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MTU Aero Engines AG (OTCPK:MTUAF) This autumn 2023 Outcomes Convention Name February 29, 2024 6:00 AM ET
Firm Individuals
Thomas Franz – Vice President, Investor Relations
Lars Wagner – Chief Government Officer
Peter Kameritsch – Chief Monetary Officer
Convention Name Individuals
Kseniia Maslova – UBS
Robert Stallard – Vertical Analysis
Phil Buller – Berenberg
Chloe Lemarie – Jefferies
David Perry – JPMorgan
George Zhao – Bernstein
Ross Regulation – Morgan Stanley.
Christophe Menard – Deutsche Financial institution
Milene Kerner – Barclays
Tristan Sanson – BNP Paribas Exane
Aymeric Poulain – Kepler Cheuvreux
Ben Heelan – Financial institution of America
Olivier Brochet – Redburn Atlantic
Thomas Franz
Good morning, girls and gents. Welcome to our convention name for MTU’s preliminary full 12 months outcomes 2023. As ordinary, we’ll begin with a enterprise overview offered by Lars. Peter will give extra — offers you the monetary overview, a comparability to our 2023 steering in addition to a extra detailed look into our OEM and MRO phase. Following that, Lars will stroll you thru the steering for 2024. This would be the finish of the presentation half, and we’ll then open the decision for questions. Let me now hand over to Lars for the overview.
Lars Wagner
Sure. Thanks, Thomas. Good morning, girls and gents, a heat welcome additionally from my facet. 2023 was certainly a 12 months of contrasts. As you already know, on one hand, operationally, MTU is in high type and we as soon as once more posted report outcomes for this monetary 12 months with €6.3 billion adjusted revenues, €818 million adjusted EBIT and a powerful free money stream of €352 million, we demonstrated once more the energy of our firm. . However, as a result of GTF fleet administration plan introduced within the second half of 2023, we needed to e-book USD 1 billion cost. This resulted in a big discount on reported revenues and a loss on reported EBIT.
However let me begin with the market atmosphere. 2023 was very encouraging. Air site visitors has nearly absolutely recovered to the degrees we noticed earlier than the pandemic. World passenger site visitors reached 98% of its precrisis ranges and is anticipated to develop by 10% in 2024, exceeding pre-COVID ranges by roughly 5%. Robust demand for MRO providers and rising manufacturing charges for brand new plane are additional indicators that the restoration is almost accomplished and the trade is again on monitor. This upswing can also be seen in important order intakes on the air exhibits in Paris and Dubai.
MTU secured order wins within the worth of over $1.5 billion at these commerce festivals. And extra lately, eventually week’s Singapore Airshow, this pattern continued the place we acquired orders price USD 500 million. Important orders got here for GEnx engines in addition to for the GTF on the A220 in addition to on the A320.
Let’s check out MTU. Our current funding in store extensions has confirmed to be the fitting technique to be ready for very excessive market demand and elevated capability wants for the GTF fleet administration plan. The improve and enchancment of our services is ongoing. Our newest addition is our new turbine disk heart in Munich, which can convey a brand new stage of automation to our operations. It’s now absolutely outfitted and can begin its operation in just a few weeks. Moreover, we celebrated the groundbreaking ceremony of our new engineering heart at our Munich web site. The development of our geothermal energy plant is progressing as deliberate. The drilling has began, and we predict to succeed in the specified depths in about 2.5 months.
Within the MRO phase, we’re seeing progress on the growth of MTU Zhuhai. The second take a look at cell is working since June and is a part of our new MRO outlets in China. The extra store is predicted to begin its operation in early ’25. After ramping up, it is going to add an extra annual capability of 260 store visits to our MRO community and can primarily deal with MRO for GTF and V2500 engine.
Now let’s deal with the challenges across the GTF fleet administration plan. As beforehand stated, I wish to emphasize that MTU isn’t a part of the issue, however we’re a part of the answer. We’re working very intently with Pratt & Whitney to handle the plan in the absolute best means as we’re assessing choices find out how to enhance MRO capability and to develop clever and good options to handle store visits and optimize workshops. The defining issue for this system stays the flexibility to hurry up turnaround time and to make sure functionality of trade elements.
Whereas this plan is progressing and anticipated most AOG numbers are up to date in the meanwhile, we’re not updating the monetary and operational outlook. Anyway, I wish to emphasize as soon as once more that the GTF powder steel concern is a producing drawback and never a design drawback. The Geared Turbofan has the fitting forward-looking structure and is an indispensable a part of our expertise roadmap in the direction of the sustainable aviation.
This brings me to our replace of our expertise roadmap. As a part of the European Clear Aviation Funding program, we at the moment are specializing in 2 initiatives the place we’re main the consortiums on these duties. On the one hand, and we proceed to drive ahead our water-enhanced turbofan idea within the undertaking change. However, our actions and work on the Flying Gasoline Cell lately led to the launch of the Mission HEROPS.
Let me proceed with the progress in our army expertise packages. In 2023, we began improvement work for the engines to energy the long run fight plane system FCAS. This additionally contains a 4-year contract for extra expertise research for the German armed forces. We see nice potential for MTU on this undertaking, not just for subsequent European fighter engine, but in addition to enhance our capacity within the industrial place. And along with that, we’re working along with Safran from an European workforce to type an European workforce to discover applied sciences for an engine for a European next-generation rotorcraft. The goal is to equip European armed forces with a purely European helicopter engine. This program could possibly be key to strengthen European sovereignty and strengthen the European provide chain.
