Leonardo S.p.a. (LDO) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our full year 2021 results live Q&A session. Before taking your question, I would like to hand you over to our CEO, Alessandro Profumo, for some initial remarks. Thank you.

Thank you, Valeria, and good morning, everybody. Before starting the Q&A, I would like to highlight some key messages. 2021 was an important year of delivery, and we are pleased to report today a strong set of full year results, meeting or exceeding all our target once again. We are back to our growth path, with a strong performance in defense governmental now 88% of group revenues and above pre-COVID levels, excluding aerostructures, where we expect a gradual recovery after plan. We have a growing top line. We are improving profitability, and we are structurally improving cash flow. We are also making progress on ESG, and we have enhanced our cooperation at European level. So we expect to make further good progress again this year. And we are well positioned for the medium and long term, thanks to our solid fundamentals. Finally, let me highlight again our important purpose aimed at helping to provide security for people and nations. This could not be more clear today in these times of geopolitical threats and uncertainty. And with this, and together to Alessandra and Valerio, we are ready to take your questions. Thanks a lot.

[Operator Instructions] Our first question today comes from Martino De Ambroggi of Equita.

The first question is a company-specific issue, the free cash flow. Just to understand what is the bridge in terms of -- particularly in terms of net working capital contribution in terms of Aerostructure lower cash absorption. If I understand correctly and I do correctly my math could be in the region of EUR 300 million, also in -- or probably less in '22. And something about the factoring. Alessandra, in your remarks, you said it was reduced. Just to understand the value for this reduction and what is expected in '22. So this is the question concerning the free cash flow. You also mentioned EUR 300 million of divestiture. I understand -- I clearly understand that you cannot share with us all the details. But we read several pieces of news in the past few months concerning Oto Melara bus automation is not anymore up for sale. So if you could elaborate on this. And the last is more general. Based on the recent geopolitical events, what in your view is going to structurally change in Europe? I'm referring to Germany increasing military spending. I read something about new common initiatives. And also, possible risks for the supply chain, if any.

Okay. Shall we start in the same order you have raised the question. So Alessandra will start with free operating cash flow.

Yes, Martino. So you're asking about the bridge. Let me start with 2021 results. We're very pleased with the free operating cash flow results we have achieved in 2021. It's a EUR 200 million step-up versus 2020. And it's all driven by solid, good contribution from governmental and defense businesses. On top of that, we have strengthened the quality of the free operating cash flow. As you have highlighted, we have significantly reduced the factoring that we had to resort to during the COVID times, down approximately EUR 600 million from EUR 1.1 million to EUR 500 million. And we have also accelerated payments to suppliers. So all in all, it's a much stronger and solid cash flow in 2021. Now bridging into '22, we're starting from the solid base that we have achieved in '21, and we are building on it. With continued growth and margin expansion in the governmental and military business, coupled with increased contribution from joint ventures as well as important delivery of milestones on a number of contracts that will generate an unwinding of working capital. All of this is married with a slightly lower cash absorption in Aerostructures compared to 2021 when it was close to 340. So that would be the order of magnitude that I would refer to. So all of this is also coupled with a very strong focus within the organization on cash flow generation at every level of the organization. If you want, Alessandro, I can go to the last question on supply chain.

Yes, you can continue to answer, and then I will take the floor on disposal.

Sure. So on supply chain, what we're seeing, Martino, is that, clearly, the situation is in flux. We are monitoring closely all the areas of potential exposures and putting in place major mitigation plans. What we're seeing today is that the most sensitive area is the electronics component. This is not going to come as a surprise to you because this is what you are hearing from the sector and, in general, from everyone in each components. On the platform side, we are in good shape in terms of availability of components, and we are registering a contained and manageable price increases. On Electronics, on the other hand, the situation is more fluid, and we have high visibility for the first half of the year. While on the second half of the year, we are putting in place mitigation plans, talking with suppliers, extending the times of contracts with the goal of locking in components. Clearly, the situation is to be of maximum alert and it's monitoring closely from Leonardo and will be object of a continued asset from our side throughout the year.

