Mtu Aero Engines Hldgs Ag

Welcome to the conference call on MTU Aero Engines AG H1 2023 results. For your information the management presentation including the Q&A session will be audio taped and streamed live or made available on demand on the internet. By attending in the conference call you grant permission for audio recordings intended for publication on the internet to be taken. The speakers of today's conference call are Mr. Lars Wagner, Chief Executive Officer, and Mr. Peter Kammerich, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words.

Yes, thank you, and good morning, ladies and gentlemen. Welcome to our conference call for MTS Age 1-23 results. As usual, we start with a review and some key messages presented by Lars. Peter will start with a financial overview and a more detailed look into our OEM and MRO segment. After that, Lars will walk you through the recently updated guidance. This will end the presentation part, and we will open the call for questions. Let me now hand over to Lars for the review.

Great. Thank you, Thomas. Also welcome from my side, everyone. Let's start with taking a look at the latest trends in our market environment. According to the IATA, total passenger traffic reached almost 96% of pre-pandemic levels in May 23. For the second month actually in a row, domestic air traffic outperformed 2019 pre-pandemic levels, being up 5.3%. Recovery in international traffic is accelerating. reaching 90.8% of pre-COVID levels in May. In its June forecast, IATA even expects the total passenger traffic to reach 88% of 2019 levels in 2023 and a full recovery back in 2024. This is supported by a constant strong demand despite economic challenges and supply chain constraints. We always talk about freighter. Dedicated freighter flights also remain strong, with 26% above 2019 levels, despite weakening cargo demand and recovery of available belly freight capacity. In June, the Paris Airshow has returned after a four-year-long break. Airbus and Boeing concluded the show with record orders of over 1,000 passenger aircraft, the majority of them for narrowbodies. And MTU also benefited from the positive sentiment and received orders worth more than US$1 billion. With more than 400 engine orders placed, the GTF accounted for the lion's share of the Paris Airshow orders. The enormous demand in our industry for modern aircraft with better fuel efficiency is also reflected in orders for the Dreamliner's GE NX engine and for the GE 9X powering the B777X. At the Paris Airshow, we were also in a position to update our guidance for the current year. Revenues and growth rates were left broadly unchanged. The EBIT adjusted expectation was lifted to above 800 million euros, while free cash flow is expected to be at least above the amount achieved in 2022. I will come back to this in a few minutes. Further exciting news are also on the military side of our business. At the Paris Airshow, we signed a memorandum of understanding with Safran to create a 50-50 joint venture with the intention to develop a new engine for the European Next Generation Rotorcraft Technologies Project. This project does not only complement our already established partnership with Safran on the next European fighter engine, but will also further strengthen our position in the European military market over the long term. Before I hand over to Peter for the financials, I would like to provide you some key messages on the GTF durability, which were also part of discussions of the airshow. First of all, the GTF is the most fuel-efficient and sustainable engine for single-aid aircraft. The GTF time on wing is already on a higher level than the V2500 at this point in its service life, while the durability is subject to continuous improvements. Bretton Whitney, MTU, and the other RP partner have introduced several technical upgrades since entry into service, and currently 60% of the GTF engines are already equipped with the latest technical upgrades. We expect that 90% of all engines will receive these upgrades in the next two to three years, and the GTF Advantage will provide further improvements. Even while we see the program well prepared for the future, we currently see the fleet in a more difficult situation. In combination with industrial execution challenges and relevant upgrades to be put into the fleet, we see several GTF-powered planes to be out of service temporarily. On top of these known challenges, an additional HPT inspection program will put further pressure on airline fleets and our customers. Together with our partners we are working on this topic to limit the impact on our customers as far as possible. The mentioned program targets a specific population of engines in the field that has been produced from Q4 2015 until Q3 2021. By mid-September 2023, 200 engines from the fleet shall be inducted into the inspection process. Further engines partially already scheduled for maintenance in the coming months, will also be part of this inspection program. This is certainly not a situation we want to be in, but generally we are aware of the challenges and together with our partners we will ensure an efficient management of the situation. This inspection program will have an effect on our financial performance in the coming years. This will look differently between the impact on EBIT and cash. On the EBIT side, the cost for the inspection program will be part of our regular contract accounting and thus be spread over a longer period of time. This results in the comparably modest effect on our profit expectations in the coming years. On the cash side, the impact is more concentrated and will form a headwind for our free cash flow number over the time of the inspection program. The program and its detailed implications are still under evaluation, so there are no detailed numbers we can share with you at this point in time. The inspection program affects engines that have been delivered in the past. This is not a design issue and it's not affecting new engine or spare parts production. To make it clear, this will be a challenging period for the months to come and we certainly see headwind for our customers and us as a consortium. However, we strongly believe in the benefits of the GTF architecture and we continue to see the engine as a key revenue and profit driver in the future. Let me now hand over to Peter for the financials. Peter.