MTU Aero Engines AG (MTX) Earnings Call Transcript & Summary

Ladies and gentlemen, I hereby declare this year's Annual General Meeting of MTU Aero Engines AG open. Due to the unchanged difficult pandemic situation, it will once again be held as a virtual Annual General Meeting. On behalf of the Supervisory Board and the Executive Board, I would like to welcome you most cordially. We are pleased that you have accepted our invitation, and thus demonstrated your interest in and loyalty to our company. For our shareholders in non-German speaking countries, we offer simultaneous translation into English, which you can select by changing the language settings on the website. Ladies and gentlemen, I shall now take you through the formalities relating to today's Annual General Meeting. The Executive Board has resolved, with the approval of the Supervisory Board and on the basis of the so-called COVID-19 laws, to hold this AGM as a virtual meeting, without the physical presence of shareholders or their proxies and to give them the opportunity to participate and vote by means of electronic media and also to give Supervisory Board members the opportunity to participate by means of audiovisual transmission and also to permit the audiovisual broadcasting of the AGM. The Executive Board has also resolved, with the consent of the Supervisory Board, to allow shareholders to use electronic media to ask questions. [Operator Instructions] The company has set up an AGM portal for the exercise of shareholder rights via electronic media, for which you received access data together with the invitation document. Up to the end of the speech delivered by the CEO, this Annual General Meeting will be broadcast via the company's website and will be available to the general public. And after the end of this meeting, in the same place, it will be available as a video recording. The entire Annual General Meeting will only be available to shareholders via the AGM portal of the company. In view of the protective measures in the context of the COVID-19 pandemic, we limited the number of AGM participants present on site. I note that from the Executive Board, the CEO, Reiner Winkler; and the CFO, Peter Kameritsch, are present; and from the Supervisory Board, myself as Chair of the Supervisory Board and Chair of this meeting. The other members of the Executive Board and Supervisory Board follow the broadcast of this meeting via electronic media, and we can contact them if necessary. The minutes of today's AGM will be taken by Dr. Joachim Schervier notary public with his office in Munich, whom I would also like to welcome very cordially. This Annual General Meeting was convened in due time with the publication of the agenda in the Federal Gazette of 15th of March 2021. A printed copy of the publication was presented to the notary public. The information on the invitation to the Annual General Meeting and the notice pursuant to Section 125 of the German Stock Corporation Act were forwarded to those shareholders who were registered as shareholders in the company's share register at the beginning of the 21st day prior to the Annual General Meeting. The list of attendance has already been drawn up. Since this AGM is held as a virtual meeting, only the voting proxy and the votes it represents are recorded in the attendance list. And I would like to announce the attendance as follows. The capital stock of 53,398,749 is represented at today's Annual General Meeting as follows. The proxy represents -- out of the total of 53,398,749 no-par shares, that's the capital stock is divided up into, it represents 38,277,333 no-par shares with an equal number of votes. And this corresponds to a share of 71.68% of all no-par shares of the capital stock. In addition, votes were submitted for 157,990 no-par shares via postal vote. All of this taken together means a share of 71.98% of all no-par shares of the capital stock. Ladies and gentlemen, you may find summarized information on the current status of votes represented by the proxy and the postal votes on the AGM portal in the section for accessible documents. Two shareholders submitted countermotions concerning agenda items 2, appropriation of net profit; and 3, discharge of members of the Executive Board; and 7, approval of the compensation system of the Executive Board. These -- or as required by law, these countermotions were made available, including their supporting information on the company's website. We will come back to them later. For the purpose of the German Stock Corporation Act, the place of the meeting is the company's domicile at Dachauer Strasse 665 in 80995 Munich, Germany. Today, we are once again in the MTU Museum where you can see a number of engines that MTU was involved in over many decades or is still involved in and that have led to its current outstanding position in the aviation industry. You had and you still have the possibility to submit your votes via the password-protected AGM portal by means of a postal vote, or to grant power of attorney to the company appointed proxy and to issue instructions to the company appointed proxy on how you wish your voting rights to be exercised. If you registered in due time, the exercise of your voting rights on -- the modification of your instructions on the AGM portal is still possible up to the time when the Chair of the meeting announces the opening of the vote in today's virtual AGM. The question submitted by you will be answered by the Executive Board after the CEO's speech, after Mr. Winkler's speech. Mr. Winkler's speech was published before the meeting by the company on the AGM portal to give shareholders the opportunity to submit questions concerning the speech. Those shareholders who have exercised their voting rights may use electronic media to raise objections to the resolutions of the AGM via the company's AGM portal up to the closure of today's Annual General Meeting. Ladies and gentlemen, with this, I would like to close my introductory remarks on the formalities. And now I would like to proceed to the agenda, the complete text of which has been made available to all of you. And I would now like to call item 1 on the agenda: Presentation of the adopted annual financial statements, the approved consolidated financial statements, the combined management report for