The income up. Regardless of the challenges of the GTF fleet administration plan, MTU is in glorious form and all enterprise segments are performing effectively. We’re financially and operationally very sturdy — a really sturdy firm and we see an incredible future mendacity forward of us. In 2024, we’ll see additional progress in all enterprise segments, which I current — which I’ll current to you in a couple of minutes. We additionally stay assured past 2024. Our 8-1-25 goal stays unchanged. This implies in 2025, we wish to generate gross sales of €8 billion and an adjusted EBIT of €1 billion. As already talked about to start with, 2023 was a 12 months of data by way of adjusted revenues and adjusted EBIT in addition to a powerful free money stream. However on the similar time, we have now to cope with the monetary burden of USD 1 billion for the GTF fleet administration plan.
On this slide, we have now to steadiness the curiosity of each our fairness and our debt traders. With this in thoughts and as introduced final week, we’ll suggest a dividend of €2 per share at this 12 months’s Annual Normal Assembly on Could 8. We see this proposal as an affordable steadiness between the anticipated money outflows and the corporate’s sturdy progress progress.
This ends my overview on 2023. I wish to hand over to Peter for the financials.
Peter Kameritsch
Sure. Thanks, Lars, and I wish to welcome additionally from my facet. So let me begin with the comparability of our full 12 months 2023 numbers with our respective steering for the 12 months. Adjusted revenues got here in at €6.3 billion on the higher finish of our steering vary. We noticed progress in each industrial segments according to our expectations. Solely in our army phase, progress was barely under our steering. With an EBIT adjusted of €818 million and a margin of 12.9%, we ended the 12 months completely according to our expectations.
Free money stream adjusted was €352 million, effectively forward of our 2022 achievement. Money conversion fee stood at 59%. Additional, I wish to spotlight the numerous impression the fleet administration plan had in 2023. This may be seen within the reported numbers the place we confirmed the income of roughly €5.4 billion, whereas EBIT reported was unfavourable at minus €161 million.
Turning the web page and evaluating adjusted numbers of 2023 with 2022. Whole adjusted group revenues elevated 19% to a brand new report excessive of €6.3 billion. This progress was supported by all enterprise segments. In U.S. greenback phrases, natural revenues have been up 22%. EBIT adjusted elevated 25% to €818 million, leading to an EBIT margin — adjusted margin, as simply talked about, of 12.9%. This quantity additionally exceeds the achieved adjusted EBIT of the earlier report 12 months in 2019, the place we had €757 million.
Internet revenue adjusted was up 25% to €595 million. On this determine, we’re making use of a barely larger normalized tax fee of 27%, ensuing from a unique distribution of earnings in our world community. Free money stream adjusted was at €352 million, up 8% from 2022 ranges.
So let’s transfer on to the enterprise segments, and let me begin with the OEM phase. Whole OEM revenues adjusted for the impression of the GTF fleet administration plan elevated 21% to roughly €2.2 billion. And inside that, army revenues grew 8% to nearly €540 million, which is barely under our full 12 months expectation because of some delayed deliveries. Adjusted industrial enterprise revenues in euro rose 25% to €1.6 billion. And inside that, natural OE revenues in U.S. {dollars} have been up roughly 30%, which is according to our full 12 months expectations. Larger GTF deliveries, in addition to elevated output of [indiscernible] engines and ITT deliveries, have been the primary progress components.
On a quarterly foundation, OE gross sales have been additionally up 30%. Natural spare half gross sales in {dollars} have been up excessive teenagers. This progress was seen in all platforms, specifically, widebodies and ITTs. On a quarterly foundation, spare half gross sales have been additionally up within the excessive teenagers. Adjusted consequence, we count on a decline in profitability within the fourth quarter with a margin of 18.1% in comparison with the opposite quarters of 2023. This improvement was primarily based on the already mentioned pickup in prices over the course of the 12 months. For instance, wage enhance in mid-2023. And secondly, we noticed a better share of put in engine deliveries, particularly within the fourth quarter.
Yr-over-year, we noticed a barely higher profitability primarily ensuing from achieved FX charges and better debt-equity outcomes. Nevertheless, we completed the 12 months with a barely decrease profitability than anticipated. That is the results of army revenues being a bit behind and spare elements revenues being on the decrease finish of our anticipated vary.
So transferring on to the industrial MRO phase on the subsequent web page. MRO revenues elevated 17% to €4.2 billion, whereas U.S. greenback revenues have been up roughly 20%. All engine platforms noticed stable demand. GTF total progress was primarily pushed by the continued ramp-up at MTU Zhuhai and EME Aero in Poland. Our lease and asset administration enterprise within the Netherlands additionally booked sturdy revenues. Inside the phase, our GTF MRO share was roughly at 35%. On EBIT adjusted, we noticed a continuing enchancment over the 12 months, and particularly in This autumn, we had a really sturdy EBIT margin of 9.5% in that phase.
Yr-over-year, EBIT adjusted elevated 23% to €329 million, leading to a margin of seven.8%. The sturdy margin within the 12 months and particularly in This autumn was potential by way of just a few optimistic tendencies I might like to say. First, the GTF share revenues was on the decrease finish of our full 12 months expectations whereas the work scopes turned out to be much less dilutive to margins. Second, sturdy contribution from fairness corporations, particularly from MTU Zhuhai, have been very helpful for the margin. And third, the combination of contracts that work scopes within the impartial enterprise proceed to be very worthwhile, as already seen within the third quarter.