On disposal, Martino, now we are in the process of finalizing a first disposal of a U.S. business. This is -- the proceeds are considering the forecast for the debt and not talking of [ system phase ] that we continue to work. Clearly, what is going on at the European level increase the strategic meaning of such kind of move. We have to understand clearly what will be the approach by the other countries since we think that the unfortunate but existing geopolitical situation will be a strong incentive towards European -- in European defense system. Clearly, as Leonardo, we are part of that with major programs, talking of Eurofighter or [indiscernible] NH90 or other activities. We are fully convinced as well on the land business, there will be the need for creating something more European.

Our next question comes from Ben Heelan of Bank of America.

I had a question. My first question was on helicopters. And how do you think about price escalation in the backlog in helicopters? Is there price escalation on those contracts? And how are you thinking about -- obviously, we've seen massive inflation in aluminum and steel prices over the past few months. So how are you thinking about offsetting inflation in that business? And then the second question I had was on the free cash flow guide of EUR 500 million. I think you said you expected a small improvement in the Aerostructures cash burn this year, and you've guided for EUR 80 million improvement in EBITA. So where is the other incremental step-up in free cash flow coming from? Is there any prepayments we need to be aware of? Is it just better working capital performance? Just any color that you could give there would be super helpful.

Sure, Ben. So on helicopter backlog and price escalation, well, let's remember that our backlog is also partially locked in, both in terms of future revenues as well as in terms of actual costs already incurred that are now in our work in progress on the balance sheet. So a portion of it is already naturally hedged by the progress we have been making on the backlog. And that is not yet accounted in the revenues, but it's been part of the working activity. How do we plan to offset that inflation? Well, in 2022, we see contained impact from inflation on the platform side helicopters included, thanks to leveraging the inventory we already had in-house and negotiation, which has been in place since the end of '21 with our key suppliers to contain all price increases. Clearly, '23 will be a year where the exposure and the impact of this inflation will be higher. Nonetheless, what we have to bake in is the fact that starting from this year in our new bids for new contracts, we are factoring in this heightened level of inflation. And therefore, we are incorporating the effect of the cost base that is going up. On your cash flow question. How are we stepping up cash flow from '21 to '22? The major drivers are the increase in top line throughout the group focus on governmental and military businesses, coupled with increased profitability that you also all see in the guidance, an element of unwinding of working capital. So there are no major prepayments on single contracts that we are expecting. This is all organic flow of working capital as we deliver important milestone on a number of contracts. And those milestones have already been worked on and now in our work in progress at year-end '21. That will be monetized naturally through milestone deliveries to customers. There is also going to be a higher contribution from our joint ventures, broadly speaking, in terms of dividend paid.

Okay. Very clear. And then just a quick follow-up. So I should think that there's not inflators in the contracts in helicopters per se, but it's when you rebid you will see -- you will be rebidding assuming the higher levels of raw materials that we're seeing today. So it's not that the contracts will naturally inflate, it's just when you go into that rebid process, you obviously have the new input from an input cost perspective and that is passed through. Is that how I should think about it?

Correct, Ben, because the majority of our contracts are fixed price contracts.

Sorry, maybe it's important to say that since we don't have the so-called white tail. So usually, we start to work on a helicopter when we have the order. The lead -- the raw material have been already bought before the actual events. So the problem you are raising clearly is there if you have a huge number of white tails. So you start the production without having the buyer.

Our next question today comes from Christophe Menard of Deutsche Bank.

I had three. The first one is actually on the R&D capitalized. There is an increase in 2021. I wanted to understand where it's coming from, which division and where you're actually seeing that increase -- I mean, whether you see a further increase in future years. I will follow up with the two other questions.

