Mtu Aero Engines Ag · XETR:MTX
Mtu Aero Engines — Investor Day (December 2016)
68 slides from Mtu Aero Engines's investor day presentation, Dec 14, 2016
Slide 1: Investor & Analyst Day 2016
Investor & Analyst Day 2016 MTU Aero Engines AG Rzeszów, 14th December 2016
Slide 2: Agenda – MTU Investor and Analyst Day 2016
Agenda – MTU Investor and Analyst Day 2016 Time Agenda Speaker Michael Röger, 9:00 – 9:10 Welcome VP Investor Relations MTU’s Market Environment: Reiner Winkler, 9:10 – 9:30 The Cycle Continues Chief Executive Officer Technology Leadership Dr. Rainer Martens, 9:30 – 10:40 Cost Leadership Chief Opera
Slide 3: MTU's Market Environment: The Cycle Continues
MTU’s Market Environment: The Cycle Continues Reiner Winkler, Chief Executive Officer Rzeszów, 14th December 2016
Slide 4: Market indicators support our end customers
Market indicators support our end customers 2015 2016 Oil $52 $43 Continuing low fuel prices … Airline Customers Traffic growth +7.4% +6.2% … stimulates traffic via low fares Load factors 80% 81% Load factors at a historical peak 14th December 2016 Investor & Analyst Day 2016, Rzeszów 4 © MTU Aero E
Slide 5: Market environment supports new engine deliveries as well as engine aftermarket
Market environment supports new engine deliveries as well as engine aftermarket 2015 2016 Engine Deliveries 3,130 3,150 Delivery rates are expected to go up Deliveries Backlog 26,030 26,150 Backlog will turn into deliveries Fleet growth +5.0% +5.2% Fleet growth has been above average over the last f
Slide 6: MTU's continuous growth is supported by all market segments
MTU’s continuous growth is supported by all market segments OEM market volume ($bn) 140 CAGR Aircraft CAGR 2016-2026 segment 120 Total market Mid to high single digit 100 Mid single digit Widebody (50-120 klb) 80 60 Mid single digit Narrowbody (20-50 klb) 40 20 High single digit Regional jet (13-24
Slide 7: Over-proportional growth in three out of four segments
Over-proportional growth in three out of four segments Increasing market shares, program shares and new business segments Above average growth Business jets Regional jets Narrowbodies Widebodies Regional jets New segments New segments Existing market Partner in all new GE acquired acquired share inc
Slide 8: MTU achieved higher CAGRs than industry average during good times
MTU achieved higher CAGRs than industry average during good times and was less influenced by crises in bad times Sales CAGR '00-'04 '04-'07 '07-'11 '11-'15 '00-'15 9/11, SARS, Iraq Financial crisis Aerospace engines Vehicles incl. planes Manufacturing All sectors Source: MTU internal, Oxford Economi
Slide 9: Main indicators that influence the resilience of our industry
Main indicators that influence the resilience of our industry Demand Early '00s Mid-late Today Influence on Demand indicators '00s ✓Higher rates needed to Backlog 4 yrs 8 yrs 8 yrs meet orders Technology ✓ Step change in efficiency status '90s '90s '10s achieved ✓ Easier access to financ
Slide 10: Conclusion
Conclusion MTU's market is in excellent shape: No indictation of weakness of demand MTU has the right portfolio: MTU has positioned itself better than ever to move forward MTU is reliable: In the past, MTU weathered well through all times 14th December 2016 Investor & Analyst Day 2016, Rzeszów 10 ©
Slide 11: Technology Leadership
Technology Leadership – Status Development Programs and Production Ramp-up Dr. Rainer Martens, Chief Operating Officer Rzeszów, 14th December 2016
Slide 12: Geared Turbofan – flying in-service
Geared Turbofan – flying in-service First Geared Turbofan engine flights Bombardier CS100: 16.09.2013 Airbus A320neo: 25.09.2014 Bombardier CS300: 27.02.2015 Mitsubishi Regional Jet: 11.11.2015 Airbus A321neo: 09.03.2016 Embraer E190-E2: 23.05.2016 Irkut MS-21: open Embraer E175-E2: open Six maiden
Slide 13: Geared Turbofan – flying in-service
Geared Turbofan – flying in-service A very successful new product family High Bypass Geared Turbofan Engines PW1100G-JM / A319neo, A320neo and A321neo Medium Bypass PW1400G-JM / Irkut MS-21 Direct Drive Turbofan Large core ~81” Fan PW1900G / Embraer E190-E2 PW814 / Gulfstream G500 PW1500G / BA C Ser
Slide 14: Geared Turbofan – flying in-service
