Fresenius SE & Co. KGaA (FRE) Earnings Call Transcript

Good afternoon, and welcome to the Conference Call of Fresenius Investor Relations, which is now starting. May I hand you over to Markus Georgi, Investor Relations. Please go ahead.

Thank you, Stuart. Good afternoon, everybody, and good morning to the U.S. and welcome to Fresenius Full Year 2019 Earnings Call. I'm joined on the call today by Stephan and Rachel. We will start the call with some prepared remarks and then proceed to Q&A. As always, before we begin, I would like to remind you that forward-looking statements and the disclaimer are on Page 2 of today's presentation. Without any further ado, I will pass the call to Stephan. Stephan, the floor is yours.

Thank you, Marcus. Good afternoon, good morning, a warm welcome. Thank you for joining us. As always, we appreciate your interest in Fresenius. Markus has pointed out the Safe Harbor language to you. So let's move right to Page 3 with our take on 2019's highlights and our expectations for this year and beyond. Starting with 2019, a tough year, more disappointments than positive surprises. But yet we delivered on our commitments. A strong Q4 had us return to positive earnings growth and took us to our 16th consecutive record year. Very healthy top line growth across all our segments. And at the same time, net income, currency adjusted was flat year-over-year, as guided. And a bit of currency tailwind took us to a new peak. Growth clearly below our aspiration level, but overall, satisfactory, given the various challenges we were facing. And given our meaningful investments into accelerated and then sustainable earnings growth going forward, investments which, to some degree were taken through our P&L. Let me highlight some of them. At FMC, integration of NxStage and the rollout of home infrastructure in Asia. At Kabi, our major planned upgrades and expansions as well as the ongoing development of our biosimilar's portfolio. And at Helios Germany, our efforts to counter regulatory headwinds as well as to capitalize on opportunities. So 2019 broadened the foundation for accelerated growth in the coming years. And all our investment initiatives are on track. That brings me to our dividend proposal for 2019. And we want to extend our flawless track record and propose a 5% increase to $0.84 per share. If approved, that would mark the 27th consecutive dividend increase. With that, let us move to our key expectations for 2020. For Kabi, again, strong emerging markets growth, tempered by last year's tough comp. And given normalization of drug shortages and opioid market contraction in North America, we're suffering from a bit of an extended hangover there. For Helios, ongoing stabilization in Germany, despite the pain caused by the unbundling of the DRGs. And at the same time, Spain is expected to plow ahead, primarily driven by admission growth and our recent acquisitions in Colombia. For FMC, a continuation of the strong underlying growth trend, somewhat massed by the ESCO and Tricare one-timers last year. Taken together, sustainable sales growth and a return to earnings growth for now has flagged already last year, below our medium-term target CAGR of 5% to 9%. But we remain confident in an acceleration towards 2023. At the same time, I believe it's just too early to reliably assess the impact of the coronavirus on our group. Kabi, given the size of its China business has the largest exposure. And for the avoidance of doubt, corona is not going to be a positive for us. But from today's perspective, we also do not expect a significant impact on group net income. On to Page 4, with a few more details on our expectations for Kabi, starting with North America. There, we've seen a 2% organic sales decrease in full year '19, a rare disappointing year for business, we have grown so rapidly over the last decade. However, you know the reasons. We've discussed them last year as they emerged. To start with, 2019 had tough comps, given 8% and 10% organic growth in 2017 and '18, respectively. On top, drug shortages have normalized. Related to that, our largest competitor returning to full capacity after an extended absence, slowly developing price erosion, continued contraction of the injectable opioids market, a few delayed product launches, the voluntary extended plant shutdown. Most of these factors were foreseen. The effects were sometimes underestimated. Taken together, are pretty heavy, and unfortunately, growing weight on our top line and earnings growth last year. And these factors haven't simply gone away just because it's a new calendar year. Much rather, given how 2019 evolved, in the first quarters of 2020, we're still up against some quite tough comps. So our cautious guidance is not about any new challenges arising, but rather reflects the gradual annualization of the trends we already know, without any non-foreseeable positive effect to offset. Now specifically on pricing. Annual price erosion for injectable drugs in North America has historically moved in a fairly narrow band from very low to mid-single digits. Last year, a few smaller competitors created price challenges in certain molecules that then inched overall price erosion more towards the mid-single digits. And our model does not assume an improvement from there. On to launches, a very strong 16 new pharmaceutical products in the U.S. alone last year, fully in line with our guidance. But as I indicated, some of these came a bit later than originally anticipated. Hence, that 2019 contribution was smaller. More importantly, the overall size of the opportunity is reduced, as we were a bit late to the party on quite a few occasions. So yes, the 2019 launches will make a contribution this year, less than originally planned, though. And for 2020, we expect, again, say, 15-plus launches, targeting a market of an aggregate of $1.3 billion. Their contribution will help us compensate, at least partially, those prevailing volume and pricing headwinds, this year and going forward. And indeed, our product pipeline is fuller than ever. Last year, yet again, we filed more ANDAs than we received approvals. Hence, at year-end, we had a record 54 files pending with the FDA, and I believe that bodes well for pretty vigorous launch activity in the coming years and fulfilling remaining gaps in our injectables portfolio. That's a nice takeaway to Slide 5, with an overview of our U.S. portfolio strategy. You will have seen a variation of this Slide before. We keep on both broadening Kabi's product portfolio and expanding our channel access to serve more health professionals and more patients in ever more places. You find the distribution channels across the top line, with top left, our current focus on injectables into hospitals via GPOs. But you also see the growing number of blue dots by 2023, down the channels as well as across the product groups. Our investments in R&D are diversifying the current product portfolio into adjacent growth areas. And we are deepening our market penetration by building additional market access capabilities to selectively enter new distribution channels. At the same time, the capital investments we are making in manufacturing and distribution, they will make us an even more cost-efficient and reliable supplier. Taken together, we continue to strengthen our IV drugs business, first 2 rows. And at the same time, as we diversify, we are becoming more independent product. So in summary, despite the decline of our U.S. business in 2019 and the expected softness this year, we are a leader in a structurally growing market, with healthy share and margin positions and the diversification strategy that is opening new growth opportunities in the medium term. On to emerging markets on Slide 6, where Kabi's strategy has been and continues to be a huge success. We've grown at exceptional rates and expect to show further strong organic sales growth this year. Especially in Latin America, we believe we can keep our momentum. And also there, broadening and deepening our product portfolio is key. Actually, Latin America is a great example in this regard. When originally, Kabi there was primarily about infusion solutions, we now see large and growing contributions from our clinical nutrition and medical device ranges. But China is even more important for Kabi's emerging markets presence and contributed significantly to its overall growth over the last decade. As you can see bottom left, by now, China is roughly a EUR 1 billion business for Kabi, driven by healthy double-digit volume growth over the last decade, coupled with a low- to mid-single-digit price erosion in most of the years. This translated into consistently significant organic sales growth. Now whilst the absolute increments keep on growing, percentages don't. And that's just math. Hence, I maintained the view that high single digits is a more realistic exception for sustainable CAGRs than getting carried away into the double digits. Now specifically for this year, whilst we're expecting healthy volume growth, we see a more pronounced price erosion, driven by regulatory headwinds. The new national reimbursement drug list was implemented on January 1. It foresees not only more price cuts for individual drugs. It also limits reimbursement for clinical nutrition products to specific indications. It hurts a bit. And clearly, the impact on earnings is larger than on sales. Second week of January, I visited our annual Kabi China sales conference. I was very impressed by the energy and the enthusiasm in the