the company and the group and the report of the Supervisory Board including the explanatory report of the Executive Board on the statements pursuant to Sections 289a and 315a of the German Commercial Code, HGB, each for fiscal year 2020. On this agenda item, I would like to state as follows: The above-mentioned documents have been available on the company's website as of the date on which the Annual General Meeting was convened. I would now like to present the report of the Supervisory Board, and I will refer to the report of the Supervisory Board printed on Page 10 and the following pages of the annual report. Ladies and gentlemen, MTU Aero Engines experienced a very difficult fiscal year 2020 with a strong downturn in the aerospace industry. Thanks to the fast and determined countermeasures taken by the Executive Board as early as in the spring of last year, MTU nevertheless finished the fiscal year with a significant profit. MTU did not require any assistance from the state and was able to overcome the crisis on its own strength and supported by the experience and commitment of its workforce. On behalf of the entire Supervisory Board, I would like to say thank you to the Executive Board and to all employees for their successful work and their great commitment in this difficult year 2020. Likewise, I would like to thank the Works Council for its constructive cooperation and also -- and naturally, also the shareholders for the trust that they placed in our company last year. Let me now inform you of the work of the Supervisory Board in detail. The Supervisory Board regularly advise the Executive Board on the running of the company. It monitored its work and it continually dealt with MTU's business performance and situation. The Supervisory Board was informed and consulted in a direct and timely manner on all decisions of consequence for the company and provided with regular and comprehensive information on the company's situation. The Supervisory Board received written monthly reports on important business activities and the development of the company's net assets, financial position and results of operations. New plans were explained in detail to the Supervisory Board. Together with the Executive Board, the Supervisory Board discussed the strategy and all important projects that Mr. Winkler will report about soon, and it endorsed the company's strategic orientation after careful deliberation and examination. In fiscal 2020, as in previous years, the Supervisory Board paid special attention to the internal control mechanisms at MTU, especially the risk management system, the internal auditing, legally compliant corporate governance. The Supervisory Board examined these aspects on the basis of the documents submitted to it and in dialogue with the Executive Board, and it reached the conclusion that the company has effective systems in place. The Supervisory Board's compliance monitoring activities are supplemented by those of the Audit Committee, which has a special responsibility in this respect. The internal auditors regularly present their findings to the Audit Committee and the compliance officer reports to it on findings and the latest developments in the field of compliance. The Supervisory Board held 6 routine meetings in 2020. Due to the pandemic, some were held exclusively as conference calls or video conferences, while some were hybrid meetings. Attendance at meetings was 97.22%. At its meetings, the Supervisory Board discussed the extension of the contracts with the Executive Board members Peter Kameritsch, CFO and IT -- Chief Information Officer, so CFO and CIO; and then Lars Wagner, Chief Operating Officer; and Michael Schreyogg, who is Chief Program Officer. The Supervisory Board also thoroughly discussed the provisions of the German Act implementing the second Shareholders' Rights Directive, ARUG II, and the German Corporate Governance Code with regard to the Executive Board's compensation, and it also performed a review. Based on the recommendations of an independent external compensation expert and an examination of appropriateness, the Supervisory Board adopted a new remuneration system for the Executive Board, which takes into account the new provisions and integrates sustainability targets in the compensation. I will explain this new compensation system to you later. In view of the new legal requirements for stock corporations which impose an obligation to obtain the consent of the Supervisory Board for certain related party transactions, the Supervisory Board adopted an internal procedure to comply with these requirements. In the reporting period, there were no transactions requiring consent or disclosure. One item on the agenda at every meeting was the coronavirus crisis and its implications for MTU. In this context, the principal focus went on the forecast of the company's business development in fiscal years 2020 and '21 and the long-term implications of the COVID-19 pandemic for air traffic. Further topics were the issuance of a EUR 500 million corporate bond, new engine concepts for the shift to lower emission or emission-free aviation, MTU's eco road map to achieve climate neutrality in production and information on the planned additional site for MTU Maintenance Zhuhai in China and the planned repair location in Serbia. Other issues examined in detail by the Supervisory Board were the operational business plans and the budget for 2021. The short-term incentive payable to the members of the Executive Board for 2019 and the definition of the targets and bandwidth for the award of STI payments to the Executive Board members for 2020. Further question dealt with by the Supervisory Board was the appointment of an external auditor. Following the recommendation of the Audit Committee, the Supervisory Board proposed to the AGM that Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Munich should be appointed to audit financial statements and consolidated financial statements and to review the half year financial report for fiscal 2020. The Annual General Meeting approved this proposed last year with a majority of 93.88% of the votes. In 2020, as in previous years, the Supervisory Board looked in detail at the application and implementation of the German Corporate Governance Code. And it also assessed how effectively