Fresenius Se & Co

Thank you, Operator. Hello, everyone. Welcome to our year-to-date in Q3 2024 earnings call and webcast. The presentation was emailed to our distribution list earlier today and is available on Fresenius.com. On slide two of the presentation, you'll find the usual safe harbor statement. Unless stated otherwise, we'll comment on our performance using constant exchange rates or CER. Today, I'm joined by Michael and Sarah, and the call will last approximately one hour, with the presentation taking around 35 minutes. The remaining time for your questions, so please ask one or two questions so that everyone has a chance to participate. And with that, I will now hand the call over to Michael.

Well, thank you, Nick, and hello, everyone from my side. This was, as we call it, an exciting quarter, but even more a defining election in the U.S. The outcome brings clarification, and I congratulate the 47th President of the United States, Donald J. Trump. Now, first, let me welcome Nick, Nick Stone. He joins us from GSK. He started on October 1st, so it's been a lot in a short time. But he knows our industry very well, and he's a real addition to the Fresenius team. You will be meeting him in person shortly, I'm sure. As always, Sarah and I have a lot to cover today. I'll do a brief introduction and overview. Sarah will give more detail on the numbers with plenty of space for your questions. These quarterly results are almost kind of like an anniversary of sorts, and I'd like to emphasize how far Fresenius has come since October 2022. From the outset, two years ago, we said that going forward, we will focus on returns and drive structural productivity with rigor. Also, that we will focus on organic growth, and we introduced margin bands as a means to improve performance and grow earnings. With Hashtag Future Fresenius, we've progressed rapidly, simplified the group, and created a stronger, more competitive company. In essence, we put the money where our mouth is. The result? Sustained and consistent delivery. The deepened focus is evident in our strong Q3 print. We delivered high single-digit top-line growth, increased margins, grew earnings, and generated outstanding cash flow. All metrics improved versus prior year. And all of this in the service of our key mission, improving patient care and patient outcomes. Fresenius is committed to life. Turning now to Q3, there's a lot of highlights, but two words capture it, consistent and sustained. In a usually seasonally softer quarter, both CAVI and Helios delivered strong results. The new energy and focus is paying off. Across the group, we delivered top-line revenue growth of 9%. At CAVI, the growth vectors paced our success. BioPharma with ongoing momentum, Product launches coupled with milestone payments at MapScience again led to positive EBIT. Helios 2 turned strong results in a quarter where summer holidays do slow admissions and treatments. Our productivity programs have achieved in nine months what we originally said would take a year. We are more productive and more efficient in everything we do, and margins are showing exactly that. Consistent top-line growth, sustained productivity gains, these two together have spurred a key part of Hashtag Future Fresenius. And cash is and remains king. Fresenius generated more than €760 million in operating cash flow, outstanding results, as I would call it. And this in turn means that we continue to lower leverage and thereby increase our flexibility and drive returns. And we see more upside for a sustainably improved leverage profile. More on this to come probably at the beginning of next year. As you see, 2024 is unfolding strongly, and as a result, we are increasing our outlook and now expect 6% to 8% revenue and 8% to 11% EBIT growth. This is a strong sign of our confidence in CABI and Helios for the remainder of the year. Now let's drill down more deeply into CABI and Helios. Going deeper into CABI and Helios, both delivered a strong performance in Q3. At CABI, revenues were up by a very powerful 11% year-on-year in organic terms, which is clearly above the top end of the structural growth. And yes, revenues were helped by hyperinflation-driven price increases in Argentina. More on that a little later. The growth vectors continue to drive the financial performance of CABI. For EBIT, CABI expanded its margin, reaching a powerful 15.9% of revenues. Here, too, it was the growth vectors which have been driving the improvements. being in the structural EBIT margin band of 14% to 17% for the second consecutive quarter, a remarkable margin expansion of 470 base points. Helios showed solid and consistent performance despite the usual seasonality. Now let's take a closer look at Kavi, where our growth vectors since their inception three years ago are consistently enhancing operating performance. BioPharma is standing out. I will focus on the ongoing momentum and continued product successes on the next slide. Great progress also in our medtech business. A highlight is the contract with SSM Health, which is expected to purchase more than 6,500 Ivonex pumps. Advancing innovation and fostering an ecosystem in cell and gene therapy is another driver for future Fresenius. Hence, the agreement between CARBI and Cellular Origins to leverage each company's expertise in cell and gene therapy is a great achievement. Overall, nice growth for our medtech business, considerable potential for further advancements going forward. The nutrition business demonstrated, once again, steady