Title: Fresenius Makes Shocking Move: Cancels Dividend After Energy Aid
Fresenius shareholders in Hesse, Germany, are in for a surprise this year. The healthcare giant's decision to withhold state energy subsidies totaling up to 300 million euros for its subsidiary, Helios, has left no room for bonuses for managers or dividends for shareholders. This news, announced on Tuesday evening, has sent shockwaves through the DAX-listed company in Bad Homburg.
Michael Sen, Fresenius CEO, had hinted at such a move earlier in November, citing that not all shareholders are dividend-focused. The acceptance of these energy subsidies from the German government's "energy relief package" had reached a legal threshold, prohibiting both bonuses and dividends for this fiscal year.
Fresenius Chooses Debt Reduction Over Dividends
While the company could have repaid the energy subsidies to enable a potential dividend payout, Fresenius is instead utilizing this opportunity to reduce its high debt level. The Group, which has accumulated significant debt due to a series of takeovers and escalating interest rates, recognizes the importance of cost-cutting measures at this critical juncture.
Analyst Sven Kürten from DZ Bank estimated that a potential 516 million euros in dividends remain with the Group in 2023. With the waiver of the dividend payment, Fresenius seeks to alleviate financial pressure, strengthening its long-term potential.
In Defense of Future Dividends
Despite the current situation, Fresenius remains committed to its policy of increasing or maintaining dividends in the future. The company argues that the linking of energy subsidies to dividend and bonus payments is unconstitutional and plans to challenge this regulation through legal action. Fresenius also distributed a dividend of 92 cents per share for 2022.
Conclusion
Fresenius' decision to withhold dividends after accepting state energy aid is a strategic move aimed at improving its financial stability and managing its high debt load. While the company remains committed to its dividend policy, it is also adhering to regulatory constraints and prioritizing long-term financial prudence. Despite these challenges, Fresenius is forging ahead, focusing on operational enhancements, regulatory compliance, and strategic growth in its pursuit of sustained success.