it performs its tasks. In a joint declaration with the Executive Board dated 14th of December 2020, the Supervisory Board states that MTU complies with all of the recommendations of the German corporate code. This declaration of conformity can be found in the annual report on Page 106, and it has also been posted on the MTU website. Committee meetings. Apart from the Nomination Committee, the Supervisory Board has released with numbers of employee and shareholders representatives, the Personnel Committee, the Audit Committee and the Mediation Committee. Each of these committees present regular reports on the activities on its activities at the [ panel ] meetings of the Supervisory Board. The Mediation Committee did not have to be convened in 2020. The Personnel Committee had 2 meetings last year with an attendance rate of 100% During which it discussed the issues such as the short-term incentive for the Executive Board for 2019, the definition of the targets for 2020, the efficiency review of the Supervisory Board and the recommendation to the Supervisory Board for the appointment and compensation of members of the Executive Board. The committee discussed and recommended the extension of the contracts of the 3 Executive Board members: Peter Kameritsch, Lars Wagner and Michael Schreyogg and to discuss in detail the new remuneration system for the Executive Board. The Audit Committee met 6 times in 2020. Attendance was 100%. It focused on reviewing the annual financial statements, the consolidated financial statements and the combined management report, including the nonfinancial statement, of the MTU Group and MTU Aero Engines AG as well as the company's net assets, financial position and results of operations and the annual and half year reports and quarterly statements. Further, the Audit Committee discussed the additional services provided by the auditor and the granting of the audit mandate. It specified the key areas for the audit of the annual financial statements and consolidated financial statements for 2020, and it concluded the audit contract with Ernst & Young Wirtschaftsprüfungsgesellschaft. In addition, the Audit Committee obtained the auditor statement of independence, and it also monitored the auditor's independence. Furthermore, the procedure for procuring non-audit services provided by the auditors was reviewed and affirmed and the provision of such services by the auditor in the reporting period was approved. Four of its meetings in 2020 and additional direct discussions outside of such meetings, the Audit Committee obtained report from the auditor on its audit strategy and approach and on the audit process. Moreover, the Audit Committee examined a qualification of the persons engaged in the audit and the auditor's general quality assurance concepts, including its controls and practical application. As a result of its audit, the committee recommended that the Supervisory Board should adopt the annual financial statements, approve the consolidated financial statements, approve the combined management report and the nonfinancial statement and consent to the Executive Board's profit distribution proposal. The Audit Committee monitored the accounting process, the accounting-related internal control and risk management system and the internal auditing system. which is judged to be effective, and it also received regular reports on the company's compliance activities. The Audit Committee also oversaw the placement of a corporate bond with a total value of EUR 500 million. The issue of aircraft funding and the so-called coronavirus scenarios used to forecast the company's business development in fiscal 2020 and in fiscal '21. Further issues, where the economic situation of MTU Maintenance Zhuhai, the revision of pension rules for senior managers. The report on risk management, non-audit services and the audit fees, and it also examined the reappointment of Ernst & Young as the auditor. The status of the convertible bond 2023, the EME audit, the debt position of companies accounted for using the equity method and the organization of accounting at MTU. Ladies and gentlemen, so much for the topic stat with at the committees in the last year. The Supervisory Board reviewed the annual financial statements and consolidated financial statements and combined management report and the nonfinancial statement for which the auditor issued an unqualified audit opinion and it raised no --I repeat, no objections. The company's annual financial statements and consolidated financial statements for fiscal 2020 as submitted by the Executive Board were approved at the Supervisory Board on the 9th of March 2021. The annual financial statements are therefore adopted. The Supervisory Board agreed to the Executive Board's proposal for the distribution of the net profit after giving consideration to the interest of the company and its shareholders. This year as well, there were changes in the governing bodies. On the employee representative side, Angelo Gross left the Supervisory Board. He was succeeded on the 1st of May 2020 by Michael Winkelmann. On the side of the shareholders representatives, Professor Steffens stepped down the 31st of December 2020 as planned. Professor Steffens was our -- he was responsible for technology, and he was also an important member of management and for more than 2 decades, he was very closely associated with our company. And the Supervisory Board would like to thank both former members, Dr. Steffens and Mr. Gross for their constructive and competent work on the Supervisory Board. Dr. Rainer Martens was appointed to the Supervisory Board by code decision as a successor to Professor Steffens. He is to be elected to the Supervisory Board today. I'm stepping down as a member of the Audit Committee from the end of today's AGM. Dr. Christine Bortenlänger has been elected as my successor on the committee effective 22nd of April 2021. In addition, on the 7th of March and 1st of July 2020, the Supervisory Board extended the appointment of Peter Kameritsch, Michael Schreyogg and Lars Wagner as members of the Executive Board, for another 5 years in each case until December 2025 and 30th of June 2026. Ladies and gentlemen, I would now like to inform you about the principles of the new compensation system for members of the Executive