Table of contents Fundamental information about the Group Economic report | Overall assessment of the business situation | Outlook | Opportunities and risk report Media Hub THE MARKET FOR PROJECTS AND SERVICES FOR Fresenius Vamed has become a leading provider in this field THE MANAGEMENT BOARD’S ASSESSMENT OF THE HOSPITALS AND OTHER HEALTH CARE FACILITIES in Central Europe. In emerging markets, the focus is on BUSINESS RESULTS AND SIGNIFICANT FACTORS The market for projects and services for hospitals and other building and developing infrastructure and improving the level AFFECTING OPERATING PERFORMANCE health care facilities is very fragmented. Therefore, an over- of health care. In 2019, Fresenius made significant investments in all busi- all market size cannot be determined. The market is country- Fresenius Vamed has no competitors that cover its com- ness segments to lay the foundation for future growth. We specific and depends, to a large extent, on factors such as prehensive portfolio of services across the entire life cycle. As achieved our Group sales and earnings targets for fiscal year public health care policies, government regulation, and levels a result, Fresenius Vamed has a unique selling proposition 2019. Hence, the Management Board is of the opinion that of privatization, as well as demographics and economic and of its own. Depending on the service, the company competes the Fresenius Group’s performance in 2019 was successful political conditions. In markets with established health care with international companies and consortia, as well as with overall. systems and mounting cost pressure, the challenge for local providers. Fresenius Medical Care’s sales (adjusted 1) in constant health care facilities is to increase their efficiency. Here, currency increased by 5% to € 17,329 million (2018: € 16,026 demand is especially high for sustainable planning and energy- OVERALL BUSINESS DEVELOPMENT million). On an adjusted basis 2, net income attributable to efficient construction, optimized hospital processes, and the shareholders of Fresenius Medical Care increased by 2% outsourcing of medical-technical support services to external THE MANAGEMENT BOARD’S ASSESSMENT (-2% in constant currency) to €1,369 million (2018: €1,341 specialists. This enables hospitals to concentrate on their OF THE EFFECT OF GENERAL ECONOMIC million). core competency − treating patients. In addition to offering DEVELOPMENTS AND THOSE IN THE HEALTH Fresenius Kabi achieved organic sales growth of 4%. services for health care facilities worldwide, Fresenius CARE SECTOR FOR FRESENIUS EBIT 3 increased by 5% (increased by 3% in constant cur- Vamed itself is active as a post-acute care provider in several Overall, the development of the world economy had an only rency) to € 1,200 million (2018: € 1,139 million). countries, including Germany, Austria, Switzerland, the negligible impact on our industry in 2019. On the whole, Organic sales growth of Fresenius Helios was 5%. EBIT 4 Czech Republic, and the United Kingdom. Through the inte- the health care sector, both in mature and growth markets, decreased by 4% to € 1,015 million (decreased by 3% 5 in gration of the post-acute care business of Fresenius Helios, developed positively, with continued increasing demand constant currency; 2018: € 1,052 million). Fresenius Vamed for health services. This had a positive effect on our business achieved organic sales growth of 16%. EBIT 4 grew by 19% development. (6% 5) to € 131 million (2018: € 110 million). Fresenius | Annual Report 2019 1 On an adjusted basis: 2018 adjusted for divestitures of Care Coordination activities; 2019 adjusted for IFRS 16 effect, excluding effects from NxStage transaction 2 2018 before special items (gain related to divestitures of Care Coordination activities, FCPA-related charge), after adjustments; 2019 before special items (transaction-related expenses, gain related to divestitures of Care Coordination activities, expenses associated with the cost optimization program), adjusted for IFRS 16 effect, excluding effects from NxStage transaction 3 On a comparable basis: before special items and adjusted for IFRS 16 effect 4 Adjusted for IFRS 16 effect 5 Adjusted for the post-acute care business transferred from Fresenius Helios to Fresenius Vamed as of July 1, 2018 For a detailed overview of special items and adjustments please see the reconciliation tables on pages 56 – 61. 50

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