At this level, I wish to hand again to Lars for some ideas on our steering 2024.
Lars Wagner
All proper, Peter. Thanks. Sure. For the 2024, the market atmosphere continues to look very optimistic with air site visitors lastly exceeding 2019 ranges. Provide chain is bettering, however stays a difficult issue whereas demand stays very promising. Nonetheless, the operational atmosphere will probably be very a lot influenced by the execution of the GTF fleet administration program.
General, we count on progress in all enterprise segments, which we count on to consequence within the group revenues between €7.3 billion and €7.5 billion. This outlook relies on a U.S. greenback FX fee of $1.10.
Inside that, we count on army revenues to develop within the low to mid-teens share vary, pushed by stable deliveries, whereas income contribution from FCAS demonstrator Part 1 builds up. Natural industrial OE revenues will probably be up within the low to mid-20% vary. Important drivers right here will probably be larger manufacturing charges for the A320neo, A220 and E-Jets, and better deliveries for Boeing 787 and Enterprise Jet.
Additionally contributing to this would be the first deliveries on the GE9X program. Natural industrial spare elements gross sales are anticipated to develop within the low teenagers vary. Spare elements gross sales ought to profit from the continuing restoration in air site visitors and checklist worth will increase. Important income contributor would be the V2500 and older widebody platforms.
The plane on floor scenario of the A320neo may set off further spare elements demand for narrow-body engines. And natural MRO revenues will develop within the mid- to excessive teenagers share vary. Constructive market atmosphere ought to additional assist impartial MRO demand. Robust enhance in GTF MRO store visits as a result of fleet administration plan are additionally a part of this outlook.
As described, enterprise developments present a slight headwind for profitability. We count on to have the ability to generate an EBIT adjusted margin above 12%. We count on a low 3-digit million euro quantity in free money stream, primarily affected by AOG compensation funds as a result of GTF fleet administration plan. This marks the top of the presentation. Thanks in your consideration, and we at the moment are completely satisfied to reply your questions.
Query-and-Reply Session
Operator
We’ll now start the question-and-answer session. [Operator Instructions] We at the moment are going to proceed with our first query, and the questions come from the road of Kseniia Maslova from UBS.
Kseniia Maslova
Kseniia on the road. I’ve 2, please. So first one on industrial spares outlook, natural progress steering for ’24 appears fairly cautious, contemplating supportive backdrop after which additionally commentary out of your friends. Are you able to assist us perceive assumptions behind the quantity? And specifically, what pricing progress you’re baking for this 12 months? And my second query will probably be in your free money stream outlook. Once more, the steering appears to mirror a level of warning. Are you able to simply assist me to grasp transferring elements year-on-year and in addition possibly round how your expectations round GTF funds for ’24, ’26 and phasing of these has modified because the final replace?
Peter Kameritsch
Sure. I imply, coming to spares, sure, it’s a cautious outlook that is positively by way of that, that we may see tailwinds from, for example, from the grounding scenario. However on the opposite facet, we noticed already in 2023 that we have now had some provide chain constraints. That was additionally the explanation why our spare elements efficiency in 2023 was on the decrease finish of our steering vary, so excessive teenagers as a substitute of, for example, low 20s. So we nonetheless have to take a look at the availability chain.
So particularly in narrow-body packages, we had some incidents at suppliers. You already know that we had a fireplace within the manufacturing facility of 1 provider and so forth. So I’d say that is the bottleneck, for example, for aftermarket revenues. That is true for MRO, nevertheless it’s additionally true for spare elements.
Money stream, money stream steering. I imply the end result in 2023 will closely rely upon the phasing of the funds in the direction of the airways. And there, originally of the 12 months, the scenario is cloudy and unclear. So we may see the scenario that, for example, some funds transfer to the fitting, so relatively into the 12 months 2025, the money stream will probably be larger, or we have now extra funds in 2024 that the money stream will probably be decrease. In order that’s why, for example, the steering for our free money stream is a wider vary than ordinary. So low triple digit.
So our personal assumption concerning money outflow for funds remains to be, for example, kind of unchanged and according to what RTX gave you at their earnings name. So they supply additionally numbers for his or her outflow. So there isn’t any purpose to deviate from that assumption presently. However we can have extra readability as we undergo the 12 months.
Kseniia Maslova
Good. Can I simply make clear one factor on the spares outlook, for those who can simply assist me what pricing progress you are anticipating for 2024?
Peter Kameritsch
Pricing will probably be a bit bit — the worth will increase will probably be a bit decrease in comparison with the earlier 12 months. So mid- to excessive single digits, one thing like that.
Operator
We at the moment are going to proceed with our subsequent query, and the questions come from the road of Robert Stallard from Vertical Analysis.
Robert Stallard
A pair from me. To start with, on the GTF recall. From what RTX stated, it appears like you are going to be seeing a smoother profile, I suppose, the place you can put it on the engine store visits. So I used to be questioning if that helps you out by way of how that would impression the workflow and in addition the money stream impression down the road.
