MTU
Annual report 2010 » United by excellence

The MTU share

The MTU share price gained 33% in the course of 2010, outperforming the Dow Jones Aerospace & Defense Index, the barometer of Europe’s aviation industry. MTU’s shareholders will also benefit from the company’s sustainable, earnings-oriented dividend policy. In view of the good business performance, the Board of Management and the Supervisory Board intend to propose an increased dividend of € 1.10 per share at the 2011 Annual General Meeting. This represents a dividend yield of 2.2%.

INTERNATIONAL STOCK MARKETS IN 2010

Buoyed by strong economic recovery, international stock markets began well in 2010. By mid-year, however, concerns arose about the sustainability of the positive global economic trend and about the sovereign debt crisis affecting a number of European countries. These developments were not without an impact on European stock markets, triggering strong volatility and a pronounced sideways movement in stocks throughout the summer months. A more optimistic outlook began to prevail again as from September, especially in Germany, and the stock market there picked up again strongly even in the face of lingering worries about the consequences of the euro crisis. As a result, the German stock indices experienced higher-than-average growth in 2010 compared with those of other countries. For instance, Germany’s blue-chip index, the DAX, grew by 16% in the course of year, while its U.S. counterpart, the Dow Jones, registered a plus of only 11%. By contrast, Europe’s Euro Stoxx 50 index lost 6% over the year. The MDAX German mid-cap index, on which the MTU share is listed, improved by 35% in the course of 2010 to close at 10,128 points on December 30. The Dow Jones Aerospace & Defense Index – which includes major European companies such as Rolls-Royce, EADS and BAE Systems as well as MTU – rose by 16% over the same period, reflecting the positive trend in the industry in 2010.

MTU SHARE PERFORMANCE

In the first four months of 2010, the MTU share price moved in line with both the MDAX and the Dow Jones Aerospace & Defense Index, the barometer of the aerospace industry. Throughout the period May to August, the improved outlook for international air traffic and, in particular, a strong U.S. dollar both served to further boost the company’s share price. As a result, the MTU share price made aboveaverage gains during this period. As from September, however, the U.S. dollar again began to lose ground against the euro, which negatively impacted the MTU share price. Other detrimental factors for the company’s stock during this phase were the cuts in military budgets announced across Europe and the uncertainty surrounding the recovery of the high-margin commercial spare parts segment. Towards the end of the year, aircraft manufacturer Airbus decided to equip its A320 series with innovative and efficient engines from programs in which MTU is involved and, around the same time, the U.S. dollar began to gain in value again. These factors were sufficient to trigger a year-end rally in MTU shares. All in all, the MTU share gained 33% in the course of the year, outperforming the Dow Jones Aerospace & Defense Index (at +16%) and finishing not far behind the MDAX (at +35%).

 

MTU DEFENDS ITS POSITION AMONG THE TOP TEN MDAX STOCKS

MTU’s market capitalization on December 30, 2010 stood at € 2,632 million. On the same date, the MTU share was listed eighth in the Deutsche Börse Group’s MDAX rankings, cementing its position among the top ten MDAX securities (2009: tenth place). The MTU share moreover improved its position in the liquidity ranking of German stocks published by the Deutsche Börse Group, taking ninth place among the MDAX shares (2009: 13th). Whereas the trading volume of MTU shares remained virtually stable at an average of around 300,000 per day, the value of the shares traded rose from around € 8 million to some € 13 million per day owing to the higher share price.

AT € 1.10, PROPOSED DIVIDEND HIGHER THAN PREVIOUS YEAR

MTU’s dividend policy is earnings-oriented, and the company’s good business performance in 2010 enables it to offer its shareholders a significantly higher dividend than in 2009. At the Annual General Meeting on May 5, 2011, the Board of Management and the Supervisory Board intend to propose a dividend payment of € 1.10 per share, € 0.17 more than in the previous year. The dividend is expected to be paid out on May 6, 2011. The dividend payout ratio calculated as a percentage of net profit available for distribution is thus 40.8%. With approximately 48.8 million shares outstanding, the total dividend amounts to € 53.6 million. Calculated on the basis of the MTU share price at the close of trading on December 30, 2010, the proposed dividend represents a yield of 2.2%.

BROAD INTERNATIONAL SHAREHOLDER BASE

At December 31, 2010, the company held 3,247,593 treasury shares, which is equivalent to 6.25% of its capital stock. Consequently, the free float (as defined by the Deutsche Börse Group) accounted for 93.75% of MTU shareholdings at year end. According to the information available to the company, institutional investors held around 87% of the MTU stock, while about 7% was owned by retail investors. More than 90% of the institutional investors were based outside Germany, primarily in the United States, the United Kingdom, Australia, Canada and western European countries. In view of these figures, MTU can rightly claim to have a broadly diversified shareholder base.

According to notifications received in compliance with Article 21 of the German Securities Trading Act (WpHG), the following investment companies were among the largest MTU shareholders at year end 2010:

• Capital Research & Management Company (10.22% on November 18, 2010)

• BlackRock Inc. (4.997% on August 6, 2010)

• Gryphon International Investment Corporation (3.02% on June 8, 2010) 

• Ameriprise Financial Inc. (3.01% on August 5, 2010)

SUSTAINED HIGH PROFILE AMONG ANALYSTS

Owing to restructuring within the banking sector in the wake of the financial crisis, the number of financial analysts regularly reporting on the company decreased from 26 to 22 in 2010. The still relatively high number of analysts covering the company demonstrates that MTU and its stock continue to attract great interest worldwide. At year-end, 59% of the financial institutions maintained a ‘buy’ recommendation for MTU shares, while 36% rated it as ‘neutral’. Only one institution had issued a ‘sell’ recommendation (out of a total of 22 analyses). The average share price target at year-end was € 53.

INVESTOR RELATIONS WORK PAYS OFF AGAIN          

In the financial year 2010, MTU continued its policy of maintaining an open, ongoing dialog with institutional investors, retail investors and analysts alike. The company’s investor relations team stepped up its communication activities focused on these target groups, organizing 15 road show days and eight conference days to report on MTU’s business activities, strategy and key financial data. In addition to these events in the United States and Europe, a large number of personal meetings took place, both at MTU’s locations and at the Berlin Air Show (ILA). In 2010, the number of such individual and group meetings rose to over 200.

The company held its annual Investor and Analyst Day meeting at the company’s headquarters in Munich on November 9, 2010. It was attended by around 35 investors and analysts, who were given an overview of the company’s current business situation, its technologies and growth strategy.

The MTU Annual General Meeting, a key platform for a direct dialog with shareholders, was attended by shareholders representing 51% of the share capital with voting rights (previous year: 58%) and took place in Munich on April 22, 2010.

Analysts and investors have repeatedly confirmed the high quality of MTU’s investor relations work. At the annual German Investor Relations awards 2010, which were organized by the Deutscher Investor Relations Verband e.V. in conjunction with Thomson Reuters Extel Surveys, MTU took 9th place, maintaining a position among the top ten MDAX companies (2009: 6th place). In addition, MTU made it to the top ten in NetFederation’s well-known IR website ranking, taking ninth place among the MDAX companies (2009: 13th place).

MTU was especially gratified that the MTU Annual Report 2009 earned first place among MDAX companies – and second place overall – in manager magazin’s prestigious competition to pick the best annual report in Germany.

Further information is published in the Investor Relations section of MTU’s website: www.mtu.de. The Investor Relations office in Munich can be contacted on the following number: +49 (0)89 1489 8313.