Operations and Business Environment - Fresenius Medical Care

dialysis will remain the treatment of choice, accounting
for about 90 % of all dialysis therapies. Peritoneal dialysis
should be the preferred treatment for about 10 % of
all dialysis patients.
The market volume should amount to nearly $ 58
billion in 2007 (2008: nearly $ 61 billion) and increase
by about 5 %. The dialysis care market is expected to
grow stronger than the dialysis product market with
its traditionally more significant price pressure.
As a dialysis company, we operate in a very heterogeneous
market with varying national and in some cases
regional regulations for both dialysis products and
patient care. Our key market in terms of revenue will
remain the United States. Details of the reimbursement
structure for dialysis care by the public health insurance
programs Medicare and Medicaid can be found in the
“Reimbursement” chapter from page 92 onwards.
Business Performance of
Fresenius Medical Care in 2007 and 2008
Exchange Rates
Fresenius Medical Care’s outlook for the 2007 and 2008
fiscal years is based on an exchange rate of $1.25 to
the euro. This exchange rate, in turn, is based on the
average annual exchange rates in 2005 and 2006,
which were approximately $1.25. In our forecast we
also take other exchange rates into account such as
yen to U.S. dollar and yen to euro.
Revenue
For the full year 2007, Fresenius Medical Care expects
a revenue growth at constant currencies of approximately
11% over 2006, totaling $ 9.4 billion. While the
revenue increase in established markets in North America
and Europe should be in the high single-digit range,
we expect particularly strong revenue growth of more
than 30 % in the Asia-Pacific region due to the acquisition
of Excelsior at the beginning of 2007.
For 2008, we anticipate an organic revenue growth
of 6 % to 9 % at constant currencies which should be
once again above the expected average market
growth of 5 %.
Earnings
The net income is expected to be between $ 675 million
and $ 695 million in 2007. This represents an increase
of between 18 % and 21% on an adjusted basis to 2006.
On a reported basis, the net income would increase by
26 % to 29 %. In the future, costs related to SFAS 123(R)
will not be adjusted when comparing with 2007 figures.
We do not expect any further one-time items in the
2007 fiscal year.
In accordance with the aims of our GOAL 10 growth
strategy – which is discussed in detail from page 50 onwards
– the net income should increase by more than
10 % p. a. in the long term and thus in 2008 as well.
Dividend
Fresenius Medical Care has pursued a long-term profit-oriented
dividend policy since its foundation in 1996.
The dividend will increase for the tenth consecutive
time, pending approval of the proposed annual dividend
increase by the General Shareholders’ Meeting
on May 15, 2007. During this period, the dividend per
ordinary share rose from € 0.51 to €1.41 for the fiscal
year 2006. This represents an average annual growth
of 12 %. We intend to continue this development in
2007 and 2008.
Capital Expenditures and Acquisitions
We expect our capital expenditures and acquisition
spending to total approximately 650 million in 2007
and 2008. Our capital expenditures would thus be within
the targeted range of spending about 6 % of the
total revenue. Most of this amount will be invested in
North America and Europe. We intend to make investments
to expand our production capacities for dialyzers
in Ogden (Utah, USA), St. Wendel (Germany) and
Buzen (Japan) to respond to the high market demand
for our blood filters. In addition, we will expand our
manufacturing facilities for blood lines and peritoneal
dialysis solutions. In the dialysis services, we plan to invest
in the modernization of existing dialysis clinics and
the opening of new clinics.
Our acquisitions will serve to extend our core competences
and expand our worldwide dialysis business.
For instance, we intend to offer therapies for dialysis patients
that include the administration of dialysis drugs.
105
Fresenius Medical Care 2006