Mtu Aero Engines Ag · XETR:MTX
Mtu Aero Engines — Investor Day (September 2006)
54 slides from Mtu Aero Engines's investor day presentation, Sep 28, 2006
Slide 1: MTU Aero Engines - Investor and Analyst Day 2006
MTU Aero Engines - Investor and Analyst Day 2006 Munich - September, 28th 2006
Slide 2: Agenda for the Day
Agenda for the Day Time Event Speaker 11.00 – 11.30 Update on Strategy and the Commercial & Military Business Udo Stark 11.30 – 12.00 Q&A 12.00 – 12.20 Overview of New Cost Efficiency Initiatives Reiner Winkler 12.20 – 12.50 Q&A 12:50 – 13:40 Lunch Break 13:40 – 14:10 Future Technology and R&D Dr. R
Slide 3: Update on Strategy and the Commercial & Military Business
Update on Strategy and the Commercial & Military Business Udo Stark, CEO September, 28th 2006
Slide 4: Airlines Continue to Experience Positive Demand 1-7/2006
Airlines Continue to Experience Positive Demand 1-7/2006 Freight Traffic Recovers from 2005 Weakness Billion Revenue Billion Freight Passenger Kilometers Tonne Kilometers • International traffic shows 3 0,2 robust growth in first 7 months of 2006 • Strong passenger traffic combined with record load
Slide 5: Record Oil Prices Enhance Need for Fuel Efficient Engine Technology
Record Oil Prices Enhance Need for Fuel Efficient Engine Technology Jet Fuel and Crude Oil Spot Prices Highlights 110 110 • Fuel prices reached 100 100 again record levels in 90 90 July / August due to situation in Middle-East 80 80 70 70 • Decline since end of August looks 60 60 sustainable 50 50 •
Slide 6: Within Next 20 Years 21.000 New Aircraft to Enter the Market
Within Next 20 Years 21.000 New Aircraft to Enter the Market # of aircraft Fleet in 20 yrs. 25.600 Current Future Corresponding fleet Market: # of New 90+ seats Engines: 14.600 2006-2025: 49.000 21.000 aircraft * 4.600 End 2005 End 2025 * Airliner market (90 + seaters) 6
Slide 7: Key Business Issues Since H1 2006
Key Business Issues Since H1 2006 • Ongoing strong business performance in July and August • Favourable business mix (spare parts) • A380: First flight with GP7200 in August 2006 • Engine with aircraft certification (IASA25) planned for Mid 2007 • Airbus delays have limited impact on MTU (revenue sh
Slide 8: Five MTU strategic pillars
Five MTU strategic pillars 1 Maintain leadership in technology 2 Gain access to fastest growing new engine programs Strengthen core business by accessing related niche 3 businesses 4 Evaluate acquisition opportunities 5 Further improve cost competitiveness 8
Slide 9: 1. Maintain Leadership in Technology
1. Maintain Leadership in Technology Costs requirements Emission requirements Cash Operating Costs -10 - 15 % Noise - 20 - 25% Fuel burn Maintenance CO2 - 15 - 20% - 15 % - 30 % NOx - 80 - 85% Manufacturing - 20 - 30 % 9
Slide 10: 2. Gain Access to Fastest Growing New Engine Programs
2. Gain Access to Fastest Growing New Engine Programs Market Potential Market Potential Upcoming Program EIS Thrust Range # of engines Engines US$ bn Opportunities (2006-25) (2006-25) Commercial OEM Engine for A320/B737 2013/15 20-30klb ~ 15.400 100 Successor A350 XWB-Engine 2012 75-95klb 3.600 60 R
Slide 11: Overall Market Demand 2006-2025: 52.000 Aircraft
Overall Market Demand 2006-2025: 52.000 Aircraft - incl. Narrowbodies, Widebodies, Business & Regional Jets Number of Aircraft Deliveries (2006-2025) PW600 PW500 PW300 10-14K 10-14K 14-20K 20-35K 50-115K Cirrus, RAC, CAC BBD,EMB, CAC, BBD, EMB, BBD EMB, BBD, AVIC, RRJ Airbus, Airbus, CAC CAC DAS,EMB