Board, which we will deal with under Agenda Item 7 today. I would also like to refer you to Page 75 and the following pages of the annual report there. As required by law, we have reported the remuneration of the members of the Executive Board and its development in fiscal 2020 on an individualized basis, and we explained it in detail. As I already mentioned, we also modified the compensation system, and we adjusted it to the provisions of ARUG II and the German Corporate Governance Code. The adjustments were developed by an external consultant in close cooperation with the Supervisory Board and take into account the applicable framework conditions for the compensation of Executive Board members of German-listed companies. The consultant explicitly confirm the appropriateness of the compensation in general and the conformity of each individual compensation component with market conditions. It is for each of the members of the Executive Board in the middle range or even in the lower range of the comparative market for compensation. I would now like to briefly explain the structured individual components of the compensation system. You will find a detailed explanation of the system in the notice of invitation and also in our annual report. First of all, compensation components and structure of compensation. The compensation for members of the Executive Board consists of nonperformance-related and performance-related components. The sum total of which then constitutes the total compensation for a member of the Executive Board. The nonperformance related components comprise the fixed compensation, the fringe benefits and pension benefit. The performance-related components consist of a short-term variable compensation in the form of the STI, the short-term incentive, and a long-term variable compensation in the form of the restricted stock plan. There's some total of fixed compensation, the target amount for STI for the short-term incentive and the RSP or Restricted Stock Plan grant value is the target direct compensation for members of the Executive Board. The target direct compensation consists mainly of performance-related components. The majority of which are linked to the achievement of long-term targets. This means that the structure of the target direct compensation is geared to long-term and sustainable development of the company. Pursuant to the Stock Corporation Act, the Supervisory Board defined a maximum compensation for each member of the Executive Board, which includes all of the fixed and variable components. The maximum compensation limits, the overall amount of the compensation granted for specific fiscal year, irrespective of the payout date. For the [ VC ] it amounts to EUR 5.5 million and for the other members of the Executive Board, it's EUR 3 million in each case. The nonperformance-related compensation as I said before consists of fixed compensation, fringe benefits and pension benefits. The fixed compensation is a fixed contractually agreed compensation, which is paid out in 12 equal installments. The fringe benefits include taxable reimbursements of expenses and the cash equivalents of payments in kind, such as a company car, medical checkups and insurance premiums. Let me now refer to pension benefits. Members of the Executive Board appointed to the Executive Board prior to the 31st of December 2020 received a defined benefit commitment. The members of the Executive Board earn company pension entitlements in accordance with the MTU pension capital plan That governs post-employment benefits. The benefit target is to provide a pension amounting to 60% of the defined fixed compensation after 15 years of service on the Executive Board. Executive Board members newly appointed to the Executive Board as of the 1st of January 2021 received a cash payment in lieu of pension contributions as a lump-sum earmarked amount paid out annually for their own pension provision. This allows the Executive Board members to take responsibility for their own pension provision at their own discretion. The performance-related compensation consists of the short-term incentive or STI for short and the Restricted Stock Plan. First of all, the short-term incentive. The short-term incentive is granted as performance-related compensation with a short-term incentive effect. It amounts to around 40% of the performance-related Executive Board compensation and is intended to ensure the achievement of operational targets, important for the long-term development of MTU. The actual amount depends on the degree of target achievement for 2 financial performance criteria. The equally weighted key performance indicators at group level of adjusted EBIT and free cash flow. In addition, nonfinancial ESG targets are taken into account in determining the overall target achievement via the multiplier. ESG stands for environment, social and governance, and it includes, for instance, environmental or energy efficiency issues, aspects such as occupational safety and health protection, diversity or corporate social responsibility and sustainable corporate governance, including corporate values and management and control processes. The payout amount is based on the individual target amount and the overall target achievement determined for the fiscal year. The individual target amount, the defined target values of the financial performance criteria, the agreed nonfinancial targets within the scope of the multiplier as well as the determined target achievements and the over targeted limit achievement are published exposed in the compensation report for each fiscal year with the resulting payout amount. Adjusted EBIT and free cash flow are considered as financial performance criteria with equal writing. The target values to be achieved in the respective fiscal year to ensure payment of 100% of the STI are set annually in advance by the Supervisory Board, taking the operational business plan into account. In addition, an entry threshold is set at 80% of the target value, which if achieved, corresponds to an STI payment of 50%. There is no STI entitlement below this entry threshold, no entitlement to the STI. Similarly, the upper limit of 200% of the payout applies if the maximum degree of target achievement of 120% is reached. Between the entry threshold, the 100% level and