Mtu Aero Engines Hldgs Ag

Good morning, ladies and gentlemen. Welcome to our conference call for MTU's preliminary full-year results 2024. As usual, we will start with a review presented by Lars. Peter will give you the financial overview, a comparison to our initial guidance, as well as a more detailed look into our OEM and MRO segment. Following that, Lars will walk you through the updated guidance for 2025. This will end the presentation part, and we will open the call for questions. Let me now hand over to Lars for the review.

All right. Thank you, Thomas, and welcome from my side to all. Let me start with some words on the market environment. The market environment remains favorable for the A&D sector. We expect to see robust passenger and cargo traffic throughout 2025. IATA forecasts passenger traffic to grow by 8% and cargo traffic by 6%. While demand for new aircraft remains very high, the level of new aircraft deliveries is still lagging following ongoing supply chain challenges. This allowed the delivery and sale of more spare and lease engines. Further, it led airlines to expand the services to extend the service life of older aircraft beyond their original plans, leading to increased demand for maintenance and spare parts. The already limited MRO capacities are facing an environment with high demand and supply chain constraints. This opened pricing opportunities for MRO services and lease equipment. MTU is well positioned in all of these areas and has benefited accordingly in 2024. We witnessed limited growth in new aircraft deliveries, allowing an increase in spare and lease engine deliveries. And additionally, we saw solid MRO demand for mature engine programs like the V25, GenX, GE90, or CF34. The spare parts business performed quite well in 2024, particularly for narrowbody and mature widebody engine platforms. Moreover, our MRO business benefited nicely from the strong results of our engine lease and asset management business in Amsterdam. With these market trends and MTU's strategic positioning, we are confident to continue our success story in 2025. Let me now focus on the GTF fleet management plan. Firstly, I'd like to emphasize that it is no longer an emergency or crisis plan. It has evolved into a well-structured set of measures that are being executed accordingly. Notably, we have seen a significant increase in powder metal output by RTX. As mentioned before, on-time spare parts availability is a key. and allows us to reduce turnaround time well below 100 days. However, we will continue to feel the effects of this plan in 2025 and 2026, both in terms of operational impact in our shops and financially on our free cash flow. Anyway, we do see the available capacity to increase and with that the ability to support our customers. The market confidence in the GTF engine is evident through the strong orders placed in 2024, including over 220 GTF engine orders at the Farnborough International Airshow. And from the operations side, we reached a milestone with the delivery of the 1,000th GTF engine assembled at MTU here in Munich. The GTF Advantage program is on track to receive its final FAA certification in H1 2025 with first deliveries expected within the year. Additionally, the first A321XLR with PW 11000G engines is expected to be handed over to Wistair in Q1 2025. Let me switch to some highlights from our business segments. In the commercial MRO sector, we secured contract wins totaling 5.6 billion US dollars, mainly for narrowbody and mature widebody engines in 2024. With over 45 years of experience, we have completed over 25,000 shop visits, demonstrating our expertise. To meet growing demand, we expand our global MRO capacities, including a new shop in China dedicated to V-25 and GTF engines. In our military business, we have important projects on the agenda. Very favorable environment for the Eurofighter aircraft, with Spain and Italy ordering 49 Eurofighters. Germany is expected to follow with an order for 20 Eurofighters. Further interest from various export countries could lead to further Eurofighter engine orders. Beyond that, we are concentrating on the Phase 1B development work for the new generation fighter engine. Negotiations for Phase 2 demonstrator work are expected in 2025, with flight demonstrator work to start in 2026. Additionally, we established the Jura joint venture for Europe's next military helicopter generation with Zafron helicopter engines. Our industry is actively pursuing improvements towards more sustainable flight with the ultimate goal of emission-free flying. In 2024, we made good progress in the development work for both, further improvements on gas turbine technology as well on the flying fuel cell. The latter includes successful tests on the liquid hydrogen fuel system or the establishment of a new test facility for the flying fuel cell at our Munich site. The flying fuel cell is also the focus of the EU technology program called HEROF. Let me say some words on our upcoming management change in 2025. Already in our Q3 call, I elaborated on my personal decision of leaving my professional home, MTU, and taking on a new role at Airbus. In the meantime, our supervisory board nominated Dr. Johannes Busmann as my successor at the helm of MTU. Johannes is an esteemed aviation expert with extensive high-level management experience. He has been a trusted companion for MTU over many years. in his former role at Lufthansa Technik, as well as a member of our supervisory board. We know, respect and appreciate each other and will ensure a smooth transition between us. However, time of this transition is still work in progress. Johannes will assume his role as CEO at MTU in the course of 2025. A specific date is not yet fixed. The reason is that currently Johannes serves as CEO of a certification specialist TÜV Süd AG and the company is currently in the process of finding a successor for him. Independently from my decision, Peter has also decided not to extend his contract, which expires by the end of this year. After over 25 years at MTU, including eight successful years as CFO, he wants to move on to the next phase in his career. In the future, he plans to focus more on supervisory board mandates. In January, the supervisory board chose Katja Garcia-Vila, a SIG successor, as our CFO. Katja joined the aerospace world after a long track record in the automotive industry. She served 27 years in various functions at Continental AG, including the role as CFO. She will join MTU already in April 1st and take over as CFO on July 1st, 2025 after an intense transition period with Peter. I know this is more change on board level than MTU had in the past. Nevertheless, MTU is an outstanding company and our successors deserve your full support. I'm speaking also on the behalf of Peter when I express our full commitment to ensure a smooth transition to Katja and Johannes. Both of them can rely on a stable, very capable and performing organization. We are sure that they will continue to enhance MTU's operational and financial performance on the path of profitable growth. In the remaining time, Peter and I will continue to drive MTU forward working together with our colleagues to set the course for a positive, constructive and value-based future. Let me now hand over to Peter for the financials.

