Montana Aerospace AG (AERO) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Montana Aerospace AG Q3 2024 Earnings Call hosted by the Co-CEO and CFO, Michael Pistauer; as well as by the Co-CEO, Kai Arndt. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Michael Pistauer, Co-CEO and CFO of Montana Aerospace. Please go ahead, sir.

Hello, everybody. Warm welcome from our side. As already announced, we are Kai Arndt Co-CEO and responsible for Aerostructures. He's dialed from the West Coast, so still early birds for him. Me, Michael Pistauer, Co-CEO also responsible for Energy and E-mobility and also CFO for the group. We are happy to present today's numbers for the third quarter 2024 of Montana Aerospace Group, and we are happy also to answer then later the discussion the other questions you have concerning some details and also the outlook. Let me start with a summary and the highlights of the last quarter and also the development of the first 9 months, where we are quite proud of it. We know all that we are right now in quite turbulent times concerning the industries we have, aerospace industries and OEMs are in, I would say, daily discussions also in the papers and everywhere. But we have achieved in the first 9 months a net sales of over EUR 1 billion with EUR 1.086 million on total sales, which reflects a growth of more than 18% in comparison to last year's 9 months. And what we are really proud of it that the business model works, showing it in the adjusted EBITDA or reflecting it in the adjusted EBITDA more or less 3x higher growth rate in comparison to the net sales with EUR 180 million for the first 9 months, it's 56% above last year's 9 months result. Results from continued operations, also quite increase in comparison to last year, over EUR 35 million growth, slightly negative. I will explain it a bit later. We have suffered in the third quarter quite some non-cash impacts on FX. Everybody maybe knows U.S. dollar and also other currencies were pretty high on the 30th of September. Today, it would be completely different result, but this impacts our continued operations result with around almost EUR 15 million, therefore, slightly negative, but a very good development in comparison to last year. Balance sheet. We have a net debt also at higher volumes, still lower than last year's 9 months result. Please note, I come to that one also later, that by nature and also seasonality, the net debt and the trade working capital are always in the 30th of September, the highest and will decrease latest during the year. This is the same also for trade working capital, also at volume higher than last year, lower in comparison to last year. And please always note that within the net debt, the cash in from the divestiture of the E-mobility segment, which happens to be closed 2 days ago is not yet reflected. The equity ratio at a constant high over 45%. And we do have an operating result, which is steadily increasing, which is also our target and with EUR 45 million higher than what we had last year, I guess, quite okay. Looking at the segments, I start with the last point, the E-mobility. Two days ago, we announced with an ad hoc statement that we have closed the transaction, which was signed in spring 2024. We successfully divested, meaning that we will have the cash in out of the transaction of the closure of the transaction shown in the fourth quarter and with the use of proceeds, we will by 2/3 of the use of proceeds, deleverage and 1/3 is reserved for strategic CapEx and M&A. And the amount of the divestiture of the use of proceeds is in a low area of [ 3-digit million euro ] amount. Aerostructures, the name giver of Montana Aerospace with the strongest growth, reflecting the strategy where we say we take market share, we grow faster than the market growth and with EUR 612 million, 23% above last year. And the same with the adjusted EBITDA, more or less 3x faster growth in the EBITDA in comparison to the net sales showing the economies of scale and also the good development concerning costs and contribution margin and price situation of Aerostructures. Energy, still a pain storm in the market. So everything what is allowed to produce concerning the capacity which is installed is produced and sold, reflected within a growth of 12% in comparison to last