MTU Aero Sees Profit Margins Rising From 2018

MTU Aero Engines said profits will increase faster than revenues from 2018 due to an expected surge in demand for spare-part sales and maintenance, its most profitable activities.

The German aircraft engine maker, whose customers include Airbus and Boeing, has seen profit margins fall over the last five years as it invests in new engines, facilities and equipment.

Revenues from production of engine components for new planes, which is a less profitable business, are also expected to rise from 2018 thanks to higher production rates of the Airbus A320neo, MTU said in a presentation to investors.

"Overall, this product mix will enable us to increase our EBIT margins in the medium to long term," chief executive Reiner Winkler said.

It said spending on research and development will gradually return to normal levels around 2018.

In the short-term, the dollar-euro exchange rate is helping to boost MTU's revenue and profits. MTU confirmed a forecast for revenues of around EUR€4.6 billion in 2015 and adjusted earnings before interest and tax (EBIT) of EUR€430 million, and said it expects "steady" growth in earnings in 2016.

With Airbus and Boeing boosting production rates of their best-selling single-aisle jets, MTU also said it had taken measures to ensure it could meet the ramp-up.

"Successful production ramp-up in the past and already implemented activities put MTU's supply chain in an excellent position to execute the future ramp-up efficiently," Chief operating officer Rainer Martens said.