MTU Warns Weak Spare Engine Parts Sales to Curb Earnings Growth

MTU Aero Engines Holding AG (MTX) said it will fail to meet its 10 percent growth target because of weaker spare parts sales at the German aircraft engine maker. The shares fell as much as 10 percent, the most since 2008.

Adjusted net profit for the year will probably rise about 0.7 percent to 235 million euros ($311 million) from 233.4 million euros in 2012, the Munich-based engine maker said in a statement today. The previous forecast was for profit to advance as much as 12 percent. The average estimate of 19 analysts compiled by Bloomberg was for full-year profit of 246.6 million euros.

“We knew the second quarter wasn’t going to be stellar, but the profit warning is a clear negative surprise,” said Sebastian Hein, an analyst at Bankhaus Lampe in Dusseldorf, Germany. “The crucial question now is when will the spare parts business come back? Or is someone else filling those orders?”

MTU fell 8.7 percent at 9:08 a.m. in Frankfurt, the biggest intraday decline since October 2008, valuing the manufacturer at 3.52 billion euros.

MTU has been investing in new aircraft engine programs, including the geared turbofan Pratt & Whitney is developing for planes such as the Airbus SAS A320neo and Bombardier Inc. (BBD/B) CSeries, with outlays hampering profitability before more than 3,500 orders are delivered. Engine spare parts sales, which could have been an earnings bridge, have been slowed as carriers look to control cost and defer some repairs.

Behle Leaves

Adjusted earnings before interest and taxes will be around 375 million euros compared to 374.3 million euros last year, the company said. Revenue should advance about 10 percent to 3.7 billion euros, it said. The previous forecast was for sales to rise 10 percent to 12 percent.

“The spare parts business is unable to fully counterbalance, because sales have been lower than expected in certain programs,” said Chief Executive Officer Egon Behle. He will leave the company at the end of this year and be replaced by Chief Financial Officer Reiner Winkler.

Spare parts sales for its PW2000 engine, and turbines powering the Boeing Co. 757 airliner and C-17 military airlifter declined, even as activities for V2500 engines powering some current A320s advanced, MTU said.

Profitability was also affected by non-aerospace gas turbine activities which have been “stagnant” with low energy prices slowing investment, MTU said.

Revenue in the first half advanced 19 percent to 1.85 billion euros, driven largely by sales of new commercial engines, MTU said. The company has set a goal of 6 billion euros in sales in 2020.

Adjusted net profit for the first-half fell 4.2 percent to 105.1 million euros.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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