the upper limit, the total target achievement percentage is interpolated linearly. In addition to financial performance criteria, nonfinancial ESG targets are also taken into account as part of the STI by means of a multiplier, ranging from 0.8 to 1.2. And these are derived from MTU's sustainability strategy. This offers the Supervisory Board the possibility to implement nonfinancial targets in the STI that are relevant to the long-term and sustainable success of MTU. Before the start of the fiscal year, the Supervisory Board selects relevant criteria based on the criteria catalog and it defines explicit targets and corridors for evaluating the criteria. The specific targets for each fiscal year and the resulting target achievement are also published exposed in the compensation report. Now the Restricted Stock Plan. Performance-related long-term incentive compensation is awarded under the Restricted Stock Plan, the RSP. This compensation component is share-based and it represents around 60% of the variable compensation. The RSP payout value is based on the contractually agreed RSP grant value, and it depends on 2 equally rated performance criteria. Adjusted EBIT and relative total shareholder return, TSR, measured against the STOXX Europe Total Market Aerospace & Defense index. Target achievement can assume a value of 0 to 200%. Technically, the restricted stock plan is awarded in the form of a cash settlement. It's net amount i.e., after income tax must be reinvested immediately and in full in restricted MTU shares by the respective member of the Executive Board. And these shares must be held for a holding period of 4 years. The MTU shares are freely available to the Executive Board member after the end of the holding period and thus, after a total term of 7 years. If a realized result for adjusted EBIT is below 80%, which is the entry threshold of the target value set by the Supervisory Board, target achievement is 0% while at 80% of the target value, the threshold of 50% target achievement is reached. If the realized result is equal to the target value target achievement is 100%. If the realized result is 120% of the target value. This equals a target achievement of 200%. Target achievement is thus limited to 200% as the upper limit. Thus, a realized result of more than 120% of the target value does not lead to a further increase in target achievement, [ intermediate ] values are interpolated linearly. Relative total shareholder return is recognized as an external performance criteria geared to the capital market. It enables relative measurement of performance against relevant competitors in the STOXX Europe Total Market Aerospace & Defense index and a link between the interests of the Executive Board and the shareholders. This creates an incentive for long-term and sustainable performance of the MTU share on the capital market. To determine the annual target achievement of the relative total shareholder return, the annual tiers are performance of the MTU is calculated during the performance period and it is compared with the annual TSR performance in the benchmark index. The resulting difference in percentage points so-called outperformance is plotted on the target achievement curve to obtain the percentage value for target achievement. If the difference is greater than minus 10 percentage points, which is the entry threshold, target achievement is 0%. Whilst if the difference is 10 percentage points, the threshold of 50% target achievement is reached. If the difference is 0 percentage points, target achievement is 100%. Now if the difference is plus 10 percentage points, target achievement is 200%, which is the upper limit. See [ divisive tiers ] -- our target achievement for each RSP tranche is calculated as the average of the annual relative TSR target achievements. determined during the 3-year performance period and published in the compensation report after the end of the performance period. And we have further specific provisions, which we defined and they are also included in the contracts. First of all, malice and clawback. In the event of serious breaches of duty, the Supervisory Board has the option to reduce or demand repayment of performance-related compensation components in part or in full. To strengthen the long-term and sustainable development of MTU and to further align the interest of the Executive Board and shareholders, the compensation system stipulates share ownership guidelines for the Executive Board members. The members of the Executive Board are obliged to acquire MTU shares equivalent to 300% for the CEO or 200% for ordinary Board members of their gross fixed compensation and to hold these shares for a period of 2 years after their term of office as an Executive Board member has ended. Executive Board contracts of service are concluded in accordance with the requirements of the German Stock Corporation as well as the recommendations of the German Corporate Governance Code for a term of 3 years for newly appointed Executive Board members and subsequently for a maximum term of 5 years. In the case of premature termination, members of the Executive Board with contract of services terminated prematurely by MTU are entitled to receive a severance payment equivalent to the total of the prorated compensation components for the original remaining term of the contract. The severance payment is capped at twice the total annual compensation. If the contract of service is terminated by MTU for good cause, no severance packages paid. The same severance payment cap applies if Executive Board members resigned their office because of a change of control. In accordance with Section 87-A, Paragraph 2, sentence 2 of the German Stock Corporation Act, the Supervisory Board has the right to temporarily deviate from the established compensation system in special and exceptional circumstances for instance in the event of a serious financial or economic crisis. If this becomes necessary in the interest of MTU's long-term well-being. A deviation from the compensation system is only possible by means of a resolution to this effect by the Supervisory Board based on a proposal by the Personnel Committee and after careful consideration of the necessity. Even in the event of the deviation, compensation must continue to be geared to the