Geared Turbofan – flying in-service Deliveries and in-service experience • Nine airlines are now operating over 30 aircraft powered by Geared Turbofan engines • The engines have already accomplished more than 17,000 flights • The dispatch reliability is already very high in early phase • Early teeth
Slide 15: Geared Turbofan – flying in-service
Geared Turbofan – flying in-service Features and metrics of PW1100G-JM Source: P&W • 25% fewer stages FDGS 2 stg HPT • Higher propulsive 3 stg LPC 3 stg LPT efficiency • 45% fewer airfoils 8 stg HPC • Higher low spool • Lower cycle component temperature efficiency • Shorter, lighter Fuel Burn Redu
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 -JM MRJ MS-21 2nd Gen G500 / B777x CH-53K A320neo E-Jets G600 First engine to test Tested in flying N/A 2017 N/A testbed Engine certifica- tion 2017
Slide 17: Update: Production ramp-up
Update: Production ramp-up Key ramp-up projects New blisk shop Optimize rotor and stator production lines Progress status Progress status In operation In operation Extension of MTU-AE Polska Engine assembly Progress status Progress status In operation In operation Logistics building Shop floor manag
Slide 18: Update: Production ramp-up
Update: Production ramp-up Production rates 2009 2015 2020 Turbines 800 1150 1850 Compressors 200 320 1580 Turbine center 30 380 350 frames Engine assembly 30 110 290 Total 1060 1960 4070 +10% +15% Yearly increase Yearly increase Volume increases step by step 14th December 2016 Investor & Analyst Da
Slide 19: Update: Production ramp-up
Update: Production ramp-up Geared Turbofan target costs and achievements Unit costs • Quality is at a high level: Production target Production and supplier costs after challenges have been fixed Today 250 engines • Volume is increased step by step • Lead times are on track • Actual costs are within
Slide 20: Cost Leadership – Production Strategy for Best-Cost
Cost Leadership – Production Strategy for Best-Cost Dr. Rainer Martens, Chief Operating Officer Rzeszów, 14th December 2016
Slide 21: Production strategy for best-cost
Production strategy for best-cost Major company sites MTU Aero Engines Headquarters in Munich MTU Maintenance Hannover Aerospace Embedded Solutions MTU Aero Engines Polska MTU Maintenance Canada Ceramic MTU Maintenance Zhuhai Coating Center 50% MTU; 50% China Southern MTU AENA Airfoil Services (ASSB
Slide 22: OEM production strategy
OEM production strategy Strategic set-up High-tech Mid-low-tech Raw material, mid-low-tech MTU Aero Engines Munich MTU Aero Engines Polska Supplier • Sophisticated parts and • Adopting established parts • Raw parts production processes and production lines • Finished parts as second • Automation • I
Slide 23: OEM production strategy
OEM production strategy Highly-automated blisk machining shop in Munich Target Flexible manufacturing system Key factors • Suitable product portfolio • Efficient processes and structures • Stable processes • High utilization rate • High flexibility and reaction time Operating figures ~1,100 blisks p
Slide 24: OEM production strategy
OEM production strategy Labour and machining hours trend in Munich Production rate Machining hours Labour hours +108% +34% +6% 2015 2020 2015 2020 2015 2020 Higher automation makes future production more efficient 14th December 2016 Investor & Analyst Day 2016, Rzeszów 24 © MTU Aero Engines AG. The
Slide 25: OEM production strategy
OEM production strategy Engineering, operations and services at MTU Aero Engines Polska Major business • Engineering and operations areas • V2500 IAE upshare: Externals and accessories center • Services: IT, procurement, production planning, production tooling design Operating figures ~ 110,000 part
Slide 26: OEM production strategy
OEM production strategy History and company development at MTU Aero Engines Polska June 2007 Supervisory board April 2008 approval First ground August 2008 broken Construction phase April 2009 started Production Dec. 2012 start Complete Shop floor in June 2012 operation V2500 IAE Dec. 2014 upshare C
Slide 27: MRO production strategy
MRO production strategy Engine MRO at MTU Maintenance Zhuhai Co. Ltd. Major business • Engine MRO areas • On-wing services • Standard repairs • MRO-related services Operating figures ~ 250 engine shop visits (YE 2016) ~ 750 employees Labour costs per hour Average high-tech sites MTU MRO Zhuhai MTU M
Slide 28: MRO production strategy
