Mtu Aero Engines Ag · XETR:MTX
Mtu Aero Engines — Investor Day (December 2017)
100 slides from Mtu Aero Engines's investor day presentation, Dec 12, 2017
Slide 1: Investor & Analyst Day 2017
Investor & Analyst Day 2017 MTU Aero Engines AG Munich, 12th December 2017
Slide 2: Agenda – MTU Investor and Analyst Day 2017
Agenda – MTU Investor and Analyst Day 2017 Time Agenda Speaker 11:00 – 11:10 Welcome Michael Röger, VP Investor Relations 11:10 – 11:30 MTU’s Market Environment: Reiner Winkler, No Clouds in Sight Chief Executive Officer 11:30 – 12:30 Leading Technology & Cost Leadership Dr. Rainer Martens, Chief Op
Slide 3: MTU’s Market Environment: No Clouds in Sight
MTU’s Market Environment: No Clouds in Sight Reiner Winkler, Chief Executive Officer Munich, 12th December 2017
Slide 4: Key indicators remain in excellent shape
Not much has changed since last year – key indicators remain in excellent shape Demand Mid-late Early '00s Today Influence on demand indicators '00s ✓ Higher rates 1 Backlog 4 yrs 8 yrs 9 yrs needed to meet orders ✓ Step change in 2 Technology status '90s '90s '10s efficiency achieved ✓
Slide 5: Overall backlog represents 9 years of production
Overall backlog represents 9 years of production # a/c on order # years • Higher production (currently 14.000 14 1,450 p.a.) required is naturally turning the backlog 12.000 Narrowbodies 12 into deliveries Widebodies Backlog in years of production • Recent cancellation and 10.000 10 deferral data as
Slide 6: Production plans are justified by backlog
Production plans are justified by backlog Backlog distribution vs. production plans Narrowbody orders Planned production # a/c • Narrowbody backlog equates to 10 years of production 1.600 1.400 alone 1.200 1.000 • By 2020, Airbus and Boeing plan a production rate of 60 800 and 57 aircraft per month
Slide 7: Technology status – MTU applications bring required step change
Technology status – MTU applications bring required step change in cost, performance and comfort Gulfstream G550 Gulfstream G600 (RR BR710) (PW800) Larger cabin New generation flight deck Speed up to Mach 0.925 vs 0.885 A319ceo C Series (V2500) (PW1500) C Series: first single-aisle clean sheet desig
Slide 8: Technology status – MTU applications bring required step change
Technology status – MTU applications bring required step change in cost, performance and comfort A320ceo A320neo (V2500) (PW1100G-JM) 15-17% fuel burn improvement 75% lower noise footprint New routes: 3.700nm vs. 3.300nm 767 787 (CF6-80C) (GEnx) 130 new non-stop routes since EIS 20% lower fuel consu
Slide 9: Cost of debt still historically low
Cost of debt still historically low % 0.8 0.7 0.6 Financial Crisis 0.5 09/11/2001 0.4 0.3 0.2 0.1 0.0 6M LIBOR USD 12th December 2017 Investor & Analyst Day 2017 - Munich 9 © MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.
Slide 10: Airlines continue to enjoy ample funding options
Airlines continue to enjoy ample funding options and cheap access to money 2009 2010 2011 2012 2013 2014 2015 2016 2017F Leasing Companies Capital Markets Commercial Banks Export Credit Agencies Private Equity and Hedge Funds Tax Equity New Sources of Funding Aircraft and Engine Manufacturers Satisf
Slide 11: Oil - strong traffic demand in a low fuel price environment
Oil - strong traffic demand in a low fuel price environment supports the high utilization of MTU engines Crude oil price US Dollars per Barrel (Brent) 120 EIA forecasts another year of low fuel 100 prices with $56 for Brent in 2018 (in line 80 60 with EIU and Oxford Economics forecasts) 40 20 0 20
Slide 12: Park rate at a record low and substantially less retirements
Park rate at a record low and substantially less retirements Industry Stored/parked engine fleet Park rate1) 6.000 15% 5.000 -12% 12% 3.820 MTU outperforms overall 4.000 3.345 9% industry with a park rate of 6.6% 3.000 08% 07% 6% 2.000 3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sep 17
Slide 13: Key indicators status November 2017
Key indicators status November 2017 Status Indicator 2015 2016 2017 Trend Traffic +7.3% +7.4% +7.5% Airline Profits $36 bn $35 bn $35 bn Oil (Brent) $52 $44 $53 Airliner Deliveries 1,397 1,443 ~1,500 Airliner Backlog 13,400 13,400 13,200 Source: IATA, Ascend, EIA 12th December 2017 Investo
Slide 14: Corporate Strategy
Corporate Strategy Balanced Leading Portfolio Technology Benchmark Innovative Competitiveness Culture 12th December 2017 Investor & Analyst Day 2017 - Munich 14 © MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.