Slide 12: Market Demand for 90-230 Seat Aircraft Represents 40% of Total Deliveries
Market Demand for 90-230 Seat Aircraft Represents 40% of Total Deliveries 90-230 Deliveries and sales 2006-2025 52.000 114.300 US$ 510 bn aircraft engines engine sales 230 + seats Widebodies 6.300 17.900 US$ 220 90-230 seats Narrowbodies 14.600 31.500 bn US$ 200 20-90 seats bn RJs and Bizjets 31.100
Slide 13: The Most Relevant Single-Aisle Segment is Between 120 and 230 Seats
The Most Relevant Single-Aisle Segment is Between 120 and 230 Seats – With 85% of Total Single-Aisle Market Single-Aisle Deliveries 2006-2025 A318, 737-600, Emb 190/195 A321, 737-900 ARJ21-90, RRJ95 A310, 757, 767-200/200ER 737-500, DC9, MD-87, 717, F100, RJ100, BAe 146-300 175-230 90-120 16% 15% 12
Slide 14: 3. Strengthen Core Business by Accessing Related Niche Businesses
3. Strengthen Core Business by Accessing Related Niche Businesses – especially MRO Segment Disassembly/ Parts Engine Accessory Assembly Repair Lease Repair Test • MTU currently focused on D/A/T and associated repairs • Room for increased service offerings by • Engine Lease • 3rd party parts repair •
Slide 15: 4. Evaluate Acquisition Opportunities
4. Evaluate Acquisition Opportunities MTU Portfolio M&A search criteria • Strategic fit with MTU core business Com. MRO • Financial fit • > 14% EBITDA margins long Mil. Com. term OEM/ OEM MRO • No dilution of MTU margins or EPS • Currently well leveraged portfolio of synergetic business units • M&A
Slide 16: 5. Further Improve Cost Competitiveness
5. Further Improve Cost Competitiveness MTU Efficiency Program Reduction of Reduction of Reduction of Indirect Cost Direct Labour Cost Procurement Cost 16
Slide 17: Overview New Cost Efficiency Initiatives
Overview New Cost Efficiency Initiatives Reiner Winkler, CFO September, 28th 2006
Slide 18: Overview H1 2006 Financial Performance (1/2)
Overview H1 2006 Financial Performance (1/2) Revenues (€ m) EBITDA adj. margin + 12% 1.149 €m 1.026 300 15,0% 13,2% 12,4% 468 10,9% 11,2% MRO 351 + 33% 200 10,0% 10,0% + 39% 140 8,4% Military 204 102 203 + 1% + 77% 52 Business 100 5,0% 30 +22% 75 91 Commercial + 9% (*) Business 480 485 0 0,0% H1 200
Slide 19: Overview H1 2006 Financial Performance (2/2)
Overview H1 2006 Financial Performance (2/2) Cash Flow from Operating Activities Net Income / EPS (underlying) €m €m €/share 233 70 1,2 250 1,0 60 1,0 200 - 48 % 50 0,8 150 40 + 216% 120 0,6 30 100 0,3 55 0,4 20 50 0,2 10 18 0 0 0 H1 2005 H1 2006 H1 2005 H1 2006 Net income EPS 19
Slide 20: FY 2006 Outlook – as Announced on July 26
FY 2006 Outlook – as Announced on July 26 Revenues EBITDA adj. (margin) €m €m +9-10% 2.350 400 15% 2.149 12,3% 10,8% 2.000 300 10% 200 + 25% 1.000 290 233 5% 100 0 0 0% FY 2005 FY 2006 Outlook FY 2005 FY 2006 Outlook Cash Flow from operating activities Net Income / EPS (underlying) €m €m in €/share
Slide 21: MTU Objective: Sustain and Further Improve Top-Line Performance
MTU Objective: Sustain and Further Improve Top-Line Performance Adj. EBITDA (€ m) Revenues (€ m) +20 % + 65 % 290 2.350 2.149 233 1.952 1.918 176 172 2003 2004 2005 2006 2003 2004 2005 2006 Outlook Outlook 21
Slide 22: Industry Environment Remains Challenging
