MTU Aero Engines AG Company Presentation€¦ · • Direct customer business, partner of OEMs and...

March / April 2020 – Investor Relations

MTU Aero Engines AG – Company Presentation

© MTU Aero Engines AG. The information contained herein is proprietary to the MTU Aero Engines group companies.

Contents

1. Company Overview

2. Commercial OEM Business

3. Military OEM Business

4. Commercial MRO Business

5. Technology Roadmap

6. Financials & Outlook

7. Appendix

2March/April 2020 Company Presentation - MTU Aero Engines AG


3

Overview of aero engine industry playersMTU is an essential partner in the engine value chain

Aero Engine Industry Characteristics

• Industry players are specialized in different

modules/technologies

• Oligopolistic structure of market

High barriers to entry

• High technology expertise required

• Substantial up front investment

(R&D, Concessions) required

• Long term contracts

• Structurally captive spare parts business

• Certification requirements and regulatory

approvals

Material

suppliers

Engine component

suppliers

Engine sub-system

(module) providers

OEMs

*former Volvo Aero

March/April 2020 Company Presentation - MTU Aero Engines AG


• Revenues: € 2.7 billion (58 %)**

• Services: maintenance, leasing and

asset management

• Exposure to highest growth engines

(V2500, CFM56, CF34, GE90)

• Global network

• Direct customer business, partner of

OEMs and airlines

• More than 1,400 customers, including

over 200 airlines


• European and U.S. engine programs

• Full system capability

• R&D is typically customer financed

• Leading partner of the German Armed

Forces

• Service packages precisely tailored to

the requirements of military partners


• Decades of partnerships with OEMs

• Balanced product portfolio in all thrust

categories

• Order volume secures business

beyond mid of this decade

• Partnerships with OEMs increasingly

include maintenance

• Approx. 30% of active aircraft with

MTU participation

MTU is built on three pillarsPartners and customers appreciate MTU’s excellence

*) MRO = Maintenance, Repair and Overhaul

**) Basis: Fiscal 2019

Commercial OEM business Military OEM business Commercial MRO business*

OEM

Revenues

€ 2.0 billion**

EBIT adj margin**

24.8%

MRO

Revenues

€ 2.7 billion**

EBIT adj margin**

9.6%

4

MTU Group

Revenues

€ 4.6 billion**

EBIT adj margin**

16.4%March/April 2020 Company Presentation - MTU Aero Engines AG


5

The MTU share is an attractive investment

1

2

3

4

6

Aviation industry is an attractive growth market with a strong order book

MTU’s biggest investment phase is completed

Long term outlook with focus on cash flow improvement and dividend increase

MTU is a pure aero engine player and very well positioned in all market segments

15 years reliability in the financial market with high quality guidance since IPO

5 Excellent technological position with clear focus on eco-efficient engines

Company Presentation - MTU Aero Engines AG

Key investment highlights

March/April 2020


Contents

1. Company Overview






7. Appendix



A balanced portfolio and products in all thrust categories ensure MTU’s long-term success

7

PW1000G-family

A320neo, E2-Jet,

A220, MC-21, MRJ

GP7000

A380

GEnx

787, 747-8

Cu

mu

late

d c

ash

flo

w

40

+

-

Calendar years after

market launch

Entry into service

GE9X

777X

V2500

A320, MD-90,

KC-390

PW2000,

PW4000

757, C-17,

777

CF6-80, LM6000

747, 767, IGT,

A300, A310, A330

0

Production

Technology R&D Aftermarket

Production

PW800

G500, G600,

Falcon 6X

PW300, PW500

Latitude, Sovereign, Citation,

Learjet, G200, Bravo,

Falcon 7X

Return on investment periods in the commercial OEM business

Company Presentation - MTU Aero Engines AGMarch/April 2020


0

20

40

60

80

100

120

140

160

2019 2021 2023 2025 2027 2029

MTU’s continuing OEM growth is supported by all 4 market segments

CAGR 2019 - 2029

Total market mid single digit

CAGR Aircraft Segment

Mid single digit Widebody (50-120 klb)