Slide 15: Leading Technology: Status Development Programs and Operations
Leading Technology: Status Development Programs and Operations Dr. Rainer Martens, Chief Operating Officer Munich, 12th December 2017
Slide 16: Update: Development milestones of new engine programs
Update: Development milestones of new engine programs PW1500G PW1100G PW1200G PW1400G PW1900G PW800 GE9X T408 C-Series A320neo MRJ MS-21 E-Jets 2nd G500 / B 777X CH-53K Gen G600 First engine to test Tested in flying N/A 2017 N/A testbed Engine certifica- tion 20
Slide 17: MTU’s contribution to the Geared Turbofan (GTF) family
MTU’s contribution to the Geared Turbofan (GTF) family Key components of GTF technology 30% of PW1100G-JM engine assembly at MTU 4 stage HPC front block 3 stage LPT Advanced aero-structural HPC design High speed LPT design • High efficiency • Minimum stage and airfoil count • Robust dynamic behavior
Slide 18: MTU’s contribution to the Geared Turbofan (GTF) family
MTU’s contribution to the Geared Turbofan (GTF) family A very successful product family Medium bypass High bypass direct drive turbofan geared turbofan PW1100G-JM: Airbus A319neo, A320neo and A321neo PW1400G-JM: Irkut MS-21 Large core ~81” Fan PW814: Gulfstream G500 PW1900G: Embraer E190-E2 PW815: G
Slide 19: GTF in-service and flying
GTF in-service and flying Deliveries and in-service experience • 18 airlines are now operating 111 aircraft powered by GTF engines • The engines have already accomplished more than 400,000 flights • Dispatch reliability is still high at 99.9% • Flight test program for other GTF applications (MRJ, MC
Slide 20: OEM production status and ramp-up
OEM production status and ramp-up Ramp-up figures 2009 2017 2020 Turbines 800 1,300 1,750 Compressors 200 750 1,650 Turbine Center 50 250 300 Frames Engine 50 150 300 Assembly Total 1,100 2,450 4,000 Volume increases by a factor of 4 in one decade 12th December 2017 Investor & Analyst Day 2017, Muni
Slide 21: OEM production status and ramp-up
OEM production status and ramp-up Achievements and lessons learnt • Quality is at a high level, internal production challenges have been fixed • Capacities and workload are continuously rising January 2018 January 2019 according to the OEM production strategy LPT module deliveries for GTF engines •
Slide 22: MRO status and ramp-up
MRO status and ramp-up Major MRO sites MTU Maintenance Hannover MTU Maintenance NB + WB engines Berlin-Brandenburg RJ + BJ engines IGT EME Aero – Engine Maintenance Europe MTU Maintenance Canada NB engines NB + WB engines NB + WB accessories MTU Maintenance Zhuhai NB engines MTU Mainte
Slide 23: MRO status and ramp-up
MRO status and ramp-up Achievements and lessons learnt • High workload and utilization at all MRO sites due to high customer demand • MRO production strategy was updated to implement the best allocation of engines 2016 2017 2018 • PW1100G-JM warranty program established at MTU Overall MRO capacity r
Slide 24: MRO expansion strategy
MRO expansion strategy Expansion of MRO capacity with focus on best-cost • Total capacity increase ~50% Capacity needs • High-cost countries: Best-cost short-term increase of locations workforce • Best-cost countries: doubling of capacities High-cost locations • Best-cost share will raise from 2018
Slide 25: MRO expansion strategy: MTU Zhuhai
MRO expansion strategy MTU Zhuhai: Growing portfolio and customer base requires increase of capacity MTU Maintenance Zhuhai Ltd. Max. capacity • 50:50 JV with China Southern since 2001 New engine • Current capacity ~300 shop visits after platforms extension in 2012 (+50%) • Workforce ~800 • ~50% of
Slide 26: MRO expansion strategy: EME Aero
MRO expansion strategy EME Aero: New GTF MRO facility Max. capacity • Company founded December 2017 • 50:50 joint venture with LHT • Total investment of €150m • One product shop: GTF only • Start of operations in 2020 • Work force max. ~ 800 employees • Full utilization of capacity in 2028 2018 2020
Slide 27: Cost Leadership: Higher Automation and Flexibility at MTU Munich
Cost Leadership: Higher Automation and Flexibility at MTU Munich Dr. Rainer Martens, Chief Operating Officer Munich, 12th December 2017
Slide 28: OEM production strategy
OEM production strategy Strategic set-up MTU Aero Engines Munich: High-tech • Sophisticated parts and production processes • Automation • Development of new production technologies • Know-how to support all MTU sites and suppliers MTU Aero Engines Polska: Mid-tech • Adopting established parts and pr