After which secondly, on the dividend, I used to be questioning for those who may elaborate on the announcement you made the opposite day or the Board made the opposite day and what this precisely means. Does it imply you are truly going to chop the dividend going ahead or there will not be a dividend going ahead? I used to be questioning for those who may assistance on that. .
Lars Wagner
Sure. Properly, I begin with the GTF and Raytheon communicated numerous these information already final week is definitely true that we see a discount of the height that was beforehand anticipated to be round 600, 650 for the top of this quarter or the second quarter, this peak is decreasing. I’d say the problem remains to be ongoing to search out important store go to capability to induct all these engines. It is nonetheless an excessive amount of then we see capability for this 12 months. So it’s optimistic information that the height is decreased. And that is because of, on the one hand, the timing of the IT concern and the additionally proactive fleet administration by our clients, I’d say nonetheless the problem is ongoing to ramp up MRO capability after which to scale back the store turnaround time.
Peter Kameritsch
Concerning dividend, I imply that’s a cautionary stance, I’d say. I imply we’re originally of two, 3 years, the place we see a big money outflows. So we have now to steadiness our capital wants. On the one hand facet, we nonetheless have to take a position closely into our enterprise or into our capability, into R&D, into expertise. However facet, we wish to pay a dividend. And we additionally — I imply we have now to look additionally on the score businesses. So to take care of — our funding grade score can also be a really, let’s say, pressing job. So that’s — the €2 is, I’d say, a balanced method of all of the stakeholders’ curiosity, so I’d name it like that.
And going ahead, we have now not outlined but a brand new, let’s say, payout ratio for the subsequent 2 to three years, nevertheless it’s positively not a goal to scale back the dividend additional. So relatively at the very least to take care of the €2 by way of the two to three years the place we have now that scenario, however that’s not our dividend forecast or dividend announcement for subsequent 12 months.
Operator
We’re now going to proceed with our subsequent query, and the questions come from the road of Phil Buller from Berenberg.
Phil Buller
I’ve 3, if I could, please. Firstly, on the GTF. It appears like this case is comparatively unchanged. If something, the money profile you talked about is perhaps smoother than initially anticipated. However on that dividend coverage shift subject, it does really feel as if one thing has modified someway. So I assume I am questioning if there’s something broader than simply the GTF powder points we’re centered on, i.e., has there been some other wider provide chain concern that will have emerged that’s embedded within the revised view on the money profile? That is query one.
Peter Kameritsch
No, in no way. So there’s nothing new on different points. It is simply — it is actually a cautionary stance originally of the two to three years. In order that’s it. There is not any extra hidden secret additionally we may share.
Phil Buller
No, that is proper.
Lars Wagner
I stated originally, Phil, all site visitors lights present a inexperienced mild going ahead by way of demand, each on OE and on MRO, additionally on army facet. So the one concern we face right here is the money drain from the GTF fleet administration plan. So nothing — no hidden agenda. .
Phil Buller
Obtained it. Okay. After which how most of the GTF that do should be grounded at the moment are presently on the bottom? And at what level will we have now carried out sufficient of the fixes in an effort to have derisked the present provision in both path? Or at what time limit ought to we be extra comfy?
Lars Wagner
That is a superb query. I’d say, the primary reply is we’re presently at round 350-ish, I’d say, plane on floor that’s based on the forecast. We now have began, as you already know, in center of September, finish of September to induct the primary engine. We’d say have — in whole, we have now most likely a excessive double-digit, low 3-digit variety of returns already, and we should always come fairly quickly to some extent the place we will estimate what’s ongoing it.
All the pieces depends on the availability chain scenario and principally on the powder steel and really sense that cautiously that in the course of the 12 months of ’24, we can have a superb view on the half influx most certainly within the second half of this 12 months. And I’d say then we’re — we could be assured on turnaround instances on store go to capability after which on the monetary outlook.
Phil Buller
And at last, only a little bit of assist or clarification, please, simply by way of accounting. You talked in regards to the GTF upkeep accounting for about 35% of MRO income. Are you able to simply perceive a bit higher actually how the mechanics of that work precisely? I believe you stated that income was barely under your expectations, however the work scope is barely higher. So I might identical to to raised perceive actually how income and earnings are being booked on the GTF and the way we should always take into consideration the EBIT margin for MRO in 2024, please?
Peter Kameritsch
I imply we talked about it a number of instances on prices on Capital Markets Day. So I imply we get store visits allotted by i.e., LSE. So the OEM firm, which they maintain the aftermarket contracts, and we get — there is a pricing framework for the entire, for example, GTF MRO community. And primarily based on that pricing framework, I imply, you possibly can possibly generate a low single-digit margin, and that’s under our impartial margin. And as a consequence, clearly, dilutes the MRO margins. So when the share is larger, it is dilutive to MRO margins. .
Usually, we do not give phase steering. However I imply, for those who learn our 2024 steering accurately, I imply we attempt to, for example, within the OEM phase, keep at roughly the place we have been in 2023, so round 22%. And MRO margin might be because of a better share of GTF volumes will go down a bit bit extra within the, for example, vary 7% to 7.5%, however the 7.8% we noticed in 2023. So a bit bit dilution comes from extra GTF proper ow. However that will probably be primarily based on our expectations for the MRO phase, for example, 2, 3 years in the past, the place we count on 6% to 7%. We’re past that. We’re higher than that.
Operator
We at the moment are going to proceed with our subsequent query, and it comes from the road of Chloe Lemarie from Jefferies.
