Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
ANNUAL GENERAL MEETING
Fresenius Medical Care AG & Co. KGaA
SPEECH BY RICE POWELL
Chief Executive Officer
May 11, 2017
The spoken word shall prevail.
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
Fellow shareholders,
shareholder representatives,
dear employees,
ladies and gentlemen,
Twenty percent! That is the dividend increase we wish to propose to
you today. After 80 euro cents last year, we intend to pay 96 euro
cents per share this year, making it the 20th consecutive dividend
increase. As you can tell, Fresenius Medical Care is a success story,
and 2016 was an excellent year. We want you to participate in this
performance in the form of a dividend. This is the highest dividend we
have ever paid in the history of our company.
It is my great pleasure to welcome you to the Annual General Meeting
of Fresenius Medical Care. I would also like to welcome everyone who
is following the event online.
ANOTHER RECORD YEAR
One year ago, I stood here after an encouraging 2015, and promised
you that 2016 would be even better. Today, I can confirm that we
have kept that promise. We reached the ambitious targets we set for
ourselves. 2016 was another record year for our company.
Simply put, Fresenius Medical Care grew in 2016, and substantially so.
1. Revenue increased to 17.91 billion U.S. dollars, up seven percent
on the previous year. This is another new all-time high for revenue
in the history of our company.
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
2. In terms of operating income: We generated 2.64 billion U.S.
dollars, up 13 percent on 2015.
3. Net income attributable to the shareholders of Fresenius Medical
Care grew to 1.24 billion U.S. dollars, 21 percent more than in the
previous year.
Phase one of our Global Efficiency Program, which we successfully
concluded in 2016, contributed to these figures. The results show that
our growth and efficiency strategy is a success. It guides us and it
works.
You – our shareholders – have continued to stand by us and benefit
from our success. The dividend proposal of 96 euro cents corresponds
to a total distribution of 294 million euros. In other words, around 26
percent of our net income will go directly to you.
STRONG SHARE PRICE DEVELOPMENT
Our share price performance also plays an important role for you. The
value of your shares rose by 3.5 percent in 2016. In a long-term
comparison, the strength and stability of Fresenius Medical Care’s
shares is even more impressive: With dividends reinvested, our share
price has risen by 174 percent over the last ten years. This equates to
an average annual return of around eleven percent. It means that
Fresenius Medical Care’s shares have significantly outperformed the
DAX, which has recorded an average annual growth of six percent
over the past decade.
To illustrate this, if you had invested 10,000 euros in Fresenius
Medical Care shares ten years ago and reinvested the dividends, you
would have had 27,400 euros in your account on December 31, 2016.
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
THE WORLD’S LARGEST DIALYSIS COMPANY
Ladies and gentlemen,
Fresenius Medical Care is the world’s largest dialysis company.
No one sells more dialysis products than we do. Patients, physicians
and clinics in more than 120 countries around the world rely on our
products. We have production facilities in 37 locations. Last year
alone, Fresenius Medical Care sold 130 million dialyzers, representing
a global market share of almost 50 percent. More than one in two
dialysis machines are made by us. We generated revenue of 3.4
billion U.S. dollars last year with our dialysis products, accounting for
19 percent of our total revenue.
No company cares for more dialysis patients than we do. We look
after some 310,000 dialysis patients in our network of over 3,600
dialysis centers in more than 45 countries. This corresponds to 47
million dialysis treatments a year, or around 5,300 treatments every
hour. Our revenue from dialysis services amounted to 12.2 billion U.S.
dollars last year, or around 68 percent of our total revenue.
We combine our dialysis-related services in our Care Coordination
division. We generated revenue of 2.3 billion U.S. dollars in this area
in 2016. Care Coordination now accounts for 13 percent of our total
revenue.
With Care Coordination, we are creating and expanding business
areas that are geared towards offering patients comprehensive
treatment beyond the dialysis clinic. Examples are vascular care and
the Fresenius Medical Care pharmacy. New business areas like these
will provide the foundations for enhanced growth also in the future.
