That’s what investors expect from Michael Sen and Carla Kriwet

Frankfurt Monday will begin with a double change of management for the 319,000 employees of the Fresenius Group: Michael Sen, 53, will then take up his duties as CEO of the parent company, and he has been in charge of the Kabi drug division since April. At the dialysis subsidiary Fresenius Medical Care, the former Philips manager Carla Kriwet, 51, takes over as CEO. Both want to start with a video message to the workforce. There have never been so many changes at once at the top of the traditional group.

The new management staff should ensure that both Dax companies grow faster and, above all, more profitably. Not an easy task, every company has its own problems, but the two are closely related. Because Fresenius Medical Care (FMC) contributes around half of the sales and operating profit of the parent company Fresenius. Or as fund manager Sébastien Buch from Union Investment puts it: “Mr. Sen is largely dependent on Ms. Kriwet delivering.”

However, investors do not expect quick success. After the initially positive reaction to the change of boss, share prices have now fallen again. “It would be a lot if they could deliver another round quarter without a profit warning. A quarter without bad news from Fresenius Medical Care, which spoiled the mother’s numbers,” says fund manager Buch.

The outgoing Fresenius CEO Stephan Sturm has felt the dependence on the dialysis subsidiary FMC painfully in the past two corona years. The pandemic had been responsible for two years of drastic profit declines at FMC, in the wake of which Fresenius had to withdraw its forecast twice.

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Added to this were Sturm’s changing signals about a spin-off from Fresenius Medical Care and the unsuccessful search for investors at the hospital subsidiary Helios. A mixed situation that ultimately led to the early replacement of the long-standing Fresenius manager.

High debt, high pressure

Fresenius Medical Care boss Rice Powell had to retire a few months earlier than originally planned after the last profit warning at the end of July. The restructuring of the group into two global business units, which was initiated last year and in the course of which around 5,000 jobs at Fresenius Medical Care were to be cut, was most recently driven by his deputy and chief financial officer, Helen Giza.

Many employees at Fresenius are now hoping that the group will move forward again under the new management and that it will get new perspectives. Both Sen and Kriwet know the healthcare industry well and are both considered accomplished managers.

It is not very likely that the health group will recover quickly. “The situation at Fresenius is muddled,” says Cornelia Zimmermann, specialist in sustainability and corporate governance at Deka Investment. The industry is struggling because it continues to be burdened by Corona and the costs associated with it, as well as by employee turnover and rising wage costs. “In addition, there is inflation and rising interest rates. With the high debt burden that the group is carrying around, this is a very big burden,” says the expert.

Fresenius had repeatedly made acquisitions worth billions in the past. At the end of June this year, the net debt was 26.2 billion euros. A high value for a company that recently achieved a consolidated profit of 1.8 billion euros with annual sales of 37.5 billion euros. With a debt ratio of 3.72 times Ebitda, the financial scope for growth investments is narrow.

“Mr. Sen is certainly a very experienced manager, but of course he can’t do magic,” says Deka expert Zimmermann. You can’t overload him with expectations in such a complicated situation. In any case, Deka is preparing for the fact that it will be years before Fresenius sees positive effects from its actions. Zimmermann: “In view of inflation, cost increases and interest rate developments, the pressure is growing.”

Negative surprises for Helios are possible

For the time being, investors are not expecting any major portfolio changes at Fresenius. There is not enough money for large acquisitions. And a spin-off from Fresenius Medical Care doesn’t make much sense given its low valuation right now. According to company representatives, Michael Sen has also stopped plans to expand the hospital subsidiary Helios with the help of investor money through acquisitions.

“For Sen, it must now be a matter of uniting the board of directors so that everyone pulls together,” says an insider. This is not likely to be an easy task either, as long-standing Helios CEO Francesco De Meo repeatedly shows ambitions to further expand the hospital division internationally.

In any case, it is clear that Sen will take a closer look at Helios, the second-largest Fresenius division in terms of sales. In the important German market, the federal government is planning a fundamental hospital reform in the direction of more outpatient services. In addition, more and more houses are groaning under rising energy costs. Fund manager Buch does not rule out the possibility that there could still be negative surprises at Helios in this regard.

The high-margin drug division Kabi is currently seen as a hope for growth at Fresenius. In the future, Michael Sen wants to focus more on the globally growing business with biotechnologically manufactured drugs. To this end, he bought a majority stake in the Spanish biopharmaceutical company mAbxience for almost EUR 500 million this year.

Fresenius Medical Care, on the other hand, is likely to be burdened by the corona pandemic and its negative consequences for some time to come. This also limits Carla Kriwet’s room for maneuver. “Ms. Kriwet is highly dependent on the development of external factors.

One can only hope that the effects of the pandemic will subside and some of the costs can be reduced,” says Deka expert Zimmermann. In the current situation, Kriwet must above all manage to improve the personnel situation. This can be done through monetary incentives, but also through an improved work-life balance.

Fund manager Buch also sees opportunities in the expansion of home dialysis: it still plays a small role at FMC, but it has almost doubled to a share of 5.5 percent in the past year. “Continuing this development would be the right signal,” says Buch.

In his view, the markets should give the two new CEOs a grace period in order to achieve visible success. “Definitely by 2024,” says Buch. “Both will be given two years by the investors, also independently of each other.”

More: Weak profits, burdensome dialysis division: why Fresenius shareholders need a lot of patience


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