Sure, Christophe. Well, the increase you see in '21 is, in a way, also magnified by the reference of '22, which is totally skewed on the low side. What happened in '20 -- sorry, '20 is to the lower side. You may remember that in '20, we cashed in an extraordinary amount of financings on investments for multiyear periods. And that was the driver, the main driver of an extraordinary and anomalous low numbers we booked in 2020. Now in 2021, we're going back to a more ordinary level in the range of 150 to 200, which is the figure we are targeting also for next year as a result of the completion of important programs, especially in the helicopter and trainer business, so in our platform business, where we are finalizing the certification process in order for the machines to enter into service and be delivered to customers.

Okay. That's very clear. The other question now is more on the Aerostructure EBIT. Well, Q4, you had a loss of close to EUR 18 million in Aerostructure, which is more or less double what you had in previous quarters. How should we think about the loss going into 2022? I mean is it the same run rate, i.e., EUR 80 million per quarter? Or are you seeing an improvement going forward? And the last question is on the gross margin on the new contract that you have in terms of the order book. Are you seeing an improvement in those gross margins in the contracts that you actually booked, but also those you are considering booking in the coming months?

Okay, Christophe. Well, on Aerostructures, no, I wouldn't use the fourth quarter performance as a run rate for the full year. I think you are better positioned if you look at the full year EBITA for the business. And what we expect is that compared to that full year, we will be doing better. We will be doing better from a P&L standpoint as we said that we will be doing slightly better also from a cash flow perspective. On gross margin on new contracts, well, we are clearly in a highly competitive environment across the board. The strength of Leonardo is one of anchored on the combination of domestic markets, Italy, U.K., U.S. and Poland and export market. So those -- the diversification across geographies of our order book, the lack of concentration in single programs and single geographies is allowing us to maintain a strong competitive position in a context where clearly competition is going up and pressure on prices is there.

Few questions from the web. The first one from Charles Armitage at Citi for Alessandra. Your 2022 EBITA guidance is after COVID costs, which were below the line in 2021. How much were these costs in '21? And what do you expect them to be in 2022?

Okay, Valeria. Yes, absolutely, Charles, you are correct. In '21, COVID costs were around EUR 50 million. And in '22, we plan to reduce slightly that number around EUR 40 million, EUR 45 million.

Okay. Another question from the web from Monica Bosio. This is for Valerio. Good morning, everyone. When do you expect the EuroMALE project will start to have positive fallout on Grottaglie for the plans? And could you please give us more details on that.

Okay. Thanks for the question. Really, you know that the signature of the contract is only 20 days old, 15 days old. So it's a new contract even if it's included in our plan, as we said also during our last quarter speech. So now we are really starting the industrial part in aerostructure of the program together with all the divisional activities because, as you know, EuroMALE, really, is Leonardo large impact program involving electronics, aircraft and also aerostructure and not only aerostructure. So really, we are not seeing now, after 15 days, modification in our plan. The program is a long-lasting program and foreseeing a real impact in aerostructure volumes and manpower starting from the end of our plan '24 the prototype phase and then going on to the serious activities.

Okay. Another question again from the web. Two questions for Alessandra, divisional level. The Space division delivered strongly than expected. Should we expect this growing trend also in 2022? And as for helicopters, despite the impact of pass-through activities, would you see feasible the achievement of a double-digit profitability in 2022?

Okay. Thanks, Valeria. On Space, we did see an increase year-over-year of performance, which is mainly driven by the recovery in the manufacturing segment of Space. And what we are seeing, the plan that we have put together with our joint venture partners makes us confident that there is going to be -- we are on solid ground to repeat good performance. I also want to highlight that '21 includes in TAS in the manufacturing business, an extraordinary component related to the adoption of our tax principle, which is deriving -- which is generating some one-off benefits that will not be repeated in the years to come. On helicopters, if you also, Alessandro, wants to say something about it.