Industry Environment Remains Challenging Airlines require advanced technology combined with low 1 emissions and low operational costs Increased competition among the airlines and entry of 2 low-cost-carriers 3 Current development of US$/€ and raw material pricing Increased engagement of low-cost-cou
Slide 23: Efficiency Program IMPACT100 has Led to € 310 m Savings
Efficiency Program IMPACT100 has Led to € 310 m Savings Efficiency objective was to increase labour productivity, reduce process times and improve supply chain. The restructuring program focused on the reduction of indirect and material costs as well as headcount Cash improvement 2004-2006 Headcount
Slide 24: MTU is now introducing Three Efficiency Initiatives
MTU is now introducing Three Efficiency Initiatives to Further Improve Cost Position Current Efficiency Initiatives Reduction of Reduction of Reduction of Indirect Cost Direct Labour Cost Procurement Cost Efficiency programs established as regular process at MTU 24
Slide 25: 1. Reduction of Indirect Cost
1. Reduction of Indirect Cost Headcount MTU Germany Project: Reduction of Indirect cost Approach: Indirect 3.000 Reduce indirect cost via two main levers: Operations • Complexity reduction and process improvement on-site • Outsourcing / Off-shoring Direct 2.750 R&D General Total German Headcount as
Slide 26: 2. Reduction of Direct Labour Costs
2. Reduction of Direct Labour Costs Headcount MTU Germany Project: Reduction of Direct Costs • Focus on Munich Facility Direct Approach: MUC ~1.700 Indirect • Optimisation of labour hours 3.000 • Reduction of overtime compensations Direct Optimisation of shift models HAN + BER ~1.050 • Introduction
Slide 27: 3. Reduction of Procurement Costs
3. Reduction of Procurement Costs MTU Direct Procurement Costs Project: Reduction of Procurement Cost • Initial Situation: • 47% of total procurement costs are fixed (OEM spare parts for MRO) Finished components • 53% can be influenced by MTU 24% OEM Spares 47% • Approach: Raw Material • Resourcing
Slide 28: Ambitious Targets Combined with Conservative Accounting
Ambitious Targets Combined with Conservative Accounting R&D fully No Capitalisation of expensed OE losses Mid Term Target EBITDA Margin 14% -15% Gross revenue recognition (pre concessions) 28
Slide 29: Future Technology and R&D Investor and Analyst Day
Future Technology and R&D Investor and Analyst Day Dr. Rainer Martens, COO September, 28th 2006
Slide 30: MTU Portfolio: Overview and Outlook
MTU Portfolio: Overview and Outlook "MTU Fleet" Certification / Entry into Service "MTU Fleet" # of Installed Engines*** until 1980 JT8D J79; Tyne CF6-50/80 RB199; T64 1981 - 1990 CF6-80C 17.100 PW2000; V2500 13.100 1991 - 2000 CF6-80E; PW300 PW4000G; PW500 2001 - 2010 PW6000 EJ200 GP7000 MTR390/E P
Slide 31: MTU's Key Competencies
MTU‘s Key Competencies HPC HPT LPT High- High- Low- Low & High Low-pressure pressure pressure pressure pressure turbine compressor turbine turbine compressor PW2000 PW2000 V2500 JT8D FAN PW4000 PW6000 JT8D EJ200 LPC Low- PW6000 RB199 pressure compressor Combustor GP7000 Tyne PW300/500 T64/62 Control
Slide 32: MTU Portfolio: Extended by Intensive Research & Development
MTU Portfolio: Extended by Intensive Research & Development € 1 bn R&D Effort EJ 200 2002 - 2006 € 189 m € 172 m GP 7000 MTR390 PW6000 TP 400 act. 2005 exp. 2006 PW307 32
Slide 33: Next Generation Requirements
