Procurement

We will continue optimizing our procurement management in 2010: prices, terms, and especially quality are key factors for securing further earnings growth.

Fresenius Medical Care secured long-term supply guarantees and considerable cost reductions in the International segment for the current year. Especially for strategically important raw materials supplies have been secured through framework agreements.

The logistics processes in the International segment are also being further standardized and streamlined. Over the long term, the aim of the SCALE project described here is to improve flexibility and efficiency of our supply chain management, to harmonize it globally and to enhance profitability.

The high volatility of commodity prices makes it difficult to predict the price trends in the coming years for the Fresenius Kabi business segment. Producers in the various industrial segments are evidently adjusting their capacities, and thus supply, to the expectation of continued low global demand. This will probably cause raw material prices to rise. It remains to be seen how demand generally will develop in 2010. If it should pick up significantly, this is likely to have an additional price-driving effect given the resulting low supply. We have already fixed the prices for processed corn products for 2010 through purchasing agreements. They are lower than the 2009 prices. For all other products whose prices are linked to those of the underlying commodities, the prices will be fixed at already scheduled dates in 2010. We will continue to pursue projects of the Global Sourcing Initiative and implement cost reductions in 2010. The same applies to all make-or-buy projects.

At our HELIOS clinics, the central materials management currently only covers our own HELIOS hospital pharmacies, and thus 75 % of their total pharmaceutical sourcing. HELIOS intends to integrate the approximately 20 external supply pharmacies into its own IT system. In addition, it is planned to introduce the online ordering system at other clinics and / or pharmacies for their materials management. The project for implementing the master article database, which we discussed in last year’s annual report, has taken longer than expected and is now due to be completed in 2010.

We already contracted our electricity supplies for 2010 in the fourth quarter of 2008 and for 2011 in the first quarter of 2009. We were able to reduce our electricity costs by over 7 % for 2010, and by a further 6 % versus 2010 for 2011. The last phase of the liberalization of the natural gas market was completed in 2009. We achieved very good results in our natural gas sourcing thanks to the enPortal online platform and have now covered our natural gas requirements until Decem- ber 31, 2012. We reduced our natural gas costs for the period 2009 / 2010 (October 31, 2009 to October 31, 2010) by 13.5 % and for the period 2010 / 2011 by 10.8 % versus the 2009 / 2010 period. For the period 2011 / 2012, we reduced our costs by a further 4.5 %.

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