FACC AG (FACC) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and a warm welcome to today's earnings call of the FACC AG. Today, we'd welcome you to the half year financial figures of 2024. I am delighted to welcome the CEO, Robert Machtlinger; CFO, Florian Heindl; as well as Michael Steirer from Investor Relations, who will start with the presentation shortly. After the presentation, we'll move on to a Q&A session in which you will be allowed to place your questions directly to the management. We're looking forward to the results. And having said this, Mr. Steirer, the stage is yours.

Thank you, Judith, for the introduction, and good morning to everyone. Again, welcome to FACC's earnings call in regard to the first half of the financial year 2024. As always, we have already provided detailed financial information in our press release issued earlier today. Shouldn't it be possible to address all questions in today's call due to time constraints, we are very happy to schedule additional one-on-one meetings afterwards. In this case, please let us know within the IR department, Tanja Maisenberger and myself, and we will coordinate for prior appointments. And now I will turn over the call to Robert Machtlinger, our CEO. Thank you.

Thank you, Michael. Good morning, ladies and gentlemen. A warm welcome also from my side to the presentation of the FACC first half year results of 2024. I very much appreciate your participation. As always, during the next hour, our CFO, Florian Heindl, and I will share relevant business information concerning the general global market development, FACC business highlights and the results out of the business development. We also provide information on our full year guidance and activities we put in place to deal with market environment. Besides the presentation, as we shared today, we have addressed further details in our half year report. Before I entrant to this presentation, I would like to make some references to the aerospace industry, that are specific and that are also implementing our business on a daily basis. And in lateral, this is the very positive news. The aerospace industry is growing in all markets in terms of revenue passenger kilometers, but also the aerospace industry is growing in terms of production output, demand signal and new development. All this is very positive. However, in addition to the general favorable market developments, the entire aviation industry is preoccupied with a couple of issues. And again, and as Michael stated in our report, we have made certain references to those ongoing. I would like to address three of them, that the key thing, the industry basis from the airlines to our OEMs to the Tier 1 down to the Tier 5. And first of all, it's the ramp-up of the production rate being very favorable. All our customers are ramping up production rates, mainly in the smaller airplane platforms like the A320 family. New players like COMAC 919 is joining with ramp-ups, but also business jets are doing extremely well. However, global supply chains are still not at the stability level as we have seen it before 2020. The good thing is it's not a big number of small suppliers that are impacting production rate increases. It's more a handful of larger systems like engines, like a couple of complex aerostructures components like landing gears and the one or the other [indiscernible] customer-defined interior component that is causing a bottleneck in the supply. This has resulted in the one or the other ramp-up reassessment and you are very close to the business anyhow the one or the other ramp-up of curve was readjusted to a more moderate ramp up. We know from our customer discussions, there is lots of activities ongoing to further stabilize the industry. Still, the good news is even in this environment, outputs are increasing, and we will have a couple of slides prepared for yourself. Secondly, it's the adjustment of the production rates, the results from Item 1 Airbus. This is, of course, resulting in short-term demand adjustments. We are dealing with. I can just announce here, we are in those cases, in very good collaboration with our direct customers. We have been able also in the first half year to agree on certain transition clients that adjustments are not showing a 1:1 impact to FACC. So our customers are willing to take pre-deliveries in order to keep efficiency more stable. However, not everything can be compensated by the market. So our cash flow inventory levels is a discussion globally with all of our customers with the competition as well, but also with FACC. And Florian will share a couple of details with yourselves, how we deal with it. And then, of course, and this is more specific for Central Europe, it's the inflation cost and how we work against it. And here, especially Europe has challenges in front of it. Everyone also efficiency is having a strong focus on efficiency increases a situation that we have faced over the last 2 years, especially, but the solid planes are in place. So in saying that, we are, I think, very proactive with our customers, with our supplier partners and internally to deal with the environment. And basically, in a nutshell, on the next slide, I think we can go into a detailed information we would like to share with you. Well, next slide, please, on the market development overall, and this is the good thing. As mentioned before, it's rising passenger numbers in all markets. We see a stable increase in production rates for all major aviation programs, still a very high demand in a future growing demand in short and mid-haul aircraft and business jets. This is a confirmation of the last couple of quarters we see continuing. But also we see a rising demand for wide-body aircraft namely, the A350, but also the Boeing 787. So even in Paris, most of our big number of the sales announcement is linked to wide-body aircraft, again, a market that is significant and important for efficiency because of our engagement with the Airbus and Boeing with the Pratt 1350 and 787. COMAC 919. As you know, we have good [indiscernible] on that airplane. We do the entire interior, but also aerostructures is ramping up. We see a significant demand increase in 2024, 2025, even going into 2028. So from last year, where we have delivered 12 airplane sets of the COMAC, we are targeting a number of 30 airplane sets, a little bit more this year, which with another significant increase in 2025 and the years on. So the COMAC 919 is an extra platform that is important for FACC that will support our growth plans in the global industry. And last but not least, a positive development in the Urban Air Mobility market. As you know, we have a couple of contracts assigned, lots of development work, which is continuing as planned. But also, we see serial production to be started and started its ongoing with the momentum we see are growing for the next periods to come. We are benefiting from this strong -- from the strong development even overproportionally in regards to the rest of the aviation industry, we have been growing by 23% in the first half of 2024, which is a continuation of the strong growth path we have seen already last year. Also, the order backlog is good, and we also have been able to manage to increase the profitability of the company. Next page, please. So in terms of airplane delivery rates, a quick look into the first half year. Well, the arrow shows down actually. The reason for that is still the ongoing activities at Boeing to sort out the issues. Boeing in the first half year of 2023, delivered more airplanes than in the first half year of 2024, which is