* Q4 sales 963.6 mln eur vs Reuters poll avg 940 mln
* Q4 adj EBIT 106.8 mln eur vs Reuters poll avg 105 mln
* New engine business to grow faster than spare parts
* Shares rise 1.8 pct, among top midcap gainers
By Victoria Bryan
MUNICH, Feb 18 Delivering costly new engines to
meet a boom in orders for passenger jets will keep profits flat
at MTU Aero Engines this year, before its more
lucrative spare parts business benefits later this decade, it
said on Tuesday.
The German firm, which supplies planemakers Boeing,
Airbus and Bombardier, makes bigger profit
margins from selling spare parts than supplying new engines, in
which it has to invest more money, and saw its operating margin
fall by 1 percentage point to 10.1 percent in 2013.
"We're investing now because this means good business for us
in the future," board member Michael Schreyoegg said, adding it
can take eight to ten years for investment in a new engine
programme to pay off.
Revenue in the firm's new engine business will grow by
around 10 percent this year in dollar terms, while the spare
parts business will rise only by a mid single-digit percentage,
Airlines placed firm orders for a record 11,200 aircraft
last year, said MTU, which will be doubling production volumes
to meet demand.
Its military business, which like others has been hit by
reduced government spending on defence, is likely to see
revenues drop around 10 percent, it added.
Rival Rolls-Royce last week sent shivers through
Europe's defence and aerospace sector after it said U.S. and
European spending cuts would halt profit growth in 2014, causing
its shares to fall the most in one day for more than 13 years.
"We can expect a turnaround in the spare parts business to
come at the end of the decade," Chief Executive Reiner Winkler
MTU forecast adjusted earnings before interest and tax
(EBIT) would be stable at around 373 million euros in 2014. That
compares with analysts' forecasts of between 356 and 422 million
euros, according to a Reuters poll.
Shares in MTU, which had dropped 12 percent this year,
underperforming a 2 percent gain for German mid-caps,
rose 1.8 percent on Tuesday.
"A scenario of an even lower EBIT number for 2014 has not
become reality is the good news next to the solid
fourth-quarter," Equinet analyst Adrian Pehl wrote.
MTU expects 2014 revenues of 3.75 billion euros, stripping
out sales from a maintenance joint venture which will no longer
be consolidated in results under IFRS accounting rules.
The group reported fourth-quarter sales of 963.6 million
euros and adjusted EBIT of 106.8 million.
It said it would announce its dividend proposal on March 11.
Analysts on average expect a dividend of 1.46 euros per share,
up from 1.35 euros paid for 2012.
The new accounting requirements also means it will have to
adjust its 2020 targets, which had forecast turnover of 6
billion euros by then.