year with EUR 469 million. And also the same picture like in Aerostructures, more or less plus/minus 3x higher growth in EBITDA with a record high number of EUR 25.5 million EBITDA for the first 9 months. This brings us to the guidance. Yes, we do know it's turbulent times, turbulent times, mainly when we come then later also in the discussion of aerospace with problems within the supply chain, OEMs and similar and other topics. But still, we guide excluding the E-Mobility segment, so excluding the divestiture for a net sales of around EUR 1.5 billion, sales tough. But on the other hand, with a good feeling concerning the adjusted EBITDA of around EUR 165 million and definitely a high free cash flow and depending a bit on the FX, but also here concerning the guidance, also a positive net income by year-end. Within the segments, Aerostructures, it's challenging, but we still guide for that one, EUR 850 million to EUR 900 million on sales, as said, on a good margin level due to a broad spectrum on customers, work packages and also different shades of aero and space. And energy sales was clearly above EUR 600 million and a continuous also growth in EBITDA. For 2025, but we will discuss this one later also in detail, not easy to project but still the outcome of, for instance, Boeing strike and macroeconomic topics are still not yet so clear. But also here, we continuously guide for growth and definitely for a stronger growth in terms of EBITDA with a level of over EUR 200 million on the basis of the 2 segments, Energy and Aerostructures, so excluding E-mobility and with a net debt below 2x leverage. Coming to some details and the overview. The overview reflects the picture we tried to explain in the executive summary, growth in net sales, adjusted EBITDA. Please note that first time for comparison reasons, we compare 9 months to 9 months in this table. We think it makes it better to compare, so therefore, in comparison to last year, adjusted EBITDA, as said, 56% higher than for the first 9 months 2023. This is also reflecting the so-called discontinued operations, which means the segments, Energy and Aerostructures. Result from continued operations, the growth by 35%. CapEx spend right now is one of the only topics which is shown on the full scope is EUR 57 million versus EUR 47 million last year. So this is including this number, the investment of the CapEx, which was invested in the E-mobility segment. Without that one, it would have been around EUR 52 million for the first 9 months 2024. The main area of investment is for the capacity increase. In energy, this is the 3 years program, which is driving us to a potential sales of EUR 1 billion in Energy segment and the CapEx for that one is the capacity increase. Trade working capital, as said, usually and by seasonality, always the highest at the 30th of September. Net debt not yet reflecting the use of proceeds out of the divestiture of the E-mobility, which was in the amount of a low 2024 -- 30th of September of 2024. Please note that the free cash flow is minus EUR 22 million is including shown also in the footnote, the E-mobility segment. Without that one, it's around plus EUR 10 million for the first 9 months 2024 and therefore, showing that we are more and more gradually and continuously developing in a strong cash flow businesses in the different areas of our segments. Quick look at the details on a quarter-by-quarter basis over the years. So third quarter in a row from 2021 until 2024 without going into too many details, but it shows that our strategy to continuously grow, but over-proportionately grow the EBITDA does work. And if we look on also the margin, usually the tendency is a continuous growth on the margin level, mainly also this year in comparison to the last year, driven by a quite stable development, which was maybe not as constant on a quarterly basis. It's better to be seen on a year-to-date basis, 2021, first 9 months till the first 9 months 2024, a growth of 133% on sales, but more or less double the speed on growth concerning the so-called adjusted EBITDA or EBITDA, and this is then reflecting the growth also in the margin level. Saying that, I would like to hand over to give you a bit more insight in the development of Aerostructures. And I hand over to Kai to give you the explanation.