MRO production strategy Parts repair at Airfoil Services Sdn. Bhd. (ASSB) Major business • Repair of high-pressure compressor areas (HPC) airfoils • Repair of low-pressure turbine (LPT) airfoils Operating figures ~ 440,000 parts repaired (YE 2016) ~ 450 employees Labour costs per hour Average high-t
Slide 29: Site selection and benefits
Site selection and benefits Three-step model for site selection Step 1: Step 2: Step 3 “deep dive”: Evaluation of possible Pre-selection of countries Close-pitch selection of countries and regions and regions 2-3 countries 1-2 regions each Total cost of Labour cost vs. operation vs. skilled labour e
Slide 30: Site selection and benefits
Site selection and benefits OEM benefits and achievements 2009 2015 2020 • Total production will grow approx. 15% per year, from 2015 to 2020 Total production rates 1060 1960 4070 • Headcount in Munich will remain stable through increased efficiency and Headcount benefits from production 4430 4410 4
Slide 31: Industry 4.0 @ MTU
Industry 4.0 @ MTU Dr. Rainer Martens, Chief Operating Officer Rzeszów, 14th December 2016
Slide 32: Industry 4.0 projects and digitalization
Industry 4.0 projects and digitalization MRO and Research and Production and Aftermarket- Development Supply Chain Services • Product design/ • Manufacturing • Predictive virtual engine execution system maintenance (MES) • Engine Trend • Simulation in material • Optimized material Monitoring Industr
Slide 33: Virtual engine – product design 4.0
Virtual engine – product design 4.0 Technology roadmap key enabler Virtual Engine • Intensified use and development of highly capable simulation methods for all engineering disciplines as well as manufacturing of engine parts and modules Goal • Reduction of cost-intensive testing of materials, parts
Slide 34: Additive manufacturing – the cornerstone has been laid
Additive manufacturing – the cornerstone has been laid Very promising new technology Commercial & Military Business Boroscope eye Sealing carrier Bearing chamber Cost reduction Up to 30% Weight reduction Up to 10% Certification 2013 2019 2020 Additive manufacturing offers distinct functional and c
Slide 35: Conclusion
Conclusion • Geared Turbofan engine generation has entered service and meets all targets • Development milestones for all new engine programs are secured • Several new programs are about to enter service or already in-service • Major ramp-up projects done. Quality, volume and cost on track • OEM and
Slide 36: MTU's Partnership Strategy: Teaming up for Growth
MTU's Partnership Strategy: Teaming up for Growth Michael Schreyögg, Chief Program Officer Rzeszów, 14th December 2016
Slide 37: MTU's strategic objectives in a long term business environment
MTU’s strategic objectives in a long term business environment • Substantial up front investment Risk mitigation • Long-term product cycles require a balanced portfolio Access to Benchmark growing markets competitiveness • Strongly growing • Strong competition engine programs • Portfolio expansion L
Slide 38: General Electric: Reliability in a long-term partnership
OEM MRO Com. Milit. General Electric: Reliability in a long-term partnership Focusing on widebody segment and US military market access Next engine generation Expanding OEM/MRO presence network in WB Increase in responsibility partner R&D CF34 responsibility MRO for TCF Access to US Military RRSP ma
Slide 39: Pratt & Whitney: Exclusive collaboration
OEM MRO Com. Milit. Pratt & Whitney: Exclusive collaboration Increase our market presence and expand our responsibilities Next engine generation Future GTF technology EIS GTF Increase in responsibility Technology engines footprint for Engine HPC lease Footprint in IAE Exclusive Business jets upshare
Slide 40: Return on investment in the commercial engine business
OEM MRO Com. Milit. Return on investment in the commercial engine business V2500 PW2000 CF6-80 A320 PW4000 LM6000 757, C-17 747, 767, IGT 777 A300, A310, A330 + Cumulative cash flow Entry into service GE9X GP7000 777X GEnx A380 Calendar - 0 787 40 years PW1000G-family 747-8 after A320neo, E2-Jet, C
Slide 41: MTU Aero Engines partnering with OEMs
OEM MRO Com. Milit. MTU Aero Engines partnering with OEMs Well established in all market segments • Excellent technology • Long-term relationship • Strategic collaboration • Benchmark production costs • Market leader in widebody • Improving market position in • Reliable partner in terms of segment b
