Welcome to the conference call on MTU Aero Engines Outlook 2025. For your information, the management presentation, including the Q&A session, will be audio-taped and streamed live or made available on demand on the internet. By attending in the conference call, you grant permission for audio recordings intended for publication on the internet to be taken. The speakers of today's conference call are Mr. Lars Wagner, Chief Executive Officer, and Mr. Peter Kameritsch, Chief Financial Officer. Firstly, I will hand over to Mr. Thomas Franz, Vice President, Investor Relations, for some introductory words. Yeah, thank you, Sonia. Good morning, ladies and gentlemen. Welcome to our Capital Market Update call. The main intention of this call is to share our view on 2025. The planned outlook beyond the year 2025 remains a topic for the postponed CMD. After management's presentation, we'll have time for the questions you might have. With this, let me hand over to Lars for the review. Right, thank you, Thomas, and good morning, everyone. Welcome to today's Capital Market Update. Obviously, let me start by answering one of probably your pressing questions: why are we only meeting today for a simple conference call to present our guidance for 2025 and not, as previously announced and intended, for our CMD in Munich to present our strategy up to 2030? Let me be very clear on this: this new setup has nothing to do with MTU's future prospects, nor do we need more time to establish our strategy and financials beyond next year, up to 2030. All of this remains very positive. As you can imagine, and I indeed have received many supporting feedback from you, the reason is a personal one. With my announcement to step down at the end of next year, I simply want to elaborate this strategy with my successor and then present this together in front of you as soon as possible. This is, for me, clearly an act of respect towards the new CEO of MTU Aero Engines. And in the meantime, we are, of course, executing and/or preparing the necessary steps to double down on this strategy, and I see this very promising. The presentation of the outlook for 2025 alone would not be enough to sustain an entire Capital Market Day. Therefore, we believe that it would simply not be worth your travel to Munich exclusively for this information. Instead, we can very well conduct a comprehensive discussion on the outlook through this regular conference call today. And ladies and gentlemen, our supervisory board is addressing the issue of my succession as we speak. However, I would like to reiterate that I remain fully committed to MTU and will continue to devote all my energy to the company until the end of my terms in office. The outlook for the aerospace industry is very promising, and MTU in particular has excellent prospects. And then, needless to say, but I'd like to comment, my departure had nothing to do with MTU. It was, and it is, and it remains a great company with excellent prospects. But the opportunity to shape the future of aviation in this leading position as CEO Commercial Aviation at Airbus only comes around once in a career, and I decided to take it. With that in mind, and also reflecting that it's still a long way off, let's focus on MTU now and our forecast for 2025. Let me start, as usual, with a brief summary of the trends which we have seen so far in 2024. The challenges faced by the supply chain slowed the increase in new aircraft deliveries. Consequently, there was a decline in new engine shipments to airframers, and a greater proportion of spare and lease engines was delivered to customers with a respective tailwind for profitability in our commercial OEM business. Throughout the year, MTU has furthermore effectively capitalized on a range of market opportunities in the MRO business. There has been consistent demand, particularly for established engine platforms such as V25, GEnx, GE90, and CF34. Notably, a lower GTF MRO revenue share was observed due to decreased material intensity. Moreover, the positive product mix in the MRO segment, along with a strong engine lease and asset management business, contributed significantly to EBIT, surpassing original expectations. Additionally, the commercial spare parts business experienced robust market demand with notable contributions from both narrow body and mature wide body engine programs. As previously mentioned in our nine months 2024 results, we have successfully leveraged this favorable momentum and revised our earnings target upwards. Let me emphasize this once again, that we expect to achieve this year an EBIT of slightly over EUR 1 billion one year earlier than originally planned. Now, towards 2025, this year is expected to be another year of a robust market environment, although the supply chain remains a watch item. However, I believe MTU is well prepared to continue on our growth path. Before Peter provides you with the details of our outlook for 2025, let me give you a brief overview of the key drivers in our business segments. First, the military business. In our military business, the underlying business remains strong, with anticipated growth for the development