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
ACTIVE CHANGE THROUGH CARE COORDINATION
Care Coordination represents a strategic expansion of our business
model. Care Coordination allows us to take current and future changes
in health care systems into account. Moreover, we can use our dialysis
expertise and our Care Coordination services to actively shape the
various markets!
Health care systems are transforming. Rising costs and the growing
number
of
patients
present
many
countries
with
ever-greater
challenges. At the same time, health care providers and health care
systems must find new ways of achieving even better treatment
outcomes with the highest degree of quality along with cost efficiency.
What does this mean for Fresenius Medical Care?
We started as a company that provides dialysis products and dialysis
treatments. Traditionally, health care systems reimbursed each
service separately. Today, we are increasingly operating in an
environment where services are reimbursed on a lump-sum or
bundled basis.
This is just the beginning: In the future, in certain markets, we will
coordinate the entire medical care and treatment of our patients. We
will no longer be responsible solely for dialysis products and
treatments. We will ensure that our patients receive all the medical
services they need – not just dialysis treatment. The aim is to reduce
the cost of treatment while maintaining the same high standard of
care.
This development is already well underway in the U.S. health care
market. Individual medical services are increasingly a thing of the
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
past there; instead, it is all about offering comprehensive value-based
care for patients.
We are already participating in various pilot projects and state-run
public health care programs in the U.S. We are also working closely
with various private health insurers in the U.S., offering value-based
care to them and their customers.
How exactly does that work?
THE END-STAGE RENAL DISEASE SEAMLESS CARE
ORGANIZATION PROGRAM IN THE U.S.
Allow me to illustrate this using the example of ESCO, one of the
state-run programs in which we are participating in the U.S. This
involves coordinating the entire spectrum of medical care for patients
in selected dialysis centers. We are taking patients by the hand, so to
speak, providing them with value-based care that goes beyond
dialysis. Most dialysis patients suffer from other chronic diseases,
which often require additional doctor appointments and hospital stays.
We bring all of these threads together. We coordinate every step in
the treatment process – both within and outside our dialysis centers.
It makes it easier for patients to live with their condition. It makes
doctor appointments, treatment programs and hospital stays more
efficient. In return, we receive a portion of the cost savings for the
patient’s overall medical care.
In 2015, we participated in the ESCO-program in a total of six cities in
the U.S., taking responsibility for the care of around 8,000 patients.
We coordinated a network of physicians, hospitals and other medical
facilities in each location. We have managed to reduce the number of
hospital stays by around 20 percent. Based on this, we decided to
extend our participation in the program to a total of 24 locations at
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
the beginning of this year. As a result, the number of patients for
whom we provide complete medical care through this program is
expected to rise to 30,000 to 32,000 in 2017.
But why us? Why is Fresenius Medical Care ideally placed to improve
outcomes for our patients and reduce costs for the health care system
by providing this kind of value-based care?
IDEALLY PLACED FOR VALUE-BASED CARE
There are two reasons:
First, we recognized the benefits of value-based treatment models
early on. We began testing them in pilot projects more than ten years
ago and have used this experience to optimize our organization and
continuously improve our performance.
The second and far more important reason is that we know our
patients! We see them three times a week for several hours during
their dialysis treatment. What’s more, we have access to huge
volumes of statistical information on patient characteristics and the
course of their disease. This allows us to forecast the probability of
certain outcomes and take preventive measures at an early stage. We
are better positioned than almost anyone else when it comes to
identifying the need for further medical procedures early on and
coordinating patient care accordingly. So you can see that we are
extremely well placed to provide our patients with comprehensive
value-based care.
At this point, I should mention that the U.S. health care system has
evolved steadily in recent years. We have always played a leading role
when it comes to driving innovations that help to make treatments
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
more efficient and effective for our patients. We have no plans to
modify this approach in the future. We are not afraid of leading
change.
INCREASING NUMBER OF DIALYSIS PATIENTS
The U.S. is our biggest market. But kidney failure is a global illness.
Around three million people suffer from it. We expect this number to
grow to 3.8 million by 2020. This has several reasons:
-
People are getting older – all around the world.
