Montana Aerospace AG ($AERO)

Welcome to the Annual Results Call of 2025. It's another year with strong financial performance and a year in which we successfully divested the Energy segment, and thus became a focused aerospace company. It's my first earnings call as CFO of Montana Aerospace after taking over in January from Michael Pistauer. Because Kai cannot make it today, I'm joined by our CHRO, Vicky Welvaert; and as always, by Marc Vesely. Before we dive into the presentation, let me briefly remind you why Montana Aerospace is so well positioned as a pure-play aerostructure company following the divestment of the E-mobility segment in 2024 and the Energy segment in 2025. From the beginning of our journey, our ambition has been to become a game changer in the global aerospace industry, with deep vertical integration, multi-material competence and a global best cost country footprint. This combination gives us a competitive advantage in lead times and cost efficiency, flexibility, but also in ESG performance versus our peers. And on top, reduce complexity for our customers and give us a sustainable competitive advantage with attractive margin levels. Over the past years, we invested more than EUR 800 million anti-cyclically into our state-of-the-art best cost footprint facilities to support the industry ramp-up and the long-term perspectives of the aerospace industry. These investments have become fully operational now and underpin our scalable growth model. At the same time, our disciplined acquisitions have been complementary, where we still needed an integration in the supply chain and further strengthened our one-shop approach. With this background in mind, let us jump into the presentation that clearly demonstrates the strength of our focused strategy. Yes. As discussed, the successful divestiture of the Energy segment after a long process that actually started in 2023 has made us a pure aerospace player now with a very strong balance sheet going forward. IPO after the Energy segment this year will, on top, result in an earn-out of more than EUR 40 million and allow to close the ties between the two companies earlier than expected. It makes our equity story clean going forward, and with the divestiture, we also had the chance to convert another EUR 65 million of Belgian state financing into equity at ASCO without impacting Montana Aerospace shares. Our balance sheet is thereby now stronger than ever. We have achieved at the end of 2025 already a 0.8 net debt-to-EBITDA ratio, which will actually turn positive in 2026, and an equity level of 62.5%. This setup and the enhanced financial strength will allow us to capture M&A or also internal strategic opportunities in the aerospace market going forward. Let's now look a bit more in-depth into the results. 2025 was another year with double-digit sales growth despite the negative FX impact as most of our Aerostructures sales are in U.S. dollars. And with that growth, which was primarily in the Aerostructures segment driven by the build rate increase and further gains in the market share. With this growth, we were able to grow our EBITDA over proportionally using our fixed costs and asset base. We have achieved a 16.5% EBITDA margin and are on track, especially in the Aerostructures segment, to come to the 20% that we always communicated and work towards. And how do we do that? As discussed before, there are a few pillars, which are, let's say, the strength behind such sustainable figures. First, it's the integration that eliminates transport costs. It eliminates complexity, qualifications and quality checks and positions us as an attractive partner to the OEMs. On top, we have a local-to-local approach, primarily with investments and asset base in low-cost countries. And all of that gives us basically a competitive sustainable advantage versus many peers. The operating results, so the EBIT has improved by more than 72% versus last year. And the only caveat to the results that I would like to highlight right away are -- that is the financial result and thereby also net income, which was heavily impacted by the strong U.S. dollar rate. And the outcome of that is that in IFRS, we are required to evaluate our U.S. dollar intercompany loans despite the fact that they have not been paid back at the end of 2025 with then in place euro-U.S. dollar exchange rate, and that has led to losses of EUR 28 million, which are inside the financial results in 2025 versus EUR 18 million gains in '24, despite the fact that those -- neither the gains nor the losses this year have -- in 2025 had any cash impact on the company. On the cash flow side, this is a bit more complex with our path towards a pure aerostructure player, especially the investment cash flow was impacted by those transactions where we will dive into in a minute, but what I would first like to highlight, as you can see, the operating cash flow, which includes working capital changes has had a very solid growth of 42% to EUR 168 million compared to -- in 2025. So very strong operational performance that we have seen throughout the group. On the investing side, next to our, let's say, standard CapEx program, we have seen two special effects in 2025, adding up to EUR 81 million that you can see here in the, let's say, third bar of the upper graph. Those are the energy divestment, where we will see the cash inflow primarily in the year of 2026. And the second one was the final payment for the ASCO acquisition in the amount of EUR 30 million. On top, in '25, we have deleveraged by more than EUR 100 million over the year by, one, refinancing our loan and partially paying back the old loan for the next 5 plus 2 years, which gives financial stability