room, more than 3,200 sales reps covering the country. You see a photo of that top right. And as I said earlier, it is just too early to reliably assess the impact of the coronavirus, but if justified, here, we have some SG&A cost potential to mitigate lost sales. Over to Slide 7 with an update on our biosimilars portfolio. Last year, as you know, we launched Idacio, our biosimilar of Adalimumab in Europe. And as per our settlement with AbbVie, we plan to commercialize Adalimumab in all its indications in the U.S. from mid-2023. Of course, subject to marketing authorization by the FDA, which we firmly expect to obtain in time. And moreover, we can and will commercialize Ada globally. For Pegfilgrastim, we expect a slight delay relative to the originally planned launch date. After final alignment with the FDA end of last year, we have rearranged our dossier to their requests and now expect a smooth regulatory process. We are finalizing our filing as we speak and will submit the dossier in the EU, soon after the FDA submission. So we are targeting a 2021 launch, both in the U.S. and in Europe. And hence, as you would expect, launch preparations have already started. On Tocilizumab, the biosimilar to ACTEMRA, we have successfully finalized our Phase I study for subcutaneous application. And whilst we'll also do a bridging study for IV application, subcute is the larger of the 2. And here, we appear to be leading the competition. Our Phase III study has already been initiated, and we expect the inclusion of first patients in the summer. On that basis, we expect to launch Tocilizumab, both in the U.S. and in Europe in 2023. Beyond these, there are 3 more biosimilar candidates in our pipeline, making progress according to plan and ready to launch some clinical development phases next year. It takes me to our business plan. Considering that we are talking about the living business with a fairly dynamic regulatory framework, we are progressing very well with the rollout and commercialization of our biosimilars portfolio. We see, however, a slight delay for the launch of Peg and our first market experiences with Idacio in Europe, show us that price levels are a notch lower than originally assumed, especially in tender processes. Thus, we now expect EBITDA breakeven in 2023 and that high triple-digit million euro sales number from 2024 onwards. That's one year later than originally planned. Unfortunate, but not the end of the world. And thanks to our risk-mitigating transaction structure, where delays generally result in reduced milestone payments that halt total investment ceiling, that will be unchanged at EUR 1.4 billion until EBITDA breakeven in 2023. Over to Slide 8, which shows the current status of the Idacio rollout in Europe. And here is the key takeaway. The rollout is progressing according to plan, and we have a fairly decent coverage of most of the European countries. Hence, sales will increase significantly this year. We have won recently 3 large tenders in Italy, an indication of our competitiveness and our growing market penetration over the coming quarters. One word on our transfusion medicine and cell therapies business, that's on Slide 9. We created the TCT division last year to better reflect the requirements of an ever more agile business environment. After an in-depth strategic review, we have decided that the TCT business will remain an important part of Fresenius Kabi. And we're very pleased with the financial performance of that business last year. As I already said, in Q3, we are determined to continue to invest in that division's development. A good example here is Haina in the Dominican Republic, where given growing volume demand we keep on investing into the expansion of our capacities for disposables. And now that the building is inaugurated, start for the new production lines will be later this year. I also want to mention the formation of our recently formed joint venture with Bio-Techne and Wilson Wolf. So beyond the organic expansion of the business, we will also pursue bolt-on acquisitions and like here, corporations, treating -- creating win-wins. The joint venture provides a scalable manufacturing technologies and processes needed to develop and commercialize new cell and gene therapies, very clearly a growth market. On to Slide 10, with an update on Helios Germany. With a timely initiation of decisive measures to counter regulatory headwinds, we feel well prepared for 2020 and beyond. We know we are working on the right trends. And we are setting up exciting new business models. I'm convinced that Helios Germany has now stabilized, and we are optimistic to see sustainable growth over the coming years. For this year, we're obviously still facing regulatory pressure from the unbundling of DRGs. We have said early on that we expect a negative high double-digit million euro EBIT amount, as a gross effect from that carve-out of nursing costs. At the same time, we said that already identified countermeasures would cover about half of that shortfall. We were, hence, looking at a residual, low to mid double-digit million euro gap. You can draw from our Helios EBIT outlook for this year, but we believe we can close also that gap. So we expect a flattish EBIT development in Germany. And if we're lucky, may even get to a bit of growth. That will be quite an achievement. We have made progress in filling Chief Doctor vacancies. We have hired a large number of well-trained nurses. At the same time, we further optimized our processes and adjusted our cost positions. On top, we see a DRG inflator for 2020, which is at a record high. Mind you, as in previous years, the effective price increase will be a bit lower as it is subject to negotiations at the state level. So let's have a closer look at our investments into future growth areas. Now with regard to clustering, the share of patients actively choosing our specialized hub hospitals has meaningfully improved. We have also increased the share of patients being transferred from smaller hospitals to those hubs. And in addition, physicians from our smaller hospitals have generally intensified collaboration with their colleagues at hubs. For instance, in tumor boards or in the field of neurology. They will then jointly decide on the best treatment path for an individual patient. This clearly improves medical outcomes with a knock-on commercial effect. In 2019, we also laid the foundation for internationally scalable business models, which will, in the medium to long term, accelerate top line growth and improve our profitability. Let me give you just a few examples. We've continued the rollout of our prevention centers with openings in Berlin and Munich, and are by no means done. We also aim to expand Helios into a nationwide provider of occupational medicine, another revenue synergy from the Quironsalud acquisition who are true experts in this field. Telemedicine, in November, our digital health company launched our digital and personalized companion for chronically ill patients, it's called [ Couralee ]. And while [ Couralee ] has been certified as a digital medical product in Germany already, we're also generally open for an internationally rollout. The [ Couralee ] platform is also open for third-party providers to offer patients the best available care. Coming to our outpatient services with our network of more than 120 outpatient clinics in Germany, we are keen to ramp up our outpatient business going forward. And now we are specializing our outpatient centers even more, for example, radiation centers, diagnostic centers or surgery centers. The beauty of that strategy is that we offer even better medical quality, whilst we optimize cost structures and increase admissions. With that, over to Helios Spain on Slide 11, where we see an ongoing organic and inorganic growth momentum. Quironsalud has opened its proton therapy center in Madrid. As you know, it's the first such center in Spain, and proof of our ambition to provide the best possible cancer treatment. Quironsalud has also finished a major expansion project in its largest private hospital in Madrid, the University Hospital in Pozuelo. Generally, we've seen steady organic growth across our network of private hospitals in Spain, to a large extent, driven by admissions. We have also seen a positive momentum in the ORP segment. And we expect these trends to continue this year. Coming to Latin America, more precisely to Colombia. What we have managed to do here is nothing less than building a national leader in health care services in about 18 months. That is, as we see value in providing integrated services to our patients through a network of facilities. And hence, we expect attractive returns on these investments, frankly, also on a risk-adjusted basis. With that, on to Slide 12, where we feel confident in confirming our medium-term growth targets. We expect accelerated growth over the next years, organic and inorganic growth to both continue to play a role for us in the medium term. So in terms of sales, we expect 4% to 7% organic growth. And at earnings level, we see growth a touch faster at 5% to 9%, again, organic. We expect that our sales growth and efficiency improvement initiatives as well as Fresenius Kabi's biosimilars business will drive an acceleration of group earnings growth over that period. Small and mid-sized acquisitions are expected to contribute an incremental CAGR of approximately 1 point to both sales and net income growth. With that, let me hand you over to Rachel. Thank you for now.