Slide 29: High level of automation
High level of automation Increase in capacity demands higher operator and machine/process hours 1400 1300 Increasing level of automation 1200 1100 1000 900 800 2014 2015 2016 2017 2018 2019 2020 Operator [hrs.] Machine/Process [hrs.] Level of automation was continuously increased in recent years 12t
Slide 30: High level of automation
High level of automation Key elements of the new blisk machining shop • Blisk = Blade Integrated Disk • One-piece-flow • High level of process control Traditional New blisk shop Labor utilization rate • More-machine-operation for every employee • Machine running time more than 6,000 hours p.a. • Cen
Slide 31: High level of flexibility with newest production technologies
High level of flexibility with newest production technologies Flexible manufacturing system for blades and vanes Traditional set-up Advanced set-up Flexible manufacturing system • Fixed tact • Variable tact Same as advanced set-up • One machine for one • One machine for several and: operation operat
Slide 32: Technology Roadmap and Key Enabler
Technology Roadmap and Key Enabler Lars Wagner, Executive Vice President OEM-Operations Munich, 12th December 2017
Slide 33: Key technology drivers and enablers
Key technology drivers and enablers Continuous demand for innovation • Ensure competitiveness based on reliable, attractive products • Achieve aggressive production and maintenance target costs • Strong IP management ensuring effective patent portfolio • Meet challenging environmental goals for: F
Slide 34: Environmental challenges
Environmental challenges CO2 development as an example Relative change 5 Air traffic CO2 emission with Highly- Growth +5% per year business as usual Efficiency +2% per year improved air traffic 4 management 3 Alternative jet fuels 2 New aircraft concepts 1 ICAO & IATA targets: • CO2 neutral growth b
Slide 35: MTU’s approach CLAIRE – Clean Air Engine
MTU’s approach CLAIRE – Clean Air Engine Vision 2020 and Flightpath 2050 targets BASE CLAIRE 1 CLAIRE 2 CLAIRE 3 15% 40% 25% 50% 40% 65% BPR = 5 BPR = 12 BPR > 14 BPR > 20 OPR = 36 OPR = 46 OPR > 60 OPR > 70 BPR: Bypass ratio Geared Next Future OPR: Overall pressure ratio Today’s air traffic between
Slide 36: Future propulsion system development
Future propulsion system development ∆CO2 % / ∆SFC % V2500 - 15% GTF engine - 25% Source: ENOVAL Next generation engine - 40% Future propulsion concepts 2000 2010 2020 2030 2040 2050 Year The Geared Turbofan engine concept offers a substantial improvement potential 12th December 2017 Investor & Anal
Slide 37: Technology roadmap supporting engines for entry into service 2030+
MTU’s leading technology roadmap supporting engines for entry into service in 2030+ Additional 10% CO2 and noise reduction relative to GTF engines CLAIRE 2 25% 50% BPR > 14 OPR > 60 Next generation engine Technology roadmap established to achieve demanding next generation engine targets 12th Decembe
Slide 38: Additive manufacturing
Additive manufacturing Increase of complexity and share of AM parts in aero engines AM parts in aero engines Light weight Airfoils highly functional 30% bionic design … 15% More complex static parts Substitution Blades with 10% of castings complex cooling system 5% Source: CIAM* 2015 2020 2025 2030
Slide 39: Intensive use and development of simulation tools
Intensive use and development of simulation tools Integrated computational manufacturing and materials engineering (ICM2E) Manufacturing processes: Material development: • Reduction of machining trials • Numerical design of new materials • Optimization of tools and CNC processes • Predict texture an
Slide 40: Conclusion
Conclusion • Development milestones for all new engine programs are secured • GTF engines have proven their game changing performance • Corrective actions have been implemented to increase GTF reliability and durability • 2018 and 2019 will see highest OEM growth rates triggered by GTF • MRO workloa
Slide 41: Site plan of MTU in Munich
Site plan of MTU in Munich GTF 3 Testcell 4 Museum 5 Blisk 4 facility 3 Canteen 2 002 GTF 1 assembly line 12th December 2017 Investor & Analyst Day 2017 - Munich 41 © MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.
