The Group’s business model

Fresenius has made major contributions to high-quality and afford-able medical care worldwide during the COVID-19 pandemic. We stand by our patients – and live up to our social responsibility. Fresenius has proven to be economically robust and resilient in 2020.

Fundamental information about the group

The group’s business model

Fresenius is a global health care Group in the legal form of an SE & Co. KGaA (a partnership limited by shares). We offer products and services for dialysis, hospitals, and outpatient medical care. In addition, Fresenius focuses on hospital operations. We also manage projects and provide services for hospitals and other health care facilities worldwide.

The operating business comprises four business segments, all of which are legally independent entities managed by the operating parent company Fresenius SE & Co. KGaA. The business segments are organized on a regional level and have a decentralized structure. There were no changes to the Group’s business model in 2020.

  • ­Fresenius Medical Care offers services and products for patients with chronic kidney failure. As of December 31, 2020, Fresenius Medical Care treated 346,553 patients at 4,092 dialysis clinics. Dialyzers and dialysis machines are among the most important product lines. In addition, Fresenius Medical Care offers dialysis-related services.
  • ­Fresenius Kabi specializes in intravenously administered generic drugs (IV drugs), biosimilar products with a focus on oncology and autoimmune diseases, clinical nutrition, and infusion therapies. In addition, the company is also a supplier of medical devices and products for transfusion technology.
  • Fresenius Helios is Europe’s leading private hospital operator. The company comprises Helios Germany and Helios Spain (Quirónsalud). At the end of 2020, Helios Germany operated a total of 89 hospitals, around 130 outpatient clinics, and 6 prevention centers. In Spain, Quirónsalud operated 46 hospitals, 70 outpatient centers, and around 300 occupational risk ­prevention centers. In addition, Helios Spain is active in Latin America with 6 hospitals and as a provider of medical diagnostics.
  • ­Fresenius Vamed manages projects and provides services for hospitals as well as other health care facilities worldwide and is a leading post-acute care provider in Central Europe. The portfolio ranges along the entire value chain – from project development, planning, and turnkey construction, via maintenance and technical management, to total operational management. The services are aimed at various areas of health care, ranging from prevention and acute care to rehabilitation and nursing.

Fresenius has an international sales network and maintains more than 90 production sites. Large production sites are located in the United States, China, Japan, Germany, and Sweden.

Important markets and competitive position

Fresenius operates in more than 90 countries through its subsidiaries. The main markets are Europe with 44% and North America with 41% of sales, respectively.

Fresenius Medical Care holds the leading position worldwide in dialysis care as it serves about 9% of all dialysis patients, as well as in dialysis products, with a market share of about 35%.

Fresenius Kabi is among the leading companies for large parts of its product portfolio in Europe and has significant market shares in the growth markets of Asia-Pacific and Latin America. In the United States, Fresenius Kabi is one of the leading suppliers of generic IV drugs.

Fresenius Helios is Europe’s leading private hospital operator. Helios Germany and Helios Spain are the largest pri­vate hospital operators in their respective home markets.

Fresenius Vamed is a global company with no direct competitors covering a comparably comprehensive port­folio of projects, services, and total operational management over the entire life cycle of health care facilities. In Central Europe, the company is one of the leading private providers of rehabilitation services. As a result, Fresenius Vamed has a unique selling proposition of its own. Depending on the business segment, the company competes with international companies and consortia, as well as with local providers.

External factors

The COVID-19 pandemic has a significant impact on the economic environment of the Fresenius Group. We demonstrated our special responsibility as part of the health care system even under the difficult circumstances of the COVID-19 pandemic. With our products, services, and therapies, we have made an important contribution combating the COVID-19 pandemic worldwide. Despite partial government compensation, COVID-19 had an overall negative effect on the 2020 financial figures, mainly due to restrictions imposed by the authorities in many of the Group’s important markets.

Nevertheless, Fresenius has come through the COVID-19 pandemic in an economically robust manner. Once again, our company’s business development has proven to be comparatively stable and largely independent of economic cycles. Our diversification into four business segments and our global focus give the Group additional stability.

The legal framework for the operating business of the Fresenius Group remained essentially unchanged in 2020.

