Mtu Aero Engines Ag · XETR:MTX
Mtu Aero Engines — Investor Day (November 2020)
62 slides from Mtu Aero Engines's investor day presentation, Nov 19, 2020
Slide 1: Welcome
Welcome Start: 1.30pm CET MTU Aero Engines AG – Investor & Analyst Day 2020
Slide 2: Agenda
Agenda 1 MTU´s Market Environment | COVID-19 Reiner Winkler | Chief Executive Officer (CEO) 2 Product Portfolio | Opportunities Michael Schreyögg | Chief Program Officer (CPO) 3 Technology Roadmap | Cost Leadership Lars Wagner | Chief Operating Officer (COO) 4 Financials | Outlook 2021 Peter Kamerit
Slide 3: MTU's Market Environment | COVID-19
MTU´s Market Environment | COVID-19 Reiner Winkler | Chief Executive Officer (CEO)
Slide 4: An entire industry is on the test bench
An entire industry is on the test bench.
Slide 5: Flights matter more to our business than headline traffic figures
Flights matter more to our business than headline traffic figures Passenger traffic and capacity Passenger aircraft flight cycles YTD, Jan – Sep YTD, up to CW 44 Global International Domestic Total Single-aisle Twin-aisle -38% -51% -48% -47% -56% -53% -65% -66% -72% RPK ASK • Capacity (ASK) is not p
Slide 6: Global passenger flights have plateaued since August, Asia recovers faster
Global passenger flights have plateaued since August, Asia, led by China, recovers faster ∆ Worldwide flight cycles year-on-year by week Flight cycles Passenger Cargo YTD in regions 40% 20% Cargo World -48% +16% 0% -20% Asia (incl. China & -42% +30% Asia-Pacific) -40% Passenger -60% Europe -60% +6%
Slide 7: Domestic passenger flights in China have now recovered
Domestic passenger flights in China have now recovered – so have V2500 and GTF there ∆ Flights year-on-year by week Market development 150% • China Southern Airlines became first of “Big 3” to return to operating profit in 100% Chinese National last quarter with ~40% revenue Holiday Week decline; ot
Slide 8: Latest MTU engine models are recovering the fastest
Latest MTU engine models are recovering the fastest Development of flights with PW1100G-JM Development of flights with GEnx-1B/-2B 16,740 18,000 9,000 8,112 16,000 15,818 8,000 14,000 7,000 5,667 Number of flights Number of flights 12,000 6,000 10,000 5,000 8,000 4,000 6,000 3,000 4,000 2,000 930 1,
Slide 9: MTU benefits from an above-average share of engines in freight service
MTU benefits from an above-average share of engines in freight service Cargo flights until CW44 vs. 2019 Airliner fleet breakdown by usage MTU engines on dedicated freighters Total Single-aisle Twin-aisle Industry MTU 30% 100% PW2000 JT8D-200 20% 20% GEnx 16% 13% 10% CF6 ~22% ~14% 0% 0% Freighter Pa
Slide 10: The pandemic is going to keep interest rates and oil prices low
The pandemic is going to keep interest rates and oil prices low, supporting our industry US interest rates (fed fund rate upper bound) Oil price [in %] 3 2,5 71 2 64 1,5 41 1 0,5 0 1 Dec 2016 1 Jun 2020 1 Dec 2015 1 Dec 2017 1 Dec 2018 1 Dec 2019 1 Jun 2016 1 Jun 2017 1 Jun 2018 1 Jun 2019 2018 2019
Slide 11: As airlines deferred orders, airframers have adjusted rates
As airlines deferred orders, airframers have adjusted rates A320 to make up majority of 2020 industry deliveries Monthly rate 2019 Adjusted rates # Aircraft on order A220 4 2+ 2.500 A320 60 40 31.12.2019 A330 4 2 2.000 30.09.2020 A350 10 5 1.500 737 52/42 Restart 1.000 787 14 6 500 767 3 3 0 2015 20
Slide 12: Positive implications for MTU from leasing market trends
Positive implications for MTU are derived from trends and strategies in the leasing market Positive effects from the leasing market NB Ownership lessor NB Ownership airline • Lessors own >50% of commercial airlines' narrow-body fleet and share will increase 52% 48% • Lessors have access to capital m
Slide 13: Positive implications for MTU from leasing market trends
Positive implications for MTU are derived from trends and strategies in the leasing market 1 Lessors support airlines to keep existing fleets Parked fleets expected to be reactivated, supporting (and lease contracts) running through rent deferrals, profitable MRO demand on older A/C, delaying contra
Slide 14: MTU expects an early recovery in single-aisle cycles
MTU expects an early recovery in single-aisle cycles Single-aisle aircraft cycles [Millions] 50 Recovery driven by single-aisles • Return to 2019 global traffic levels expected between 2023 and 2024 but earlier for domestic travel 40 • Strong MTU presence in the narrow-body market • Despite general
Slide 15: Industry is ready, but not yet cleared for take-off
Industry is ready, but not yet cleared for take-off.
