BERLIN German aircraft engine maker MTU Aero Engines said a phase of investment will come to an end in 2017, with core profits set to grow faster than revenues from 2018, thus improving its margins.
MTU Aero, whose customers include Airbus (AIR.PA), Boeing (BA.N) and Bombardier (BBDb.TO), has been investing in new engine programmes recently, but new engines are less profitable than replacing and repairing parts.
"We expect our highly profitable spare parts and maintenance business to generate the highest increase in revenues as of 2018," Chief Executive Reiner Winkler said in a statement on Wednesday.
MTU said it expected cash flows to increase from 2018, meaning greater payouts for shareholders.
Its shares were up 1.3 percent at 0927 GMT, outperforming a 0.1 percent rise for German mid-sized companies .MDAXI.
MTU's operating profit margin was 9.9 percent in 2015, down from 11.1 percent for 2012. It expects adjusted earnings before interest and tax of around 500 million euros (419.73 million pounds) this year, on revenues of 4.7 billion.
In 2017, revenues from the commercial maintenance business should increase by a percentage in the low teens, while spare parts sales will grow by around 3 to 7 percent, MTU said during an investor day.
Revenues from production of new engines will rise by 7 to 9 percent, while military sales will decrease by around 3 to 7 percent.
It added it expects the military business to remain stable through to 2025, whereas previously it had expected a moderate decline.
It said it would provide a more detailed outlook for 2017 when it reports annual financial results on Feb. 23.
(Reporting by Victoria Bryan; Editing by Maria Sheahan)