Fresenius SE & Co. KGaA (DE:FRE) yesterday announced that it has scrapped dividends and executive bonuses for 2023 to safeguard state aid. The company received the aid to help it bear the high energy costs of its hospital business. Fresenius shares on the Frankfurt exchange are trading down by almost 2% as of writing.
Based in Germany, Fresenius is a European healthcare company that specializes in products and services related to chronic kidney failure, hospitals, and other medical care.
Fresenius Suspends Dividends
In September, the company indicated that it was evaluating whether the state aid would prohibit it from paying management bonuses and dividends. The company noted, at that time, the legal implications were not entirely clear. Yesterday, the company announced that it was suspending its dividends and management bonuses and explained that the government aid would help in its “value enhancement” by decreasing the debt ratio relative to operating income by 20 to 25 basis points.
In fiscal year 2022, the company declared an annual dividend of €0.92 per share, which was paid in May 2023. The company is known for consistently raising its dividends or at least maintaining the previous year’s level, underscoring its dedication to rewarding shareholders.
The Road Ahead
Fresenius’ CEO, Michael Sen, assumed leadership a year ago and has been overseeing the group’s restructuring. The group has been struggling with the declining earnings of its kidney dialysis division, Fresenius Medical Care. To address these challenges, Sen has implemented measures to reduce costs and debt. Additionally, Sen is exploring the possibility of divesting smaller non-core businesses, with a strategic focus on strengthening the generic drugs unit Kabi and the hospital operator Helios.
In the first three quarters of 2023, the German hospitals under the group’s Helios division received €158 million in government aid to offset the increase in energy costs.
Additionally, as part of its restructuring, the company is targetting annual structural cost savings of approximately €1 billion before interest and tax by 2025.
What is the Target Price for Fresenius Stock?
According to TipRanks’ rating consensus, FRE stock has received a Strong Buy rating, backed by recommendations from 12 analysts. The Fresenius share price forecast is €39, indicating an upside of 37.6%.
