Profits rise but MTU cuts full-year sales outlook

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German engine specialist MTU has downgraded its 2014 revenue target 2.7% to €3.65 billion ($4.92 billion) after a decline in its MRO business and adverse exchange rate effects during the first half-year.

Turnover grew 2% to around €1.8 billion compared with the January-June period 2013. This was driven by an 8% sales rise in the civilian manufacturing business to just over €1 billion. But revenue in the commercial engine maintenance segment fell 7% to €573 million as customers deferred MRO work, the Munich-headquartered group says.

Operating profit in the aftermarket division declined 12 % to €48 million on an adjusted basis, but pre-tax earnings in the OEM segment grew 6 % to € 122 million. Total operating profit thus remained flat at nearly €171 million, with the group maintaining its full-year outlook of around €375 million.

Exchange rate effects also contributed to turnover remaining below expectations, says chief executive Reiner Winkler. Military revenues remained flat at around €225 million.

However, net profit grew 4% to €111 million, and MTU expects that increase to continue for a full-year profit of around €245 million. The rise is due to a lower German tax burden than in the past, as the group transferred more production work abroad, especially to its Polish plant, it says.

Free cash-flow fell 29% to just under €18 million. Winkler says that this was due to investments in future programmes, such as General Electric’s under-development GE9X engine. MTU will direct around €50 million from its 2014 cash-flow for the planned manufacture of the turbine centre frame for the Boeing 777X powerplant, he says.

Meanwhile, research and development expenses declined 17% to €79 million during the first six months. This is was largely due the Pratt & Whitney PW1000G geared turbofan programme – in which MTU is a key shareholder – approaching its serial production stage, the group says.