Outlook

Outlook 2018

MTU's targets for the financial year 2018 are as follows:

in € millionForecast 2018Actual 2017
Adjusted EBIT Moderate growth606.6
Net Income adjustedGrowth in line with EBIT adjusted429.1

Free Cash Flow

Stronger growth than net income adjusted

151.0

The company expects its earnings and free cash flow to continue rising in 2018.

Revenues by operating segment

In the commercial engine business, MTU expects to see an increase in revenues in 2018, both from engine manufacturing activities and from spare parts sales. Prior to the effects arising from the changes to IFRS 15, this business unit is expected to grow in U.S. dollar terms by a percentage in the low double-digit range.

Revenues in the military engine business are expected to remain stable in 2018.

Growth in the commercial engine business is based above all on a doubling of deliveries under the new Geared Turbofan™ programs, whereas deliveries of the V2500 predecessor are expected to decline. The increase in revenues from spare parts sales derives principally from the V2500 program.

MTU’s revenue forecast for its commercial maintenance business (MRO segment) in 2018 is for a growth rate in the high teens in U.S.-dollar terms. MRO activities are expected to rise, for example, in connection with the V2500 and the new Geared Turbofan™ programs.

Identified risks in the commercial new engine and maintenance segments relate to the possibility of delays in ramping up the new engine programs, above all in light of the technical problems relating to a component of the Geared Turbofan™ engine identified in February 2018, which lies within the responsibility of a partner. MTU bases its forecast on the assumption that the problems can be rectified in the short term and the delivery targets can still be met.

Given these considerations, MTU expects to see total group revenues grow in euro terms by a percentage in the low-to-mid teens. This estimate is based on an average exchange rate of the  U.S. dollar to the euro of 1.20 and does not take effects arising from the application of IFRS 15 into account.

Operating profit

MTU expects its operating profit (EBIT adjusted) to increase moderately in 2018 compared with 2017. The enormous ramp-up of the new programs is likely to have a negative impact on earnings. MTU assumes that the effect of these changes will be outweighed by growth in spare parts and commercial MRO sales.

Net income adjusted (NI adjusted)

In 2018, net income adjusted are expected to grow in line with EBIT adjusted.

Free cash flow

2018 will be another year of high investment spending. However, MTU plans to compensate for these effects through its operating activities and achieve a higher free cash flow conversion rate (ratio of free cash flow to net income adjusted) compared with the 2017 financial year. 

Disclaimer

In addition to information relating to past events, this report also contains forward-looking statements. Such passages can generally be identified through the use of such terms as ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘anticipate’, ‘predict’, ‘will’, ‘believe’, ‘is likely to’, ‘might’ and similar phrases, or through the fact that they are presented in the context of a strategy. Forward-looking statements relate to future expectations, developments, trends, and business strategies, and are based on analyses or predictions of MTU’s future business performance and estimates of figures that cannot be affirmed with any certainty at the present time. These forward-looking statements merely reflect MTU’s current outlook at the time the statements were made, and MTU does not accept any responsibility for updating forward-looking statements except in cases where it is a statutory requirement. The forward-looking statements contained in this chapter involve known and unknown risks, uncertainties, and other factors that may result in an actual future outcome based on real events, developments and performances that deviates significantly from the content of the statements presented here. These factors include changes in the general economic climate and business environment, exchange rate fluctuations, in addition to the factors enumerated in the "risk report" section of the MTU Annual Report 2015.