Good morning, everyone. I hope you hear me good. I'm just now on the airport in Seattle on my way to Wichita and giving these 2 cities, you can easily imagine where I am and to whom I talk here. Yes, turbulent times, [ Michi ] mentioned it. The Q3 is not impacted by the strike from Boeing. So this will be kick in, in Q4. So this is why I think we see still a very strong Q3 in terms of Aerostructures. Happy to see also the development in the EBITDA. And I can only repeat Michi saying that the main focus of us is to leverage our production system to make use of the installed capacity and to increase the margin inside our business. This is working in the half year's report, there was a question about the further way to increase even more. And this is what we are doing. So we are using the crisis from Boeing. So remember, in the first 9 months, we were heavily impacted by the door blowout, which happened in January and which kept Boeing on a very, very low rate during the year. So the Boeing rates over the year were not surpassing 30. It was even more in the range of an average of 20 in the first 9 months. And we made use of this impact and cleaned up our portfolio, saying that we are moving work packages from left to right where fit best into our production system. This will kick in mainly in '25 and '26, but we already see some of the effects in the end of '24. So having said this, we see an increase Q3 '23 to '24 by 23% and an increase in terms of the EBITDA by 68%. So that's exactly describing where we are and should continue also in '25. For the Q4 because I think that's one of the main questions later on. You know that since now 8, 9 weeks, Boeing is not producing a single plane in the 737. And based on the, let's say, fresh from the press, fresh from the discussions I had here in Seattle, it will continue at least 1, 2 weeks until they will be able to really delivering new build aircraft again. So there will be some further impacts expected at least until the end of quarter 1. Our assumptions showing for the next year that we only see, let's say, a side move in terms of the build rates of Boeing. So we are very conservative in terms of what we expect as the build rates coming from Boeing, and that's reflected in our 2025 budget, too. On the next slide, please, you see the 9 months development. And again, underlining that we are on the way, we are seeing the growth in our company that's mainly built on new packages we are winning. The main sites profiting from new packages, Romania, Vietnam, but also -- and we are happy. But also for North America, we won recently smaller packages, but very profitable for us. And this is the way we want to continue. In terms of the adjusted EBITDA, you see that we are in the line with our guidance. But with the impact of the Q4, everybody can imagine that with these low build rates, so since 8 weeks, not a single plane in 737 was built, the 777, 787 also impacted somehow by the lower rates. For Q4, we see a further impact on the revenues. But again, the impact on revenues percentage-wise will be higher than the impact on the EBITDA so that we think we will stay in the given guidance for 2024. Next slide, please. Yes, coming to the build rates, and I hope the background noise is not too high because I'm at the airport and of course, there's a lot of background noise here. You see what happened in terms of the Boeing build rates comparing the September '23 with September '24 in terms of Boeing, it's a drop of 21%. This is including some protection we already got from Boeing. So this is not exactly what Boeing is or was able to build. Saying this, that means in terms of really produced aircraft and this continues like this, there will be further impact seen for October, November, December. And this, of course, will also impact mainly Romania and Vietnam in terms of Aerostructures for Montana Aerospace. This is why we are in discussions about support from Boeing protection from Boeing, very good discussions, good, yes, let's say, alignment. But anyhow, there will be some further impacts. As said, the main impact there will be on the revenues, and we definitely hope that in terms of EBITDA, we will continue our growth path. For Airbus, this, again, shows is an increase of the build rates, but it's definitely not the increase which was foreseen by Airbus. You will remember that Airbus wants to deliver the 770 aircraft this year. They are 200-ish away from the build rates. But the original target, which then also impacts, for example, ASCO in Belgium was far higher. So during the year, we had 4 adjustments of the demand of the build rates from Airbus, and this was also heavily impacting then ASCO in terms of the revenue and ultimately also in the EBITDA. So I think there is a right to say that in terms of the build rates, which are announced by the big OEMs and then later on will be transferred into the supply chain, there are at least some adjustments needed from our side in terms of conservative planning, this will be also reflected then in 2025 because there is definitely the right on our side to say that with the build rates announced in the newspapers and then adjusting them over the year by 4x, 5x, we have to plan more conservative than maybe in 2024. Next slide, please. Okay. Here, you see the steady development again in terms of the net sales, and this is telling you something because you see that it's around EUR 200 million each quarter. And there, you see already the impact, which I mentioned from the OEMs. But compared to Q2 in the beginning and then Q3 in 2024, there is still a growth path. But more importantly, we see what we always expected that we can improve our margins in terms of the profitability, and this is then showing that we are on a steady path here. Next one, please. So having said this, I'm expecting questions at the end of our presentation. And with that, I will hand over back to Michi.