making the total picture turning south ways. On the other hand, Airbus is doing still well even with the last adjustments they have announced in the second quarter of 2024, with even giving a re-guidance on the 2024 outlook. This did not come completely unexpected for the industry, and it has no impact overall for the FACC guidance, which we will talk later during the call. In terms of order intake, as you all know, last year was a record year in airplane orders, especially [indiscernible] was significant. This did not continue during 2024, also not unexpected, because the order backlog of firmly ordered airplanes is significant. Demand is higher than supply and airlines are not yet ordering big quantity at the time being, again, not unexpected, because the industry needs to deliver on the order backlog. Next page, please. We have added this time, the Business Jets development as well, because Business Jet is roundabout 20% of the FACC revenue. So this is not a niche market for FACC. This is important. And our main customers, Bombardier, and Embraer, they have announced their results in the last 2 weeks. Looks very positive. Again, in Business Jets, the last quarter of the year always is the strongest quarter. What we see from our direct discussions with all of our clients, they are ramping up some of their issues, which was ongoing concern last year is pretty much on a good way to dissolve, the engine was an issue. The supply of engines in the business jet environment is more and more stabilizing. And in the business jet environment, we see an increase of demand by roundabout 20% for FACC. This is not only doing the quantity, but also by more complex components, we are producing, having a higher value compared to the previous configuration. So also, the business jet development, it's growth is stable with indication of a very stable and growing demand for this year and for the period going forward. Next page, please. In terms of order backlog, it's roundabout 16,770 airplanes are firmly ordered. This is a little bit a new number, because we have added turboprops and COMAC to our chart. If you remember correctly, we always showed this 13,000 to 14,000 airplanes on order backlog, which only accounted for Airbus and Boeing. We have extended our information here to give you the full intend of the industry. So, overall, it's getting very obvious, Airbus with 51% of the market is leading the chart followed by Boeing with 35%. But -- and this is important, our COMAC is picking up with roundabout 9% of -- from the backlog, which you also see, I think, in terms of delivery by the end of the decade, COMAC will have a market share in terms of airplanes produced and delivered to airlines in a range of 10%. Today, we more talk about 3% to 5%. So overall, a good order backlog again, 80% of the demand is short and mid-haul airplanes in market segments where FACC is developing a significant portion of the revenues. So a positive picture once going forward. The industry needs to deliver airplane have -- airlines have a high demand of new airplanes they've ordered. Next page, please. And again, in the next page, in terms of the first half year, again, very stable. Our firm order backlog, it's slightly have increased, but we did not update our numbers, because it's a few hundred million up and down, which is the market volatility. Revenue growth with more than 20% to EUR 438.3 million, so very strong first 2 quarters. As you all know, and I would like to go a little bit into the outlook. The third quarter always, it is a little bit weaker one because of facility shutdowns and less demand from our customers. Seasonality, as we always had it, will happen also this year. But again, for the rest of the year, a very stable outlook with a growing perspective. And again, in the guidance slide later on, we will enter that EUR 22.5 million of operating EBIT, which was a more than 50% increase to last year's half year results. So the activities we have started are showing results. We are not stopping here. We have guidance for the next couple of years, where we would like to be close to double-digit EBIT numbers. That's ongoing. That's a constant activity plan we are following. But so far, the EBIT number for the first half year did met our expectations. We are ramping up our employees in Austria and outside of Austria to deal with certification, qualification issues and then later on with further ramp-ups. And the cash flow was positive with EUR 7.4 million. Florian will talk a little bit more about it. Still, inventory levels are an issue for the industry, also for FACC with the actions we are planning as we speak. Next page, please. In terms of platforms, very stable. The A320 family is still the strongest platform. Overall, comparing 2024 with 2023, not too much of a change. A few percentages here and there is an update. However, with the 23% growth, we see that all our markets are growing. In some areas, we can overcompensate short-term announcements like the Airbus reduction to 770 airplanes, we can backfill with other platforms that are doing a little bit better than expected at the start of the year. So overall, very stable. We are not seeing too much change in this year. The Boeing volume will increase once Boeing will start ramping up again. That [ conflicts ] we have on our books. Well, as I stated before, this is an ongoing issue since the last couple of years, giving us some future tailwind we're expecting to come starting in 2025 and beyond. Next page, please. In terms of highlights, as you know, we have invested heavily into plant #6, Croatia, which is giving us a very favorable cost structure compared to Upper Austria. So we have tripled the size of the facility. This is a picture from July. We are currently entering the new facility space. We also have developed a office space, helping us to employ people in central functions, again, for efficiency reasons. In the next couple of quarters, we gradually will ramp up the workforce to roundabout 1 million production hours. So this facility will support interior manufacturing, and it's a very important milestone in the long-term profitability plans of efficiency. So overall, we completed as planned in time, in budget and right now, we are starting to ramp up the new capacity. Next page. COMAC 919, project transfer, as you all know, COMAC 919. We have EUR 1 million round about our volume per airplane developed in Austria, -- produced in Austria. We have supported production lines out of Austria for the first couple of airplanes starting in the first quarter of 2024. We have launched the production move from Austria to our sister company. In China, a company we have developed and set up. This company really is producing A321 components for us. We have qualified this production site to the standards of 919. All the aerostructures components already moved to China. First packages of the interior works is moved as well. And by the end of 2024, production of the 919 components will be local in China, close to our customer, COMAC. Ramp-up will be executed out of that, that facility strongly supported by FACC. How are we benefiting, of course, local for local manufacturing procurement in China for China. And as you can imagine, logistic costs from Austria to China, especially interiors are quite significantly, which are right now reduced by 90% in terms of costs. So overall, this transfer was essential for us executed as planned. And right now, we are ramping up production to prepare for the future. Next page, please. Well, in saying that, I would like to hand over for more details on the financials to Florian.

