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Fresenius Vamed

In 2011, sales and EBIT exceeded the strong previous year’s levels despite challenging market conditions in the Middle East/North Africa region. Order backlog reached a new all-time high. Order intake was again at an excellent level.

Key data of Fresenius Vamed

  2011 € in millions 2010 € in millions Change
1 Net income attributable to the parent company of the respective business segment
Sales 737 713 3%
EBIT 44 41 7%
Net income1 34 30 13%
Operating cash flow -83 47 --
Capital expenditure/acquisitions 10 14 -29%
Order intake 604 625 -3%
Employees (December 31) 3,724 3,110 20%

  2011 € in millions 2010 € in millions Change
1 Net income attributable to the parent company of the respective business segment
Sales 737 713 3%
EBIT 44 41 7%
Net income1 34 30 13%
Operating cash flow -83 47 --
Capital expenditure/acquisitions 10 14 -29%
Order intake 604 625 -3%
Employees (December 31) 3,724 3,110 20%

Fresenius Vamed specializes in international projects and services for hospitals and other health care facilities. Our portfolio ranges along the entire value chain in the health care area: from consulting, project development, planning, and turnkey construction, via maintenance, and technical management to total operational management. This entire competency enables us to support complex health care facilities efficiently and successfully at each level of their life cycle. The company is also a pioneer in public-private partnership (PPP) models for hospitals in Central Europe.

VAMED is a worldwide acting provider of a full line of services for the health care industry. Meanwhile, we hold a unique position with our comprehensive range of services. We have successfully completed approximately 600 projects in more than 60 countries.

BUSINESS DEVELOPMENT

In 2011, sales of Fresenius Vamed increased to €737 million (2010: €713 million). Organic growth was 4%. Prior-year sales included a substantial medical supply contract with the Ukraine. In addition, current sales were impacted by the unrest in the Middle East/North Africa region.

The table shows the sales development by activity:

€ in millions 2011 2010 Change
Project business 494 487 1%
Service business 243 226 8%

€ in millions 2011 2010 Change
Project business 494 487 1%
Service business 243 226 8%

The strongest region was Europe with 72% of total sales. Africa and Asia-Pacific contributed 17% and 11%, respectively.

In addition, VAMED was responsible for revenues of €595 million from management contracts. The related fees are included in VAMED’s financial statements.

Order intake and order backlog for projects developed as follows:

€ in millions 2011 2010 Change
Order intake 604 625 -3%
Order backlog (December 31) 845 801 5%

€ in millions 2011 2010 Change
Order intake 604 625 -3%
Order backlog (December 31) 845 801 5%

EBIT of Fresenius Vamed rose by 7% to €44 million (2010: €41 million). At 6.0%, the EBIT margin exceeded previous year’s level (2010: 5.8%). In the project business, EBIT increased by 22% to €28 million (2010: €23 million). In the service business, EBIT was slightly below previous year’s level with €16 million (2010: €18 million). Fresenius Vamed’s net income1 was €34 million, an increase of 13% (2010: €30 million).

Property, plant and equipment including intangible assets amounted to 13% of Fresenius Vamed’s total assets. Since the business model has a low capital intensity, Fresenius Vamed achieved an excellent return on equity (ROE) before taxes of 21.0% (2010: 21.9%).

PROJECT BUSINESS

The project business comprises the consulting, project development, planning, turnkey construction, and financing management of projects. VAMED responds flexibly to clients’ local needs, providing custom-tailored solutions, all from one source. VAMED also carries out projects in cooperation with partners. In particular among public clients there is growing interest in public-private partnership (PPP) models. With these business models, hospitals or other health care facilities are planned, constructed, financed, and operated by public and private partners together through a joint project company.