long-term sustainable development of MTU, and it must be in line with the success of the company and the performance of the Executive Board. Ladies and gentlemen, so much for the compensation of the Executive Board. And now I would like to inform you of the main features of the compensation system for Supervisory Board members which is to be confirmed today. Compared to the compensation of the Executive Board, the system for the Supervisory Board is relatively straightforward. The members of the Supervisory Board receive a fixed annual compensation of EUR 50,000. In accordance with recommendations of the German Corporate Governance Code, the chair of the Supervisory Board and the Chairs and members of Supervisory Board committees receive increased compensation on account of the additional time commitment. The Chair of the Supervisory Board received compensation of EUR 150,000. Members of Supervisory Board committees receive additional -- an additional compensation of EUR 10,000. The Chair of the Supervisory Board committee receives an additional compensation of EUR 20,000. This does not include membership of the mediation committee for which there is no additional compensation. In addition, members of the Supervisory Board or Supervisory Board Committee, received for participation in a meeting of the Supervisory Board or Supervisory Board Committee an attendance fee of EUR 3,000 per meeting to a maximum of EUR 3000 per calendar per diem. The attendance team is halved for meetings conducted by means of modern telecommunications. Supervisory Board members are covered by our directors and offices liability insurance policy for members of governing bodies. The insurance premiums are paid by the company. The company reimburses all members of the Supervisory Board in addition for the expenses and value-added tax payable loan compensation. There shall be no compensation-related agreements between the company and the members of the Supervisory Board that go beyond the provisions in the Articles of Association. You will find information on the compensation of the Supervisory Board on Pages 85 and the following pages of the annual report. Now ladies and gentlemen, so much for now from my side. Now I'd like to give the floor to the CEO, Reiner Winkler, for the report from the Executive Board, Mr. Winkler?

Thank you, Mr. Eberhardt. Shareholders, shareholders' representatives, ladies and gentlemen, welcome to the Annual General Meeting of MTU Aero Engines AG. In view of the persistence of the coronavirus pandemic, this meeting is, once again, taking place in virtual form. It's good that this possibility available because protecting health continues to be our highest priority. And it goes out saying that your rights as shareholders and our dialogue with you in this digital format is also very important to us. And this is why I want to provide extensive information online, and we'll try to answer your questions comprehensively. I'd like to begin my report with a review of the past fiscal year. After that, I look forward to the current fiscal year and then beyond. In the process, I want to outline the main focal points we'll be setting. Let's begin by looking back. We will all remember 2020 for a long time because of the coronavirus pandemic. The pandemic catapulted the aviation industry into the worst crisis of its history. You, our shareholders, were able to see that for yourselves from our share prices. We started the year well but the pandemic triggered a slump. In the course of the year, the MTU share did recover. But even so, over the year as a whole, it lost 16% of its value. And as you can see in the chart, we performed better than our competitors, but we were still well below the curve chartered by the banks. And that, of course, is unsatisfactory. especially when we consider the MTU's business model proved to be sound and resilient during the crisis. Of course, we were and still are affected by the unprecedented market collapse triggered by the pandemic. And our results did not live up to our original expectations for 2020, which we thought will be another record year. Instead, like so many other companies in 2020, we had to revise our forecast in the course of the year because of the market. Nonetheless, we can be satisfied with our business figures. Our revenues in 2020 amounted to just under EUR 4 billion. We achieved an operating profit of EUR 416 million and adjusted net income of EUR 294 million. At EUR 105 million, our free cash flow was clearly positive. These results show that MTU is able to hold its course and fulfill its goals even with most difficult conditions. We succeeded in this because we did everything in our power that we could influence ourselves to counter the crisis. In 2020, that included, in particular, strict liquidity management and a special focus on our capacity. I'd like to expand on these 2 points a little. First of all, liquidity management. MTU built up its liquidity reserves significantly during 2020. We expanded an existing credit facility, took out a promissory note and placed the corporate bond. MTU was, by the way, one of the first companies successfully to place such a bond on the market during the corona pandemic. In my opinion, this demonstrates, once again, how much the financial markets trust MTU. Among the steps of secure liquidity, there was also something that affected all of you directly as shareholders, namely the wide scale shortfall of the dividend payment for 2019. We also drove forward our cost control program vigorously. In this context, in 2020, we postponed a number of projects, such as the development of our new repair facility in Serbia or the construction of the second plant in the Chinese city of Zhuhai. However, I would stress that the expansion of our network of location has merely been postponed, not abandoned. In the meantime, construction has been resumed. Moreover, we've significantly reduced our materials expenses to that of cost of consulting and travel. I'd like to look at the topic of capacity, the 3 [ business ] venture operations, our German MTU plant and in Poland. In addition, we have used the short-time working system as a means of controlling our capacity. When managing inventories, pay attention to a healthy balance between capital commitment and optimum control