Mtu Aero Engines Hldgs Ag

Good morning and welcome to our conference call for MTU's preliminary full-year results 2025. We'll begin today's session with Johannes sharing some thoughts on strategic priorities and a business review. Following that, Katja will walk you through the financials of the year 2025 as well as the guidance for 2026. To close the presentation, Johannes will summarize the key takeaways before we open the floor for your questions in the Q&A session. With that, It's my pleasure to hand over to Johannes.

Thank you, Thomas, and a warm welcome to everybody. As already announced during the course of the Q3 call, I would like to share some key priorities of MTU's way forward with you. First of all, MTU has a communicative growth agenda, and I'm completely committed to execute on that one. This means we will expand our footprint internationally and invest in even more technological capabilities. Through our expansion in Hanover, Berlin, China, and especially our new LEAP facility in Fort Worth, Texas, we are leveraging our global presence. With this, we support the growth of our MRO business and increase efficiency to serve our customers even better. With the latest development of the GTF, we have the most efficient engine in the narrowbody market. We developed this technology together with our partners and will continue to enhance this technology even further to be perfectly prepared for the NGSA. My ambition is to provide an even larger share in the upcoming program. As an addition to the conventional engine, we have entered into an agreement with Airbus to develop the flying fuel cell. Due to this, we will be an enabler for our client to emission free flying in the future. Given the significant improved free cash flow generation in 2025 and our planning for the next years, We are committed to focus on shareholder value by increasing the dividend by 64% from 2.20 to 3.60 in 2025, representing a payout ratio of 20%. We are on our way to reach our 40% payout ratio target. Let's have a look on the next slide. Let me walk you through our major achievements in 2025 starting with an overview of our key financial results. In 2025, we delivered on our financial guidance and are pleased to report that the strongest performance in MTU's history has been reached. Revenue reached 8.7 billion euros. EBIT increased to 1.35 billion euros, resulting in a very strong margin of 15.5 percent. Free cash flow rose to 378 million euros, also a new all-time high despite the financial impact of the GTF Fleet Management Plan. Based on this performance, we will propose a dividend of €3.60 per share to the AGM, representing an increase of 64% year-on-year. In addition, we will present our 2026 guidance today and an important next step on our way to achieve our 2030 ambitions. Let's take a look at the market environment in general. In 2025, our industry continued to gain momentum. Demand again exceeded available capacity and despite persistent supply chain challenges and a more uncertain macro environment, airlines were highly resilient. Passenger traffic grew by 5.2% and cargo volumes by 3.1%, reaffirming the sector's strong fundamentals. This performance came despite headwinds from U.S. terrorists and a weaker U.S. dollar factor we managed very successfully. The outlook remains positive. For 2026, IATA expects RPK growth of 4.9% and the cargo traffic to rise by 2.6%, both consistent with long-term structural trends. Robot passenger demand, high-value cargo flows, and expanding global e-commerce continue to support the industry while limited aircraft availability keeps utilization and load factors at an elevated level. This environment plays directly to MTU's strength. Our supply chain is built to support customers on both OEM deliveries and the aftermarket, positioning us well to capture ongoing demand. Overall, the market indicators are fully in line with our Plan 2030. Our current order book stands at $29.5 billion, U.S. dollars, which technically means we are sold out for the next three years. To sum this up, MTU is exceptionally well positioned to benefit from market dynamics in 2026 and beyond. Let's have a look at the commercial OEM side of our business. In 2025, demand from new commercial engine remained exceptionally strong. We recorded more than $2 billion in new orders driven by the GTF, GENX, and GE9X program. For the GTF alone, customer placed orders and committed for more than 1,500 engines. And 2026 also started on a solid note for the GTF. Vietjet selected the PW1100 to power 44 A320neo family aircraft. Customer confidence in the GTF remains high. With commitments for more than 13,000 GTF engines, the order book is now roughly twice the size of the active Weed 2500 fleet. The strong position of the GTF is visible for the program after just 10 years in service. Since 2016, the GTF family has accumulated over 15 million flight hours on more than 2,600 aircraft, safely carrying more than 1.7 billion passengers. Its fuel efficiency has enabled airlines to save more than 2.8 billion gallons of fuel. And the journey continues with the next major milestone, the entry into service of the GTF Advantage later this year. An engine that provides even better performance metrics and will