(Bloomberg) — Fresenius SE outlined plans to streamline its conglomerate structure, cut costs and separate from its kidney-dialysis unit in a revamp that failed to impress investors amid lackluster earnings.
(Bloomberg) — Fresenius SE outlined plans to streamline its conglomerate structure, cut costs and separate from its kidney-dialysis unit in a revamp that failed to impress investors amid lackluster earnings.
The stock fell as much as 6.9% in Frankfurt trading, the steepest decline in almost seven months.
Chief Executive Officer Michael Sen offered a scathing account of past management’s lack of vision in a presentation Wednesday, saying the company has lacked direction for years, resulting in disappointing performance and a probable profit decline this year.
“Fresenius needed a complete reset in terms of priority and performance,” Sen told investors.
The turnaround has started, he said, but it can’t deliver results overnight. The new CEO is working to simplify the German health-care conglomerate and overhaul its management to reignite growth.
After taking over in October, Sen conducted a review during which he canvassed shareholders including activist investor Elliott Investment Management.
Fresenius will now focus its efforts on Kabi, the intravenous-drug division, and Helios, which owns hospitals in Europe and Latin America. The plan also calls for annual cost savings of about €1 billion ($1.06 billion) by 2025 and reducing focus on Vamed, the company’s smallest division that manages health-care centers’ construction and operation.
Division’s Freedom
The German company still plans to keep a 32% ownership stake in the dialysis business, Fresenius Medical Care AG, but give it more operational freedom. The division’s shares surged on the news, gaining as much as 12%, the most since 2008.
The transformation efforts will likely start bearing fruit in 2024 after a difficult year in 2023, according to Sen’s assessment.
The company’s guidance shows that Fresenius’ fundamental situation is very difficult, even though it’s taking steps in the right direction, said Florian Oberhofer, a fund manager at Union Investment in Frankfurt.
New Hires
Based in Bad Homburg outside Frankfurt, the firm on Wednesday said Sen’s previous position as CEO of Kabi will be filled by Pierluigi Antonelli, previously chief executive at Italy’s Angelini Pharma. Fresenius’ head of legal, risk and human resources, will be replaced by Michael Moser, who joins from Turkish energy company Enerjisa starting Aug. 1 at the latest.
The new hires mark yet another reshuffle on Fresenius leadership following the replacement of Fresenius Medical’s CEO Carla Kriwet in December, only two months into the job.
Fresenius’s operations have gotten too complex in recent years, Sen told reporters, with the desire for growth coming at the expense of returns. That’s created a situation where the growing debt burden has constrained room for strategic moves, he said. Fresenius said it’s targeting savings through optimizing procurement and administrative costs and divesting non-core assets.
Fresenius Medical will gain more operational freedom by being converted into a stock corporation, a change that will become effective by the end of 2023. The unit has struggled in the pandemic amid rising costs, a higher-than-normal rate of patient deaths and staffing shortages.
Under the new structure, Fresenius will refer to the Kabi and Helios units as operating companies, while Fresenius Medical and Vamed will be considered investment companies. The dialysis sector remains attractive and Fresenius wants to benefit from a potential turnaround, according to Sen.
–With assistance from Lisa Pham and Angela Cullen.
(Updates with CEO comments in third and fourth paragraphs)
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