On helicopters, clearly, the pre pass-through number is "affected" by the Qatar contract. The Qatar contract is starting to be significantly present, so -- and as we always said, this is partially dilutive on return on sales. Pre pass-through, we are already at the double digit -- sorry, post pass-through. So I think that this is the most relevant number because we do like a lot to be prime in such kind of contract. Sorry it's also, I think, crystal clear that when you are diluted by the fact that you are prime on a contract where, as we always said, you have 42% of world share, you are, yes, diluted, but you are not absorbing capital for such kind of activities and you have a prime "fees." So we think that is the right way to move.

Our next question from the conference call comes from Tristan Sanson of BNP Paribas Exane.

I'll ask three, please. The first one is a quick one on Space, but please can you quantify the -- sorry, it's about the tax one-off you mentioned a couple of times on the conference call? Is it something significant, helping the contribution of 2021? The second is on the dividend from joint venture. So you had EUR 63 million of fairly stable dividends. I think Thales Alenia Space have not paid a dividend in 2021, but the business is going pretty well there. So do you expect Thales Alenia Space to start paying a dividend in '22? And how should we see the trajectory of dividend from JVs in '22 and after your best estimate? And third question, I wanted to come back quickly on factoring to make sure I understand well, because you mentioned that the factoring at year-end moved from EUR 1.1 billion at the end of 2020 to EUR 0.5 billion at the end of 2021, which means that actually excluding factoring, you probably -- you would have generated like EUR 800 million free cash in 2021 with, I suspect, the big working capital efforts that you mentioned. That's offset the product and the factoring activity. Is that the way I should understand the free cash flow performance of 2021?

Okay. Tristan, thank you for your questions. I'll start from the mid one. So dividends from joint ventures, you remember correctly, absolutely, in 2021, TAS did not distribute dividends. And now we are in engaged conversation with our joint venture partner, Thales. And in light of the solid results that the business has generated on all metrics, starting from new order intake down to net income, we're confident that 2022 will be the right year to restart dividend distribution. So clearly, all of this, together with continued good contribution from the other joint ventures, will be a driver of cash flow generation in the planned time. The extraordinary item related to tax that TAS booked on 2021, it is meaningful. So it is an element that you have to take into account in the mix of projecting results in the time to come. On factoring, your read is absolutely correct. Our, as we call it, business factoring or organic factoring would have actually been much higher if we include the unwinding of the factoring balances '21 versus '20.

Our next question comes from Alessandro Pozzi of Mediobanca.

I have a few questions. The first one is on aerostructure deliveries. Can you give us maybe a bit more color on deliveries for the receivable programs in 2022. And especially ATR, I believe it was supposed to increase towards a rate of 50 deliveries a year. I was wondering whether that is still the case. Also, the second one is on restructuring costs. I was wondering if you can give us an idea of the restructuring costs for 2022, tax rate and financial charges as well so we have some numbers for the net income. And the last one is on cybersecurity. I think it's a nice little business that we've not heard a lot. I was wondering what are the prospects for cybersecurity in the next few years for Leonardo.

Okay. Thanks. I will start from aerostructure. As you understood, really, we are working on our plan. And so coming back to what you are asking us, independently by our manpower reduction furlough that we agreed back in January, we have a strong increase in our Airbus volumes. We are mainly coming higher than pre-COVID levels, both on the A321 and the A220. ATR was tripling the levels with respect to 2020. And we are planning an increase also in 2022. So we are really coming back, as we said, to volumes, more than 50 starting from 2024. At the same time, we have also the good news on B787 because we resumed deliveries on the 787 this month. And we will -- we are planning to maintain deliveries during this year. So having a gradual improvement also on the 787. I'm not talking about the 767, because 767 is a stable program in terms of delivery for Aerostructure. The plan that we have is not including any real upside in terms of new program, even if, as you understood, we have a lot of additional opportunities that we are catching in the market and that we are planning to put in, in our plan in a short time.

What level of deliveries do you expect at the end of 2022 for the 787?

Mainly, we -- in our plan, we have a level of delivery, which is a bit higher than the 2021.

