August 1, 2012 2:04 pm

Fresenius – in rude health

German healthcare group needs better geographical spread

That’ll show ’em! The best way to convince your competitors’ owners that they really would be better off accepting your overtures is to report half-year results to die for. Smarting from the failure of its €3bn offer for Rhön Klinikum, Fresenius SE did just that on Wednesday. The German healthcare group had a strong first half, lifting sales 17 per cent to €9bn and net income 20 per cent. A tie-up between its private hospitals division and Rhön’s made sense. The group’s bigger headache, however, may be that it is too dependent on the US and European markets.

Buying Rhön would have boosted the share of revenue in its German private hospitals business by about 10 percentage points to just less than 30 per cent. It would also have made Fresenius less reliant on Fresenius Medical Care, its biggest, separately listed unit, which accounted for 55 per cent of first-half group revenue. That in turn might help to sharpen the group’s operating focus.

Yet it is not the business mix at Fresenius that is a cause for concern so much as its geographical spread. The group earned about 40 per cent of first-half revenue in both the US and Europe – but organic growth in the former was only 3 per cent and just 5 per cent in Europe. Organic growth in Latin America and Asia-Pacific, in contrast, was 19 per cent and 10 per cent respectively – yet only 15 per cent of group revenue.

German private hospitals may indeed be a growth area. So might US transfusion technology group Fenwal, which Fresenius bought last month (on undisclosed terms). But both markets are dependent to a greater or lesser extent on state spending, which is definitely not a growth area. The group says it is “evaluating options” on Rhön – code for another offer, perhaps. Fresenius makes no bones about its growth strategy. Chief executive Ulf Mark Schneider should keep the definition of that as wide as possible.

Email the Lex team in confidence at lex@ft.com

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