A n n u A l r e p o r t To our shareholders

Transcription

1 A n n u a l r e p o r t To our shareholders

2 t o o u r S h A r e h o l d e r S» reiner Winkler, Chief Financial officer we strive to guarantee our shareholders a solid investment. our trump cards are products and services of the highest quality and our sound financial underpinnings. «6

3 » To our shareholders Corporate Governance Group management report Consolidated Financial Statements Additional information t o o u r s h a r e h o l d e r s Letter to the shareholders 8 The Board of Management 12 The MTU share 14 7

4 L e t t e r t o t h e s h a r e h o l d e r s Egon Behle, Chief Executive Officer of MTU Aero Engines 8

5 » Letter to the shareholders To our shareholders Corporate Governance Group management report Consolidated Financial Statements Additional information After the most severe recession since the Second World War, the global economy began recovering in the course of 2010, gathering pace very quickly. In this improving environment, MTU Aero Engines did not simply maintain its position, but performed very well, meeting and even exceeding our profit forecasts including those that had been adjusted upward in summer Operating profit rose from 292 million in 2009 to 311 million, against a forecast figure of 310 million. What is more, with an annual net income of 142 million, MTU outperformed compared with both the previous year and its own forecast of 140 million. Revenues climbed from 2.61 billion in 2009 to 2.71 billion, against a slightly higher forecast of 2.75 billion. Despite big investments in research and development aimed at safeguarding the company s future, MTU s free cash flow improved by 21 % to 145 million, much higher than the expected figure of 120 million. All these results are proof positive that, as an innovative high-tech company with a balanced portfolio and an exceptionally motivated and qualified workforce, we are extremely well placed. Another key factor in our success is the finely meshed network of partnerships that MTU has cultivated for decades. Together with our partners, we are in the business of shaping today s and tomorrow s aviation industry. We are thrusting forward in all power categories, meeting the highest safety and quality standards in our industry it is this striving for excellence that unites us. I would like to take this opportunity to thank all those without whom the company s success in the past year would not have been possible. My thanks go to all our business partners and customers for their excellent cooperation in the financial year just passed, as well as to our investors you, our shareholders. MTU s success hinges on your commitment. I am particularly grateful to the MTU workforce around 7,900 men and women worldwide who once again demonstrated great commitment and delivered excellent performance in Their work is the key to MTU s innovative strength. We actively support our staff with training programs and place particular emphasis on encouraging female employees; in the years ahead, we intend to double the percentage of women in management positions at MTU. It goes without saying that we want you, our shareholders, to participate again in the company s success. In the light of our positive expectations for the company s growth over the next few years, we are proposing to increase the dividend for the financial year 2010 to 1.10 per share. Your confidence in us continues to spur us on in our efforts to strengthen MTU s position in the market and further enhance the value of the company. Given the current trend, I am optimistic that we will achieve our goals. The economic upswing is a welcome boost for the aviation industry. Passenger traffic has grown by 8.2 % compared with 2009, and freight traffic by as much as 20.6 %, with both segments having reached their pre-crisis levels again. The most dynamic markets are to be found in Asia, the Middle East and Latin America, and that looks set to remain so, with experts expecting ongoing globalization to fuel a substantial increase in international air traffic in the coming years. With its comprehensive portfolio of innovative products and services, MTU is set to profit from this growth. 9

