MTU Aero Engines expects significant growth to continue in 2014
26-Nov-2013 MTU Aero Engines AG anticipates strong growth in its new engine business, based on higher delivery volumes in 2014. Revenues in this segment are expected to rise at a mid-teens percentage figure. According to forecasts, the spare parts business, which is much more profitable than the new engine business, will grow moderately in the mid-single-digit percentage range next year. Traditionally, earnings in the aircraft engine business are higher in later program life-cycle phases when the demand for maintenance, repair and overhaul services as well as for spare parts goes up. In the commercial engine maintenance business, MTU predicts an increase in revenues in the upper single-digit percentage range, while the company's military business will probably decline slightly. Research and development expenditure will essentially remain at this year's level. MTU announced these first forecasts for the year 2014 at its annual Investor and Analyst Day in London. As in previous years, MTU expects to present a comprehensive full-year guidance at its annual press conference scheduled for February 18, 2014.
The preparations for the new Geared TurbofanTM programs for the Airbus A320neo and other jets, which have proved very successful in the market, as well as the ramp-up of further programs require substantial upfront investments into development and production. MTU will take additional measures in the years to come to put a cap on the associated cost increase. In its administrative offices, around 100 employees retiring or leaving the company due to attrition over the next four years will not be replaced. There are no plans for any involuntary layoffs. Also, the costs incurred for business travel, external consultants, marketing and other expenses will be cut. At the same time, the company intends to accelerate its productivity improvements. Over the next few years, the company will continue to invest heavily in the expansion of highly productive manufacturing and logistics capabilities at its Munich headquarters. MTU Aero Engines Polska is about to be expanded, too, so that a larger part of the necessary capacity increase is accomplished in Poland. By 2018, some 300 additional jobs will have been created at MTU's Polish subsidiary.
By taking these actions, MTU wants to sustainably reduce the cost increase by several ten million euros every year, as announced in July 2013. MTU's program designed to improve its cash and earnings situation is dubbed "Cash for Future". As MTU Chief Financial Officer Reiner Winkler explained: "The aim is to continue to ensure a sufficient cash flow, against the backdrop of the upfront costs we incur for the successful new engine programs. Today, we are investing heavily in tomorrow's growth, and hence in MTU's future. And we want to retain some flexibility that allows us to take stakes also in emerging engine programs."