Chloe Lemarie
I might like to begin with the GTF recall marketing campaign. Simply wanting some clarification by way of the place you have recognized alternatives to scale back the wait time, the way you’re progressing by way of unlocking these alternatives. Additionally, by way of first engines within the store. I am undecided for those who make clear that, however the variety of days that they’ve spent and the way they have been returning to the fleet at this stage.
And on the MRO margin. So that you talked about Zhuhai contribution was sturdy in 2023. I used to be additionally questioning if there’s something possibly distinctive on this efficiency or if it ought to proceed into 2024. .
Lars Wagner
I am going to begin along with your operational questions. First, Chloe, I believe we — with the primary store go to, I discussed, we’re just about in line within the store turnaround time of what we have now anticipated. However it’s our problem and our ambition, clearly, as I stated beforehand, that we wish to drive down the turnaround time. And that comes by pure capability by way of wing-to-wing turnaround time and secondly, by new strategies, new engineering strategies, new means of this meeting and assembling in an effort to scale back the store turnaround time.
And we have now concepts for each of them are presently in dialogue with the community with our associate, Pratt & Whitney, to introduce them as quickly as we have now the great concepts fastened, and we most likely go public that may enhance within the or lower principally the turnaround time. However to date, for example, we’re in line of what we have now introduced. .
Peter Kameritsch
Certain. Fairness consequence, I imply we had in 2023 a bit bit greater than €70 million of fairness contribution coming from Zhuhai, and that may develop additional. So in 2024, going to make a superb leap ahead and extra so than within the coming years. I imply from — you already know that from 2025 on, we have now an extra store capability for nearly 300 further store go to capability there. And from there, we will additionally see extra dynamic progress popping out of Zhuhai, that can also be very worthwhile store down in China. That is why we invested in further capability there.
Chloe Lemarie
Good. And simply if we will have like a technical affirmation service. In This autumn, you truly reversed a bit little bit of the PW adjustment on the EBIT. So simply needed to affirmation that this was simply technical and never [indiscernible].
Peter Kameritsch
That’s FX pushed. So the spot fee on the finish of the 12 months was a bit bit larger in comparison with Q3. And so we needed to — the U.S. greenback provision was devaluated a bit bit in euro and Zhuhai didn’t wish to digest it as a acquire. So we adjusted it backwards. So it’s only a technical concern.
Operator
We at the moment are going to proceed with our subsequent query, and the questions come from the road of David Perry from JPMorgan.
David Perry
Really 3 from me, please. The primary one is, Lars, while you stated in your opening feedback there isn’t any change to your operational or monetary steering on the GTF in the intervening time, would it not be wishful pondering to assume that when if — when or for those who do replace us, it could possibly be a greater replace relatively than only a unfavourable replace? Or is that too optimistic?
The second is, may you simply say just a few phrases on the GTF Benefit? Is all of it on monitor? And the third one is you — the OEM margin got here in a bit bit decrease than we thought originally of the 12 months. Do you continue to follow the 25% OEM margin goal, please?
Lars Wagner
The final one, Peter, it’s straightforward as a result of, sure, we follow that concentrate on. The second, the GTF Benefit. It’s our subsequent program. And to date, we’re in line in the direction of certification into service to start with of subsequent 12 months. As you already know, this program ought to incorporate all of the block fixes and the upgrades and the teachings discovered of what we have now seen within the GTF program to date and ought to be a super-performing engine beginning then subsequent 12 months and being the predominant alternative for the bigger single A321 lengthy vary and further long-range fleet.
And within the first one, effectively, sure, I’m an optimist, Perry. So if I ought to come out with higher information than clearly — with information that it ought to be higher than forecasted, this was build-out that we did within the final quarter of 2023 and the entire group of MTU and Pratt & Whitney and partly Raytheon as effectively is specializing in bettering these figures, therefore rising capability and decreasing turnaround time. That’s our purpose.
Operator
We at the moment are going to proceed with our subsequent query. And the questions come from the road of George Zhao from Bernstein.
George Zhao
First, on the dividend once more. Up to now, you have stated you had this goal leverage of 0.5x to 1.5x internet debt to EBITDA. Is that also your goal leverage? And what would be the anticipated 2024 year-end leverage following the decreasing — discount in dividend? As a result of it appears such as you would have been on the low finish of it, even for those who had saved the identical payout ratio.
And the second, simply on GTF. Final quarter, you stated a low triple-digit quantity within the turnaround time, however that was earlier than the heavier work scope. So I assume what’s it now on the services that you’ve got?
Peter Kameritsch
No. On the leverage, I imply, for those who learn our 2023 numbers, that we had an EBITDA of €170 million and internet debt of €660 million. So we have been nearly at leverage fee of 4. So, far past our goal leverage ratio however I imply we nonetheless have the goal leverage ratio of 0.5 to 1.5 in subsequent 12 months. In 2024, we will probably be within the hall once more. So as a result of we do not foresee any earnings cost for the GTF concern anymore. In order that’s clear. As stated, I imply the dividend minimize was an actual precautionary measure, not a lot taking a look at leverage ratio, relatively money stream efficiency as a result of additionally score businesses do not choose MTU primarily based on, for example, leverage ratio relatively on money stream efficiency in that time frame.