work for the New Generation Fighter Engine, as well as increase in T408 engine volumes. The EJ200 engine will remain the key revenue contributor in the coming years. In 2025, we will see EJ200 new engine production to grow, driven by the German Quadriga and the Spanish Halcon One order. We expect a significant increase in T408 engine revenues from 2024 to 2025. However, RB199 revenues are expected to decline from 2025 onwards due to the phase-out of the Tornado aircraft. In the commercial OE business, we anticipate growth across various engine programs. The PW1100G engine deliveries will be the key growth driver. In 2025, we expect the first GTF Advantage deliveries, while the smaller GTF engine programs will also benefit from production increases. Further growth is expected in Genx production, as Boeing is expected to increase the output on the 787 program. And also, the very first engine deliveries for GE9X are anticipated in 2025, as the entry into service of the Boeing 777X is now expected for 2026. And generally, the deliveries are expected to happen at a more normalized ratio of spare and lease engines compared to installed engines. Commercial spare parts growth remains influenced by ongoing supply chain constraints. However, we anticipate solid growth in narrow body engines. The V25 engine, in particular, will benefit from robust market demand and higher utilization. Spare parts on wide body engines, as well as business jet engines, are projected to remain relatively stable. And in the commercial MRO business, we expect continued growth in GTF MRO work. The PW1100 engine will be a significant driver across all MTU network locations, particularly with a further ramp-up at EME Aero, as well as MTU Zhuhai through the start of operations at our second Jinwan site. The projected revenue share in our MRO business for GTF MRO is anticipated to be around 40%, four-zero. Freighter engines such as the GE90 and the CF6-80C2 will benefit from the ongoing robust cargo traffic. And our engine leasing business will continue to drive the overall profitable growth in MRO, while the asset management part should see a bit of a slowdown. As you can see with all of this, we are well on track to see another successful year for MTU. And for the translation of these trends into our financials, Peter, I would like to hand over to you. Yes, thank you, Lars, and also a warm welcome from my side. As outlined, 2025 will again be a year with a very supportive market environment. We anticipate an increase in demand in all of our segments, although we are keeping a close eye on the supply chain. Nevertheless, we feel very confident in our ability to manage demand and supply in a way to generate significantly higher revenue and EBIT numbers. For 2025, we expect total group revenues between EUR 8.3 and EUR 8.5 billion, based on a US dollar exchange rate of 110. Military business is expected to grow mid to high single digits, driven by, as Lars mentioned, rising EJ200 and T408 OE deliveries, as well as more funded development work for the next generation fighter engine. Commercial OE revenues will increase in the mid-teens range, mainly driven by higher production volumes for the GTF family, the GEnx, and delivery of the first GE9X installed engines. Commercial spare parts are expected to grow in the low teens range, benefiting from strong demand for narrow body engines. Commercial MRO will experience growth in the low to mid-teens, driven by increased GTF MRO work, high demand for freighter engines, and strong contributions from our engine lease and asset management business. Overall, this should result in a low to mid-teens increase in EBIT adjusted in absolute numbers. Compared to 2024, we expect some normalization in the delivery share of spare and lease engines, as well as some slowdown in asset management contribution from MLS. As usual, adjusted net income is expected to grow in line with adjusted EBIT. On cash flow, as expected and communicated several times, also 2025 free cash flow will be materially impacted by payments for the GTF fleet management plan. In addition to that, a still volatile supply chain brings us, as for 2025, to a rather broad cash flow guidance of a low triple-digit million euro number, but with the clear ambition to surpass 2024 levels. Maybe some comments on FX. As mentioned, this outlook is based on a US dollar rate of 110. Given the latest currency movements, it's worth to provide you with a rough sensitivity on the numbers. At a rate of 105, you would realize around EUR 300-EUR 400 million euros of additional revenues and roughly EUR 30 million euros of additional EBIT, as the exposure of 2025 is roughly hedged at a level of 70%. Based on the strong results expected for 2024, we plan to propose a dividend of EUR 220 per share at the upcoming annual general meeting on May 8th, 2025. This represents an increase of EUR 0.20 or 10% compared to last year's dividend. This concludes our presentation on the outlook for 2025, and we are now happy to answer all of your questions. Thank you very much. We will now begin the question and answer session. If you'd like to ask a question, please press