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UPDATE 3-Fresenius Medical shares at 12-yr low as labour costs weigh on profit

UPDATE 3-Fresenius Medical shares at 12-yr low as labour costs weigh on profit

Reuters · 07/27/2022 17:49
UPDATE 3-Fresenius Medical shares at 12-yr low as labour costs weigh on profit

Adds details, share prices

By Ludwig Burger and Riham Alkousaa

- Shares in kidney dialysis group Fresenius Medical Care (FMC) FMS, plunged 7.5% to a 12-year low after it cut its earnings outlook due to cost inflation and staff shortages in the United States.

In an unscheduled statement late on Wednesday, the world's largest provider of dialysis treatments flagged a decline in income in the high teens percentage range this year and withdrew its 2025 targets.

It also said it expected sales growth at the lower end of the previous forecast range.

Its parent, German healthcare group Fresenius SE FSNUF, said it expected group income to decline in a low-to-mid single-digit percentage range, prompting its shares to fall 5.6%.

It also expects group sales to grow in a low-to-mid single-digit percentage range in 2022, down from its previous forecast of a mid-single-digit percentage range.

Fresenius, which runs dialysis centres and hospitals, makes generic drugs and helps plan hospital construction projects, reported a 5% drop in income to 450 million euros ($458.96 million) while group revenue rose by 8% to 10.2 billion euros.

FMC said increased staff training costs, higher turnover rates and growing reliance on contract labour in the United States pushed costs further, in addition to -wage cost and supply chain disruptions which also took a toll on earnings.

It said it longer expected to achieve organic revenue growth in North American health care services this year.

"At the end of the first quarter we assumed extended labour shortages but clearly did expect such a significant and rapid deterioration," FMC Chief Financial Officer Helen Giza said in a statement.

"Although the company expects many of the factors behind this deterioration in -term outlook to be temporary, we do think this will come as much comfort to investors," analysts at brokerage Berenberg said in a .

FMC's income fell by 33% in the second quarter year-on-year to 147 million euros, despite a 10% rise in revenue in the quarter, preliminary results showed.

The company said Chief Executive Carla Kriwet will take over from Rice Powell, who is retiring on Oct.1, earlier than previously planned.

In February, parent company Fresenius increased its cost savings target to at least 150 million euros per year after tax, up from a previous goal of more than 100 million euros.

Fresenius Chief Executive Stephan Sturm said this year that FMC could be sold over the longer term but only if a very attractive price was offered.

He has also been looking for external investors to help finance a takeover or merger involving hospitals unit Helios, though Fresenius intends to keep the majority of shares.

Both Fresenius and FMC were due to release detailed results on Aug. 2.

($1 = 0.9805 euros)


(Reporting by Ludwig Burger and Riham Alkousaa in Berlin
Editing by Matthew Lewis and David Gregorio)

((ludwig.burger@thomsonreuters.com; +49 30 220133634;))