MTU Aero Engines AG saw its first-half-year revenues rise by 21% to €2,202.0 million in 2015 (1-6/14: €1,815.8 million). The group’s operating profit grew by 25% to €212.8 million (1-6/14: €170.7 million), while the EBIT margin increased from 9.4% to 9.7%. Earnings after tax climbed 33% to €147.2 million (1-6/14: €111.0 million).
“The continuing strength of the U.S. dollar has boosted our revenues and earnings these past six months, throughout all business segments. These results have allowed us to revise our full-year forecast in the expectation of setting new records once again in 2015,” said Reiner Winkler, CEO of MTU Aero Engines AG. MTU now foresees revenues of around €4,600 million for 2015, instead of the €4,400 million predicted at the beginning of the year (2014: €3,913.9 million). Adjusted EBIT is expected to rise to around €430 million (2014: €382.7 million) and adjusted net income to around €295 million (2014: €253.3 million). The corresponding amounts in MTU’s original outlook were €420 million for adjusted EBIT and €285 million for adjusted net income.
The new guidance is based on an exchange rate of U.S. $1.10 to the euro (previously U.S. $1.20 to the euro). “The modified outlook reflects the positive impact on earnings of the U.S. dollar exchange rate and lower R&D expenses. Our forecast takes into account the extended maintenance intervals for the V2500 engine and postponements in the military sector, which will reduce our 2015 earnings expectation but will later increase our earnings potential. As a further consequence of these changes, we have also slightly adjusted the revenue expectations for our various business units,” added Winkler. In the aftermarket business more and more customers are opting for flight hour agreements in which maintenance services are invoiced at a flat rate per flying hour rather than on an actual time and material basis.
The greatest increase in revenues in the first six months of 2015 was registered by the commercial maintenance business, where revenues grew by 32% from €572.9 million to €754.2 million. The main source of these revenues was the V2500 engine that powers the Airbus A320 family.
Revenues in the commercial engine business increased by 21% to €1,251.8 million (1-6/14: €1,032.9 million). Here, the key revenue drivers alongside the V2500 were the GP7000 engine for the A380 and the GEnx for the Boeing 787 and 747-8.
Revenues in the military engine business decreased by 5% to €215.3 million (1-6/14: €225.5 million). The EJ200 Eurofighter engine accounted for the greater part of these revenues.
At June 30, 2015, MTU’s order backlog stood at €11,520.4 million, which is 3% higher than at the end of 2014 (€11,176.5 million). This represents a production span of roughly three years. The majority of these orders are for the V2500 and the Geared Turbofan™ engines of the PW1000G family, foremost among them the PW1100G-JM for the A320neo. As Chief Program Officer Michael Schreyögg reported, “We received many orders for these engines and for the GE9X und GEnx widebody engines at the Paris Air Show in June.” These new orders, with a total value of €800 million, are not yet included in the order backlog.
MTU’s commercial maintenance business saw its earnings rise substantially in the first half of 2015, with a 53% increase in adjusted EBIT to €73.5 million (1-6/14: €48.0 million). The EBIT margin gained 1.3 percentage points, rising to 9.7%. “This growth in earnings from commercial MRO activities is due not only to the favorable U.S. dollar exchange rate but also to an increased added value per shop visit,” commented Schreyögg. Earnings in the OEM segment increased by 14% from €122.5 million to €139.2 million, resulting in an EBIT margin of 9.5% (1-6/14: 9.7%).
In the first six months of 2015, MTU spent €102.0 million on research and development projects (1-6/14: €79.2 million). The decrease in the amount of company-funded development costs recognized as expense in the income statement, which dropped from €38.4 million to €24.3 million, is due to MTU’s greater involvement in R&D for new programs, for which the costs can be capitalized as intangible assets. The main R&D focus lies on the Geared Turbofan™ engines and the GE9X for the Boeing 777X.
MTU’s free cash flow in the first half of 2015 amounted to €86.7 million, which is significantly higher than in the same period of 2014 (€17.9 million). “We expect to be able to sustain this positive development through to the end of the year and report a free cash flow in the upper two-digit million range,” said Winkler. Until now MTU had been counting on a free cash flow close to last year’s level of around 40 million euros.