MUNICH (MTU Aero Engines) - MTU Aero Engines Holding AG in 2005 stayed on its growth track. Fiscal 2005 sales rose 12 %, from EUR1,918.0 million to EUR2,148.6 million. This gain went hand in hand with an overproportional increase in operating profit to EUR233 million, up by 35 % over the year before (2004: EUR172.2 million). The cash flow from operational activites nearly quadrupled, from EUR72.9 million to EUR290.1 million.
- Group sales up 12 % to EUR2,149 million
- Operating profit plus 35 % to EUR233 million
- Cash flow from operational activities quadrupled to EUR290 million
- Financial liabilities reduced by EUR525 million
"MTU Aero Engines in 2005 continued its growth track, showing strong gains in earnings. We have well met our objectives; we have grown faster than our markets and substantially reduced debt," noted Udo Stark, MTU Aero Engines Holding AG chief executive officer.
Order book sharply up
As of December 31, 2005, the order book stood at EUR3,649 million, or 1.7 times the 2005 sales. Compared with year-end 2004, this reflects a EUR241 million increase, up 7.1 %. The growth is attributable chiefly to the commercial engine business, where the order backlog grew 21.4 %, to EUR1,844 million. This came as a result notably of successful marketing campaigns for the GP7000 (A380) and V2500 (A320 family) engines. For the new PW6000 (A318) engine, LAN Chile was won as the launch customer.
In the commercial engine maintenance, repair and overhaul (MRO) segment, the order value of contractually committed engine work last fiscal year grew EUR943 million, to EUR2,896 million. Contributing to this growth has also been a ten-year agreement inked with U.S. airline JetBlue.
Sales growth in OEM and MRO segments
The sales growth to EUR2,148.6 million is due largely to a sustained overproportional gain in commercial engine MRO, where sales increased 27 %, from EUR575.9 million to EUR732.1 million.
The OEM business too saw growth. It increased 4.3 %, from EUR1,375.6 million to EUR1,434.8 million, with commercial engine sales growing 7.2 %, from EUR879.9 million to EUR943.4 million. An upward trend was noted especially for the V2500 engine (A320 family). The military engine segment, with sales of EUR491.4 million, remained flat at last year's level. The current entry into service of the Eurofighter resulted in sustained high EJ200 engine sales. The MTR390 helicopter engine (Tiger) also had a positive impact on sales. Expected to grow the military engine business long-term is the ten-year contract on the expansion of the industry-military cooperative model of engine maintenance, inked in 2005. In this MTU-led cooperative effort with the Luftwaffe, several engine types are jointly repaired at MTU and the Luftwaffe's Erding air base.
Notably improved earnings base, in both segments
MTU notably improved its operating profit by 35 %, from EUR172.2 million in the previous year to EUR233.0 million in 2005. "We've seen a very positive trend in commercial MRO earnings, where operating profit jumped 69 % compared with the year before," explained chief financial officer Reiner Winkler. "The OEM segment likewise showed improved operating profit, up by 24 %."
That puts the EBITDA margin in the OEM business at over 11 %, and in commercial MRO at almost 10 %. It was especially in commercial engine MRO that MTU achieved its medium-term earnings goals prematurely at the end of fiscal 2005. The growing contribution of new production engines to overall sales, plus the accelerated growth of commercial engine MRO, not unexpectedly led to a rise in the cost of sales in 2005. Earnings before interest and taxes (EBIT) nevertheless increased by 60 %, from EUR81.1 million to EUR130.0 million. This is to a large degree attributable to an almost 30 % reduction in selling and administration expenses.
Dividend proposal of EUR0.73 per share
In accordance with IFRS, fiscal 2005 net earnings (after taxes) were EUR32.9 million (versus EUR0.2 million in 2004). Adjusted for the effects of the sale of MTU (particularly of purchase price-related depreciations), the year's net earnings amounted to EUR51.4 million (versus EUR13.0 million in 2004). "In view of these positive sales and earnings developments, we'll propose a dividend payout to the general shareholders' meeting in the amount of EUR0.73 a share," Winkler said. "The payout will be made regardless of the June 6, 2005, date of the IPO, that is for the full fiscal year. The payout amounts to a dividend yield of about 2.5 % as of today."
Financial liabilities reduced by almost three-fourths
MTU's financial position in 2005 has seen a particularly positive development: the cash flow from operational activities grew by almost 300 %, to 290.1 million € (versus 72.9 million € in 2004). Significant contributors to the growth were improved results from operations and improvements in working capital, specifically through exceptionally high advance payments from military engine customers.
Moneys flowing from the IPO and the company's prospering operational activities were used to reduce net financial liabilities by 72 %. Overall, MTU has repaid loans in the amount of about EUR525 million.
8 % of sales for research and development
In 2005, expenditures for research and development (R&D) amounted to 8 % of the Group's consolidated sales. Totally EUR171.9 million were spent on R&D, including customer-funded activities. The expenditure for R&D activities in the OEM business corresponded to 12 % of OEM sales. Of the total, EUR83.8 million were company-funded R&D outlays. The big GP7000 and PW6000 development programs rapidly nearing production launch, R&D expenditures for them were predictably tailing off.
Investments up by 27 %
MTU invested 27 % more than the year before: in 2005, capital expenditures grew from EUR65.9 million to EUR83.5 million. The investment focus was on machine tools and facilities, such as CNC machines for the TP400-D6, special tooling and equipment and test facilities for the GP7000 (Airbus A380), TP400-D6 (Airbus A400M) and CF34 (business jets and regional aircraft). Additional investments went into software.
6,746 employees, of which 4,607 employed in Munich
As of December 31, 2005, MTU Aero Engines employment had decreased-adjusted for changes in the consolidated entity (spin-off of Atena Engineering GmbH)-by nearly 3 %, to 6,746 (calculated on a basis comparable to year-end 2004: 6,954).
Stark commented: "For 2006, we expect sales to keep growing and earnings to again improve. The first two months of the year are so far supporting our expectations."
Sales will continue to grow predominantly in the commercial engine OEM and MRO segments, with the first two months of the year showing promising growth in both the sales and revenues figures.