6 Our starting position is a good one, for we are well placed in the key markets. What is more, our success across all lines of business last year served to underscore our strong market presence. One of the most significant events for the OEM business was the news that Emirates had placed the largest single order in aviation history up to that date, namely for a further 32 Airbus A380s, the world s biggest passenger aircraft. The airline has opted to equip its new A380s with engines from the GP7000 program in which MTU holds a 22.5 % stake, so we also stand to profit from the deal. Emirates operates by far the biggest fleet of A380s, and has announced its intention to order even more aircraft. Airbus also received numerous orders for the A320, its bestselling aircraft family. These came mainly from airlines based in the burgeoning markets of the Middle East and Asia, among them Yemen Airways, Vietnam Airlines and China Southern. These aircraft are powered by engines from the V2500 program, in which MTU plays a central role. Some of these new aircraft orders included MRO services for the V2500 engines, and MTU Maintenance is the world s biggest provider of maintenance services for this engine type. In China, MTU Maintenance Zhuhai has taken a clear lead. This joint venture with China Southern Airlines is flourishing, prompting us to expand our facilities there and complete a first extension to the maintenance hangar in Zhuhai. In 2010, the commercial MRO business also signed or renewed contracts with customers in other up-and-coming markets, the largest being with the Brazilian airline TAM and with Royal Jordanian Airlines. As far as our military portfolio is concerned, we are making good progress with a project of key importance to the company s future the TP400-D6 engine designed to power the A400M military transporter. In 2010, three prototypes of this aircraft equipped with a total of twelve engines successfully completed their scheduled flight tests. A fourth A400M entered the flight testing phase at the end of the year. The program is proceeding well and showing good export potential. In the United States, the world s largest military market, we accomplished our plans to ramp up maintenance of the CF6-50 engines of the U.S. Air Force s KC-10 tanker fleet. This is another area in which we are looking to exploit opportunities for future growth. In a high-tech field such as engine manufacturing, standing still is tantamount to falling behind. That is the reason why we have been driving forward our R&D activities, boosting expenditure in the financial year 2010 by 4 % to 239 million. This scale of investment was possible thanks to our solid finances and excellent position in the market. The focus of our R&D work last year was on the PW1000G, GE38 and GEnx engine programs, and they look set to remain our growth drivers in the years ahead. 10

7 » Letter to the shareholders To our shareholders Corporate Governance Group management report Consolidated Financial Statements Additional information Among these engine programs, the PurePower PW1000G geared turbofan is set to become one of the most important engines in the commercial aviation market. This entirely new engine concept is based on technology developed and implemented jointly by MTU and Pratt & Whitney. The superior performance of this cutting-edge, eco-efficient propulsion technology has also convinced Airbus to deploy the geared turbofan (GTF) when it re-engines its topselling A320 aircraft. While the earlier decisions by Mitsubishi and Bombardier to equip the MRJ and the CSeries respectively with the GTF were already important milestones for the engine, the decision by Airbus to use this engine in its A320neo must rank as the market breakthrough for this engine type. Many years of joint technological collaboration are now starting to bear fruit. We kept closely to our schedule last year, successfully completing the first test run of the CSeries engine, the PW1524G, at the beginning of October, and are well on track to complete certification of the engine by Despite Airbus s decision to re-engine the A320, the aircraft s previous V2500 engine is not likely to lose its appeal in the coming years. In fact, it will continue to play a key role, especially in terms of demand for maintenance services. Work on the GE38, an engine for heavy transport helicopters, is also going according to plan. This engine has much potential, not least owing to its suitability as the powerplant for a future European heavy-lift helicopter. In 2010, the Dreamliner engine GEnx went into volume production, and 2011 will witness the launch of production activities at MTU in Munich. In order to not only maintain but also strengthen our role as a technological innovator, we will continue to invest heavily in research and development. One thing is clear: we are on course to continue MTU s success, achieve substantial growth and ensure that a company with a distinguished past has a bright future ahead of it too. I sincerely hope we can count on your continued support as we strive to meet the challenges ahead. Egon Behle 11

