MTU Aero Engines reports profitable growth in the first quarter of 2019
• Increased revenues and earnings
• Business prospects remain positive
Munich, April 30, 2019 – In the first quarter of 2019, MTU Aero Engines AG saw its revenues increase by 11 % from € 1,016.4 million to € 1,131.2 million. The group’s operating profit1 grew by 7 % to € 187.6 million (1-3/2018: € 175.1 million), resulting in an adjusted EBIT margin of 16.6 % (1-3/2018: 17.2 %). Net income2 increased in line with EBIT adjusted, rising by 8 % from € 123.3 million to € 133.5 million.
“These results confirm our assumptions for our full-year business development,” said Reiner Win-kler, CEO of MTU Aero Engines AG. “We therefore maintain our prediction of continued profitable growth in all operating segments.“
In the first quarter, MTU recorded the highest revenue growth in the commercial engine business. Revenues here increased by 21 % from € 318.7 million to € 385.6 million. The major part of revenues in this segment was attributable to the V2500 engine for the classic A320 family as well as the PW1100G-JM for the A320neo and the GEnx engine that powers the Boeing 787 and 747-8.
Revenues in the commercial maintenance business increased by 6 %, rising from € 618.2 million in the first quarter of 2018 to € 655,1 million. “Revenues were somewhat slowed by changes in the ordering and billing process for V2500 maintenance services,” commented CFO Peter Kameritsch. “But demand remained unabated, as evidenced by the organic growth in the MRO segment, which amounted to around 9 % in the first quarter. The main revenue driver in the commercial maintenance business was the V2500.
Revenues in the military engine business increased by 15 % to € 105.1 million in the first quarter (1-3/2018: € 91.3 million). The EJ200 Eurofighter engine was the main source of these revenues.
MTU’s order backlog reached its highest level ever at the end of March 2019, namely € 18.5 billion (Dec. 31, 2018: € 17.6 billion). “In arithmetical terms, this corresponds to a workload of almost four years and reflects MTU’s strong market position,” said Winkler. The majority of these orders relate to the V2500 and the Geared Turbofan™ engines of the PW1000G family, in particular the PW1100G-JM for the A320neo.
In the first quarter of 2019, the commercial maintenance business reported the highest percentage growth in earnings, with EBIT adjusted increasing by 10 % to € 56.8 million (1-3/2018: € 51.5 million). The EBIT margin rose from 8.3 % in the first quarter of 2018 to 8.7 % in the same period of 2019.
In the OEM segment, MTU increased its first-quarter earnings by 6 % from € 123.4 million to € 130.5 million. The EBIT margin stood at 26.6 % compared with 30.1 % at the end of March 2018. “This result particularly reflects the ramp-up of the Geared Turbofan™ programs,” said Kameritsch.
First-quarter research and development expenditure increased by 9 % to € 58.0 million (1-3/2018: € 53.1 million). These R&D activities mainly focused on the Geared Turbofan™ programs and future enhancements, the GE9X engine for the Boeing 777X long-haul airliner, technology studies relating to next-generation engine design, and the digitalization of engine manufacturing processes.
At € 141.4 million, free cash flow at the end of March 2019 was 70 % higher than one year earlier (March 31, 2018: € 83.3 million).
MTU’s capital expenditure on property, plant and equipment amounted to € 37.4 million in the first quarter of 2019 (1-3/2018: € 34.5 million).
MTU had 9,942 employees on its payroll at March 31, 2019 (December 31, 2018: 9,731 employees). New hires were taken on above all at the company’s headquarters in Munich, at MTU Aero Engines Polska and at the maintenance sites in Hannover and Ludwigsfelde.