Thank you, Stephan. A warm welcome to everyone. We are pleased with the fourth quarter, a strong finish to 2019. This year, we are back on a growth trajectory, and we are targeting continuing accelerating growth in future years. But first, let's have a closer look at the 2019 results. The results for last year are shown in our usual fashion. So before special items, including the operating results of NxStage and excluding IFRS 16 effects. Prior year's figures are adjusted for the divestitures of care coordination activities at Fresenius Medical Care. A comprehensive overview of all special items and adjustments is provided at the back of our investor news and in the results center on our website. The effects from IFRS 16 are shown on Slides 32 and 33, and in detail at the back of our investor news. So let's switch to Page 14 in our key financials. Growth rates on this slide are on a constant currency basis. We delivered 6% sales growth in 2019 and 5% in the fourth quarter, fully in line with our guidance. EBIT showed a decline of 2% in the full year and remained on prior year level in Q4. There are 3 main reasons for the full year decline. Firstly, at Fresenius Medical Care, the negative impact of the decreasing savings rates for ESCOs, paired with the other onetime revenue adjustment was only partially compensated by a gain on a remeasurement of FMC's investment in Humacyte. Secondly, at Kabi, the softer development in North America was only partially offset by an excellent development in the emerging markets. Finally, at Helios, investments to counter those regulatory headwinds weighed on the profitability in Germany. Interest decreased year-on-year by 9% in constant currency in the full year to EUR 510 million. That's at the low end of our expectations, mainly driven by ongoing favorable market conditions, successful refinancing activities and supportive foreign exchange effect. The figure including IFRS 16 is EUR 714 million for 2019. And after this year, based on current exchange rates, we aim for net interest between EUR 690 million and EUR 710 million. Hence, we are expecting a further slight reduction year-on-year. To be clear, that expectation is excluding potential new acquisitions. The guidance relevant group tax rate before special items was 23.4% for 2019, fully in line with our expectations. And here, for 2020, we aim again for a tax rate between 23% and 24%. So let's move on to net income, which on a constant currency basis was at the prior year level for 2019, and thus fully in line with our guidance. Net income even increased by 2% in the fourth quarter, despite the absorption of the negative onetime effects of Fresenius Medical Care and the extended plant shutdown at Kabi North America. A good proxy overall then for the growth rate for the full year 2020. Page 15 illustrates the Q4 2019 momentum of the 4 business segments. And the results are presented in the usual guidance relevant fashion. I think particularly pleasing here is the consistent organic growth across the group. Let's start with Kabi. Overall, a somewhat weaker Q4. The company showed solid 4% organic sales growth, but a slight EBIT decline. The excellent emerging market development helped to partially offset the softer development in North America as far as sales are concerned. At the EBIT level, the positive contribution of the emerging markets could only partially compensate the weakness in both Europe and North America, which was intensified by that planned longer-than-usual U.S. plant shutdown in Q4. Helios showed a strong quarter with accelerated EBIT growth compared with Q3, particularly driven by Germany. Overall, the top line grew by 4% organically. Germany continues to stabilize, and we see slight positive admissions growth for the second quarter in a row, coupled with a favorable pricing environment, pleasing indeed. Spain continues to shine with an excellent growth momentum, both sales and EBIT wise. Vamed showing slightly lower growth rates in Q4 over a tough prior year comp, but delivering nicely on their full year guidance. Let's turn to Page 16 for a review of Fresenius Kabi's organic sales growth by region. And let's start with North America, where we've seen organic sales declining by 1% in Q4 and by 2% in the full year, in line with our revised expectations that we gave in Q3. Sequentially, we have seen a slight improvement and an indication for a stabilization of the market. We are facing ongoing volume headwind, coupled with pricing pressure, which has recently skewed more towards mid-single-digit than low single digit declines. However, our strategy to diversify and broaden our product portfolio is showing positive effects. Especially noteworthy is the excellent growth of our clinical nutrition and medical devices businesses, and we are very optimistic that we can accelerate growth in the non-IV business areas in the upcoming years. In Europe, we have seen 2% organic growth in Q4 and in the full year, respectively. That is in line with our expectations to grow mid -- low to mid-single digit. We are pleased with the broad-based positive performance across all product segments, and yet again, with the dynamic growth momentum of our enteral nutrition business. Moving on to the emerging markets, which continue to show remarkable organic growth of 12% in Q4, leading to an outstanding 14% in the full year, clearly double digits and thus, in line with our expectations. China with a healthy 9% organic growth in Q4 over a very tough comp. With that, let's turn to Slide 17 in Kabi's regional EBIT development. Total EBIT came in at EUR 283 million in Q4, a decline of 1% to constant currency. For the full year, total EBIT was EUR 1.2 billion, an increase of 3% at constant currency. And thus, as indicated in Q3, at the low end of our guidance range, of course, primarily driven by North America. Here, we saw an 8% decline in North America in Q4, taking the full year 2019 to a decrease of 3%. The full year '19 results reflects the volume headwinds and the stronger competition for certain molecules, whilst in addition, Q4 was impacted by that extended shutdown at our U.S. facilities. As we said in Q3, we decided to consciously have a longer-than-usual