Slide 42: MTU Aero Engines cooperating with the German Armed Forces
OEM MRO Com. Milit. MTU Aero Engines cooperating with the German Armed Forces Performance based logistics & service concept Private Public Increase in responsibility Partnership Integrated services Classic License MRO manufacturing … 1950s 1960s 1970s 1980s 1990s 2000s 2010s 2020s… J79 RR250 RB199 E
Slide 43: MTU Aero Engines and the German Armed Forces
OEM MRO Com. Milit. MTU Aero Engines and the German Armed Forces Saving cost, time and resources 60 • Customer since 1956 • Private Public Partnership since 2002 years • Employees: 75% MTU; 25% Armed Forces Since 2002 900 Engines • Engine, module and parts repair • Technical and logistical support •
Slide 44: Evolution of our MRO service portfolio
OEM MRO Com. Milit. Evolution of our MRO service portfolio Increasing airline demand for full MRO service packages GTF JV Increase in responsibility Full-service packages GE Additional Integrated OEM/MRO services services independent IAE MRO OEM/MRO Classic MRO Increasing local presence worldwide …
Slide 45: MTU Maintenance and Lufthansa Technik
OEM MRO Com. Milit. MTU Maintenance and Lufthansa Technik Best-cost for engine parts repair 25 • 50:50 partnership with Lufthansa Technik since 2003* • Over 80 customers worldwide years • Revenue has grown 9x since 2003 • Repair of blades from major aircraft engine types, including GE, ~5 million CF
Slide 46: MTU Maintenance Zhuhai Ltd. and China Southern
OEM MRO Com. Milit. MTU Maintenance Zhuhai Ltd. and China Southern A success story 15 • 50:50 JV with China Southern since 2001 • Access to 3rd biggest airline worldwide years • JV $ revenue has doubled in last 5 years In 2016 • Improved market access ~$800m • Most efficient narrowbody engine MRO sh
Slide 47: MTU Maintenance and JetBlue
OEM MRO Com. Milit. MTU Maintenance and JetBlue Low-cost airline supported with t(h)rust 11 • Contract in place since 2005 • Reliable fleet management on a flight-by-hour basis years • Offering full service package >500 • Market leader for V2500 • More than 300 engines covered Shopvisits • Joint cap
Slide 48: Engine lease JVs with Sumitomo
OEM MRO Com. Milit. Engine lease JVs with Sumitomo Complementing each other’s business model • Entities located in Amsterdam since 2013 3 • Lease pool of +100 engines • Lease business complementing traditional MRO business years • Improved access to used material • Asset & material management In 201
Slide 49: Partnerships are necessary to remain competitive in commercial MRO
OEM MRO Com. Milit. Partnerships are necessary to remain competitive in commercial MRO OEM cooperation Independent MRO Airline cooperation Goal • Provide cost-efficient, • Remain #1 provider with • Develop current industrialized MRO focus on customers cooperation • Leverage OEM network • Provide int
Slide 50: We continue to develop strong partnerships
OEM MRO Com. Milit. We continue to develop strong partnerships MTU and Lufthansa Technik explore a maintenance joint venture Background • MTU and Lufthansa Technik participate in the PW1000G aftermarket network • Additional capacity for disassembly, assembly and test work in a cost competitive envir
Slide 51: Opportunities @ MTU to ensure future growth
OEM MRO Com. Milit. Opportunities @ MTU to ensure future growth Next generation of engines for fighter Next aircraft WB / NB Future generation Fleet GTF management technology Opportunities for military programs Enterprise 4.0 @ MTU GTF JV … 2016s 2030s… 14th December 2016 Investor & Analyst Day 2016
Slide 52: Pillars of MTU Strategy
Pillars of MTU Strategy Access to Benchmark Leading Risk mitigation growing markets competitiveness technology Access to Benchmark Leading Risk Mitigation Growing Markets Competitiveness Technology Employees & expertise All of MTU‘s partnerships with their different characteristics contribute to MTU
Slide 53: MTU's Financials and Outlook: Reap the Benefits
MTU’s Financials and Outlook: Reap the Benefits Reiner Winkler, Chief Executive Officer Rzeszów, 14th December 2016
Slide 54: Pillars of MTU Strategy – Profitable growth