for the company. And on top, as mentioned, by converting the profit certificates of EUR 65 million at ASCO into equity. If we come to the working capital, I'd like to highlight that this is a focused topic in Montana Aerospace for the last couple of years already, but we have become better and better at it. And thereby, at the end of '25, we have achieved the ratio of 30%, which is quite strong and where we were driving forward to, which doesn't mean we will not further work on it, but it's already a good, and for sure, sustainable level. Looking a bit into 2026, and we will go into more details of that on the next slide. We will potentially add a bit of metal into our inventories in order to secure our supply chain with the turmoil in the Middle East at the moment, but I want to highlight once more that with our integration in Montana, where we partially do chips recycling and casting in several sites, especially in Europe, we are much more independent than our peers, and thus less reliant on the external market. On the next page, we want to give you more confidence of how Montana Aerospace is positioned in regards to the Middle East crisis or any other macroeconomic challenge that may come up in the future. And we divided that into 4 pillars that may be a concern or that you may see as a concern. So first one is the material pricing. Raw material prices in Montana Aerospace are largely protected with our customers, and we can pass them forward in almost all of our contracts. So that means that the increase in metal costs that we see at the moment should not impact, or for sure, not materially impact our supply -- our results for the year 2026 or going forward. On the sourcing side, as just mentioned, we have chips recycling and own casting, and with the target of M&A or internal CapEx, we are further trying to integrate the supply chain backwards to be less dependent on the external market. On top, as I said, we have started to put a bit more inventory on the balance sheet in the recent weeks in order to respond to the Middle East crisis. From energy pricing resilience, there are 2 sides to this. So one is the energy that we purchase ourselves. One, we have largely hedged those in 2026 and partially '27 among our sites, and on top, we have learned from the '22 crisis here and have installed, especially in the Romanian side, substantial PV facilities in order to become less dependent on the external market. Second point is that we have in most of our -- in several of our contracts, CPI escalation clauses and therefore, can also pass price increases in that area onwards to our customers. And the last pillar is the demand side. For the moment, OEMs and the communication from the OEMs that they are still confident with their rates for 2026, but as you know, we have a safety buffer of around 10%, 15% versus the OEM rates in our planning and in our guidance. And that means that we feel still very secured with the current picture at this point in time. On this page, we see that the OEMs are growing, but much more in line with our own expectations and assumptions, and also guidance rather than the ambitions that are communicated from their end towards the market. So if you look at Airbus, for example, the last 2 years from '23 to '25 showing around 4% annual growth in the rates. On the Boeing side, '23 to '25, it's around 6% growth per year. And that is pretty much in line with our conservative approach of putting rates into our guidance. On top, I would like to highlight that you can see that Airbus is very strong and leads the semi-aisle market, while Boeing is strong on the wide-body market. So the Boeing sold 88 planes on the 787 versus Airbus 59 on the A350. But good or important to mention here is that Montana Aerospace is part of all platforms, and therefore, less agnostic to any change in a single platform that we could see. Before we come to the guidance, I'd like to highlight one more time that there are great opportunities that lie ahead of us in Montana Aerospace for the year '26 and going forward because as you can see on the left side, the supply chain towards the OEMs is still far too fragmented and the main reason basically why they cannot deliver according to their plans year after year. Montana Aerospace, we position ourselves as an integrated and reliable partner to the OEMs with our integration and approach that you can see on the right side. And thus, the logic conclusion is that we further integrate our supply chain where we see gaps or where things make sense from a geographical or supply chain perspective, either via M&A or strategic CapEx investments is supported by the OEMs. And as I said in the start, we clearly have a strong balance sheet for the moment that allows us to follow such attractive opportunities in the market or in our -- inside of our company. With that, I would like to jump to the guidance, which is particularly interesting for you, I believe. And I'm glad to say that we are very confident with the 2026 numbers, and I want to reconfirm that we see sales above EUR 1 billion for '26 as well as an EBITDA -- adjusted EBITDA of more than EUR 185 million and towards the end of the year, a net cash position. In terms of 2026, 2027, we also want to give a first outlook. So despite our conservative build rate assumptions and the conservative FX rate assumption that is above the current picture, but that obviously changes on a daily basis. We see further growth in our sales and in our market share to above EUR 1.1 billion in 2027 and to an EBITDA of more than EUR 210 million, which already comes very close with our -- to our 20% EBITDA margin target. And with that, I would like to open the M&A question round.