Thank you, Robert. A warm welcome also from my side. I will now guide you through a couple of slides concerning our financials. Compared to the first half of 2023, FACC AG was able to increase sales by 24% to EUR 438.4 million. Actually, the second quarter of 2024 was historically the strongest in FACC's history in terms of sales. This illustrates what Robert has already said, the support from the market is definitely there. In terms of operating results, we were able to build on the positive third quarter. This is now the third positive quarter in a row, although, and Robert also mentioned it before, we cannot rest on these results. I will come back to this in my later comments. Next slide, please. Talking about our revenue growth in our divisions. The revenue growth is very much in line over divisions and reflects our stable in product portfolio. Cabin Interiors remains our biggest revenue contributor, also not much of a surprise here. Next page, please. In terms of free cash flow, we saw an improvement. Robert also stated that before compared to first half year 2023, which delivered a slightly positive free cash flow in terms of EUR 7.4 million. A positive free cash flow is nice, but the low number, of course, cannot be satisfactory for FACC management. This will be one of the core areas where we will have our focus on, and I will give you some more details in a later slide. Next page, please. In terms of investments, also nothing surprising on these slides. All our investments are closely monitored, controlled and are progressing as planned. In terms of [ creation ] as Robert already said, we are completing the extension of the plant right now, which means there will be a cash flow impact in the next couple of quarters as we are paying down the [ open ] bills. On the right, you have the big focus item of myself and the whole management Board. High inventory is a huge burden on the industry, but also on FACC in terms of our operating cash flow numbers. Supply chains are still somewhat troubled, yes, but we have to find solutions to free up a double-digit number in terms of million euros of block cash. Right now, 25% of the FACC balance sheet is inventory. From my perspective and also from the perspective of the management board, this is way too high. Said so, we are right now in the process of kicking off a working capital improvement project where we will have a dedicated team to drive those numbers sustainably down. Next page, please. In terms of leverage, you all know our key figures, we have to achieve EUR 4.25 million by end of June and end of December 2024. As you can see, we managed this KPI quite well this time with EUR 3.21 million in terms of end of June. The EUR 4.25 million will turn into EUR 3.75 million for 2025, which is also a positive figure from my perspective to work on our cash flow and a positive driver for all of the actions that we have planned. Next page, please. I've been in office for a little over 100 days now. So the protection phase for myself is over. Of course, I already know FACC from my first time from 2016 to 2022. So what are my impressions and where do we, as a management team, want to attack. As we have heard already from Robert, our core business is stable and growing strongly. And so we need to work more intensely to improve our volume projects in this regard. I have already mentioned working capital in the context of inventory development. For me, this is the most important lever right now that FACC has to improve our cash flow quickly and sustainably. Due to the massive cost increases in terms of inflation effects in Central Europe and also Robert stated that before. However, we cannot avoid to tighten our belts at FACC. We will, therefore, put together a package to reduce our fixed costs and increase efficiency across the whole FACC group. So with that said, I want to hand back to Robert for the market outlook.

