In the 2009 financial year we succeeded in linking the tradition of MTU Aero Engines to the future. We not only celebrated the 75-year anniversary of our company, but also paused to take thorough stock of the present and prepare ourselves to meet the future. The result of these endeavors is our new set of MTU Principles, which we have communicated to our staff company-wide. The Principles contain all the elements that characterize MTU – business model and products, customers and partners, values and goals – and are intended to provide all our staff with a compass to guide their day-to-day work. Our goal is to focus all our strength in order to make our vision of the future a reality. We want to continue doing what we have done in the past: playing a decisive role in shaping the future of aviation.
Throughout its corporate history, MTU has amassed unrivaled expertise in engine construction and worked hard to attain a strong position in the global aviation market. We are one of the drivers in the development, production and maintenance of commercial and military aircraft engines and have established our name in the industry as a highly innovative and reliable partner. In the years ahead our plan is to expand this leading role and consolidate it by growing profitably. We want to participate in further promising aero engine programs and strengthen our commitment to projects we are already involved in. Increasing our presence in international markets is another focal point of our strategy. By doing so, we aim to safeguard our business success in the long run and create sustainable value – for our partners, for our customers and for you, our shareholders.
The financial year 2009 presented MTU with a host of major challenges. The global economic and financial crisis developed into the worst recession of the post-war period, leaving its marks on our industry, too. International passenger traffic fell by about 4 %, freight traffic posted a double-digit drop in percentage terms, while the business jet segment took a nosedive. Additional headwind for the market came from reviving oil prices and the persistently strong Euro. Given this difficult market environment, MTU put in a solid performance: with revenues of € 2.6 billion and an operating profit of € 292 million we were again able to achieve a double-digit EBIT margin. Although the slower market demand led to a slight drop in revenue, operating profit was higher than expected. At 11.2 %, the adjusted EBIT margin was still higher than we had predicted in October, when we revised the forecast upwards to 11 %. You, our shareholders, will again benefit this year from our earnings power: we are proposing a dividend of € 0.93 per share. This underscores our commitment to keep dividends at the high level of the previous two years, when general economic conditions were much better.
This continuity in our dividend payments is possible thanks to the positive results of our business policy, which is oriented towards stability, being based on a broad portfolio of comparatively young products. Our engines and engine components have allowed us to position MTU in all thrust and power categories. Being active in a variety of markets enables us to compensate more easily for fluctuations in individual sectors. The comparatively low age of the engines in our portfolio means they are not being withdrawn from service and decommissioned. In fact, the percentage of parked aircraft equipped with engines containing MTU components is below the industry average. In 2009, our biggest revenue earners were the V2500 engine for the Airbus A320 family, the PW2000 for the Boeing 757, and the C-17 and CF6-80C, which are used to power widebody jets such as the A330 or Boeing 747.
A key pillar of our business model is commercial maintenance. In 2009 we succeeded in strengthening our position as the top independent maintenance provider worldwide and secured a number of important long-term contracts. For example, we were able to renew our licensing agreement with General Electric for CF34 repair techniques for a further ten years, in advance of its original expiry date, while in the R&D area we signed a framework agreement with the same partner for the joint development of repair processes. This partnership underscores MTU’s role as a global technology leader.
We not only maintained but substantially boosted our level of investment in research and development: in the financial year 2009, our capital expenditure on R&D was 27% higher than the previous year.
Strengthening our hand as a global technology leader is also at the top of our agenda in 2010, with the focus here firmly on implementation of the PW1000G geared turbofan. Initial applications for this engine include the Mitsubishi Regional Jet, the Bombardier CSeries and Irkut’s MS-21. Our activities in the field of materials, production processes and repair techniques continue at the same high level as always. In this area, our engineers are working flat out on new processes and forward-looking programs. Examples of these include the GE38 engine for heavy-lift transport helicopters and the GEnx, which is destined for the Boeing 787 Dreamliner and the Boeing 747-8.
We can give a positive report of our Challenge 2010 cost-reduction program, which is proceeding according to plan. This year we are looking to save about € 30 million; from 2011 onward that figure is set to rise to € 50 million per annum. With expenses for new programs on the rise, this is the only way to maintain our earnings at the current level. Our efforts are focused on optimizing product costs and making savings in production and logistics processes. Last year our system of flexible working hours proved to be a useful tool that prevented us having to introduce short-time working or make staff cuts. It granted us the flexibility to respond quickly to the dramatically deteriorating economic climate. We will be relying on it again in 2010.
In the short term, the general economic climate will remain challenging. In addition to the strained situation of many airlines, exchange rate volatility and rising oil prices will continue to weigh on our business. And yet, we are sanguine about the long-term outlook. Once we have weathered the current turbulence, the global aviation market will enter a new phase of growth. Industry experts expect passenger volumes to increase at an annual rate of close to 5 % over the next 20 years; the forecasts for Asia and the Middle East are even higher. Against this backdrop, MTU is systematically strengthening its presence in these regions. We took important steps in this direction in 2009, for example by acquiring a stake in the Saudi Arabian maintenance company MEPC and signing a cooperation agreement with the Chinese engine manufacturer AVIC.
Increasing our global reach is one way of strengthening MTU and making the company fit for the challenges that lie ahead. Another lies in the ongoing improvement of our cost structures and processes. One initiative in this respect is CIP, MTU’s Continuous Improvement Program. Here we have launched improvement processes in all areas of the company, are ensuring that they are implemented consistently, and are thus enhancing overall efficiency. Optimization of the production network is of key importance to us, and in 2009 we notched up two milestones along this path: we sold our production facility in the United States and opened a new plant in Poland. The result will be a substantial improvement in our production cost structure.
All in all, we are well equipped for the future. With our strong global presence, the deep roots we have in the key growth markets, our technological edge and our efficient organization, I am optimistic that MTU will emerge invigorated from the current crisis.
But what is a company without its staff? Last year, MTU’s some 7,600 employees worldwide proved yet again just what they are capable of achieving. With their skills, motivation and dedication they make MTU what it is today – a top-class high-tech company of global stature. I would like to thank all our staff sincerely for this.
My thanks go also to our customers for their loyalty and trust, another cornerstone of our future success.
Our gratitude to you, the owners of MTU, is of a very special nature. Your financial commitment is what makes our success as a company possible in the first place. Therefore, from myself and on behalf of the entire company and my fellow members of the Board of Management, sincere thanks to all our shareholders. Your confidence instills in us a sense of purpose that motivates us to continue shaping the future of aviation while at the same time sustainably increasing the value of our company.
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