carry the success even further. On the customer side of the GTF program, the feed management plan continues to make solid progress in line with our expectations. Turnaround times are improving, material availability is stabilizing. With RTX reporting significantly higher MRO output and airlines confirming an easing of the AUG cases, we expect the situation to continue to improve throughout 2026. Compensation payments remain on track. We contributed by roughly $360 million in 2025 and expect the remainder of the payments to be settled in the current year. Looking ahead, we continue to invest in the future of propulsion. In November, we reaffirmed our commitment with our partners, Pratt & Whitney and JAIC, to evolve the technologies for engines for the next generation of commercial aircraft. This partnership, which is now in place for more than four decades, will allow us to deliver even higher efficiency, lower emissions, and long-term competitiveness in the future. In short, MTU is taking advantage of the strong demand and is ready to deliver on our customer needs and is set to for a strong and successful future. Let's have a look at the MRO, sorry, at the military OM business. Over the past two years, we have seen strong order momentum for the Eurofighter engine program. The core nations, Spain, Italy, and Germany, together with export customer Turkey, placed engine orders for more than 80 Eurofighter aircraft. This clearly demonstrates the continued relevance of the program for Europe's defense capabilities. In the United States, demand for the heavy-lift helicopter remains high. The U.S. Marine Corps has ordered an additional 99 units. MTU holds an 18% share of the T-408 engine program powering this platform, and we continue to benefit from the program's production ramp-up. At the same time, our OEM business for the TP-400 is secured until 2029. With additional export opportunities offering meaningful upside, the A400M continues to attract international interest. Looking ahead at the future of military propulsion in Europe, we have joined forces with Safran and Avior Aero to develop a potential next-generation helicopter engine. This partnership positions us well to support future European defense platforms with advanced propulsion technologies. And while recent headlines around the FCAS program have been mixed, we remain confident that the partner nations will find a constructive way forward. It is essential for Europe's long-term defense sovereignty to develop their own military products, and MTU is fully committed to do this. In short, through our programs, partnerships, and long-standing expertise, MTU contributes meaningfully to Europe's long-term defense readiness. Now we come to the commercial MRO site on the next page. And here we are continuing to invest in both capacity and the scope of our product portfolio, strengthening our global footprint and supporting the ramp-up across all major engine programs. In Poland, EME Aero has added a second test cell, enabling the site to execute 500 GTF shop visits per year from 2028 onwards. an important expansion of our European GTF capabilities. In China, we opened our second MRO shop, initially focused purely on GTF engines, and we delivered the first overhauled engines just a month after the inauguration. Together with this, our first shop in MTU maintenance Chuhai, the site has now capacity for more than 700 shop visits annually, creating a major capacity hub in one of the world's fastest-growing aviation markets. In North America, we enlarge our Fort Worth portfolio to include the LEAP and the GENX later on, and will invest further to transform the site from an on-site service center into a full disassembly, assembly, and testing facility, significantly strengthening our market position in North America. At MQ maintenance in Berlin, we introduced full MRO capability for the PW800 and are about to increase our industrial gas turbine capacity by around 30%, supported by targeted investments, including the new IGT Hall already under construction. In the broader IGT segment, we have deepened our collaboration with GE Aerospace to expand activities in the marine sector, opening even additional market opportunities. Taken together, These initiatives significantly enhance MTU's global MRO network and technical capabilities. As we execute this expansion, our focus remains clear, supporting the ramp up and enabling sustainable, profitable growth. On the technology side, we reached important milestones in developing further propulsion concepts. First of all, we are proud that the GTF Advantage has received both FAA and EASA certification, positioning it for the market entry in 2026. Aircraft certification is expected soon. With higher thrust, improved fuel efficiency, and enhanced durability, the engine is particularly well-suited for the larger aircraft of the A320neo family. In addition, RTX announced the introduction of a Hot Section Plus retrofit package enabling to benefit from 90% to 95% of the durability improvements on the GTF advantage. As announced earlier, our EIA consortium publicly reaffirmed its commitment to advancing the GTF architecture as a foundation for the next generation engines. We are incorporating all learnings from