Fresenius SE & Co. KGaA has again cut its guidance for the year, foreseeing a sharper fall in earnings as macroeconomic pressures and a struggling North America business at subsidiary Fresenius Medical Care & Co. KGaA weighed on third-quarter performance.
The German healthcare company FRE, -3.19% now expects a fall of around 10% in group net profit in 2022 at constant currency, from previous guidance of a single-digit decline. Sales growth is still expected in the low- to mid-single digits, Fresenius said Sunday.
The lower guidance comes amid expected lower contributions from dialysis-care subsidiary FMC, where net profit is now expected to fall more steeply, in the percent range of the high teens to mid-20s. Delays to improvements in the North American healthcare services operations are weighing on earnings, as are general macroeconomic pressures, FMC said. Revenue is still expected to grow moderately for the year.
In the third quarter, Fresenius’s net profit fell 19% at constant currency, excluding recent acquisitions, to 371 million euros ($ 369.7 million) amid higher labor costs at FMC’s U.S. business, as well as general cost inflation, the company said. Earnings before interest and taxes and before special items fell 17% to EUR949 million, with the operating margin contracting to 9.1%, the company said.
Sales grew organically by 4% to EUR10.46 billion, Fresenius said.
At FMC, in which Fresenius holds a stake of around 32%, quarterly sales rose 3% to EUR5.1 billion, while net profit before special items fell 24% to EUR230 million and operating profit before special items fell 17% to EUR472 million, the company said.
“While it is disappointing that the execution against our North America recovery plan is delayed, we are confident that the intensified efforts will improve the performance,” FMC’s chief financial officer, Helen Giza, said.
In July, Fresenius cut its sales outlook for the year as a result of weak business performance at FMC, and said it expected a decline in earnings for the year, having previously guided for an increase.
Further ahead, macroeconomic factors remain a major headwind and source of uncertainty, Fresenius said, pointing to cost inflation, labor shortages and potential disruption to energy supplies. The Russia-Ukraine war also directly and indirectly affects the company business, valued at a EUR24 million drag on the bottom line in the first nine months of the year, the company said.
“Fresenius will continue to closely monitor the potential further consequences of the overall heightened volatility and muted visibility, including balance sheet valuations,” the company said.
Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby