MTU Aero Engines : Präsentation

Q1 Results 2020

Conference Call with Investors & Analysts

30 April 2020 - Investor Relations

Q1 2020 Review

• Sharp decline in traffic beginning in February and intensifying in March
• IATA forecasts passenger traffic to decline by 48% in 2020
• Measurements implemented to minimize infection risks for employees and to reduce cash consumption
• Temporary suspension of operations at sites in Germany and Poland
• Short-timework arrangements for German locations after initial suspension
• Overhaul shops in China, Vancouver and Dallas in operation
• MTU Maintenance Canada becomes F138 engine depot for the United States Air Force
• AGM postponed and dividend proposal suspended
• Guidance for financial year 2020 withdrawn
• Measures to secure additional liquidity under negotiation
• Impact of reduced demand not seen in Q1 2020 results
• Crisis will begin to negatively influence demand and results beginning in Q2

30 April 2020

Q1 2020 Results - Investor Relations

2

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Financial Highlights Q1 2020

Revenues
(in m€)
	1.273
1.131 +13%
3M 2019	3M 2020

EBIT adjusted

(in m€)
188		182
(16.6%)	-3%
(14.3%)
3M 2019		3M 2020

Net income adj.

(in m€)

134	-4%	128
3M 2019		3M 2020

Free Cash Flow

(in m€)

141
	-51%
	69
3M 2019	3M 2020

30 April 2020

Q1 2020 Results - Investor Relations

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

3

OEM Segment

(in m €)		3M 2019	3M 2020		Change
Revenues		491	497		1%
Military Business	105	98	-7%
Commercial Business	386	399	4%
EBIT adj.		131	116		-11%
EBIT adj. margin %	26.6%	23.4%

• US$ Commercial business growth: ~ 1%
• Military revenues down by 7%
• EBIT margin down due to change in business mix (Military Business vs. Commercial Business)

30 April 2020

Q1 2020 Results - Investor Relations

4

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Commercial MRO

(in m €)		3M 2019	3M 2020		Change
Revenues		655	795		21%
EBIT adj.	57	66	16%
EBIT adj. margin %	8.7%	8.3%

• US$ Organic Revenue growth ~ 19%
• EBIT margin slightly down

30 April 2020

Q1 2020 Results - Investor Relations

5

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

MTU expects an commercial aviation market recovery to 2019-level in 2022

Market recovery & risks and opportunities

Market recovery - basic assumptions for passenger traffic

• MTU follows basically the IATA assumptions regarding the Covid19 impact on commercial aviation in 2020 as published in week 16/2020
• Nearly standstill of global commercial flights in Q2/2020
• Recovery of domestic flights starting in Q3/2020
• Recovery of international flights starting in Q4/2020
• Air traffic demand back on 2019 levels in 2022. Domestic air travel will recover earlier than international travel due to border restrictions

Risks for further market recovery delay

• No effective medicine and/or vaccine available well into 2021
• New increase of Covid19 infection rates in Winter 2020/21
• Extended global recession, lasting longer than 2021
• Resurge of trade wars and international conflicts after immediate Covid19 crisis

Opportunities for earlier market recovery

• Effective medicine or vaccine available 2ndhalf of 2020
• Positive impulse on global trade due to constructive political environment

30 April 2020

Q1 2020 Results - Investor Relations

6

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

MTU business segments 2020 market expectation

Scenarios modelled lead to a yet volatile outlook for 2020

• Military business to remain largely unaffected
• Civil aerospace business with significant reduction in demand in both OE and AM
• Standard Commercial MRO to see reduced demand at least through Q2 and Q3
• High air freight demand leads to robust operation at specialized operators
• Availability of capacities allows more PW1100 warranty work
• Cost and cash saving measures identified and initiated
• • Market environment still highly volatile
  • Implementation of measures secures financial health

Still too early to provide forward looking guidance at the current time

30 April 2020

Q1 2020 Results - Investor Relations

7

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

30 April 2020

Q1 2020 Results - Investor Relations

8

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

Group Order Book almost stable

19.8 bn€

-2%

19.4 bn€

	Order book 2019/12/31	Order book 2020/03/31
30 April 2020	Q1 2020 Results - Investor Relations	9

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

US$ Exchange Rate / Hedge Portfolio

Hedge book as of April 30, 2020 (% of net exposure)

in m$

1,330

(=75%)

1,060

(=57%)

740

(=38%)

440

(=23%)

40

(=2%)

	2020	2021	2022	2023	2024
Average hedge	1.18	1.18	1.17	1.16	1.13
rate (€/US$)
30 April 2020			Q1 2020 Results - Investor Relations		10