Yes, thanks Lars. 2024 was indeed another exceptional year for MTU. We achieved for the first time an EBIT exceeding 1 billion euros one year earlier than anticipated. I will provide you with the driving factors in a few moments. This impressive performance, combined with our positive outlook for 2025, was also reflected in our share price, which reached a new all-time high of almost €350 at the end of January. As part of our 2025 outlook, we announced our dividend proposal for the fiscal year 2024. We intend to propose a dividend of €2.20 per share at the upcoming AGM on May 8, 2025. This represents a 20 cent increase compared to last year's dividend. It is important to note that our dividend proposal for this year strikes a thoughtful balance between the financial obligations associated with the GTF Fleet Management Plan and the promising outlook for MTU. Furthermore, in September, we successfully launched our largest corporate bond in history, raising 750 million euros. The bond carries a coupon of 3.875% and has a seven-year term. These funds will be utilized to refinance MQ's existing corporate bond and for general corporate financing. Additionally, in April, we secured a promissory note of 300 million euros. Now let's move on to the key financials of 2024. And let's kick off with a comparison of our full year 24 numbers versus our initial guidance for the year. Adjusted revenues came in at the higher end of our guidance range, showing the robust growth across all of our business segments. With EBIT adjusted slightly exceeding €1 billion, we have already achieved our mid-term target one year earlier ahead of schedule. The corresponding EBIT margin stood at 14%. A free cash flow adjusted of €183 million met our full-year expectation. It was primarily influenced by payments for the GTF fleet management plan and the volatile supply chain, leading to a higher level of working capital. In addition to that, we see an impact of higher receivables on the GTF program. They are built on our balance sheet when shop visits are performed earlier than initially anticipated, triggering payment at a later point in time. The cash conversion rate stood at 24%. Turning the page and comparing adjusted figures 2024 with those of 2023. Total adjusted revenue showed an 18% increase in both euros and US dollars, reaching a new record high of approximately 7.5 billion euros. This growth was driven by all of our business segments. EBIT adjusted saw a 29% increase to 1.05 billion euros, resulting in an EBIT adjusted margin of 14%. This positive performance was supported by a favorable business mix across all segments. Net income adjusted grew as expected in line with EBITDA adjusted and improved by 29% to 764 million euros. Entry cash flow adjusted, as mentioned, stood at 183 million euros, down 48% as expected, impacted by the effects mentioned earlier. So now let's move on to the business segment and starting with our OEM segment. Total OEM revenue saw a 14% increase to more than 2.5 billion euros. In military, revenues grew 14% to 612 million euros in line with our full year guidance. The main drivers behind this growth were the increases in funded development work for the next generation fighter engine, as well as higher volumes for the TP400 and EJ200 engines. Commercial business revenues in euros and dollars rose by 15% to 1.9 billion euros. And within that, organic OE revenues in dollars increased in the low 20% range in line with our guidance. The main growth drivers were higher GTF engine deliveries and a healthy mix of spare and used engines. On a quarterly basis, OE sales also grew in the low 20% range. Organic spare part sales in dollars increased in the low teens. Main growth drivers were mature wide-body platforms and narrow-body engines. On a quarterly basis, spare part sales experienced high teen growth. EBIT adjusted benefited from the favorable business mix mentioned earlier, resulting in a 26% increase to 612 million euros. The corresponding EBIT margin improved to 24.2%. Moving on to the MO segment. MRO revenues experienced a 20% increase, reaching nearly 5.1 billion euros. We saw solid demand across all engine platforms. Main drivers of revenue growth in our core MRO business were the G90, the V25, the GenX, as well as our leasing and asset management business in Amsterdam. The share of GTS MRO revenues accounted for approximately 31%, slightly below our fully expectation of 35%. Throughout 2024, we experienced lower material intensity, while the number of shop visits was in line with expectations. EBITDA adjusted showed a strong growth of 33% to 438 million euros, resulting in a margin of 8.7%. The higher image margin was supported by the robust leasing and asset management business, and in addition, a better contract mix in the independent MRO business, as well as a lower share and material intensity, as mentioned, of the GTF MRO. That resulted in further upside. At this point, I would like to hand back to Lars for some insights on our guidance for 2025.