Montana Aerospace AG (AERO) Earnings Call Transcript & Summary

Welcome, everybody, and good afternoon from Zurich, and thanks for dialing in into our earnings call for the half year's results. We're very proud of it. Before we start, I want to start off by reminding you why we see ourselves as the game changer in the aerospace supply chain and also the other industries we are in and how we follow our strategy. We then will continue with a deep dive into the results for the first half year 2022, and also an outlook into the next 6 months to come and later also for the total guidance, management guidance for the full year's result. So let's start right away. And I'll explain to you what we do, why we do it and how we think that we exceed also not only the development of other peers, but also, hopefully, the expectations. We started at Montana Aerospace 1 year ago with the IPO, the clear claim and the claim was to be the game changer in the Aerostructure supply chain. And here with a very strong focus on technological market leadership, high-margin business fields and also fast -- in fast-growing markets. What we do is simple. We are manufacturer of highly engineered, very special material parts and structures, which are most terms crucial for aerospace, e-mobility and energy sectors, and the way we produce this, the how, is quite unique. So our business model is unique by being highly vertically integrated. This is very broad material competence in the field of steel, titanium, aluminum, copper and our composite. And thereby capturing the entire manufacturing value chain and offer a much better lead time and the production flexibility and also ESG compared to our peers, leading to what we believe to a 90% of single-source product exposure. And this leads to a compelling value proposition, which is the key for our customers. Customers, which are right now more than ever under pressure to reduce the cost and complexity in the global supply chain and therefore rely on such vertically integrated companies like Montana Aerospace. And the end is delivered us with this unique business model, quite some market share. We have gained market share with long-term contracts up to 13 years from now, and therefore, could increase on a constant basis our contracted sales. Now we exceed with EUR 5 billion in comparison to the IPO, 30% up. Order backlog, quite some extensive market share win, which we have in our books. Of course, to deliver this growth and also to take additional opportunities on the market, which we think that we can capture in the future, we have made significant investments in the last years with the last investment program this year, more or less most of it already paid and most of it has already finished by expanding our state-of-the-art manufacturing capacities and many best cost manufacturing footprint countries like Vietnam, but also South America and Romania and by spending over EUR 600 million over the last 5 years. Why we're going this way in this, I would say, unique strategy is quite simple. With the volumes and the utilization to increase and it is increasing on a constant level. We expect margins to expand over proportional and also the cash generation to grow materially over the coming years should grow over proportional, offering us high accretive payback of our investments with future growth. Given our PAE background and mindset, we also have a view ourselves as a key consolidator in the industries. So not only organically, but also with the help of M&A. We keep on integrating the value chain, completing or completed already several acquisitions since the IPO. And we keep on to continue to consider further opportunities. Most of those M&A opportunities are offered and promoted to us by our customers themselves, research for solutions for their mission-critical suppliers to integrate them in companies with a long value chain that we have. That's the main proposition, the strategy of what we do, why we do it and also the way how we structured this business. And now let me go directly into the numbers of the presentation, which is also shared online for your availability. What we have seen in the first half year 2022 is an overproportionate growth in comparison to the market development. We've increased our sales by more than 60% from EUR 300 million around EUR 60 million first half year 2021 to more than EUR 578 million on total sales for the first 6 months 2022, which is also slightly tough. The consensus for the full year is around EUR 1.1 billion, so above the half year's consensus on sales in comparison to our actual sales we have shown here. Adjusted EBITDA adjusted by mostly noncash effective MSRP numbers sponsored by the Montana Tech components AG Group. So therefore, the adjusted EBITDA rose by around 50%, slightly under proportionate to the net sales plus/minus in line with the consensus, but with an increasing pace of EBITDA on a quarterly basis. Pace, which we want to continue also, and we give them guidance in the later slides for the next quarters to come. If we look and break down those sales into the segments, as seen on Page #6, we can claim that all 3 segments or structures, in mobility and energy showed growth. Growth in case of Aerostructures more than 100% was 119% in comparison to the first half year 2021 with over 70% growth in mobility, mainly backed by large contracts with OEMs, German-based OEMs and energy but a strong demand for Energy Solutions for working out the grid and energy generation worldwide. If you look on Page #7 on the quarterly development, we see that our main giver Aerostructures is the fastest growing with the segment with not only more than Q2 2021 to Q2 2022, 169% growth but also with a huge jump on sales in Q1 -- Q2 2022 to Q1 2022, a development, which also should keep on going. And for more explanations on the Aerostructures segment, the main giver, the most important segment for Montana Aerospace. I would like to hand over to Kai Arndt to give you more explanations on the development and also the challenges within this segment.