Next Generation Requirements Costs Requirements Emission Requirements Cash Operating Costs -10 - 15 % Noise - 20 - 25% CO2 - 15 - 20% Fuel burn Maintenance - 15 % - 30 % NOx - 80 - 85% Manufacturing - 20 - 30 % Additional Increase of Agility/Flexibility of Flight Safety Reliability military Applicat
Slide 34: MTU Technology - Fuel Burn Reduction
MTU Technology - Fuel Burn Reduction Cash Operating Costs (US$) Active Clearance 718 Control 383 718 254 3D Flow Control 383 718 254 383 2100 Casing Treatment More Electric Materials: Engine 254 1428 LEK94 DA 718 588 718plus 0,7 1,7 2,5 US$/gal Fuel Engine Maintenance Aircraft Maintenance Flight Cre
Slide 35: MTU Technology – Engine Cost Reduction
MTU Technology – Engine Cost Reduction (Manufact./Maintenance) Breakdown of Manufacturing Costs Other 21% 40% Airframe High Lift Blading Control 14% system Turbine Blisk/ 25% Blade Clusters Engine Breakdown Maintenance Costs Engine Condition Monitoring 100% 100% MIM Vane 40% Engine 70% Blisk Design,
Slide 36: MTU Technology – Emissions Reduction (Focus on NOx)
MTU Technology – Emissions Reduction (Focus on NOx) traffic volume Heat Exchanger fuel consumption Talon X Burner NOx emission Quench Air Rich Lean new generations of engines RQL (Rich Quench Lean) Combustor … and all fuel burn reduction technologies 36
Slide 37: MTU Technology – Noise Reduction
MTU Technology – Noise Reduction B 727-100 B 737-200 A 319 Noise-optimized Optimized Turbine Design Numbers of Airfoils per Stage 3D Airfoil Design Active Noise Control 85 db isophones Silencer 37
Slide 38: MTU Focus on Next Generation Single Aisle (NGSA) Engine
MTU Focus on Next Generation Single Aisle (NGSA) Engine MTU World Class Component Technology Ready for NGSA Controls & Monitoring • Commercialise military SW & HW • Applied In-Service Monitoring Experience from EJ200 & MRO LP Turbine • Baseline World Class GP7000 and CLEAN • Rig & Materials Program
Slide 39: Continued Development of Various Engine Concepts
Continued Development of Various Engine Concepts to Satisfy Future Requirements Budget in € m 2006 Advanced Turbofan € 38 m Continued development of conventional turbofan to satisfy forthcoming requirements GTF and ATF € 35 m Geared Turbofan Geared turbofan, the high-technology innovative answer als
Slide 40: Know-how Ensured through our Team and Cooperation
Know-how Ensured through our Team and Cooperation Approx. 780 employees in development and testing at MTU Partnership with Science Partnership in Industry European projects Berlin SILENCE(R) TU Hannover TU/DLR/BAM Brauns. TU VOLVO Cottbus BTU Göttingen TU . Jülich KFA MTU Maintenance Dresden Hannove
Slide 41: MRO – MTU Growth Business
MRO – MTU Growth Business Bernd Kessler, President and CEO Commercial Maintenance September, 28th 2006
Slide 42: Highlights 2006
Highlights 2006 Financials • Sales growth of 33% yoy (H106 vs H105) • EBITDA Margin increase of 77% yoy (H106 vs H105) Growth • Contract Wins of US$ 1,2 bn ytd 2006 (Total Contract Value US$ 5,1 bn incl. Zhuhai) • 20 new customers ytd 2006 • Expansion of MTU Hanover (200 new employees, new test cell
Slide 43: World-Wide Commercial MRO Market 2006-2015
World-Wide Commercial MRO Market 2006-2015 Revenues (US$ bn) 35 30 29 ,7% CAG R=6 25 others 20 PW2000 16 Trent JT3/4/8/9 15 V2500 V2500 CF6 10 5 CFM56 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: AeroStrategy Forecast Initiative 2005; all commercial jet aircraft above 25 seats; 3,1% esc
