Engine Manufacturer MTU Aero Engines Presents Good Business Figures
28 April 2005 16:42
Munich – MTU Aero Engines has published its business figures for the year 2004. The company has significantly enhanced its results and improved its capital structure through the repayment of bank liabilities ahead of schedule. Sales were slightly up and the order book grew apace. The accounting, for the first time in accordance with IFRS, was influenced in particular by special effects deriving from the sale of the company.
ADJUSTED EBITDA
In 2004, adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation and extraordinary items), rose from €176 million in 2003 to €247 million, which this corresponds to an increase of 40%. The growth can be attributed to the rise in air traffic with a bigger demand for spare parts and Maintenance, Repair and Overhaul (MRO) services as well as to ongoing improvements in efficiency within the company. The company also made good progress in reducing its indebtedness: a total of some €200 million was repaid in 2004 and approximately a further €130 million by the end of March 2005. "With these repayments, MTU has substantially improved its capital structure and reduced its interest load, " explained Udo Stark, MTU president and CEO.
The repayments, with which MTU paid back more than 50% of its bank liabilities by the end of 2004 and as much as 86% by the end of March 2005, were made possible by a sustained strong liquidity position: the adjusted cash flow from operating activities was increased by 35%. "We achieved the cash flow target that we had set ourselves within the framework of the Impact 100 restructuring and cost-cutting program," declared MTU CFO Reiner Winkler. "In 2004 our adjusted cash flow from operating activities was €213 million (comparable adjusted)."
"In the past year [2004], aviation got going again. The figure for passenger miles was 8% higher than in the previous record year 2000. We have benefited from this positive trend and have reached the quantitative targets that we had set ourselves – in some cases we even clearly surpassed the target figures," summarised Stark. "However, the industry had to cope with the adverse development of the dollar exchange rate. This also left its mark on MTU."
COMMERCIAL SALES AND COMMERCIAL MRO
The persistent low exchange rate of the US dollar weighed heavily on commercial sales and commercial MRO. Even so the engine manufacturer was able to slightly increase its sales to €1,993 million (comparable adjusted, prior year: €1,952 million); adjusted for the dollar exchange rate, it would have increased by 9% to €2,135 million. Thanks to significantly improved efficiency, MTU was able to achieve these sales with a 7% smaller workforce of 7,400 employees.
Order entry in 2004, at €2,267 million, was substantially higher than sales. As a result the order backlog grew by 11% from €3,060 million to €3,408 million. The order base is sound: at year-end 2004 it was 1.7 times the annual sales of the company.
"We expect to see a further upswing in 2005," stressed Stark; "after all, the planned aircraft deliveries send a clear message: this year Airbus and Boeing want to hand over some 680 aircraft to their customers. In addition, engines in which MTU has a stake are to be found in comparatively young fleets of aircraft and are intensively used – factors that form an ideal basis for further growth at MTU."
RESEARCH AND DEVELOPMENT
Research and Development (R&D) expenses at MTU reached a new record level in 2004. Expenses rose once more from €228 million (2003) to €233 million (2004). R&D expenditure financed from the company's own funds accounted for €156 million of this figure, while customer-financed R&D amounted to €77 million. The lion's share of the R&D funds went to the GP7000 program for the Airbus A380, the PW6000 program for the Airbus A318 single-aisle airliner and technology projects such as the clean technology demonstrator for a recuperative engine with fuel savings of up to 20%.
Stark stated: "The GP7000 and PW6000 programs, which were our key focus in the past few years, are now being prepared for production ramp-up and therefore require less research and development input." On the other hand, it will be necessary to shoulder the high expenditures associated with the launch of production. "The years ahead of us now will be years of investment," said Stark. MTU will again be spending some €200 million on research and development in 2005: "We do not intend to skimp on our future," he added.
COMMERCIAL ENGINES (INCLUDING SPARE PARTS)
Business with commercial engines, including spare parts, contributed €927 million (47%, comparable adjusted), to overall sales in 2004. This corresponds to an increase of 1.9 %. The biggest money-spinner in the commercial engine sector was the V2500, which powers the Airbus A320 family, followed by the PW2000 for the Boeing 757 and the American military transport C-17. A further significant contribution was made by the CF6, which powers various wide-body jets such as the Airbus A330 or the Boeing 747.
New orders for commercial aero engines declined compared with the prior year. The reason for this, apart from the dollar exchange rate, was the fact that a significant volume of major orders for the PW2000 and GP7000 programs had been received in 2003. A decidedly positive development was the order entry volume for the V2500 program, which was significantly swelled by orders from the airlines JetBlue, America West and Spirit Airlines.
MILITARY ENGINES
The contribution made to sales by military engines in the past financial year was €496 million (comparable adjusted), or 25% of overall sales. For the first time the Eurofighter engine EJ200 replaced the Tornado engine RB199 as the strongest-selling military program. New on the list of military sales performers is the TP400-D6, the propulsion system for the future European military transport A400M.
The improvement in military order entry was primarily attributable to the second tranche of the EJ200, the contract for which was signed in December 2004. In the case of the Tiger engine MTR390, export orders as well as demand for the MTR390 Enhanced led to a rise in new orders.
COMMERCIAL ENGINE MRO
With sales of €570 million (comparable adjusted) commercial MRO accounts for 27% of the overall sales of the MTU Group. The decisive contributions here came from MTU Maintenance Hannover and MTU Maintenance Berlin-Brandenburg. The 3% decline in sales in comparison with the prior year is mainly attributable to the dollar – adjusted for the exchange rate, sales would have increased by 10%.
There was an increase in new MRO orders. The rise in order entry reflects the recovery of the aviation industry and the good positioning of MTU as the world’s leading independent provider of MRO services.
OUTLOOK 2005 – PROFITABLE GROWTH TREND TO BE CONTINUED
The commercial MRO business in particular will benefit from the ongoing growth that the analysts are predicting for aviation. This growth is put at 5.5% pa worldwide, and in some regions – for example Asia – it is expected to be higher. In the medium term, the company plans to substantially increase the share of commercial MRO sales in overall sales. Intentions are to expand the part-repair business and to add the maintenance and repair of accessories to the service portfolio.
Also in its commercial and military engine business, MTU is well set up for profitable growth. Its well-balanced portfolio of products and services and its investments in future-oriented programs such as the GP7000, the PW6000 and the TP400-D6 make the company a heavyweight market player. Said Stark: "We will keep a watch on the efficiency of our business and will not rest on the laurels of our good 2004 results. We will stay on course for growth and will thus strengthen the stand-alone position of our company. The first few months of the year 2005 have seen a continuation of the positive development of the company and underscore the optimistic expectations for the year as a whole."
For more information on this company:
MTU Maintenance Hannover - Maintenance, Repair and Overhaul (MRO) of Commercial Aircraft Engines, Marine and Industrial Gas Turbines
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