Fresenius SE & Co KGaA
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Fresenius SE & Co KGaA
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Good afternoon, ladies and gentlemen, and welcome to the conference call of Fresenius Investor Relations, which is starting now. May I hand over to Markus Georgi, Head of Investor Relations. Please go ahead.
Thanks, [ Francie ]. Good afternoon, and thanks, everybody, for joining us today. Welcome to our first quarter 2022 earnings call. With me on the call are Stephan and Rachel. As always, I would like to start the call today by drawing your attention to the cautionary language that is included in our safe harbor statement on Page 2 of today's presentation. And with that, I hand it over to Stephan. The floor is yours.
Thank you, Markus. Good afternoon, good morning, everyone. A warm welcome to all. Thank you for joining us. As always, we appreciate your interest in Fresenius, and we want to move right to Page 4.
We are pleased to report a solid start to the year despite meaningful macro challenges, such as input cost inflation and supply chain disruptions. We are now in the third consecutive year operating under crisis conditions, and I want to sincerely thank all Fresenius employees around the world for their tremendous dedication these unprecedented times. The war in Ukraine continues to bring unspeakable human suffering. As a health care company, we have a special responsibility. We support the Ukrainian people and especially the local patients as best we can. Also in those countries Ukrainian refugees find themselves in. And whilst that represents a net financial burden, we view that as our duty and part of our mission.
Beyond the humanitarian crisis, the war is creating more supply chain disruptions and inflationary pressures as well as increasing volatility and uncertainty, and hence, intensifying headwinds beyond our assumptions from February when we provided our guidance for the year. But I believe our truly solid Q1 performance demonstrates that we've been able to navigate these challenges reasonably well, at least slightly better than we expect. At the same time, disciplined execution of our cost and efficiency program turns ever more important. So I am pleased to confirm we are on track with our cost-saving initiatives. We remain optimistic to reach more than EUR 150 million savings after tax and minorities in 2023, and aim for even higher sustainable cost savings thereafter. Against this backdrop, we feel comfortable to confirm our guidance for full year '22.
Allow me now to thank Rachel for her massive contributions over the last 5 years. She has helped us through a period of significant volatility and change marked by quite a few unforeseen adversities, particularly the pandemic. Rachel has driven important improvements in Fresenius' finance function and her other areas of responsibility. We've always had a very close working relationship based on trust and great mutual respect. I have not only, but especially, valued her as a sparring partner during our discussions about the group's growth strategy and our group structure. Frankly, I don't like Rachel's decision, but I respect it. Rachel will stay with us through the summer, facilitating a smooth transition, so it's too early to bid farewell. But I think it's never too early to say thank you.
At the same time, I'm thrilled to welcome Sara Hennicken as our new Group CFO, hand-picked by Rachel about 3 years ago and mentored ever since. Throughout her tenure at Fresenius, Sara has impressed us not only with her financial expertise, her creativity, her drive and engaging personality, but also with her sound strategic thinking. Sara is tough. Frequently, when we found ourselves in discussion, exchanging different views, she convinced me of hers, because I'm open to the better argument, and I'm now looking forward to an even more intense collaboration with Sara for the benefit of Fresenius.
Let me also thank Rice, who, in accordance with Fresenius Medical Care's age limit for Management Board members, will be stepping down when his contract matures on December 31. Rice has been with FMC since 1997, on the Management Board since 2004, and has headed the company as CEO for 10 years. I am deeply grateful for his dedicated service and for his so important contributions to the company's success. Rice has played an instrumental role in shaping FMC. He initiated very many forward-looking developments and thus set in motion the necessary transformation of the company. Also here, it's too early to bid Rice farewell. I expect him to be in top form running FMC's shareholder meeting next week. But also here, it's an excellent time to say thank you. Rice, we owe you.
At the same time, I am very much looking forward to working with Dr. Carla Kriwet. At the end of a thorough search process, Carla convinced us most. She is an experienced manager; revenue-wise, her current employer is FMC's size. She is dedicated to health care, but now also has valuable consumer goods experience. Carla is an empathic leader, but has also proven her transformation and restructuring skills. She is a true global citizen, a team player, radiating lots of positive energy. I know Carla can't wait to take on FMC's various challenges, and I'm confident that she, together with the entire management team, will successfully shape FMC's transformation to sustainable success. In keeping with tradition, Carla will also be serving on Fresenius' Management Board.