performance. In Q3, we launched Peditrace NACOM in Europe, our state-of-the-art pediatric trace element solution on an IV basis, and our pharma business showed a nice Q3 performance on the back of advancements in Europe and the U.S. With the latest investment decisions to further expand the filling capacities for infusion solutions at our site in Poland, we are underlining our long-term commitment to the system-relevant medical products. At the same time, the streamlining of our production network is ongoing. In a nutshell, we are advancing with product innovations, new launches, and enhancements in our healthcare ecosystem, providing more therapeutic solutions to those in need. Let's focus on our biopharma business, where we're moving rapidly. We see significant progress in terms of market access and payer coverage in 2024. Just recently, both EMA NFDA approved our Ustekinumab biosimilar. We call it Otulfi, referencing Stellara. We have a global commercialization partnership with Formicon covering key global markets. It is an attractive market with originator sales globally of $11 billion. And we further are growing our biopharma platform. A couple of weeks ago, MapScience and Tavor have entered a second global licensing agreement for an anti-PD-1 biosimilar candidate currently in development for the treatment of multiple oncology indications. We are further enhancing our strategic network with this new agreement, building on our initial partnership with TEVA. By providing affordable and innovative healthcare, we improve and save human lives. We're very encouraged by the Taen launch, which is unfolding in line with our expectations. We're on track to deliver on our ambition. In Europe, the uptake has been dynamic so far with 19% market share in the EU5. We see a significant coverage by SIGFunds. That's the name we have for Kartenkasse in Germany in the markets we launched. Also in the U.S., the launch is progressing well. We are shipping tie-in under more than 35 payer-client agreements. Beginning of October, CMS issued a permanent product-specific Q code and pass-through payment status for Tyen. It enables more efficient billing processes and speed time to reimbursement for providers. Moreover, through KabiCare, our application, we are collaborating with patients and healthcare providers to address insurance and financial assistance, all of that aiming to simplify the treatment process. We contracted several large PBMs and IDNs and are continuously adding new contracts as we speak, among them really big names. This is consistent with our messaging that we see a steady ramp-up peaking in the final months of this year. Remember that the U.S. launch is still early innings, and we are all excited what is lying ahead of us. especially when looking beyond the current quarter, so watch this space. Over to Helios, where I would like to touch on some highlights. At Chiron Salud, we are providing patients with latest cutting-edge technologies. Chiron Salud incorporated more than 1 million new users into its patient portal in less than one year. That means Cassiopeia has now surpassed 7 million users. Digital tools combined with AI provide a clear path to market success by connecting patients and providers and enhancing care through digital platforms. Moreover, breast cancer patients who were thought to be at the end of their treatment are finding new hope with a new therapy, the so-called antibody drug conjugate targeting cancer cells more precisely than other available medicines. A study in Germany has now shown that they significantly increased treatment success according to initial results. This is yet another example of how we are fostering innovation. Not at least the cluster and specialization strategy at Helios Germany is progressing nicely, and we will get an attractive DOG inflator for the next year. We have always been very transparent on the energy relief funds. In Q3, we have received the last payment supporting our profitability, and we continue to expect no further support in Q4. Looking ahead, obviously, the Helios organization has to run faster and do their work, starting from what we would call a strong base as Europe's number one hospital provider. The structural setup is poised to benefit from the targeted reforms in Germany, while medical quality in our facilities remains at an all-time high. The dedicated Helios program launch is to set to deliver further improved efficiency in our processes to work against the effect of ending energy relief payments. Sarah will come back to that one in more detail a little later. Back to our group performance, 2024 is the year of financial progression, and it is great to see that simplification and focus are driving our operating performance. The strategy is working. We have a very solid and resilient growth base with our care provision and pharma assets. And the boost is coming from our attractive assets in market with secular growth trends. Bringing this all together, Fresenius has delivered quarter-on-quarter and year-on-year sustained improvement in revenue, margins, and cash, and there's more to come. Applying these revenue, margin, and cash achievements to some key shareholder metrics, the Fresenius picture gets even better looking forward. EPS moving up, return on investment capital improving, the only metric which is rightfully trending down our leverage. Again, we are generating shareholder value consistently, and we will sharpen this focus even more intently as we move into 2025. Now, let me hand it over to Sarah.

