Mtu Aero Engines Hldgs Ag

Good morning, ladies and gentlemen. Welcome to our conference call for MTU's preliminary full-year results 2023. As usual, we will start with a business review presented by Lars. Peter will give you the financial overview, a comparison to our 2023 guidance, as well as a more detailed look into our OEM and MRO segment. Following that, Lars will walk you through the guidance for 2024. This will be the end of the presentation part, and we will then open the call for questions. Let me now hand over to Lars for the review.

Thank you, Thomas. Good morning, ladies and gentlemen. A warm welcome also from my side. 2023 was indeed a year of contrast. As you know, on one hand, operationally, MTU is in top form, and we once again posted record results for this financial year. 6.3 billion euros adjusted revenues, 818 million euros adjusted EBIT, and a strong free cash flow of 352 million euros, we demonstrated again the strength of our company. On the other hand, due to the GTF fleet management plan announced in the second half of 2023, we had to book a billion US dollar charge This resulted in a significant reduction on reported revenues and a loss on reported EBIT. But let me start with the market environment. 2023 was very encouraging. Air traffic has almost fully recovered to the levels we saw before the pandemic. Global passenger traffic reached 98% of its pre-crisis levels and is expected to grow by 10% in 2024, exceeding pre-COVID levels by roughly 5%. Strong demand for MRO services and increasing production rates for new aircraft are further signs that the recovery is nearly completed and the industry is back on track. This upswing is also visible in significant order intakes at the airshows in Paris and Dubai. MTU secured order wins in the value of over $1.5 billion at these trade fairs. And more recently, At last week's Singapore Airshow, this trend continued where we received orders worth 500 million US dollars. Main orders came for a GE NX engine as well as for the GTF on the A220 as well as on the A320. Let's take a look at MTU. Our recent investment in shop extensions has proven to be the right strategy to be prepared for extremely high market demand and increased capacity needs for the GTF fleet management plan. The upgrade and improvement of our facilities is ongoing. Our latest addition is our new turbine disc center in Munich, which will bring a new level of automation to our operations. It is now fully equipped and will start its operation in a few weeks. Furthermore, we celebrated the groundbreaking ceremony of our new engineering center at our Munich site. The construction of our geothermal power plant is progressing as planned. The drilling has started and we are expecting to reach the desired depth in about two and a half months. In the MRO segment, we are seeing progress at the expansion of MTU Zhuhai. The second test cell is running since June and is part of our new MRO shop in China. The additional shop is expected to start its operation in early 2025 After ramping up, it will add an additional annual capacity of 260 shop visits to our MRO network and will primarily focus on MRO for GTF and V25 engines. Now let's focus on the challenges around the GTF fleet management plan. As previously said, I would like to emphasize that MTU is not part of the problem, but we are part of the solutions. We are working very closely with Brett and Whitney to manage the plan in the best possible way as we are assessing options how to increase MRO capacity and to develop intelligent and smart solutions to manage shop visits and optimize work scopes. The defining factor for the program remains the ability to speed up turnaround time and to ensure the availability of exchange parts. While this plan is progressing and expected maximum AOG numbers are updated, for the time being, we are not updating the financial and operational outlook. Anyway, I would like to emphasize once again that the GTF powder metal issue is a manufacturing problem and not a design problem. The gear turbofan has the right forward-looking architecture and is an indispensable part of our technology roadmap towards a sustainable aviation. This brings me to our update of our technology roadmap. As part of the European Clean Aviation Funding Program, we are now focusing on two projects where we are leading the consortiums on these tasks. On the one hand, we continue to drive forward our water-enhanced turbofan concept in the project SWITCH. On the other hand, our activities and work on the flying fuel cell recently lead to the launch of the project HEROPS, Let me continue with the progress in our military technology programs. In 2023, we started development work for the engine to power the future combat aircraft system, FCAS. This also comprises a four-year contract for additional technology studies for the German armed forces. We see great potential for MTU in this project, not only for NEXT European fighter engine, but also to improve our abilities in the commercial place. And in addition to that, we are working together with Safran from a European team to form a European team to explore technologies for an engine for a European next-generation rotorcraft. The target is to equip European armed forces with a purely European helicopter engine. This program could be key to reinforce European sovereignty and strengthen the European supply chain. To wrap the review up, despite the challenges of the GTF fleet management plan, MTU is in excellent shape and all business segments are performing well. We are financially and operationally a very strong company and we see a great future lying ahead of us. In 2024, we will see further growth in all business segments, which I will present to you in a few minutes. We also remain confident beyond 2024. our 8-1-25 target remains unchanged. This means in 2025, we want to generate sales of 8 billion euro and an adjusted EBIT of 1 billion euro. As already mentioned in the beginning, 2023 was a year of records in terms of adjusted revenues and adjusted EBIT, as well as a strong free cash flow. but at the same time we have to deal with the financial burden of 1 billion US dollars for the GTF fleet management plan. In this light, we have to balance the interests of both our equity and our debt investors. With this in mind, and as announced last week, we will propose a dividend of 2 euro per share at this year's annual general meeting on May 8th. We see this proposal as a reasonable balance between the expected cash outflows and the company's strong growth progress. This ends my review on 2023, and I would like to hand over to Peter for the financials.