Now, before I get too sentimental, on to Slide 6 and an update on Kabi. Our highlights from the first months of 2022 are the acquisition of Ivenix and the takeover of the majority stake in mAbxience. The transactions are testament to the diligent execution of Fresenius' new strategic imperatives that we laid out in February. We are rigorously pursuing our group strategy of unleashing accelerated growth. We are fully committed to allocating our capital to the most profitable growth areas of our healthcare group, with Kabi being defined as top priority. The transactions strengthen Kabi's capabilities and access to the attractive growth areas of biopharmaceuticals and medtech, and should hence be seen as first steps in executing Fresenius Kabi's Vision 2026 strategy. And on a very positive current note, just yesterday, we were able to successfully close the acquisition of Ivenix, and I would like to take this opportunity to warmly welcome our new colleagues.
Over to North America, where Q1 was marked by ongoing headwinds, staff shortages, supply chain disruptions -- more details later from Rachel -- but specifically the volume impact of COVID in North America. Outpatient surgeries have now recovered almost to pre-pandemic levels. Inpatient surgeries are still lagging a bit behind. Both metrics have improved since the beginning of the year, and hospitalizations due to COVID have reached a new low in early April.
As far as the triannual tendering activity's concerned, the Premier RFP is nearing completion, and we are generally satisfied with the results. We believe our significant investments in our U.S. manufacturing and distribution network, combined with our broad portfolio, helped us retain many key product awards. Early indications confirm the award is in line with our forecasted expectations.
A few words on the progress of our biosimilars business. We generated EUR 23 million of sales in the first quarter; that is in line with our full year target to roughly double sales this year, which were a mid-double-digit absolute number last year. This sales development is testament to the continued good sales of our adalimumab biosimilar, IDACIO, in Europe. The U.S. approval process is running smoothly so far, and we remain fully on track with our time schedule. On a positive note, we have now received European Commission approval for our PEG biosimilar, Stimufend. We are expecting to launch Stimufend in the first European markets in the third quarter of this year. And for the U.S., we are now expecting the FDA pre-approval inspection for Stimufend later this quarter.
With respect to our tocilizumab biosimilar, we are now moving ahead as planned for launch in 2023. And last month, Amneal Pharmaceuticals announced FDA approval for its BLA for bevacizumab, the biosimilar referencing Avastin. The product was developed by mAbxience. And so this is a great proof point of mAbxience development expertise, and that remains a key rationale for us pursuing this acquisition. Here, we continue to expect the transaction to close mid-2022.
On to Slide 7 and an update on Helios. Starting with Helios Germany, where, with an 11% year-over-year increase, we see a continuation of the positive admissions trend of the last quarters. In comparison to previous COVID waves and consistent with our observations from February, we see far fewer patients in our ICUs due to Omicron. And even though absenteeism of nurses and doctors was a significant headwind during the quarter, more recently we have seen signs of normalization. On another positive note, a Helios-commissioned representative survey shows that the confidence of patients to undergo medical treatment in a hospital has significantly improved over time. The diminishing psychological barriers should hence support ongoing admission growth also over the coming quarters.
In Spain, the overall activity levels continue to grow. Also here, the impact from Omicron on hospitalizations is significantly less pronounced than in previous COVID waves. Positive financial momentum is additionally fueled by an excellent performance of the ORP business, and our Latin American operations, significantly strengthened over the recent years, continued to show a very decent performance. With respect to Helios' fertility business, we've seen activity picking up quickly since mid-February. Beyond organic growth, we continue to pursue consolidation opportunities in the fertility market, such as the recent acquisition of two IVF clinics in Brazil and one in the U.S. And we expect more interesting bolt-on opportunities during the remainder of this year.
That brings me to Slide 8 and an update on Vamed, where the service business is continuing to show a good performance. But also in the project business, we see encouraging signs of a sustainable improvement alongside the easing of COVID headwinds. Order intake in the first quarter grew significantly year-over-year, not only, but in particular, because we won a major turnkey project in Guyana. So despite the macroeconomic challenges that also Vamed is exposed to, we believe Vamed remains on a good path towards pre-pandemic profitability levels. With that, let me hand over to Rachel. Thank you for now.