8 T h e B o a r d o f M a n a g e m e n t The members of the Board of Management are wholly committed to the development of MTU Aero Engines as a worldleading engine manufacturer. They recognize the importance of long-lasting partnerships and cooperative ventures as a means of sustaining the company s future. The members of the MTU Board of Management place great value on communication, maintaining an ongoing dialog with partners, customers and institutions, and keeping regular contact with stakeholders in business and government circles. Egon Behle in conversation with H.E. Jacky Foo, ambassador of the Republic of Singapore to Germany Dr. Rainer Martens in conversation with Dr. Jens-Peter Heuer, permanent secretary in the Berlin Senate department for economics, technology and women s issues Egon Behle, born 1955, Chief Executive Officer Appointed term: to December 31, 2013 Egon Behle has stood at the helm of MTU Aero Engines as the company s Chief Executive Officer since January 1, As well as managing the corporate departments, he is also responsible for commercial and military programs. Prior to his appointment to MTU s Board of Management, he had served for five years as the CEO of ZF Lenksysteme GmbH after previously heading several business units at ZF Friedrichshafen AG. He was also the sole managing director of Fortuna Spezialmaschinen GmbH. In the earlier stages of his career, after obtaining a degree in aerospace engineering, Egon Behle worked for Renk AG, Dornier System GmbH and Robert Bosch GmbH. Dr. Rainer Martens, born 1961, Member of the board of management, Chief Operating Officer Appointed term: to April 14, 2014 Dr. Rainer Martens has been a member of the MTU Board of Management since April 2006, with overall responsibility for engineering and production. Before that he was production manager at the Airbus plant in Bremen, after spending five years as the head of MTU s manufacturing center for turbine blades. The holder of a doctorate in mechanical engineering, he has also held various management positions at the Airbus plant in Varel and was managing director of CIM-Fabrik Hannover ggmbh. 12

9 » The Board of Management To our shareholders Corporate Governance Group management report Consolidated Financial Statements Additional information Reiner Winkler in conversation with analyst Ben Fidler, Director Aerospace & Defence Research at Deutsche Bank Dr. Stefan Weingartner in conversation with Ralf Christoffers, Brandenburg s minister for economic and European affairs Reiner Winkler, born 1961, Member of the board of management, Chief Financial Officer (Director of Labor Relations) Appointed term: to September 30, 2014 Reiner Winkler has been a member of the Board of Management of MTU Aero Engines since May 2005, with responsibility for finance, human resources and IT. A graduate of business administration, he has been in charge of these three areas since he began working for MTU in His last post before joining the company was as managing director finance and controlling at TEMIC Telefunken microelectronic GmbH. He has also held management posts with Daimler-Benz AG and Siemens AG. Dr. Stefan Weingartner, born 1961, Member of the board of management, President and CEO Commercial Maintenance Appointed term: to October 31, 2015 Dr. Stefan Weingartner has been responsible for the company s commercial maintenance operations as a member of the Board of Management since November Prior to that date, he had headed MTU s military engine programs. The holder of a doctorate in engineering, a degree in physics and an MBA, his previous posts included managing director of MTU Turbomeca Rolls-Royce GmbH, president and managing director of EADS Japan Co. Ltd., and managing director of DaimlerChrysler Japan Holding. 13