star one one on your touch-tone telephone. The operator will announce your name when it's your turn to ask a question. In case you wish to cancel your question, please press star one one again. We will now take our first question, and the first question comes from Mr. Robert Stallard from Vertical Research. May we have your question? Thanks so much. Good morning. Morning. Hey, Robert. A couple from me. First of all, on your guidance for the commercial spares up low teens, you said that supply chain issues continuing to impact that. Is that across the board, or is that related to a specific engine program? And then secondly, on the GTF fleet management cash payments, I was wondering if you've got any further clarity on how those payments are going to be split in 2024 and 2025. Thank you. No, on the GTF payment plan, I mean, we still, I mean, we frequently said that it's roughly 300, 300, 100. So that's the rough distributions over the years, so 2024, 2025, 2026. There might be some movements from 2024 into 2025, and maybe also some movements from 2025 to 2026, but that is still our base assumption. Yeah, and on the supply chain, Robert, it's generic. We see ups and downs, and that occurs obviously one time or the other, but in general, this is a cautious remark across the board. Okay. Thank you very much. Thank you. We will now take our next question. Mr. Philip Buller from Berenberg, may we have your question? Hi, good morning. Yeah, thanks for the question. In terms of the puts and takes or the bridge into 2025, you talked very helpfully to slide three on some of the revenue drivers. I know they all have different margin profiles. Can you help us scale some of the most important items on that slide, and perhaps which ones do you have the most or least visibility on? And as a follow-up, the sales growth and EBIT growth, low to mid-teens in absolute terms year- on- year, the cash guidance is essentially the same wording as before. So just to be clear, would you not assume that cash is also up at a similar low to mid-teens levels in 2025, please? Thanks. No, on the cash flow guidance, that could be the final outcome, of course, yeah, but we described that we have, I mean, the visibility going into 2025 is not as good as for the EBIT number. I mean, we have, regarding the supply chains, we have some volatility in the supply chains. Parts supply in the MRO is not at the best level, and so on, also as Lars mentioned, for the supply chain for the spare parts. So working capital and timing and phasing of the GTF payments are a volatile element, and so we are rather cautious, and we give the same guidance for 2025 as to 2024 are. But I said in my last sentence, I think, with the clear ambition to be above the 2024 levels. That's clear. That's our target. But not everything is in our own hands, I have to admit. Thanks. And then the first part of the question, I guess, is there anything on slide three that we should pay a disproportionate amount of attention to in terms of the visibility or risk on the bridge into 2025 from a profit and cash standpoint beyond the GTF payment plan? Thanks. I wouldn't particularly emphasize one or the other item. I mean, as I said, that probably MLS asset management will be a little bit lower the contribution, so maybe that has a little impact on the MRO margin in 2025 versus 2024. As I said, I mean, we probably have a lower share of spare and lease engines compared to 2024 in 2025. So that will, let's say, have a low impact on the OEM division margin, but overall, there's nothing to particularly emphasize in these drivers, yeah. Thank you very much. Thank you. We will take our next question. Mr. Ian Douglas-Pennant from UBS, may we have your question? Thanks for having me on. I have two quick ones here at UBS. Firstly, on your commercial OE guidance is above what, I guess, I would expect given consensus delivery estimates for the OEMs. So just picking up on something you said about the MRO business, about the assumption for spare sales next year, does that apply to the OE business as well? Or I guess the guidance, the way I see it, would imply continued strong spare sales for next year is your assumption. And secondly, could you your comment, the GTF Advantage was the entry into service next year, could you narrow that down, beginning, end? Could you just give us an update on your thinking there? Thank you. We start with that. We specifically said entry into service in the year 2025. We have gone through most of the testing, obviously, but certification, as you know, our industry is way before entry into service, and I expect the certification in around Q1 probably, and then with a little bit of lead time, the EIS. Yeah, regarding new engine deliveries, I mean, it's driven by, as I mentioned, I mean, on the one hand side, the ramp-up of the GTF engine family, not only the PW1100, but also the small GTFs ramp-up significantly from 2024 to 2025. I mean, that's the first part of the growth driver. The second is obviously that on GEnx, we are at quite low levels compared to, let's say, past delivery levels we had. We were above 200 shipsets per year, and now we are rather