Mid single digit Narrowbody (20-50 klb)

High single digit Regional jet (13-24 klb)

High single digit Business jet (3-16 klb)

8

OEM market volume, series and spare parts ($bn)

GEnx, GE9X, CF6-80

GTF, V2500, PW2000

GTF, PW300, PW800

MTU is well positioned in volume and growth segments



In the commercial OEM MTU is strengthening its position in all market segments

Business jets

Revenues will triple in 10

years

Regional jets

Market share will increase

from

0 % to 90 %

Narrowbodies

Excellent

market position

will further improve

Widebodies

New market opportunities

are opening up

9

PW800

PW300/500

GEnx, GE9x

GP7000

CF6-80

V2500

PW1100G-JM

PW1500G

PW1700G/1900G

PW1200G



Business jet marketMTU will triple its revenues in the highly profitable business jet market over the next 10 years

• Installed base of more than 7,600 engines

• 10 business jet applications in operation

• Successful market introduction of Cessna Latitude

PW300 / PW500

• Program share of 15%

• Exclusive engine for future Gulfstreams and future Dassault Business Jet

• MTU is responsible for the LPT, the first four stages of the HPC and will

participate in the MRO

• EIS in 2018 (G500), 2019 (G600) and 2022E (Dassault)

PW800

Regional jets Narrowbodies WidebodiesBusiness jets



Regional jet marketMTU will increase its market share in the regional jet market from 0 % to 90 %


• Exclusive engine for Mitsubishi SpaceJet with

seats up to 92 passengers

• EIS expected in 2021/22

PW1200G


• Exclusive engine for the A220

• A220 gained order momentum since Airbus

stepped in

• EIS in 2016

PW1500G PW1700G/1900G


• Program share of 15-17%

• Exlusive engine for Embraer‘s 2nd Gen E-jets

• Embraer is current market leader with large

customer base

• EIS in 2018



Narrowbody marketIn the short- and medium-haul business, MTU has expanded its market share and risk-and-revenue partnerships

• ~ 6,000 engines flying

• Strong growth of spare parts sales until mid of next decade

• #1 MRO provider - capability in 3 locations

• Program share 16%

V2500

• Strong order book

• 16% improved fuel efficiency

• Designed for lower maintenance cost

• Program share 18%

• EIS 2016

PW1100G-JM




Widebody marketIn the long-haul business, MTU is a partner of Pratt & Whitney and the center of excellence for GE Aviation's turbine

center frame

• Market share of ~ 50% on the A380

• EIS in 2008

GP7000

• Market share ~ 70% on 787, exclusive on 747-8

• In production since 2011

• Market expectation of 4,400 engines

• MTU is partner of the GE-MRO network

• Exp. MRO revenue 3 bn€

GEnx

• Revenue potential 4 bn€

• Flight test program started in Jan. 2020

• Exclusive engine for Boeing 777X

• MTU will be partner of GE-MRO network

GE9X




14

Deliveries per year of all OEM programs

OEM production is continuously ramping-up with additional demands in various programs

2009 2018 2020 2023

Turbine

Compressors

Turbine Center Frames

Engine Assembly



An optimized make and buy ratio will enable total production volume to double over the next

five years at competitive prices

MTU Aero Engines, Munich

High-tech

• Complex components and production

processes

• High degree of automation

• Development of new technologies for

production

Mid-tech, Best-cost Raw materials, Mid-Low Tech

MTU Aero Engines Polska

• Adaptation of standard components and

production lines

• Expansion of production of “mid-tech”