Slide 42: MTU goes Digital
MTU goes Digital Michael Schreyögg, Chief Program Officer Munich, 12th December 2017
Slide 43: Impact of digitization on MTU‘s business model
Impact of digitization on MTU‘s business model In B2C industries, Media digitization partly leads Impact on product, business model Services to a serious change in Trade / Commerce Finance/ Banking B2C the business model (“Disruptive“) Insurance Auto- Logistics mobile MTU MRO For companies in B2B MT
Slide 44: Digitization@MTU focus on 4 areas of activity
Digitization@ MTU focus on 4 areas of activity Technology 4.0 Work 4.0 Production 4.0 MRO 4.0 12th December 2017 Investor & Analyst Day 2017 - Munich 44 © MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.
Slide 45: Work 4.0
Work 4.0 Unified collaboration & communication (UCC) Continuous improvement of digital Robotic process communication and collaboration, automation regardless of medium, place and device Automation of repetitive adminstrative tasks as well as ordering and procurement processes increase in workflow
Slide 46: Technology 4.0
Technology 4.0 Digital twin Pooling together value adding data from development activities to MRO Material & manufacturing simulation Achievement of considerable savings in development and Virtual engine testing of new materials and Design, development, manufacturing techniques by manufacturing, ass
Slide 47: Digital twin – Enabler for efficient and adaptive production
Digital twin – Enabler for efficient and adaptive production processes Design Planning and simulation process Product lifecycle Production Learn Product lifecycle management as basis for the Optimize digital twin Manage Recycling Repair Planning and Simulation of repair process Operation and MRO 12t
Slide 48: Production 4.0
Production 4.0 Intelligent machine control Digital control of largely automated processes including consideration of all necessary resources Additive manufacturing Ensures process capbilitiy and industrialization of additive manufacturing Optimized material Optimization of turn around flow/Logistics
Slide 49: MRO and aftermarket 4.0
MRO and aftermarket 4.0 Predictive maintenance (ETM) Engine Trend Monitoring monitors the condition of engines during flight and after Predictive analytics Analyze comprehensive and complex data volumes for patterns and correlations 12th December 2017 Investor & Analyst Day 2017 - Munich 49 © MTU Ae
Slide 50: Predictive analytics improves engine lifecycle management
Predictive analytics improves engine lifecycle management Data creation and usage within MTU Data Sources Data applications Simulation Development & production MTU data pool MRO inspections & Lifecycle advanced analytics management Engine usage MTU leverages its big data pool and modern advanced ana
Slide 51: The ‘big five’ digitization projects are already in implementation
The ‘big five’ digitization projects are already in implementation Timeline overview 2017 2018 2019 2020 2021 2022 Digitization Integrated Digitization Competence Teams (Business + IT) Strategy ‘Big Five’ Projects Robotic process Group-wide automation Roll-Out Digital twin Roll-Out to Intelligent ma
Slide 52: Military Business – Defense budget - driver for future growth?
