Fresenius SE & Co. KGaA — Call Transcript 2018

Jul 31, 2018

Conference Call – Q2/18 Results

Bad Homburg, 31 July 2018

Safe Harbor Statement

This presentation contains forward-looking statements that are subject to various risks and uncertainties. Future results could differ materially from those described in these forward-looking statements due to certain factors, e.g. changes in business, economic and competitive conditions, regulatory reforms, results of clinical trials, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, and the availability of financing. Fresenius does not undertake any responsibility to update the forward-looking statements contained in this presentation.

Fresenius Group: Q2/18 Highlights

Fresenius Kabi's financial performance standing out

– segment guidance increased

Preparatory structural measures for regulatory requirements weigh on Helios Germany

FMC optimized U.S. Care Coordination portfolio

Successful transfer of German inpatient rehabilitation business from Helios to Vamed

Fresenius Group: Current Topics (1/2)

• Trial at Delaware Chancery Court took place from July 9 to 13
• Submission of Post-Trial Briefs until August 20
• Closing argument on August 23
• Judgement up to 90 days thereafter
• Potential appeal to the Delaware Supreme Court

HES

• Majority vote of the Co-ordination Group (CMDh) of the European Medicines Agency (EMA) for the maintenance of HES marketing authorization in the EU
• CMDh concluded that further risk minimization measures will be efficacious to ensure the safe usage of HES products
• The European Commission adopted this position
• Kabi's FY/18 outlook no longer considers a meaningful risk adjustment

Fresenius Group: Current Topics (2/2)

Pricing Environment North America

• Continue to see "nothing out of the ordinary" in U.S. injectables market
• Still low single-digit price declines for our base portfolio of injectable generics

Kabi growth initiatives

• Significant investment projects in U.S. plants to increase capacity and foster automation
• New compounding center in Massachusetts
• Enteral Nutrition New production facility planned in China
• Parenteral Nutrition steep ramp-up of SMOFlipid in the U.S. and further broadening of portfolio
• Won major Canadian pump tender

Biosimilars

• Progress of product pipeline according to plan
• Conditions for first small development milestone payment fulfilled in Q2/18; becomes cash-relevant in Q3/18

Helios

• Financial performance of Helios Germany impacted by:
• − Additional "DRG catalogue effects"
• − Preparatory structural activities (e.g. clustering) for anticipated regulatory measures
• Helios Spain continues to seize opportunities

Financial Review Q2/18

Fresenius Group: Q2/18 & H1/18 Profit and Loss Statement

€m	Q2/18	Δ YoY cc	H1/18	Δ YoY cc
Sales	8,382	5%1	16,503	6%1
EBIT	1,145	2%	2,199	-2%/2%2
EBIT (excl. biosimilars)	1,182	5%	2,271	1%/5%2
Net interest	-151	7%	-297	3%
Income taxes	-233	13%	-424	23%
Net income	472	7%	922	7%
Net income (excl. biosimilars)	499	12%	975	12%

1 Growth rate adjusted for IFRS 15 adoption 2 Excluding VA agreement

All figures before special items (i.e. the Akorn and NxStage transactions and gains from divestitures of Care Coordination activities at Fresenius Medical Care) All growth rates in constant currency (cc)

Net income attributable to shareholders of Fresenius SE & Co. KGaA

For a detailed overview of special items please see the reconciliation tables on slides 25-26.

Fresenius Group: Q2/18 Business Segment Growth

1 Growth rates adjusted for IFRS 15 adoption 2 Excl. biosimilars

All figures before special items

For a detailed overview special items please see the reconciliation table on slide 25.

Fresenius Kabi: Q2/18 Regional Highlights (1/2)

North America

• 4% organic sales growth
• 35 Kabi-marketed IV drugs currently designated in shortage (vs. 24 at Q4/17)
• 6 product launches YTD; confirm 15+ target
• Confirm FY/18 outlook: Mid-single-digit organic sales growth

Europe

• 3% organic sales growth
• Enteral nutrition continues to drive growth
• Confirm FY/18 outlook: Low to mid-single-digit organic sales growth

Fresenius Kabi: Q2/18 Regional Highlights (2/2)

Emerging Markets

China

• 10% organic sales growth
• Tender rules:
• − Introduction of new tender policy is now completed
• − Expectation for FY/18 unchanged low to mid single-digit price decline and continued double-digit volume growth