Slide 16: Product Portfolio | Opportunities
Product Portfolio | Opportunities Michael Schreyögg | Chief Program Officer (CPO)
Slide 17: We benefit from a robust product portfolio
We benefit from a robust product portfolio.
Slide 18: MTU's business segments affected differently by the corona crisis
MTU's business segments affected differently by the corona crisis Military OEM business Commercial OEM business Commercial MRO business • 2019 revenues: €0.5bn (9%) • 2019 revenues: €1.5bn (33%) • 2019 revenues: €2.7bn (58%) • No COVID-19 impact • Impact on new engine business • Less shop visit dema
Slide 19: EJ200 remains the most important fighter revenue contributor
EJ200 remains by far the most important fighter revenue contributor in the coming years Expected EJ200 engine deliveries 2020 – 2029 driven by national and international export campaigns Highlights • Fighter revenue share ~80%* in 2020 • German order for replacement of Tranche 1 Eurofighter signed i
Slide 20: MTU's participation in the FCAS engine program secures future revenue growth
MTU’s participation in the FCAS engine program secures future revenue growth Volume of 1,000+ engines expected Highlights • Biggest European defense program • Concept phase contracted in 2019, ongoing • Decision on funding of next technology projects in Q1 2021 • Engine and A/C demonstrator by ~2026
Slide 21: Passenger air traffic down by 66% in 2020
Passenger air traffic down by 66% in 2020. A return to 2019 levels not expected before 2023/24. Nevertheless, there are many reasons why air traffic will rebound. Situation today …. But … Dec. 2019* Sep. 2020* 20-year market outlook* Revenue Passenger +4.2% -64.7% GDP growth Kilometers (RPK) YTD YTD
Slide 22: The recovery of commercial aviation can be divided into 3 phases
The recovery of the commercial aviation market can be divided into 3 phases Crisis phase – year 2020 Restart phase – years 2021-23 Growth phase – years 2024+ • Traffic down 66%, slow recovery since Q2 • Air traffic begins recovery • Traffic growing above 2019 levels • High storage rates • Modern and
Slide 23: The market for commercial series is adjusting to the pandemic
The market for commercial series is adjusting immediately to the impact of pandemic Segment Trend next 5 years Market dynamics/MTU impact • Trends center on aircraft downsizing and capturing freight demand • MTU has limited exposure to new wide-body engine production • 787 production rate to recover
Slide 24: MTU's spare parts business shows resilience to COVID-19
MTU's spare parts business shows resilience to COVID-19 impacts due to its high proportion of military, freight and narrow-body engines Segment Trend next 5 years Market dynamics/MTU impact • Slow recovery weakens wide-body passenger market • High retirement risk for older wide-body platforms Intern
Slide 25: Further significant increases of GTF MRO are imminent
Further significant increases of GTF MRO within the aftermarket network are imminent GTF engine highlights* Highlights • Key technical improvements on >95% of the in-service PW1000G engine fleet to be implemented by year end** • Decline in regular MRO work leads to increased GTF shop 850+ In service
Slide 26: Limited impact on MRO revenues based on diversified portfolio
Limited impact on MRO revenues based on a diversified product portfolio and market access Strong contract wins for our independent MRO business even in difficult times MRO revenues in 2016 – 2020 (in m US$) Independent MRO campaign wins 2016 – 2020 (in bn US$) 7.5 MTU Maintenance Zhuhai 100% MRO rev
Slide 27: A sustainable MRO order book secures future growth
A sustainable MRO order book secures future growth and strengthens resilience to external influences MRO order book highlights* Highlights • 80% is dominated by narrow-body engines (V2500, GTF, CFM56) • Low widebody exposure – predominantly cargo Narrow-body OEMRO • 54% is related to OEMRO participa
Slide 28: Long-term MRO strategy remains valid
Long-term MRO strategy with clear focus on future profitable growth remains valid Customer-focused service Next level digital Expansion of MRO network and product portfolio maintenance solutions structure with focus on best-cost • Customers value MTU’s know- how, • Engine Fleet Management (CORTEX) •
Slide 29: Technology Roadmap positions MTU for potential new aircraft platforms
With our Technology Roadmap we are well positioned to participate in potential new aircraft platforms A350–1000 stretch? A330neo successor A321neo XLR NGSA H2-powered Airbus concept(s) A220 stretch? 777-9 stretch? 777-9/8/8F 787 successor NGSA Boeing C929 MS-21 Widebody Source: MTU 2020-30 2030-40 N
Slide 30: Diversified approach in product strategies and partnerships
Diversified approach in product strategies and partnerships – a fundament for future performance.