Pillars of MTU Strategy Profitable growth Access to Benchmark Leading Risk mitigation growing markets competitiveness technology Employees & expertise 14th December 2016 Investor & Analyst Day 2016, Rzeszów 54 © MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Eng
Slide 55: Head and tailwinds 2017
Head and tailwinds 2017 Organic Revenue Growth Military: Down mid single digit Commercial OE: Up high single digit Commercial Spares: Up mid single digit Commercial MRO: Up in the low teens Tailwind from US$ Slight headwind from mix 14th December 2016 Investor & Analyst Day 2016, Rzeszów 55 © MTU Ae
Slide 56: Long-term outlook 2014-2025: Status CMD2015
Long-term outlook 2014-2025: Status CMD2015 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 Income adj. Growth stronger tha
Slide 57: Investment phase 2014 to 2017 – well on track to deliver
Investment phase 2014 to 2017 – well on track to deliver Organic revenue growth 2014 A 2015 A 2016 G 2017 G CAGR Military: Commercial OE: Commercial Spares: Commercial MRO: 14th December 2016 Investor & Analyst Day 2016, Rzeszów 57 © MTU Aero Engines AG. The information contained herein is p
Slide 58: Investment phase 2014 to 2017 – well on track to deliver
Investment phase 2014 to 2017 – well on track to deliver 2014 A 2015 A 2016 G 2017 G 2014-2017 EBIT adjusted Growth in line with ~10% ~10% ~11% Margin revenue Growth stronger than Net Income adj. €253m €307m ~€340m EBIT CCR 17% 22% 21% Low double digit % 14th December 2016 Investor & Analyst D
Slide 59: Revenue growth in commercial OE
Revenue growth in commercial OE Today (2015) Future (2025) Other Business Jet Other Business Jet CAGR Wide- Regional ~ mid-single body Jet Wide- Narrow- body body digit Narrow- body Growth of commercial OE business secured through extensively filled order books and stronger diversification 14th Dece
Slide 60: Revenue growth in commercial spare parts
Revenue growth in commercial spare parts Today (2015) Future (2025) Other Business Jet Regional Jet Other Business Jet CAGR Widebody Wide- Narrow- ~ high-single body body digit Narrowbody New engine programs (GP7000, GEnx, GTF) will join the V2500 to significantly drive future spare parts growth 14t
Slide 61: Revenue growth in military
Revenue growth in military Today (2015) Future (2025) After CAGR After market/ Series market/ Series ~ stable services services Stronger demand in aftermarket/services and T408/GE38 compensates for decline in EJ200 production 14th December 2016 Investor & Analyst Day 2016, Rzeszów 61 © MTU Aero Engi
Slide 62: Revenue growth MRO
Revenue growth MRO Today (2015) Future (2025) Airline cooperation Independent Airline cooperation CAGR OEM ~ 10 % cooperation incl. MTU Zhuhai OEM Independent w/o MTU Zhuhai cooperation high single digit* Independent business will remain MTU MRO's revenue driver while OEM & airline cooperation busin
Slide 63: Long term outlook 2018-2025 update: Improvement of profits and cashflow reconfirmed
Long term outlook 2018-2025 update: Improvement of profits and cashflow reconfirmed Consolidation phase 2018-2025 Revenue Military (ex slightly down ): Com. OE: Com. spares: Com. MRO: EBIT adjusted Growth stronger than revenue Net Income adj. Growth in line with EBIT adj. CCR High double digit % 14t
Slide 64: MTU's cash deployment strategy
MTU’s cash deployment strategy 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 buyback No buyb
Slide 65: IFRS 15 – Summary
IFRS 15 – Summary • IFRS 15 "Revenue from Contracts with Customers" has been endorsed by the EU in October 2016, becoming effective in 2018 • It replaces all existing IFRS revenue recognition requirements • IFRS and US GAAP revenue standards are substantially aligned • The new framework focuses on c
Slide 66: IFRS 15 @ MTU
IFRS 15 @ MTU Preliminary assessment of implications on MTU accounts: Main accounting issues Current accounting Potential future accounting Concessions Cost of goods sold Reduction of revenue when underlying engine sales occur Program entry fee and Capitalization as intangible asset Payment
Slide 67: Market in excellent shape, better position than ever
Market in Better position excellent shape than ever Acceleration of GTF on spec EBIT and FCF growth ...looking forward to answering your questions! 14th December 2016 Investor & Analyst Day 2016, Rzeszów 67 © MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engine
Slide 68: 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