components and production processes

• Expansion of module assembly with

know-how from the automotive industry

Suppliers

• Raw material

• Second source for components

• Low-tech components from best-cost

countries

• Double-sourcing for all important key-

components



Contents

1. Company Overview






7. Appendix



MTU is well positioned in the international military aircraft market

Fighter Transport Helicopter

• 140 Eurofighters and 85 Tornados

in service in Germany

• Eurofighter with attractive export potential

• Increasing aftermarket for EJ200

• Germany phase out of Tornado

from 2025 onwards

• 170 A400M ordered, thereof 84

delivered

• A400M well positioned for export

• Potential cooperation between Boeing

and Embraer on KC-390 (equipped with

V2500) could strengthen order activity

• 181 Eurocopter Tiger delivered

• CH53-K entry into service 2021 and

excellent positioned for export



Fighter,

trainer Eurofighter

EJ200

TransportA400M

TP400

C390

V2500

HelicopterCH-53K

T408

203020252020 20402017

FCASEurofighter

Upgrade, Tranche 1 replacement

ExportEurofighter

Middle East

A400MExport potential

CH-53KExport potential

Overview about military engine programs and business outlook

18March/April 2020Nov/Dec 2019 Company Presentation - MTU Aero Engines AG



MTU participates in the Next Generation Fighter

Highlights

• Successor for Eurofighter / Rafale

• First prototype expected by ~2031

• Entry into service expected by ~2040

• Roughly 1,100 engines (incl. spares) expected

• Joint collaboration with Safran announced in Feb. 2019

• MTU as German engine partner

• Clear division of responsibilities

• Achievement of 50% workshare with focus on MTU key competencies

• Demonstrator phase starts in 2020

• Customer financed development

MTU and Safran join forces to develop the Next European Fighter Engine (NEFE)

19


Contents

1. Company Overview






7. Appendix



MTU is one of the world’s leading MRO service providers with strong growth rates

21

Source: MTU, escalated

Commercial MRO market (in bn$)

Independent OEM-MRO cooperationNo access as of today

0

10

20

30

40

50

60

70

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

CAGR 2019-29

Total market High single digit

CAGR Market Approach Portfolio

Mid single

digitNo access today -

Mid to

high

single

digit

Independent

or airline cooperation

CF34, CFM56

CF6-80C, GE90G

PW2000, V2500, LEAP

Low to

mid teensOEM cooperation

V2500, PW1000G

GEnx, GE9X, GP7000

Source: MTU, escalated


Future growth is secured by two different market approaches and the largest product portfolio worldwide