Asia-Pacific ex China: 14% organic sales growth

Latin America/Africa: 10% organic sales growth

Total Emerging Markets

Strengthen FY/18 outlook: Double-digit organic sales growth

Fresenius Kabi: Q2 & H1/18 EBIT Growth

€m	Q2/18	Δ YoY cc	H1/18	Δ YoY cc
North America	220	7%	442	7%
Margin	40.1%	140 bps	38.8%	40 bps
Europe	89	8%	174	8%
Margin	15.8%	60 bps	15.5%	60 bps
Asia-Pacific/Latin America/Africa Margin	96 19.5%	20% 150 bps	183 19.3%	16% 60 bps
Corporate and Corporate R&D	-116	-51%	-242	-48%
Total EBIT1	289	-1%	557	-1%
Margin1	18.0%	-130 bps	17.4%	-200 bps
Total EBIT excl. Biosimilars1	326	11%	629	10%
Margin1	20.3%	100 bps	19.6%	20 bps

Margin growth at actual rates ¹ Before special items

For a detailed overview of special items please see the reconciliation tables on slides 25-26.

Fresenius Helios

Helios Germany

• 3% organic sales growth in Q2/18
• Additional "DRG catalogue effects" and preparatory structural activities for anticipated regulatory measures impact earnings development

Helios Spain

• Excellent sales growth of 9% in Q2/18
• Additional month of consolidation contributed significantly to 28% sales growth in H1/18
• Accelerated organic sales growth
• − 8% in Q2/18
• − 5% in H1/18

Fresenius Helios: Q2 & H1/18 Key Financials

€m	Q2/18	Δ YoY	H1/18	Δ YoY
Total sales	2,343	5%	4,674	10%
Thereof Helios Germany	1,547	2%	3,121	3%
Helios Spain1 Thereof	796	9%	1,553	28%
Total EBIT Margin	293 12.5%	4% -10 bps	571 12.2%	6% -40 bps
Thereof Helios Germany Margin	168 10.9%	-6% -90 bps	345 11.1%	-4% -70 bps
Helios Spain1 Thereof Margin	124 15.6%	19% 130 bps	227 14.6%	28% 0 bps
Thereof Corporate	1	--	-1	--

¹ Consolidated since February 1, 2017

Fresenius Vamed

• Strong H1/18 with 5% organic sales growth
• Ongoing healthy growth of service business in Q2/18
• Good order intake of €195m in Q2/18
• Transfer of post-acute care business from Helios to Vamed as of July 1st, 2018
• Small acquisition to strengthen medicaltechnical service business in the UK

€m	Q2/18	Δ YoY	H1/18	Δ YoY
Total sales	266	3%	515	7%
Project business	99	-7%	191	4%
Service business	167	11%	324	9%
Total EBIT	12	9%	18	6%
Order intake1	195	2%	455	10%
Order backlog1,2			2,372	10%

¹ Project business only 2 Versus December 31, 2017

Fresenius Group: Cash Flow

	Operating CF			Capex (net)		Free Cash Flow1
€m	Q2/18	LTM Margin	Q2/18	LTM Margin	Q2/18	LTM Margin
	228	16.8%	-104	-7.1%	124	9.7%
	162	7.6%	-99	-5.0%	63	2.6%2
	-14	1.1%	-3	-1.0%	-17	0.1%
Corporate/Other	-12	n.a.	-6	n.a.	-18	n.a.
Excl. FMC	364	11.2%3	-212	-5.7%	152	5.5%3
	1,020	10.5%	-440	-5.5%	580	5.0%

¹ Before acquisitions and dividends

² Understated: 3.1% excluding €41 million of capex commitments from acquisitions 3 Margin incl. FMC dividend

Fresenius Group: 2018 Financial Outlook by Business Segment

€m (except	otherwise stated)		FY/17 Base	H1/18 Actual	FY/18e1	FY/181 New
		Sales growth (org)	6,358	7%	4% - 7%
		EBIT growth (cc)	1,1772	-1%6	-6% to -3%2	-2% to 1%2
		EBIT growth (cc) excl. biosimilars	1,2373	10%6	~2% - 5%3	~6% - 9%3
		Sales growth (org)	8,6684	4%	3% - 6%5
		EBIT growth	1,0524	6%	5% - 8%7
		Sales growth (org)	1,228	5%	5% - 10%
		EBIT growth	76	6%	32% - 37%8

¹ Excluding effects of the Akorn and NxStage transactions and gains from divestitures of Care Coordination activities 2 Before special items; including expenditures for further development of biosimilars business (€60 m in FY/17 and expected expenditures of ~€160 m in FY/18)

³ Before special items; excluding expenditures for further development of biosimilars business (€60 m in FY/17 and expected expenditures of ~€160 m in FY/18) 4 Helios Spain consolidated for 11 months

⁵ Organic growth reflects 11 months contribution of Helios Spain in 2018

⁶ Before special items

⁷ Before transfer of the German inpatient post-acute care business from Helios to Vamed: 7% - 10%

⁸ Before transfer of the German inpatient post-acute care business from Helios to Vamed: 5% - 10%

For a detailed overview of special items please see the reconciliation tables on slides 25-26.