Thank you very much, Michael, and welcome to all participants, also from my side. The third quarter was a strong one, with broad-based performance achieving high single-digit organic revenue and earnings growth. cash flow generation alongside strongly leveraging. Fresenius is in a much better position than we were a year ago with improved financial performance and a structurally stronger balance sheet. Saying what we do and doing what we say, it is a great team effort. So thanks to all our colleagues for their contributions. Looking at it in more detail, all numbers are in constant currency unless otherwise specified. Group organic revenue increased by 9% to €5.3 billion, driven by strong performance at Helios and, yet again, excellent top-line delivery at Kabi. EBIT before special items at €552 million was up by 9%, reflecting our focus on operational excellence and performance. Interest expenses and taxes were in line with expectations. For the full year, we expect interest expenses at the upper end of the 420 to 440 million euro range. On tax, we continue to see a tax rate between 25 and 26%. EPS increased by 7%, a further proof point of financial progress. Cash flow was really strong at 763 million euro, showing ongoing strong momentum and our focus on cash conversion. Our commitment to deleveraging means we ended the quarter at 3.24 times net debt to EBITDA, in the middle of our target range, and a remarkable 52 basis points improvement since the end of last year. Turning to CARBI, sales increased by an excellent organic 11% to 2.1 billion euro above the structural growth bands continuing to benefit from hyperinflation-related pricing effects in Argentina. Overall, the growth vectors drove performance, with organic revenues increasing by 16%. Biopharma had another great quarter, with organic growth increasing 66%, driven by a positive development across the portfolio. The Taian rollout is standing out. Strong development also at MapScience, driven by Bivacizumab and additional milestone payments. Medtech organic revenue increased by 7% in the quarter, driven by broad-based growth in the US, Europe, and international regions. Infusion and nutrition systems stood out in terms of performance. Nutrition with 11% organic revenue growth benefited from pricing effects in Argentina. China continued to be soft, and we do not anticipate this to change in the short term. In pharma, a good 6% organic revenue growth, driven by positive pricing effects in particular in Europe and international regions. The U.S. also had a solid growth, driven by improved supply situation. China continued to weigh on the performance. EBIT was €335 million, equivalent to a margin of 15.9%. This is a significant year-over-year margin improvement of 160 basis points and an impressive 16% constant currency growth rate. Here you can see operating leverage combined with improved structural productivity at work. The pharma margin was impacted by the US client go-live costs. Year-to-date, the margin stands at 20%. The growth vectors were again within the structural margin band, a significant margin improvement of 470 basis points to 14.5%. All three growth vectors contributed. Biopharma was again EBIT positive. We expect not only to be EBIT-er, but also EBIT break-even for the full year, despite lower milestone payment expectations in the last quarter. Turning to Helios, revenue grew by organic 8% to 3.1 billion euro. This is above the top end of the structural growth band. Despite the usual lower admissions in Spain in the third quarter, we still delivered strong growth year over year. In Germany, pricing effects and some volume growth as well as some favorable technical reclassifications supported strong organic revenue growth of 8%. Spain, also with 8% organic revenue growth, showed a very healthy performance on the back of year-over-year activity growth and positive pricing effects. At €244 million, the EBIT margin was 7.9% given the seasonally lower admissions Year on year, Helios turned in 6% EBIT growth, demonstrating the relative strength of this quarter. In the first three quarters, the EBIT margin stood at 10%, and we expected to be back in the structural margin band in Q4. Helios Germany delivered another strong quarter with an EBIT margin of 8.8%, helped by the last tranche of energy relief funding. Year-to-date, the margin is up by 80 basis points to 9.3%. Helios Spain's margin of 6.3% was lower due to seasonal softness and some phasing. Year-to-date, Helios Spain has delivered a strong low double-digit margin of 11.2%. One cornerstone of Future Fresenius is structural productivity. In delivering our strategy, we have become a leaner organization with long-term structural improvements. These are not one-time gains, but permanent changes in the way we operate. We will continue to drive operational excellence, which clearly improves also our cost structure. In Q3, we surpassed our 2024 target of 400 million cumulative savings. Congratulations to the team for this significant achievement. So far, Carby has delivered the lion's share of these savings. Going forward, it will be Helios as they are rolling out their dedicated efficiency program. As outlined at the Capital Markets Day, they are focusing on operations excellence, including reduction of processes and waiting times and digitalization of processes. Resource optimization and synergies, in particular logistics and procurement. We will update you further on these plans in February next year. The next two slides are also key slides to me. They show how our ongoing focus on cash conversion and capital allocation led to tangible balance sheet and return improvements. Cash flow in the quarter builds on what we have achieved so far this year. Carbi's operating cash flow was driven by further improving inventory management and optimizing its payment terms and schedules. For Helios, it was an intensified focus on cash and working capital across Germany and Spain. Successful nursing budget negotiations and related cash-ins added to the positive developments. What is particularly striking is the powerful and sustained achievement when looking at the last 12 months' progress. Operating cash flow improved by more than 700 million. Group CapEx remains tightly managed with 4.4% last 12 months, well below the 5% level. The combination of focus on cash conversion and disciplined capital allocation led to a significantly improved free cash flow generation. In terms of last 12 months, free cash flow increased from €45 million last year to an impressive €2 billion this year. Even if you adjust for an around €500 million dividend payment in 2023, this is still really powerful. As a result, our deleveraging continued to progress nicely. At the end of Q3, we were at 3.24 times net debt to EBITDA, and thus in the middle of our self-imposed leveraged corridor. Higher EBITDA and the stronger free cash flow are the main drivers. It helps to reduce interest expense and of course drives a stronger and healthier balance sheet. We are regaining strategic flexibility. One of the things I have outlined as a key target back in February of 23. As we continue to deliver, we are of course reviewing our target corridor best fitting to future Fresenius. Return on invested capital is a main driver of value creation. We have achieved the turning point and see ROIC improving quarter over quarter. We ended the quarter at 6.1%, the lower end of our structural ROIC band. Turning to my last slide. In summary, a strong quarter and an excellent first nine months of 2024. It gives us the confidence to upgrade our guidance on both guidance metrics. We now expect organic revenue growth between 6% to 8%. On EBIT, we expect 8% to 11% growth. This upgrade is despite the ongoing China weakness. lower biopharma milestone payments in Q4, and the loss of energy relief contribution. Overall, we're at a strong third quarter and year-to-date. We have delivered improvements on our financial metrics and achieved major progress, in particular on cash flow and leverage. It is exciting to see how Fresenius is unlocking its true value. Now, let me hand back to Michael.