March/April 2020


March/April 2020 22

Competitive MRO landscape

MTU achieves an advantageous position compared to its competitors

by covering all market segments

• Well positioned in all market segments as a unique selling point

• Technological know-how from the OEM segment creates high

level of trust among independent airline customers

• Customized MRO solutions and asset management

• Continuous innovative product and service development

• High quality standards

• Financial strength and willingness to invest in long-term contracts

and partnerships

• 3rd largest engine MRO provider worldwide

MTU's strengths

OEM Independent

Airline MRO

Access to engine fleets

Standardized solutions

MTU

GE RR

PW

StandardAero

American Airlines

SRT

SAFRAN

LHT

DTO

AFI/KLM

CHR

Customized solutions



March/April 2020 23

Capacity demand vs. available capacity

Increasing demand requires capacity expansion primarily in best cost countries

• Rising demand for mature and new engine programs

• Short-term: full capacity utilization at existing locations

• Mid to long term: increase capacity and repair capabilities

at best cost locations

• Strengthen partnerships with China Southern, Lufthansa Technik

Capacity share in best cost countries will increase from ~30% to ~50%

Highlights

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Current capacity

demand

Best-cost

locations

High-cost

locations

Available

capacity



March/April 2020 24

Key expansion projects support future profitable growth

• Most efficient GTF MRO

shop worldwide

• JV with Lufthansa Technik

• Operational begin in Dec 2019

• Capacity ~450 SV*

EME Aero

• Prolongation of JV until 2051

• LEAP repair licenses

• 2nd expansion → ~ 450 SV*

• Long-term expansion concept

under development

MTU Maintenance Zhuhai

• New parts repairs shop

• Capacity 400,000 repair hours

• Operational begin 2022

MTU Maintenance Serbia

• MTU Maintenance Hannover

• MTU Maintenance Berlin

• ASSB Malaysia

• MTU Maintenance Canada

Other MRO expansions

* Shop visits



Contents

1. Company Overview






7. Appendix



Vision 2020 and Flightpath 2050 targets

MTU’s approach CLAIRE | Clean Air Engine

2000 2015 2030 2050

V2500 Fan with low pressure ratio Integrated high-

efficiency propulsion

Geared Turbo Fan

∆ CO2-reduction in %∆ Noise reduction in %

100% 100% -40% -15% -50% -25% -65% -40%

Increase in alternate fuels

March/April 2020 26Company Presentation - MTU Aero Engines AG


March/April 2020 27

Our approach

2030 20502020

Maturity

Ele

ctr

ic

pro

puls

ion

Gas

turb

ine

Application

Evolutionary Gen2 GTF development

Revolutionary concepts

Drop-in power-/sun-to-liquid: SAF

Turbo-electric, hybrid concepts

Batteries

Direct H2-burn/fuels cells with liquid-H2Urban

mobility

Short-

range

Mid-

range

Long-

range

Urban

mobility

Short-

range

Short-

range

Mid-

range

Long-

range

Short-

range

Mid-

range

Long-

range

Short-

range

Mid-

range

Long-

range

Short-

range

Mid-

range

Long-

range



Contents

1. Company Overview & Market Environment






7. Appendix



March/April 2020 29

Capital structure management

MTUʼs financial strength gives us flexibility for business development

opportunities and higher shareholder returns

1. No need for new equity as FCF further improves

2. Management of dilution remains a key item on the

agenda

3. Dividend payout ratio towards 40% of net income

adjusted

4. MTU has a well diversified refinancing profile

5. Balanced leverage ratio of net debt/EBITDA

around 0.5-1.5 grants flexibility for business

development and shareholder returns



US$ Exposure

• Approx. 75% of US$ revenues are covered with US$ costs

via procurement (“natural hedging”)

• US$ sensitivity will rise over the next years due to increasing

net US$ exposure

Rolling Hedging Model

• Exchange rate analysis and

new hedging contracts on a quarterly basis

• Hedging period: maximum 16 following quarters

US$ exchange rate / Hedge portfolio

30

Hedging ModelHedge book as of Feb 20, 2020 (% of net US$ exposure)

• For MTU hedging remains an instrument for risk mitigation

• Sensitivity pre hedging: 10 ct move in US$/€ exchange rate

has an impact of ~ € 130m on EBIT (2020)

1,330

(=75%)

1,060

(=57%)

680

(=35%)280

(=14%)

2020 2021 2022 2023

in m$

1.18

Average

hedge

rate (US$/€) 1.18 1.17 1.18



Contents

1. Company Overview & Market Environment






7. Appendix



32

Financial figures FY 2019

FY 2019: Group revenues up 1%; EBIT adj margin at 16.4%

FY 2018 FY 2019

261

(9.6%)240

(8.6%)

FY 2018 FY 2019

203

358

Revenues[in m €]

EBIT adjusted[in m €]

Free Cashflow[in m €]

Net Income adjusted[in m €]

+9%

+15%

Commercial OEM Business Military OEM Business Commercial MRO Total GroupTotal OEM Segment

757(16.4%)671

(14.7%)

+1%

FY 2018 FY 2019

1,5371,396

459431

2,7112,800

4,567* 4,628*

-3%**

+6%

+10%***

+13%

+77%496

(24.8%)431

(23.6%)

*) Consolidated number // **) MRO (on US basis) organic growth +7% //***) Commercial OEM (on US basis) +4%

Appendix

FY 2018 FY 2019

479538+12%



MTU‘s credit ratings represent investment grade

33

Loan Details Amount Coupon Issue date Maturity

Convertible Bond 2016 90.1 m€*0.125%

Conversion Price € 123.3222 (Premium 50%) 17 May 2016 17 May 2023

Convertible Bond 2019

Notes

(Private Placement)

500 m€

100 m€

0.05%

Conversion Price € 378.4252 (Premium 55%)

3.55%

0

18 Sept 2019

12 June 2013

18 March 2027

12 June 2028

Note purchase agreement 30 m€Variable interest rate corresponding to the 6-month

Euribor rate plus a percentage margin28 March 2014 27 March 2021

Revolving Credit Facility 600 m€Customary market reference rates plus an additional margin;

unused credit facilities are subject to a loan commitment fee28 Oct. 2021

MTU is rated by two credit rating agencies:

