MTU Aero Engines reports that the company had another record year: revenue in 2019 reached a new high of €4,628.4 million (2018: €4,567.1 million). Operating profit came in at €756.9 million, surpassing the previous high of €671.4 million in 2018 by 13%. The EBIT margin rose from 14.7% to 16.4%. Net income increased by 12%, from €479.1 million to €537.6 million.
“MTU’s course of profitable growth thus continues unabated. We fully met our ambitious earnings forecast,” said Reiner Winkler, CEO of MTU Aero Engines AG, summing up the provisional annual results for 2019 at a presentation on Thursday, February 20, 2020. MTU had raised its forecast at half-year and confirmed it after nine months. The company had forecast an adjusted EBIT margin of about 16% and expected both operating profit and adjusted net income to increase. Revenue in 2019 came in slightly below the target of approximately €4.7 billion due to shifts in commercial series production business and the military engine business, as well as to lower material usage in the MRO segment. Winkler added: “In 2020, we want to raise the bar even higher and once again outperform our own records.”
Outlook for 2020
Revenues in the commercial series production business are predicted to increase organically by a high single-digit percentage in 2020. In the commercial spare parts business, MTU expects revenue to increase by a mid- to high-single-digit percentage. Revenue in the MRO business is expected to grow in the low twenties. “We anticipate a high-single-digit percentage revenue increase in the MRO core business. The remaining revenue increase results from the retrofit program for the Geared Turbofan™, which is likely to hold back our margin in commercial maintenance,” explained CFO Peter Kameritsch. Revenue in the military business is forecast to increase by a mid-single-digit percentage in 2020. MTU predicts a high-single-digit percentage improvement in operating profit. The cash conversion rate – that is, the ratio of free cash flow to net income adjusted – is expected to be around 70% in 2020 (2019: 67%). MTU is observing the potential impact of the coronavirus issue and will, if necessary, adjust its forecast in the course of the year.
Revenue increase in the OEM business
In 2019, revenue increased above all in the OEM business – both in the commercial engine business and in the military sector. Revenue in the commercial engine business rose by 10%, from €1,395.6 million to €1,536.9 million. The major part of this revenue was attributable to the V2500 engine for the classic A320 family as well as the PW1100G-JM for the A320neo and the GEnx engine that powers the Boeing 787 and 747-8.
Revenue in the military engine business grew by 6% to €458.7 million (2018: €431.1 million), mainly due to the EJ200 Eurofighter engine. “In 2019, we set the course for the future in the military business: we’ve secured a strong role in development, production and aftersales support of the Next European Fighter Engine for Europe’s next generation of fighter planes,” added Winkler.
In the commercial maintenance business, revenue declined from €2,799.8 million to €2,711.4 million. “Revenue was impacted by changes in the ordering and billing process for V2500 maintenance services,” explained Kameritsch. “In organic terms, MRO revenue improved by 7%. This shows the ongoing high demand in this area as well as the fact that we posted a record U.S.$7.5 billion in MRO contract wins in 2019.” The largest shares of revenue in commercial maintenance were generated by the V2500 and the CF34, which is used in business and regional jets.