Fresenius SE&Co. KGaA

The stable outlook reflects our expectation that, despite some near-term challenges from the pandemic, the group's diversified and resilient business model should support strong recovery prospects. While we see the potential for adjusted leverage to reach about 4x this year due to COVID-19's impact, we believe the group has sufficient financial flexibility to restore leverage to meaningfully below 4x by the end of 2021 and maintain this. This is supported by our projections for a rebound in discretionary cash flow to about €2 billion per year from 2021. In our view, given the business' overall strength, a risk to our ratings is mostly linked to an unforeseen large acquisition, which would push the group's adjusted leverage about or above 4x

...Fresenius SE & Co. KGaA (FSE) delivers solid organic growth thanks to positive underlying growth trends in the life-saving and life-sustaining products and therapies that the group offers. These favorable trends are fueled by aging populations in developed markets and increasing access to health coverage in emerging markets. This is particularly true for chronic kidney failure, where FSE, through FMC, is the world leader. Despite temporary headwinds in Helios' business due to COVID-19 and the postponement of elective surgeries affecting the group's private hospitals business, S&P Global Ratings still expects FSE to report mid-single-digit revenue growth globally in 2020, in line with the company's pre-COVID-19 guidance for 4%-7% organic sales growth. This resilience in top-line growth also reflects the group's ability to negotiate price hikes every year. COVID-19 could introduce temporary challenges for Helios and FMC, while competition for injectable drugs could heighten for Kabi. The...

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