Fluctuating exchange rates, particularly between the U.S. dollar and the euro, have an effect on the income statement and the balance sheet. In 2020, the average annual exchange rate between the U.S. dollar and the euro of 1.14 was above the 2019 rate of 1.12, and therefore had a negative currency translation effect on the income statement. Furthermore, negative currency translation effects on the income statement resulted, in particular, from the depreciation of Latin American currencies (especially the Argentinian peso and the Brazilian real) against the euro in 2020.

As a consequence of the macroeconomic downturn and increasing risk adjustment rates for certain countries in Latin America, Fresenius Medical Care reported an impairment of goodwill and tradenames in the Latin America segment.

In particular due to the exchange rate changes (from 1.12 U.S. dollars on December 31, 2019, to 1.23 U.S. dollars on December 31, 2020), the balance sheet total decreased by 1% (increased by 5% in constant currency).

In 2020, the Fresenius Group was involved in various legal disputes resulting from business operations. Although it is not possible to predict the outcome of these disputes, none is expected to have a significant adverse impact on the assets and liabilities, financial position, and results of operations of the Group. Further information regarding legal matters can be found in the Notes.

We carefully monitor and evaluate country-specific, political, legal, and financial conditions. This also applies to the possible impact on our business resulting from the United Kingdom's decision to leave the European Union. We do not expect this to have any material impact on our business.

Management and control

In the legal form of a KGaA, the Company’s corporate bodies are the General Meeting, the Supervisory Board, and the general partner, Fresenius Management SE. Fresenius Management SE is wholly owned by Else Kröner-Fresenius-Stiftung. The KGaA has a two-tier management system – management and control are strictly separated.

The general partner, represented by its Management Board, conducts the business and represents the Company in dealings with third parties. The Management Board generally has seven members. According to the Management Board’s rules of procedure, each member is accountable for his or her own area of responsibility. However, the members have joint responsibility for the management of the Group. In addition to the Supervisory Board of Fresenius SE & Co. KGaA, Fresenius Management SE has its own Supervisory Board. The Management Board is required to report to the Supervisory Board of Fresenius Management SE regularly, in particular on its corporate policy and strategies, business profitability, current operations, and any other matters that could be of significance for the Company’s profitability and liquidity. The Supervisory Board of Fresenius Management SE also advises and supervises the Management Board in its management of the Company. It is prohibited from managing the Company directly. However, the Management Board’s rules of procedure require it to obtain the approval of the Supervisory Board of Fresenius Management SE for specific activities.

The members of the Management Board are appointed and dismissed by the Supervisory Board of Fresenius Management SE. Appointment and dismissal is in accordance with Article 39 of the SE Regulation. The articles of association of Fresenius Management SE also provide that deputy members of the Management Board may be appointed.

The Supervisory Board of Fresenius SE & Co. KGaA advises and supervises the management of the Company’s business by the general partner, reviews and approves the annual financial statements and the consolidated financial statements, and performs the other functions assigned to it by law and the Company’s articles of association. It is involved in corporate planning and strategy, and in all matters of fundamental importance for the Company. The Supervisory Board of Fresenius SE & Co. KGaA has six shareholder representatives and six employee representatives. A Nomination Committee of the Supervisory Board of Fresenius SE &Co. KGaA has been instituted for election proposals for the shareholder representatives. Its activities are aligned with the provisions of law and the Corporate Governance Code. The shareholder representatives are elected by the Annual General Meeting of Fresenius SE & Co. KGaA. The European works council elects the employee representatives to the Supervisory Board of Fresenius SE & Co. KGaA.

The Supervisory Board must meet at least twice per calendar half-year. The Supervisory Board of Fresenius SE &Co. KGaA has two permanent committees: the Audit Committee, consisting of five members, and the Nomination Committee, consisting of three members. The members of the committees are listed in the Annual Report. The Company’s annual corporate governance declaration pursuant to Section 315d and Section 289f of the German Commercial Code (HGB) describes the procedures of the Supervisory Board’s committees in the Corporate Governance declaration. The declaration can also be found on the website www.fresenius.com/corporate-governance.

The description of both the compensation system and individual amounts paid to the Management Board and Supervisory Board of Fresenius Management SE, and the Super­visory Board of Fresenius SE & Co. KGaA, are included in the Compensation Report. The Compensation Report is part of the Group’s Management Report.

Capital, shareholders, articles of association

The subscribed capital of Fresenius SE & Co. KGaA amounted to 557,540,909 ordinary shares as of December 31, 2020 (December 31, 2019: 557,379,979).

