Post #26: German road trip and kidney dialysis

On what was the hottest day in Europe so far this year, your intrepid Fund Manager spent over 4 hours in a bus (fortunately airconditioned) on a 360km round-trip in Germany. Why, you may justifiably ask? The answer: to visit the largest production plant for kidney dialysis machines and consumables in the world, owned by Fresenius Medical. This was the first time the investment community had visited the venue in 15 years and so it was a privileged opportunity to learn more about the complexities of kidney dialysis and the importance of this future trend.

Located in St Wendel, the site is 140m square metres in size and includes a 13-storey high warehouse which can handle 30,000 pallets of product. Annually, the site produces some 61m filters and 30m dialysis machines with a total production value equivalent to ~€400m (the sale price would obviously be higher). Some 17,000 tonnes of plastic alone (notwithstanding other material costs) are required each year to produce these products. 

Given the scale and magnitude of operations, for such a factory such as this to work efficiently, two key things appear essential: good logistics and a high degree of automation. It was highly impressive to see that over 95% of internal transportation around the plant is done using autonomous trucks and at each production station our group visited, humans were, for the most part, absent, with robots completing many of the tasks. 

This all matters since every 0.7 seconds of the day someone, somewhere in the world is being treated using a dialysis machine, most likely one made by Fresenius. Demand is likely only to grow going forward given a combination of ageing western populations, improving mortality rates and growing levels of obesity. Pre-emptive of these trends, when we visited St Wendel, Fresenius was in the very process of installing an additional production line for finished goods. Meanwhile the prevailing mindset across the whole factory was to find ways of improving output productivity. Sadly, dialysis is a non-discretionary treatment for the chronically ill.   

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