Okay. And how many did you deliver in 2021, can you remind me?

We deliver -- we are planning to have deliveries more than 30 because -- in 2022 because we had 28 or less than 30 in '21. So we are planning now. But I think that the level of deliveries of our division is strictly linked with Boeing restart of deliveries to all its customers. So we are strictly linked to their plan. And up to now, as I said, we are more than 30, so 10% more than the last year.

Okay. Just maybe a follow-up on Aerostructure. Do you expect ATR to break even this year?

The breakeven of ATR is a point under the table of discussion with Airbus on our JV. Obviously, the breakeven is strictly linked to several elements, not only to the deliveries. And we are evaluating how to achieve in a short time the breakeven in ATR, yes.

Okay. Alessandro, quickly going to -- through your other questions. On tax rate, we confirm the guidance that we have provided in the past, around 25%. Financial charges, around EUR 200 million. The number you see in the '21 accounts is not a run rate level. As you can see, the FX value is particularly low and that is the result of some volume effect on hedging activities. As we restart and go back to an ordinary trend, that amount will go up. Therefore, the overall number is more in the range of EUR 200 million. On restructuring costs, finally, our target as of now is to have a number for '22, which is below the '21 figure. I leave the floor to Alessandro for the cyber question.

Cybersecurity. This is clearly an important business for us. You have to consider that when we are talking of our cyber division, it's not only pure cybersecurity. Because there, we have as well a secured communication. We have as well monitoring of globe of infrastructure. So we have many different activities, which are related always to security and to command and control for civil business. We foresee a significant growth of this division in the period of the plan. We are starting from a level which is close to EUR 400 million. So a significant growth is relevant. But if you consider the overall group, the driver for our growth at the group level are more related to the other 3 main divisions we have, namely Defence Electronics, which is by far the most dynamic one. And then aircraft and helicopters, more or less at the same level, clearly with some differences because they are related to different programs. I think that we have to stress the fact that cybersecurity is becoming more and more important for our own business because you are perfectly aware that NATO, for instance, is providing new rules on the cyber secure by design of the products we are -- and services we are bringing to the market. So it always is becoming more and more important to be sure that satellite and aircraft and helicopter or whatever it is are secure. And when we are talking on secure communication, for instance, this is one of the capabilities that we have, which is not pure cybersecurity but is in the business we are working on. On top of that, there is also the, how do you say, [Foreign Language].

The crypto.

The crypto activities, which are very important, where we are working as well with quantum technologies, but not only. So our all areas which are related to this business. This is one of the trends of Leonardo because we have inside this service for us and for our customers.

Our next question today comes from Zafar Khan of Societe Generale.

It's Zafar Khan from Societe Generale. I have a couple of questions, please. Just housekeeping effectively. The net interest number for '21 was well down on 2020. The net debt across the year didn't really change that much. So is it just refinancing at much lower rates? What's behind that? That's the first question. And also just if you can give us some indications of where this is going in '22. Tax rate, could you please tell us what the underlying tax rate was in '21 and what you're looking for '22 in the medium term? I haven't been able to access the detailed accounts, so if you could please just tell me what the gross capitalized R&D and how much was amortized in the year. That's the third one. I'm sorry to go on a little bit. But the Aerostructures cash consumed in '21, can you give me what the number was there, please?

Zafar, sorry for leaving you the floor. Just for you to know, we had some issue yesterday and this morning with the website. But now the integrated reporting is available on the website.

Yes, the slight problem I've got is SocGen has blocked everything, so we can't access any company stuff on the web. So I'm struggling a little bit on that. So if you could maybe send me the PDF by email.

Yes, we'll send it over to you, of course.

Thank you very much.

So trying to get through your list, Zafar. So on free operating cash flow from Aerostructure in '21, it was [ 339 ] negative. Gross capitalized R&D., I think we have a slide in the presentation, maybe we can go through it so that we can mention the number of the slide, Valeria.