Yes. Good afternoon from my side, Kai Arndt speaking. I hope you can hear me good. I will come to the phrase that Michael Pistauer in his introduction where he said that we want to be a game changer in the aerospace business. I think you need to have a USP. And our USP is a vertically integrated production system we have. So that means that a customer who's ordering a part needs only 1 focal point, that's Montana Aerospace compared to several focus points for every single step in the production system of other companies. So we are delivering everything as a one-stop shop concept from 1 site from the Montana Aerospace, and this is definitely paying off now. So we invested a lot of money in the last couple of years and now we see that this concept is paying off. So we see a clear appetite for more work share from the big OEMs but also from other customers. So when other companies are failing to deliver and especially when we see the current ramp-up and the current production rates, the OEMs are closing nearly on a daily basis. And you see that already now suppliers are failing to deliver and then we can deliver even the higher rates. So this is definitely giving us a USP in the market, and we see clearly a strong demand to give us further market shares in all of the production systems we are working in. So you will see them later on, on the different slides. So our contracted sales, for example, this increased from EUR 3.9 billion to over EUR 5 billion, most of it coming from organic growth. We see that we don't need that big CapEx spend in the months to come, but also in the next year. So it's more of the same where we are investing in, but not a big new sites and new production systems. So that's definitely something where we see ourselves in the USP. We also have 1 comparison now inside of Montana Aerospace. So with the acquisition of ASCO, we see that also ASCO is not completely fully vertically integrated, and this is definitely something we will work on. We are in the middle of the post-merger integration process. And also ASCO will be one of the areas where we see that we have a lot of improvements in front of us in terms of making ASCO as vertical integrated as the Montana Aerospace system is. So this is where we see our big strength, and this is also acknowledged by our big OEMs, but also for the other customers. And there, the big growth is coming from. And we definitely think that also for the years to come, we will see more wins in terms of market share, and this is definitely a concept of Aerostructures inside of Montana Aerospace. So Michael, I think you will continue now with the financials.

