[News] MTU Aero Engines Boosts Earnings in First Quarter 2008

[tornado]

MTU Aero Engines Holding improved its EBITDA by 9% in the first three months of 2008, from &uro;90.6 million in the equivalent period of 2007 to &uro;98.3 million. The EBITDA margin increased by 1.5 percentage points to 15.6%. Revenues of &uro;630.0 million were generated in the first three months of 2008, remaining close to the previous year's level (1-3/07: &uro;640.6 million). After adjustments for the US dollar exchange rate, revenues increased by 10%. MTU's first-quarter net income more than doubled to &uro;44.2 million (1-3/07: &uro;18.0 million). The 2007 figure includes a nonrecurring charge for the early redemption premium in connection with the high yield bond. Excluding this exceptional charge, net income increased by 40%. "These results show that MTU is still a highly profitable company, despite the continuing unfavorable US dollar exchange rate situation," commented CEO Egon Behle. "The first quarter's results substantiate our expectations for the financial year 2008 as a whole. We are confident that we will reach the targets we have set, and we intend to optimize costs still further in order to do so." DEVELOPMENTS DURING THE FIRST THREE MONTHS OF 2008 Like revenues at group level, revenues in the OEM and MRO segments roughly matched those of the previous year. The effects of the US dollar exchange rate were evident in both the commercial engine business and commercial MRO. Whereas commercial engine revenues increased by 11% after adjustments for the US dollar exchange rate, the actual amount in euros was &uro;265.3 million, which represents a year-on-year decrease of 2.9% (March 31, 2007: &uro;273.1 million). Similarly, commercial MRO revenues in-creased by 13% excluding adjustments for the US dollar exchange rate. Expressed in euros, revenues in the commercial MRO business amounted to &uro;258.3 million, or 1.5% lower than at the end of the equivalent period in 2007. The main contributors to revenues in the commercial MRO segment were the V2500 engine for the Airbus A320 family and the CF6 engine used to power wide-body passenger airliners such as the A330 and the Boeing 747. The programs that generated the greatest revenues for the commercial engine business were the V2500 and the PW2000 for the C17 transporter. Revenues in the military engine business increased by 3% to &uro;114.1 million. The highest contributions to these revenues came from the EJ200 Eurofighter engine and the RB199 employed in the Tornado. At March 31, 2008, MTU's order backlog amounted to &uro;3,113.3 million or 1.2 times annual revenues in 2007. This figure is lower than that at the end of the last financial year (December 31, 2007: &uro;3,311.1 million), primarily as a result of the US dollar exchange rate. Excluding this factor, the order backlog is stable. The improvement in the EBITDA margin is above all attributable to the positive evolution of the OEM business, where the successful implementation of various programs to improve efficiency, a high demand for spare parts, and the start of volume production in certain programs compensated for the unfavorable US dollar exchange rate. EBITDA in the OEM business grew by 45% to &uro;85.6 million, bringing the EBITDA margin to 22.6%. The EBITDA margin for the commercial MRO business amounted to 5.5%, while this segment's EBITDA dropped by 53% to &uro;14.2 million. This result, which reflects the additional costs occasioned by the introduction of new software and logistics systems at MTU Main-tenance Hannover, was not unexpected. "We have taken steps to bring the commercial MRO business back on course, and these measures are already having the desired effect at an operational level," explains Chief Financial Officer Reiner Winkler. Free cash flow at the end of March 2008 amounted to &uro;43.4 million, or roughly the same as at the end of the equivalent period one year earlier (1-3/07: &uro;44.3 million). MTU's investing activities in the first three months of 2008 amounted to &uro;18.9 million, exceeding those of the equivalent period in the previous year by 6% (1-3/07: &uro;17.9 million). A large part of these investments relate to the construction of a new engine test rig at MTU Maintenance Hannover. "Research and development is the keystone in our efforts to strengthen our innovative lead, and we intend to make considerable investments in this area in the future," Behle points out. "In the coming years, we expect to invest an average of 7 to 8% of our revenues in R&D." The number of MTU employees at March 31, 2008 was 7,156, which is about the same as at the end of the previous year (December 31, 2007: 7,130 employees). OUTLOOK There has been no change in MTU's end-of-year forecast for 2008. The company expects to generate revenues of &uro;2.6 billion, roughly equivalent to those generated in 2007 (&uro;2,575.9 million). Adjusted EBITDA at year-end 2008 is expected to amount to around &uro;390 million, thereby remaining close to the previous year's level of &uro;392.9 million despite a significant increase in investing activity and de-spite the effects of the US dollar exchange rate. MTU expects its reported EBITDA (i.e. the EBITDA figure including the capitalized research and development expenses) to reach &uro;420 million at the end of 2008. Net income for 2008 is expected to increase year-on-year by an estimated 20% to around &uro;180 million (2007: &uro;154.1 million). In view of the planned strategic investments to assure MTU's future - notably the acquisition of additional shares in engine programs and the construction of the new plant in Poland - free cash flow is expected to decrease to around &uro;100 million (2007: &uro;131.7 million).

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