Thanks. Thank you, Kai. So I have the honor to explain the -- give some details on the Energy segment. Easier industry right now, still a strong tail storm, I would still say, concerning the demand worldwide infrastructure programs progress and need the copper cores we produce there. The limits we do have in our Energy segment is on a worldwide scale, the capacity. The capacity increase program, as we announced and also published was started already last year. That's why we do have already growth, but it's still on the limits. And the growth program, the CapEx program will last for the next 2 years then have a potential capacity for around EUR 1 billion on total sales. Nevertheless, each single ton, each single copper core we produce also with the tail storm, the good pricing and the cost structure we have in the meantime worldwide in place, we are able to leverage on the EBITDA. And what you see here is on a more or less continuous basis, a tripling on sales growth than -- sorry, EBITDA growth in comparison to sales growth. And this is not only on a quarter-to-quarter basis, but more or less, if we flip to the next page, also if you see on a very continuous basis, plus/minus with some shades that you have maintenance or holiday season with a week less or more, more or less also on a year-to-date basis over the last years. Our goal is clear in the next years to come, depending on the strategy of Energy segment per se, we would like to reach this 8% to 9% with EUR 900 million to EUR 1 billion sales and 8% to 9% EBITDA. And I think the progress is clear, and we are definitely developing quite well into this direction. Let me see it on a quarterly basis. Here, you see it what I said that, for instance, the third quarter 2024 has a slight impact in sales in comparison to Q2. What is it? It is a week less or 2 weeks less in holiday season. But nevertheless, plus/minus always a very constant development and also the fourth quarter is expected again strong. By the way, in October, we already had a record ever sales on a monthly basis, which really made everybody proud working in the Energy segment. And therefore, we keep on our guidance for over -- clearly over EUR 600 million on total sales for the full year 2024. Scrolling back to Montana Aerospace as a group. As announced in the executive summary, we had an impact in 2024 in the first quarter, like also in the last year, if you can maybe remember for those who are longer shareholders or longer accompanying our calls here in 2022, 2021. This is by year's end and then, I would say, the change within the first quarter 2024 on the cash flow. But the impact, which was still in 2023, almost triple million amount is smaller, smaller, smaller, and we don't expect any negative impact in 2025. By the way, in the first quarter anymore. But you see that from then on, continuously operating positive free cash flow. And for the full year, also with the help of a triple million euro amount of the divestiture of our E-mobility business, of course, we expect a very high positive free cash flow and a massive drop in the net debt and with also operational positive cash flow for the third -- fourth quarter per se. And this is then also then reflecting all the numbers for 2024. So quite proud on that one, with some shades on details on trade working capital and as a result. The seasonality, there is some seasonality on the trade working capital, so we try to keep our inventory high to have the deliveries done everywhere within also in the fourth quarter, something which is reflected since years, since -- ever since our listing also in a record high on trade working capital and inventory on the third quarter and then dropping sharply on the fourth quarter. Nevertheless, even so we had an increase of around 18% on sales, we have a drop in trade working capital by streamlining the operations and also the processes and also, I would say, better contracts by 4%. This is a trend we want to continuously improve and work on it with also specialized teams on it. Results from continued operations, in general, we are proud on the development. There is only one, I would say, cloud on the sky. As said, these are FX losses on consolidation issues, which came up in the third quarter by really the 30th September 2024, which impacted the result with almost EUR 15 million in total with a non-cash effect, which are fully -- it's only balance sheet, but it is like it is. And of course, this, of course, brings some shades on the usual good development, which we think that we have even so of the industry developments we just explained. Just to give you an idea of what would it look like right now, the FX right now is USD 1.05 or USD 1.06 and also Brazilian real is completely different. And what we do have also the [indiscernible] Swiss franc to the different currencies we explained, it would impact -- a positive impact of more than EUR 10 million to EUR 15 million in comparison to what we had in September only from the FX again. But that's how it is. Nevertheless, we continue to give the guidance, as we said, 2024, not easy to reach concerning the sales, very positive, I think even positive what we gave guidance on the Energy segment. as said, every milligram on copper cores we produce for the energy transition worldwide is sold. And therefore, the only limit is our capacity, something we can steer. So therefore, a continuous positive development here. Not easy, as Kai already explained in Aerostructures on the sales. Nevertheless, our main key aspect is on the profitability and the cash flow, which we, I guess, steer quite well by shifting worldwide by also aligning the best packages into our processes. Therefore, yes, also a margin growth, which we expect by the year's end in comparison to the previous years. And with EUR 165 million adjusted EBITDA, we keep on this guidance concerning the EBITDA. High positive free cash flow. And yes, with, I would say, the footnote of the [ FX ] but in general, we think that it's a high positive net income on the continued operations by year's end. For 2025, still tough to project. So we will give a bit more detailed guidance once, I would say, the turmoil on Boeing and Airbus mostly Boeing and the outcome of the strike implications to the full industry are better to be seen. So this will be done with our, I would say, preliminary results in 2025. But we keep on the guidance for a bit above EUR 1.6 billion for the 2 segments we have for Montana Aerospace. And the adjusted EBITDA of slightly over EUR 200 million, saying once again what Kai already explained with a flattish or I would say, a [ sidewards ] development on the build rates. We are more skeptical concerning the near term or next year's development on the build rates, and this is reflected in this guidance. Of course, if it comes faster back and better back, we are happy and then we will also project a different possibility on sales and EBITDA. That's it from our side concerning the presentation. And now we are happy, Kai and me to answer your questions and to discuss future developments of our industries.