Thank you very much. We'll guide you through the financials, which are also shown on our website and the detailed presentation also the report. If you flip to Page #9, we see that we have achieved within the first half year 2022, more or less in all areas, good development of the KPIs. Net sales increased by more than 60% EBITDA growth by more than -- around 50% CapEx spend, as also guided went down dramatically. Why? Because the large CapEx programs are finished. It's only the last big project, which is now going to be finished in Romania, the so-called heavy price we built up for European demand, which will be also finished within this year. So you're definitely within our also guidance slightly below. Great working capital, therefore, not a full mark on this point, but strategically intended due to the massive supply chain issues we face right now, mostly in Europe, but also concerning certain suppliers of material. Our vertical integration gives us the chance to outperform in case of shortcuts in the delivery and supply chain, but only if they have enough material. Therefore, this material and inventory is intended. Even so I would say the KPI is not fully in shape, but should come down once the -- more or less the crisis in different areas are fading out, then also this area of trade working capital will be reduced. Total assets in line. And therefore, as we continue, you see that the result for the period is still mostly impacted by the depreciation. Of course, I don't have to tell you, investments of around EUR 600 million result also done in the last year and higher depreciation we guide for this year for a total depreciation of around EUR 100 million. Total year, also seeing the peak more or less concerning depreciation within this year and the next year then to continue on a slightly smaller pace. If we continue to look at it on a detailed breakdown concerning sales and adjusted EBITDA by the segment, Aerostructures in line also with adjusted EBITDA with the intensive growth we have EUR 119 million -- 119% year-on-year growth first quarter -- first half year 2022 versus the first half year 2021 in sales, concerning adjusted EBITDA, more or less in the same range with 117%. A very, very nice development in mobility. Even so here, we have the most of our gas needs in Romania. And therefore, here also a certain pace, which we have to consider concerning how much gas with high costs we consume. But also here until now, it worked out well with an increase of the adjusted EBITDA almost 4x as fast as the growth in sales with 280% versus last year. Energy slightly down concerning the EBITDA. This has a reason. If you recall also our last calls, we also said that we had -- we already integrated and tended since last year and also started with price increasing towards the customers. And actually the mostly project-based business. So pass-through of price increases take up to 6 to 9 months. So therefore, these price increases, which are, in many cases, at least compensating our inflationary cost developments will show the results from July 2020 to onwards. So therefore, also here, we stick with our guidance concerning energy to slightly increase for the total year. The EBITDA margin comparison to last year at the higher -- at the higher pace of the sales, but first half year still impacted by the inflationary costs and not pass-through of the price increases yet. To take it a bit -- more guide on the development in detail and we will come to that one also later, let deep dive on production performance, personnel expenses and also other operating expenses. Production performance, I would say, in line with the development of last year. Forecast, we upfront produce what is needed concerning as the build rates and the POs for the later months. Personnel expenses slightly below the sales and production performance concerning growth of the personnel expenses. Please keep in mind that we face worldwide, a short picture of good workers and staff, something we will elaborate a bit later on. So there is a run and run for good tenant worldwide. And if you are not really worldwide operating, it's tough to work on those shortages concerning good labor and workers on a worldwide scale. Other operating expenses, the impact you see here concerning higher operating expenses in comparison on the growth rates in comparison to the production performance is mainly due to the increased freight costs and also energy costs, something which is not new anymore, but something we have to cope with is mainly Europe, a massive increase of energy costs in electricity and also gas is also a constant stress of more development in each direction. Right now, we see it stable on a very high scale, but it's something we can partly pass through by around 2/3 of it for the total year. We think that we can pass through those extensive energy cost increases, but still a certain amount we have to go chase and this is also part of the guidance for the total year already. Net debt increased heavily to EUR 408 million, the net debt position. This should more or less show the peak of this more distressed level of -- which is, I would say, guided also for 2022. The main impact came by the increase of working capital, which was strategically intended. In comparison to last year, we started to increase the inventory starting mid of 2021 seen already that there were certain shortages on materials, not to fall in any short cut and to fulfill also the massive growth we have. Therefore, we started to increase inventory strategically, but the most impact came also by the acquisition of ASCO. And therefore, the amount of EUR 408 million should not only show the peak of our net debt position but for 2023 onwards, we guide for and want to intend not more than 2.5x net debt-to-EBITDA as a ratio, which is for us also the guidance for the management for the next years to come. The number of employees rose by 23%. This mostly reflects the acquisition of ASCO, but also not to fall in any shortcuts concerning workers on a worldwide scale if there is an ongoing increase also consuming build rates and demands from us concerning our sales and therefore, to be capable to deliver in time to outperform also for the next quarters to come. If we look at the trade working capital, here, this one reflects mostly the inventory. The inventory once again increased in comparison to last year by more than EUR 140 million and this is strategically intended. It's high. It's too high for normal years, but I'm not the -- I would say, [ I'm brand ] and spotlight of the present shortages worldwide concerning certain supply chain with our value chain we have, this helps us. And therefore, we can deliver also when other competitors are not able to deliver, and therefore, it's strategically intended as long as the supply chain constraints in the market. Contracted sales, definitely there is favorable development. Be proud to announce that we increased almost by 30% in comparison to what we showed in Aerostructures in -- during the IPO with EUR 3.9 billion. Now it's over -- more than EUR 5 billion contracted sales, and this means that we can, with high probability, fulfill our growth plans also for the next years to come, still knowing that we don't calculate with this hybrid rate as announced increasing, but not that high ones. Kai will further explain it a bit later on how we calculate with what [ tipping ] rates we calculate for the future. Cash flow, as said, still free cash flow mostly impacted by the acquisition of ASCO and also by the increase of trade working capital. Without those developments, we see from quarter-to-quarter in improving cash flow. And here, once again, we have a 3-year guidance and also management aim to have a positive free cash flow by 2023 by reducing not only the CapEx, which you see on the right-hand side, which is also reduced in comparison to 2021, but will further reduce also in comparison than when you look in 2023, but mostly also by keeping the trade working capital, at least stable and therefore, increasing the EBITDA and therefore, having the possibility to [indiscernible]. Looking on the detail, which I guess I named already, it's on Page 16, some topics, which is, I guess, at least from an operational issue, then when we look at it on a more or less daily basis, freight costs and energy costs. Freight cost, it's not only the cost, but also I would say, the availability of the right transportation capacities and also the period of time for transportation. In many cases, for instance, oversea transportation is not showing any more detailed arrival time. So it's a band wide, which is given, which makes it, in many cases, more strategically difficult how to schedule them deliveries. But on the other hand, it's the energy costs, which at least tripled in total in comparison to what we have seen in H1 2021 or the last quarter. So therefore, higher energy costs is something we have to account for the future for the next years -- next quarters to come, at least for 2022, let's see how the development will be in 2023. When we come digging for the financials for the first half year, I guess important is how the management and we as a company, as Montana Aerospace see also the development for the total year 2022. The main element for the guidance 2022 as it is out of Aerostructures. It's still not only the name but as we have seen over the most important, the fastest-growing and the largest segment. And here, within the build rate is the crucial element and the explanation and which build rate we calculate. I would like to hand over to Kai once again, please.