10 T h e m t u s h a r e The MTU share price gained 33 % in the course of 2010, outperforming the Dow Jones Aerospace & Defense Index, the barometer of Europe s aviation industry. MTU s shareholders will also benefit from the company s sustainable, earnings-oriented dividend policy. In view of the good business performance, the Board of Management and the Supervisory Board intend to propose an increased dividend of 1.10 per share at the 2011 Annual General Meeting. This represents a dividend yield of 2.2 %. International stock markets in 2010 Buoyed by strong economic recovery, international stock markets began well in By mid-year, however, concerns arose about the sustainability of the positive global economic trend and about the sovereign debt crisis affecting a number of European countries. These developments were not without an impact on European stock markets, triggering strong volatility and a pronounced sideways movement in stocks throughout the summer months. A more optimistic outlook began to prevail again as from September, especially in Germany, and the stock market there picked up again strongly even in the face of lingering worries about the consequences of the euro crisis. As a result, the German stock indices experienced higher-than-average growth in 2010 compared with those of other countries. For instance, Germany s blue-chip index, the DAX, grew by 16 % in the course of year, while its U.S. counterpart, the Dow Jones, registered a plus of only 11 %. By contrast, Europe s Euro Stoxx 50 index lost 6 % over the year. The MDAX German mid-cap index, on which the MTU share is listed, improved by 35 % in the course of 2010 to close at 10,128 points on December 30. The Dow Jones Aerospace & Defense Index which includes major European companies such as Rolls-Royce, EADS and BAE Systems as well as MTU rose by 16 % over the same period, reflecting the positive trend in the industry in MTU share performance In the first four months of 2010, the MTU share price moved in line with both the MDAX and the Dow Jones Aerospace & Defense Index, the barometer of the aerospace industry. Throughout the period May to August, the improved outlook for international air traffic and, in particular, a strong U.S. dollar both served to further boost the company s share price. As a result, the MTU share price made aboveaverage gains during this period. As from September, however, the U.S. dollar again began to lose In 2010, the MTU share performed significantly better than the Dow Jones Aerospace & Defense Index. ground against the euro, which negatively impacted the MTU share price. Other detrimental factors for the company s stock during this phase were the cuts in military budgets announced across Europe and the uncertainty surrounding the recovery of the high-margin commercial spare parts segment. Towards the end of the year, aircraft manufacturer Airbus decided to equip its A320 series with innovative and efficient engines from programs in which MTU is involved and, around the same time, the U.S. dollar began to gain in value again. These factors were sufficient to trigger a year-end rally in MTU shares. All in all, the MTU share gained 33 % in the course of the year, outperforming the Dow Jones Aerospace & Defense Index (at +16 %) and finishing not far behind the MDAX (at +35 %). 14

11 » The MTU share To our shareholders Corporate Governance Group management report Consolidated Financial Statements Additional information MTU share performance (indices at Dec. 31, 2009=100) MTU 100 MDAX Dow Jones Aerospace & Defense Index 80 Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. MTU share indicators year on year Highest quoted price 1) Lowest quoted price 1) Beginning-of-year share price 1) End-of-year share price 1) Annual performance 2) % Market capitalization at year end million 2,632 1,986 Average daily trading volume million in 000 shares Earnings per share Dividend per share ) 0.93 Dividend payout ratio 4) % ) 28.5 Dividend yield 5) % 2.2 3) 2.4 1) Xetra closing price. 2) Based on Xetra year-end closing price (Dec. 30). 3) Proposal. 4) Dividend payout as a percentage of net profit available for distribution. 5) Net dividend yield based on Xetra year-end closing price (Dec. 30). MTU defends its position among the top ten MDAX stocks MTU s market capitalization on December 30, 2010 stood at 2,632 million. On the same date, the MTU share was listed eighth in the Deutsche Börse Group s MDAX rankings, cementing its position among the top ten MDAX securities (2009: tenth place). The MTU share moreover improved its position in the liquidity ranking of German stocks published by the Deutsche Börse Group, taking ninth place among the MDAX shares (2009: 13th). Whereas the trading volume of MTU shares remained virtually stable at an average of around 300,000 per day, the value of the shares traded rose from around 8 million to some 13 million per day owing to the higher share price. 15

