MTU Aero Engines gives more precise guidance in the wake of stable nine-month figures

Munich - In the first nine months of 2021, MTU Aero Engines AG generated stable revenue and earnings. Revenue was EUR3,008 million, compared with EUR2,957 million in the first nine months of 2020.

* Revenue forecast to be between EUR4.3 and EUR4.4 billion in 2021

* Adjusted EBIT margin expected to be around 10.5%

* CCR should be in the high double-digit percentage range

The operating profit1 was EUR307 million; in the prior-year period it was EUR311 million. The adjusted EBIT margin was 10.2% (1-9/2020: 10.5%). Net income2 was almost unchanged year-on-year at EUR220 million (1-9/2020: EUR219 million).

'We managed to deliver stable earnings in persistently volatile market conditions. On this basis, we can now give more precise guidance for the full year,' said Reiner Winkler, CEO of MTU Aero Engines AG. 'We now assume that revenue will be between EUR4.3 and EUR4.4 billion at year-end. The adjusted EBIT margin should be around 10.5%, which is the upper end of the range forecast to date.' In its guidance at the end of July, MTU gave a slightly broader range of EUR4.3 to EUR4.5 billion for revenue and predicted an adjusted EBIT margin of between 10% and 10.5%. The company expects adjusted net income to develop in line with the operating profit.

In the first nine months, revenue was affected by the U.S. dollar exchange rate. CFO Peter Kameritsch: 'There was some headwind from the exchange rate. In dollars, revenue grew by 8% in the first nine months.'

In euros, MTU registered higher revenue from both commercial maintenance and the military business in the first nine months of 2021.

In the commercial maintenance business, revenue rose by 8% to EUR2.010 million (1-9/2020: EUR1,866 million). 'As in the previous quarters, the commercial maintenance mix was around 60% MRO for our core business and 40% maintenance on the Geared Turbofan,' said Winkler. The most important revenue drivers in the commercial maintenance business were the PW1100G-JM, which is used in the A320neo, and the V2500 for the classic A320 aircraft family. Winkler: 'In the third quarter, some engine programs had slightly lower MRO content than expected. This affects the figures for the full year: The revenue from the commercial maintenance business is expected to grow in the mid-teen percentage range in 2021.' After the first six months, MTU had assumed that revenue from the commercial MRO business would rise by between 15% and 20%.

Revenue from the military engine business increased from EUR296 million to EUR310 million. The principal source of revenue was the EJ200 engine for the Eurofighter. Winkler: 'Minor supply chain delays could mean that deliveries in the military business are pushed back to next year. We are therefore revising our revenue guidance for the 2021 financial year to a mid single-digit increase.' Previously, MTU had expected revenue growth in the mid to high single-digit percentage range.

In the commercial engine business, revenue declined by 10% from EUR850 million to EUR765 million in the first nine months. 'The organic drop in revenue was in the low teens percentage range in the commercial series business and the low single-digit percentage range in the spare parts business,' reported Winkler. A quarterly view shows an organic improvement in both businesses - by about 20% in the series

business and in the low teens percentage range in the spare parts business. The PW1100G-JM for the A320neo was the main revenue driver in the commercial engine business. The full-year guidance for the commercial series business and the spare parts business remains unchanged: Both businesses are expected to report organic growth in the low to mid single-digit percentage range in 2021.

The order backlog was EUR20.7 billion at the end of the third quarter (December 31, 2020: EUR18.6 billion). The majority of these orders are for the V2500 and the PW1000G family of Geared Turbofan engines, especially the PW1100G-JM.

In the first nine months, MTU posted higher earnings in the OEM business and lower earnings in the MRO segment. The operating profit from the OEM business increased from EUR194 million to EUR202 million. The adjusted EBIT margin was 18.8%, compared with 16.9% in the prior-year period. In the commercial maintenance business, the operating profit dropped from EUR116 million to EUR105 million. The adjusted EBIT margin was 5.2% (1-9/2020: 6.2%). 'In the OEM business, the revenue mix and our cost-saving programs had a positive influence on earnings. In the commercial maintenance business, earnings were held back principally by the high proportion of work on the Geared Turbofan,' reported Kameritsch.

Spending on research and development was EUR162 million in the first nine months of 2021 compared with EUR139 million in the comparable period of 2020. MTU's R&D activities are focused on emissions-free aviation, especially hydrogen and flying fuel cells. In addition to these R&D activities and technology studies for future engine generations, MTU's activities concentrated on the Geared Turbofan programs and their ongoing development and the digitalization of engine production.

The free cash flow was EUR205 million as of end-September 2021, a year-on-year rise of 41% (1-9/2020: EUR145 million). 'In view of this positive development, we are increasing our forecast for the cash conversion rate,' said Kameritsch. 'We now expect the cash conversion rate to be in the high double-digit percentage range.' Previously, MTU expected the CCR to be in the mid to high double-digit percentage range.

Net capital expenditure on property, plant and equipment increased by 25% to EUR117 million in the first nine months (1-9/2020: EUR93 million).

MTU had 10,298 employees at the end of the third quarter. At year-end 2020, the headcount was 10,313 employees.

MTU Aero Engines - Key data for the third quarter of 2021

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