production shutdown to accelerate investment at our U.S. plant on the back of the softer volume demand. Nevertheless, we still managed to show an EBIT margin of 33.5% in Q4. And I'd like to take the opportunity to reiterate our sustainable EBIT margin target of around 35% for the IV drug business in the U.S. Let's move on to Europe. Total EBIT came in at EUR 87 million in Q4, a 10% decrease year-on-year. That's nothing structural. We're talking relatively small numbers here, and the prior year quarter was a tough comp. The negative impact on our EBIT line from the sales efforts of the Idacio launch in Europe has not yet annualized. Moreover, we've seen, again, some small onetime items in our production facilities weighing on our profitability. We are convinced that those headwinds will ease during 2020. Thus, we expect very solid EBIT growth this year. On to emerging markets, where we had 7% growth in the fourth quarter on the back of high comps, bringing the full year 2019 to an outstanding level of 19% growth. We can move on to Slide 18 now for Fresenius Kabi's regional outlook. Let's start with North America. Clearly taking the well-known volatility of the IG generic -- IV generic business into consideration, here we anticipate ongoing volume headwinds, coupled with somewhat increased price declines year-on-year. Those effects will be partially compensated by our growing clinical nutrition and medical devices businesses as well as, of course, new drug launches. Hence, our current best estimate is a broadly stable development as far as organic sales growth is concerned. We project the EBIT development to be below the top line performance, thus we currently expect to see a decline. Let's move to Europe. And for 2020, we expect mid-single-digit organic sales growth. We assume the excellent growth of our enteral nutrition business to continue in the coming quarters. And moreover, growth is expected to be additionally fueled by Idacio in 2020. In the emerging markets. In aggregate, organic sales growth will likely be in the high single digits in 2020. We have considerably broadened and deepened our emerging markets presence over the last years. So emerging markets growth is by no means only dependent on China. Let's take Latin America or Africa, as an example. We expect to see no major changes from 2019, meaning continued strong growth in all business lines this year. That is despite a challenging situation in some local economies. In Asia Pacific, outside of China, we expect an ongoing positive momentum, especially clinical nutrition is growing very dynamically in that region. We expect double-digit volume growth, coupled with single-digit price declines, leading to healthy growth in 2020. And on to China. You heard Stephan's caveat with regards to the regulatory headwinds, thus, a bit more pricing pressure is baked into our outlook for 2020. And obviously, we are watching the coronavirus development very carefully. To be clear, the potential financial impact of the coronavirus on our business is not yet reflected in the emerging markets organic sales growth expectation for 2020. To reiterate what Stephan said, though, if the situation persists or worsens, we have some flexibility to appropriately address marketing and sales expenditures. Let's move to Helios on Slide #19. Organic growth at Fresenius Helios came in at 4% in Q4 2019, bringing the full year growth to 5%. Thus, as expected, at the upper end of our outlook range of 2% to 5% growth. Helios Germany showed a 3% organic sales growth for both the fourth quarter as well as the full year 2019. We are very pleased that we see an ongoing positive admissions growth, testament that our initiatives are materializing, which bodes well to 2020. Thus, we project that the positive pricing environment coupled with slight admissions growth will lead to solid organic sales growth in Germany this year. Moving on to Helios Spain, where we've seen very healthy organic sales growth of 7% in Q4, and with organic sales growth of 7% also for the full year, Helios Spain even exceeded its historical organic sales growth range of 4% to 6%, mainly driven by admissions growth and excellent execution, within the existing hospital and service offering. Reported sales growth is even at 9%, obviously fueled by the recent acquisitions in Colombia. Moving on to EBIT. Total EBIT came in at EUR 292 million in Q4, a 5% increase year-on-year and bringing the full year 2019 rate to minus 4%, that is in line with the outlook range of minus 5% to minus 2%. Helios Germany had an EBIT of EUR 143 million in Q4, with a 4% increase year-on-year. So the business is back to growth. Here we've seen first positive effects from the initiated measures, and growth was also supported by a softer prior year comp. The EBIT margin was at 9.7% for both the fourth quarter and the full year, that's 80 basis points below the level of 2018, mainly due to the implementation costs for our initiatives as well as ongoing investments into outpatient facility and new business models. For 2020, we expect an absolute EBIT around the same level as for 2019, hence, a slight margin dilution. At Helios Spain, EBIT increased by 6% to EUR 134 million in the fourth quarter and by 5% to EUR 434 million for the full year. The new Colombian acquisitions contributed with a small positive effect in 2019, and we expect that to accelerate in 2020. Let's move to Fresenius Vamed on Slide 20. We are pleased with Vamed's fourth quarter performance. Total sales showed 6% growth and on the back of a tough comp. For the full year, we have seen tremendous 31% growth. If we strip out the acquired German post-acute care business and other small acquisitions, organic growth was still excellent with 16% for the full year, and hence, clearly above our guidance. As far as the sales development is concerned, both of Vamed's business lines performed very well, while the service business increased sales by 43% or 25% excluding the post-acute care business, the project business showed strong growth of 13% in 2019. With a 63% share of overall sales in 2019, the less cyclical and less seasonal service business now clearly outstrips the project business. Sales growth of Vamed is still