MTU confirms its positive business prospects for 2019. Group revenues are expected to reach around € 4.7 billion (2018: € 4.6 billion), based on a low-teens organic percentage growth in the commercial series production business, a percentage increase in revenues from spare parts sales in the mid-to-high single digits, an increase in revenues of around 10 % in the military engine business, and organic growth in the commercial maintenance business of a percentage in the high single digits. The group’s full-year forecast for its adjusted EBIT margin lies at around 15.5 % (2018: 14.7 %). Operating profit and net income adjusted are expected to increase in line with one another (EBIT adjusted 2018: € 671.4 million; net income adjusted 2018: € 479.1 million). The cash conversion rate – that is, the ratio of free cash flow to net income adjusted – is expected to lie between 55 and 65 % in 2019 (2018: 42 %). The target range issued in February specified be-tween 50 and 60 %. “This adjustment of the cash conversion rate is solely due to the first-time application of IFRS 16 in the financial year 2019,” said Kameritsch. This new accounting standard introduces changes with regard to the presentation of operating leases, and specifically impacts MTU’s engine leasing business. On the one hand it will increase free cash flow in 2019 by around € 30 million, and at the same time reduce cash flow from financing activities. Kameritsch added: “While this affects our cash conversion rate in quantitative terms, it does not change our forecast in qualitative terms.”
MTU Aero Engines – Key financial data for January through March 2019
(Figures stated in € million)
MTU Aero Engines
March 31, 2018
March 31, 2019
+ 11.3 %
of which OEM business
+ 19.7 %
of which commercial engine business
+ 21.0 %
of which military engine business
+ 15.1 %
of which commercial maintenance
+ 6.0 %
+ 7.1 %
of which OEM business
+ 5.8 %
of which commercial maintenance
+ 10.3 %
EBIT margin (adjusted)
for OEM business
for commercial maintenance
Net income (adjusted)
+ 8.3 %
Net income (reported)
+ 19.1 %
Earnings per share (undiluted, reported)
+ 18.6 %
Free cash flow
+ 69.7 %
Research and development expenses
+ 9.2 %
of which company-funded
+ 9.9 %
of which outside-funded
+ 3.4 %
Company-funded R&D expenditure
+ 28.6 %
Investment in property, plant and equipment (net)
+ 8.4 %
Dec. 31, 2018
March 31, 2019
Balance sheet key figures
+ 0.8 %
Cash and cash equivalents
+ 109.8 %
+ 0.3 %
+ 5.5 %
Net financial debt
+ 2.5 %
Total assets and liabilities
+ 6.8 %
+ 5.2 %
+ 2.2 %
1 EBIT adjusted = Earnings before interest and tax, calculated on a comparable basis
2 Net income adjusted = Earnings after tax, calculated on a comparable basis
Geared Turbofan is a trademark application of Pratt & Whitney.
Cautionary note regarding forward-looking statements
Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, competition from other companies in MTU Aero Engines’ industry and MTU Aero Engines’ ability to retain or increase its market share, the cyclicality of the airline industry, risks related to MTU Aero Engines’ participation in consortia and risk and revenue sharing agreements for new aero engine programs, risks associated with the capital markets, currency exchange rate fluctuations, regulations affecting MTU Aero Engines’ business and MTU Aero Engines’ ability to respond to changes in the regulatory environment, and other factors. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences. MTU Aero Engines assumes no obligation to update any forward-looking statement.
MTU Aero Engines AG is Germany's leading engine manufacturer. The company is a technological leader in low-pressure turbines, high-pressure compressors, turbine center frames as well as manufacturing processes and repair techniques. In the commercial OEM business, the company plays a key role in the development, manufacturing and marketing of high-tech components together with international partners. Some 30 percent of today’s active aircraft in service worldwide have MTU components on board. In the commercial maintenance sector the company ranks among the top 5 service providers for commercial aircraft engines and industrial gas turbines. The activities are combined under the roof of MTU Maintenance. In the military arena, MTU Aero Engines is Germany's industrial lead company for practically all engines operated by the country's military. MTU operates a network of locations around the globe; Munich is home to its corporate headquarters. In fiscal 2018, the company had a workforce of some 10,000 employees and posted consolidated sales of approximately 4.6 billion euros.