Mtu Aero Engines Hldgs Ag

Welcome to the conference call on MTU Aero Engines first quarter results 2024. 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 would like to hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words.

Thank you, Melanie, and also welcome from my side. Welcome to M2's Q1 2024 results call. As usual, we will start with a review from Lars. Peter will then give a financial overview and take a look at our OEM and MRO segments. After that, Lars will share our view on expectations for 2024 and the outlook 2025. Then we will open the call for questions and with that, I'll hand over to Lars for the review.

All right, Thomas, thank you very much. A big welcome from my side as well. I usually start with a view on the market environment As we all see and know, passenger traffic has now fully recovered and exceeded pre-pandemic levels by nearly 6% in February 2024. Out of that, domestic traffic was up almost 14% compared to 2019. And as the last part of the market expected to recover, international traffic has now also surpassed 2019 by roughly 1% based on strong recovery in Asia-Pacific regions. These figures are proof of a strong demand situation in the global aviation sector with no slowdown expected. Dedicated cargo flights also remain strong well above 2019 levels. This strong market demand is very encouraging and is the foundation for the great prospects ahead. Nevertheless, the ability to satisfy this demand is not fully under our control as global aviation supply chains remain challenging. Even after significant increases in aircraft production rates since the corona crisis, there is still a lack of new aircraft on the market. For ourselves and our aftermarket in particular, this is not unfortunate per se. As airlines are keeping their older equipment longer in service than originally planned to serve the high traffic levels and passenger demand. This results in growing MRO and spare part demand. The challenge, in fact, is to digest these high volumes in a stressed supply environment. We see the impact of these supply chain hiccups in our MRO shops. A wide shortage of spare parts leads to significantly lower turnaround times, as final assembly has to wait until all parts are available ready. This slows the speed of inducting further engines into the shop and results in lead times for inductions. The implication is a reduced throughput, which reduces engine availability in the market. This causes airlines to focus on lighter work scope and deferral of LLPs and heavy maintenance wherever possible. In turn, the combination of these sectors leads to lower orders for spare parts for large parts of the fleet and service. The result is a slower start of aftermarket sales, in particular for spare parts, even though the demand is there. Given the latest outlook on parts availability and signs of recovery on certain parts, we expect an acceleration of the aftermarket business in the second half year. So let's switch focus and move on to the GTF program. I'm sure you all followed last week comments from RTX on that plan. I'm sure you all hoped for more information already at this stage and this is totally understandable. Being fully aligned on the inspection plan and given the confidential nature of the topic, both in our dealing with spread and our dealings with airlines, we hope for your understanding that we're not able to provide more color on the program than our partner RTX did. The fleet management plan and the assumptions as well as the financial assessment remains unchanged. All aspects of the program remain in line with expectations. And please keep in mind that we see more opportunities than risks in the execution of this program. We are fully committed to doing our utmost to reduce the impact on airlines and to mitigate cost. One clear point here is the acceleration of the work in our shops. Currently, we are in the middle of implementing measures to reduce the TAT in our shops. We have identified multiple areas where we can further improve and together with Pratt & Whitney, and we will share these learnings with all network shops. This is key to optimize the scope of the fleet management plan alongside increased availability of full-life powder metal parts. Despite a strong focus on the GTF fleet management plan, we are happy to report progress on the other side of the GTF program, the new engine deliveries. On March 20th, we delivered the 1,000th PW1100GM engine assembled and tested by MTU. We started with the very first final assemblies of GTF engines back in 2016, and since then have consistently ramped up our GTF assembly line at Munich site, and we expect to deliver around 240 GTF engines in 2024 with further growth in the next years. Returning to the general business and the demand situation. Even in the years of the pandemic, we did not stop investing into our capacity. We remained committed to our plans as we were confident that our industry would rebound. Today's demand environment proves that this was the right approach. In Shuhai, we are progressing as planned. The second test cell is up and running and the construction work for the second site is continuing. In 2023, MTU Maintenance Dallas moved into a significant larger facility. Now we have accomplished another milestone with a certification of the test cell for CFM56 engines, opening additional opportunities for this location. MTU Maintenance Serbia, our newest site, is constantly ramping up its volume and capacity. This shop will be capable of performing over 10,000 repairs across 16 engine types for both the MTU maintenance network and third-party customers. And finally, the previously mentioned new turbine disc center in Munich started production recently. These are only a few examples of our activities to position ourselves in the best possible way to take our share of the strong market developments. Let's move on to a financial topic. On April 23rd, we issued a new 300 million Euro promissory note. It was placed in two tranches, roughly 50% of the volume with a duration of three years and the remaining 50% with a duration of five years. The issuance of this promissory note is for general purposes as growth in all business segments resides in the need to establish higher liquidity reserves. One last thing before handing over to Peter for the financials. We are very happy to announce that we achieved a significant step forward with our geothermal project at our Munich site. We actually found thermal water with a temperature of 70 degrees Celsius at a depth of 2.6 kilometers, and we expect to finish drilling work in the second half of 2024. The geothermal project will help us to cover roughly 80% of our heating needs at our Munich site and replaces gas. The total investment in the mid-double-digit million-euro range is expected to be amortized within seven years, depending on the gas prices. Through this project, we have achieved another milestone in our path to climate-neutral production facilities. This is for now the review for today, and I hand over to Peter.