the first generation of GTF engines, design execution, as well as fleet experience. From today's point of view, the design of future engines will definitely be geared. Building on these advancements in our current product portfolio, we are simultaneously accelerating in the development of next generation propulsion technologies. In June, we signed a memorandum of understanding with Airbus to jointly advance hydrogen fuel cell propulsion. Within our own technology program, the flying fuel cell, we have made significant progress. The design has been finalized, early tests have been successfully passed, and we have commissioned a dedicated flying fuel cell test bed in our Munich site. This marks a major step towards an extensive test campaign for this technology. All of this demonstrates one thing very clearly. We are not only advancing propulsion technology, we are actively shaping what comes next. MTU is preparing the future of aviation step by step and with a very clear long-term vision. Over the past year, we have made strong progress in reducing CO2 emissions across our production sites. Here in Munich, for example, our new geothermal plant has been operating since December 2025 and will cover around 80% of our heating needs, entirely CO2-free. The 71 degrees Celsius thermal water is sourced from a depth of more than 2,100 meters and will provide clean, reliable heat well into the future. Looking ahead, our ambition is clear. Reduce CO2 emissions across all NTU sites by 63% by 2035 compared with 2024. Each location contributes through its own targeted measures. We are driving this ambition through three main levers, improving energy efficiency, expanding onsite renewable energy generation, and, of course, purchasing renewable energy such as green gas and green electricity. Together, these actions ensure that we are progressing credibly towards sustainable decarbonization. In addition to our operational success and progress, our sustainability performance is also externally recognized. has once again received the silver medal in the Ecovades Sustainability Rating. Together, these developments demonstrate that we are on a strong and credible path towards significantly decarbonization. With that one, I will hand over to Katja, and she will walk you through the numbers.

Thank you, Johannes, and welcome from my side as well. Let me begin my part by briefly putting our results into perspectives. For 2025, we achieved our several times upgraded guidance in all financial KPIs. These results are new record highs for MTU and mark the next milestone on our ongoing growth path. Revenues of $8.7 billion were in line with our updated guidance, clearly exceeding our initial guidance despite the weaker U.S. dollar. A headwind we were able to offset through strong operational performance. Adjusted EBIT increased 29% to $1.35 billion, showing a strong margin of 15.5%. This represents a significant step up compared to our expectations. Adjusted net income roughly followed the EBIT growth as expected and grew 27% to $968 million. Free cash flow of $378 million came in significantly better than originally anticipated, and in line with the guidance from October 2025. This marks another record level in recent years, even while carrying the burden of the GTF fleet management program, and it proves our progress in improving our cash conversion. Let's now take a closer look at some details behind this outstanding performance. Group revenues increased by 16% to 8.7 billion euros. In US dollar terms, revenues were up 21%. This strong performance was driven by our commercial OEM business, which benefited from a favorable mix in engine delivery, including a higher share of spare and leased engines, as well as the expected growth in spare parts revenues. We also achieved strong sales growth in the MRO segment, supported by continued momentum across our activities there. Adjusted EBIT rose over-proportionally by 29% to 1.3 billion euros, resulting in a margin of 15.5%. The excellent result was driven by the above-mentioned business effects. Adjusted net income grew by 27% to 968 million euros. Growth was influenced by higher interest expenses associated with new financial instruments. The higher earnings translated into a strong free cash flow of 378 million euros, an all-time high for MTU. This level exceeds the previous peaks of 2019 and 2023, even though the expected impacts from the GTS fleet management plan were fully reflected. Airline compensation payments amounted to roughly 360 million US dollars. Let's now move on to the business segment. Let me begin with the OEM segment. In Q4 2025, total OEM revenues increased by 11% to 817 million euros. Therein, commercial OEM revenues were up 13%, reaching 621 million euros. In Q4, organic growth in commercial OE and US dollar sales increased by a low to mid-teens percentage. As anticipated, Q4 OE sales included a higher share of installed engines. Organic spare part sales in Q4 in U.S. dollar grew in the low to mid-teens range. Drivers were both narrow-body and wide-body engine platforms. Military revenues increased by 6% in Q4, marking the strongest quarter of the year. However, delays in the supply of parts and modules required for the planned delivery limited