Fresenius Medical Care AG

Ladies and gentlemen, welcome to the Fresenius Medical Care Report on the fourth quarter 2024 conference call. I'm Sandra, the call school operator. I would like to remind you that all participants have been listened only more than the conference has been recorded. This recording will also be available on the Fresenius Medical Care website. Additionally, the transcript of this conference will also be published on the website of the conference. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Dominic Hager. Please go ahead, sir.

Thank you, Sandra. I would like to welcome everyone to our earnings call for the fourth quarter and financial year 2024. Thank you for joining us today. As always, I 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 and to our SEC filing. As our call is scheduled for 60 minutes, we would limit the number of questions again to two in order to give everyone the chance to ask questions. It would be great if we could make this work again, as always. Let me now welcome Helen Gieser, CEO and Chair of the Management Board, and Martin Fischer, CFO of Presidents Medical Care. Helen, the floor is yours.

Thank you, Dominic, and a warm welcome to everyone. Thank you for joining our presentation today. I'm excited to speak about the remarkable progress that we have made in executing our strategic plan and the strong set of financial results we have delivered. Before I begin my prepared remarks, I want to take a moment to acknowledge that this success would not have been possible without the unwavering commitment of our employees around the world. We have set ambitious targets to turn around and transform our company all at the same time. and our employees continue to rise to the challenge. I'm especially inspired by the way our teams have stepped up in the face of natural disasters and geopolitical challenges. During our last call, I talked about the hurricanes in the southeastern United States and ongoing conflicts in Israel and Ukraine. Since then, we've also faced devastating wildfires in California, extreme ice and snowstorms, especially in Texas and Louisiana in January, and more recently in New England, as well as flooding in the Mid-Atlantic. Through it all, our dedicated teams continue to ensure our patients receive their life-sustaining dialysis treatments with minimal interruption, an incredible testament to the strength of our teams and resiliency of our operations. and recognized in this year's Net Promoter Score of 72, matching last year's very high level. This score, based on patient surveys, demonstrates very strong patient satisfaction with the quality of our services. Executing such a turnaround and transformation plan while maintaining an unwavering commitment to delivering the quality of care to our patients is no small feat. and I want to extend my deepest gratitude to our employees for their dedication and hard work. Now I'll begin my prepared remarks on slide four. Two years ago, we embarked on an ambitious plan to turn around and transform our company over a three-year period. I'm proud to say we have made significant progress on all dimensions, which is why this chart is so full, but I feel it's worth to recap all we have achieved. This serves as a reminder of our commitment to deliver on what we set out to do as it lays the foundation for the future success of our great company. In 2023, we implemented major structural changes, including the change in our global operating model, provided more transparent financial reporting, and changed our legal form. In parallel, we successfully advanced all aspects of our plan. And we did not stop there or let up the pace. In 2024, we built on this momentum, further strengthening our foundation and driving accelerated progress to position our company for sustained profitable growth in the future. We further upgraded our leadership team, including a new head of care delivery and a new head of legal, HR, and compliance at the management board level. Also, on the executive level, we have made several important changes, creating new key positions as well as upgrading our capabilities and talent bench. In 2024, we further accelerated our FME25 transformation program, achieving incremental sustainable savings ahead of plan. As a result, we have been able to compensate the lower than expected volume growth in the U.S. dialysis business over the last two years. Due to the great momentum in the FME25 program, we are now raising our total savings target from €650 million to €750 million by the end of 2025. We continued the execution of our portfolio optimization plan, ensuring our business is focused on a strengthened core with a higher return profile. And in 2024, we realized important milestones in our business. While we continue to experience elevated mortality in the United States, as is the case for the general population in the country, the work we have been doing in our U.S. care delivery operations to drive operational excellence, upgrading and standardizing and streamlining our operational processes, as well as reducing missed treatments, is really paying off. Our same-market treatment growth in the U.S. turned positive for the full year, supported by an accelerated 0.5% development in the fourth quarter when adjusted for the exit of less profitable acute contracts. Additionally, the excellence of our disaster response and clinic operations meant that despite more pronounced weather-related incidents, we only had a five basis point impact on third and fourth quarter volume development. We are further detailing the rollout plan of our high-volume hemodifiltration-capable 5008X machine in the U.S. We received FDA approval in early 2024, and we performed our first HDF treatments on the machine in our clinics in the meantime. We are excited about the opportunity this innovation brings to our U.S. market. The improvements we have made in care enablement not only supported recent performance, but strengthened the base of our operations and positioned us for profitable growth going forward. This includes rationalization of our supply chain and manufacturing footprint, as well as broad scale cost and efficiency improvements. These positive developments supported strong operational progress over the course of the year. By sharpening our focus on the core business, we delivered 4% organic growth and achieved the upper end of our earnings outlook for 2024. As a result, our group operating income margin further improved as planned. And our commitment to a disciplined financial policy and priority to deliver resulted in an improved leverage ratio, which brought us below our self-imposed range. For our shareholders, we are planning to propose a dividend increase of 21% in line with our current dividend policy. Slide 5 shows how our progress translates into numbers. This slide highlights the tangible impact of our strategic execution reflected in our strengthened financial performance and enhanced value creation. Our operating income margin has shown consistent improvement towards our target margin bands for 2025, supported by both operating segments. Care delivery has already reached the lower end of its target band, with a margin over 10% in full year 2024. This improvement reflected our turnaround efforts, including positive price and volume effect, realization of productivity gains and labor efficiency enhancements, as well as a focused international portfolio. Care enablement has improved its full year margin to 6.1%, almost tripling the margin from only a year ago. The improved profitability of both segments has been supported by the acceleration of our FME25 program, Here, we have already achieved €567 million in sustainable savings through 2024. As a result, we are now on track to realize the new increased target of €750 million savings by the end of this year. In line with our dividend policy and improving financial results, we plan to propose a dividend of €1.44 reflecting a 13% compound annual growth rate over the past two years. As outlined, our leverage ratio has improved as a consequence of our current financial policy from 3.4 times at the end of 2022 to 2.9 times, and below our self-imposed target range. S&P, Moody's, and Fitch now have us rated at investment grade with stable outlooks. Moving to slide six, we have continued to execute against our portfolio optimization plan as we look to divest non-core and lower margin assets. Just yesterday, we announced the divestiture of select assets of Spectra Laboratories, our U.S. lab service business. Collectively, in addition to exiting non-core assets like Spectra, NCP, and Cura, we have now exited around a dozen dialysis service markets. as we strategically refocus our international portfolio on growth markets with attractive returns. This includes the exit of all of our Latin America service business with only Brazil left, which we expect to close in the first half of this year. We have made significant progress since we first presented this slide at our last Capital Markets Day in 2023. By the end of 2024, we had realized total cash proceeds of €750 million. We remain focused on our core business and continue... Ladies and gentlemen, please hold the line.