Fresenius Group: 2018 Financial Guidance

€m (except otherwise stated)		FY/17 Base	H1/18 Actual	FY/18e1	FY/181
	Sales growth (cc)	32,8422	6%8	5% - 8%
	Net income3 growth (cc)	1,8044	7%	6% - 9%5
	Net income3 growth (cc) excl. Biosimilars	1,8476	12%	~10% - 13%7

¹ Excluding effects of the Akorn and NxStage transactions and gains from divestitures of Care Coordination activities

• ² 2017 base adjusted for IFRS 15 adoption (deduction of €486 million at Fresenius Medical Care) and divestitures of Care Coordination activities (deduction of €558 million at Fresenius Medical Care)
• ³ Net income attributable to shareholders of Fresenius SE & Co.KGaA
• ⁴ Before special items, i.e. expenses related to the Akorn and NxStage transactions, gains from divestitures of Care Coordination activities (deduction of €12 million at Fresenius Medical Care), book gain from the U.S. tax reform and FCPA provision

⁵ Before special items (i.e. expenses related to the Akorn and NxStage transactions and gains from divestitures of Care Coordination activities; including expenditures for further

• development of biosimilars business (€43 m after tax in FY/17 and expected expenditures of ~€120 m after tax in FY/18) 6 Adjusted net income: Before special items (i.e. expenses related to the Akorn and NxStage transactions and gains from divestiture of Care Coordination activities
• (deduction of €12 million at Fresenius Medical Care), book gain from the U.S. tax reform and FCPA provision), before expenditures for further development of biosimilars business 7 Before special items (i.e. expenses related to the Akorn and NxStage transactions and gains from divestitures of Care Coordination activities; excluding expenditures for further

development of biosimilars business (€43 m after tax in FY/17 and expected expenditures of ~€120 m after tax in FY/18) 8 Growth rate adjusted for IFRS 15 adoption (H1/17 base: €16,624 million)

For a detailed overview of special items please see the reconciliation tables on slides 25-26.

Attachments

Fresenius Group: Calculation of Noncontrolling Interest

€m	H1/18	H1/17
Earnings before tax and noncontrolling interest	1,902	2,067
Taxes	-424	-589
Noncontrolling interest, thereof	-556	-562
Fresenius Medical Care net income not attributable to Fresenius (H1/18: ~69%)	-417	-400
Noncontrolling interest holders in Fresenius Medical Care	-112	-138
Noncontrolling interest holders in Fresenius Kabi (-€18 m), Fresenius Helios (-€6 m), and due to Fresenius Vamed's 23% external ownership (-€3 m)	-27	-24
Net income attributable to Fresenius SE & Co. KGaA	922	916

Before special items

For a detailed overview of special items please see the reconciliation tables on slides 25-26.

Fresenius Group: Cash Flow

€m	Q2/18	LTM Margin	Δ YoY
Operating Cash Flow	1,020	10.5%	-15%
Capex (net)	-440	-5.5%	-23%
Free Cash Flow (before acquisitions and dividends)	580	5.0%	-32%
Acquisitions (net)	1,479
Dividends	-728
Free Cash Flow (after acquisitions and dividends)	1,331	6.1%	--

Fresenius Group: Leverage Ratio

Before special items; pro forma closed acquisitions/divestitures At LTM average FX rates for both EBITDA and net debt

1 Pro forma excluding advances made for the acquisition of hospitals from Rhön-Klinikum AG 2 Calculated at expected annual average exchange rates, for both net debt and EBITDA; excluding expenses related to (i) the Akorn transaction, (ii) NxStage acquisition; excluding gains from divestitures of Care Coordination activities; excluding further potential acquisitions; at current IFRS rules