Thank you, Stephan, and a warm welcome to everyone also from my side. I'm pleased that we delivered a solid start to the year despite those significant macro challenges. Our Q1 '22 results, which are shown on Page 10, are in our usual fashion, so before special items, which this quarter are driven by one-off costs associated with the cost and efficiency program and direct effects from the Ukraine war. A comprehensive overview of all special items is provided at the back of our Investor News and in the results center on our website.
So let's go to the numbers. Growth rates on the slide are, as usual, on a constant currency basis. We delivered sales growth of 5% in Q1, in line with our guidance of mid-single-digit percentage growth. EBIT, with a decline of 5% in the first quarter driven by Fresenius Medical Care, where the COVID-related excess mortality significantly elevated labor costs. Increased material as well as logistics costs were weighing on the EBIT development. Interest decreased year-on-year by 16% in constant currency to EUR 119 million, mainly driven by successful refinancing activities. For 2022, we confirm our expectation that reported net interest will be a little above 2021 with a volatile interest rate backdrop and some currency headwinds. The group tax rate before special items reached 22.7% in Q1, broadly in line with our expectations. And for the full year 2022, we continue to expect a tax rate between 23% and 24%.
Moving on to net income, where we've seen an increase of 3% in constant currency in Q1 that is at the upper end of our guidance range of low single-digit percentage growth. At actual rates, we've seen an increase of 6%, thus a solid, actually better-than-anticipated start to the year considering the macro challenges. However, with the increased uncertainty and volatility related to the Ukraine war, we expect further cost inflationary effects and supply chain disruptions.
Over to Page 11, which illustrates the Q1 '22 momentum at our four business segments. Q1 in a nutshell, COVID-related excess mortality and costs at FMC as well as the macro environment weighed on earnings growth. Overall, however, these headwinds were partly compensated by strong EBIT growth at Helios and Vamed, and Kabi showed a better-than-anticipated development based on a strong emerging markets business.
Let's start with Kabi. The company showed 1% organic sales growth and a flat year-on-year development for EBIT. In the U.S., ongoing competitive pressure, supply chain challenges driven as well by an unprecedented level of absenteeism of production staff earlier in the year due to the Omicron wave as well as input cost inflation, weighed on the financial performance. This led to an organic sales decline of 3% and an EBIT decline in constant currency of 17% in Q1. In Europe, we saw 2% organic sales growth and an EBIT decline of 33% in constant currency. The EBIT decline was driven by a strong prior year comp, which was inflated by some positive one-time effects as well as that said cost inflation. Emerging markets showed a 3% organic sales increase and an EBIT growth of 29% in constant currency.
In China, higher sales of products not affected by the national tendering more than offset price headwinds from the NVBP product. Profitability in China was supported by a soft prior year comp, lower SG&A costs, some one-timers as well as delayed promotional activities due to the COVID lockdowns. Asia ex China contributed nicely to growth, and we saw a broad-based positive development across all product groups.
Let's move to Helios, where we saw strong 8% organic sales growth in Q1, slightly above the upper end of the full year guidance range of low to mid-single-digit percentage growth. Helios Germany grew 3 -- sorry, 5% organically, driven by higher year-on-year admissions, which are, however, still below pre-pandemic levels. Hence, growth was also supported by the relevant COVID reimbursement schemes. We saw a very strong 11% organic sales growth in Spain, driven by year-on-year calendar effects and strong activity levels. Latin America is continuing to show a nice business development.
Moving to EBIT. Here, we've seen very strong growth of 15% for Fresenius Helios in Q1, also here better than the full year outlook of mid-single-digit percentage growth. In Germany, EBIT increased by 3%. Higher staff absenteeism rates at the beginning of the quarter weighed on profitability. But as you heard from Stephan, absenteeism rates have normalized in the recent weeks. Inflationary effects were only a small headwind in Germany in Q1.
Helios Spain delivered a very strong growth of 22% in constant currency. Year-on-year calendar effects, good admissions and a great performance across our businesses drove the excellent performance overall in Q1. The Latin American business also continues to show a good performance. Sales of Helios fertility were EUR 57 million with an EBIT of EUR 4 million. Here, activity started to pick up again since the middle of the quarter with the easing of COVID-related restrictions. We expect a meaningful improvement of profitability in the next quarters.