Thank you, Michael. Coming to the build rates, which we have as an assumption in our calculations. You might find them a bit conservative, but honestly, if you see the current situation on the market, I think it's relevant that we manage also our trade working capital and also the employee numbers. And therefore, we did an analysis on the realistic scenarios in the market, and you can see that for our guidance, we are a little bit below the announced build rates, especially when it comes to 2024 and 2025. But I think we have the capacity. We can react very fast if there are higher demands in the market, then we are able to deliver them. But for the moment, I think this is a very conservative approach, how we do it but it's the right one in the moment to do so. If you see the long-range numbers, for example, the [indiscernible] the 787 also there, you saw some announcements in the press, some speculation in the press about higher rates, especially in 2024 and 2025. But also there, and my argument is valid if there are higher rates coming from the OEMs, we are able to deliver to this rate. So there's no problem to ramp up very fast and to deliver on the demand from the OEMs. So that's very important for us. So there are no big CapEx investments needed to cover the demand on the market, just the question of the right timing to, let's say, build out the capacities in terms of employees and then deliver to the demand of the market. This is what we are doing. And I mean, you might expect that we are managing our trade working capital very seriously. And this is why we have lower -- at least a bit lower assumptions in our planning, then you might read it in the press. But as I said, this is also giving us some opportunities when there are higher rates coming from the big OEMs.

Saying that this brings us to the guidance for 2022 for the total year. Sales-wise, we slightly increased the guidance to around EUR 1.15 billion to EUR 1.16 billion for total sales for the total year with around EUR 578 million for the first half year. I guess we are in a good pace to reach this number. And as I said, the most part of this increase in sales, which is definitely far over the market average is organic. So the organic growth is the most amount of this increase in total sales and the responsibility for it is, on the one hand side, the increased ramp up at different industries, but also the market share win, which we can now deliver and show in our sales. Therefore, also the segment guidance on sales over EUR 500 million for Aerospace. Back again, the largest segment, as also announced during the last quarterly result presentations, e-mobility plus/minus around EUR 190 million, which is closer related to the capacity. So there is the main aim is to improve the EBITDA, which is going on track also here on a constant basis and energy with the closing of São Marco, which should show the consolidated numbers from first September onwards is around EUR 420 million on total sales for the total year, which sums up at the amount of a bit more than EUR 1.15 billion, EUR 1.16 billion on total sales for the full year 2022. Adjusted EBITDA here also within the guidance of the year in comparison to margin level percentage, a slight increase, which we expect for the total year. So overproportionate growth on EBITDA. Expected CapEx, slightly lower with around EUR 90 million maximum of cash out for total year on CapEx, which reflects more or less 25%, 26% less than what we have done last year and which is most of it for the finishing of the -- for the termination of the -- for the last large CapEx program, as said, which is taking place right now, and the last topics have to be solved until the end of the year. 2023 and onwards, we stick to our guidance to increase it by another 20% in 2023. I think that we can achieve based on the setup we have and the contracts we have, also overproportionate growth in EBITDA, ongoing with another reduction of the CapEx. And I would say, more in-line development of the trade waking capital slightly under-proportionate and therefore, a positive free cash flow, which is the key goal for 2023 onwards. For 2024 and based on the build rates we have shown, we calculate with plus/minus a full utilization of the CapEx we have right now in place in installed and highly accretive business with good synergy effects all through our Montana Aerospace. So we would like to finish with the key areas, and therefore, I would like to hand over again to Kai which we are right now focusing on and which are the challenges for showing this growth rate and the sales development and please Kai, may I ask you to elaborate on those issues, which we have to focus on.

