‘Tailwinds’ push MTU Aero Engines to hit earnings target early after solid Q3

By Leeham News Team

Oct 24, 2024, © Leeham News: MTU Aero Engines reported solid financial performance for the third quarter, with the German manufacturer confirming it would achieve its earnings target of €1 billion ($1.08 billion) a year early thanks to strong results across its military and commercial divisions.

The company’s adjusted revenue increased by 14%, rising from €4.6 billion as of September 2023 to €5.3 billion in 2024.

Adjusted operating profit to September rose by 25% to €744 million, versus €597 million in the first nine months of 2023, while adjusted EBIT for the quarter rose by 42% to €273 million, versus €192 million in Q3 2023.

The adjusted EBIT margin increased from 12.8% to 14.0% and adjusted net income to September rose to €541 million, an increase of 23% from €438 million. The results, announced on Thursday, beat market expectations, and shares were trading up by around 1%.

Speaking to investors, CEO Lars Wagner said “current tailwinds” were offering MTU “significant growth opportunities”, with robust demand across the OEM, spare parts and maintenance businesses driving this.

Wagner said MTU was also benefiting from improvements within the supply chain. “Am I happy? Not yet, but some of the parts have recovered earlier than expected. I see a good trend here so in general the supply chain is improving,” he said.

Higher revenue

MTU’s military business saw the highest revenue growth, with adjusted revenue climbing 16% from €367 million to €426 million, driven by the TP400-D6 engine for the A400M, the New Generation Fighter Engine for the next-generation European fighter jet, and the EJ200 engine for the Eurofighter.

In the commercial maintenance business, adjusted revenue increased by 15% from €3.1 billion to €3.6 billion, linked to the GE90 engine for the Boeing 777, the V2500 for the A320 family, the GEnx for the Boeing 787, the CF34 aircraft engine for business and regional aircraft, and the engine leasing business.

In its Q3 update, MTU said the general market situation remained unchanged in Q324 with limited new aircraft deliveries and heavy utilization of older aircraft, alongside strong MRO demand and tight MRO capacity. As a result, high engine lease rates were supporting profitability.

“We seize all the opportunities the market has to offer. We also meet the ongoing challenges presented by the market with appropriate responses,” said Wagner.

OEM revenues were up 11% in 2024. Credit: MTU Aero Engines

“This meant that the first nine months of 2024 were so successful that we can achieve our earnings target of €1 billion one year earlier than originally planned.”

MTU is spending more on research and development, covering both alternative propulsion and improved efficiency within its existing maintenance operation.

The €254 million R&D spend in the first nine months of 2024 (up 14% YoY) has been focused on raising the efficiency of the geared turbofan programs, technology studies for future engine generations and expanding its virtual engine capabilities.

Last month MTU announced the completion of multi-week testing of a liquid hydrogen fuel system for its Flying Fuel Cell (FFC).

Together with MT Aerospace, the engine specialist is developing a complete liquid-hydrogen fuel system for commercial aviation that consists of tanks, sensors, heat exchangers, valves, safety systems, and controls. Wagner said MTU had shown it was “unwavering in our vision of zero-emission flight.”

Mixed picture

MTU’s order backlog now stands at €23.4 billion, down from €24.4 billion by the end of 2023, primarily made up of geared turbofan engines for the PW1000G family, especially the PW1100G-JM, and the V2500.

On the GTF, Wagner said work to overhaul and replace the engines was “progressing in line with expectations.” MTU announced over the summer that the time in shop for engine repairs had fallen below 100 days, which was helping to minimise disruption.

Commenting on the 777X delays, Wagner said: “We monitor the situation compared to our expectation. It is a small delay. It will result in a slightly higher level of working capital as we produce parts and they don’t find their way to the customers, and a slower, later ramp up of revenues and a dilution of margins.”

MTU’s free cash flow was also down, to €213 million at the end of September 2024, compared with €257 million in the first nine months of 2023.

“Free cash flow was affected in particular by the ongoing supply chain bottlenecks and by the geared turbofan fleet management plan, which were reflected in the high working capital,” said CFO Peter Kameritsch, who was also on the call.

“We are meeting these challenges with strict cash management and steps to improve efficiency.”