Slide 44: MTU Maintenance Market Coverage
MTU Maintenance Market Coverage Commercial MRO Volume 2005-15: US$ 233 bn MTU Coverage* CFM56 2005 51 19 MTU CF6-80C2 32 PW4000 24 US$ 14 bn V2500 17 RB211 17 51% 49% Trent 14 JT8D 9 MTU capabilities 2015 CF34 8 No MTU participation PW2000 7 MTU GE90 6 US$ 29 bn CF6-50 5 GP7000 0,8 PW300 0,2 45% 55%
Slide 45: MRO Growth Opportunities
MRO Growth Opportunities MTU MAINTENANCE Large Engines Small Engines IGT Repair Services • GP7000 • CF34-10 • New Product • High Tech Repair • Enlarge E-Pool • PW6000 • PW600 Families 3rd Party • Accessories • GE90 • PW307 • Asset Management • US Military • Engineering Services • Trend Analysis • CF
Slide 46: Capacity
Capacity Expansion area at SH (10.000 sqm) 120 Expansion area at SB (40.000 sqm) 100 Expansion area at SZ (>40.000 sqm) 80 New Test cell at SH 90% 90%** 75%* New Cleaning and Inspection at SH 60 Expansion MTU Malaysia 40 50% Continuous Improvement Program 20 40% Portfolio Optimizatio
Slide 47: Major Initiatives to Enhance Financial Performance
Major Initiatives to Enhance Financial Performance [Mio €] 300 11,2% 12% 10,7% 9,8% 247 10% Impact 06 250 8,9% 221 8,2% 8,4% Vendor / Material Cost Reduction 200 7,3% 7,4% 194 187 8% 6,9% 6,7% 173 179 Low Cost Opportunities / Offshoring 158 150 150 6% Integrated Supply Chain Management 133 1
Slide 48: Market Growth in China
Market Growth in China Engine MRO Market Growth in China Comments • Market Volume more than 2,8 % triples between 2005 and = 1 R 2015 CAG • Fastest growing region worldwide 2,0 • Moderate local US$ bn competition 1,0 US$ bn 0,6 US$ bn 2005 2010 2015 Source: AeroStrategy Forecast Initiative 2005; all
Slide 49: Our Presence in China: Benefits and Challenges
Our Presence in China: Benefits and Challenges Benefits Challenges • Secure leading market share in • Cross-Culture Management fastest growing MRO market • Lower Productivity • Secure Base workload through JV partner • Business environment • Access to further licenses • Technology Transfer • Synergi
Slide 50: Joint Venture Partner China Southern Airlines
Joint Venture Partner China Southern Airlines • Largest domestic airline group • 250 active aircraft • 75 (+50) orders • SkyTeam partner from 2007 on • China Southern Air Holding includes China Northern and China Xinjang Capacity Revenues • Xiamen Airlines (60%) (ASM2, M) (US$ bn) • China Postal Air
Slide 51: MTU Maintenance Zhuhai at a Glance
MTU Maintenance Zhuhai at a Glance • Foundation: 2001 • Shareholder: MTU Aero Engines 50%; China Southern Airlines 50% • Size: Land area 156.000 sqm; Shop area 17.000 sqm • Investment: totalling US$ 170 m • Capabilities: V2500-A5 (Market Share 80%); CFM56-3/-5B/-7 (Market Share 30%); standard repair
Slide 52: MRO Segment Financials (incl. MTU Zhuhai 100%)
MRO Segment Financials (incl. MTU Zhuhai 100%) Including MTU Zhuhai €m H1 2006 H1 2006 Revenues 468,0 520,4 Gross profit 64,5 73,0 Gross profit margin 13,8% 14,0% 52
Slide 53: Commercial MRO - Summary
Commercial MRO - Summary Growth will continue to outpace market • Exceptionally strong growth over the last 2,5 years • Significant new contract wins in 2006, strong Sales Pipeline • Major future growth opportunities • Capacity levels secure growth path and leave room for operational gearing Continu
Slide 54: 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