Lars Wagner
And for — once more, for the operational query. It’s — as a matter of truth, the GTF has a number of work scopes. We name them mild work scope. We name them heavy work scope. We name them a sensible work scope. And each work scope has a unique trade mechanism or exchange mechanism. So you possibly can’t actually put it on one line. For the heavy work scopes, the place we incorporate all of the block patches and fixes and we — after we put within the new supplies, this quantity remains to be in line of what we have now mentioned, the low 3-digit quantity for the sharp turnaround time. If the work scope is less complicated or smarter, then this might shift right into a double-digit timing. So it actually depends upon what we have now to do with that engine.
Operator
We at the moment are going to proceed with our subsequent query. And it comes from the road of Ross Regulation from Morgan Stanley.
Ross Regulation
First one on army. Are you able to simply discuss us by way of the precise drivers of the miss there and what brought on these delays? And equally, how ought to we take into consideration your information for 2024 in army? Is there a catch-up impact, the low to mid-teens information? Or is every little thing simply shifted to the fitting?
After which secondly, on the dividend minimize once more. Clearly, that is designed to preserve money inside the enterprise. Is it subsequently honest to imagine given the timing of this resolution that your discussions with Pratt on compensation or at the very least some kind of assist with the money impression from the GTF haven’t progressed as you could have hoped? .
Peter Kameritsch
Navy was — there have been some engines which we initially thought can be delivered in 2023 for the T408. So the engine for the brand new helicopter — transport helicopter from Sikorsky. That moved a bit bit to the fitting. In order that was relatively pushed by, I’d say, provide chain, a bit bit scarcity in provide chain and every little thing. So the entire program strikes a bit bit to the fitting, however solely barely. So it isn’t that we recuperate utterly in 2024. .
Lars Wagner
On the second query, you possibly can most likely perceive, I don’t do this publicly. We’re in good dialogue with our associate, Pratt & Whitney. And I wouldn’t deteriorate from that message. The dividend minimize was, as Peter beforehand talked about, a steadiness between what we wish to give again to our traders and what we expect we have to put money into our firm to revenue from the expansion interval that’s in entrance of us. And that was a choice we have now carried out prior to now couple of days and weeks, however don’t make any connections to discussions with Pratt & Whitney.
Operator
We at the moment are going to proceed with our subsequent query, and it comes from the road of Christophe Menard from Deutsche Financial institution.
Christophe Menard
I had 4 fast ones. First one is you talked about on a number of instances the necessity to put money into new capability and new packages. So what can be the R&D and CapEx steering for 2024? That is the primary one. The free money stream, I perceive that the vary is fairly huge. I imply low triple digit could be wherever from €100 million to, I do not know, €300 million or extra. Are you able to assist us body this? I imply I perceive that there’s some volatility. However are you able to assist us perceive a bit bit what can be the conversion — the money conversion ex-GTF? Would it not be 60%, 70%. In order that’s the second.
I imply bouncing on the final query. Your share of the GTF in 2024, I imply, within the MRO combine is now 40% to 45%. So it is most likely exceeding a bit bit your regular share in this system. So is it a superb purpose to assume that you can be compensated by Pratt, I imply, on that entrance? I imply is it one other angle to take a look at this? And the final query is on provide chain and HR, you say provide chain is bettering, is HR additionally bettering? Otherwise you nonetheless have some points with the recruitment of individuals and coaching?
Peter Kameritsch
So steering for — I’d relatively information for investing money stream, not for CapEx as a result of below IFRS 16, it may be totally different in money flows. So investing money stream ought to keep relatively secure. So round, for those who have a look at the money stream assertion, roughly €300 million money outflow for the various things we put money into.
R&D, clearly, I imply, self-funded R&D will develop, I’d say, barely, however actually solely barely, however clearly, buyer funded R&D will go up considerably as a result of phasing of the FCAS program now, the place we will see important progress.
Free money stream ex-GTF, I imply that could be a troublesome factor. So — however I imply, we had money stream of €350 million final 12 months. We’re positively with none, for example, airline compensation fee, we’d be above €400 million definitely. However it’s not — I imply it isn’t a black and white factor. So the GTF Benefit program additionally triggers working capital and so forth, so you possibly can strip that out black and white so utterly. However that is, I believe, that is my view on provide chain.
Lars Wagner
And the final level, Christophe, I believe it’s 2 years in the past, the place I stated we have now a slight labor concern. Since then, I don’t see any labor points in any a part of the world for our personal MTU facility nor do I see any provide chain hiccups proper now for the MTU perimeter. So our perspective on our provide chain is robust and wholesome and is getting ready to ramp as much as larger numbers. Once you have a look at the macro stage of — in our trade, then for certain, we have now some labor points and possibly some provide chain points, however this ought to be commented by the opposite corporations themselves.
Operator
[Operator Instructions] We at the moment are going to proceed with our subsequent query. And the questions come from the road of Milene Kerner from Barclays.
Milene Kerner
I even have 4, please. The primary 2 ones are on the GTF inspection once more. So firstly, what has been holding the issuance of the ultimate Air Pressure made directive? Then my second query is on the MRO that you’ve got carried out, have you ever acquired and changed full life disk on any of the GTF that you’ve got carried out? My third query is on the V2500 engine. In case you can make clear how this spares income have carried out final 12 months and what you count on for 2024? After which I’ve a fast one on the accounts. Why has your tax money pay been so excessive in ’23 after we examine for ’22? And what do you count on for ’24?