Slide 31: Technology Roadmap | Cost Leadership
Technology Roadmap | Cost Leadership Lars Wagner | Chief Operating Officer (COO)
Slide 32: Adaption of production facilities and future engine technologies
Adaption of production facilities and future engine technologies.
Slide 33: Geared turbofan engines are setting new economical standards
Geared turbofan engines are setting new economical standards First geared turbofan (GTF) engine generation Production re-Ramp-Up (GTF/ GTF Gen2/ NEFE) ̴ 16% reduction in fuel burn ̴ 75% Fewer reduction of emissions noise footprint CO2 / NOX Source: P&W MRO cost savings 25% fewer stages, 45% fewer bl
Slide 34: Preparation of Re-Ramp-Up
Preparation of Re-Ramp-Up MTU is using the time generated by the COVID crisis to prepare for the ensuing re-Ramp-Up Performance Leadership Supply Chain Operational Adaptive Excellence Product Design Value Stream Sourcing Production Organization Management Strategy Producibility Capacity and Processe
Slide 35: Automation in engine manufacturing
Automation in engine manufacturing We constantly increase our level of automation Reduction of costs Adaptivity to volatile markets Reduction of turnaround time and working capital • Increased operating times • Highly flexible lot sizes (down to 1) • Fewer workplace rotations • Higher level of autom
Slide 36: MTU as role model for automation in aero engine manufacturing
MTU as role model for automation in aero engine manufacturing 2023 Progressive automation at MTU Automated ECM manufacturing Fir tree slots 2015 2019 2021 Fully automated Fully automated Fully automated Manufacturing of blisks Turbine blade manufacturing Bearing chambers 2022 Fully automated Rotor d
Slide 37: Rotor2 Manufacturing 4.0
Rotor2 Manufacturing 4.0 Fully automated rotor manufacturing Main benefits • High degree of automation: Chained Production System for Milling and Turning Automated Parts and Tool Set Up Closed Door Machining • Reduced cost and lead time • Advanced process monitoring -60% + -30% November 19, 20
Slide 38: Electrochemical machining (ECM)
Electrochemical machining (ECM) Manufacturing 4.0 Alternative to cutting – ECM removes metals through electric currents in conductive solutions Main benefits • Reduced cost • No tooling wear • Improved surface quality • Lower tolerances • Advanced process monitoring • Parallel processing -50% +30% -
Slide 39: Our future approach
Our future approach
Slide 40: MTU's leading technology roadmap
MTU’s leading technology roadmap Maturity Application Evolutionary Gen2 GTF development Short- range Mid- range Long- range Short- Mid- Long- Revolutionary engine concepts range range range turbine Gas Mid- Long- Drop-in – no infrastructure change: SAF range range Not drop-in – new infrastructure re
Slide 41: New concepts
New concepts Evolutionary Revolutionary Gen2 GTF WET engine Flying Fuel Cell At least -10% fuel burn, -10% dB At least -15% fuel burn, -80% NOx 1) -100% CO2 and NOx 1) noise 1) 1) w.r.t. to current GTF engine 41 © MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero E
Slide 42: New European Fighter Engine – NEFE
New European Fighter Engine – NEFE Military technology development Key enabler • Variable cycle engine technology • World class components: LPC, HPC, LPT • High-temp, low-weight materials • Integrated aircraft/engine heat management • Fully digitalized design and aftermarket processes • Technology p
Slide 43: MTU operations and technology are prepared for future challenges
MTU operations and technology are prepared for future challenges.
Slide 44: Financials
Financials Peter Kameritsch | Chief Financial Officer (CFO)
Slide 45: We remain attentive and continue to act with foresight
We remain attentive and continue to act with foresight.
