(Correcting typo in graphic headline)
BERLIN/FRANKFURT (Reuters) – Fresenius Medical Care shares rose to their highest level in nearly seven months as investors welcomed news that parent Fresenius would cede control over the struggling dialysis maker but will keep its stake for now as it attempts to improve its own performance.
Healthcare group Fresenius late on Tuesday said it would give up strategic control over FMC via a planned change of the division’s legal form, also releasing annual results and a outlook that failed to impress investors.
Fresenius CEO Michael Sen who took the helm in October wants to simplify the company’s structure but said he will keep the 32% stake in FMC.
FMC shares rallied more than 10% and were the best performer on Germany’s blue-chip DAX 30 at 0938 GMT.
Some analysts and investors were sceptical it will help quickly solve Fresenius’ poor performance. Its stock was the worst performer on the DAX, down 4.9% at 0936 GMT, having lost more than 40% since January 2020.
“Fresenius and FMC have shown with their weak annual results that the crisis continues,” said Cornelia Zimmermann, sustainability and corporate governance specialist at Deka, a top-20 investor of both companies.
“However, deconsolidating FMC by converting it into an AG will only address the problems on the surface. It remains to be seen whether a value-creating solution can be found,” she said.
While shareholders were relieved Fresenius did not want to sell the stake, some picked up a clear signal that the two companies will eventually go their separate ways.
“The focus now is on two points: a) when will the stake in FMC be reduced and b) when will fundamental improvement be visible,” said Florian Oberhofer, portfolio manager at Union Investment, which holds 0.26% of Fresenius shares.
Fresenius said it expects its operating profit (EBIT), when adjusted for currency changes, to be flat or decline by up to a high single-digit percentage in 2023, an outlook Jefferies called “tough but realistic”.
According to estimates compiled by Vara and made available on Fresenius’ website, EBIT is expected to fall by 3.7%.
While expecting no further escalation of geopolitical tensions and challenges from the COVID-19 pandemic, Fresenius said that “general cost inflation and labor shortages will have a more significant negative effect on its business than in 2022”.
Under the plans, Fresenius aims to exclude FMC, which was hit hard by a high rate of COVID-19 deaths among its patients, from its financial reporting by changing its legal form to that of a stock corporation from KGaA, likely by the end of 2023.
Graphic: FMC and Fresenius shares lag https://fingfx.thomsonreuters.com/gfx/mkt/gkplwlgawvb/fresenius.PNG
(This story has been refiled to correct a typo in the graphic’s headline)
(Reporting by Ludwig Burger and Christoph Steitz; Writing by Rachel More and Christoph Steitz; Editing by Josephine Mason and Elaine Hardcastle)