production. Capacity planning also makes it necessary to adjust our personnel capacity by the end of 2021 by 10% to 15%. We're doing this with prudence and care, run primarily on voluntary programs such as partial retirement, avoiding operational layoffs and keeping the future viability of MTU in mind. So much in brief for the levers and measures that are available to ensure the financial stability of MTU. Ladies and gentlemen, MTU has weathered the crisis well so far. But I would like to emphasize one thing in particular at this point. We only master crisis together. The workforce of MTU have performed outstandingly well also during the pandemic regardless of whether they're working from home, whether they were physically present at our facilities or working on site for our customers. The MTU employees went on delivering products to our customers and partners and supporting them with services even at the most difficult conditions. And thus, they kept the supply chains moving. That deserves respect and recognition. I also wanted to mention the extremely disciplined implementation of our coronavirus measures. Up to this time, we've been able to ensure that MTU has not become a kind of hotspot for infections. With a great deal of commitment for 2020, I should like to thank all our employees on behalf of the entire Executive Board for all they have done for their flexibility, discipline and a sense of responsibility. A common battle against the effects of the pandemic have brought us even closer together than the past year. In this context, I've mentioned our solidarity fund for hardship cases resulting from the corona crisis. With this money, we can provide fast unbureaucratic financial help to employees who need it. I'd like to thank the other members of the Executive Board and all the managers and members of Supervisory Board of MTU for their generous contribution to this fund. I'd also like to thank our works council for its support. It has been and continues to be a reliable partner in efforts to master the crisis. In difficult times, good counsel is very important and very valuable. I'd like to thank you, Mr. Eberhardt and other members of the Supervisory Board for your advice. My particular gratitude goes to Professor Dr. Klaus Steffens, who stepped down at the end of 2020. Klaus, thank you for all your suggestions, your inspiration and for the working relations marked by great trust. On behalf of the entire Executive Board of MTU, I wish you all the best for the future. Today, under Item 6, the Supervisory Board has proposed to elect Dr. Rainer Martens to the Supervisory Board. Like Professor Martens (sic) [Professor Steffens ], Dr. Martens formally worked for MTU and will bring valuable industry expertise to the Board. The Executive Board will therefore be very glad for your support for this proposal. Later on, Mr. Eberhardt will be talking about it in more detail, and Dr. Martens will also introduce him in a brief video message. We should also like to thank our customers and partners for their trustful work with us. We look forward to continuing our good business relationships. And last but not least, I'd like to thank you, shareholders, for your candid dialogue and your trust, both are important and valuable to us, especially in difficult times. We'd also like to express our thanks with our dividend proposal. For fiscal 2020, the Executive Board and Supervisory Board are proposing a dividend of EUR 1.25 per share. In principle, we, of course, continue to embrace the dividend strategy we've communicated to you. MTU's dividend policy envisage of the payment of an attractive dividend. And moreover, we want to increase the payout ratio. Ladies and gentlemen, looking at our business performance in 2020 shows that MTU faced strong headwinds, but we demonstrated our strength and our resistance in the crisis. We've shown that we can work profitably even in difficult times, at last now is to stay on course and to shape the future of aviation. What does that mean specifically for fiscal 2021? What are the topics on our agenda and our goals have we set ourselves. Let me begin by saying that in 2021, we are also seeing a very challenging year because the pandemic is not over yet. And we should have to deal with the economic effects for quite a while to come. However, we are in a good position, for example, in the freight business, which has turned up to be extremely robust during the crisis. Here, with the PW2000 and CF6, we have 2 strong engines in our portfolio. In 2021, the turbofan PW1100 is going to be very important, which will power the A320neo. In Hannover we'll be increasing our maintenance focus on this engine and in Munich, we'll be trying to improve the performance. In all our turbofan engine programs, we're working intensively on strengthening reliability, quality and service life even further. Because these engines for regional narrow-body aircraft, are essential to helping us out of the crisis. This market segment is expected to recover more quickly than the long-haul business and to return to the precrisis levels as early as 2023. In our military business, the Next European Fighter Engine will be a central topic in fiscal 2021 for future European fighter aircraft. As I've already mentioned, in 2021, we are planning to expand our site network with the result of new repair facility in Serbia and the expansion of MTU Maintenance Zhuhai to -- into the second plant. With all these measures, we are, of course, keeping an eye on MTU's liquidity by optimizing our cost structures even further and being very conscious about expenditure. All in all, for 2021, we have set ourselves a target of earning revenues between EUR 4.2 billion and EUR 4.6 billion. The adjusted EBIT margin should reach between 9.5% and 10.5%. Adjusted net income is expected to develop in line with the adjusted EBIT. Ladies and gentlemen, our fundamentally important element of all our plans is digitalization. Corona, not least, has shown how important it is for our companies. For example, if people are having to work at home because of health risk instead of in the office. At MTU, we currently have a number of digitalization offensives underway. The focus lies on digitalization on the entire value creation chain from the development, to production control, all the way to