The following highlights some of our main projects in the respective target markets of our project business:

EUROPE

We achieved another major success in Germany: On behalf of the hospitals in the Main-Taunus county, VAMED will construct a new hospital building in Hofheim. The purpose of the new building is to further increase treatment quality and to render hospital operations more efficient. The investment volume is €42 million. The turnkey construction project of the new examination and treatment center (U/B West) at the University Clinic in Cologne will be completed in 2012, at a cost of €65 million. Within the framework of the project, we have also been entrusted with the technical operational management for 25 years. The project for the construction of a new wing at a hospital in Cologne-Merheim, begun in 2009, is proceeding according to plan. A special feature of this contract is that we are carrying out the construction work while the hospital is still operating. The investment volume is €58 million.

In the Austrian market, the focus was on further PPP projects and holistic realization models. At the beginning of 2011, we completed the reconstruction and expansion of the rehabilitation facility Gars am Kamp. Operations have commenced successfully. In addition, we completed a center for psychosocial health in Rust. We also opened the la pura women’s health resort in Kamptal. This one-of-a-kind exclusive hotel-like facility focuses exclusively on women’s health and offers services based on insights from modern gender medicine. It features a holistic prevention and treatment concept, which combines traditional medical approaches with proven methods from complementary medicine. At the Otto Wagner Hospital in Vienna, we started with the turnkey construction of an inpatient rehabilitation center to expand its orthopedic acute care services. VAMED will also be managing this facility. Having been awarded another contract for the expansion and management of a third nursing home, we are further expanding the existing PPP partnership for nursing homes in the Burgenland region.

In Bosnia, the large contract we received for the turnkey realization of the 220-bed Bijeljina General Hospital is proceeding according to plan.

In Romania, contracts were signed for the modernization and refurbishment of a total of three hospitals.

In Russia, work continued according to plan on the turnkey construction of a 300-bed hospital in Krasnodar. It is due to be completed in 2012. We were able to win a large contract for the reconstruction and expansion of the municipal hospital no. 4 in Sotschi. With 350 beds and 16 operating rooms, it will make a considerable contribution to the health care provided for the Olympic Winter Games in 2014. It is also considered a reference facility for further health care projects in Russia.

In Turkmenistan, the first orders for medical technology are already being processed.

AFRICA

In Gabon, the work on the turnkey construction of the specialist hospital for cancer diseases in Angondje was completed before schedule. Other extension projects at the central hospital in Libreville, begun in 2008, were continued according to plan.

In Ghana, we received a follow-up order for the construction of five additional turnkey polyclinics after having successfully completed and started up five initial polyclinics.

In Nigeria, we successfully finalized the total of 14 university clinics which we have modernized.

In Mali, we successfully entered the market by building a radiation therapy center.

ASIA-PACIFIC

Key markets in Asia are Malaysia, Vietnam, and China, where VAMED has been operating successfully for many years. High client satisfaction with the execution of existing contracts helped us win new contracts in China, among other countries. In 2011, we received a total of seven large-scale contracts for the supply of medical equipment from different provinces with a total investment volume of €33 million.

In Malaysia, we were asked to build the National Cancer Institute. The investment volume is €34 million.

In addition to its work relating to existing projects, VAMED received another pioneering contract in Vietnam: The expansion of the hospital in Hue with special oncology facilities.

In Laos, we successfully entered the market with the help of our first contract for the modernization and expansion of the Mahosot University Hospital.

LATIN AMERICA

In addition to existing projects in El Salvador, Peru and Columbia, VAMED received a first order from Honduras. It involves the planning, delivery, installation, and start-up of medical equipment for two hospitals.

One year after the devastating earthquake, the new Hôpital Communautaire Autrichien – Haïtien was opened in Haiti. It provides basic health care for tens of thousands of people. This project was made possible with the cooperation of several partners in Austria and Germany. VAMED acts as a partner for the facility and is operating the hospital during the starting phase.

SERVICE BUSINESS

VAMED offers a full range of facility management services for health care facilities. Modular in design, our service offering encompasses every aspect of technical, commercial, and infrastructural facility management, ranging from building and equipment maintenance, medical technology management, waste management, energy management, security services, and the cleaning of buildings and outdoor facilities through to technical and operational management. With this integrated portfolio of services, we guarantee optimal operation of a facility over its entire life cycle, from the construction of the buildings to the end of primary use, modernization, or renewal. In addition to facility and operational management, we also specialize in logistics for the health care industry. By optimizing the processes, logistics costs are minimized while still maintaining the necessary supply standards.