Military Business – Defense budget - driver for future growth? Michael Schreyögg, Chief Program Officer Munich, 12th December 2017
Slide 53: German Defense Budget (in bn €)
German defense budget 2018-2025 will increase in average by €1.3 bn or 3.4 % (nominal) annually 49.5 47.6 45.8 44.0 40.9 42.3 38.4 39.6 37.0 German Defense Budget (in bn €) 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: BDLI; MTU estimates 12th December 2017 Investor & Analyst Day 2017 - Munic
Slide 54: German defense budget equals 1.2% of the GDP on average
German defense budget equals 1.2% of the GDP on average Annual growth rate of ~3.4% confirmed by German government 2% 2% 2% 2% 2% 2% 2% 2% 2% 1.3% 1.3% 1.2% 1.2% 1.2% 1.2% 1.2% 1.3% .1.2% 2017 2018 2019 2020 2021 2022 2023 2024 2025 2% Defense Budget Target Actual Defense Budget % Source: BDLI To re
Slide 55: Military aircraft equipment equals 5-6% of German defense budget
Military aircraft equipment equals 5-6% of total German defense budget Investment in military aircraft equipment expected to increase by ~5% annually 60 6% 5.7% 5.7% German defense budget (in € bn) 5.6% 5.6% 50 5.5% 5.4% 5.2% 5.3% 40 30 4.8% 5% 20 10 0 4% 2017 2018 2019 2020 2021 2022 2023 2024 2025
Slide 56: Military business outlook
Military business outlook 2017 2020 2025 2030 2035 Fighter, trainer Eurofighter EJ200 Eurofighter Upgrade, Tranche 1 replacement NGWS Transport A400M TP400 KC390 V2500 Helicopter CH-53K T408 Export Eurofighter A400M CH-53K Kuwait, Qatar Saudi Arabia Export potential Export potential 12th 1
Slide 57: NGWS market landscape – potential partner countries
NGWS market landscape – potential partner countries Gripen supplement Tornado replacement Rafale add on F18 replacement JSF partner countries NGWS “initiator” Potential NGWS Partner Nations (D, F, SP and SW) 12th December 2017 Investor & Analyst Day 2017 - Munich 57 © MTU Aero Engines AG. The inform
Slide 58: MTU Military revenue outlook 2017 to 2027 (in €m)
MTU Military revenue outlook 2017 to 2027 (in €m) Series Aftermarket/services Upside mainly through export ~ €500 m ~ €450 m ~ €400 m 2017 2022 2027 • TP400 ramped up • T408 strong revenue • Strong export potential contribution 12th December 2017 Investor & Analyst Day 2017 - Munich 58 © MTU Aero En
Slide 59: MRO Strategy – Mastering future growth
MRO Strategy – Mastering future growth Michael Schreyögg, Chief Program Officer Munich, 12th December 2017
Slide 60: MRO revenues increased over proportionally over the last 2 years
MRO revenues increased over proportional over the last 2 years MRO revenues 2015 – 2017 (in € m) CAGR 2015 – 2017 (organic (US$)) Total Market High single digit MTU-MRO Up high teens MRO revenues grew stronger than the market Organic (US$) up mid to ~2,200 Main revenue driver: high teens 1,914 V
Slide 61: MTU Maintenance centers of excellence
MTU Maintenance centers of excellence MTU Maintenance Hannover MTU Maintenance Revenue growth 2017 ~20% Berlin-Brandenburg NB + WB engines Revenue growth 2017 ~20% BJ + RJ + IGT MTU Maintenance Canada NB + WB engines MTU Maintenance Zhuhai NB + WB accessories Revenue growth 2017 ~20%
Slide 62: Future MRO volume growth mainly driven by new engine platforms
Future MRO volume growth mainly driven by new engine platforms No. of shop visits MTU is very well positioned in the CAGR 2016-2027 MRO market: Market Low single digit MTU served market Mid to high single digit 2 different points of access: CAGR MTU served market independent, OEM co-operation La
Slide 63: New engine platforms sold with OEM flight hour agreements
As the majority of new engine platforms are sold with OEM flight hour agreements more shop visits will be subcontracted by the OEM Today’s Revenues (2017) Future Revenues (2027) EBIT adj. Margin low to mid single digit OEM co- CAGR OEM operation cooperation ~10% Independent Independent EBIT adj. Mar