maintenance. Let me pick up 2 examples. Our IT is home to a number of projects that are driving for process digitalization in various areas. We're also using digitalization completely to reposition our technology department. The technology partners being aligned to the entire process chain and program to call "Reshape T", which will expand our technology leadership. We're also creating structural and capacity terms, the preconditions for scaling up production again and for further growth. Growth is being restricted at the moment by the coronavirus, but we are optimistic about the future because the prospects are good. The growth trends in our markets will be intact over the long term. Let's have a quick look at the forecast. As you can see in the chart, numerous analysts assume that aviation is currently in a short phase of starting up again. As of 2024, precrisis levels are expected to be recovered. After that, aviation ought to pick up again. First, in the short- and medium-haul segments and somewhat later in the long-haul business as well because the demand for exchange of goods and services is just as unbroken as the wish to pursue cultural exchanges. I'll repeat at this point, what I've said in the past years as well when that nothing has changed. Mobility and globalization benefit us in every area, also in the fight against corona. Enable people to be supplied with the things they need for their everyday lives, and they help to mitigate the economic consequence of a crisis. For example, means to have stable supply chains and access to the global marketplace. Of, supply chains can change [ growth ] of the coronavirus. For example, manufacturers may distribute their production locations more strongly geographically than before but that means more global exchange, not less. And we support this exchange, our products and services. And we are well positioned for above-average participation in growth. There's no question that this growth must be sustainable because sustainability is a strategic factor, and it's an important driver of efficiency and innovation. MTU is committed to the Paris Climate Agreement. We want make our contribution to restricting global warning by developing sustainable products for our customers and by improving the ecological footprint of our production processes. Let's turn to the first point, sustainable production. Together with Pratt & Whitney, we are early in pursuing sustainable aviation with a turbofan engine that uses fuel sparingly and is quieter. The engine has become well established in the market. And as I mentioned, we are currently developing that turbofan engine further. We plan to reduce fuel consumption by a total of 25% and to cut its noise level in half compared to engines from 2000. Another important area is sustainable [ regenerative ] fuels. They're indispensable for climate-friendly aviation. On a way to mission-free flight, new revolutionary engine concepts are necessary. And in this field, we're working especially in the fields of hydrogen and flying fuel cells. In other words, concept that could be launched on the market in the mid-2030s. When it comes to second point, production, we're doing everything we can to make a sparing use of resources as possible. The key here is the more efficient use of energy in order to use our consumption permanently and sustainably. Here in Munich, That's the biggest facility of MTU Group. We have made the greatest progress. And at other German national sites, similar projects are to be implemented. Decisions on this are on the agenda in months to come. Information on a full spectrum of our sustainability activities and the associated results can be found in our Sustainability Report and we're also reporting on our contributions on further sustainability also United Nations such as decent work and economic growth or peace, justice and strong institutions and also our ethical responsibility. The sustainability report will be published at the end of May. Ladies and gentlemen, we plan to be measured by our results in the area of sustainability. The Executive Board's new remuneration system, which we'll be voting on today is no longer orientated exclusive towards financial key figures, but rather includes targets oriented towards sustainability because our aspirations are clear. We want to shape the future of MTU with innovative technologically leading products to support sustainable growth in our industry and enable us to participate in this to an above average extent. On the concept of our growth targets, I want to briefly about Items 9 and 10 of today's AGM agenda. We are planning to ask for authorization issue new shares and bonds and both are anticipatory resolutions, which will enable the Board to react flexibly and to adopt capital market bases when necessary. So you are giving us freedom to maneuver, which will be a tangible advantage for MTU and enable us to receive important opportunities for development. In the past, we've always handled these authorized responsibility, and I assure you that we intend to continue to do so. Ladies and gentlemen, let me draw a conclusion. MTU has a business model that has proven to be extremely robust during the crisis. We are and will remain a reliable partner even under difficult conditions. We have outstanding future prospects, and we know how to use them, namely by investing in promising innovations, driving for digitalization, relying on sustainable solutions and in this way, actively shaping the future of aviation. I can assure you, we are looking to the future optimistically, and we will emerge from this crisis with new strength. I'd be very pleased if you shared our confidence and will support MTU in the future. I'd like to thank you also on behalf of the other members of the Executive Board for your confidence, interest and your time. Take care of yourself and stay healthy.

Mr. Winkler, thank you for your comments which were very impressive, I think. At this point, the public broadcast of the AGM is being terminated, and we say goodbye to all those who have watched us via the public link, and we thank you for your interest. The broadcast now is only available to shareholders who have logged on via the HV AGM portal. [Statements in English on this transcript were spoken by an interpreter present on the live call.]