³ Excluding proceeds from divestitures of Care Coordination activities

Fresenius Kabi: Organic Sales Growth by Regions

€m	Q2/18	Δ YoY organic	H1/18	Δ YoY organic
North America	549	4%	1,140	7%
Europe	563	3%	1,120	3%
Asia-Pacific/Latin America/Africa	492	11%	947	12%
Asia-Pacific	326	11%	627	13%
Latin America/Africa	166	10%	320	10%
Total sales	1,604	6%	3,207	7%

Fresenius Kabi: Organic Sales Growth by Product Segment

Total sales	1,604	6%	3,207	7%
Medical Devices/ Transfusion Technology	273	6%	526	4%
Clinical Nutrition	445	10%	880	12%
Infusion Therapy	239	10%	475	10%
IV Drugs	647	1%	1,326	4%
€m	Q2/18	Δ YoY organic	H1/18	Δ YoY organic

Fresenius Helios: Key Measures

	H1/18	FY/17	Δ
No. of hospitals Germany - Acute care hospitals	110 87	111 88	-1% -1%
No. of hospitals Spain (Hospitals)	45	45	0%
No. of beds Germany - Acute care hospitals	34,452 29,360	34,610 29,438	0% 0%
No. of beds Spain (Hospitals)	6,688	6,652	1%
Admissions Germany (acute care)	631,019	1,237,068
Admissions Spain (including outpatients)	6,876,086	11,592,758

Reconciliation Q2/18

Consolidated results for Q2/2018 include special items related to the Akorn transaction. These are mainly transaction costs in the form of legal and consulting fees as well as costs of the financing commitment for the Akorn transaction. Moreover special items arose from gains/losses of divestitures of Care Coordination activities at Fresenius Medical Care. The following presentation shows the corresponding reconciliation to the IFRS values.

€m	Q2/2018 Before special items and before expenses for biosimilars business	Expenses for the further development of the biosimilars business	Before special items	Special items (transaction related effects Akorn)	Special items (gain from divestitures of Care Coordination activities)	After special items (IFRS reported)
Sales	8,382		8,382			8,382
EBIT Net interest	1,182 -149	-37 -2	1,145 -151	-35 -4	833	1,943 -155
Net income before taxes Income taxes	1,033 -245	-39 12	994 -233	-39 8	833 -147	1,788 -372
Net income Noncontrolling interest	788 -289	-27	761 -289	-31	686 -475	1,416 -764
Net income attributable to shareholders of Fresenius SE & Co. KGaA	499	-27	472	-31	211	652

The special items are reported in the Group Corporate/Other segment.

Reconciliation H1/18

Consolidated results for H1/2018 include special items related to the Akorn transaction. These are mainly transaction costs in the form of legal and consulting fees as well as costs of the financing commitment for the Akorn transaction. Moreover special items arose from gains/losses of divestitures of Care Coordination activities at Fresenius Medical Care. The following presentation shows the corresponding reconciliation to the IFRS values.

€m	H1/2018 Before special items and before expenses for biosimilars business	Expenses for the further development of the biosimilars business	Before special items	Special items (transaction related effects Akorn)	Special items (gain from divestitures of Care Coordination activities)	After special items (IFRS reported)
Sales	16,503		16,503			16,503
EBIT Net interest	2,271 -293	-72 -4	2,199 -297	-40 -7	820	2,979 -304
Net income before taxes Income taxes	1,978 -447	-76 23	1,902 -424	-47 10	820 -147	2,675 -561
Net income Noncontrolling interest	1,531 -556	-53	1,478 -556	-37	673 -466	2,114 -1,022
Net income attributable to shareholders of Fresenius SE & Co. KGaA	975	-53	922	-37	207	1,092

The special items are reported in the Group Corporate/Other segment.

Basis for guidance

€m	2017	Targets 2018
Sales reported	33,886
adjustments from IFRS 15	-486
divestitures of Care Coordination activities at FMC	-558
Basis sales guidance	32,842	5-8%
Net income reported	1,814
Acquistion-related expenses	43
Book gain from U.S. tax reform	-103
FCPA provision	62
divestitures of Care Coordination activities at FMC	-12
Basis net income before special items guidance	1,804	6-9%
Adjustments for guidance comparison: Expenditures for further development of biosimilars business	43
Basis net income guidance excluding biosimilars	1,847	~10-13%

Financial Calendar / Contact

Financial Calendar

30 October 2018 Results Q3/2018

Please note that these dates could be subject to change.

Contact

Investor Relations Fresenius SE & Co. KGaA phone: +49 6172 608-2485 e-mail: ir-fre@fresenius.com For further information and current news: www.fresenius.com

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