MTU Aero Engines beats profit expectations

By Isabel Demetz and Chiara Holzhaeuser

(Reuters) -MTU Aero Engines beat quarterly profit expectations on Thursday driven by its maintenance, repair and overhaul business, sending its shares higher.

The supplier to Airbus and Boeing reported a 16% rise in second-quarter adjusted core profit to 252 million euros ($509 million), beating the 223 million expected by analysts in a company-provided consensus.

MTU shares were trading up 6.3% at 0919 GMT.

It also raised its adjusted core profit margin forecast for the year to 13% from over 12%, saying it had seen progress in its geared turbofan fleet (GTF) management program and a sustained positive market.

Last year, the company had to recall up to 3,000 geared turbofan engines from its partner Pratt & Whitney due to a potentially defective turbine disc, costing the company about 1 billion euros.

The company is said to be in talks with Pratt about potential compensation. In July, J.P. Morgan published a note in which MTU management said it had reached an agreement with Pratt to compensate them for the unplanned GTF inspections that they are doing in their maintenance, repair and overhaul (MRO) division. The company declined to elaborate on the matter when asked to confirm during a press conference.

Geared turbofan maintenance accounted for around 30% of its MRO business. "In view of the lower material intensity in geared turbofan shop visits, we now expect geared turbofan MRO to be around 35% over the full year," Peter Kameritsch, the company's CFO, said in a statement.

It had initially expected geared turbofan to account for 40-45% of its MRO work.

"After a very challenging set of Q1 results earlier this year, resulting from direct and indirect impact of the GTF, the Q2 results are a step in the right direction," analysts at Bernstein said.

($1 = 0.9237 euros)

(Reporting by Isabel Demetz and Chiara Holzhaeuser; Editing by Christian Schmollinger and Eileen Soreng)