Thank you, Florian, for the presentation of the numbers. Well, I only can sum up in the outlook. Overall, details have been presented in the last slide. Overall, we have guided yourself and the industry and our investors for a 10% to 15% growth during 2024 compared to 2023. This 10% to 15% growth rate is confirmed after the first half of the year. Management focus, Florian went into further details, profitability and ramping up the industry and ramping up efficiency is, of course, most important for FACC. Cash flow improvements are high on the agenda and with Florian and the entire management team, we are launching programs as we speak. This is ongoing and will be ongoing for roundabout 18 months to have sustainable changes, including process changes, how we manage material flow, lead times in production and certain other things. Further improvement in profit margins, our targets by the end of the decade 2028, roundabout, we want to be close to a double-digit group. This is on the agenda, this will be supported by our activities. This will be supported by our global manufacturing network. Increased efficiency in all areas to compensate inflation effects. This is needed. There is room for improvement. We know how we can manage in a ramp-up where we have lots of new people, of course. It's a little bit more difficult for even with the hiring plans we have set up with a couple of pre-hirings, we're right now seeing a turning point in productivity as well. So this will support our profitability margins. Realization of investment programs. This is ongoing a normal process and without surprises. And of course, FACC will further expand its global manufacturing footprint. We entered into two very important points. The one is Croatia, which is our best cost hub for European manufacturing, especially Jakovlje products and, of course, our offloads to China in terms of COMAC 919, which is bringing efficiency close to the COMAC working environment, but similar things are ongoing in Europe, but also in our hubs in the United States. In saying that, we are happy to answer your questions. If not all our questions can be answered, Mike already offered to have further talks later on. Thank you for your attention, and the floor is yours.

Thank you so much for your insightful presentation. [Operator Instructions]. And we have one hand up. Mr. Miguel Lago Mascato from Montega AG.

A couple of questions. On your guidance, which is now unchanged. Considering your figures right now as of H1 significantly above those you are guiding for, meaning more than -- way more than 50% revenue growth. And if I'm not mistaken, your EBIT is already above the previous full year EBIT. First question would be, are you planning to sort of narrow down the guidance maybe Q3, which was basically the last chance for you to narrow it down? Or is there any -- I mean, what are the reasons you're not narrowing down or give more color on your guidance as of today? And then on the implications of the guidance and having not adjusted the guidance, what are your expectations for Q3? What should we read into this? I would read into this that we would have to expect a weaker Q3. I mean, obviously, it's always weaker compared to other quarters, but especially compared to other Q3. Having those headwinds we are currently seeing in the industry. Can you maybe share some comments on your expectations for the quarter that is currently running?