Let's move to Vamed, where we've seen an organic sales increase of 7%. COVID and supply chain disruptions remained headwinds in the project business. The service business showed ongoing nice growth supported by an upward trend in elective treatment activity, albeit overall still below pre-pandemic levels. EBIT was positive with EUR 8 million, also here driven by the service business. The order intake was very strong with a 91% year-on-year increase to EUR 263 million.
With that, let's move on to cash flow, which you'll find on Slide 12. With EUR 101 million group operating cash flow, it was, as usual and as expected, soft in Q1. Kabi posted a Q1 cash flow of EUR 133 million, with a last 12-month margin of 14.5%. The year-on-year decline of 52% was mainly driven by a working capital buildup, for example, in raw material inventories. Helios with a negative cash flow of EUR 136 million in Q1, which followed a strong Q4 and COVID-related delays in budget negotiations in Germany. We are confident that the cash flow at Helios Germany will significantly improve in the upcoming quarters.
Vamed's cash flow is negative and on a similar level to prior year, mainly due to phasing effects, COVID-related delays in its international project business as well as some working capital build. So overall for the group, the Q1 performance took the group last 12 months margin to 11.8%. If you deduct group CapEx, which is healthily back in our normal range of 5% to 6% with a 5.1%, you'll arrive at a free cash flow margin, bottom right, of 6.7%.
We ended the quarter with a 3.6x net debt-to-EBITDA as a ratio. We confirm our expectation from February: without further acquisitions, we project an improvement of the net debt-to-EBITDA ratio by the end of this year. Thus by the end of '22, the ratio is expected to be within the self-imposed target corridor of 3 to 3.5x. Obviously, once both those Kabi acquisitions close, we will increase our leverage ratio slightly.
With that, let's turn to Slide 14 and the 2022 outlook. Our guidance includes the effects of COVID and, as usual, excludes the effects of special items. Our COVID assumptions for guidance purposes are unchanged from February: basically a waning impact from COVID over time. In terms of inflationary effects and supply chain challenges, take energy costs, wage inflation or supply of key raw materials, here we have now reflected some more pronounced headwinds in our assumptions. The extent and nature of these effects varies significantly across the different business segments. Obviously, the war in Ukraine adds volatility and muted visibility across the whole raft of assumptions. As a reminder, the Ukraine and Russia contribute only roughly 0.5 point of group revenue. But the war, obviously, has an impact on energy prices, supply chains, raw materials and potentially balance sheet valuations. We will continue to monitor these indirect impacts very closely.
The guidance assumptions of Fresenius Medical Care, especially with respect to excess mortality and the remeasurement effects on the fair value of investments, also apply to the Fresenius group. There remains, of course, significant uncertainty in all of these assumptions and the potential impact on our business. The recently announced acquisitions of Ivenix and the majority stake in mAbxience, as well as any further potential future acquisitions, are excluded from guidance.
Having said all of that, let's turn to the 2022 outlook by business segment, starting with Kabi. With 1% organic sales growth year-to-date for Kabi, we confirm our outlook range of low single-digit percentage organic sales growth for the full year. We assume ongoing competitive pressure in the U.S. that will last throughout the year, with additional headwinds from supply chain disruptions and the triannual GPO tendering activity. Moreover, we expect ongoing price pressure from the NVBP system in China.
With a flat EBIT development year-to-date, we confirm the outlook of a high single to low double-digit percentage EBIT decline for the full year. Despite a stronger-than-expected Q1, we are now taking into account a higher level of geopolitical and macro uncertainty that can be very relevant for the Kabi business. The top line drivers, of course, have a direct impact on the EBIT line. Moreover, we are expecting negative effects from input cost inflation, supply chain pressure and ramping investments into biosimilar sales and marketing capabilities, predominantly in the U.S.
For Helios, in terms of organic sales growth, with 8% organic growth year-to-date, we confirm the outlook range of low- to mid-single-digit percentage growth for the full year. As far as EBIT is concerned, with an EBIT growth of 15% in constant currency in Q1, we confirm our full year guidance range of mid-single-digit percentage growth. Q1 growth was supported by calendar effects, hence those growth rates are not expected to be sustainable throughout the full year. Vamed, with an organic sales increase of 7% year-to-date, we confirm the outlook range of high single-digit to low double-digit percentage growth.