It's in the [indiscernible] you find both the gross and net capitalized R&D.

So we'll track down the page and send it to you.

Yes, of course.

Then on tax rate, we are -- the target here is continued 25%. It was 22% in '21. But again, if we look forward, the guidance is consistent with the past at 25%. The net interest number, it's a blend of elements. So there is the element of interest expenses on the debt. Then there is the present valuing of a number of assets and liabilities we have on the balance sheet. And then there is the FX component. So it is, as you can appreciate, a mix of various effects that get to that number. So as you think about that number going forward, the target in '22 is going to be around 200 by virtue of the fact that the FX hedging activity will go up. Therefore, the FX amount will become -- as usual, it was always been negative because we are mainly net seller of U.S. dollars as we receive U.S. dollars from customers. And the amount on the interest expense is the result of multiple effects, 200 overall.

Okay. And just on the interest expense on the debt, because I haven't seen the accounts full yet. How much was that number, just the interest expense on your debt? And how does that compare with 2020?

Well, the interest rate is also in the presentation. We are now in '21 at the lowest level that we have registered in the past few years, benefiting from the European Central Bank activity, consistently helping rates go down and also a market-driven opportunistic refunding policy. We're now at 2.3%, and we have lowered that amount by 60% since 2016. Also, in that case, Zafar, we'll lead you, we'll guide you to the specific page on the presentation where we have the yearly trend.

Yes. I think once I get hold of the presentation, that would be fine. Thank you very much indeed for that. It's very helpful.

Our next question comes from Gabriele Gambarova of Banca Akros.

Just a couple of questions from my side. The first one is on Eurofighter, if you can possibly comment the commercial opportunities you see around and if you are involved in any tender. Not asking which ones, but if you see opportunities here and now. And the second one regards your 2022 guidance. I see that you are assuming 1.18 euro-dollar foreign exchange rate. So I was wondering if you could remind me what is the sensitivity to this specific exchange rate. That's it.

On Eurofighter, I will start, then I will leave the floor to Valerio. Clearly, we are seeing opportunities. We do see opportunities for second tranche in countries where there have already been sales, not in 2022, but in the period of the plan. Are not factored in our numbers, but we do see opportunities. There is also some opportunity of new sales. So we consider the Eurofighter as an important program where -- and I'm sure you have seen in the presentation also the chart on the value of customer support, where there is not only the new sales, but as well the customer support, which is pretty relevant for us. And as Leonardo, we are considered a benchmark in terms of cost and quality of the support to the Air Force. But I don't know if Valerio wants to add something.

Probably, I can only add that, as I said last year, really Eurofighter is and will be a long-lasting program. While waiting Tempest, Eurofighter will live at least another 20 year. And this means that we are planning to find new customers also because the last configuration that we delivered and last year to Kuwait is top of the edge in terms of technological level. So we are planning, also with the LTE, long-term evolution program, coordination in the industries to plan the updated sensor suite and so on in order to maintain really competitive and affordable. So we are working, as Alessandro said, on potential customers, new customers. Also evaluating the coordination, because you know that Germany and potential Spain, it's enlarging the fleet.

Okay. Gabriele, on FX sensitivity, no news versus the other years, it's all translation effect, and it's in the range of EUR 10 million to EUR 15 million on EBITA on the dollar. And on revenues, it's 100 to 150 on the dollar and 250 to 300 million on the sterling. I think it's disclosed in the presentation, Valeria, correct?

Yes. In the guidance slide, you have the exchange rate assumptions that we have in our budget.

And our next question today comes from Harry Breach of Stifel.

Can you hear me?

We hear you quite well.

