Fresenius Se & Co

Hello, everyone. Welcome to our year-to-date NQ3 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 CR. Today, I'm delighted to be joined by Mike and Sarah, who will take you through the EBIT guidance rate and the disciplined execution that drove the continued performance this quarter. As usual, the call will last approximately one hour, with the presentation taking around 25 to 30 minutes, with the remaining time for your questions. To give everyone the chance to participate, please limit your questions to one to two only. We can always come back for a second round if needed. And with that, I will now hand the call over to Michael.

Yeah, thank you, Nick, and welcome to everyone joining us on a very, very busy day. You know, exactly three years ago, we hit the reset button and then embarked on the new strategic and transformative journey to deliver a step change in performance with what we call future Fresenius. This transformation was about simplifying our structure, sharpening our focus, and instilling a performance-driven mindset. But it wasn't just about operational changes. It was about rebuilding the portfolio and reshaping our culture and fostering accountability, a cultural power driving us forward. Fast forward to today and we have started the next phase, Rejuvenate. This has kicked off with great traction and focus and will guide us for the next few years. This phase is all about upgrading the core, scaling our platforms, and as a result, elevate our performance to deliver profitable long-term growth. This means, in essence, bringing new products and innovations to market, focusing on the needs of patients and customers, and infusing fresh energy into our leadership and management teams to deliver further value, expand ecosystems, and create more opportunities for the company. At the start of the year, we committed to delivering incremental revenue and earnings growth through new products and services, and our performance here to date demonstrates our continued momentum. Future Fresenius continues to deliver. I am pleased to share with you yet another strong quarter driven by the resilience and consistency of disciplined execution across CABI and Helios. Despite ongoing macroeconomic volatility and geopolitical tensions, we have maintained transparent market communication. Our adaptive and focused strategy has proven effective in navigating these challenges. Now let's turn to the third quarter highlights. After an excellent start to the year, I'm pleased to announce that following the Q2 organic revenue guidance upgrade, we're now raising our full year EBIT growth guidance from 3 to 7 to 4 to 8. The upgraded guidance represents the success of our future Fresenius strategy and is based on the excellent momentum we have seen year to date. Encouragingly, we see sustained strength in our bottom line, with core EPS growing by an impressive 14%, significantly outpacing top-line growth. This performance reflects strong market position and top-line growth yielding margin expansion, and we expect this momentum to continue. Kabi is an ongoing key driver of our profitability, achieving an excellent 16.7% EBIT margin. We see broad-based performance across all Kabi segments with particular strength from newly launched products and continued pipeline progress, particularly in our IV generics and biosimilars. You know, great job by the team. Helios delivered another good quarter, maintaining a solid EBIT margin, demonstrating the resilience of its operations. In addition, based on the strong cash flow delivery and the quarter, we are now back in our self-imposed target corridor that we have tightened at the beginning of the year. Now let's take a closer look at our core businesses, starting with Kavi. In pharma, we have further focused and simplified the business with the successful divestment of the Calier home care business in Canada. In the U.S., I am pleased Fresenius was recognized for supply and service excellence. These recognitions demonstrate our unwavering commitment to ensuring supply for essential medicines and technology. It also recognizes the more than one billion we have invested over the several years to strengthen our capabilities and support for the U.S. healthcare system. We will continue with U.S. investment to support the healthcare system to deliver affordable and life-changing medicines for patients. In nutrition, we continue to enhance our globally leading portfolio and strengthening our position in this fundamentally attractive market through innovation and differentiation. In Q3, we delivered three new product launches focused on patients with high energy and protein needs. In MedTech, we announced our leadership of the EasyGen Consortium, a collaboration with industry and academia aimed at accelerating CAR T-cell therapy manufacturing, reducing costs, and improving patient access across Europe. This initiative underscores our commitment to advancing cutting-edge therapies and technologies. Now turning to biopharma. Again, we are increasing sales quarter over quarter as more medicines launch into key markets. For Denusomab, a key milestone was achieved with CMS issuing permanent and product-specific billing codes, the HCPCS codes. This is an important step forward in expanding access to high-quality biologic medicines while driving broader adoption and ensuring more patients benefit from these innovative, cost-effective treatments. Another major milestone was the first delivery of tie-in vials to European countries from our MAP science plant in Argentina. We've now largely completed the technology transfer, delivering a fully