MTU Aero Engines AG has lost $3.6 billion in market value on worries that the engines it manufactures with US firm Pratt & Whitney contain flawed components made from contaminated metal powder.
(Bloomberg) — MTU Aero Engines AG has lost $3.6 billion in market value on worries that the engines it manufactures with US firm Pratt & Whitney contain flawed components made from contaminated metal powder.
MTU shares extended a two day-rout to 23% on Tuesday — the most in the Germany company’s 18 years as a publicly-traded company — after Pratt parent RTX Corp. warned Monday that thousands of ‘geared turbofan’ engines used in Airbus SE jets must be removed to check for troublesome parts.
Since the issue first emerged in late July, MTU lost about 3.4 billion euros ($3.6 billion) in market capitalization.
Read More: Pratt Engine Flaw to Idle Hundreds of A320 Planes for Years
MTU, which has an 18% share in the engine program, said in a statement Monday that it faces a potential 1-billion-euro hit to revenue and profit in the current financial year. However, analysts at UBS AG say the market may be pricing no geared turbofan deliveries on the A320 program from 2026.
“An assumption of ejection from the A320 program is clearly unwarranted,” analysts including Kseniia Maslova said in a note, “the share price reaction looks overdone.”
A spokesman for MTU said “the concept of the GTF engine is sound,” and that they “fully believe in the future of this engine program for many years to come.”
“This issue has been solved for engines which are currently being produced and those to be delivered in the future,” they added in emailed comments.
(Adds company comments; updates shares.)
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