[Operator Instructions] The first question comes from Phil Buller at Berenberg.

I've got a few. I'll take them one at a time, if I may. Firstly, on the Aerostructures side of things. Obviously, we've had ramp-ups and downs at various points over the past few years since COVID and they've typically had a lingering effect and the Boeing strikes, I guess, are pretty new. So I understand where we are, and I expect that getting everything back into a rate of the 20s on the 737 is going to take a while. I assume it doesn't snap back as soon as employees come back to work. But can you just talk us through what is happening at your end? Have you had a material change to the master schedule yet? Are you being asked not to deliver temporarily? Are you delivering and not being paid yet? I guess I'm just looking to better understand the real-world link at the moment with Boeing rates and your own deliveries to them and your cash flows, please? That's question one.

Great question. I will take it. I hope you can hear me. Yes. So on our end, our system is set up like that we have in Vietnam. It's a 100% Boeing site with 900 employees roughly. So this site is impacted mostly from the strike and also the turmoil Boeing was in over the year. Romania, again, I would say, 40% -- 30%, 40% Boeing. So these are the sites with the biggest impact in terms of lower demand coming from Boeing. We -- since the beginning of the year with the door blowout, the cap on deliveries from the FAA, we were in close discussions with Boeing and also with Spirit AeroSystems in terms of the build rates, what do they expect from us? What is the demand? And we adjusted throughout the year also our capacities towards this demand changes. The strike, of course, completely new now for us. It increases inventories everywhere, not only with us, but also with our supply chain. So inventory is piling up. And the question, of course, is how we manage it over the next couple of months. We -- as said, I'm in Seattle right now. We'll go to Wichita this afternoon. We are in talks to Boeing and Spirit AeroSystems about what is really the demand over the next, let's say, half year, next year and how do we have to adjust our system to it. We had some furloughs immediately with the Boeing right. So we are trying to manage, let's say, the 2 angles of this problem. One is if we lay off people, then, of course, it will be very difficult to restart whenever Boeing or Spirit is ready. So we are trying to manage through it because we -- first of all, we value our employees very much and these guys have gone through us with all the crises and these guys are extremely well trained and skilled. So we want to keep them to be ready for the restart, which will definitely come. So there is no doubt in our industry that the restart will come. It's just a question of timing. And on the other side, it's definitely in terms of inventory, working capital. So what is Boeing and Spirit able to take from us and of course, to pay for it and how can we manage the situation. Short term, we are moving packages into Vietnam, which are not Boeing-Spirit related. There are a lot of packages in our own portfolio we can move to Vietnam. And this is, of course, helping to have a steady volume in terms of operations. In Vietnam, this is what we do right now. And the second is, of course, to talk to our customers to overcome the crisis. This is what we do right now, but it will have some impact in terms of revenues mainly, but also in terms of EBITDA in Vietnam and Romania. I hope that answers your question.

It does. And I guess a lot of that is stemming from the Boeing situation, but there's -- and that's supply chain-driven, but there's also the strikes, which appear to have exacerbated the situation. But on the supply chain specifically, the Boeing situation doesn't have too big an impact on Airbus. I know that Spirit perhaps has some impact. On the Airbus call, they referenced the supply chain was engine availability interiors and aerostructures. So it still sounds quite broad-based. So are you in any way part of the bottleneck that may require more investment to fix? Or are you simply slowed down by the weak link, please?

That's a very good question. I'm trying to stay professional because we had from Airbus, the first demand beginning of the year was around 670 aircraft to be shipped. So aircraft, when I'm talking aircraft, shipsets from ASCO, for example, on the 320. So that was the original demand we had from Airbus. Then it got down to 610 and it was again adjusted to 570 or something like this. So we had during the year, 3, 4 adjustments in the terms of the demand coming from Airbus to us because of the wing sets that are piling up and brought in where they prepare the wings. So this is coming from the OEMs and is giving us, of course, a very, very hard time to plan and to schedule our own deliveries. I definitely don't think that we are any kind of a bottleneck for Airbus, at least when we talk to them, they appreciate us as a constant and reliable partner. We had some hiccups here and there in terms of missing single parts, but I don't think we are one of the biggest bottlenecks, and this is how we continue also in terms of reliability when it comes to deliveries. We won significant work packages recently with Airbus Atlantic, Airbus Aerostructures, and also directly with Airbus. We are in the industrialization phase, mainly in Romania. And as always in every of the industrializations, there are some delays here, some delays there. Sometimes it's missing engineering data from the OEMs, sometimes it's our own capacity, but we are managing through it. And I would definitely say we are not the bottleneck for any delay inside of Airbus.

That's good to hear.

I would even add a bit more bluntly, we are more the solution than the bottleneck. But of course, it's only possible if you work quite closely together with the OEMs, and you hear it from Kai being directly at the customer right now, this is the case.

Got it. And outside of Aerostructures, 2 quick follow-ups, if I may. On the leverage or the net debt position, I know Q3 is typically the peak from a working capital standpoint, but it sounds as though Q4 might be a different pattern to normal. You've also had the cash receipts from e-mobility. You talk about a positive cash flow expected for the year. So perhaps you can help steer us to where you'd expect to land from a net debt position at year-end? Is it EUR 0.2 billion, EUR 0.3 billion, EUR 0.4 billion? And does that change your view on when we might expect to see the introduction of a dividend?

We are still steering for a dividend in 2025, so which is paid out in -- so 2024, which is paid out in 2025. We expect, as I said, a positive net income and also a high positive free cash flow. So what amount of free cash flow do we expect? It's significantly higher than the [ triple million euro ] amount for the third -- for the fourth quarter, out of which one part is the divestiture of the e-mobility segment here, but also the other part, which is also positive out of the operational business. And therefore, I would say, I give a best guidance on the net debt. And here, we expect something to be something slightly above 200 and something on the net debt. So I expect less -- clearly less than 2x net debt-to-EBITDA by year's end on the IFRS basis.

And finally, on the energy business, obviously, it's in a very good spot at the moment. And it sounds like the outlook is attractive. Are you looking at that business in a different light today, or is there still some intent to find a strategic buyer or exit that business in some way, please?