Perfect. Can I please ask maybe 4 slightly different ones. Firstly, Alessandro, around a year ago, you decided to put on hold the IPO of DRS, saying that market conditions were not favorable. Now in the last couple of weeks, we've seen a major shift in market sentiment towards defense stocks and a very clear upward re-rating. Do you think that market conditions are now favorable for that IPO? Secondly, some other defense stocks in Europe have spoken about being a clear intense increase in the amount of inquiries for their product, some foreign countries in the last sort of 2, 3 weeks given the recent events. Can you let us -- have your businesses, helicopters, defense electronics, I guess, in particular, seen any significant increase in inquiries or requests for proposals recently? And thirdly, and just a technical one maybe for Alessandra. Alessandra, I think in the past Leonardo used to say that around 65% of the business was military or governmental, implying 35% for the commercial side. And I think today, you're saying 88% is military or governmental, implying 12% for the commercial side. But should -- is it right for us to think then that the commercial businesses has reduced from 35% to just 12% of your group revenues? Or have you perhaps reclassified or changed your categories of what is commercial and what is military? And then very final question, the energy costs, hot topic at the moment. Can you tell us a little bit over how many years or months into the future have you fixed your electricity and gas purchasing?

Okay. So shall we start from DRS IPO. Clearly, we continue to monitor the market. We keep updated all the documents necessary. It's not a matter of 1 week or 2 weeks. So we continue to monitor the market and then we will take a decision when the time will be proper. So today, there are no news in this perspective on our side. In terms of new inquiries, we are not seeing a pickup of inquiries clearly. We received some requests, but not yet seeing a significant pickup. Also because the key decision, for instance, the German decision to raise dramatically the amount of fund allocated to defense is a decision of 10 days ago. We think that this is incredibly relevant because it's a huge change in terms of posture towards defense by a key European country. We were convinced of that when we took the decision to invest in, hence, of the -- we are clearly very positively impressed by the fact that this has been so fast and with the government -- with a different government from the one we was focused on defense before. I'm sure that these tragic events will create a higher coordination, but also a higher spending in defense -- in security and defense. And this is clearly important for our industry. As we always said, it's not something we are saying today because with -- be tomorrow 2030. So 2 years ago, we were talking of being part of key European programs. What we are seeing with Tempest, what we are seeing with Eurodrone, what we are starting to do with the new European Helicopters, the future of the NH90, shall we say, is important. So we, as Leonardo, are an actor of these changes. And I think this is what we can say. Alessandra, you will take the floor for the other questions?

Sure, sure. So Harry, on the mix between military and governmental, your read is absolutely correct. And there has been, let's say, reallocation of the governmental part of the business. Now we're talking about 88% of defense, military and governmental, which in the past used to be within the civil component. So I think that explains a lot of the delta that you were expressing and you had clear in your mind. On energy costs...

Sorry, if I can add, Alessandra. Clearly, if you see the number of Aerostructure today, in 2021, Aerostructure is, in terms of revenues, 1/2 than what it was in 2019. So clearly, we have -- the other business is growing and Aerostructure, which was one of the key components for the civil business, which has been significantly reduced. We know that at the end of the plan, Aerostructure will recover -- sorry, not only at the end. There is a trend at the end of the plan, we will go above where we were in 2019. So clearly, the weight of Aerostructure will grow a little bit. Lucky enough, the rest will grow maybe even more. So the relative weight, the weighted average will remain the one we are seeing today, more or less. This is clearly important. I think it's important to say that for us, the civil business in helicopters is very relevant. Then in many cases, helicopter, which are utilized for civil purpose, shall we say, emergency medical services, are bought by governmental entities. So we're classifying governmental, but are not military helicopters. This has to be very clear. Or for instance, if we sell helicopters to the fire brigade. These are civil helicopters, but are considered as governmental. We think that firefighting will be one important element in the future because in many countries the use of helicopters for such a purpose is growing. So it's significant also, this change but, again, are governmental in terms of classification.

Thank you, Alessandro. And Harry, to your last question on energy costs. We are hedged throughout the current year and for a large portion of next year. So as Leonardo, we're not directly affected by price increases on energies. Clearly, we have to consider that the entire supply chain is suffering from these price increases. And clearly, we can't say that we will not indirectly be affected by what's happening around us.