Well, Miguel, thank you for your questions. I think on the full year guidance, well, last year, we had a similar guidance and the outcome in terms of top line was above the guidance. Well, we looked into certain numbers. And as always, I think the year starts strong with strong order demand from all of our customers. We have seen a couple of adjustments in especially the second quarter. As Florian mentioned, especially the second quarter was the strongest revenue quarter in history of FACC. I also made reference that we agreed with our customers that certain reductions they wanted to see immediately can be worked out in a transition plan, meaning that we have completed products. We have invoiced the product, and we have delivered the product. So this is right now with our customers' inventory. This is not applicable to all of our customers, but with a good number of customers. But that means, of course, that our customers will use this, let's say, FACC delivered product in the second half of the year. So the agreement also is that in the second half of the year, some of the demand will be adjusted. So this is not unexpected. However, it's helping us significantly to manage inventory. So the inventory we had, we have been able to sell to our customers. They are paying for it, without their transition plans. I think our inventory level even would be higher. So in considering those kinds of transition plans, the front-loading revenues we had in the first half year, the outlook we have for the second half of the year, and it's only natural that our customers need to burn down the inventory as well. We have a very clear picture for the second half of the year and the 10% to 15% is a reasonable number. We will narrow it down for all of you with the third quarter. There is still some volatility in the market. We do not want to guide every quarter and then change it. As we see it today, the 10% to 15% growth is a spread we can achieve. In terms of the third quarter, again, and you mentioned it, Miguel, it's also seasonal. We have it as in years. Last year was in terms of EBIT, a very, I would say, challenging third quarter. We assume for this third quarter improvement. So it will not be as severe as we have seen it in the past, because we did some activities already in -- July was still performing as planned, August is the weakest month in the year, because of many shuttles with our customers. At the end, I think, Q3 will also not be a surprise. EBIT will be very low, if any, I would say, volume will be significantly less. So you can use the last Q3 from the last couple of years, and you will see the impact. At year-end, still, I think, we think we can -- we have the right things already in the pipeline with a gradual increase of our profitability also by the year-end. So more specifics, if you would allow an excuse will be after the Q3.

Now I guess that's already quite substantial. Last year, in H1, we had significant effects coming from, I call it, compensation agreements within the supply chain. Can you maybe quantify those effects for this H1, if any?

Well, I think this is an ongoing exercise at the time being. The entire industry needs to cope and deal with certain inflation effects like material cost increases, the whole world has seen. We have, in our count certain regulations for compensation. On others, we have been able to work out agreements. Some are long-term, other ones, compensations for the time being, like energy, we have seen energy cost compensation. Once energy was high right now, it's going down. So I think this is not a one answer would fulfill all of your questions. I think, every concept is different. But adjustments are negotiated inside the contract if it was extraordinary, we have been able to get some release of depression, which is helping us today but also going forward.

Okay. But assuming that those effects have softened over the last 12 months, it's fair to assume that those -- yes, those effects were smaller compared to last year. Is that?

Indeed, the cost inflation is going down. So the significant inflation numbers did hit us 2022, not us, but the entire industry also in 2023. There was some in 2024, and you said it correctly. So I think -- still, I think, I mentioned that, when Europe has a couple of other challenges compared to the rest of the world, especially Central Europe on personnel cost, this is not compensated by global customers. This is why we, as the management Board take extra efforts to reduce cost, direct cost, but also indirect cost.

Okay. Two more from my side. On your shift to -- production shift to China, are there any extraordinary costs or income resulting from this? Or do we see any more effect in the remainder of the year? And -- sorry, and then how much are the savings in logistics? You mentioned 90%. Can you maybe quantify those effects? One more then.

