Mtu Aero Engines Hldgs Ag

Welcome to our conference call for MTUS Q2 2026 results. We'll begin today's session with Johannes presenting a first view on results and a look on recent developments. Following that, Katja will walk you through the financials. Johannes takes over for the guidance and some key takeaways before we open the floor for questions. With that, it's my pleasure to hand over to Johannes.

Yeah, thanks Thomas and welcome to everybody. We have delivered an excellent performance in the first half of 2026, so group revenues increased by 13% to roughly 4.7 billion euros. Our adjusted EBIT grew 5% to 692 million euros, resulting in a strong margin of 14.8%. So the free cash flow generation was notably strong, reaching 294 million in the last six months. This represents an increase of 39% compared to the prior period in 2025. As a result, our cash conversion rates stood at 59%, exceeding the full year guidance we provided in February. While the situation in the Middle East remains highly volatile, we have not seen any material impact on our business so far. We therefore remain confident in achieving our 2026 guidance on revenues and EBIT adjusted, reflecting the strong performance in the first half of the year. We are rising our free cash flow outlook today. We will provide more details in just a few minutes. Let me first take a closer look at the current market environment and share some views on topics particularly relevant for MTU. Looking at our industry and especially at MTU, recent geopolitical tensions in the Middle East have increased near-term volatility, but they have not changed the underlying fundamentals of our business. We have seen no material impact on our first half performance, no cancellations and no evidence of structural deferral across either OEM or MRO market. High demand continues to outpace aircraft deliveries supporting both new engines, shipments and aftermarket activities and at the same time industry-wide MRO demand continues to exceed available capacity. MTU has a proven track record of successfully navigating disruptions. So our diversified portfolio, growing installed base and significant aftermarket exposure continues to provide resilience across geopolitical cycles. While near-term volatility may persist, our long-term growth trajectory remains firmly intact. MTU benefits from a uniquely diversified portfolio that provides strong visibility on long-term aftermarket growth and cash generation. Starting with our future growth drivers, the GTF family continues to benefit from a rapidly expanding installed base, compelling fuel efficiency economics, and ongoing product enhancements. These factors support significant long-term aftermarket potential. In the wide-body segment, both the GE-NX and our latest portfolio addition, the GE-9X, additionally strengthen our growth outlook. While the GE-NX has established itself as a highly successful platform, also the GE-9X is expected to become an increasingly important contributor as it enters service and ramps up over the coming years. At the same time, MTU benefits from a grown portfolio that is well balanced across In the narrowbody segment, the V2500 remains a significant source of cash generation and provides substantial long-term aftermarket visibility. With a large installed base and many years of operational life ahead, it continues to play a critical role in our customers' fleet. Also beyond commercial passenger aviation, our portfolio is diversified across a broad range of applications, including military, freighters, industrial gas turbines, and business jet engines. This broad exposure has been a key contributor to the resilience that MTU has constantly demonstrated over decades and across multiple industry cycles. As a result, despite the current geopolitical uncertainties, our diversified and resilient portfolio enables us to deliver sustainable earnings growth, strong cash generation, and long-term value generation. Let's turn a moment to the GTF program. The GTF fleet management plan continues to progress as expected. AOG levels have declined by around 25% year-to-date, and MRO output for the BW1100 GTF engine increases 40% year-over-year. Based on the progress achieved to date, we expect powder metal-related AOGs to continue to decline and to be resolved by the end of 2026. While much of the attention is naturally focused on the A320 neo fleet, it is equally important to look beyond that platform. On the A220 and the E-Jets, engine-related groundings are expected to be fully eliminated by the end of the year, marking another important milestone in the recovery process. MTU's share of AOG-related compensation amounted to $110 million in the first half of this year. As previously announced, we expect the first GTF Advantage engine to enter later this year into service, followed by the introduction of the Hot Section Plus upgrade. These enhancements are designed to further improve durability and operational performance. By strengthening the competitiveness of the platform, they create opportunities for additional market share gains and support further improvements in program economics over time. With an installed base approximately 2.5 times larger than that of the V2500, the GTF is expected to become one of MTU's most important drivers for revenues, earnings, and cash flow in the years ahead. Turning to the military business, it is clear that particularly against the backdrop of heightened geopolitical tension, the need for the next generation European fighter aircraft remains a strategic priority for Europe. Following the discontinuation of the FCAS program in its previous