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

Profit & Loss

				3M 2019	3M 2020		Change
	Revenues			1,131	1,273		13%
	Total cost of sales	-893	-1,035
	Gross profit	238	238	0%
	Gross profit margin %			21.1%	18.7%
	R&D according to IFRS			-17	-15
	SG&A			-53	-59
	Other operating income (expense)			-9	-4
	P&L of companies accounted at equity and equity investments			15	9
	EBIT reported	175	169	-3%
	EBIT adjusted	188	182	-3%
	EBIT adjusted margin %	16.6%	14.3%
	Financial result	-1	-6
	Profit before tax (EBT)			173	163		-6%
	Taxes (IFRS)	-47	-51
	Net Income reported	127	112	-12%
	Net Income adj.	134	128
	EPS reported*			2.42	2.10
	EPS adj.	2.59	2.42
	* without non-controlling interests
30 April 2020	Q1 2020 Results - Investor Relations		11

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

Reconciliation to adjusted Key Performance Indicators

		3M 2019	3M 2020		Change
EBIT reported		175	169		-3%
Adjustment (PPA Depreciation & Amortization)	5	5
Adjustment (IAE Upshare)	8	8
EBIT adjusted		188	182		-3%
thereof P&L of companies accounted "at equity"	14	9
Interest result	-1	-3
Interest for pension provisions		-4	-2
EBT adj. w/o P&L "at equity"		169	167		-1%
Tax rate normalized	-29%	-29%
Taxes	-49	-49
Net Income adj.		134	128		-4%
EPS adj.	2.59	2.42	-6%

30 April 2020

Q1 2020 Results - Investor Relations

12

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

Segment Revenues and EBIT adj.

		3M 2019	3M 2020		Change
Revenues Group		1,131	1,273		13%
OEM Commercial	386	399	4%
OEM Military	105	98	-7%
MRO	655	795	21%
Consolidation	-15	-19
EBIT adjusted Group		188	182		-3%
OEM (Commercial / Military)	131	116	-11%
MRO	57	66	16%
Consolidation	0	0
EBIT adjusted margin Group	16.6%	14.3%
OEM (Commercial / Military)	26.6%	23.4%
MRO	8.7%	8.3%

30 April 2020

Q1 2020 Results - Investor Relations

13

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

Research & Development

		3M 2019	3M 2020		Change
Total R&D		58	60		3%
Customer funded R&D	-6	-10	-65%
Company expensed R&D		52	50		-5%
Capitalization of R&D	-27	-24
Amortisation	5	5
Total R&D impact P&L (on EBIT)		30	31		3%
thereof booked into sales and COGS	13	16
thereof booked into R&D according to IFRS (P&L)	17	15

30 April 2020

Q1 2020 Results - Investor Relations

14

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

Financial Result

		3M 2019	3M 2020		Change
Interest income	3	1	-68%
Interest expense		-4	-4		0%
Interest result		-1	-3		-121%
Financial result on other items	0	-3
US$ / non cash valuations / others	4	-1
Interest for pension provisions	-4	-2
Financial result		-1	-6		<-300%

30 April 2020

Q1 2020 Results - Investor Relations

15

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

MTU's Cash development January - March 2020

16

Free Cashflow:	+69

-80

149

0

-0

0

-50

3

0

156

140

Adjusted Non-operating

exceptional items:

-0

Cash and

CF from

CF from

Payments for

Sales

Acquisition

CF from

Translation

Adjustments

Cash and

cash

operating

investing

liquidity

Financing

payments for

financing

differences

cash

equivalents

activities

activities

management

program

activities

equivalents

Jan 1st

shares

Mar 31st

2020

2020

30 April 2020

Q1 2020 Results - Investor Relations

16

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

					Appendix
	Cash Flow
	(in m €)		3M 2019	3M 2020		Change
	Net Income IFRS		127	112		-12%
	Depreciation and amortization		60	66
	Change in provisions and liabilities		79	76
	Change in working capital		-83	-115
	Taxes		20	12
	Interest, derivatives, others		0	-1
	Cash Flow from operating activities		202	149		-26%
	Net Investment in intangible assets		-18	-15
	Net Investment in R&D payments and entry fees		-1	-10
	Net Capital expenditure on property, plant and equipment		-37	-38
	Net Investments in financial assets		5	-17
	Cash Flow from investing activities		-50	-80		-60%
	Adjustments	-10	0
	Free Cash Flow		141	69		-51%
	Cash Flow from financing activities		-46	-50		-9%
	Cash and cash equivalents at 31.03.	208	156