-
At the same time, the risk factors for kidney failure, such as
obesity, high blood pressure and diabetes, are increasing.
-
In some developing economies, access to dialysis is only just
gradually becoming available for many patients.
As the largest provider of dialysis products and services, we benefit
from this trend. We are also making a point of expanding our network
of dialysis centers in developing countries.
EXPANDING DIALYSIS SERVICES IN INDIA
In 2016, for example, we acquired the second-largest provider of
dialysis services in India with a total of 50 dialysis centers. We have
now been active on the Indian market for more than 15 years, mostly
with our dialysis products. This acquisition represents the next big
step, as we will also be offering dialysis treatment in future. We want
to become a leading player in one of the world’s fastest-growing
economies.
In many countries, the health care system is still largely or completely
state-run. This means we generally cannot operate our own dialysis
centers there. But even in that kind of system, various options are
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
open to us, from offering dialysis products to taking on full
management of state-owned centers.
TAILORED SOLUTIONS FOR OUR PATIENTS - WORLDWIDE
As you can see, the countries in which we operate and their health
care systems are as diverse as the patients we treat. We have many
years of experience in the industry. We aspire to continue improving
the treatment of dialysis patients worldwide. This allows us to
precisely tailor our product and service range to the conditions in the
respective region. Whether we are dealing with developed or
emerging markets, privatized or state-run health care systems, we
can offer solutions. Whether we are selling dialysis products or
offering value-based care for our patients, we can serve markets
individually. We are flexible. We take on challenges. We see change as
an opportunity. All of this makes us a valued partner of choice.
One aspect is especially important to me: Although Fresenius Medical
Care is a global company, when it comes to our patients we also have
a regional presence and are nearby. Being close to our patients is
what sets us apart.
With this in mind, I would like to thank all of our 109,000 employees
in more than 50 countries around the world. They are the reason why
we are able to be so close to our patients. Thank you for what you
have achieved so far and for your tireless work with patients in our
clinics, our plants and our local offices. Your efforts have paid off.
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
OUTLOOK
Ladies and gentlemen,
Let us turn to the future and look ahead to 2017 and our long-term
goals for 2020.
We are successful because we set challenging goals for ourselves. We
intend to continue growing strongly in 2017. This applies to our core
business with dialysis products and services as well as to the further
development of our Care Coordination activities. We want to increase
our revenue eight to ten percent on a constant currency basis in 2017
and our net income between seven and nine percent. The results for
the first quarter of this year are in line with our ambitious targets.
Last year, we wrote a new chapter in the unique success story of
Fresenius Medical Care. We intend to continue writing this story with
great commitment and enthusiasm.
Our ambitions are also reflected in our long-term targets. We aim to
generate revenue of 24 billion euros by 2020. This equates to an
average annual growth rate of around ten percent. At the same time,
we expect average growth in net income in the high single-digit
percentage range.
I would like to conclude by thanking you, dear shareholders. Many of
you have been with us for a number of years. You have shown that
you also believe in the future of our company – the future of Fresenius
Medical Care.
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Speech to the Annual General Meeting of Fresenius Medical Care AG & Co. KGaA, May 11, 2017
We intend to keep on using our knowledge and experience to help
patients all over the world. And also to enable you, our shareholders,
to gain a fair reward from the success of the company, and to show
you that you have made the right decision in backing Fresenius
Medical Care. I look forward to being able to report here next year
that we have become even better, are working even more efficiently
and are continuing to operate successfully around the world – thanks
to our knowledge and experience.
Thank you very much for your attention.
Legal notice: This speech contains statements on the future that are subject to
certain risks and uncertainties. The actual results may differ significantly from
the results currently expected due to a variety of risk factors and uncertainties,
such as changes in the business, economic and competitive situation, legislative
changes, results of clinical studies, exchange rate fluctuations, uncertainties
related to legal disputes or investigations and inquiries as well as the insufficient
availability
of
financial
resources.
Fresenius
Medical
Care
assumes
no
responsibility of any kind for updating the statements on the future that are
contained in this speech.
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