Lars Wagner
Milene, that is the primary time I acquired this query, and I need to admit, I can not actually reply what has postponed the issuance. We’ll come again to you and provides an info. On the disk substitute, so far as I do know, all of the disks which have been changed are usually not life-limited anymore. So therefore, a brand new disk substitute.
Peter Kameritsch
Concerning on the V2500 progress, we do not give the precise numbers. However I imply, V2500 in 2023 grew under-proportionately. So we set the 19% or the excessive teenagers for the 12 months and V2500 was a bit bit under that because of, as I discussed earlier than, particularly provide chain points. So there was a fireplace.
I believe we talked about it additionally in earlier earnings calls within the facility of 1 provider, essential provider V2500 packages. In order that prevented larger spare elements progress. And I imply in 2024, I’d say the V2500 will develop a bit bit over-proportionally in comparison with our low teenagers quantity. So relatively, sure, mid- to high-teens, so in that vary. .
Lars Wagner
Tax fee. So for those who refer — do you consult with…
Milene Kerner
In your money stream assertion, Peter, I imply there was a giant swing within the tax.
Peter Kameritsch
Within the minus €345 million. So that’s the reversal of tax protect. So we booked the supply, clearly, which is the €930 million, and that’s tax deductible. So that you e-book within the internet revenue, you e-book tax shields and clearly, the tax protect isn’t money stream. You do not get the cash, clearly. So that you reverse it within the money stream assertion.
Milene Kerner
So for ’24, we could possibly be now extra again to what you had in 2022 then as a base.
Peter Kameritsch
Sure, precisely. I imply as an assumption, I imply we have now the anticipated tax fee of 27%, and that’s the run fee tax fee.
Operator
We at the moment are going to take our subsequent query, and the questions come from the road of Tristan Sanson from BNP Paribas Exane.
Tristan Sanson
I respect the time. I’ve 3 ones, please. The primary one is on the MRO division. I seen in your slide that you’ve got a big enhance within the D&A line for MRO in 2023, which means that the EBITDA margin truly was actually up loads in ’23 versus 2022. Are you able to clarify to us what’s driving that enhance of D&A in MRO? Is it one thing structural and seeing associated to particularly the engine lease enterprise?
And a follow-up is I needed to grasp how large is now the contribution of the engine lease enterprise to the dividend. And whether or not the adjustments like the dimensions of this enterprise, whether or not that adjustments a bit the sample of improvement of the revenue of that unit? And the ultimate query, I simply needed to get a fast really feel of your evaluation of the evolution of variety of store visits on the core actions, so not GTF, that you’re going to do in 2024 versus 2023.
Peter Kameritsch
MLS, we do not — I’d say we do not strip out numbers for — you imply, [Netherlands] our personal the GTF lease pool, however our personal MLS leasing firm within the Netherlands.
Tristan Sanson
Sure, appropriate.
Peter Kameritsch
I imply there we’re — so revenue-wise, we’re near, I’d say, €300 million. And I believe it is honest to say that we have now a margin which is above the typical MRO margin and that we’ll develop. That exhibits a really dynamic progress you possibly can think about. MRO, Your query on D&A. I believe you need to talk about it with IR. So I do not.
Lars Wagner
After which the store visits, I imply, we are saying mid- to excessive teenagers. That’s together with the GTF. I’d say I see, like I stated, a powerful demand and demand is larger than capability. So it is best to see that enhance ex-GTF additionally double digit.
Operator
We at the moment are going to proceed with our subsequent query. And the questions come from the road of Aymeric Poulain from Kepler Cheuvreux.
Aymeric Poulain
Sure, I simply needed to return on 2 questions. You didn’t reply in line. The primary 1 from Christophe, on the rising share of GTF work within the MRO. Is it due to the upper share of the whole program of GTF and subsequently, extra money coming from Pratt & Whitney on that GTF work in your MRO? And is it one of many rationalization behind the stronger margin efficiency? That is the primary query.
I believe David requested in regards to the OEM margin goal at 25%, and also you did not reply it. I am simply questioning, is it since you see stress, further stress, maybe industrial effort which might be wanted to take care of your market share or different IFRS 15 impact on the spare margin. May you assist us on that, please?
Peter Kameritsch
Final seek the advice of V2500 [indiscernible]
Lars Wagner
[indiscernible] What you make out of, you assume I did not reply the query. No, no. Properly, I stated instantly, sure, David, this 25%, we’re maintaining. So do not make a unique story out of that. You may need answered that.
Peter Kameritsch
Properly, larger share, that is the conventional course of the enterprise. I imply we have now 25% MRO share extra on the decrease finish of our anticipated vary in 2023 and in 2024, it is going to transfer up. I imply additionally partially pushed by the fleet administration program as a result of powder steel concern, we’ll carry out extra store enterprise that generates extra revenues. And that clearly, a bit bit dilutive additionally to margins partially. So — however not considerably, clearly, as a result of for the additional shares of every little thing we do above our contractual obligation of 30% of the store visits to get higher compensation. .
Aymeric Poulain
I am undecided I adopted what you stated, is that your share of the whole GTF program has elevated from 25% to 30%. Is that what you stated?
Peter Kameritsch
No. We now have to do 30% of all GTF store visits. That’s our contractual obligation. In order that’s not the identical as OEM part. So we have now a program share of 18%. That’s the OE a part of the enterprise. And within the MRO phrases, we do 30% of the store visits for the GTF. .