significantly supported by the stronger collaboration between Vamed and Helios, which leads to higher intra-group sales. The 19% growth rate for the financial year 2019 is significantly supported, of course, by the transfer of that post-acute care business from Helios as of the 1st of July 2018. Excluding this effect, EBIT grew at 6% for the full year. EBIT growth was healthy with 8% in Q4, and now we have a truly like-for-like growth comparison. So let's move on to cash, which we will find on Slide #21. A solid Q4 took the full year group operating cash flow to EUR 3.5 billion, that's a 6% decline year-on-year. Excluding the FCPA payment at Fresenius Medical Care of roughly EUR 200 million, group operating cash flow was, in absolute terms, around the prior year level. A strong Q4 cash flow of EUR 273 million at Kabi took the full year cash flow to EUR 968 million, with a decent margin of 14%. Helios had a strong finish to the year. The Q4 cash flow of EUR 212 million helped the full year cash flow to increase by 23% year-on-year to EUR 683 million. And the margin improved to 7.4% accordingly. Vamed's cash flow was negative, mainly due to phasing effects in its international project business as well as working capital build up. We are confident that we will see a catch-up effect during this year. So for the group, the Q4 performance took the group full year margin to 9.9%. If you deduct the group CapEx of 6.9% in the middle column, you'll arrive at a free cash flow full year margin, bottom right of 3%. CapEx is obviously at a higher level in 2019 and therefore, weighing on our free cash flow. We are also expecting for 2020 to see an inflated CapEx level and a return to our historical level of roughly 6% of sales from 2021 onwards. Including the acquisition of NxStage, we ended the quarter at 3.14x net debt-to-EBITDA as a ratio, slightly above the upper end of our self-imposed corridor of 2.5 to 3x net debt-to-EBITDA. For 2020, we expect some light deleveraging, thus, we project the leverage ratio towards the top end of our target leverage corridor by the end of 2020. That is, of course, excluding potential acquisitions and including IFRS 16. That accounting rule change, technically increases our leverage ratio by roughly 50 basis points. Hence, as a reminder, that we've already addressed at the beginning of last year, we increased our self-imposed target corridor from 2.5 to 3x net debt-to-EBITDA to a ratio of 3 to 3.5x based on this technical effect. With that, let's turn to the 2020 outlook by business segment, which you will find on Slide #22. Again, it is just too early to quantify the effects of the coronavirus outbreak. From the current perspective, however, we do not expect a significant impact on group net income. The 2020 guidance, we took the guidance relevant to 2019 basis, that now include IFRS 16 effect for both years. Our guidance includes our acquisitions, which are signed but not yet closed. And as usual, our guidance excludes special items. For example, arising from unusual or unforeseeable topics. Kabi's organic sales growth, first, where we project 3% to 6% growth, that's the blend of the regional contributions I mentioned, mid-single digits for Europe, high single digits for the emerging markets, coupled with a broadly stable development for North America. On the EBIT, where we expect a decline of up to 4%. As I said, we are assuming that the softness of our North American business will persist in 2020, which will have a stronger effect on our EBIT line. Moreover, we are seeing higher depreciation levels due to our significant investments over the last years, and we have ramping investments into biosimilar sales and marketing capabilities. Over to Helios. Here, we expect 3% to 6% organic sales growth. For 2020, we expect Helios Spain to continue to grow roughly in its historical organic sales growth range of 4% to 6%, and we expect Germany to show a very solid organic sales growth. For EBIT, we project 3% to 7% growth this year. We expect Spain to grow faster than Germany, additionally fueled by EBIT contributions from the recent acquisitions in Colombia. At Helios Germany, we expect as the base case EBIT to be around the same absolute level as in the prior year. At Vamed, we feel confident to see organic sales growth of 4% to 7% and expect EBIT to grow by 5% to 9%. That is a notch below the historical guidance ranges for Vamed. The growth rates in the post-acute care business are somewhat lower than in the other parts of Vamed. Hence, with the enhanced size of the business, we see the guidance level of 2020 as a more indicative growth rate going forward. Now let's take all that together for the group, and you'll find that on Slide #23. Starting with sales growth. Here, we expect 4% to 7% growth in constant currency, just the same as we had last year. There is a small inorganic effect from the hospital acquisitions in Latin America baked into that expectation. Moving on to net income. Here, we are projecting 1% to 5% growth. Also for net income in 2020, we are expecting a small inorganic effect from the acquisitions in Colombia. We are pleased to be back on a growth trajectory, and we anticipate an acceleration of growth in the coming years. To reiterate, we are confirming our medium-term organic growth targets of 4% to 7% sales growth and 5% to 9% net income growth. We still expect, further, to get back additional 1% growth to come from bolt-on acquisitions. A word on the phasing that we expect for 2020. As I said at the very beginning of my prepared remarks, negative onetime effects at Medical Care and the extended plant shutdown at Kabi North America weighed on our bottom line development in Q4. Since we are not expecting them to reoccur in 2020, that should be an underlying tailwind at Medical Care and Kabi for Q4 2020. Finally, the currency translation effect, if current exchange rates prevail until the end of the year, we would see a tailwind of 1 to 2 percentage points, mainly from the U.S. dollar for both sales and net income. Hence, we expect to see a somewhat smaller foreign exchange tailwind compared with what we saw in 2019. Many thanks for your interest. And with that, I'd like to hand back to Stephan.

