Fresenius Medical Care AG

Ladies and gentlemen, thank you for standing by. I am Hayley, your chorus call operator. Welcome and thank you for joining the Fresenius Medical Care Earnings Call on the third quarter 2020 results. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press Start followed by 1 on your touchtone telephone. Please press the Start key followed by 0 for operator assistance. And I would now like to turn the conference over to Dominic, Head of Investor Relations. Please go ahead.

Thank you, Hayley. We would like to welcome all of you to the Fresenius Medicare earnings call for the third quarter 2020. We appreciate you joining today. Now, it is my very big pleasure, as always, to start out the call by mentioning our cautionary language, that is in our safe harbor statement as well as in our presentation and in all the materials that we have distributed earlier today. For further details concerning risks and uncertainties, please refer to these documents as well as to our SEC filings. I would like to limit the number of questions again to two in order to give everyone the chance to ask questions. Should there be further questions and time left, we can go a second round. It would be great if we could make this work. With us today in a virtual way from Boston is, of course, Reid Powell, our CEO and Chairman of the Management Board. Reid will give you some more color around the business development and go through some of the major topics of the quarter. And, of course, also with us in a virtual way in Chicago is Helen Gieser, our Chief Financial Officer, who will take you through the financials and the outlook. I will now hand over to Reid. The floor is yours.

Thank you, Dominic. Hello, everyone. It's great to have you with us today. I very much appreciate your interest in Fresenius Medical Care, and I sincerely hope that you and your families are safe and very healthy. Please allow me to start by saying how proud I am of the ongoing efforts of Fresenius Medical Care employees in the face of this unprecedented pandemic. Our more than 120,000 employees continue to ensure that our patients receive their life-saving dialysis treatments in a safe environment and with the same high quality they've become accustomed to. Please allow me. Thank you very much, FMC employees. You're my hero. Hang in there. In what has become business as usual, as Dominic has pointed out, in this current world that we live in, we are with you virtually from three locations. Let's hope our technology holds up as we go through the next hour or two. I'll start my real prepared remarks on slide four, please. In the quarter, we had very good underlying business performance, somewhat clouded by unfavorable exchange rates. Our strong earnings generation in the third quarter proves our core value proposition and the resilience of the FMC business model. We have managed the COVID-19 effect to be roughly neutral for the first nine months of this year. This is partly due to government support, predominantly in the United States, but also due to the steady improvements in efficiency that we continue to drive for. In North America, we were able to continue our good business development despite the headwind from Calcimometics. This is due to an improved commercial mix. If you look at our nine-month figures, you will see that we are on our way to reach our targets for 2020. The new normal. The new normal is anything but normal or predictable. We feel a headwind from COVID-19 in our treatment volumes, and at the same time, higher costs for personal protective equipment, hero's pay, etc. None of us knows how long the pandemic will go as it goes back around the world in the fourth quarter of this year and continues to accelerate into 2021. Governmental support to cover the additional cost is uncertain at the present time. In the light of these various moving parts, we are confirming our outlook, which includes the currently anticipated impacts. Turning to slide five. We continue to grow while we are remaining steadfast in our commitment to quality. We consistently deliver a very high level of quality in services and products for our dialysis patients. Although we are reducing clinic growth in North America with a stronger focus on our home business, we are continuing to expand our service globally and we have seen our clinics grow by 2% to just over 4,000 clinics worldwide. In these clinics, we provided more than 40 million treatments to just over 349,000 patients for the first nine months of 2020. Turning to slide six, quality patient care is the most important factor in our business and the top priority on our sustainability agenda. We are committed to provide the best possible outcomes for our patients around the globe. Here I would like to focus on one of the KPIs that is the number of days patients have spent in the hospital in the quarter. Despite the challenging environment of the pandemic, the number of days that our patients were hospitalized has come down further in most of our regions. I suspect you may have some questions for that during the Q&A, and I'm happy to give you further insight. Turning to slide seven. In the third quarter of 2020, we continued to deliver strong income growth, in large part due to the positive operating performance and very focused expense management. Including significant foreign currency headwinds of 6%, revenue for the quarter was stable and amounted to 4.4 billion euro. While the healthcare services remained steady despite negative exchange rate effects, The products business saw its revenue decrease 1% as a result of these FX headwinds. Our operating strength was not deterred by COVID-19, with both operating income and net income increasing 11% at constant currency. And as we normally do, Helen will have some more insight to you in our earnings during her presentation. Turning to slide eight. In the quarter, we delivered organic growth of 3%. We had positive contributions to organic growth from each of the four regions, despite the headwinds from calcium memetics in North America and from COVID-14 effects in all of the other regions. North America contributed 2% organic growth, despite a sizable headwind from calcium memetics, and slower growth in the number of treatments due to COVID-19. A further improved payer mix supported this development. The 1 percent organic growth in EMEA was largely driven by the services business benefiting from an increase in the same market treatment in several countries and regions. We saw a stronger organic growth in Asia Pacific and particularly Latin America, but obviously the exchange rate developments there were unfavorable to the reported figures. Turning to slide nine, despite the challenges presented by COVID-19 on a global basis, healthcare services showed solid organic growth of 3% in the quarter. Growth drivers for North America included some prior year adjustments, which Helen will discuss later, growth in same market treatments, and a higher commercial revenue. At the same time, we faced the expected headwinds from lower reimbursement for council of medics, and in addition, slower growth for the number of treatments due to COVID-19. These effects were dragged on the dialysis services. In Europe, Middle East, and Africa, growth was driven by an increase in same market treatments across several countries and regions as previously mentioned. In Asia Pacific, we had an 8% same store growth driven by the Asian portion of the region, and achieved a strong performance in care coordination. Turning to slide 10, products. Product revenues were impacted by sizable currency headwinds. Excluding the currency headwinds, dialysis products saw an overall revenue increase of 4%, driven by higher sales of products for acute care treatments, machines for chronic treatment, and peritoneal dialysis products. The negative organic growth for dialysis products in EMEA can be explained by tenders that have been postponed into Q4 that were planned for in Q3 in the areas of Eastern Europe and the Middle East. On the other hand, the non-dialysis product revenue increased by 20% to 24 million euro. As in the previous quarter, this is partly due to the current development of the pandemic. This concludes my prepared remarks, and it's my pleasure to turn it over to Helen.