Well, today, talking about logistics is a challenge. Logistics was always very stable, then we had a big decrease in logistic cost in 2022, because of logistic imbalance between China and the rest of the world, containers, as you all know. It stabilized quite well in the second half of 2023, with the container routing around the Suez Canal, I think logistics cost went up again. [ Honestly ] saying, this was a moving target we had globally. And again, with being more local. So Europe, I think, is very local. We control it with our milk runs between the Austria and Croatian facilities between Hamburg, Toulouse and the U.K. facilities of Airbus and Rolls-Royce. China was a big effort in terms of shipping. This will be reduced, and I only can say 90% reduction in logistic cost is significant, and it's giving us more sustainable forecasting for cost, if the reason of cost, if it's higher or lower, it's not affecting us anymore. So logistics in terms of interiors is announced -- is a significant number because our volume is high. This is gone. And the big saving actually comes from China sourcing. So metal parts, extrusions, some injection molded parts we need for interior components are resourced from European sources for China sources with good cost reduction effects and of course, producing locally in China with local people and not from Austria is helping us as well. So overall, I think the 919 cabin in [indiscernible] was a positive business for us. With the China production side, I think we're increasing our profitability after the ramp-up are quite substantially. So -- and again, as you know, the 919 is a growing platform. Volumes are increasing and giving you the number of EUR 1 million of revenue per airplane and 70 airplanes being part of our forecast for 2027 to be produced, we talk about a EUR 70 million plus revenue stream where cost is essential.

Okay. Last one. We touched upon the working capital management. Is there any long-term targets in terms of sales maybe or just inventory days? I mean, is there any targets you could share with us as of today?

I will take that question. As we said before, we are right now in the process of setting up a dedicated task force, I would say, with a project name working capital improvement. And as you have seen on the slides before, the main focus will be inventory as the main driver of our block cash that we have right now. And I said a little bit unspecific maybe, but I said a double-digit number in millions. If you calculate it right now, and I said it before, it's 25% of our balance sheet right now blocked in inventories. And you can do the calculation if you compare it to the numbers of our peers, I would say. But as a first target, from my perspective, going into 2025, I would say a number around EUR 50 million is definitely one of our targets internally. And of course, we -- there is a long way to achieve that. But as I said before, this is the main driver from my perspective, in optimizing our cash flow and bringing it back to peer numbers and on a more sustainable basis.

Sorry, a follow-up. Just to be clear, I mean, obviously, I'm assuming you are increasing your sales in 2025 as well, but you are still aiming for a reduction in inventory. Is that correct?

Yes.

Thank you so much for your questions, Miguel. And we'll follow with Christian Obst from Baader Bank.

I have a question concerning your [ sentence you are ] mentioning additional group wide cost improvement measures will be implemented to compensate disproportionally higher personnel and known wage labor cost in Austria. Two questions on that. First, in the second half, of course, you guided for lower production and therefore, a lower utilization rate. How do you prepare for this downward trend in utilization rates when it comes to personnel? And for a longer term, you have ramped up your personnel and you are still in kind of a training mode. Are you now on some kind of a -- on a top of a mountain, more or less, and you are reducing going forward? Or what kind of measures do you take to adjust personnel cost going into '25? These are the two questions.

Well, first Christian, thank you. I think utilization is not going down and efficiency at the time being. So we have high utilization rates are high and our facilities are highly utilized. In many cases, again, two shifts, in some cases, three shifts. So that's good because this is utilizing our investment. In terms of cost reductions, you are right, we have employed more than 1,000 people over the last 2 years, which had an impact on certain learning curves in production, which we have put into our budget. That's not unexpected, because we know how to deal with it and how it -- what it means. Right now, we see a slight, let's say, the curve of new hiring is not as deep as it was in 2023. So what we have is we have better trained people, we have learning curves going up again, and we can produce more output with the same amount of people. So productivity, learning curve, the one or the other industrialization and digitalization program is put in place, just meaning more volume output with less people we need to hire. In terms of white collar, we are growing. That's good, and we want to grow the business without adding new people. So that's one item we are currently facing. That's doable. We have done this in 2016, '17 when we had the last major industry ramp-up. And those people who are watching us for a longer distance, we had similar ramp-up effect in the year of 2016. Starting with 2017 and '18, I think, we have been over the hurdle. As you have said, we are over the peak of people hiring and training. And for the next period, it's the time of harvesting on the investment we have made into our people. And again, quality and safety comes first in FACC, hiring people and delivering that quality is a logo for efficiency. So we plan for it. That's what we have done, of course, impacting our margins to a certain degree. But as you see in the first half of the year and going forward, the activities we have started are delivering results, and that's what we are continuing. Secondly, in terms of labor cost or personnel cost reductions, Croatia is an important pillar in this long-term plan. As you know, Croatia was decided in 2018 that we want to set up the plant #6 outside of Austria. We had to postpone the plan by a year. Right now, we are back to the original size. And by filling up this new capacity with 1 million labor hours, such labor hours of capacity is certainly helping us to reduce the share of personnel costs significantly for products we need to produce in Europe and deliver to European customers.