vertically integrated supply chain and manufacturing platform to support Cayenne. This marks a step up, upgrading our core to deliver efficiency and increased capability, showcasing the benefits of a vertically integrated platform. All these advancements underscore our commitment to patients around the globe to deliver accessible, innovative, and high-quality healthcare solutions. CABI remains at the forefront of innovation, operational excellence, and patient care. Now let's take a closer look at our resilient and very strong foundation. Our highly cash-generative pharma business continues to deliver strong and stable performance. Year-to-date, we have successfully launched 12 products with a total of 15 launches expected for the full year. As part of Rejuvenate, we are further optimizing our cost of goods sold, streamlining our network, and strategically investing to further scale this high-margin platform. With a globally leading portfolio and a local-for-local approach, we deliver essential medicines to patients worldwide. In the U.S., we supply 70% of the FDA's essential medicine list, underscoring our critical role in healthcare in the U.S. With stable organic growth, highly accretive margins, and an attractive cash generation, pharma remains a strong contributor to our balance sheet and a profitable foundation for sustainable long-term growth. Now, double-clicking on biosimilars, we continue to see strong growth momentum, really strong growth momentum. Last year, the business reached EBIT break-even, marking its transition into a scalable, fully operational platform. With MapScience, we have built a robust development and manufacturing platform demonstrating our ability to quickly advance molecules from development through regulatory approval and into the market. Our BioPharma franchise has now 11 products launched and marketed globally. As previously outlined, a key advancement of BioPharma is the integration of MapScience to deliver a dedicated development and manufacturing platform, including contract manufacturing. For biopharma, we will continue to upgrade the core and scale the platform to deliver further simplification and drive increased efficiencies as we strive to become a global leader. Now let's look at some of our recently launched medicines or molecules. Starting with Tayana or Totsilizumab Biosimilar, we continue to make great progress, leveraging our first mover advantage. We continue to see excellent market share growth development, which is supported by multiple PBM and health plan contracts, many of which are exclusive. Turning to Atulthi, our Ustekinoma biosimilar, we anticipate incremental sales in Q4 following our exclusive U.S. distribution agreement with Civica Script. As for our Denusoma, we already achieved sales, little sales in Q3. This is the only biosimilar to offer a subcutaneous 120 milligram pre-filled syringe for oncology indications, delivering a key differentiation from even the originator and competitors. This product profile really strengthens our competitive position. In addition, we are pleased to have recently received FDA interchangeability designation for both Denusumab products. This allows the medicine to be dispensed at the pharmacy as a substitute for the reference product, creating greater access for patients and healthcare professionals. Also, the FDA's recent draft guidance aimed at streamlining the biosimilar approval process and broadening interchangeability designations in the U.S. is a promising development for patients and payers. While it may have not fundamentally changed the existing framework, we see this as a further support for market growth and expect the U.S. biosimilar landscape to continue evolving positively in For the remainder of the year and into next, we expect the portfolio momentum to continue as contracting agreements convert into prescriptions. So watch this space. Over the past two years, what we labeled as in growth factors, they have delivered an impressive 37% EBIT on a CAGR basis. And year-to-date, we've achieved an exceptional 18% year-over-year EBIT growth. This performance is underpinned by new products and new innovations, which we will continue to upgrade and scale as part of rejuvenating. The growth vectors are performing in line, if not even better than initially envisioned when we launched future Fresenius. Not only are they driving accelerated top-line growth, but they are also significantly advancing our margin profile. At the same time, our structural improvements to the cost base continue to support margin expansion. The growth vectors, the key drivers behind Carby's elevated profitability, while our established farmer portfolio remains a strong, resilient, and profitable foundation. Looking ahead into 2026 and beyond, we expect this positive trajectory to continue. Key drivers here are the increasing contributions from biopharma, sustained product momentum and upcoming innovations in nutrition, the step-up in MedTech profitability, all underpinned by our resilient pharma business. Now let's turn to the Q3 highlights in our care provision platform, Helios. Overall, the German reimbursement environment continues to be, you know, by and large supportive. However, for 2026, the projected DOG inflator is anticipated to be approximately 3%, which is lower than initially expected due to a methodology change that favored the lower parameter versus the corridor of the two parameters previously used. This new percentage is broadly in line with the historical median. The one-time invoice surcharge of 3.25% with public insurance is an encouraging development. It is effective between November 1st, 