Slide 64: Expansion of MRO capacity with clear focus on best cost
Expansion of MRO capacity with clear focus on best cost initiated Capacity needs vs. availability Capacity needs Total capacity increase ~50% Best cost High cost countries: locations short-term increase of workstaff Low-cost countries: doubling of capacity Low-cost portion to total High cost
Slide 65: Measures to increase profitability
Measures to increase profitability Labor cost is not the only way to improve profitability Cost structure MRO (i.e. V2500 Indep.) Measures of cost reduction Expand low-cost footprint Added Value Repair development, repair licences, low cost shops (Labor etc.) Gain access to used material through tea
Slide 66: MTU MRO “Three X“ strategy
MTU MRO “ Three X“ strategy adresses key elements to secure profitable growth Alignment of sales structure and focus on cooperations with airlines, lessors and Sales strategy OEMs. Offering TEC® and integrated solutions such as leasing, alternatives to MRO, Service portfolio engine life extension an
Slide 67: Future landscape of MRO locations
Future landscape of MRO locations MTU Maintenance Hannover MTU Maintenance Short-term increase in Berlin-Brandenburg personnel New logistics center GTF maintenance Expansion of BJ portfolio Expansion repair EME AERO MTU Maintenance technologies New GTF MRO shop Canada 50:50 JV with LHT
Slide 68: Introduction of the GTF: Keeping a long term perspective
Introduction of the GTF: Keeping a long term perspective (compared to the V2500) Michael Schreyögg, Chief Program Officer Munich, 12th December 2017
Slide 69: Bold technology required to deliver step changes
Bold technology required to deliver step changes in fuel burn, range and noise JT8D V2500 PW1000G • Entry into Service (EIS) 1964 • EIS 1989 • EIS 2016 • <22 klbf • <33 klbf • <35 klbf • Bypass ratio 1.0-2.0 • Bypass ratio 5.0 • Bypass ratio 12.0 • 18% improved fuel efficiency • Gear technology • Im
Slide 70: Pioneering engine programs have rarely been exempt from introductory issues
Pioneering engine programs have rarely been exempt from introductory issues V2500 PW1000G • 1983-88 • 2011-15 R&D • Early development shortcomings • No major issues • 100 engines delivered in first 2 years • 500 engines delivered in first 2 years • Early technical removals and • Early technical remo
Slide 71: The GTF history in numbers
The GTF history in numbers Cumulated 5000 aircraft orders (incl. options) Cumulated flight hours (in m) 4000 V2500 PW1000G V2500 PW1000G 5 4 3000 3 2000 2 1000 1 0 0 EIS-5 EIS-4 EIS-3 EIS-2 EIS-1 EIS EIS+1 EIS EIS+1 EIS+2 EIS+3 1984 1989 1989 2011 2016 2016 Unprecedented ramp-up for MTU and its part
Slide 72: Fast-growing engine fleet to peak at 15,000
MTU expects the fast-growing engine fleet to peak at 15,000 Number of installed engines PW1000G V2500 PW1000G successor? EIS EIS+10 EIS+20 EIS+28 1989 1999 2009 2017 2016 2026 2036 2044 The GTF engine fleet will outnumber its predecessors by a factor >2 Source: MTU 12th December 2017 Investor & Anal
Slide 73: Fleet requirement will lead to unprecedented aftermarket demand
Fleet requirement will lead to unprecedented aftermarket demand Number of scheduled shop visits PW1000G V2500 PW1000G successor? 1989 TODAY 2025 2040 EIS EIS The GTF family is forecast to peak at 2 to 3 times what the V2500 is experiencing Source: MTU 12th December 2017 Investor & Analyst Day 2017 -
Slide 74: Geared Turbofan @ MTU: The long term perspective
Geared Turbofan @ MTU: The long term perspective ~$90 bn ~15,000 Revenues engines ~1 bn ~50,000 flight hours shopvisits ...looking forward to answering your questions! 12th December 2017 Investor & Analyst Day 2017 - Munich 74 © MTU Aero Engines AG. The information contained herein is proprietary to
Slide 75: MTU’s Financials and Outlook: Ramping up Cash Conversion