The following gives an overview of the relevant developments in the target markets of our service business:

EUROPE

In 2011, VAMED successfully continued its 25-year partnership with University Clinic AKH in Vienna. In addition to VAMED’s technical management role, which we have been performing since 1986, this included a number of structural building projects to round off the hospital’s facilities. AKH is one of Europe’s largest hospitals and comprises 30 clinics and institutes with a total of about 2,100 beds.

We also successfully continued performing the technical management of two hospitals in Lower Austria with a total of 1,230 beds. After AKH Vienna, this is the largest technical service contract ever awarded in Austria.

Counting the start-up of the rehabilitation facility in Gars am Kamp, VAMED is now operating seven rehabilitation facilities.

The PPP model in Oberndorf near Salzburg is a VAMED reference project for integrated health care. After having assumed the overall management responsibility in 2008, the expansion and remodeling project of the existing acute hospital as well as the turnkey construction of the rehabilitation center were successfully completed. The planned medical center will be built in 2012.

In Germany, the consortium Charité CFM Facility Management GmbH, headed by VAMED, has been responsible for all operations at Charité except the purely medical services since 2006. In 2011, approximately 2,600 employees again successfully carried out their services under this contract, which is one of the largest service contracts in the hospital sector in Europe.

The service contract with the University Clinic in Hamburg-Eppendorf was also continued to the customer’s complete satisfaction. It has been renewed earlier than scheduled.

The five-year cooperation with the University Clinic Schleswig-Holstein, concluded in 2010, was successfully continued. The aim is to further improve the quality of IT-services and operate the IT-infrastructure more efficiently.

ASIA-PACIFIC

The total operational management contract in Abu Dhabi was once again prolonged. After the National Research Center for Maternal and Child Health in Astana, Kazakhstan with about 500 beds, the Al Ain Hospital in Abu Dhabi, United Arab Emirates is the second hospital in our target markets in Asia where we are responsible for the total operational management. All these projects are being conducted in cooperation with the Vienna and Graz University of Medicine and are important reference projects for VAMED’s total operational management competence.

Through close market coverage, business in Thailand has also developed very positively for VAMED. After initial contracts in 2009, the service contract for the Ramathibodi University Clinic and the consulting contract for a medical spa in Bangkok were successfully continued.

AFRICA

In Gabon, VAMED is responsible for the overall management of a total of seven regional hospitals and for the technical management of the Omar Bongo Ondimba Hospital in Libreville.

VAMED VITALITY WORLD

As a result of the new health consciousness trend and desire for vitality, thermal spa and wellness resorts are acquiring ever greater importance as health facilities. Thanks to its many decades of experience in health care, VAMED was able to build a bridge between preventive medicine and health tourism with the thermal spas and the health resorts of the VAMED Vitality World and to develop a program that offers health-conscious guests both the benefits of a health-touristic facility as well as the natural experience of the surroundings. VAMED operates eight thermal spas and health resorts in six different Austrian states, and is therefore the market leader in this region.

In 2011, the resorts of VAMED Vitality World received not just one, but three of the internationally coveted World Travel Awards. The judges nominated the Tauern SPA Zell am See-Kaprun to be “Europe’s Leading Lifestyle Resort 2011”. The St. Martins Therme & Lodge took first in the “Austria’s Leading Resort” category, and the Aqua Dome Tirol Therme in Längenfeld in the “Austria’s Leading SPA Resort” category.

OUTLOOK

In Europe, the focus of VAMED’s activities will continue to be on holistic realization and PPP projects in 2012. As health care facilities have high value for preventive care, and health tourism is becoming increasingly popular, we see development potential in this segment as well. Outside Europe, the focus will be on custom-tailored solutions for hospitals along the VAMED value chain.

Further information on VAMED can be found on its website at http://www.vamed.com.

Please the Management Report for the 2012 financial outlook of Fresenius Vamed.

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