currently in 2024 in the 100 range, and that should, so following the ramp-up of Boeing and having all the, let's say, quality problems behind them, should also drive an increase in GEnx deliveries, and then we have the GE9X entry into service in 2025, obviously starting from zero, so that is, I would say, quite tangible. From today's point of view, so looking into the supply chain, that shouldn't be endangered, yeah, new engine deliveries. Thank you very much. Thank you. We will now take our next question. Mr. George Zhao from Bernstein, may we have your question? Hi, good morning, everyone. First, just a clarification. You mentioned a few times expected slowdown from MLS, but the three sites continue to grow. So could you just clarify what you mean by that? Second on cash, so excluding the GTF compensation payment, where would your free cash flow conversion be in 2024 or 2025? I understand there's a lot of supply chain uncertainty, but even in the past, you had targeted only 70% conversion, which is lower than peers. But as your CapEx normalizes, when and how much could you begin to see that gap narrow? Thanks. I didn't get your first question. I couldn't, so the line was quite bad. The second, I mean, we are talking now about 2025, not about 2026 or 2027. So in 2025, we still have a rather high level of CapEx. We are in a year where we have, as I said, base assumption, EUR 300 million of AOG payments for the GTF, and still probably, let's say, some working capital increase. And all these three elements, they bite into cash conversion, of course. So once the GTF payments are behind us and, let's say, supply chain work as they should, turnaround times are at a very good level, then we are going to have definitely a completely higher cash conversion, yeah, and narrow the gap to our peers. Could you? The you? The first question was just on MLS. Yeah. Yeah, just on MLS, I think you mentioned a few times that I would expect it to slow down, but the slide three also talks about continued growth. So what is the expectation there specifically? No, I mean, the expectation for the asset and lease management, lease business is that it continues to grow, but probably not at the same margin as we saw in 2024, which was extraordinary, yeah. So they profited from, let's say, quite good engine purchases in the past, and when you sell them, obviously, you generate a high profit, and you can't continue that because now asset prices have gone up, and the margin is probably lower. But the lease business will also continue to grow and show very, very healthy margins, yeah. So it grows, but at a lower margin compared to 2024. Okay, sounds good. Thanks. Thanks. Thank you. We will now take our next question. Mr. Christophe Menard from Deutsche Bank, may we have your question? Amazing. Yes, good morning. Thanks for taking my question. I have three quick ones. The first one is to bounce on the last answer. Should we understand, I mean, the combination of GTF being a bigger share of the MRO division plus MLS, a bit less profitable, that the MRO margin in 2025 will be lower than in 2024? That's the first question. Second question is, can you comment on the market share you have on the, well, not the market share, but the percentage you're going to have in terms of deliveries on the A320? I understand versus GE. I understood you delivered more than expected in 2024. Will it be lower in 2025? And the last question is just out of my own interest, why do you have so limited visibility on the GTF fleet management payment? I mean, we're very close to the end of the year, so I understand you don't have a tangible number yet for 2024, if I understood well. Thanks. Yeah, on MRO margin, I mean, we are in 2024, we are far ahead of the margin we originally expected. I mean, that's the baseline. Probably we're going to end the year with, it's not 9%, but a little bit below 9% margin, which is extraordinary for the MRO division, given the fact that in 2024, we had a little bit lower share of GTF, but still, it's a 30% share of our MRO volumes come from the low margin business. So 2024 is, in a certain way, a very, very special situation. So, and in 2025, maybe MRO margin is a little bit below. I mean, that doesn't fall 1-2 percentage points. Maybe it's at 8.5% or so, but not dramatically. It's just a way of, let's say, normalization of the situation, not the MRO margin falls. So it's not going to fall dramatically, maybe 10 basis points, 20 basis points, or whatsoever. On the percentage, I don't see a reason why we should defer significantly from what we've seen this year, even if we have overdelivered a couple of engines, but that profile will ease out as we look into 2025. No hidden agenda here in our view. It's regarding, I mean, cash outflow. I mean, these are ongoing negotiations between Pratt and the airlines. So we have still one month to go, and cash flow is, as you know, a KPI, which counts from the 1st of January until 31st of December. And if a payment is done the 2nd of January, then it is not in the 2024 cash flow. So there is some uncertainty regarding the cash outflow still until the end of the year. It could easily be