Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Worldwide passenger traffic grew 9.1% in June, indicating strong demand for air travel.
- Adjusted group revenues increased by 10% to EUR3.4 billion, with EBIT adjusted up 16% to EUR470 million.
- Spare parts sales have improved, contributing to better turnaround times and more inductions into MRO shops.
- MTU Aero Engines AG (MTUAF, Financial) secured significant orders at the Farnborough Airshow, worth roughly USD800 million.
- Military business is strong, with increasing interest in Eurofighter engines and a new joint venture with Safran Helicopter Engines.
Negative Points
- Supply chain challenges continue to limit production of new aircraft, affecting overall deliveries.
- Despite improvements, supply still can't keep pace with the high demand for spare parts.
- Free cash flow guidance remains volatile due to ongoing supply chain issues and pending customer support payments.
- The share of GTF work in the MRO segment is expected to be lower than previously anticipated, reflecting lower material intensity.
- Airbus's postponement of production rate increases highlights ongoing challenges in the aerospace supply chain.
Q & A Highlights
Q: Lars, you mentioned the strength of the market, but some airlines are commenting on revenue pressures. Is this affecting your business, particularly in the aftermarket?
A: Currently, we don't see an impact on our business, neither short term nor midterm. The MRO market has a dramatic shortage in capacity, so even if demand goes down slightly, it won't significantly impact us. (Lars Wagner, CEO; Peter Kameritsch, CFO)
Q: Regarding Eurofighter orders, will these extend your current volumes or require an increase? What investment might be needed?
A: If all orders come in, we will need to increase engine output over the next years. We are currently investigating the investment needed, but we don't foresee significant investments as we have handled similar rates before. (Lars Wagner, CEO)
Q: The OEM margins were strong in Q2. Was there any positive contribution from elevated GTF spare engine sales?
A: Yes, we had a healthy mix in the commercial OEM business, including a higher number of spare engines compared to a normal situation. (Peter Kameritsch, CFO)
Q: Can you explain the adjustment in the GTF MRO portion of your guidance?
A: The average material intensity per shop visit was lower than expected, which impacted the revenue mix. This is the main reason for the adjustment. (Peter Kameritsch, CFO)
Q: Why not be more ambitious on your free cash flow guidance given the strong organic performance?
A: We have a broad range for guidance due to volatile elements like airline payments and working capital improvements. We are optimistic but prefer to maintain a conservative outlook. (Peter Kameritsch, CFO)
Q: Can the OEM margin hit 25% this year?
A: While the OEM margin was strong in H1, we expect it to drop slightly in H2 due to fewer spare engine shipments and a different revenue mix. We aim for an overall margin of around 13% for the year. (Peter Kameritsch, CFO)
Q: Does the 2024 EBIT guidance imply that the 2025 target is conservative?
A: The market environment has improved, and we have done our homework. We are close to our 2025 target already in 2024, and we will provide further updates at our Capital Market Day. (Lars Wagner, CEO)
Q: Any hints on spare parts price increases for 2025?
A: We don't have specific information yet, but we expect to announce details around Q3. (Lars Wagner, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