Yes, thank you, Larsen, and welcome also from my side. So let me start with a comparison of our full year 2023 numbers with our respective guidance for the year. Adjusted revenues came in at 6.3 billion euros at the upper end of our guidance range. These are growth in both commercial segments in line with our expectations. Only in our military segment growth was slightly below our guidance. With an EBIT adjusted of 818 million euros and a margin of 12.9%, we ended the year perfectly in line with our expectations. Free cash flow adjusted was at 352 million euros, well ahead of our 2022 achievement. cash conversion rates stood at 59%. Further, I want to highlight the significant impact the Fleet Management Plan had in 2023. This can be seen in the reported numbers where we showed a revenue of roughly 5.4 billion euros, while EBIT reported was negative at minus 161 million euros. Turning the page and comparing adjusted numbers of 2023 with 2022. Total adjusted group revenues increased 19% to a new record high of 6.3 billion euros. This growth was supported by all business segments. In US dollar terms, organic revenues were up 22%. EBIT adjusted increased 25% to 818 million euros, resulting in an EBIT adjusted margin, as just mentioned, of 12.99%. This number also exceeds the achieved adjusted EBIT of the previous record year in 2019, where we had 757 million euros. Net income adjusted was up 25% to 595 million euros. In this figure, we are applying a slightly higher normalized tax rate of 27%, resulting from a different distribution of profits in our global network. Free cash flow adjusted was at 352 million euros, up 8% from 2022 levels. So let's move on to the business segments and let me start with the OEM segment. Total OEM revenues adjusted for the impact of the GTF managed fleet management plan increased 21% to roughly 2.2 billion euros. And within that, military revenues grew 8% to almost 540 million euros, which is slightly below our full year expectation due to some delayed deliveries. Adjusted commercial business revenues in euro rose 25% to 1.6 billion euros. And within that, organic OE revenues in U.S. dollars were up roughly 30%, which is in line with our full-year expectation. Higher GTS deliveries, as well as increased output of BISCHAT engines and IGT deliveries, were the main growth factors. On a quarterly basis, OE sales were also up 30%. Organic spare part sales in dollars were up in high teens. This growth was visible in all platforms, in particular, white bodies and IGTs. On a quarterly basis, spare part sales were also up in the high teens. On even adjusted results, the expected decline in profitability in the fourth quarter with a margin of 18.1% compared to the other quarters of 2023. This development was based on the already discussed pickup in cost over the course of the year, for example, salary increase in mid-2023. And secondly, we saw a higher share of installed engine deliveries, especially in the fourth quarter. Year over year, we saw a slightly better profitability, mainly resulting from achieved ethics rates and higher ad equity results. However, we finished the year with a slightly lower profitability than expected. This is the result of military revenues being a bit behind and spare parts revenues being at the lower end of our expected range. Moving on to the commercial MRO segment on the next page, MRO revenues increased 17% to 4.2 billion euros, whereas US dollar revenues were up roughly 20%. All engine platforms saw a solid demand. GTS MRO growth was mainly driven by the continued ramp-up at NTU Shuhai and at EMB Aero in Poland. Our lease and asset management business in the Netherlands also booked strong revenues. Within the segment, our GTS MRO share was roughly at 35%. On EBIT adjusted, we saw a constant improvement over the year, and especially in Q4, we had a very strong EBIT margin of 9.5% in that segment. Year-over-year, EBITDA trusted increased 23% to 329 million euros, resulting in a margin of 7.8%. The strong margin, especially in Q4, was possible through a few positive trends I'd like to mention. First, the GTF share on revenues was at the lower end of our full year expectations, while the work scopes turned out to be less relative to margin. Strong contribution from inequity companies, especially from MTU Shuhai, were very beneficial for the margin. And third, the mix of contract and work scopes in the independent business continued to be very profitable, as already seen in the third quarter. At this point, I would like to hand back to Lars to some thoughts on our guidance 2024. All right, Peter, thank you.