Yes. Thanks, Michael again. Yes, here you see the 4 big challenges we are facing. I'd like to say everyone else in the market, not only in our industry, but in all of the industry, we see that the energy cost inflation, the human resources topic. So the trade for the talents and transportation costs are increasing and also the material prices, which are now going back to a normal status for at least for aluminum but for the other 3, of course, we need to find good solutions to overcome these challenges and to limit the effect on our financials. And here, again, our concept is coming into play. So as mentioned in the beginning, our USP is a one-stop shop concept. So that means that we don't have the amount of transportation between different sites as others have. So there is definitely some opportunity and some advantage for our concept so that we only have to deliver from our side to the final customers and not between the different sites. Of course, that's not valid for all of our parts, but for the majority, that's the case. And this is giving us definitely a unique selling proposition. So that's one of the bigger advantages we have. In terms of energy, I mean we are trying to find good solutions also to limit the effect of the energy cost inflation. When it comes to normal electricity, we are -- we launched a project in terms of the solar panels and we will have a concept in place after the summer break to install solar panels all over the site and at least deliver the majority of the needed electricity from our own. And this is also true for the material, we launched the project to build up recycling stations to recycle our own ships from the production side, and so that we don't have any impact and effect from other sources also on the material. When it comes to human resources, I think this is more a variable in terms of how we manage and overcome the shortage of labor in different sites. It's not true for all of the sites. If I take Vietnam, for example, we see very good experience than the talented labor in Vietnam. So there is no problem to hire from 1 day to the other in Vietnam and to ramp up. And Romania, we have some good concepts in place to overcome the challenge, but it's not easy. And we will also see that we have to increase wages as it is done in Central Europe. We also see the need to do so in the eastern part of Europe. So there will be some concepts needed to, let's say, higher the needed amount for the coming ramp-up. But all over, I think the impact of the 4 challenges, it's clearly manageable. We have the concept in place. And I'm pretty convinced that we will see a more smoother 2023 when we are in the running mode, and we have the concepts in place. So from my point of view, everything is manageable and that we will see that we don't have the big risk as maybe others have them in their portfolio.

That's why we stick to our guidance and say that this was the presentation for the first half year's results. And to that all of you, I would like to hand over to you and your questions, and we will try to answer in the best possible way.

[Operator Instructions] The first question is from the line of Richard Frei from ZKB.

I would like to start with the adjusted EBITDA margin of Aerostructures. So comparing Q1 with Q2, there is quite some drop in margin. And I'm wondering what the reason is for this? Is it the challenges you have shown to us which were already known? Or is there a bigger impact of the ASCO consolidation now visible in there?

In January, the development is mostly impacted by, as you've seen by all 3 segments, we have increased the adjusted EBITDA more or less in line with the net sales in Aerostructures. We have overproportionately developed the EBITDA in e-mobility. As I said, more or less 4x faster than the growth, which was 70%. Only Energy was beyond, I would say, the development of last year concerning margin level. The reason was, as said, that price increases need their time to show an impact in the results around 6 to 9 months and not showing before the July 2022, the results. So for the total year, again, we think that we can, on a monthly -- on a quarterly basis and on a monthly basis, increased EBITDA of the total group. And therefore, because of the total give guidance, which is slightly overproportionately concerning growth. But of course, it always needs some time if there is such an inflationary development and you have, on the other hand, such a fast-growing development on sales to pass through than all the costs. And also still with the ramp-up of certain areas, still some many costs are implied with, but everywhere, the utilization is at the peak where we want them. We know that it's going to be due to the contracted sales. This is simply a question of time. And therefore, we are quite optimistic for the future. Does this help concerning the answer?

I'm not sure if I was clear enough. I was having a look at the sequential margin at Aerostructures. So Q1 to Q2. And here we had the significant drop, at least if my numbers are still correct in my model. And I was wondering what was the reason for that not just a few basis points like 13% in Q1 to 9% in Q2. That was my question. But just in Aerostructures.

