MTU Says 2014 Forecast Cut Limited to Two Orders in U.S.

MTU Aero Engines AG said a 2.7 percent cut in its 2014 sales forecast stems primarily from postponements of maintenance contracts with the U.S. Air Force and American Airlines Group Inc. that will be revived later.

Revenue this year will amount to about 3.65 billion euros ($4.91 billion), 100 million euros less than predicted earlier, Munich-based MTU said in a statement today. Adjusted net income will total 245 million euros, about 10 million euros more than forecast, as more work done abroad lowers the tax rate.

The U.S. Air Force has put off work on CF6-series engines, while American Airlines has delayed maintenance of V2500-model powerplants as the company merges with US Airways and the two companies streamline their fleets. The CF6 is used on a range of Boeing Co. and Airbus Group NV planes, while the V2500 powers Airbus’s single-aisle A320 models.

“It’s those two customers, mainly, and the contracts are delayed, not canceled,” Stefan Weingartner, MTU’s head of maintenance, said on a conference call today.

A boom in civil aviation swelled MTU’s order book by 8 percent from the end of last year to 10.2 billion euros as of June 30, or almost three years’ worth of work, as new airlines in Asia expand and existing carriers modernize their fleets with more fuel-efficient planes. Changes to fleet planning from mega-mergers such as American and US Airways, and defense-budget cuts are leading to fluctuations for suppliers.

Profit Growth

The German manufacturer stuck to a forecast of operating profit amounting to about 375 million euros this year. First-half earnings before interest and taxes, adjusted for one-time items, increased 0.6 percent to 170.7 million euros as sales gained 2.3 percent to 1.82 billion euros.

“Factors affecting earnings in the commercial maintenance business, alongside exchange-rate effects and the deferral of orders, also included the ramp-up of the GE90 maintenance” for engines powering Boeing’s twin-aisle 777 planes, MTU Chief Executive Officer Reiner Winkler, who took over at the start of the year, said in the statement.

MTU rose as much as 2.8 percent and was trading up 2 percent at 65.50 euros as of 1:36 p.m. in Frankfurt. The stock has declined 8.3 percent this year, compared with a 9 percent drop in the BI Global Aerospace & Defense Index.

The amount of the company’s business in Russia is “small” at about 3 percent of sales, MTU said today, adding that engine deliveries for Moscow-based Irkut Corp.’s MS-21 aircraft are two to three years away.

The manufacturer said today it has no intention to sell its industrial gas-turbine unit following the planned acquisition of Alstom SA energy operations by General Electric Co. and Siemens AG’s agreement in May buy most of Rolls-Royce Holdings Plc’s energy assets.

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