Slide 46: Outbreak of COVID-19 – Short-term cost measures
Outbreak of COVID-19 – Short-term cost measures The emerging crisis triggered various reactions to immediately reduce cost in the short-term €-200M €-100M Personnel cost Expense reduction • Short-time work or comparable programs • Cut operational expenses by 30% • Hiring freeze • Return of leased-in
Slide 47: Outbreak of COVID-19 – Short-term cash flow measures
Outbreak of COVID-19 – Short-term cash flow measures The emerging crisis triggered various reactions to immediately limit short term cash drain €-300M Reduce cash outflow Intensifying working capital management • Reduction of 2020 Capex budget by 50% • Adjustment of supply chain to reduced demand •
Slide 48: Outbreak of COVID-19 – Increase accessible liquidity
Outbreak of COVID-19 – Increase accessible liquidity Measures to secure a liquidity buffer were initiated instantly to counter growing uncertainties Issue of €100M promissory note Increase RCF by €100M to €700M Placement of €500M euro bond • Due 11 May 2021 • Due 1 July 2025 • Due 10 July 2021 • Two
Slide 49: Debt Maturity Profile – Diversified and no immediate action required
Debt Maturity Profile – Diversified and no immediate action required Nominal €M 600 • MTU maintains a diversified refinancing mix 500 • 2021 only €130M to be redeemed 400 (Promissory Note & Loan) Convertible Bond 300 • €600M revolving credit facility to be Euro Bond 200 extended in 2023 100 • €100M
Slide 50: Key capital structure considerations
Key capital structure considerations – No principal change in MTUs targets Targets Net debt/EBITDA will range between 0.5-1.5 Conclusion No new equity • Solid financial health • Crisis has proven resilience • Targets remain in place Keep investment grade rating Shareholder returns – reinitiate divid
Slide 51: Outbreak of COVID-19 – Adjust capacity to mid-term market scenarios
Outbreak of COVID-19 – Adjust capacity to mid-term market scenarios Market scenarios for the coming years identified a gap between capacity need and demand: Reduced demand Restructuring program initiated – to be finalized end of 2021 for new engines • Provision of €34M booked in Q3 2020 • Cash outfl
Slide 52: Guidance 2021
1(734,826 am ‘isa. Liabiliti — ws pra Neca abies am Equity 74,393 Scva cr Fetanas earings tm Income statement Revenues Nets Inert Expenses 6,372,585 Feseachard Deeeomat 13858 a conta per ‘au Net income 6,505,981 Guidance 202 \_\ ae
Slide 53: The year 2021 – Commercial OEM business
The year 2021 Only an interruption in growth path Commercial OEM business • NB production rates reduced • WB production rates lowered • RJ deliveries to grow at slower pace • BizJet production remains largely stable • Spare parts demand to grow from actual levels – main programs remain V2500, CF6 an
Slide 54: The year 2021 – Military
The year 2021 Only an interruption in growth path Military • No COVID-19 impact • EJ200 deliveries to increase in 2021 • Aftermarket & Support Volume for fighter aircraft to grow • Funded technology for FCAS engine November 19, 2020 54 © MTU Aero Engines AG. The information contained herein is propr
Slide 55: The year 2021 – Commercial MRO
The year 2021 Only an interruption in growth path Commercial MRO • Strong freighter demand remains driving SVs for CF6, PW2000 • Recovery in NB MRO continues • Volume and share of GTF MRO to increase significantly within aftermarket network • Expansion program MTU Serbia, start construction Expa
Slide 56: The year 2021: Turnaround from industries downfall
The year 2021: Turnaround from industries downfall Strong pre-COVID Q1 2020 makes direct comparison difficult 2021 main drivers Military Slightly up Commercial OE Stable Commercial Spares Slightly up MRO up in 20 percent range Commercial MRO GTF contribution strongly growing Revenue Headwind from we
Slide 57: We are ready for 2021
We are ready for 2021.
Slide 58: Executive Summary
Executive Summary Reiner Winkler | Chief Executive Officer (CEO)
Slide 59: Ready for market recovery
Executive Summary Ready for 1. Aerospace & Defence sector hit hard by COVID-19 but not all market segments were impacted to the same extent market 2. 3. MTU reacted sober and reflected on emerging crisis Business mix provides islands of stability until sustainable recovery kicks in recovery 4. Order
Slide 60: Questions & Answers
Questions & Answers Reiner Winkler Michael Schreyögg Lars Wagner Peter Kameritsch Chief Executive Officer (CEO) Chief Program Officer (CPO) Chief Operating Officer (COO) Chief Financial Officer (CFO) Investor & Analyst Day 2020
Slide 61: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could
Slide 62: Proprietary Notice
Proprietary Notice This document contains proprietary information of the MTU Aero Engines AG group companies. The document and its contents shall not be copied or disclosed to any third party or used for any purpose other than that for which it is provided, without the prior written agreement of MTU