Thank you, Rachel. Let me wrap up our prepared remarks with 2 overarching themes. Capital allocation and ESG. So let's move to Slide 24. Capital allocation is among the most frequently and controversially discussed topics by the sell-side and when we're on the road. And we meet just as many proponents of further acquisitions as share buyback supporters. So we felt it's useful to provide our perspective in front of a broad audience. In essence, we were not dogmatically opposed to buybacks, but have a clear preference for further growing our businesses. Let me be specific on our priorities. Supporting organic growth comes first. Organic growth has been and will remain our backbone. All our existing businesses offer ample opportunities. And investments are the necessary prerequisite to harness them, plant expansions, greenfield hospitals, de novo clinics, et cetera. Proven models, offer an attractive, low risk, high return profile. All our businesses are about scale. Size matters. When it comes to purchasing, manufacturing, the use of data, you name it. So in generally already fairly consolidated markets, we should and will go after remaining consolidation opportunities to gain strategically superior positions, to gain a timing advantage over an alternative organic development, to apply a proven business model in a new geography. Hence, we will continue to pursue large strategic acquisitions, determined and disciplined. Shareholder remuneration. Well, we are proud of increasing our dividend for 26, likely 27 consecutive years. We are committed to letting our shareholders participate in Fresenius' success. And hence, have a clear earnings linked dividend policy, which we feel bound by, and even more importantly, which we fundamentally believe in. Lastly, share buybacks. Well, we're not categorically ruling them out. But obviously, there is no EBITDA growth, no free cash flow generation arising from a share buyback. So they have a pretty direct and lasting effect on leverage. Actually, and even more in the perception of our lenders to whom, also in the interest of our shareholders, we have an equally strong commitment. After all, group net debt, now including IFRS 16, stood at more than EUR 25 billion at year-end 2019. So the likely impact of a debt finance share buyback on our interest rates, makes me wonder, even in a low interest environment, whether it would really create meaningful EPS accretion. That assessment would probably change, if we were towards the bottom end or even below the low end of our target leverage corridor. Or if we were like FMC last year, sitting on meaningful divestiture proceeds. But I don't see that for the time being. Hence, we will remain focused on value creation for our long-term oriented shareholders by strengthening our operating business, while bolstering our group with the right acquisition targets. Rachel and I will be happy to discuss this perspective with you either now or when we meet in the coming days and weeks. On to sustainability or ESG as the capital markets frame it, and that's on Slide 25. So where the sustainability actually sits in our business model, at its core. We're a health care company after all. The well-being of our patients and the quality of our products and services continue to determine virtually everything we do. And that's why our guiding principle, ever better medicine for ever more people, has been around for a long time and remains valid going forward. For instance, we have instigated systematic of quality measurement, target setting, peer reviews, you name it, at Helios Germany, and are trying to make these instruments compulsory. Or we have been able to supply essential medical products when others couldn't, and continue to invest quite heavily into an even higher level of reliability of our manufacturing processes. And there's ample more proof of our sustainable quality orientation. This year, we are bound to pass the 300,000 employees mark. The incredible range of skills, age, nationalities and experience is the foundation of our global business success. We're proud of that. At the same time, we have an enormous number of Fresenius lifers, a testament to our general attractiveness as an employer. No doubt, competition for skilled labor is becoming more intense. And so we will have to further increase our efforts to remain an employer of choice. But I believe the success of our hiring campaign for Helios nurses last year proves that we are both ready and able to do just that. The third major area for us is compliance, doing the right thing. In the highly regulated health care space, this is closely connected to our license to operate. We do not accept noncompliance with rules and regulations or our code of conduct anywhere. Our stance and actions in the Akorn case demonstrate that very clearly. And we have also learned our lesson from, and frankly, paid the price for some unacceptable conduct in the past. Education and monitoring have been beefed up dramatically. And not least, there is an extremely clear tone from the top. We don't cut corners. Finally, climate change. Of course, our business is not a major burden on the environment. Nevertheless, we are keen to make a contribution to the global business efforts to foster sustainability also in this area. Now while all this is fairly obvious, at least to us, we may not have spent enough time and resources on conveying the importance of these topics for us. And we also have to get better at showing to you how those environmental, social and governance topics are linked to our business model where we see risks and opportunities, where we see the positive impact of our business model. To drive this process, we are taking some decisive steps. I will continue to make sustainability, ESG as a whole, my personal responsibility for the Fresenius group. We are implementing a group sustainability Board this year headed by myself to align and coordinate all our sustainability activities across the group. And at the same time, we will continue our work on defining an integrated strategy for financials and nonfinancials and define the right performance indicators to make our efforts more visible, more tangible, for all our stakeholders. These KPIs will also be part of our refreshed Board compensation system, which we plan to put on the agenda of our 2021 Annual General Meeting. That, and you may say, finally, concludes our prepared remarks. And now, Rachel and I will be happy to take your questions. Thank you for your interest and your patience.