30 April 2020

Q1 2020 Results - Investor Relations

17

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

					Appendix
	Net debt
	(in m €)	31.12.2019	31.03.2020				Change
	Bonds and notes		100	101
	Convertible bonds		562	563
	Financial liabilities to bank		40	30
	thereof Revolving Credit Facility		0	0
	thereof Note Purchase Agreement		30	30
	Financial lease liabilities		147	176
	Loans from related companies and third parties		0	1
	Financial liabilities arising from program participation		300	279
	thereof arising from IAE V2500 Upshare		271	266
	Gross financial debt		1,150	1,150			0%
	Cash and cash equivalents	140	156
	Loans to third parties	50	51
	Loans to related companies		0	0
	Financial assets		189	206			9%
	Net financial debt		961	943			-2%

30 April 2020

Q1 2020 Results - Investor Relations

18

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

					Appendix
	Working capital
	(in m €)	31.12.2019	31.03.2020			Change
	Inventories		1,279	1,359
	Prepayments		-396	-414
	Receivables		2,083	2,216
	Payables		-1,456	-1,536
	Working Capital		1,510	1,625			8%

30 April 2020

Q1 2020 Results - Investor Relations

19

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

					Appendix
	Balance Sheet
	(in m €)	31.12.2019	31.03.2020				Change
	Intangible assets	1,163	1,170
	Property, plant, equipment	1,101	1,122
	other non-current assets		1,892	1,891
	Total non-current assets		4,155	4,183			1%
	Current assets		3,610	3,841			6%
	Total assets		7,765	8,024			3%
	Equity	2,421	2,438			1%
	Non-current liabilities		2,130	2,197			3%
	Current liabilities		3,214	3,389			5%
	Total equity and liabilities		7,765	8,024			3%
	thereof pension provisions	976	977

30 April 2020

Q1 2020 Results - Investor Relations

20

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Appendix

PPA Depreciation / Amortization

			3M 2019	3M 2020		Change
OEM	43	46
MRO	17	20
Total depreciation / amortization*			60	66		10%
PPA OEM	5	5
PPA MRO	1	1
IAE Upshare OEM			8	8
PPA depreciation / amortization & IAE Upshare amortization (EBIT adjustme	13	13	-1%
OEM		31	34
MRO			16	19
Depreciation / amortization w/o PPA and w/o IAE Upshare	47	53	12%

* incl. amortization of intangible assets, capitalized program assets and purchased development

30 April 2020

Q1 2020 Results - Investor Relations

21

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

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. In addition to statements that are forward-looking by reason of context, the words "may," "will," "should," "expect," "plan," "intend," "anticipate," "forecast," "believe," "estimate," "predict," "potential," or "continue" and similar expressions identify forward-looking statements.

Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) competition from other companies in MTU's industry and MTU's ability to retain or increase its market share, (ii) MTU's reliance on certain customers for its sales, (iii) risks related to MTU's participation in consortia and risk and revenue sharing agreements for new aero engine programs, (iv) the impact of non-compete provisions included in certain of MTU's contracts,

1. the impact of a decline in German or other European defense budgets or changes in funding priorities for military aircraft, (vi) risks associated with government funding, (vii) the impact of significant disruptions in MTU's supply from key vendors, (viii) the continued success of MTU's research and development initiatives, (ix) currency exchange rate fluctuations, (x) changes in tax legislation, (xi) the impact of any product liability claims, (xii) MTU's ability to comply with regulations affecting its business and its ability to respond to changes in the regulatory environment, (xiii) the cyclicality of the airline industry and the current financial difficulties of commercial airlines, (xiv) our substantial leverage and (xv) general local and global economic conditions. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.

The company assumes no obligation to update any forward-looking statement.

Any securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold without registration thereunder or pursuant to an available exemption therefrom. Any public offering of securities of MTU Aero Engines to be made in the United States would have to be made by means of a prospectus that would be obtainable from MTU Aero Engines and would contain detailed information about the issuer of the securities and its management, as well as financial statements.

Neither this document nor the information contained herein constitutes an offer to sell or the solicitation of an offer to buy any securities.

These materials do not constitute an offer of securities for sale in the United States; the securities may not be offered or sold in the United States absent registration or an exemption from registration.

No money, securities or other consideration is being solicited, and, if sent in response to the information contained herein, will not be accepted.

30 April 2020

Q1 2020 Results - Investor Relations

22

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Proprietary Notice

This document contains proprietary information of the MTU Aero Engines AG group companies. The document and its contents shall not be copied or disclosed to any third party or used for any purpose other than that for which it is provided, without the prior written agreement of MTU Aero Engines AG.

30 April 2020

Q1 2020 Results - Investor Relations

23

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.