Long-haul climber

The MTU Aero Engines share is turning ten.

05.2015 | Text: Larissa Klaus

Text:
Larissa Klaus has been writing for MTU internal and external publications for the past seven years. She also advises on corporate communications in the financial sector.

MTU Aero Engines has already enjoyed decades of success developing the new tech­nol­ogies it takes to make flying more economical, quieter and more envir­on­men­tally friendly. This is what ensures the company’s long-term success, which in turn gives enduring power to the MTU share—which traded for the first time ten years ago on the Frankfurt stock exchange.

June 6, 2005 was the first day of trading for the MTU share, which was issued at a price of 21 euros and opened at 21.89 euros. Since then, its price has increased by over 300 percent; in March 2015 it topped the 90-euro mark for the first time. “Com­par­able shares in the civil aviation sector have doubled in value in the last ten years­—but the MTU share has developed considerably better than that,” says Michael Röger, head of Investor Relations at MTU Aero Engines. “This is because MTU’s rev­enues and earnings have risen continuously over that period. We’ve generally come in at or even slightly above our targets, and we’ve achieved our forecasts.”

But the harsh climate of the 2008 financial crisis also caused a dip in the MTU share price. Figures sagged heavily across the aviation industry. In the first half of that year, high oil prices and a weak U.S. dollar put additional strain on earnings and, as a result, share prices. The sector also suffered due to weaker growth in air travel, which led to aircraft being taken out of service and some orders being cancelled. “That was the first time the share price became decoupled from the company’s operating per­form­ance,” says Claudia Heinle, Senior Manager Investor Relations at MTU. The economic outlook worsened over the course of the year so that by October 28, 2008, around three and a half years after its first day of trading, the MTU share price had sunk to an all-time low of 12.87 euros.

“Developed considerably better than comparable shares in the civil aviation sector”

Michael Röger, head of Investor Relations at MTU Aero Engines

+300% Since the company went public in 2005, the MTU share price has increased by over 300 percent (as of April 30, 2015). This means it has developed considerably more favorably than Germany’s MDAX index and the Euro Stoxx TMI Aerospace & Defense index. This reference group comprises the European aerospace sector’s 15 most important companies.

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IPO of MTU Aero Engines

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1_boerse

June 6, 2005 marked the first day MTU’s stock was publicly traded.

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The share, issued at a price of 21 euros, started at an opening price of 21.89 euros.

3_boerse

MTU’s share price has soared more than 300 percent since the company went public in 2005.

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MTU’s stock did much better than comparable stock of other companies in the commercial aerospace industry.

Record recovery

Recovery was not long in coming: By 2010, the share price had regained its pre-crisis level and continued to rise steadily on its way to reaching the then all-time post-IPO high of 79.25 euros in May 2013. “Although the lingering euro crisis dampened the mood on the capital market at that time, our share and the MDAX defied the volatile situation,” says Heinle. Low interest rates for other classes of investment increase the appeal of shares. The MTU share price remained fairly constant in 2014—in financial circles, this is referred to as a “sideways trend.” At the beginning of 2015, the MTU share jumped to a new record high. Starting at the end of 2014, the share got a boost from low oil prices and a strong U.S. dollar. The market also responded positively to the European Central Bank’s announcement of its asset purchase program.

The future looks promising: “We’ve reached numerous milestones, each one enabling us to benefit from a growing market. Even the analysts agree,” says Röger. The com­pany is currently in a phase of high investment that is set to continue until 2017. But conditions are such that adjusted EBIT—in other words operating profit—is still ex­pect­ed to show some growth in this period. The coming years will above all be defined by preparations for series production of the Geared Turbofan™ programs and the ad­vances in technology these will bring. MTU is also investing in R&D for engines that will have a big role to play in the future, such as the GE9X for the Boeing 777X, which is scheduled to hit the market in around 2020, thus securing a decisive market share in the upper thrust range.

Worthwhile investments

The benefit of these investments should start to show from 2018. “Some 30 percent of all aircraft in service today have MTU modules on board. Our engine fleet will ex­pand greatly over the next five to ten years,” says Reiner Winkler, CEO of MTU Aero Engines AG. MTU then expects growth in the high-margin spare parts and main­ten­ance businesses to accelerate.

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