MTU’s Financials and Outlook: Ramping up Cash Conversion Peter Kameritsch, SVP Finance Munich, 12th December 2017
Slide 76: Contents
Contents 1. IFRS15 @ MTU 2. Updated Order Book Definition 3. Review Investment Phase 2014 – 2017 4. Outlook 2018 5. Long Term Outlook 6. Cash Deployment Strategy 12th December 2017 Investor & Analyst Day 2017 - Munich 76 © MTU Aero Engines AG. The information contained herein is proprietary to the M
Slide 77: IFRS 15 @ MTU – Implications on MTU accounts
IFRS 15 @ MTU – Implications on MTU accounts Main accounting issues Current accounting Future accounting Payments to customer (OEM) Cost of goods sold Reduction in revenue 1 to compensate program expenses, e.g. concessions Capitalized program entry fee Amortization of capitalized Amortizatio
Slide 78: IFRS 15 reconciliation based on FY 2016 results
IFRS 15 @ MTU – reconciliation based on results FY 2016 (in € m) Pre IFRS15 Post (as reported) IFRS15 1 2 3 4 FY2016 FY2016 -1.445 -1.378 -40 -8 -18 Revenues 4.733 3.288 -18 0 0 0 -17,7 EBIT adj. 503 485 10.6% 14.8% Margin Margin 12th December 2017 Investor & Analyst Day 2017 - Munich 78 © MTU Aero
Slide 79: Updated order book definition
Updated order book definition Main changes Old definition New definition IFRS15 Order book definition corresponds to IFRS 15 revenue recognition scheme (i.e. net-revenue basis) IAE/GE long-term service Considered only in MRO for Consideration in both segments with agreements (FHAs) max. 10 yea
Slide 80: Order book reconciliation Dec. 31st 2016
Updated order book definition Reconciliation based on order book Dec. 31st 2016 (in € bn): +0.1 -6.5 +6.1 +4.1 -2.3 -1.4 14.2 14.3 Order Book IFRS 15 Inclusion OEM Inclusion OEM Consolidation Price Basis Order Book 2016 as FHAs FHAs 2016 2016 NEW reported OEM segment OEM segment MRO segment Group MR
Slide 81: Flashback CMD 2015: Long-term outlook 2014-2025
Flashback CMD 2015: Long-term outlook 2014-2025 - our initial commitments Investment phase 2014-2017 Consolidation phase 2018-2025 Revenues Military: Military: Com. OE: Com. OE: Com. spares: Com. spares: Com. MRO: Com. MRO: EBIT adjusted Growth in line with revenue Growth stronger than revenue Net I
Slide 82: Our status today: Stronger aftermarket and delay in new programs
...our status today: Stronger aftermarket and delay in new programs Organic revenue growth 2014A 2015A 2016A 2017G 2014-17 CMD2015 Military: Commercial OE: Commercial Spares: Commercial MRO: Compared to our initial planning we faced a stronger than expected demand in aftermarket (Spares & MRO) and a
Slide 83: Change in business mix led to overperformance in investment phase
The bottom line: Change in business mix lead to an overperformance in investment phase 2014 A 2015 A 2016 A 2017 G 2014 - 2017 EBIT adjusted Growth stronger than ~10% ~10% ~11% ~12% Margin revenue Growth stronger than Net Income adj. € 253 m € 307 m € 345 m ~€ 420 m EBIT CCR* 17% 22% 24% ~33% Low do
Slide 84: The year 2018: Transition into consolidation phase
The year 2018: Transition into consolidation phase Tailwinds will overcompensate headwinds from GTF growth Doubling of GTF volumes drives up OE losses + Improved margin from OE business due to lower cost per unit + Ongoing strong growth of aftermarket (Com. Spares & MRO) ± Retrofit shopvisits for
Slide 85: The year 2018: Transition into consolidation phase
The year 2018: Transition into consolidation phase 2018 Main drivers Military: Stable Commercial OE: Up ~30% Commercial Spares: Up mid single digit Commercial MRO: Up in the high teens EBIT adj. Moderate progression Free Cashflow Growth stronger than Net Income adj. (CCR* up) * Cash Conversion Rate
Slide 86: 2019 onwards: further consolidation of EBIT and Free Cashflow
2019 onwards...further consolidation of EBIT and Free Cashflow Long-term trends at MTU 2019 - 2025 + Further improvement of OE margins due to pricing + OE growth will stabilize from 2019 onwards + Ongoing strong growth of spares and MRO business + Spares sales growth will outperform OE growth MRO