There's 1 simple point. That was also been integrated, as you know, about ASCO. ASCO was acquired with effective in the consolidated numbers from 1st April 2022 onwards. Here we guide, as you know, with the fewer EBITDA for the total year due to the immediately started PMI process. So therefore, it's dilutive concerning the margin level in the second quarter 2022. But excluding that, we had higher margins than in comparison to the H1 2022.

That's very clear.

Ask where we can calculate it slightly positive, but more or less, with a fewer EBITDA for the first 3 months, which we consolidated right now.

Okay. Then if we stay with ASCO looking at your balance sheet, the intangibles went up by around EUR 120 million. So as goodwill and intangibles, can you give us some flavor how the PPA here looks like? So how much is goodwill, how much is in intangibles? Or is that to be seen in the yearly report?

There's preliminary statement already in the financial report. Just a second, it's on Page #35 of the total report, reflecting total consideration transferred of EUR 211 million, fair value of dedicated net assets of around minus EUR 140 million. So goodwill of around EUR 70 million. But please be -- if we added, it's a preliminary calculation, we think that the total amount will be slightly lower concerning the goodwill or quite some amount lower at the year's end when the final calculation is done.

Okay. And if I may, another question on the receivables. They have more than doubled. So we could argue that this is in line with sales. So are the customers still paying at the normal levels or normal lead times, basically, no delays? Or is that probably a matter of [indiscernible]?

No, we don't see any risk on the receivables. The main impact is coming. Of course, please be aware that in the full balance sheet, the full impact also of the ASCO transaction, which comes with its receivables. But besides that one, there is clear contracts concerning the payment periods and the payment periods are in line with the contracts. So we don't see either risk nor any overdues -- major overdues sometimes on a daily basis, yes.

Okay. Probably my last question. Kai mentioned that the biggest part of the increase in contracted sales was organic, but now I'm still curious to get some more flavor if possible. So just a rough indication how much of this increase was organic and how much was brought in by ASCO?

Around 80% is organic and the rest is inorganic of the increase. That's how we can say, and it's consisting of many, many different, I would say, smaller, but the total amount, not so small packages or contracts we achieved over the last quarters since the IPO.

Maybe 1 add-on from my side, thanks for the question again. Even with these conservative rates, we have as an assumption for our calculations. We see that we have roughly EUR 300 million from the increased contracted sales already from the build rate. So you can see if the build rates are even going higher than estimated, then you will see, again, a big impact on the contracted sales, which is for us a big opportunity, of course.

Next question is from the line of Ross Law from Berenberg.

Actually, just a follow-up on the backlog. I'm just wondering which programs you're primarily winning new business on? I know that you flagged the A320, but any other programs that you're winning business on would be interesting. And also, if you can divulge who are you actually winning the shipset content from? That's my first question.

The shipset content is something we will evolve in the next quarters to come, but decreased definitely. The program, which is the fastest growing also concerning contracted sales is definitely the A320. But would you like to give a bit more details? The other ones, I would say, is diverse. It's even going down to certain parts of the special plans. But would you like to give color on that point, Kai, but it's mostly A320.

Yes, thanks to the acquisition of -- now we have a very balanced portfolio in terms of the different programs from the big OEMs. ASCO is more exposed to the Airbus programs. As you know, we have a big spirit contract, which is more or less close to the Boeing program. So overall, we now have a very balanced portfolio and also for the long-range programs, we are definitely good-positioned. So the current growth is mainly coming from the A320 and the A220. Hopefully, we will see the 737 MAX coming back and then this will give the growth for the, let's say, hopefully, in the next 12 months to come. But overall, the portfolio is completely balanced, and then we will profit from every ramp-up in every program in the future.

Okay. Second question is just on your production rate assumptions. Obviously, you're still materially below the OEMs. And you've obviously flagged 80-20 with your assumption of 63 a month and 25 versus the internal target of 75. Presumably, your customers are sending you purchase orders for delivery, say, 6 to 12 months ahead. So at what point do you need to potentially upgrade these productions assumptions and also potentially changes in your operating model, hiring more people, purchasing more equipment if, in fact, the OEMs target start to play out? When will we actually learn that at year-end?