the level of growth we anticipated, resulting in a stable revenue versus 2025. Adjusted EBIT for the quarter improved by 39% to 234 million euros, resulting in a margin of 28.6%. The margin development was as expected, reflecting the higher share of installed engines as well as lower than expected military revenues. For the full year, total OEM revenues increased by 14% to 2.9 billion euros. Commercial OEM revenues grew by 18%, reaching 2.3 billion euros. Organic commercial OE sales in U.S. dollars were up around 10% for the full year 2025, a bit below our mid-teens guidance as the delivery plans within our various partnerships did not materialize as expected. Organic spare parts U.S. dollar sales for full year 2025 increased in the low teens range. Drivers were both narrow-body amateur white-body platforms. Overall, This performance drew adjusted EBIT up by 43% for the full year to $873 million, delivering an excellent margin of 30.4%, clearly exceeding our expectations for the year. Let us now move on to the commercial MRO business. Commercial MRO revenues in the fourth quarter of 2025 increased by 11% to $1.7 billion, making it the strongest quarter of the year. In U.S. dollar, Q4 revenues were up 22%. Key revenue drivers in the fourth quarter were the GTF, the CF6, and the MLS Leasing and Asset Management business. Revenues from CFM56, CF34, and CF6 platforms also increased compared to Q3 2025. The GTF MRO revenue share in the quarter was around 41%. In Q4, adjusted EBIT decreased by 11% to 123 million, resulting in a margin of 7.4%. The margin reflected the higher share of GTS AMAO revenues, as well as ramp-up costs at MTU Fort Worth. For the full year 2025, commercial revenues rose by 18% to 5.96 billion euros. In U.S. dollar terms, revenues increased 23%. significantly exceeding our four-year guidance of mid- to high-teens growth. Revenue growth in 2025 was broadly spread. The GTF delivered strong performance, while the CF6-80, GE90, V2500, and our IGT business also recorded solid growth. In addition, MLS Leasing and Asset Management delivered the expected operational performance, further supporting overall results. GTS MRO accounted for 40% of total MRO revenues in line with our full-year expectations. Revenue recognition accelerated in the second half of the year, driven by broader work scopes, improved material availability, and shorter turnaround times. Adjusted MRO EBIT increased by 9% to $478 million, resulting in a margin of 8%. Margin development was mainly influenced by the GTS MRO mix, Ramp-up costs for the LEAP MRO at MTU Fort Worth partly compensated from its equity contributions, particularly from MTU 2 High. Overall, the MRO business delivered a strong performance in 2025. Let me now give you an update on our Hatchbook. As you can see, we have further increased our Hatch coverage over the past month since the release of our nine-month results. For 2026, we have now hedged around 80% of our net U.S. dollar exposure at an average hedge rate of 113. Looking further ahead, we continue to build our hedge position at higher average hedge rates, reflecting the currently weaker U.S. dollar. Please keep in mind that the purpose of our hedging strategy is to reduce the impact of U.S. dollar exchange rate fluctuations on our EBIT, a 5 cent movement in the US dollar exchange rate would translate into an EBIT effect of roughly 20 million euros. Overall, our Hatchbook secures a high degree of visibility and stability for 2026, giving us a solid foundation for the year ahead. Before moving to the guidance, let us have a look on our progress on the finance side. Our net debt currently stands at around 1.1 billion euros, resulting in an adapt to EBITDA ratio of below 1. That is a very solid level, fully in line with our midterm guidance of a leverage ratio of 0.5 to 1.5, and gives us the financial headroom we need to execute on our priorities. Our strong balance sheet is also reflected in the credit ratings from Moody's and Fitch, both of which assigned an investment-grade rating to MTU. Moody's upgraded its rating from BAA3 to BAA2 with a stable outlook in August 2025, while Fitch confirmed its BBB rating with a stable outlook in September last year. At the beginning of January, we issued a new convertible bond with a volume of €600 million. We used the proceeds to repurchase our outstanding €500 million convertible bond that would have been due in July 2027. This transaction allowed us to reduce the potential dilution for our shareholders by around 300,000 shares, a clear and tangible benefit. As already stated by Johannes earlier, we intend to propose a dividend of 360 per share at our annual general meeting in May 2026. This represents an increase of €1.40 or by 64% compared with last year and corresponds to a dividend payout ratio of 20%. This is a clear signal of our gradual return to our targeted long-term dividend payout ratio of 40%, a ratio we temporarily suspended due to the GTF fleet management plan. All in all, these measures strengthen the financial flexibility and solid balance sheet that underpin MTU's long-term growth strategy. So let's now come to the key drivers for our guidance 2026. As Johannes already mentioned, the market environment remains highly