[Operator Instructions] The first question is from Veronika Dubajova from Goldman Sachs.

Rachel, Stephan, Markus, I will keep it to 2, please. The first one is just trying to understand the moving parts for the Kabi EBIT guidance for 2020. In particular, if I look at the low end of the expectation range that you have, the minus 4%. It'd be great to get some color from you on what that assumes for the profitability development, in particular in North America and the biosimilar investments. And is that really where you've taken a cautious view? Or are there other moving parts that would get you to that minus 4%? And then my second question is a medium-term guidance question. If I recall correctly, when you talked about the 5% to 9% CAGR a year ago. One of the things that was underpinning that was the acceleration in revenues and more importantly, earnings in the biosimilar business. Just curious with the statements that you made today, does that reduce the probability that you end up at that 9%? Or are there other things you see in the business that can help you offset that slightly slower progress in the biosimilars business?

Veronika, thank you very much for the questions. I think I'll take the first, and Stefan will take the second. So let me start. Your question on the Kabi EBIT guidance. So as you quite rightly reminded, we have guided of a decline of up to 4%. Let me give you a little bit of commentary on the moving parts and try to put into context some of the comments from my prepared statement. So firstly, very clearly, we guided North America organic revenue as a broadly stable. And clearly, given the pricing pressure that Stefan and I both spoke about, and at the same time, the continued product diversification that we have, both of those can put some pressure on the relative margins that you would expect. And hence, why I said in my prepared remarks that we do expect an EBIT decline in North America for 2020. And clearly, that is a significant contributing factor to that slightly negative EBIT guidance that we gave. At the same time, I would reiterate that the incremental depreciation that we see in 2020 coming from those all important growth driving investments that we've made in CapEx recently does contribute, I would say, at least a reasonable amount to a negative amount that we need to swallow in terms of EBIT, and that is also a contributing factor. And at the same time, we are ramping up those biosimilar sales and marketing expenses, particularly in Europe, but also starting to look at our capabilities and positioning in the U.S. and of course, we are expecting a significant ramp-up in biosimilars sales in Europe coming from Idacio in 2020. But clearly, we are still at the beginning of our journey there. And of course, the costs do have to come before the revenues as you start those sales and marketing activity. So those are clearly some negative contributing factors that lead us to those numbers. But I would, of course, make the point in counterbalance that the rest of the business is running very well at Kabi. We still anticipate a very nice performance, high single-digit growth in the emerging markets and also some good continuing profitability there, which will, of course, also help counteract some of those negative effects that I mentioned and, thus, bringing us to the range of up to a 4% decline for the full year.

Veronika, on the medium term, thanks for your question. Obviously, pushing out the expected breakeven by about a year, it doesn't help it on a stand-alone basis. At the same time, I was so keen to provide you with a bit more granularity, a bit more detail on our portfolio to make it clear that this is more than just the Ada launch in the United States. And I would hope that at least from my comments on Tocili and Peg, you can draw some comfort that we are making good progress here. Having said all that, I also feel reassured by the developments that we are seeing at Helios not only, but in particular, in Germany by the progress that we're making also with the international rollout into Latin America. I also feel reassured by the latest developments at Fresenius Medical Care. While I applaud management for the strong underlying business growth that we've seen in the last quarters. And therefore, despite that in isolation, not a positive factor on biosimilars, we still stand behind the full medium-term guidance range.

That's helpful. Can I just follow-up on the Kabi EBIT guidance, sorry to sort of -- I just want to make sure that I -- we drive the point home. But do you see a scenario whereby the Kabi North America margin could be lower this year than the 35% that you've talked about as the midterm level? And is that contemplated within the range or not?

Veronika, I mean, I think the IV 35% margin for North America that I reiterated today, we see that as a, if you like, a sustainable range over time. You have seen that we have had some quarters that fall below that range and some that fall above that range, dependent on what is a relatively volatile market. And you know that some moving parts that are not always beyond our -- within our control, sorry, can make quite a difference there. So I don't think it is unthinkable that you could see a margin that is below that in one particular year, and that includes 2020 in the same way that we've seen many years that have been above it as well.

Next question is from Tom Jones of Berenberg.

Unfortunately, there are a couple of follow-up ones on Kabi North America. The first one, I guess, is a big sort of perhaps a more strategic one. For the kind of expansion in the portfolio that you outlined on Slide 5, for some of those, we can work it out, but for others, it would be helpful to know or at least get a sense of how much of that you intend to do purely organically? How much you are kind of eyeing up? M&A has been the main driver and which of those categories is perhaps coming from a mix of those growth sources? And then just a kind of -- maybe some help in how to think about the margin for this North American business over the medium to long term. You've given that kind of sustainable target of 35% for the IV drug business. But as all these other parts grow, I doubt many of them are going to be as profitable as the IV drug business. So how should we be thinking about the kind of general direction of travel and perhaps ultimate destination of the EBIT margin in the North American business?

Tom, thanks for your questions. I can be relatively brief on the first one, and that is that we are generally prepared and generally working on the assumption that this will be done organically. So we're going to see a bit of an SG&A buildup, in particular, when it comes to further broadening the access to these other distribution channels. But at the same time, I'd be a fool to rule out an acquisition in this space. That -- and that is why I made the comment that you've seen a version of this slide before, that we have tried the broadening, the fast forward of the broadening of our product portfolio before, suitable targets are few and far between. But if there is one, then we'd most certainly take a look at it.

And Tom, your question on margins in North America. You quite rightly picked up on the point that I was making, that, of course, we do have a different set of margins across the different products that we are offering. And as part of the diversification strategy that we've just been discussing, and as Stefan talked about at length, we do anticipate seeing, over time, a continued growth in our IV business, but also continued growth in the other product groupings that we already have or that we hope to launch in the U.S. And that does mean that you're absolutely right, over time, we will see some sort of mix effect in North America. Obviously, the weight of the IV business is particularly strong in that region. And thus, I would say you won't see significant jumps in any one particular quarter or year, but that is something that you should anticipate over time, that will grow the IV business, but we will probably, in percentage terms, grow some of the other businesses more quickly. They are relatively small now, but they will gain some weight, and that will have some impact on margins reported for the whole North American region over time. Absolutely.