Operator
We’re now going to proceed with our subsequent query, and the query comes from the road of Ben Heelan from Financial institution of America.
Ben Heelan
I had 2. So firstly, if I have a look at the MRO steering, you have talked in regards to the GTF share attending to 40% to 45%. If I do this math for mid- to excessive teenagers, it is actually not implying an enormous quantity of progress within the impartial MRO sort of mid-single digit. I used to be simply questioning for those who may give us a bit little bit of colour as to what is going on on there, and if that is proper and whether it is why.
After which to come back again to among the solutions across the spares progress. In case you’re doing sort of mid- to excessive single-digit pricing, this steering of low teenagers, it appears — does appear very, very low from a quantity perspective. So I used to be questioning for those who may discuss a bit bit by way of your expectations for the totally different parts of the portfolio. I am pondering issues like CF6, V2500 and the GTF, if there’s any colour that you may assist us with a bit bit there. .
Peter Kameritsch
[indiscernible] I’d say, I imply we noticed in 2023, we noticed a majority or a lot progress comes from widebody. So PW2000, we had the GP7000, GEnx so on. Slim-body progress was a bit bit — was a bit bit muted. I believe in 2024, we will see a bit bit a unique image. So I’d relatively count on one thing like PW2000 CF6-80 kind of growing, kind of in a secure method, and progress actually comes extra from the narrow-body facet. So we count on a superb progress in ’25 from this jet engines, clearly, nonetheless IGTs will develop in 2024. In order that will probably be relatively the sources of progress, not a lot the, for example, PW2000 CF6-80 engines. Nonetheless, however the previous wide-bodies GP7000 will proceed to develop, I’d say, and in addition GEnx, clearly, that transformation exhibits relatively excessive utilization. So that you see larger aftermarket demand year-over-year. In order that’s going to proceed additionally past 2024, that tendency.
Lars Wagner
On the latter one, I do not assume we printed our impartial progress individually. However I stated a number of instances, the demand out there’s very, very excessive. And clearly, our tactic is that we attempt to do as many as potential store visits for GTF in our 3 services that we have now talked about earlier, whereas preserving our impartial buyer base, and inducting as many wide-body and different engines as effectively in our outlets to meet our promise over there. So there’s important progress potential. We now have capability, so we count on a superb progress on either side.
Ben Heelan
Okay. Nice. Only a fast follow-up on the spares. I imply, you talked about, I believe, in your opening remarks that the GTF inspection program goes to contribute a bit bit to that spares progress. Is {that a} important contribution this 12 months or not likely?
Lars Wagner
Little bit, a bit bit. Sure.
Operator
We’re now going to take our subsequent query, and it comes from the road of Olivier Brochet from Redburn Atlantic.
Olivier Brochet
Sure. I’d have 3. To start with, on the Benefit to observe up on the query from David. If we assume that, for example, it might slip as a result of the FAA has certification delays. What occurs? Are you able to ship baseline engines to airline or? After which what occurs subsequent by way of the contractual relationship you might have with them and the truth that they have been speculated to get Benefit and so they’re now getting the older era. Do they hold them? Do you’re taking them again? In order that’s the primary query.
The second is on the nickel. The value evolution of late has been what it has been. Is that a problem along with your nickel hedging? Do you assume or are you high quality on this entrance? And the final one is a fast query on the presentation slides, you discuss in regards to the free money stream adjusted in your presentation. What has modified versus Q3 or earlier years the place you have been speaking about free money stream? Any variations there or simply the identify?
Peter Kameritsch
So I take your final query first. So we at all times publish free money stream adjusted. However to make it utterly clear, it is the free money stream adjusted. We now have within the appendix of the bridge. However the changes within the money stream are actually, actually tiny. So that’s the plane financing and that the exercise is admittedly low single digits. After which we’ll do, for example, then we make investments into bonds or one thing like [beyond 12 minutes] it is handled as an funding. And so it is burdening.
Olivier Brochet
It is only a label that has modified?
Peter Kameritsch
Sure, precisely. So the contract is a failure, it hasn’t modified. That is your query. So nickel hedging, that’s actually extraordinarily, extraordinarily, extraordinarily tiny. So that’s completely no concern. So we shield us in opposition to nickel worth volatility relatively with long-term contracts with our suppliers. So we’re not very lively in, for example, nickel ahead contracts or issues like that. Don’t fret about that.
Lars Wagner
Don’t fret about that, both. I imply I’ve no indicators presently that the Benefit is transferring considerably to the fitting. And your query whether or not we may provide GTF base? Clearly, sure. I imply, the introduction of a brand new engine mannequin is slowly rising the supply fee of those new engines. We’re absolutely ready to ship as many base engines as obligatory, however we’re additionally working absolutely in an effort to certify and introduce the bottom engine as it’s coming as mentioned with numerous patches and fewer tons. So the main focus is ongoing for the introduction of the bottom. And we’re in closing discussions with the FAA. We and Pratt & Whitney, clearly, our partnership is within the closing dialogue with FAA.
Operator
We now have no additional questions right now. I’ll now hand again to Thomas Franz for closing remarks.
Thomas Franz
Sure. Thanks very a lot. Thanks all in your participation, in your fascinating questions. And sure, thanks, Lars and Peter, for taking the decision. And sure, communicate quickly. Bye-bye.
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