Fresenius makes solid start to year after turbulent 2018

By Caroline Copley

BERLIN (Reuters) - Fresenius reported a rise in first-quarter sales and operating profit on Thursday, helped by growth at its generic infusion drugs and dialysis units, as its troubled German hospital business showed signs of stabilisation.

The German group has flagged 2019 as an investment year as it steps up a drive to improve German hospitals that have suffered from declining admissions and high staff turnover. It also wants to scale up its home dialysis business.

Currency-adjusted quarterly sales rose 5 percent to 8.5 billion euros (£7.3 billion), helped by growth at its Kabi infusion unit and separately listed Fresenius Medical Care. Operating profit rose 2 percent to 1.11 billion euros.

"All four Fresenius business segments have developed in line with our expectations, putting us well on course to meet our targets for the year," Chief Executive Stephan Sturm said.

Fresenius had a turbulent 2018 as it grappled with operating problems at two of its three major businesses and was tied up with a court battle over its aborted takeover of generic drugmaker Akorn, which it won.

Bankhaus Lampe analysts were encouraged the company had managed to stop the margin erosion at its Helios Germany hospitals business, even though sales fell 6 percent and operating profit declined 16 percent, hurt by a nursing shortage and a less pronounced flu season.

"We see our thesis supported that none of the businesses are facing material structural challenges," wrote analyst Volker Braun, who rates the stock 'buy'.

But Jefferies analyst James Vane-Tempest said it was too early to call a stabilisation trend at Helios given the company faces challenges from reforms to the German hospital payments system that kick in next year.

Shares in Fresenius, which have surged 19 percent so far this year, outperforming a 9.6 percent increase in the European health sector index, pared early gains to trade 0.1 percent lower at 0942 GMT.

At Fresenius Medical Care, which has faced a slowdown in North America, its most important market, adjusted sales rose 6 percent to 4.13 billion euros, helped by agreements that materialised earlier than planned.

Operating profit increased by 4 percent in constant currencies to 551 million euros.

Adjusted quarterly sales at Kabi rose 4 percent, while revenue at its smallest division Vamed, which manages projects for hospitals and provides post-acute care in central Europe, jumped 33 percent.

Despite expected earnings dilution from its $2 billion acquisition of home dialysis maker NxStage, Fresenius confirmed its guidance for currency-adjusted sales growth of 3-6 percent this year compared with 6 percent last year, while profit is expected to stay around the same level as 2018.

($1 = 0.8923 euros)

(Reporting by Caroline Copley; Editing by Jason Neely and Mark Potter)