I'd like to say one word on that because when I joined the company and then with Roberto Cingolani, we started to work significantly on all ESG elements. And energy consumption and energy sources were one of the area in which we were focused in terms of ESG, so that we increased significantly the out of production. Today, if you go in one of our factories, everywhere, the roof are plenty of solar panel. We have also production from steam coming out from the production lines. So really, we moved a lot on the green technology even before the European Green Deal. And this today is paying off for us because a portion of the savings are also coming from this production. We have done so much with our company, which is an internal company, which is working on our real estate. And then now we are with [ Alenia ], promoting a similar service, for instance, for the defense [Foreign Language]. What's the translation for the places where the defense is located?

Sites.

Sites. Okay. So it's -- so we are really working with our usual customer in terms of services in order to provide them green activity for them. So it's really an area on which we are also proud of what we have done. Clearly, the financial perspective. So hedging is very relevant, but there are other elements as well.

Great. Thank you very much, Alessandro. Well, Alessandra, just one follow-up. So CapEx for this year, 2022. Can you give us some indication, please?

Yes, Harry. We are going to be around EUR 600 million to EUR 700 million run rate.

Let's take another question from the web. I understand it's too early -- this is from Martino. It's too early to talk about it, but you mentioned there are 20 sizable opportunities concerning the Italian national recovery plan. When do you expect the outcome of the bidding processes? And could you provide a rough indication of the potential amount of deep bids you are participating or will participate?

This is an area which is overseen by Valerio with a dedicated team. So, Valerio.

Yes. We have a dedicated team, probably you remember. Really, we are -- you know that there is on the table more than EUR 200 billion, which has been allocated by the government. And that are allocated on 6 different missions, which are the usual green revolution, digitalization, health, inclusion and equation. Really, we are working on all these activities, and we have created a lot of potential programs. Around 5 of that are more major and are already a real offer in order to be on the table for an issued tender. So we define them that are mainly outside the plan of this year to be more major in the last part of 2022, the first one, mainly probably starting from October, something like that, and will be included next year. So we plan to be a growth opportunity for the short and medium term. You know that we are working mainly on several projects, starting from road monitoring, environmental monitoring, sustainable mobility. And obviously, also on the national app, the PSN on which we are in a consortium, and we are awaiting government decision.

Do you have any other question?

Probably from the call, if I'm not wrong. If we can take some questions from the call again?

Absolutely. We have a question from Christophe Menard of Deutsche Bank as a follow-up.

Yes. My follow-up question was on the free cash flow pattern beyond 2022. You clearly say there is some unwinding of working capital in 2022. How should we think about this in 2023? I mean, should we expect something negative -- not negative, sorry, below the EUR 500 million? But at the same time, your mid-term guidance is quite positive as well. So I mean, should we -- I mean, the question is, should we expect an increase in free cash flow in 2023 versus 2022? Or is it heavily back-end loaded in '24 and '25?

I will answer the trend is continuously growing. We have given a very clear -- we confirm a very clear guidance for the total 2021, 2025, accumulated EUR 3 million. But we are also saying something more because the conversion rate will be -- in theory, without Aerostructure is already, but we know that we have Aerostructure. With Aerostructure at the end of the plan, the commercial rate will be above 70%, with Aerostructure in. I want to be very clear. So I think it's quite a positive trend because we are absorbing the Aerostructure negative number in the EUR 3 billion accumulated. And at the end, when Aerostructure will break even, we'll be structurally above 70% in terms of conversion rate. It's clear.

I think this was the final question. So...

If this was the final question, really, I thank all of you. Unfortunately, we are still in remote mood, but apparently things are improving in terms of COVID. Clearly, I hope that we will restart also on personal meetings. I know that there are many video call already organized. So I think it's an effective way to meet each other and to talk. So really, thanks to all of you for this time you dedicated to us.

Thank you.

This concludes today's call. Thank you for joining. You can now disconnect your lines.