Moody‘s (Long term) Baa3 negative outlook April 17, 2020

Fitch (Long term) BBB stable outlook February 25, 2020

Appendix

* Partial repurchase of 275 m€ in Sept. 2019 and early conversion of 1.093.867 million shares



Commitment to

society

Economic cooperation /

support of universities and

research institutes, local

sponsoring

Product

responsibility

Eco-efficient engines / Clean

Air Engine, sustainable

production and maintenance

procedures, European SRIA

standards

Sustainable

business practices

Compliance, corporate

governance, risk

management, ratings &

rankings

Responsibility

toward employees

Occupational health & safety,

work-life balance,

development of young talent

Environmental

protection

MTU climate strategy,

environmental management

on the shop floor

As a company, we take responsibility for our products, employees, customers, the

environment and our society



35

Impact of digitization on MTU‘s business modelDigitization will not fundamentally alter the business model of MTU in the medium term but provides with

opportunities to improve competitiveness further within the industry

Impa

cto

n p

rod

uct, b

usin

ess

mod

el

(“D

isru

ptive

“)

Impact on cost structure, quality, etc.

(“Evolutionary“)

For companies in B2B industries,

process improvements are often

the focus of attention

B2C

B2B

Services

Media

Finance/

BankingTrade /

Commerce

LogisticsAuto-

mobile

Insurance

MTU

MRO

ChemistryMTU

OEMEngineering

In B2C industries, digitization

partly leads to a serious change in

the business model



36

Digitization@ MTU focus on 4 areas of activity

Work 4.0

MRO 4.0

Technology 4.0

Production 4.0

Robotic process

automationDigital twin

Unified collaboration

& communicationE-learning

IT security

Virtual engine

Additive

manufacturing

Material &

manufacturing simulation

Optimized material

flow/Logistics 4.0

Intelligent

machine

control

Predictive analyticsPredictive maintenance (ETM)



The GTF competitive advantage

37

Geared Turbofan GTF

Direct Drive Turbofan DDTF

Config 1-G-3-8-2-3

81 in Fan Diameter

Config 1-3-10-2-7

78 in Fan Diameter

GTF relative to Direct Drive Turbofan:

• 25 % less stages

• 45 % less airfoils

• lower cycle temperature

= lower maintenance cost

• higher propulsive efficiency

• higher low spool component efficiencies

• shorter & lighter

= 3 % less fuel burn

• 3 to 4 dB quieter (EPNdB, cum.)

Appendix

The GTF concept achieves a 16% reduction in fuel burn versus the V2500 predecessor and a significant

competitive advantage over the DDTF



Commercial engine fleet

38

Aircraft Segment Engine Program Share Aircraft Application

Widebody

(50 – 120 klb)

GP7000

PW4000G

CF6-80C

Genx

CF6-80E

CF6-50/80A

GE9X

22.5%

12.5%

9.1%

6.6%

n.n.

n.n.

4%

A380

B777

B747-400, B767, Boeing MD-11, A310

B787 Dreamliner, B747-8

A330

DC 10-30, B767, A310

B777X

Narrowbody

(20 – 50 klb)

PW2000

PW1100G-JM

PW6000

V2500

JT8D-200

21.2%

18%

18%

16%

12.5%

B757, C-17

A320neo

A318

A320 family, Boeing MD-90

Boeing MD-80 range

Regional Jets

(13 – 24 klb)

PW1500G

PW1700G/1900G

PW1200G

17%

15-17%

15%

Bombardier CSeries

Embraer E-Jet Gen 2

MRJ

Business Jets

(3 – 16 klb)

PW300

PW500

PW800

25% (PW305/306)

15% (PW307)