favorable for the aviation industry, and MTU is well positioned to benefit from this momentum. Overall, we expect engine deliveries to increase in 2026 with a higher share of installed engines. For the GTS, we will support these deliveries in line with our market share, contributing to the production ramp-up while ensuring sufficient spare engine availability for our airline customers. Following RTX's announcement, demand for spare and lease engines remains strong, and on the GTS, we expect this to stay broadly flat in absolute terms compared with 2025. For the GenX, we expect higher volumes driven by Boeing's plans to increase 787 production from currently eight aircrafts per month to around 10 in 2026. Deliveries of the first GE90X are targeted for this year although the official entry into service of the first B777 has been delayed to 2027. Putting this together, we expect organic US dollar OE revenues to grow in the mid to high teens range in 2026. This reflects the current expectations with respect to mix and pricing. Commercial spare parts are expected to remain a strong revenue contributor. The V2500 should be up, supported by higher utilization of the A320 CO fleet and increased material demand and work scopes in shop visits. We expect continued growth in GTF spare parts, driven by the GTF fleet management plan, as well as ongoing durability improvements. Mature engine programs are expected to remain broadly stable or show a slight decline. Overall, this points to low to mid-teens organic spare parts revenues growth in 2026. The military business will benefit from the strong order momentum for the EJ-200, leading to higher deliveries. In addition, we expect a continued ramp-up in T-408 production, which powers the CH-53K heavy-lift helicopter used by the U.S. Marines. The development contract for the next-generation fighter engine runs until September this year, and we remain optimistic that the governments will find a solution for the FCAS program. The phase-out of the German Tornado fleet will result in a gradual decline in RB199 revenue over the coming years. Due to some supply chain disruptions in 2025, we expect certain spillover effects into 2026. Altogether, this should result in an accelerated revenue growth in the mid-teens range. Commercial MRO will continue to benefit from strong air traffic which drives high demand for mature engine programs in our independent MRO business. We also expect rising GE90 MRO volumes from our freighter customers. Our MLS leasing and asset management business will continue its growth trajectory. In 2025, we generated roughly €600 billion in revenues, marking steady progress towards our €1 billion revenue target for 2030. For GTS MRO, we expect a revenue share of 40% to 45% in 2026. Key drivers will be the growing fleet and service, ongoing execution of the GTS fleet management plan, and further durability improvements. Together, these factors should translate into low- to mid-teens U.S. dollar revenue growth and MRO. Across all business segments, we expect continued growth in 2026. another important step towards achieving our midterm revenue target of 13 to 14 billion euros. The business drivers I've just outlined, with growth across all our segments, translate into expected total group revenues in the range of 9.2 to 9.7 billion euros, based on a US dollar exchange rate of 120. Adjusted EBIT is expected to come in between 1.35 and 1.45 billion euros above the 2025 levels. Positive contributions will come from continued strong spare engine sales, partially offset by a higher share of installed engines. The spare parts business and the military segment will also contribute and support absolute EBIT expansion. The 40% to 45% GTS MRO share will have some impact, as will our investments in Fort Worth and the ramp-up of MTU maintenance gen 1. At the same time, the ongoing strength of our independent MRO business and further growth in our MLS leasing and asset management activities will drive the margins. Overall, the group margin guidance for 2026 remains well within the corridor of our midterm guidance. For net income adjusted, we expect growth broadly in line with adjusted EBITs. With regards to our cash conversion rate, we expect further improvement to 45% to 55% mainly driven by lower GTFAOG compensation payments and stronger earnings. As you can see, we are well on track to deliver our 2030 ambition across all key performance indicators. Our 2026 revenue outlook of $9.2 to $9.7 billion is broadly in line with the revenue CAGR implied by our 2030 ambition. Our 2026 adjusted EBIT target of $1.35 to $1.45 billion also implies the margin within our guided 2030 corridor of 14.5% to 15.5%. Our cash conversion rate is set to improve significantly, from 39% in 2025 to 45% to 55% in 2026, representing another step towards our 2030 ambition of reaching a high double-digit level. As you know, our midterm 2030 ambition remains unchanged. Since the future development of the U.S. dollar exchange rate cannot be predicted, we have included our well-known U.S. dollar sensitivity, noting that our 2030 ambition is based on an exchange rate assumption of 110. This concludes my presentation, and I would now like to hand over to Johannes for the closing remarks.