By Scott Kanowsky
Investing.com -- Shares in Fresenius Medical Care (ETR:FMEG) rose by more than 2% in early Frankfurt trading on Monday, despite the kidney dialysis provider slashing its profit forecast due to weakness at its North American operations and broader economic headwinds.
In a statement on Sunday, the German group said it now expects net income to decline in 2022 in the high-teens to mid-twenties percentage range. The company previously guided for a contraction just in the high-teens. Meanwhile, revenue is still seen growing in the low single-digit percentage range.
The Germany-based healthcare firm said the income estimate cut stemmed from a slump in performance at its key North American unit in the third quarter. The division was hampered by elevated labor costs in the U.S., while a recent spike in inflation led to higher input expenses.
A plan to improve the business was also delayed, with the impact from these turnaround efforts now not expected to materialize until 2023.
"The challenging macroeconomic inflationary environment persists, resulting in higher logistics costs as well as raw material and energy prices. Due to this situation not easing, it is assumed to further significantly impact the earnings development, in particular in Health Care Products, for the remainder of the year," Fresenius Medical Care said.
However, it promised to address the issues in the North American division and also bring down costs.
Analysts at JPMorgan noted that Fresenius Medical Care's profit warning should not be too surprising after a similar downgrade by peer DaVita (NYSE:DVA) last week. A strong rise in the U.S. dollar is expected to limit any further cuts to 2022 results, they added.
Also supporting sentiment was a better-than-expected 15% increase in third-quarter revenue to 5.1B euros. Earnings per share during the period beat estimates as well, despite dipping by 16% to 0.78 euros.