25%

15%

Learjet 60, Do328 JET, Gulfstream G200, Hawker

1000, Dessault Falcon 7X, Cessna Sovereign

Cessna Bravo, Cessna Excel

Gulfstream G500, G600

Appendix



Military engine fleet

39

Aircraft Segment Engine Program Share Aircraft Application

Fighter

Aircraft

EJ200

RB199

F414

30 %

40 %

4.4 %

Eurofighter Typhoon

Panavia Tornado

F414: F/A-18 E/F Super Hornet; EA-18G Growler

Transport

Aircraft

TP400 22.2 % A400M

Helicopter MTR390

T408

40 %

18.4 %

Eurocopter Tiger

CH-53K (US-HTH)

Appendix



Commercial MRO business: Top 10 engine MRO providers 2018*

40

MTU Maintenance is the largest independent and under the Top 5 MRO providers

TOP 10 MRO providers*

MRO Provider Market Share

1. GE Engine Services ~19 %

2. Rolls-Royce ~11-12 %

3. MTU Maintenance ~9-10 %

4. Pratt & Whitney ~6-8 %

5. Lufthansa Technik ~5 %

6. Delta TechOps ~4 %

7. Safran/Snecma ~4 %

8. AirFrance Industries / KLM ~4 %

9. Standard Aero ~3 %

10. American Airlines ~2 %

Appendix


*) Estimate based on active commercial jet engines under contract per Fleets Analyzer 10/2018, add-on for JV controlled workload, % share range pending on V2500/GTF calculation methodology (work split vs. program share)


Financial calendar 2020 & IR contact

41

Thomas Franz

Vice President Investor Relations

phone: +49 89 14 89-4787

E-Mail: [email protected]

Claudia Heinle

Senior Manager Investor Relations

phone: +49 89 14 89-3911


2020

February 20, 2020

Conference Call

Full year results 2019

Postponed

Annual General Meeting

for the fiscal year 2019

April 30, 2020

Conference Call

Q1 2020 results

July 30, 2020

Conference Call

Q2 2020 results

October 29, 2020

Conference Call

Q3 2020 results

November 19, 2020

Investor & Analyst Day

Matthias Spies

Senior Manager Investor Relations

phone: +49 89 14 89-4108


Appendix



Cautionary note regarding forward-looking statements

42

Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and

involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to

statements that are forward-looking by reason of context, the words “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “forecast,” “believe,” “estimate,” “predict,” “potential,” or “continue”

and similar expressions identify forward-looking statements.

Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) competition from other companies in MTU’s industry and MTU’s ability to retain

or increase its market share, (ii) MTU’s reliance on certain customers for its sales, (iii) risks related to MTU’s participation in consortia and risk and revenue sharing agreements for new aero engine

programs, (iv) the impact of non-compete provisions included in certain of MTU’s contracts, (v) the impact of a decline in German or other European defense budgets or changes in funding priorities

for military aircraft, (vi) risks associated with government funding, (vii) the impact of significant disruptions in MTU’s supply from key vendors, (viii) the continued success of MTU’s research and

development initiatives, (ix) currency exchange rate fluctuations, (x) changes in tax legislation, (xi) the impact of any product liability claims, (xii) MTU’s ability to comply with regulations affecting its

business and its ability to respond to changes in the regulatory environment, (xiii) the cyclicality of the airline industry and the current financial difficulties of commercial airlines, (xiv) our substantial

leverage and (xv) general local and global economic conditions. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.

The company assumes no obligation to update any forward-looking statement.

Any securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold without registration

thereunder or pursuant to an available exemption therefrom. Any public offering of securities of MTU Aero Engines to be made in the United States would have to be made by means of a prospectus

that would be obtainable from MTU Aero Engines and would contain detailed information about the issuer of the securities and its management, as well as financial statements.

Neither this document nor the information contained herein constitutes an offer to sell or the solicitation of an offer to buy any securities.

These materials do not constitute an offer of securities for sale in the United States; the securities may not be offered or sold in the United States absent registration or an exemption from registration.

No money, securities or other consideration is being solicited, and, if sent in response to the information contained herein, will not be accepted.



This document contains proprietary information of the MTU Aero Engines AG group companies. The document and its

contents shall not be copied or disclosed to any third party or used for any purpose other than that for which it is provided,

without the prior written agreement of MTU Aero Engines AG.

43

Proprietary notice


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