a double-digit number that could easily flow from 2024 to 2025. So it's in the nature of the KPI. Thank you so much. Okay, thank you. It's clear. So you say 300, 300, 100, that was the initial plan. So we're expecting lower number anyway in 2024. Could be, yeah. be, yeah. Could be that some payments move from 2024 to 2025, yes. Yeah. Thank you very much. Thank you. We will now take our next question. Mr. Aymeric Poulain from Kepler Cheuvreux, may we have your question? Yeah, thank you. Good morning. I've got three follow-up questions, please. On the free cash flow, I'm still confused why before GTF, the conversion ratio should not improve and why the working capital should continue to be a drag. I mean, I was under the impression that once the advantage is entering into service, CapEx should come down. And also, as the MRO turnaround time improves, there should be an improving inventory ratio as a percentage of sales. So could you elaborate a bit on the drag, what you see as a drag on the underlying free cash flow before GTF cash cost, please? And I'll follow up on that. Even with conservative assumption, your dividend, sorry, your debt should be pretty much debt-free by 2026. So why continue to be prudent on the return of cash to shareholder with a stable dividend? And last, I wanted to clarify on the MLS margin contribution in 2024. I think you said this division, this unit contributed to about 10% of the MRO sales in 2024. What would be the profit contribution in 2024, please? Regarding MLS, we don't split out EBIT per location. In 2024, MLS had something like in the magnitude EUR 500 million of revenues, yeah, so roughly 10% of MRO revenues. But I mean, what we typically say is it's above average, significantly above average, above the average MRO margin, so above the 8.7-8.8%, which we are going to show in 2024. Your first question regarding the, I mean, the CapEx we show has nothing to do with the GTF advantage. Our R&D spend for GTF has something to do with the GTF advantage, but the CapEx is obviously, I mean, we built here in Munich. We have some investments into machines and buildings here. We built a new building for our engineering. We invested into a geothermal plant to reduce our CO2 emissions. These are all investments which show up in the CapEx line and have nothing to do with the GTF advantage. Regarding dividend, dividend is not stable. We increase it by 10% or EUR 0.20. It has nothing to do really with our leverage. Our leverage is 0.5 times EBITDA, so at the lower end of our target range, it has something to do that we want to protect our investment grade rating, so if you look on our cash flow statement like Moody's does, we have a negative free cash flow, and in a period like that, if you would aggressively increase dividends, they would consider that to be, let's say, aggressive financial policy, and the risk would rise that they are going to kick us out of investment grade. We definitely want to protect our investment grade rating in order to, looking, let's say, in the period where we had corona, we were able to launch a bond. And if we wouldn't be investment grade, that wouldn't have been possible. So for the company, it's extremely important to protect that investment grade rating. And that's why we, let's say, paused our dividend policy at the occurrence of the powder metal incident for three years. We communicated that end of 2023. So everybody knows that the dividend in the next two, three years will be below our, let's say, dividend policy we had in the past, the 30%-40%. And we always said after the powder metal payments are behind us, we're going to reinstate our dividend policy and distribute more to shareholders. Thank you. Thank you. We will now take our next question. Mr. Tristan Sanson from BNP Paribas, may we have your question? Yes, good morning, gentlemen. Thanks for taking my question. Good morning. I have three quick, sorry, three quick questions on my end. The first one, you cautioned about the long-term trajectory of the RB199 support. Can you remind us how much it is today in the military sales? And I know it's just the 2025 guidance, but over how many years do you think it's going to significantly pull back? The second question is on the pricing momentum on spare parts. Do you already have a view of what's the range of price increase that is going to be applied in 2025? And are there discrepancies between the trend in narrow body and wide body? And finally, I have one on the margin recognition on the GTF activity. I wonder whether you would comment on the evolution of the margin per engine on OE deliveries, 25 versus 24, and on support, 25 versus 24, whether there are any inflection in the profit recognition on the programs, OE and aftermarket. Thank you so much. So, I start with, so we don't give exact numbers regarding the split of our military business, but it's a good estimate that, let's say, RB199. So the whole we do for RB199 services after spare parts and MRO is something like 20% of our military sales. And that will fall, obviously, in the next years. That's a trend because, I mean, most of that we do also for the German Air Force, and