Slide 87: Long term outlook 2019-2025 update
Long term outlook 2019-2025 update: Improved Free Cashflow conversion reconfirmed Consolidation phase 2019-2025 Net income adj. Steady growth Growing less than revenues + No consumption of prepayments Working capital + Inventory turns will improve + More FHAs with preferential Cashflow profile Will
Slide 88: Cash deployment 2019-25
Cash deployment 2019 - 25 Main targets in Consolidation Phase Keep investment grade rating Limit de-leveraging Increased participation of shareholders in returns Remain prepared for next investment phase after 2025 MTU´s target is a balanced leverage ratio in the range of 1 x net Debt / EBIT
Slide 89: Cash deployment 2019-25: The instruments
Cash deployment 2019 - 25: The instruments Investment phase Consolidation phase Prio Instrument 2014-17 2018 - 25 Investment in Strong investment Limited I organic growth in new programs opportunities Dividend Growth in line with Growth stronger II deployment net income than net income Share buy
Slide 90: ...looking forward to answering your questions!
...looking forward to answering your questions!
Slide 91: MTU’s route 2030
MTU’s route 2030 Reiner Winkler, Chief Executive Officer Munich, 12th December 2017
Slide 92: Global aircraft engine market expected to continue growth
Global aircraft engine market is expected to continue its growth path in the next 10 years Global aircraft engine market volume (excl. Turboprops) $bn CAGR 180 Low to mid Mid single High single CAGR Total Market 2017-27: Mid to high single digit single digit digit digit - Commercial MRO (incl. Spare
Slide 93: Corporate Strategy
Corporate Strategy Balanced Leading Portfolio Technology Benchmark Innovative Competitiveness Culture 12th December 2017 Investor & Analyst Day 2017 - Munich 93 © MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.
Slide 94: Possible new program opportunities in the narrowbody market
Possible new program opportunities in the narrowbody market NB In production Future programs A321neo NGSA Airbus A320ceo/neo A321neo stretch? MAX8/9/7 NGSA Boeing 737NG MAX10 C Series CS 300 stretch? Potential Next C919 Generation Single Aisle(s) (NGSA) from new entrant(s) MS-21 Entry into Source: M
Slide 95: Widebody – landscape seems to be set mid term
Widebody – landscape seems to be set mid term WB In production Future programs A380-800 A350-1000 stretch? A350-900 A350-1000 A330 successor? A330neo A330-200/300 747-8I/F 777-9 stretch? 777-9 777-300ER 777-8 787-10 787-9 787 successor? 787-8 NMA (MoM)? Entry Into Source: MTU 2017 2030 Service If ne
Slide 96: MTU is targeting growth by extending RSP share
MTU is targeting growth by extending RSP share in future programs Accessories/ ACC/EXT Externals MTF / TCF FDGS Fan LPC HPC CC HPT LPT TEC Combustor Compressor Turbine MTU responsibility in existing engine programs MTU has excellent expertise in various components and is well positioned to increase
Slide 97: MTU Strategic roadmap 2030
MTU Strategic roadmap 2030 2017 2020 2025 2030 OEM partnering With PW and GE + Higher program shares Balanced 1 Independent MRO & airline partnering # 1 in indep. MRO Portfolio Military business Export, NGWS Integrated HPC and high-speed LPT & TCF Gen2 GTF, adv. TCF Leading 2 New materials & advance
Slide 98: Strategic overview of programs and initiatives
Coatings MRO-/Repair Licenses G E 3 0 0 0 GE9X Integrated HPC & high-speed PW800 EJ200 Airline JV LPT, TCF Digital JTP-PW NGWS TP400 G Enx Suc c . GP7000 T e s t - & JTP-GE Upgr. GE90 MRO GTF NMA Adv. LPT, HPC & Twin LPC R e p a i r D e v e l o p m e n t Simulationszentrum Turbo-Electric Engine PW40
Slide 99: 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 100: 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