On to EBIT, with a positive EUR 8 million in Q1, we confirm our outlook of returning to absolute pre-COVID levels for the full year. So then if we take all of that together for the group, and you'll find that on the next slide, #15, starting with sales, with 5% constant currency growth year-to-date, we confirm our guidance of mid-single-digit percentage growth for the full year. Over to net income, where, after a strong start to the year with a 3% increase in constant currency, we confirm our guidance of low single-digit percentage increase for the full year. Whilst we do expect a meaningful pickup at Fresenius Medical Care from the low levels of Q1, we have factored in a slowdown in growth rates at Kabi and at Helios. In terms of phasing for the group, given the more significant effects that we expect from cost inflation and supply chain interruptions, we expect to see a softer growth rate in net income in Q2 and Q3 this year. Q4 should be stronger, driven by significant back end-loaded contributions from our cost and efficiency program.
Current U.S. dollar rates are significantly supporting our reported growth rates. Current exchange rates prevailed until the end of the year. With a particularly strong U.S. dollar versus a weak euro at the moment, we would see a tailwind of 4 to 5 percentage points for both sales and net income. With that, Stephan and I are of course very happy to take your questions. Thank you.
[Operator Instructions] The first question is from Patrick Wood from Bank of America.
I'll keep it to two, please. The first one, just curious within Kabi, infusion therapy very strong, both sequentially and then year-on-year. Just curious, a little bit more color there, please, because it's a very unusually strong results for the quarter. And then second question, I guess, is really on the staff and cost inflation and your outlook. You're obviously a very large employer, both across the services side and then on the product side and across a lot of markets. I'm just curious for any additional meat on the bones you can put in terms of which markets you're seeing, let's say, a tighter labor market with a bit more cost inflation and where it's harder to hire? Just a little bit of color there would be really helpful.
Thank you, Patrick. Rachel is going to help you out on Kabi. I'll try to be useful on labor.
Patrick, thank you for the questions. I mean, I think you're absolutely right. It was a particularly strong quarter for infusion therapies, with a growth of 14%. If I have a look at the regional split for that, we're actually driving healthy growth across the regions, obviously from quite different starting positions. But in terms of absolute numbers, I would say particularly Europe and also Latin America were relevant. And I think what's worth remembering here is the volatility that we've seen over the last 8 or so quarters because of COVID, that we often have got quite differing effects by region and over time and thus also in the comparator base, you do see some quite variability. But nevertheless, I think it is a very strong and solid performance for what is , I would say, an important and not often talked about part of our portfolio, Patrick, I hope that helps.
Patrick, on labor, I'd like to slice this regionally first, and the hot spot of labor cost inflation in our minds is the U.S., and there it is beyond manufacturing staff undoubtedly, in particular nursing staff, where we see a meaningful shortage that culminates underlying inflation. I'm sure that Rice and Helen on the FMC call later on will also have a comment on that. As far as Europe is concerned, we're seeing a more normalized development as far as manufacturing and doctors -- manufacturing staff and doctors is concerned, nothing that would be way out of the ordinary. We're seeing more inflationary trends also here on the nursing side. But as you certainly know, we have no exposure here in Germany because nursing cost is carved out from the overall DRG. We have a bit of an exposure in Spain that we're trying to manage, has been duly built into our guidance, and we continue to feel comfortable with that. Majority of our staff globally is in the U.S. and in Europe, a minor part in Asia. And as you know, as a consequence of the tender activity in China, we have actually just reduced our exposure to wage inflation, and therefore, also here, that plays a relatively minor role.
The next question is from Tom Jones from Berenberg.
I'll keep it to two. The first is, I just wanted to dig a little bit deeper into the performance of the emerging markets from an EBIT perspective from Kabi. I mean this business kind of bumbled along or -- bumbled along, it stayed fairly steady in the sort of high teens, low 20%s EBIT margin for pretty much as long as I can remember. But then in Q2 last year, it took a pretty significant step up into the sort of mid- to high 20%s. And we've now had 4 quarters in a row where, ex one-offs, it's been in that kind of range. So my question really is, is that the new normal? And what has happened that's caused that kind of step change in your emerging market margin for Kabi? And then the second question is slightly more boring one, but maybe one for Rachel. Given the interest rate environment, it might be -- and the number of debt instruments you have, it's quite a lot of work to figure out the question -- the answer to this question out, but maybe you can give us a quick answer. Broadly speaking, for Fresenius SE ex FMC, what's your kind of current split of fixed versus variable debt? And though I know you don't have any near-term refinancing needs, you do have close to EUR 3 billion-plus that needs doing next year and the year after. So I guess on that EUR 3 billion that needs refinancing, what, given current interest rate environments, would you expect the tick-up in interest cost to be? Or would you expect it to be kind of flat or even a decline given some of those debt instruments are fairly old?