MTU predicts revenue of between €7.3 billion and €7.5 billion for the 2024 fiscal year, with revenue growth across all business areas and adjusted EBIT expected to be slightly in excess of €1 billion for 2024.

Wagner said he had “confidence in meeting the full-year targets.”

17 Comments on “‘Tailwinds’ push MTU Aero Engines to hit earnings target early after solid Q3

  1. But how important is MTU’s role in modern turbine engine production? Is it the tail being wagged by the american owner, or do they have their independent activity?

    • MTU is a German company — there’s no “American owner”.

      The article makes it clear that MTU produces turbofans for European military aircraft.

          • …owned by Americans. If “read up a bit” is your solution, you could begin by following it yourself – read the web page I indicated. MTU has been bought by Americans a long time ago. As for
            “shareholder nationality isn’t really relevant.
            It is a German “Aktiengesellschaft”,
            I disagree. It is the owners who decide.

          • …And also read your own page – I realized later that I read it. Just move to the 2000s.

        • By your own argument of shareholder country of origin, and from your provided link, MTU is not a USA company but more a European owned company. At least 23% of shares are European (include UK here) help versus the 12% held by USA entities.

          • A valid point , Branaboy, but I wouldn’t go as far as to call British ownership as European. The only things European about them are their civilization ad the continent they’re living in (I know how it sounds). As far as their interests go, they are American. Still, MTU is not German owned, its biggest owner is American, and I fear the control is American as well. Do you think otherwise?

        • I still find it difficult to understand your motivation.
          Is it pissing on an accomplished participant in aero engines?

          • It is regrettable that you need an external motivation, Uwe, rather than focusing on the subject itself. MTU IS, in fact, an accomplished engine manufacturer for both of us. The difference is that I am saying it is under American control. I don’t see the “pissing on” their competence because of that.
            If anything, I feel frustration – the Americans taking Europe’s best companies, anyway. They did the same with Wankel, a long time ago.

        • MTU and PW are so closely aligned that they might as well be one company (GTF and the V2500). Also in with GE.

          MTU is associated with other endeavors such as E200 and the A400 engine but does not make any of those by itself.

          Looks to me like its basically an American susidery HG in Germany. As far as I know they don’t make any engines or lead on any engines by themselves.

  2. hi, does someone know the reason for the 100 days to repair geared turbofans ? from a non-technicien perspective it seems very long, the defective parts have to be swapped for new ones , is it so difficult to open an engine ?
    sorry for the beotian question…

      • It is obvious that it is, as Uwe said, a backlog. Think that an airplane engine in the repair shop, where everything can be swapped, still takes a few days to finish. A factory repair is more labor-intensive and meticulous.

      • Parts. You need the parts.

        Take and engine in and find it needs some parts and not others, but its still torn down until you get the parts needed.

        There is only so much room and storage for torn down engines.

        The bad parts inspection has to be done off wing. So then you got to decide to do it all and bring up to full spec or back into the system.

  3. Some rather ignorant assertions drawn above w.r.t. company “ownership”.

    Let’s take the largest “owner” on the shareholders list, which is Blackrock Investment Corp. Blackrock issues ETFs, and it needs to buy the underlying shares in those ETFs in order to physically replicate them. It therefore appears as a large participant on the shareholder lists of most companies worldwide. However, actual ownership of the shares in question rests with the purchasers of the ETFs in which they are comprised — Blackrock is only acting as an intermediary. This is immediately evident from the fact that Blaclrock has $10T in “assets under management”, whereas it only has a market cap of $145B, and an actual book value of just $40B. In summary: Blackrock doesn “own” any of those “assets under management”. It does maintain voting rights for those assets, and can securitize those assets; but, if the unfderlying owners sell the ETFs in question, then Blackrock ultimatly has to offload some stock.

    The same applies to the other big banks, investment companies and and hedge funds on the sharehholder list.

    Wikipedia lists MTU as a German manufacturer. That’s because it is domiciled in Germany, and falls under German law and regulation. You’ll find similar information on the websites of the Frankfurt stock exchange and Nasdaq.

    As regards who its customers are: customers don’t determine ownership of a company. For example, most of Airbus’ customers are in Asia — but that doesn’t make Airbus an Asian company.
    Apart from doing work for PW, MTU also manufactures military aircraft engines for non-US customers, and industrial gas turbines worldwide.

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