Okay, that makes sense. And maybe just one quick follow-up on Helios, if I may. The investments you've made in Madrid at the Pozuelo facility. Are they part -- or is that one of your PPP facilities? And are those investments part of kind of capital spending that you were obliged to do under your capitation contract? Or is it new spending? And if so, does it have any impact on the duration of that contract, which I believe runs out into the early 40s?

It's not part of the PPP, Tom, it is separate and therefore, has no effect on contract duration.

Next question is from Patrick Wood of Bank of America.

Perfect. The first one, Helios Germany. I'm probably being slow on this, but if you're taking some of that extra cost base out within the 2020 year, and then as well as seeing a relatively stable top line, I'm a little surprised that the margin structure would still be down. Is that a function of the investment in the outpatient facility is now sort of thing? Just some color around the margin structure there would be quite helpful. And equally, within Germany, what do you think you're seeing from your competitors? Because I would imagine they've not been quite as robust in taking the cost out post the DRG carve-out. Are you seeing any volume benefit from patients yet? I mean, I know we've all been waiting for it over the years, but I'm just curious about the competitive landscape.

Patrick, I have to say, covering the high double-digit million initial shortfall with quite a variety of pretty ambitious measures. I'd say if we really manage to get there, that is quite an accomplishment. So therefore, keeping the absolute level stable, will be, in my mind, a success. At the same time, you have seen the record high DRG inflator. You have seen us, even though I wouldn't rely on it, but you have seen us now for 2 quarters in a row showing admissions growth. And so I think we can have a pretty good feeling about above the recent norm organic top line growth in Germany. And therefore, maybe I don't get your question, but the combination of that aim, pretty ambitious aim to maintain the absolute EBIT level and driving the top line would necessarily result in a margin dilution, but maybe I am slow.

No, no, no. It was basically the idea of essentially, if you have a cost headwind, I'll take random numbers just to sort of illustrate the point, if you have EUR 100 million of a cost win 1 year and you offset half of that, so you're carrying over EUR 50 million, I'm now hoping you're going to offset the other EUR 50 million in the subsequent year...

No, no, no,

Revenue growth...

Patrick, that is where I believe we're getting the confusion. It is the entire amount that we're offsetting this year. When I was talking about tangible ideas to offset about half of it last year, it was still the idea that we would manage to do that in 2020. And now I'm confirming that we also feel positive that we can find an offset for the remaining half.

Got it. That's helpful. And then just as a quick follow-up on predictably Kabi North America. Just quickly on that, 2 things. One, how do you feel about the phasing of ANDAs through this year? And do you feel there's less of a risk this year that you get the back end weighting we saw last year? And then equally, do you think there's any vague benefit you could see from some of the FDA observations that some of your Indian competitors have faced?

Patrick, in terms of the phasing of ANDAs, clearly, it's an art and not a science in terms of deciding exactly how that regulatory process will run and when we're able to bring those product to market and how that will run. Nevertheless, I would say it is more back-end loaded than front-end loaded, but less back-end loaded than we saw in 2019 in terms of our overall expectation. And your second question, Stefan will take.

Patrick, that is at least what we would be hoping for, that we will be able to try and avoid the few delays that we were observing in 2019. On your 2 questions related to competitors, I failed to answer the first one. On the FDA findings, frankly, I would like to abstain from making a comment. I think it is, in any case, too early but also inappropriate to comment on that, it would be a speculation. On the German hospital scene, my observation remains the one from Q2 and Q3 last year. All these various government and regulatory initiatives that we've seen. In our minds, drive at least a gradual consolidation in the German hospital market, smaller, best specialized hospitals who find it generally a bit more difficult to attract qualified staff will find it more difficult to cope with the minimum case numbers. And therefore, as I indicated, we're seeing at least slightly growing number of consolidation opportunities. I'm choosing my words carefully here because I wouldn't talk about acquisition targets. It is in most of the instances fallen angels. Hospitals that are really in financial trouble, sometimes already in insolvency. And therefore, when I was talking about being disciplined that most certainly also relates to this particular area of our business here.

Next question is from Michael Jungling from Morgan Stanley.

I have 3 questions. Firstly, on biosimilars. Can you give an indication of what you expect the biosimilar sales will be in 2020 in Europe? Question #2 then is on M&A. You can pretty much read now in many sort of press releases and in journals, they are a large hospital group that is owned by a previous seller to you is thinking of bringing a large hospital back to market. I'm just curious how you view the French market at the moment? And then question #3 is in relation to Kabi USA. The 15 product launches that you've got for 2020, that equates to a $1.3 billion original value, to what year does this relate to? Is this a 12 months number -- a 12 months rolling number? Or is that a 2018 number? And is this value already subject to generic competition today?

Michael, thank you. But I don't think you will be surprised that I will be fairly brief. I can be most constructive on your $1.3 billion market value, that is a rolling 12 months number, and it is partially subjected to generic impact already. On hospitals, we have said that over the course of this year, given the success that we've had in Spain, we will take a look as to whether there is potentially a third European country where we could expand into. And at this point, right now, I would not rule out any country, in particular, at the same time, I would not single out any country in particular. Any market has structural challenges but also opportunities. And the challenges as long as they can be reflected in a specific valuation, I'd say, isn't something that we can deal with. On your biosimilars question, as we've said last year, we would be targeting a high single-digit million euro amount for 2019 that is achieved. And for 2020, we will try and achieve a multiple of that. That is the wording that we chose, and I'd like to stick to that for the time being. For 2020, I think, in particular, on a quarterly basis, it is too early to break out our biosimilars revenue in a separate reporting line. That is something that we will be planning for '21. But rest assured, Rachel is going to give you, at least a qualitative comment on our quarterly calls.