Okay. Maybe one additional to understand the second half, especially in the second half of the year a little bit better. So you are now guiding for -- of course, lower delivery, because the 10% to 15% growth compared to the 23% growth in the first half and the full year 10% to 15%. When you are saying that utilization rate remains high. So you are in an ongoing production. And at the same time, you are reducing working capital. That really fit together. In the end, when you are delivering less and you have to produce less to not increase your costs or your working capital on the other side. Does that mean, we fit together all these items?

Well, as mentioned before, I think we have agreed with a couple of customers, some of the demand adjustments [indiscernible] because of other supply chain issues, we have been able to control. Well, if that's a controlled and well coordinated process, we can certainly steer our supply chains as well and ramp them down, because they have lead them as well. And everything that is coming as products from the United States, which is normally ocean freight already is on its way, cannot be stopped. So by doing this rebalancing, I think, we have found a very good solution with our main customers to help us in managing the working capital. And again, I think we have material available. We are currently ramping down our supply chain as well in a controlled way as well. So this is all needs to be done all very balanced, because we also cannot afford to jeopardize our supply chains in terms of cash and financial stability. And as Florian said, this is a task for us, we have put in place, multidisciplinary from customer engagement, supplier engagements, lead time reductions inside FACC. So this is not a one thing to be solved and all this good. This is -- has a little bit of more complexity. What we see at the time being, it's manageable. And again, I think Q3 will be a soft quarter seasonally, as always, Q4 will be a good quarter, again, also driven by the one or the other development or cost milestone payment, which always comes, as you also know, mostly in the last quarter.

And maybe a little add on Christian from my side in terms of the inventory project Robert just mentioned. Of course, we know that, this is not an issue that we can solve in one quarter, and therefore, it's also in our planning, and I said it before, it will run into 2025. And as Robert said, it's a multidisciplinary approach. And we will really take a look into how we are doing business today in terms of our order intake, in terms of our planning, in terms of our operations and in our deliveries. So we will take our time to analyze that and to improve, I would say, the way we have done business in the past and try to improve it to bring our inventory levels sustainably down.

Yes. Okay. Thank you very much. So this seems to be not very easy to have, but all the best.

Thank you, Christian, for your questions. And we have one raised hand up from [ Nero Susac. ]

One question. I just -- it just caught my eyes. The administration expenses, they were up by almost EUR 5 million compared to Q1. And I think around like EUR 3 million compared to last year. Can you please comment on this?

Well, I think if we don't have it handy right now, [ Nero ] I think it would be fair to share it with yourself. Honestly saying, I cannot give you the right answer at the time being. There is certainly also costing administration, driven by collective payment agreements we had to put in at the end of April of the year, but this certainly is not EUR 5 million, I can tell you. If you would allow me, [ Nero ] we will circulate the answer by Michael later in the day, latest tomorrow.

Okay. And the next one, just to...

We are talking about -- sorry. You have the figure on the report, I guess?

Yes. EUR 16.7 million.

EUR 16...

From EUR 16.655 million, it was -- and for the half year, it was EUR 28.5 million. I mean, Q1 was a bit lower, Q2 was much higher.

Okay. Second one would be on the U.S. dollar exposure. I have some old figures here from 2022 when you have like EUR 600 million of revenues. Now you're at almost EUR 900 million, well, close maybe next year or -- so can you please remind me of the imbalance, again, between the U.S. dollar sales and the U.S. dollar cost in the new, let's say, company size setup?

I will take this one. Thanks, [ Nero ] for your question. I would say it's the same as it has always been. So our revenues are, I would say, 100% denominated in U.S. dollars. And what we try is some kind of natural hedging as we have always done it. So most of our suppliers are paid in U.S. dollars, and the remaining portion is hedged from our treasury -- by our treasury department with easy products basically forward going into a period of, I would say, 12 to 24 months. And when we look into 2025, I would say we are right now hedged at the level of, I would say, 60% of the open exposure, and 2024 is basically fully hedged already. So in 2024, there is no major remaining risk from the FX side. And as I said, in 2025, there are some open positions right now, but we are closely taking care of it in the way of our FX hedging policy.

