MTU Aero Engines AG slightly raises forecast in light of nine-month results
23-Oct-2014 In the first nine months of 2014, MTU Aero Engines AG's revenues grew by 6% to €2,811.6 million (1-9/2013: €2,659.6 million). The group generated an operating profit1 of €270.9 million (1-9/2013: €267.8 million) and its EBIT margin came to 9.6% (1-9/2013: 10.1 ). Net income2 increased by 5 to €178.3 million (1-9/2013: €169.1 million).
"The good nine-month results and the greater planning confidence for the remaining quarter allow us to reinstate the full-year revenue forecast of around €3,750 million that we issued at the beginning of the year," said Reiner Winkler, CEO of MTU Aero Engines AG. "Moreover, we expect to achieve a higher operating profit and net income than anticipated as yet. Adjusted EBIT will probably rise to around €380 million and net income to around €250 million." MTU had adjusted its revenue forecast slightly downward from €3,750 million to €3,650 million (2013: €3,574.1 million) on the basis of the half-year figures. The outlook had included a stable adjusted EBIT of around €375 million (2013: €373.1 million) and an adjusted net income in the region of €245 million (2013: €235.7 million).
The increase in group revenues in the first nine months of 2014 is mainly attributable to strong growth in the commercial engine business, where revenues rose by 12% to €1,563.9 million (1-9/2013: €1,402.9 million). The engines that accounted for the largest part of these revenues were the V2500, which powers the Airbus A320, the GP7000 for the Airbus A380, and the GEnx for Boeing's 787 Dreamliner and 747-8.
Revenues in the commercial maintenance business remained stable at €920.8 million (1-9/2013: €911.8 million). The main source of these revenues was the V2500 engine. "Our third-quarter revenues in the MRO segment were higher than ever before. This means that we have turned the corner and reversed the negative trend that affected revenues in this segment in the earlier part of the year," added Winkler.
Revenues in the military engine business decreased by 4% to €351.7 million (1-9/2013: €368.0 million). The EJ200 Eurofighter engine was the main source of these revenues.
MTU's order backlog increased by 15% between December 31, 2013 (€9,374.6 million) and September 30, 2014 (€10,747.8 million). The order backlog corresponds to a production workload of approximately three years. These orders mainly relate to the V2500 for the Airbus A320 and the PW1000G family of geared turbofan™ engines for the Airbus A320neo, the Bombardier CSeries, the latest generation of Embraer E-Jets, the Mitsubishi Regional Jet and the Irkut MS-21.
Earnings in both of MTU's operating segments remained relatively stable. Adjusted EBIT in the OEM segment amounted to €189.4 million (1-9/2013: €185.8 million), with an EBIT margin of 9.9% (1-9/2013: 10.5%). In the MRO segment, earnings reached €79.9 million after €80.5 million in the first nine months of 2013. The EBIT margin was 8.7% (1-9/2013: 8.8%).
MTU's research and development expenditure in the first nine months of 2014 amounted to €124.8 million (1-9/2013: €148.1 million). Of this amount, €58.0 million (1-9/2013: €69.1 million) of company-funded R&D expenditure was recognized as an expense in the income statement. The geared turbofan™ programs represented the main focus of MTU's research and development activities.
Free cash flow, at €84.3 million, was 26% higher than at the end of September 2013 (€67.1 million). "The free cash flow reflects the successful results of our optimization programs, which have given rise to sustainable improvements. Despite the expected costs in connection with our share in the GE9X engine program, we still anticipate to report a positive free cash flow at the end of the year," said Winkler.
In the first nine months of 2014, MTU's capital expenditure on property, plant and equipment amounted to €64.3 million, which represents a 30% year-on-year increase (1-9/2013: €49.5 million). The main investment projects concerned machinery to equip the manufacturing facility for geared turbofan™ components and the construction of a new logistics center in Munich, and the further expansion of MTU Aero Engines Polska.
As of September 30, 2014, MTU had a total of 8,349 employees (December 31, 2013:
8,343 employees). "This illustrates MTU's high level of productivity. With a revenues increase of 6%, we have generated a significantly higher volume of business with a constant number of employees," Winkler pointed out.