MTU Aero Engines 4Q Net Income Rises 52% -- Update

(Adds CEO, program chief comment, further detail)

 
   By Robert Wall 
 

MUNICH--MTU Aero Engines AG (MTX.XE) on Thursday said net income for the fourth quarter rose 52% and that the weaker dollar could help drive profit growth this year beyond the anticipated 12% rise.

Reported net income for the period was 62.5 million euros ($70.7 million) and advanced 17.5% to EUR195.4 million for the year, the Munich-based company said in a statement. The more closely watched adjusted net income, which strips out some accounting issues, rose 6.2% last year to EUR253.3 million.

Sales for the year reached a record EUR3.9 billion after revenue advanced 20% in the October to December period, MTU said.

The fortunes at aircraft engine makers have been lifted as Boeing Co. and Airbus Group NV drive production of jetliners to record levels. The world's two biggest plane makers delivered more than 1,300 aircraft last year and plan to ship more in 2015.

"We are remaining on record pace," MTU Chief Executive Reiner Winkler told reporters.

The German aircraft engine maker said sales this year should reach EUR4.4 billion delivering adjusted net income of about EUR285 million. Business growth will be driven by new engines sales which are less profitable than the company's spare parts business.

MTU, which conducts most of its business in dollars, is benefiting from the weakening euro. Even though the company has 75% of currency exposure this year locked in at rates beyond the current spot rate, Mr. Winkler said this year could see a benefit if dollar rates remain at current rates. A 10 cent swing in the exchange rate has a EUR60 million to EUR70 million impact on earnings for the company.

MTU, which has invested heavily in new aircraft engine programs such as the PW1000G geared turbofan led by United Technologies Corp.'s Pratt & Whitney engine unit, expects spending levels to remain high for another year or two. It last year added involvement in a new General Electric Co. engine for the Boeing 777X long-range jet and now has 10 development programs ongoing in parallel, Mr. Winkler said.

The company said it had not seen a meaningful impact from low crude prices on its business that some observers expect. Lower oil prices are expected to make airlines fly older jets more heavily as the cost disadvantage of using less efficient planes dwindles. That can boost the profitable maintenance activities at engine companies.

The rate of planes parked by airlines because the aircraft aren't efficient is already declining, MTU's program chief Michael Schreyogg said. But for MTU to see an earnings impact, the low oil price environment needs to be sustained for some time until major repair actions are required, he said. An earnings boost this year is unlikely, he added.

A long-term driver of sales for MTU will be deliveries of the PW1000G with more than 6,000 units on order. Production is set to ramp up aggressively starting in the second half of this year as MTU looks to double production through 2019 across its engine programs, MTU said.

The company said it would set its dividend on March 3.

-Write to Robert Wall at [e-mail]