form, political discussions regarding future European combat aviation initiatives are ongoing. Industry participants, including MTU, have shared their perspectives with key stakeholders and we view these discussions as being very constructive and looking forward. Different program architectures are currently being evaluated. At the same time, Europe's Air Force will play a key role in defining the future roadmap for next generation combat aviation capabilities. It is important to recognize that the investments made and technologies developed to date remain strategically valuable and usable. In the light of all this, MTU remains very positive and well positioned to participate in any future European fighter aircraft program and this is supported by our long standing military engine expertise and excellent relationships with the German armed forces. Today, MTU is already a core European military propulsion partner with proven capabilities across the full supply chain from development and production to lifecycle services from a broad range of military engine programs. For the future, we are actively pursuing a key role in the next chapter of European military aviation and to contribute to the development of Europe's future air combat capabilities. Staying with the topic of future aviation, let me now turn to the technology side of the story. Technology leadership remains a key pillar of NTU's long-term OEM strategy, particularly in the field of hydrogen-based propulsion and our flying fuel cell concept. Together with our partner Airbus, we have therefore decided to establish a dedicated joint venture focused on fuel cell propulsion. The rationale is straightforward. While the next generation of aircraft engines is expected to build on enhanced conventional technologies, we want a dedicated team to focus exclusively on the next step change in propulsion technologies. By separating the conventional and the step change activities from our traditional programs, we avoid competing priorities and ensure full focus on advancing hydrogen technologies. This focus will accelerate development, enhance efficiency and support the industrialization of fuel cell propulsion. Importantly, our investment in hydrogen propulsion is already reflected in our mid-term guidance and is fully aligned with our long-term technology roadmap. Subject to the required regulatory approvals, the joint venture is expected to commence operations at the beginning of 2027.

And with that, I do take over from Johannes. So thank you, Johannes, and also a warm welcome from my side. Let me start with the key financial highlights of the first six months of the year. We delivered a strong performance, with particularly strong cash generation and a cash conversion rate that exceeded our initial full-year guidance. As Johannes highlighted, the conflict involving Iran has had no relevant material impact on our business or financial performance. Turning to the numbers, group revenues increased by 13% to nearly €4.7 billion. In US dollar terms, revenues grew by 21%. Growth was primarily driven by our commercial MRO and military businesses, while revenues in the commercial OEM segment in Euro declined. Adjusted EBIT increased by 5% to €692 million, resulting in a strong adjusted EBIT margin of 14.8%. Profitability benefited from higher spare part sales and a strong contribution from our military OEM business. In commercial MRO, earnings remained solid despite a higher share of GTF-related shop visits and ongoing ramp-up costs at MTU Fort Worth. Adjusted net income increased in line with adjusted EBIT, reaching 502 million euros. Pre-cash flow was particularly strong at 294 million Euro, up 39% compared with the prior year period. As a result, cash conversion reached 59% ahead of our original expectations for the full year. I will discuss the key drivers behind this performance in more detail in a few minutes. Now turning to page 11. Let's take a look at our OEM business, which continued its strong margin performance. starting with the second quarter of 2026. Total OEM Euro revenues declined 8% year on year. Commercial OEM revenues in Euro were down 11%, while military revenues grew by 6%, mainly driven by the TP-400 program, the EG-200 and work on the engine for the next European fighter aircraft. Within commercial OEM, organic OE revenues in US dollar terms remained stable due to higher deliveries of installed engines. Organic spare part revenues in U.S. dollar increased by a high teens percentage range driven by strong demand for the V2500, PW1100 and Preston Whitney Canada engine platforms. The year-on-year decline in reported commercial OEM revenues was largely attributable to an exceptionally strong comparison base in Q2 2025. The prior year quarter benefited from a mix of positive US dollar hatching effects and a very strong spare engine sales with highly favorable pricing. As a result of this high comparison, reported revenues declined despite solid underlying operational performance in the second quarter of 2026. Adjusted EBIT declined by 2% to 233 million euro, resulting in a strong EBIT margin of 32%. Strong spare part sales and solid military revenues overcompensated the impact of higher installed engine volumes. As expected, spare engine mix and pricing normalized compared to the exceptionally strong prior year quarter. Turning to the first half of 2026, total OEM revenues in Euro were down 4%, with commercial OEM Euro revenues declining by 9% and military revenues growing by 15%. Military growth was primarily driven by the TP-400, complemented by contributions from the EG-200 and the T-408 program. In commercial OEM, organic