[Operator Instructions] The first question comes from the line of Josh Sullivan from Jones Trading.

So just, I know Montana has the 15% buffering guidance to OEM build rates. But have you seen any change in demand signals at this point from OEMs as it relates to Middle Eastern turmoil at this point?

Thanks, Josh, for the question. So as I said, for the moment, the OEMs are still reiterating their guidance for their build rates. And as I said, we still have the buffer. So we are less agnostic to that. The fact is that they, of course, sell to the Middle East companies. But if you look at the almost 10-year order book that they have, I think any company, including the big players in the Middle East will have to critically think if they delay their deliveries into future years or cancel them even because that will put them towards the end of the supply chain of the order book. And yes, then they are out of the, how to say, of the reordering of planes for a couple of years. And I don't think that's in anyone's interest.

And then with the balance sheet now at just 0.8x, you've got the Spirit reintegration, disruption in the Middle East and growing build rates at the OEMs here over the next couple of years. What does the M&A target market look like for you guys? And I guess, where are you comfortable taking that EBITDA leverage multiple to for acquisitions?

Yes. No. I mean, I think as we always read the rates, the M&A market, we are very active on that, and we have been very close in 2025 2x, but we have, first of all, a conservative approach on the pricing. So it clearly has to be accretive, and we have to see a value above the company that we purchase, I mean, an integration value above the company numbers that we purchased. And in addition, it has to fit into our supply chain and into our strategy. So those are the, I would say, two cornerstones of any M&A investment or also internal strategic investment before we go ahead. But if we see something in the market and we are ideally not in, let's say, in a bidding process, then for sure, we will pursue M&A that fits to our company.

The next question comes from the line of George Mcwhirter from Berenberg.

On the net debt, can you just walk through the bridge in 2026, touching on contributions from the loans from affiliated companies linked to the energy sale, the IPO earn-out, and also the level of underlying cash flow that you expect this year, please?

Yes. George, thanks for the question. Yes. So basically, we started out with the EUR 128 million end of 2025. We have seen, and I believe, published that we have already received EUR 61 million from the affiliated company transaction and expect a further double-digit number towards the end of the year. So that brings us already basically close to the net -- to a positive net debt or a net cash position actually. And from the free cash flow, I mean, that depends a bit on whether we will see any strategic investments, any M&A transaction, but clearly, we will not make a transaction that basically heavily harms our free cash flow. So it will be always in line with a still positive free cash flow that we project for the year.

And the double-digit amount, I think you mentioned that you expect towards the end of the year, is that a further contribution from the loans from affiliated companies? Or is that the...

No, it's a combination of loans and the earn-out, yes. Exactly.

Okay. Okay. That's helpful. And in terms of the phasing of the cash receipts from the loans from affiliated companies after 2026, what's the profile that you're expecting there?

I'm not -- can you repeat it? I'm not sure if I understood it correctly.

Sure. So I thought you're expecting more cash receipts from the loans from affiliated companies after 2026. Is that right?

Yes. So no, the vast majority we expect for '26. And yes, there could be still some final payments in 2027, although all the rates are -- or all the loans are secured with the stock and as well on market interest rates. So we are a bit agnostic to the payback because we receive well and good interest income from them, but yes, to reiterate, clearly, maturity in '26 and potentially something in '27.

Okay. That's helpful. And is there any guidance you can give on the absolute level of net debt that you expect to reach this year beyond the guidance that you put at net cash?

Not at this time, to be honest. Maybe we can give some more clarity on that in the upcoming quarterly calls, but at this time, yes, we reiterate the net cash positive position.

We now have a question from the line of Christian Bader from Zürcher Kantonalbank.

