Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MTU Aero Engines AG (MTUAF, Financial) achieved adjusted group revenues of EUR5.3 billion in the first nine months of 2024, marking a 14% increase from the previous year.
- The company raised its earnings forecast for 2024, with adjusted EBIT now expected to exceed EUR1 billion, reaching its 2025 target a year ahead of schedule.
- The MRO segment showed robust performance, with EBIT adjusted increasing by 35% to EUR300 million, resulting in a margin of 8.4%.
- The spare parts business performed strongly in Q3, particularly for narrowbody and mature wide-body platforms, reinforcing confidence in meeting full-year targets.
- MTU's lease and asset business significantly contributed to EBIT, benefiting from high lease demand and strong asset management operations.
Negative Points
- Ongoing supply chain issues continue to pressure working capital, affecting the company's operations.
- Lower delivery numbers of new aircraft have resulted in a reduction of new engine shipments to air framers.
- The GTF share in MRO remains slightly below the full-year expectation, indicating potential challenges in meeting targets.
- The company faces uncertainty in the exact timing of compensation payments to airlines, impacting free cash flow guidance.
- The delay in the 777X program is expected to result in higher working capital levels and slower revenue ramp-up.
Q & A Highlights
Q: Can you provide details on the timing of GTF fleet management plan compensation and the spare engine mix?
A: Peter Kameritsch, CFO, explained that the payment schedule for the fleet management plan is expected to move slightly to the right, with full provisions likely completed by 2025 or 2026. Regarding the spare engine mix, Lars Wagner, CEO, noted that the mix depends on market conditions and production ramp-up.
Q: How have supply chain improvements affected spare part sales, and have MRO contract terms changed?
A: Peter Kameritsch, CFO, stated that supply chain improvements have been better than expected, but challenges remain. MRO contract terms have not changed significantly; the profitability increase is mainly due to strong leasing and asset management.
Q: Can you elaborate on the lease business in MRO and the free cash flow guidance?
A: Peter Kameritsch, CFO, mentioned that the leasing business is expected to generate around EUR500 million for the year, with high margins. The free cash flow guidance remains broad due to uncertainties in working capital and compensation payments.
Q: What is the outlook for MRO margins and the impact of the 777X delay?
A: Peter Kameritsch, CFO, expects MRO margins to remain around 9% in Q4. The 777X delay will result in higher working capital and a slower revenue ramp-up, but the impact is manageable.
Q: How is the competitive environment in MRO evolving, and what is MTU's strategy?
A: Lars Wagner, CEO, stated that MTU is well-positioned as the number one independent MRO provider. The company is monitoring competitors like Fortress and plans to leverage its strong market position.
Q: What are the expectations for R&D expenses and powder metal production for GTF engines?
A: Peter Kameritsch, CFO, expects R&D expenses to reach around EUR220 million for the year. Lars Wagner, CEO, noted that powder metal production needs a mid-double-digit increase annually until 2027 to meet demand.
Q: How does MTU view the current MRO market dynamics and potential structural changes?
A: Lars Wagner, CEO, acknowledged the favorable market dynamics but noted it's difficult to predict long-term structural changes. MTU aims to capitalize on current opportunities while preparing for future shifts.
Q: What is the status of the Advantage program and its expected timeline?
A: Lars Wagner, CEO, indicated that the Advantage program is nearing certification, with entry into service expected in 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