2025 and October 31st, 2026, and is a clear positive supporting several years of previous hospital cost inflation. We continue to remain optimistic about government reimbursement in the coming years, even though recent events would seem to prioritize rather fiscal over health care policy. At Helios, Germany remains committed to advancing medical innovation and improving patient outcomes. For example, in Berlin and Wiesbaden, lung cancer centers are pioneering the use of innovative robot-assisted bronchoscopy systems. The cutting-edge technology enables earlier and more accurate diagnosis, often unlocking opportunities for life-saving curative treatments, marking a true paradigm shift in pulmonology. In Spain, Kiran Salud continues to demonstrate its strong focus on research and innovation with 285 new clinical trials initiated year to date, including 159 in phase one and phase two. This just reinforces its position As a leader in clinical innovation with best-in-class healthcare professionals and state-of-the-art hospitals, we remain the top choice for patients seeking exceptional care. I am excited by our continued EPS momentum. Through structural cost savings, we laid the foundation for transformation. Now in Rejuvenate, we're building on that strong foundation by upgrading the core, scaling our platforms, and elevating performance to drive long-term profitable growth. Productivity is no longer just about cost side. It's fueled by growth, new products, innovation, and serving the market. The results speak for themselves. From minus 13% EPS growth in fiscal 22, we hit the reset button to double-digit growth today. The transformation has been, I would say, remarkable. My colleagues should be very proud, and we are one team, and I would like to say thank you to our entire team. In the year to date, EPS increased by a powerful 14%. This is impressive and has been driven by the continued execution of our future Fresenius strategy, further operational progress, and a benefit from reduced interest expenses. Our strong EPS growth is significantly outpacing top-line growth, highlighting our ability to sustainably improve returns and to deliver shareholder value. We expect this positive trend to continue as we close out the year. The EPS momentum generated by Rejuvenate is evident as our growth vectors continue to deliver further profitability improvements. For example, Biopharma is gaining significant traction with momentum accelerating going forward. With that, I'll hand it over to Sarah.

Thank you, Michael, and thank you all for joining. Let's start with our financial highlights. consistent strong organic sales growth, sequentially increase in EBIT growth, and a meaningful EPS improvement. Looking at the top line, Q3 was another strong quarter with 6% organic revenue. Our consistent delivery demonstrates the strength of our business as well as the structural demand for the system-critical products and services we offer. EBIT growth was in line with revenue growth at 6%, a nice acceleration from Q2. Kavi's excellent performance has offset the expected and well-flagged Q3 effects at Helios. My KPI this year is our core EPS growth. In Q3, we grew EPS by an impressive 14% and achieved another quarter of double-digit growth, making it two out of three quarters in 2025. Two effects came into play. Our strong operating results combined with a significant year-over-year decrease in interest expense of 35 million euros. Following our Q3 financing activities and with a continued focus on interest expense management, we now expect 330 to 340 million euros of interest expense for the full year. Our tax rate for the quarter was 24.7%. in line with our expectations for the full year. The leverage ratio at three times net debt EBITDA was within our self-imposed target corridor of two and a half to three times. More deleveraging is expected before year end. Kabi had a strong quarter with a successful and disciplined execution on launch pipeline and rollout. This resulted in some contributions already materializing in Q3, that were initially only expected in the fall of this year. Organic revenue grew by 7%, placing it at the upper end of the structural growth range, with some additional benefits from pricing effects in Argentina. The growth vectors remained the primary driver of performance. Biopharma in particular stood out with an impressive 37% organic growth. Nutrition delivered 7% growth, demonstrating the attractiveness and structural strength of this business, despite the impact of the keto volume-based tendering in China. Pharma sales increased by 2% organically, relative to a strong prior year base. In Q3, Kabi delivered an excellent EBIT margin of 16.7%. This represents roughly 80 basis points on margin expansion year-over-year, including the absorption of the K2 effects. Three factors contributed to the performance. First, the growth factor significantly expanded their EBIT margin year-over-year to 15.9%, moving close to CABI's structural margin range of 16% to 18%. Second, and excellent profitability at Parma with a margin of 22%. And third, the strong operating leverage due to the disciplined execution and further incremental structural productivity improvements across all business units. Over to Helios. Our hospital business continues to deliver strong organic top-line growth at 5%. Year-to-date, revenue grew by 6% organically, which is at the upper end of the structural growth band. We delivered solid profitability with an EBIT margin of 7.5%, despite the loss of energy relief payments and the recent fluctuations in Spain. Year-to-date, the EBIT margin is at 9.1%. At Helios