I guess we talked about it already in the last call and the situation didn't change dramatically on that point. There is interest concerning a takeover of the energy segment still with much more diligent, I would say, work and discussions with interested parties. So our time line, which we expected to end up by somewhere late summer, starting September was a bit too eager. We are still in discussions on that point. But to be fair, and I want to be very upright on this point, we only considered then a final offer if it's really accretive for Montana Aerospace and also reflecting the growth and the contracts we have in place. We expect a double-digit growth within sales. And as you have seen, always an over-proportional growth in EBITDA and therefore, also net income over-proportional also cash flow within the next years for energy segment. And if this is not reflected, we would not consider M&A transaction as useful and accretive. So let's see. It's still open. Timetable bit pushed backwards concerning our decision point when to say yes or no due to, I would say, very intensive due diligences and discussions with interested parties. No decision yet. But we are -- to be fair, I would be happy -- me personally, I would be happy with both scenarios. If it's accretive, it makes sense, we can definitely take the window of opportunity of the next years in over-proportional manner concerning the Aerostructures. There will be massive or there are massive opportunities. If not, then we develop by their own cash flow generated from the energy segment within the next years. And yes, it's structured both ways, I guess, in a very accretive way.

[Operator Instructions] Our next question comes from Christian Bader from Zurcher Kantonalbank.

A couple of questions for me. First of all, can you maybe talk us through what are the main building blocks for cutting your revenue outlook for 2025? That's my first question.

It's from both sides, but maybe Kai wants to give more shades on it. Very easy said, we are expecting a sidewards development on the -- of the low build rates of 2024. That's it. And still we grow and we grow over-proportional on EBITDA, which means that we win again market share and also with other customers. And -- but of course, if the actual development is not as conservative as we see it right now, then we're happy to, of course, give a new guidance then later during the year 2025. But right now, we expect a complete sidewards development of the build rates.

And that's true for the main 2 OEMs. [indiscernible] I take this one. Yes, that's true for both of the OEMs. And I can elaborate a little bit on the reasons. So if I start with Boeing, I mean, there is no doubt. If you see the current build rates, if you see that they are still kept on the 38 from the FAA. So there is no release to produce higher rates. And you can expect that they will now restart after the strike. It will take months until they come back in the range of the 38, which was the cap. And even then the FAA have to release them to build higher rates. So realistically, compared to what was in the build rates for '25 when we had the budget '24, so that for me, it's unrealistic that we see an average higher rates than 31 or 32. That's what we have as a planning assumption in our budget. For Vietnam, it's even lower. And that's -- I definitely think given the current situation, that's realistic, and that's only professional to adjust our numbers into this direction. If, as Michi said, if Boeing is really able to produce higher and faster, then of course, we are happy because this will definitely a big positive impact on us. But for, I think, professionalism, we have to -- yes, we have to keep a sober view on where we are and what are the possible build rates. For Airbus, a different discussion definitely because Airbus is continuing to grow. But do we believe in the speed of the growth? Airbus has adjusted also their build rates during the year. Now with 770, they have to do another -- they have to do magic again at year-end. We know Airbus is able to do it during all the last years, they were able to deliver in November and December extraordinary numbers in terms of deliveries. I do expect that this will continue also this year. But in best case, they will deliver on the 770, which is lower than their announcements beginning of the year. And they are still -- because we are delivering into the wings, Broughton, that's our main part, and they still have a high level of inventory in Broughton. So this is why we adjusted also the numbers for Airbus. These are the main building blocks for reducing the revenues.

Okay. That's very clear. My second question, a bit related to that is, I think you mentioned in your comments earlier that you are seeking protection from Boeing. What's the actual meaning of that, please?

Yes, well, there are many ways to have some protection, some support. For me, I'm speaking about protection in terms of keeping our needed workforce when Boeing is ready to restart. So that's the main thing -- because we totally believe in the strength of Boeing. I know it sounds a bit weird in times when they are struggling heavily, but the potential is definitely there that they restart very soon and hopefully also on the speed they announced. So what is needed from our side to be ready and to be able to follow Boeing is that we keep the workforce, and there are definitely different scenarios to keep as much as we can of the skilled workforce in our facilities. That's one. The second angle of attack for me is definitely working capital. So we have to manage our cash, and we need Boeing and Spirit. We shouldn't forget Spirit because Spirit is one of our biggest customers. They should step in and they should somehow help us in terms of how much inventory they can absorb. And by absorbing, I mean they have to pay us for deliveries. This is what we are discussing with them. As I said, very professional, very good discussions, built on the relationship we have with both of the companies. I do expect that we will find a way through it.