Okay. And what's the level that -- you mentioned the 60% [indiscernible]

In terms of 2025, we are right now in a level of slightly below [ $1.10. ]

And we have two more questions in our chat from Aymeric. Given your renewed effort on working capital, what would you see as your midterm ambition for inventory days of sales? How would that work in practice notably in terms of coordinating the effort with the number of customers and avoiding the recent stop-and-go pattern?

As I said before, it's, I would say, multi-quarter approach that we are taking here, because from my perspective and also from the perspective of the management board, it has to be, I would say, a sustainable operation that we are performing here. Meaning, some short-term changes that will generate some cash and then going up later on next year or the year beyond, will definitely not help you, help us. And this is also not something we are aiming for. And as I said before, it's -- and also Robert said that it's a multidisciplinary approach, and this will take some time analyzing all the data, analyzing our value streams internally. We know, of course, how we do our business right now in terms of our customer intake in our planning in terms of our material ordering. And we have to -- from my perspective, there will be some changes in how we perform our business. And right now, we are in the process of setting up this project team that we will have internally. Maybe we will see some first effects already in Q4 this year. And I expect the major improvements in 2025 to come.

If I may one, it one more statement here, I think the stop and go was mentioned, this is definitely a case was more a case in 2023. So we see less amount of stop and go. It's not gone, I have to say, but it's getting more stable. Still, we have the one or the other issue. We are compensating with higher material inventory, but the number of events in our supply chain is significantly reducing. And another point I wanted to mention and this is again the offload of the 919 to China. This is helping us in working capital as well, because if you just imagine, we buy material in Europe, we are producing components over 6 to 8 weeks, and we put it on a ship. We are in transfer for another 7 to 8 weeks to bring the products from Australia to China going through customs. If this is local, which result easily 10 to 12 weeks of lead time, especially if volumes are increasing, if the inventory is helped by our China supplier, this is definitely having an impact. And this is why we said this is not a one issue with [indiscernible] it's also linked up with the global manufacturing network, with the local manufacturing for certain customers. So it's mantra. And I think we have put a lot of effort into securing demand in deliveries for our customers. We spend a lot of money of securing production by adding more working capital into our raw materials. And right now, it's time to start reducing it. But simply executing -- further executing supply chain stabilization is one element out of the program.

And one last question. You mentioned the double-digit market target by 2028, can be achieved from the peer manufacturing footprint? Or would you need to make further investments in relocating your manufacturing base to low-cost countries or closer to customers assembly lines?

Well, we have, as mentioned before, we have -- and that's the good thing. We did start looking into global manufacturing networks and footprints already 10 years ago. So we looked into China. We are engaged in India for more than 15 years already. We've set up U.S.A., Canada and of course, Europe. One significant decision was Croatia and Croatia was the biggest investment outside Austria since the foundation of FACC. Croatia for us is delivering the savings we have calculated in the business case 2019. This is why we have extended the facility quite significantly over the last 12 months. This facility needs another 550 people to be employed. This will be ongoing for the next 2 years. So in Croatia, we are at the time being, not expecting significant investments a little bit more, a little bit there as always. Offload to China is not financed by FACC, because it's a sister company where we are not responsible for the investments. So the investments needed to cope with growing volume is done by our shareholder, [ AVIC, ] in the sister company. So we are utilizing their investment with the products we are producing there. And probably in 2 years' time frame, we might have a need for some investment in the United States to be more locally there as well. But again, this is currently under review, not firmed up. And for the time being, we are very happy with what we have.

Thank you very much for your question, Aymeric. And we have received no further questions so far. I will give the participants a moment. And we come to the end of today's earnings call. Thank you for your interest in the FACC AG and all your questions. And a big thank you also to the gentlemen for your presentation and the time to answer the questions. Should further questions right at a later time, please feel free to contact IR or us. I wish you all a lovely and sunny remaining day, and bye-bye.

Thank you very much also here from Austria. Thank you for participating. Have a great day.

Thanks to all. Thanks to you all. Thank you. Bye-bye.

Goodbye.