Germany, we achieved solid organic growth of 4%, driven by strong admission growth and positive pricing effects, balanced by somewhat lower case mix points. This performance also needs to be viewed against the strong prior year base, which included some favorable technical revenue reclassifications. From an EBIT perspective, margins stood at 8%, and as a reminder, Q3-24 included the final energy relief payments. The performance program is progressing and has achieved over half of the around 100 million euro target year to date. Further significant progress is expected in Q4, with potentially some spillover into next year. Helios Spain achieved strong organic growth of 7%, driven by a favorable mix of activities and pricing, as well as a strong performance in the occupational risk prevention business. With operating leverage at work, the EBIT margin in Spain reflects the usual summer dip. Nevertheless, at 6.6% in Q3, the margin shows a 20 basis point increase year over year. Year to date, Helios Spain has delivered a strong margin of 11.3%. Moving to our cash flow. Again, a strong performance, especially against the backdrop of a tough prior year comparison. We continue to deliver on our cash conversion ambitions. Operating cash flow in Q3 was driven in particular by Carbi, contributing approximately 440 million euros, a great achievement. Helios delivered a robust and reliable Q3 cash flow of around 330 million euros, despite a very tough prior year comparison. Proceeds from our pro-rata sale of resilience medical care shares are included in the cash flow bridge under acquisition and amounted to approximately 30 million euros in the quarter. As of today, we have sold approximately 1.5 million shares in conjunction with FMC's ongoing share buyback. LTM cash flow numbers are testament to the reliability of our cash generation with 2.2 billion euros in operating cash flow. When considering free cash flow for the last 12 months, note that dividend suspension in 2024 influenced the prior year LTM number. Over the past two years, we have made significant progress in reducing our leverage by approximately 100 basis points. This deleveraging has been a key driver behind the acceleration of our EPS growth, highlighting the focus we place on cash flow. The leveraging remains one of our top priorities within our capital allocation framework. At the same time, we are balancing this with targeted investments aligned with our strategic agenda and strict return criteria to upgrade the core and scale our platforms and ultimately to create value and deliver long-term profitable growth. On the financing side, we adopted a forward-looking perspective and capitalized on attractive market windows. With the successful transactions in September, we proactively addressed our refinancing needs for 2025 and most of the first half of 2026. We issued two 500 million euro bonds with attractive coupons and concurrently repaid early a 500 million euro bond with a coupon of 4.25% maturing in May 2026. At the same time, we signed a new 400 million euro loan agreement with the European Investment Bank, which will be used to support our R&D activities and selected CapEx investments. These activities demonstrate our commitment to managing within our self-imposed leverage corridor of 2.5 to 3 times net debt EBITDA. With that, let's wrap up Q3 and take a look at Q4. where we expect an acceleration of earnings growth. As mentioned, positive phasing effects have helped our Q3 performance, thereby de-risking the expected acceleration to some extent. At Helios, we expect a further increase in EBIT contribution due to the performance program in Germany. In addition, we anticipate to start receiving the third surge for publicly insured patients, which came into effect on 1st of November. At the same time, we expect the usual year-end topics, including reimbursement settlements, which may affect EBIT. The fourth quarter will also reflect a year-over-year comparison without energy relief payments. In Spain, Q4 is typically the strongest quarter of the year, but this is against a tough prior year comparison. CAVI will continue to absorb the adverse effects from Cato as well as macroeconomic headwinds, which includes some effects from U.S. tariffs, particularly for MedTech. However, the strong product launch execution combined with our successful productivity measures has resulted in an excellent EBIT margin year-to-date. The operational momentum is expected to continue. Given this context, we may deliberately decide to make some incremental investments during Q4 such as in R&D. This aligns well with Rejuvenate to upgrade our core and scale our platforms. Taking all of this together, what does it mean for our full year guidance? Following our Q2 revenue upgrade, we're now also raising our full year EBIT guidance. Based on the good momentum and disciplined execution in the first nine months, we now expect group EBIT growth at constant currency to be in the range of between 4% to 8%. Remember that guidance is that constant exchange rates adjusted for translation effects. We continue to expect ethics volatility in Q4, and if current rates persist, revenue and EBIT will each be adversely impacted by approximately two percentage points. In summary, our disciplined execution and strong operational momentum have provided as well for the remainder of the year. With continued focus on delivering sustainable growth, driving productivity, and maintaining financial discipline, we are confident in our ability to achieve our upgraded guidance and create long-term value. Thank you for your attention. And with that, I'll hand back to Michael.