Okay. Now a follow-up on, let's say, the first part of your comment. When you say we keep the workforce, so do you expect that Boeing reimburses some of your salaries for the affected employees, or how shall we understand it?

Yes, that's a good question. And obviously, I'm not allowed to disclose any of the scenarios. But of course, we need to somehow keep them busy with work. So it means whether we get some other work packages to be produced or we have to find other, let's say, measures to finance our workforce. That's what we discuss.

I see. All right.

Maybe in very simple words, Chris, at the end, also for Boeing, it's a massive task to secure deliveries once they start it again. And therefore, for us, some parts and some of the parts you know, the parts we deliver is not something which you can shift from one day to another one. Also the people which are behind and the machines which are behind are dedicated in many cases. You can't shift them. And if you shift them, then they are shifted for a long period of time. This would then hinder Boeing from ramping up, and that's exactly how they have to protect it if they want to speed up production once again. And these are the discussions on how to do it best.

I see. All right. Okay. Now in terms of free cash flow guidance, I mean, you expect a free -- a positive free cash flow for the full year 2024, including the proceeds of e-mobility. But is -- can you maybe also guide us whether you expect a positive free cash flow, excluding the proceeds from the disposal?

Yes, as said also in the net result, a bit depending on the FX, but yes. And I explained it before, there are 2 positive impacts on the free cash flow in the fourth quarter. That's the one, of course, the massive one, which is a triple million euro amount, is from the divestiture, but the other one is also the business. Please also note that the energy segment is also, by seasonality, providing good cash flow also for the fourth quarter. So therefore, yes.

But do you expect, let's say, like-for-like positive free cash flow for the full year?

Yes.

Okay. That's very clear. And the last one for me is now, it's not a big issue, but still, I'd like to know your equity result has deteriorated to some extent. What are the reasons for that, please?

The equity ratio, of course, it's only at the end, a ratio to still invest. The result from the non-continued business was negative of historic reasons, consolidation, and that's the reason for it. And at the end, also here, part of the FX, please never forget is shown either on the financial -- finance result and some of it is directly linked to the equity. Please note that we have a balance differently calculated. We have a balance sheet sum of what is it, almost [ EUR 1.9 billion ]. We are reporting in euro. We are a Swiss company. So there is in the balance sheet intercompany financing, but on a stable basis. So there is no need for cash back and forth between Swiss francs and euro, euro and U.S. dollar, Swiss francs and U.S. dollar. And this are the implications. And if you look at IFRS, it usually says at the end of a certain quarter, the date of -- the FX of the date has to be taken, calculated and the result is partly then shown in the financial result and sometimes -- and partly booked, it depends on the position directly against the equity. So it's an up and down always. I can't change IFRS. That's how it is.

True.

But I'm happy to explain.

[Operator Instructions] Our next question comes from Beltran Palazuelo in DLTV.

Congratulations for, let's say, good results in difficult times. I have 4 questions. First one is regarding M&A. If you could give us, let's say, what things you're analyzing given the, let's say, the cash from the disposal, what type of opportunities you're analyzing? Second question is regarding interest rates. Your balance sheet well, has improved substantially. What is the expectations, let's say, for '25, '26? Interest rates have crunched and your balance sheet is strong. So I would like to see how interest rates are coming next year. Third question, seeing your results, I've noticed that you have repurchased Alpine Metal Tech. So if you could give us a good reasoning, why did you divest it to Mr. Tojner and now you repurchased it again. So it's -- clearly, there's a reason, but it's quite puzzling. And then my last question regarding, let's say, the max capacity in aerospace, if you could -- I know you gave the figure, but I would like to hear it again. What is, let's say, the maximum capacity in aerospace and what type of margins are you expecting?