The shares of Fresenius SE & Co. KGaA are non-par-value bearer shares. Each share represents €1.00 of the capital stock. Shareholders’ rights are regulated by the German Stock Corporation Act (AktG – Aktiengesetz).

Fresenius Management SE, as general partner, is authorized, subject to the consent of the Supervisory Board of Fresenius SE & Co. KGaA: to increase the subscribed capital of Fresenius SE & Co. KGaA by a total amount of up to €125 million, until May 17, 2023, through a single or multiple issuance of new bearer ordinary shares against cash contributions and/or contributions in kind (Authorized Capital I). In principle, the shareholders shall be granted a subscription right. In certain cases, however, the right of subscription can be excluded.

In addition, the following Conditional Capitals exist in accordance with the articles of association dated August 28, 2020:

  • ­The subscribed capital is conditionally increased by up to €4,735,083.00 through the issuance of new bearer ordinary shares (Conditional Capital I). The conditional capital increase will only be executed to the extent that convertible bonds for ordinary shares have been issued under the 2003 Stock Option Plan and the holders of these convertible bonds exercise their conversion rights.
  • ­The subscribed capital is conditionally increased by up to €3,452,937.00 through the issuance of new bearer ordinary shares (Conditional Capital II). The conditional capital increase will only be executed to the extent that subscription rights have been issued under the 2008 Stock Option Plan, the holders of these subscription rights exercise their rights, and the Company does not use its own shares to service the subscription rights or does not exercise its right to make payment in cash.
  • The general partner is authorized, with the approval of the Supervisory Board, until May 17, 2023, to issue option bearer bonds and/or convertible bearer bonds, once or several times, for a total nominal amount of up to €2.5 billion. To fulfill the granted subscription rights, the subscribed capital of Fresenius SE & Co. KGaA was increased conditionally by up to €48,971,202.00 through issuance of new bearer ordinary shares (Conditional Capital III).
    The conditional capital increase shall only be implemented to the extent that the holders of convertible bonds issued for cash, or of warrants from option bonds issued for cash, exercise their conversion or option rights and as long as no other forms of settlement are used.
  • The share capital is conditionally increased by up to €23,947,021.00 by the issuance of new ordinary bearer shares (Conditional Capital IV). The conditional capital increase will only be implemented to the extent that subscription rights have been, or will be, issued in accordance with the Stock Option Program 2013 and the holders of subscription rights exercise their rights, and the Company does not grant its own shares to satisfy the subscription rights.

The Company is authorized, until May 17, 2023, to purchase and use its own shares up to a maximum amount of 10% of the subscribed capital. In addition, when purchasing its own shares, the Company is authorized to use equity derivatives with possible exclusion of any tender right. The Company had not utilized these authorizations as of December 31, 2020.

As the largest shareholder, Else Kröner-Fresenius-­Stif­tung, Bad Homburg, Germany, informed the Company on December 22, 2020, that it held 148,685,702 ordinary shares of Fresenius SE & Co. KGaA. This corresponds to an equity interest of 26.7% as of December 31, 2020.

Amendments to the articles of association are made in accordance with Section 278 (3) and Section 179 (2) of the German Stock Corporation Act (AktG) in conjunction with Article 17 (3) of the articles of association of Fresenius SE &Co. KGaA. Unless mandatory legal provisions require otherwise, amendments to the articles of association require a simple majority of the subscribed capital represented in the resolution. If the voting results in a tie, a motion is deemed rejected. Furthermore, in accordance with Section 285 (2) sentence 1 of the German Stock Corporation Act (AktG), amendments to the articles of association require the consent of the general partner, Fresenius Management SE. The Supervisory Board is entitled to make such amendments to the articles of association that only concern their wording without a resolution of the General Meeting.

Under certain circumstances, a change of control as the result of a takeover bid would impact our major long-term financing agreements, which contain customary change of control provisions that grant creditors the right to request early repayments of outstanding amounts in case of a change of control. The majority of our financing arrangements, in particular our bonds placed in the capital markets, however, require that the change of control is followed by a decline or a withdrawal of the Company’s rating or that of the respective financing instruments.

Contact us

Fresenius SE & Co. KGaA
Else-Kröner-Str. 1
61352 Bad Homburg v.d.H.
Germany
T +49 (0) 6172 608-2294
pr-fre@fresenius.com

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