OE US dollar revenues remained stable, while organic spare parts US dollar revenues grew by a mid-teens percentage, placing performance at the upper end of our full year guidance range. As stated for the second quarter, the effects described before are seen as well in the year-to-date figures. Adjusted EBIT for the first half increased slightly an absolute term with a strong margin of 31.2%. Profitability continued to benefit predominantly from the strong aftermarket performance. Let's move to the commercial MRO segment on page 12. Commercial MRO delivered exceptionally strong growth driven by GTF MRO and supported by healthy core MRO business including MLS leasing and asset management. This helped to maintain an 8% EBIT margin. Let's have a look first on the second quarter 2026. We delivered another strong quarter in commercial MRO, with revenues increasing by 37% to 1.7 billion euro. In US dollar terms, revenues were up even 41%. GTF MRO remained the key growth driver, accounting for approximately 46% of total MRO revenues. At the same time, our core MRO business continued to perform well, growing by 18% in US dollar terms, excluding the GTF. Main growth drivers in the quarter were MLS Leasing and Asset Management business, as well as the IGT and CS6 programs. Adjusted EBIT rose 20% to $139 million and stood at a margin of 8%. The latter was characterized by a strong core MRO business including strong MLS earnings, partially offsetting the impact of a higher GTF MRO work and ramp up headwinds at MTU Fort Worth and MTU Ginwan. Turning to the first half results, the overall picture is very similar. Revenues increased by 21% to almost 3.4 billion euros. In US dollar, revenues were up 29% and with that, above our full year expectation. Once again, GTF MRO was the primary growth driver and represented around 46% of total MRO revenues during the period. Excluding GTF, our core MRO business grew by 9% in US dollar terms, supported by strong contributions from MLS, as well as the IGT, CS6 and PW2000 program. Adjusted EBIT increased by 13% to €271 million, corresponding to a margin of 8%. As in the second quarter, profitability reflected the offsetting effects from higher GTF MRO work and ongoing ramp-up costs for MTU Fort Worth and MTU Jinran on the one hand, and improved core MRO business with solid earning contributions from MLS on the other. Let's take a closer look at free cash flow, which continued to improve. We delivered a strong cash conversion rate of 59% in the first half of 2026, exceeding our initial full year expectations. In the second quarter of 2026, free cash flow increased by 56 million, or 91%, to 117 million Euro. The cash conversion rate stood at 43%. In the second quarter, We saw GTF AOG compensation payments of around 50 million US dollars. Free cash flow was impacted by ongoing investments in our capacity expansion, in particular at MTU Munich, Hanover and MTU Fort Worth. In addition, the acquisition of Aerodesign Works as a strategic asset impacted free cash flow. For the first half of 2026, free cash flow improved by 82 million or 39% to 294 million Euro. A strong cash conversion of 59% was achieved. GTF AOG compensation amounted to around 110 million US dollars in the first half of the year, in line with our full year expectations. This compares to 150 million US dollar impact in the first half of 2025. Strong business volume resulted in an increase in working capital, especially in trade receivables. Outflows for the acquisition of ADW and supportive dividends received complete the picture. To reflect the strong free cash flow momentum achieved in the first half of the year, we are raising our full-year cash conversion guidance to 50-60%, up from our initial range of 45-55%. This increase underscores our confidence in continued progress towards our medium-term cash conversion target of 75-99%. The sustained improvement in free cash flow and cash conversion strengthens our ability to generate long-term value for our shareholders. While we remain focused on managing the remaining GTF-related cash outflows and investing in attractive growth opportunities, Increasing shareholder returns continues to be a key priority within our capital allocation framework. As cash generation continues to improve, our capacity and flexibility to return additional capital to shareholders will increase accordingly. Let me now give you a quick update on our hedge book. As already mentioned in our last earnings call, we are fully hedged for 2026 at an average hedge rate of 1.14. Looking further ahead, we continue to build our hedge position at higher average head rate, reflecting the currently weaker US dollar. Nonetheless, we follow our guidelines to eliminate volatility based on moving currencies. Let me now move on to page 16 and have a short look at our order book. At the end of the first half of 2026, we had 30.4 billion in the order book, providing substantial medium and long-term visibility. In the first half of 2026, MTU secured 4.9 billion US dollars of MRO contract wins across multiple customers and engine platforms. These awards demonstrate strong customer confidence in MTU's MRO capabilities and further strengthens MTU's market position. Not reflected in these numbers are orders announced at last week's Farnborough Airshows. These amount to roughly 500 million US dollars, predominantly for GTF engines on all three platforms. Taken together, our strong order book, strong MRO contract wins, and the additional Fonboro commitments provide a solid foundation for sustainable growth and long-term shareholder value creation. With that, let me hand over back to you, Johannes.