Beltran, thank you very much. Michael here, I'll start, and thank you for your positive words. But I start with the question of Alpine Metal Tech. Yes, it was taken back, but it's a so-called asset for disposal. And that's also the reason we want to sell it completely. And also there are possibilities and to prepare for that one, and that's why we took over to sell. So that's why it's not a segment. It's not integrated in aerospace or aerostructures or need energy. And there's a good reason behind it, as I said, assets for disposal, so to be sold completely. So not having any minority anymore in our balance sheet, but to completely sell it, which with the present structure, to be fair, it is easier, hopefully. And hopefully, also we can then show quite in present time, a good result on that point. M&A, maybe a subsequent discussion with a bit different shade. Wow, all the turmoil in the industry, and I would like also to Kai to give additional answer then later on, on that point. The turmoil in the industry of aerostructures brings and our forecast is will bring even more investment opportunities on the market. Companies -- many companies don't have the possibility to shift so easily like we do. They don't have the setup with the different continents where they can, from one place to another one, optimize in the workload. They can't react so easily on ups and downs on build rates, pull rates, demand, strikes and whatever. They don't have this best cost manufacturing footprint countries. They do still have suffer from supply chain issues. And so therefore, we see already a massive growth of opportunities, not on tendering basis, but on tender basis, but on basis of, I would say, discussions on a bilateral basis or triggered by the OEM or also the Tier 1s would need to find a safe haven -- a safe harbor for those companies. So therefore, as I said, we have the divestiture of the e-mobility base closed 2 days ago. I said that the use of proceeds of the triple million euro amount is by 2/3 used for deleveraging, sorry, and 1/3 is for strategic CapEx, but also for M&A reserved. And this is also for a reason set because we see massive opportunities. Mark is in the meantime, responsible for M&A, a busy man looking at all those opportunities, and we think that, that could be quite interesting 2025. Which area, only there where it makes sense to integrate with our value chain and the capabilities we have. And with more also consent or agreements together with the OEMs in case of. This is for M&A. And maybe, Kai, you want before I then answer the other questions, add something on that point on the M&A because this is something which keeps us awake quite intensive also over the last weeks and months?

Yes. I mean with pleasure. So I can only repeat what you said, Michi. There are opportunities now in the market, and we expect that there will be some more coming up in the months to come. The reason behind it, it's pretty simple. A lot of the suppliers are struggling right now. The working capital is giving heavy pressure on many of our competitors, and we see that there will be opportunities to come. It's also obvious that we have the -- clearly the strategy to select if we do an M&A, I have to say. So there's definitely no need to do it. But if we do it, it should be 100% fit to the portfolio we have already now, and it should be definitely fit 100% into our strategy. This is what we are looking for. That's the strategy, and this is how we scan the market. And you asked about the capacity, the installed capacity of the current setup is, I would say, around EUR 1.2 billion, EUR 1.3 billion of sales. And as you have seen in our numbers, we are steadily increasing our margins by improving internally, first, our operation system; and second, the portfolio where we produce, which parts, and this is paying off and will again increase our margins in 2025. So I'm quite positive to see margins between 15% and 16% also next year for aerostructures.

Coming back to the last 2 questions, interest rates and also capacity, interest rates and financial result, we do have in the first 9 months financial result, which reflects a negative amount of EUR 39 million. This is high. But as I said, there is around -- not everything is cash-impacted. It's mostly -- not mostly, but a good portion, 1/3 is approximately FX impacted. So the cash interest is around EUR 25 million out of this amount, which is shown in the financial result. This will drop again also next year. Again, why? Because we do deleverage, as said, the interest rates are also reducing. And still in this amount, there is a high interest or negative financial result out of Brazil and also China, which we optimize constantly. And I guess the last step for optimizing those structure concerning the financing is done by the end of the year, which will only by that one drop the financial result by around -- by almost EUR 10 million, EUR 8 million. So therefore, expectation for next year is significantly lower than this year and the clear guidance we give them later on starting next year. But I would say, from the adjusted by the FX amount, another EUR 8 million less in 2025, sorry. Capacity, in aerostructures, our rule of thumb for Kai and me is always aerospace has a capacity of around EUR 1.4 billion, plus/minus. And that's something which is still stable. Slightly improving there and there. You saw it over the years, we increased this capacity from -- with not too much any more investments from EUR 1.2 billion to EUR 1.3 billion to EUR 1.4 billion on total sales. This is something which is still to be reflected. On the other hand, energy. Energy, we guided this year for clearly over EUR 600 million on total sales for -- on the sales, and that's the capacity, which we want to drive by another almost EUR 100 million, a bit less than EUR 700 million by next year on total sales, and this is the capacity we increased. EUR 600 million plus/minus, but not EUR 700 million yet, but almost in the direction of.

Ladies and gentlemen, we must conclude our Q&A session due to time limitation. I hand back to Mr. Pistauer for any closing remarks.

Thank you for attending. Thank you for also listening to our remarks to the industry. I hope you feel more secure than if we just announce high rates for 2025, which then later don't come. That's not us. Montana Aerospace has a clear strategy. We, I guess, perform over-proportional. Just think of it, if you look at what the market grew over the last years from now, just since 2021 in aerostructures in build rates to 2024, it grew only by around 20%. In the meantime, we grew by 220%. So this is our strategy and over-proportional concerning also the earnings and the EBITDA. This will be continued. And hopefully, you also agree on this strategy to be a bit more conservative concerning market expectations and make the homework yourself. That's what we do, and that's what we try to do best and what we work for with pleasure and sometimes also sleepless nights or early coffee like Kai right now. And hope to see and hear you in the next call for the preliminary results for 2024 and for the next guidance for 2025. Thank you very much from our side.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.