Thank you, Tom. That's a long question for a boring topic, as you called it. Rachel is going to help you out on both, but I can assure you that bumbling along is not the new normal.
Tom, thank you for a raft of very interesting questions from my perspective. Let me do my best to try and address them. I mean I think two or three things that I've been very boring in saying over the last couple of years is that clearly trying to read trends too much into what's happened in any of our businesses during the pandemic is definitely difficult, because there have been so many different, if you like, factors that have played in different quarters on a region-by-region basis. And clearly, as Stephan and I have been saying throughout our speeches today, as we started into 2022 -- and over time, hopefully, the COVID effects wane -- we are also hearing some more, let's say, unusual effects in terms of some of the competing influences on our business. And I think for me, your comments in terms of how is emerging markets bumbling along and how is it developing, it has definitely been subject to many of those underlying volatility topics that I'm trying to express. It has been a particularly strong quarter in Q1. And clearly, with all of the explanations that I gave you previously, including some one-time effects, some effects due to delayed promotions from COVID, a softer year comp based on just the activity levels we had last year, you certainly shouldn't read Q1 to be a standard quarter upon which you can extrapolate. I think, we've been lucky enough to have particularly good volume activity in Q1 in China within the emerging markets, which has had a particular influence. But again here, given the ongoing impacts of those tenders, I don't think that we can count on seeing such strong volumes that offset those price effects in every quarter going forward. I think generally, improvement in margin over time, I think, clearly, what you've been able to see are the building scale effects of our businesses in the emerging markets, and clearly that has helped support that general trend, but I would counsel very carefully against jumping to the conclusion that you can use trends coming out of this pandemic and extrapolate them too strongly.
I think amongst all of your questions on financing, what I can comment on is that we do have a predominantly or significantly strong percentage of fixed instruments within our financing portfolio right now. Clearly, that is something we have done on purpose given the environment in which we are currently seeing ourselves. And yes, there are of course always refinancing activities ahead of us. But nevertheless, we don't have significant refinancing needs either for '22 or for the early part of 2023. You will have seen that we have in fact paid back early some of the instruments that were due in 2022. So the tick-up that is implicit in the interest guidance that I've given for the full year is actually due to our thoughts particularly about turning some of the shorter-term financing that we have into more permanent, slightly longer-term financing that will give some tick up as we go through the year. Clearly, I don't want to preempt what those changes may be, but we have already repaid some of those instruments that were due, and that has given us some advantage in that interest number that I reported for the first quarter. And as we go through the year and move into slightly longer-term instruments, that will drive the tick-up that is implicit in the increased interest over 2021 that I talked about in the guidance.
Okay. Perfect. That's all very clear. And then I have just one follow-up, which admittedly is entirely unrelated, but it was just on the recent news about your bortezomib subcut launch. I think when you launched the IV version 4 or 5 years ago, Stephan, you cautioned us against getting overexcited given that most of the volume in that product was on the subcut side. Are we okay to get a bit excited now, or would you still express some caution about the revenue potential for subcut bortezomib?
You know me, Tom, and I would always try and encourage you to be a bit more cautious. It will be a little while before I'd truly get excited about this one. I want to see a bit more. Back to your previous question, Tom, obviously, in wrapping up, for a levered company, a rising interest rate environment is never useful. At the same time, from my perspective, it would be wrong to view rising interest rates in isolation. I would very firmly expect that we're going to see more pronounced reimbursement rate increases later this year for '23.
The next question is from David Adlington from JPMorgan.
Two, please. Firstly, just on pricing, given the cost inflation environment. I just wondered I suppose, particularly in Kabi, if there was any discussion with your customers around potentially putting through some price increases. And then secondly, just a regulatory question. Just on your HES products, I believe Europe were looking at potentially withdrawing the products. Just wondering if you had any updates on that and what sort of size those revenues are, please?
