MTU Aero Engines issues more precise ten-year forecast

On the occasion of the company’s annual Investor & Analyst Day, MTU Aero Engines AG has issued a more precise forecast for the next ten years to 2025. The group intends to maintain its growth trajectory and achieve further improvements in profitability. In the medium to long term, adjusted EBIT is expected to increase at a faster rate than revenues, with a corresponding increase in adjusted net income. These projections are based on MTU’s existing business plans, which foresee an investment phase lasting until 2017 followed by a consolidation phase from 2018 onward. They reflect the expected development of revenues in the individual operating segments. As of 2018, MTU expects to see a surge in revenues from its most profitable activities, namely spare part sales and maintenance services. Revenues from the series production of engine components, which generates lower profit margins, are also expected to rise – based on the assumption that the increased production of the Airbus A320neo will result in growth rates for the PW1100G-JM engine, which are higher than previously anticipated. Weaker revenues are expected in the military engine business. “Overall, this product mix will enable us to increase our EBIT margins in the medium to long term,” says MTU Aero Engines CEO Reiner Winkler. “As a result, we can expect our adjusted net income to rise in line with operating profit.” Chief Operating Officer Dr. Rainer Martens adds: “Once we have reached the end of the current investment phase, in which we have been focusing on the construction of new facilities and their equipment with plant and machinery to prepare for the production phase of the geared turbofan (GTF) programs, our capital expenditure will return to normal levels. The same applies to our R&D expenditure, which will also gradually return to normal levels around 2018. The main focus will be on the ongoing improvement of GTF technology.” This will significantly improve the group’s free cash flow, which in the longer term will closely match adjusted net income.