Munich- In the first six months of 2021, MTU Aero Engines AG generated revenue of EUR2,004 million; in the first half of 2020, revenue was EUR2,049 million. The operating profit1 was EUR190 million (1-6/2020: EUR224 million) and the adjusted EBIT margin was 9.5% (1-6/2020: 10.9%). Net income2 developed in line with operating profit and was EUR135 million, compared with EUR161 million in the prior-year period. 'MTU continued to operate profitably in the first half of this year. Based on this performance and the improved visibility up to year-end, we can now give a more precise guidance for the 2021 fiscal year,' said Reiner Winkler, CEO of MTU Aero Engines AG. 'We are somewhat more optimistic than previously about the commercial series business and the military business, but have slightly reduced our forecast for commercial maintenance. Overall, we are slightly increasing the lower end of our target ranges for both revenue and earnings.'
MTU now expects full-year revenue to be around EUR4.3 to EUR4.5 billion. Previously, the company's guidance was for a revenue range of between EUR4.2 and EUR4.6 billion. Revenue should develop better than previously expected in the military business and the commercial series business: Revenue from the military business should rise in the mid to high single-digit percentage range. In the commercial series business, MTU expects growth in revenue to be in the low to mid single-digit percentage range. So far, the company only expected a slight revenue increase in both of these business units. The expectations for revenue in the commercial spare parts business are unchanged, with the company forecasting a rise in the low to mid single-digit percentage range. Revenue from commercial maintenance should increase by between 15% and 20% in 2021; previously, MTU assumed growth of between 15% and 25%. The adjusted EBIT margin is expected to be between 10% and 10.5% in 2021; the previous guidance was between 9.5% and 10.5%. Adjusted net income is likely to develop in line with the operating profit.
MTU posted higher revenue in both the commercial maintenance business and the military business in the first six months of the year.
In commercial maintenance, revenue rose 6% from EUR1.27 billion to EUR1.35 billion. 'In the core MRO business, revenue was below the prior-year level. However, we were able to off-set this thanks to sustained high demand for maintenance services for Geared Turbofan engines,' reported Winkler. MTU is well-positioned for the future. In the first six months, the company won MRO contracts worth U.S.$3 billion; the value in the comparable prior-year period was U.S.$1.7 billion. 'That fuels our confidence that the downturn has bottomed out and a sustained recovery has started on the aftermarket,' said Winkler. The most important revenue generators in the commercial maintenance business were the PW1100G-JM, which is used in the A320neo, and the V2500 for the classic A320 aircraft family.
Revenue from the military business increased from EUR183 million in the first half of 2020 to EUR187 million. The main source of revenue was the EJ200 engine for the Eurofighter.
In the commercial engine business, revenue declined from EUR631 million to EUR515 million. 'The decline in revenue was particularly sharp in the commercial series business. Here, the decrease in organic revenue was in the 20-percent range. The organic drop in revenue in the spare parts business was in the high single-digit percentage range,' reported Winkler. The main revenue generator in the commercial engine business was the PW1100G-JM for the A320neo.
The order backlog at the end of the first six months was EUR20.5 billion, an increase of 10% compared with year-end 2020 (December 31, 2020: EUR18.6 billion). The majority of these orders were for the V2500 engine for the A320 and the PW1000G family of Geared Turbofan engines, especially the PW1100G-JM for the A320neo.
In the first six months, earnings declined faster in the MRO business than in the OEM business: In the commercial maintenance business, adjusted EBIT decreased by 20% from EUR96 million to EUR77 million. The adjusted EBIT margin was 5.7%, compared with 7.6% in the prior-year period. CFO Peter Kameritsch: 'The EBIT margin in the commercial maintenance business was influenced by the higher proportion of work on Geared Turbofan engines.'
In the OEM business, earnings declined by 12% from EUR128 million to EUR113 million. The adjusted EBIT margin was 16.0% (1-6/2020: 15.7%).
Kameritsch commented as follows on the adjusted net income: 'In the second quarter, we provide for the international structure of our value creation and therefore the expected growth in our business and earnings by adjusting our normalized tax rate to 26%. We use this to derive adjusted net income for the 2021 fiscal year.' In the first half of 2020, the normalized tax rate was 29%.
MTU's research and development expenses were EUR102 million in the first half of 2021, compared with EUR98 million in the first half of 2020. 'Our R&D activities are still focused on continually improving our products, services and production activities, so that we can make our contribution to a sustainable and ultimately emissions-free aviation,' said Winkler. MTU's focus is on improving the performance of the Geared Turbofan programs, technology studies for future engine generations, especially hydrogen and flying fuel cells, and the digitalization of engine production.
The free cash flow was EUR187 million as of June 2021 (1-6/2020: EUR125 million). Kameritsch: 'In view of this positive development, we are increasing our CCR guidance for the full year. We now expect the cash conversion rate, which is the ratio of free cash flow to adjusted net income, to be in the mid to high double-digit percentage range.' Previously, MTU expected the cash conversion rate in 2021 to be in the mid double-digit percentage range. In 2020, the cash conversion rate was 36%.
Net capital expenditure on property, plant and equipment was EUR63 million in the first half of 2021, as in the first half of 2020.
MTU had 10,210 employees at the end of June 2021. At year-end 2020, the headcount was 10,313.
MTU Aero Engines - Key data for the first half of 2021 (Amounts in EUR million unless stated otherwise)
See more at: https://www.mtu.de/newsroom/press/latest-press-releases/press-release-detail/mtu-aero-engines-ag-gives-more-precise-guidance-after-the-first-six-months-1/
MTU AERO ENGINES AG 
