Breakup of Fresenius? "We need to press the reset button"

The new Fresenius boss Michael Sen has been at the helm of the group for just 30 days. Now he had to announce the quarterly figures and at the same time the first profit warning – one day earlier than planned.

The last bad news of this kind was just three months ago. At that time, Sen's predecessor Stephan Sturm once again lowered the forecast for the group - and then had to vacate his post.

Of course, after such a short term in office, Sen is not threatened with this fate; he can rather claim to do the necessary clean-up work to get the company going again. "We have to press the reset button," says the new Fresenius CEO in his first conference call with analysts.

Sen speaks dynamically, almost in bullet points, while briefly outlining his plans. All business areas would be “thoroughly and quickly checked from head to toe” in order to make Fresenius fit for the future again in an extremely difficult environment.

"We have to concentrate on the matters that are in our own control, also called self-help," Sen formulates his claim.

These are sentences that analysts and investors on the capital markets like to hear. You have long criticized that the structure of the Dax group with its subsidiary FMC, which is also listed in the Dax, is too complex and the broad positioning as a health group with the four divisions hospitals, generics, medical services and dialysis machines is too cumbersome a conglomerate that is not enough offers synergy potential.

The stock market doesn't like either. As long as Fresenius reliably delivered good numbers, investors could ignore it. But the long-term growth model of the group, which has become heavily indebted through large series of acquisitions in recent years, has stalled since the pandemic at the latest. Since the beginning of the year alone, the share has lost around 40 percent of its value.

Predecessor Sturm, under the pressure of events, also held out the prospect of a possible reorganization of the nested healthcare group and was open to IPOs for Helios and Vamed or even a possible sale of the FMC stake of 32 percent.

But such considerations remained. Under Sen, it now actually seems possible that Fresenius could put at least some of the ideas into practice and, in the future, part with parts of the company.

The hope of a turn for the better is reflected in the share price, which rose on Monday despite the profit warnings at both companies: During the conference call, both Fresenius shares and FMC shares were up around five percent.

However, it is still far too early for concrete statements on the future structure, Sen persistently fended off corresponding inquiries from the analysts. "As we speak, a whole team is busy looking at the portfolio," he said.

It's mainly about reducing structural costs and improving profitability. He takes this opportunity to clear up speculation about the sale of individual assets, such as those recently circulating about the Spanish clinic chain Quironsalud: "We will first develop a strategy and then determine the order in which we will proceed."

Most recently, the news that the activist US hedge fund Elliott had joined Fresenius fueled speculation about a possible break-up of the healthcare group. Sen had recently confirmed in an interview with the "Frankfurter Allgemeine Zeitung" that there had already been contact with Elliott: "We will include their opinion on the potential of the company, like that of other shareholders, in our considerations," said Sen.

The new FMC boss Carla Kriwet, who also took over as CEO at the beginning of October and thus took office three months earlier than originally planned, wants to take decisive action at FMC. It was "urgently necessary to improve our operational business development through far-reaching measures," she announced.

Fresenius' dialysis subsidiary is under particular pressure, because FMC had recently developed into a brake pad for the entire group. In the most important market, the USA, of all places, the dialysis business collapsed enormously during the pandemic.

Efforts to counter falling margins with lower costs have recently been thwarted by the lack of nursing staff in the USA and the resulting significant increase in personnel costs. At the weekend, FMC therefore had to lower its own earnings targets for the second time this year. Since FMC contributes around a third to the result of the entire group, this also brought Fresenius another correction.

Fresenius boss Sen now expects currency-adjusted group earnings to decline by around ten percent this year. So far, the expected minus has been in the low to mid single-digit percentage range. FMC expects net income to fall by up to 25 percent, up from a maximum of minus 20 percent previously expected.

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