MTU expects commercial maintenance to show “clearest recovery” of its business segments in 2021


MTU Aero Engines says its commercial maintenance business will recover “most clearly” from the effects of the Covid-19 crisis, with revenue growth of “around 15 to 25 per cent” in 2021. The company expects the revenue contribution from the Pratt & Whitney Geared Turbofan engine to “increase considerably”.

MTU offered the forecast for the year as it released preliminary figures for full-year 2020, which were hit by the impact of the pandemic. Company revenue was down 14 per cent to €3,977 million.

Commercial maintenance revenue fell 7 per cent to €2,522 million. “The retrofit programme for the Geared Turbofan largely offset the drop in revenue in our core business, so the revenue decline was in the mid single-digit percentage range, as forecast,” said MTU Aero Engines’ CEO Reiner Winkler.

“The GTF retrofit programme comprises warranty work for the PW1100G-JM. The principal revenue drivers in the commercial maintenance business were the V2500 and the PW1100G-JM. In 2020, we gained new MRO orders worth more than US$5 billion. Our ability to achieve such success during a crisis shows our attractive service offering and our good reputation in the sector.”

A 23 per cent revenue decline was seen in the OEM business (€1,535 million), with a 32 per cent drop in the commercial engine business (€1,052 million).

MTU 2020 financial results
Source: MTU Aero Engines. Click to enlarge.

Company operating profit was down 45 per cent to €416 million. Commercial maintenance (down 48 per cent to €136 million) and the OEM business (down 44 per cent to €280 million) suffered sharp declines.

MTU’s EBIT margin was 10.5 per cent, compared to 16.4 per cent in 2019. Net income dropped 45 per cent to €294 million.

“Our swift and decisive action in the face of the coronavirus crisis has paid off. We managed the challenges due to the coronavirus pandemic well and posted respectable earnings in 2020 despite the crisis,” commented Winkler.

“While our revenue was at the lower end of our target range in 2020 as a result of lower maintenance volumes and the unfavourable development of the dollar exchange rate, earnings were slightly above our forecast.

“Experts anticipate the recovery of our sector to begin in 2021. That should be reflected in a slight upward trend in our business figures.”

MTU 2021 outlook
Source: MTU Aero Engines. Click to enlarge.

MTU reiterated its expectations for 2021 that were first stated at its Capital Market Day in November 2020. There, MTU initially assumed revenue growth in the commercial MRO business in the twenty per cent range. The commercial spare parts business is expected to post revenue growth in the low to mid single-digit percentage range. At the Capital Market Day, a slight rise in revenue was forecast for the commercial spare parts business. For the commercial series business, MTU is forecasting slight revenue growth. Until now, it had expected this business to make a stable revenue contribution.

“Overall, MTU expects revenue to be between €4.2 and 4.6 billion. The adjusted EBIT margin should be between 9.5 and 10.5 per cent,” the company stated. “Adjusted net income is expected to develop in line with adjusted EBIT. The cash conversion rate, which shows the ratio of free cash flow to adjusted net income, is expected to be in the mid double-digit percentage range in 2021.”

Chief financial officer Peter Kameritsch said: “We will monitor the market situation closely and continue our disciplined liquidity management. The financial headroom we built up in liquidity last year gives us additional security.”

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