they phase out the Tornado in the coming years, and so that will drop. That will be step by step then replaced by each EJ200 OE, but also, let's say, MRO spare parts and so on. So it's not that, let's say, military sales will drop in the coming years. So there's a shift in mix in our military sales, but it will continue to grow over the next years, yeah. Yeah, okay. Regarding margin recognition on PW1100s, there's no principle change from 2025 to 2024 regarding method or whatsoever. I mean, regarding, I mean, when we see obviously rising volumes of the GTF, which we do, that's beneficial for the margin. I mean, most of the production system for the GTF is highly automated, and when you can distribute, let's say, depreciation over a high number of engines, that is then beneficial, yeah. So it's rather supportive for the margin than dilutive or whatsoever, but the method in principle stays flat. Regarding price increase on spare parts 2025, I don't have seen it yet, but I think one of the questions was, does it differ from wide bodies and narrow body? I don't believe so. I don't believe so, yeah. We commented always in the past that we see a good increase, but less than we have seen in the previous year, but still in average where we have seen that in the past. No more details. That's super useful. Thank you so much, gentlemen. Thanks. Thank you. As a reminder, if you'd like to ask a question, please press star one one on your touchtone telephone and wait for your name to be announced. If you wish to cancel your question, please press star one again. We will now take our next question. Mr. David Perry from JP Morgan, may we have your question? Yes, good morning, Lars and Peter. Congratulations to you, Lars. Now, three questions. The first is just FX because you're keeping the guidance based on 110, but the market rate's closer to 15, and it's really been heading down for about two months now. So I just wondered how much hedging you've actually done in the last few months. And I know you don't give us the full hedge book until you report, but are you already locking in some of the benefits that might be available today? Would be the first question. The second is just with all the talk of potential tariffs, could you just let us know if any of your businesses might be affected by that if they actually do happen? And the third one, Lars, is it possible just to share any color on the succession plan? Is there a plan to announce a CEO, say, by the middle of the year so there's a handover? Is there anything you can share with us there that would be helpful? Thank you. So David, I start with the easy one, so Lars can think about the answers to this question. So FX, yes, it's heading down, and that's why we thought it, obviously, but we did our budget planning based on 110. That's why we gave the guidance based on 110, and that's why we gave you the sensitivity at 105 for 2025, yeah. Then you can assume whatever you want regarding FX. So that is based on a hedge cover, something like 70% is covered in a EUR 1.4 billion hedge book we have in 2025, obviously going down to, let's say, 50% in the year after and then 30% in 2027, yeah. Yes, we do. We have increased activity in hedging to take advantage of the, let's say, more beneficial rates, but also here, you have to be cautious because on the one hand side, you have to look on the spot rate, but what you do effectively pays the forward rate, and the forward spread has increased due to the interest gap between euro and the dollar. So you don't get the full benefit of the higher spot rate, but we do have increased our hedging activity, yes. Correct. It's too difficult for me. On the tariffs, right now, it's still unclear whether we will see U.S. tariffs on all goods or only specific goods. In my view, and you know that most of the OEMs are U.S.-based, and many customers are U.S.-based, and no company really is able to engineer and produce an engine as a whole by themselves. So the parts, our modules are really essential to build up a narrow engine done by the U.S. OEMs. So right now, I believe we do not expect any significant impact on this topic on our revenues or EBIT line from the visibility we have right now. And then the third question, well, no, I can't really shed some more light. I mean, as I said, my contract ends at the end of 2025. That is per se, then the time, the supervisory board will have to find my successor, but when they announce my successor, then obviously we make a transition. I don't leave here without supporting the next CEO into his role, and more to come if we know more. Discussions are ongoing. I can tell you that. All right. Great. Thank you for that. Thank you. As there are no further questions, I would like to hand back to Mr. Thomas Franz for any closing remarks. Yes, thank you, Sonia. This marks the end of our update call instead of our CMD, unfortunately. We will keep you posted at what time we will have the CMD, and looking forward to see you either there or on different occasions. Thank you very much and goodbye. We want to thank Mr. Lars Wagner and Mr. Peter Kameritsch and all the participants of this conference. Goodbye.