12 At 1.10, proposed dividend higher than previous year MTU s dividend policy is earnings-oriented, and the company s good business performance in 2010 enables it to offer its shareholders a significantly higher dividend than in At the Annual General Meeting on May 5, 2011, the Board of Management and the Supervisory Board intend to propose a dividend payment of 1.10 per share, 0.17 more than in the previous year. The dividend is expected to be paid out on May 6, The dividend payout ratio calculated as a percentage of net profit available for distribution is thus 40.8 %. With approximately 48.8 million shares outstanding, the total dividend amounts to 53.6 million. Calculated on the basis of the MTU share price at the close of trading on December 30, 2010, the proposed dividend represents a yield of 2.2 %. Broad international shareholder base At December 31, 2010, the company held 3,247,593 treasury shares, which is equivalent to 6.25% of its capital stock. Consequently, the free float (as defined by the Deutsche Börse Group) accounted for 93.75% of MTU shareholdings at year end. According to the information available to the company, institutional investors held around 87% of the MTU stock, while about 7% was owned by retail Institutional investors hold around 87 % of the MTU stock. investors. More than 90% of the institutional investors were based outside Germany, primarily in the United States, the United Kingdom, Australia, Canada and western European countries. In view of these figures, MTU can rightly claim to have a broadly diversified shareholder base. According to notifications received in compliance with Article 21 of the German Securities Trading Act (WpHG), the following investment companies were among the largest MTU shareholders at year end 2010: Capital Research & Management Company (10.22% on November 18, 2010) BlackRock Inc. (4.997% on August 6, 2010) Gryphon International Investment Corporation (3.02% on June 8, 2010) Ameriprise Financial Inc. (3.01% on August 5, 2010) Shareholder structure MTU shareholder structure, overall MTU shareholder structure, institutional investors by region 1) UK 32 % France 4 % Institutional investors 87 % Retail investors 7 % MTU treasury shares 6.3 % Germany 8 % Australia 8 % Canada 9 % USA 39 % 1) Approximation based on top 20 shareholders (= about 50 % of share capital). As of Dec. 31,

13 » The MTU share To our shareholders Corporate Governance Group management report Consolidated Financial Statements Additional information Sustained high profile among analysts Owing to restructuring within the banking sector in the wake of the financial crisis, the number of financial analysts regularly reporting on the company decreased from 26 to 22 in The still relatively high number of analysts covering the company demonstrates that MTU and its stock continue to attract great interest worldwide. At year-end, 59% of the financial institutions maintained a buy recommendation for MTU shares, while 36% rated it as neutral. Only one institution had issued a sell recommendation (out of a total of 22 analyses). The average share price target at year-end was 53. The following financial institutions report regularly on MTU Bankhaus Lampe DZ Bank Landesbank Baden-Württemberg Bank of America Merrill Lynch Equinet AG Merck Finck & Co Barclays Capital Evolution Securities Morgan Stanley Berenberg Bank Exane BNP Paribas Société Générale Cheuvreux Goldman Sachs UBS Commerzbank HSBC Trinkaus & Burkhardt UniCredit Credit Suisse J.P. Morgan Cazenove Deutsche Bank Kepler Equities Investor relations work pays off again In the financial year 2010, MTU continued its policy of maintaining an open, ongoing dialog with institutional investors, retail investors and analysts alike. The company s investor relations team stepped up its communication activities focused on these target groups, organizing 15 road show days and eight conference days to report on MTU s business activities, strategy and key financial data. In addition to these events in the United States and Europe, a large number of personal meetings took place, both at MTU s locations and at the Berlin Air Show (ILA). In 2010, the number of such individual and group meetings rose to over 200. The company held its annual Investor and Analyst Day meeting at the company s headquarters in Munich on November 9, It was attended by around 35 investors and analysts, who were given an overview of the company s current business situation, its technologies and growth strategy. The MTU Annual General Meeting, a key platform for a direct dialog with shareholders, was attended by shareholders representing 51% of the share capital with voting rights (previous year: 58%) and took place in Munich on April 22, Analysts and investors have repeatedly confirmed the high quality of MTU s investor relations work. At the annual German Investor Relations awards 2010, which were organized by the Deutscher Investor Relations Verband e.v. in conjunction with Thomson Reuters Extel Surveys, MTU took 9th place, maintaining a position among the top ten MDAX companies (2009: 6th place). In addition, MTU made it to the top ten in NetFederation s well-known IR website ranking, taking ninth place among the MDAX companies (2009: 13th place). MTU came top in the MDAX category in the competition for the best annual report MTU was especially gratified that the MTU Annual Report 2009 earned first place among MDAX companies and second place overall in manager magazin s prestigious competition to pick the best annual report in Germany. Further information is published in the Investor Relations section of MTU s website: The Investor Relations office in Munich can be contacted on the following number: +49 (0)

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