Fresenius Medical Care slides on outlook view

Fresenius SE & Co KgaA and Fresenius Medical Care AG & Co. traded lower at open on Tuesday after they released a preliminary statement for 2020 with a pessimistic outlook for 2021.

Fresenius said late Monday that it had achieved its sales and net income guidance for 2020, but expects this year’s earnings to be meaningfully affected by the effects of the coronavirus pandemic. Fresenius Medical Care, the group’s dialysis division, said it expects a decline of up to 25% in net income in 2021, before potential restructuring measures and including anticipated Covid-19 effects.

At 0852 GMT, shares in Fresenius traded 4.7% lower while Fresenius Medical care was down 12.6%.

According to analysts at Berenberg, Fresenius Medical Care’s expectations on net income seem to be related to Covid-19 and as that should pass, meaningful effects on long-term earnings for Fresenius aren’t expected.

Should Fresenius Medical Care post 30% lower net income, that would drive a 5% to 6% reduction in Fresenius’s net income and modestly lower-than-expected earnings for the other businesses, according to Berenberg.

Fresenius’s dialysis division said the severity of illness in Covid-19 patients with kidney disease resulted in an increased mortality for those patients throughout 2020. This is expected to carry over into 2021, the company said.

The revenue impact of higher mortality isn’t the only factor to consider, however, according to Berenberg. Operational leverage effects should also be taken into account at Fresenius Medical Care, analysts say.

“Fewer patients mean poorer fixed-cost absorption and also a knock-on effect on other businesses, such as the pharmacy and vascular access business, as well as the relatively high-margin products business. Until such time as volumes normalize, we would expect these operational leverage effects to persist,” says Berenberg.

Medium targets at Fresenius Medical Care and at Fresenius weren’t revised, though Fresenius said it will give an update on its medium-term expectations when it publishes 2020 results on Feb 23.

Write to Cecilia Butini at [email protected]

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