I mean, of course, you have to -- if you want to have a detailed answer, then you have to break it down to certain machine and machine types because it very much depends on which machine type then there could be a bottleneck. But there's a general guidance, Aerostructures. The installed capacity is around good for EUR 1.15 billion on total sales, EUR 200 million is tied around capacity in e-mobility and around the total capacity for energy is a bit more than EUR 600 million. So taking that -- this one is a guidance, you see that there is a good more room for also Aerostructures. When do we think with our assumption of the build rates when this could be reached something around between 24 to 25, depending on the redevelopment of the ramp-up of the OEMs and also their purchase rate. This is then when we need also up from to the development afterwards to increase further also sales to on some points, add some capacity. But please be aware, it's not the housing, which we need for bricks and mortar, if you can call it but it's mostly there in machine, which could be a bottleneck, another one. So still, I would say, much lower than what we have seen in the last years is still enable to increase our capacity there.

And on a little bit on the -- because I really like it. And there, we can explore also the production system we have. As you know, we're starting with extrusion and then we do machining and also the surface treatment in the assembly. So we see an extrusion and very, very high demand at the moment, which is not reflected in the purchase orders of the machining. So this is definitely underlining our assumptions that there might be small delay in terms of the big grades, which you see every day in the newspaper. There is definitely some mismatch between the extrusion demand and also the machining and assembly demand. So this is giving us some confidence that planning with some lower rates might be the right way to go. But again, we are very fast in terms of reacting if there is a higher demand and the current purchase orders definitely reflected in the current build rates at least in the years 2022 and 2023.

Understood. And just last one for me is just on the balance sheet. Clearly, your leverage is optically high at the moment following the recent acquisitions. And I appreciate it's distorted because it's not on a pro forma basis. But it has been in the past and continues to be a concern among some investors. So what kind of comfort can you give us that you don't expect to raise more equity in the coming months and quarters?

Good question. It's important. And I guess also we guided here, and I'm happy to repeat also at this point. You're right. We have right now in our terms to speak also if we see a peak continuing net debt-to-EBITDA exposure also for 2022, we think that the net debt should have reached its peak, mostly, of course, due to the 2 topics or due to the 2 topics, which is trade working capital and tenant strategic pay increase. And on the other hand, the acquisition of ASCO and both together of course, brought this development. There also, from our side, the clear guidance, free cash flow is the one clear not only goal, aim, but also have the guidance, which is intended for 2023. And therefore, also further growth and also CapEx -- excuse me, M&A acquisitions only with also free cash flow reduced by Montana Aerospace for 2022. We don't intend to have any capital increase or further acquisition. This is clear, the password is the execution of the contracted sales of the market share wins we have, capacity usage of what we have right now. And that therefore, we think that this should see from now on the positive development concerning net debt-to-EBITDA, the direction of 2.5x net debt to EBITDA 2023 onwards. Not more than 2.5x. This is fine.

[Operator Instructions] Next question is from the line of [ Andy Snider ] from zCapital AG.

I have few questions. First on ASCO. Can you give us a little bit forward guidance on what kind of trajectory we should expect for ASCO for second half of the year in terms of sales and margins and also a little bit further out in 2023 and 2024, that would be helpful.

There's -- I guess, Kai is best to answer this one. Kai, please.

Well, in terms of the trajectory, I mean, ASCO should be back on the margin, which we saw in 2019. That's at least the expectation we have. For the current year, they are delivering to the assumptions. So we will meet the guidance we have in our book. So that's the first statement from my side. In terms of the further margins, this will highly depend on the way we integrate ASCO in our system and how we make use of the current production system we have on the total Montana Aerospace, meaning that ASCO should also profit from the other side of Montana Aerospace when it comes to exclusion or the machining part from Romania. Just to give you an overview with the acquisition of ASCO, we now have over 300 CNC machines and over 400 spindles in our system. So what we are doing right now that we're trying to, let's say, clean up the portfolio in that way that we see well and at which side it makes sense to have which kind of the parts to be built. So this is what we are doing right now and ASCO will definitely profit also from this setup. What does it mean in terms of numbers? So I mean, we see that we will achieve the same profit margin in ASCO as we have it for the other sites in the aerospace environment. That's what we are targeting for. The current post-merger integration project is running. It's running in that way as expected. So we will see also the impact in 2023 as expected. In terms of concrete numbers, I'd like to be a bit let's say, reluctant to disclose any numbers here on -- especially on ASCO.

But do you believe that despite not being back at 2019 level in terms of sales in 2023 and likely not 2024 that you can go back to the 15% margin they had before just because of the integration effect and synergy effects?