David, thank you. I'll try and be helpful on both. On the first one, I'd say we have a chance to contain price erosion. I don't see us -- at least that is not what we're factoring in -- I don't see us having a chance to raise prices. On HES, it is an ongoing process. I believe also on the February call, I made a comment that the product has gotten more attention for completely the wrong reasons, because it is an utterly needed product in the Ukraine war at the moment. As tragic as these events are, I believe it has sharpened the various regulatory bodies' view on the necessity to keep this product alive. It's too early to say something definitive, but I am not all pessimistic about having to withdraw this, from our perspective, essential product.
And Stephan, you able to gauge the size of those? It's difficult looking from the outside, I don't understand how big that is as part of your portfolio.
It is a low to mid-double-digit million euro revenue amount. Nothing to be overly worried about from a commercial perspective.
The next question is from Oliver Metzger from ODDO BHF.
The first one is on Helios Spain. So you made already a comment of the strong activity level in the first quarter. But if I look in the model or in your reporting over last quarters -- over the last years, basically, we always saw a very high activity level and strong organic growth. So the question is, do you see the overall Spanish market to be in a strong shape, driven for example by some better demographics? Or is this higher patient inflow related to market share gains where you just do a better job than your competitors? Second one is on your fertility business. So now we see also the Eugin sales and EBIT and the profitability. Is in the first quarter any one-offs related to recent acquisitions included, and which underlying margin potential do you see for the year?
Oliver, Rachel is going to help you on fertility. As far as Spain is concerned, my perspective, this -- the country is still facing a meaningfully lower installed bed capacity relative to -- or per capita. And therefore, long waiting times are still the norm rather than the exception. We have always tried to capitalize on this as best we can. Therefore, right from the acquisition, we have guided you to a superior organic growth rate relative to our operations in Germany. And whilst that continues to be the case, I believe that COVID has served as a reputation builder -- building moment for us. Our contribution to containing the pandemic and to treat the patients that were in need were widely recognized by the Spanish political environment, but also by the public, and in particular by the patients in the vicinity of our hospitals. And therefore, I believe that we are beyond a catch-up mode post-COVID now, and that therefore, as I indicated, I believe, on the last 3, 4 conference calls already, I believe that there are also now more sustainable market share gains that we can rely on. You may have heard from Rachel that in this particular Q1 we were benefiting at least marginally from the calendar effect, whereas last year Easter was in -- was firmly in Q2 -- I'm sorry, was in both Q1 and Q2, and this year, it was firmly in Q2 only. So I'd be -- I wouldn't be surprised if we saw a bit of a year-over-year mitigation of growth in this coming Q2. Rachel, fertility?
Thank you, Stephan. Oliver, thank you for your question. You're absolutely right, the first time we have reported the Helios fertility numbers separately. As a reminder, the EUR 57 million of sales and the EUR 4 million of EBIT. You are quite right to observe, Oliver, that the profitability that that implies, around a 7% EBIT margin, is somewhat lower than we anticipate in general for that business. There weren't any specific one-timers associated with acquisitions, as you suggested, in Q1. Nevertheless, as I mentioned in my speech, that fertility business was suffering from some COVID restrictions in some of the relevant markets that drive that business. That activity began to pick up in the second part of Q1, and we are optimistic in terms of how that will develop for the rest of the year. Clearly, all of the topics I've been talking about in terms of potential uncertainty could also apply to the Helios fertility business. Nevertheless, I would like to think that we will creep into double-digit percentage margin for this business during 2022.
[Operator Instructions] There are no further questions at the moment, and I hand back over to Stephan Sturm. Please go ahead.
Thank you. Thanks again for joining us this afternoon. Thank you for your interest in Fresenius. I believe it is fair to say that Q1 represents a fairly solid start to this overall challenging fiscal year. I believe we are on a good track and have a reasonable amount of confidence in our guidance for the remainder of the year, notwithstanding the meaningful uncertainties and volatility that we are exposed to. Rest assured, we will keep our heads down and work away over the coming months and try to make further progress. Closing mAbxience is going to be a priority, also further progress on the regulatory side as far as our biosimilars portfolio is concerned. Next in line is going to be our shareholder meeting, Friday next week. From today's perspective, nothing new to announce, but a few updates here and there. Once again, thank you all for your support, and we look forward to talking to you, meeting you on the road or virtually over the coming days and weeks. Thank you for now. Goodbye.
We want to thank Fresenius and all the participants for taking part on this conference. Goodbye.