BERLIN (Reuters) – MTU Aero Engines will talk to U.S. partner Pratt & Whitney about compensation for an estimated 700 million euro hit to its cash flow caused by problems with its partner’s geared turbofan engines, the German aircraft engine maker’s chief financial officer said on Wednesday.
The problems would not markedly affect the current year but will result in a hit to cash flow of about 700 million euros ($751.45 million), which will be felt mainly in 2024 and 2025, with some spillover in 2026, according to CFO Peter Kameritsch.
Kameritsch added that MTU, which issued a profit warning on Monday that sent its shares sharply lower, had launched an internal programme to streamline capital expenditures and other costs.
Pratt & Whitney, a subsidiary of RTX Corp, previously identified a “rare condition” in the powdered metal used to manufacture certain engine parts, meaning that 600 to 700 engines need to be removed for the issue to be rectified in the coming years.
MTU said in a statement earlier on Wednesday that it is considering leaving the “significant resulting charges” on reported revenue and earnings figures for 2023 out of its current year guidance.
These are likely to be one-off effects, reducing revenues and reported operating profit by 1 billion euros each, it said, having announced the potential cost on Monday.
“The financial burdens arising from the geared turbofan inspection program are undoubtedly present, but they are not likely to be reflected in the adjusted guidance figures,” said Chief Executive Lars Wagner in the statement.
Apart from those charges, the company’s course of business supports the company’s previous guidance of adjusted revenue of between 6.1 and 6.3 billion euros for the year, said MTU.
($1 = 0.9315 euros)
(Reporting by Christina Amann, Writing by Miranda Murray, Editing by Rachel More, Elaine Hardcastle)