Thanks for the interesting presentation, and I have a couple of questions. The first one being, you mentioned that you are about to purchase additional raw materials or metals. I was just wondering which kind of magnitude of, let's say, inventory building we are talking about and by when are you going to do that?

Thank you, Christian, for the question. So I mean, that's just a bit, let's say, to pull forward some of the purchases that we anyhow would do in the year. So the magnitude is not substantial. We are talking about like a low double-digit million amount. So nothing that will completely change our balance sheet because, as I said, we have chips integration, so we don't need to purchase everything externally. So yes, so I would say a low double-digit amount, I would foresee at that point in time, quite low double digit.

Okay. And another question related to that. So can you confirm that you're not facing any delays or incremental cost for your metal procurement at this point or currently?

Well, not any -- that's the wrong -- probably the wrong wording is that we are protected on the customer side. So for example, the metal is -- for us is mostly a pass-through, but that's trading on different levels every day and the metal premium changes, for example, also with tariffs in the U.S. for the North American market. So we are -- the right conclusion is that we are not impacted on the result perspective and that we can pass those impacts through to the customers.

Okay. Then my next question relates to the disposal proceeds of the Energy segment. Originally, I thought that you receive everything by 2026. So -- and it seems that there is still something left in 2027. So how much is left then for 2027 in terms of these overall proceeds?

Yes. It's just some of the loans because also the Energy segment now in an independent state cannot pay back everything immediately. So they also have to look into their financing. And basically, that's why there could be a portion that's coming in '27. But that's the vast majority in '26, and potentially the full loans are repaid, but this, we will see in the course of the year.

All right. I see. And the last one for me, and then I go back into the queue, is you mentioned that you are on track to achieve this 20% EBITDA margin. So it would be helpful to tell us by when you are targeting this 20% EBITDA margin. Also, is this only for the Aerostructures segment? Or is this for the entire group?

Yes. It's short to midterm, especially for the Aerostructures segment. And short to midterm, I would see, yes, towards '27, very latest in '28, we will achieve that. Also, of course, keeping in mind that we have a conservative perspective on the build rates as well as the FX rates. So should that be more positive than our internal perspectives, it could be earlier.

Okay. And then last one for me on CapEx. Is there a CapEx guidance for this year, please?

I would say the, let's say, the standard CapEx that allow us to grow with the build rates and that cover our maintenance CapEx is in the range of the always communicated EUR 40 million to EUR 50 million. And then on top with the strong balance sheet position at the moment, we see, let's say, opportunities both internally to integrate further in the supply chain, which could be another EUR 10 million to EUR 20 million in strategic CapEx or on the M&A market, but that, that will be obviously an acquisition and not CapEx.

Okay. So the overall figure for CapEx is comparable to 2025?

Yes, comparable to 2025, although in '25, there's a small portion still of the Energy segment inside in the cash flow numbers. So yes, that portion obviously would go out anyhow. And that was another positive effect from the divestiture because we are not investing in the Energy segment, but purely in the Aerostructures now.

[Operator Instructions] We now have a follow-up question from the line of George Mcwhirter from Berenberg.

Just a question on your 2027 guidance in terms of the bridge between EBITDA and free cash flow. Do you mind just walking through that bridge? That would be helpful.

Thank you, George, for the question. Yes. So as always, with the strategic CapEx and potentially M&A, that's a bit difficult to give a final number for that. But basically, as we discussed, we are working towards our target of a 50% conversion from -- 50% conversion from EBITDA to free cash flow, and that without strategic projects should be achieved in '27 already.

And secondly, are you seeing any disruption on the supply chain so far from the Middle East complex?

As I said, not really. I mean we see, I don't know, like everyone else, increases in fuel prices and some of the energy costs, but no issue on the supply side there yet. And the same for metal, but metal with certain risks in the future, that's why we are working on securing the metal supply, the limited metal supply that we have for our company already now.

We have a follow-up question from the line of Josh Sullivan from Jones Trading.

Yes, I just wanted to touch on the defense market within the European theater. I mean what are you seeing as far as demand inbound as far as European aerostructure defense demand at this point?

Yes. So we are already engaged in the defense market, but it's also like the aerospace or aerostructure market, I would say, not super fast-moving market. So you need, in many cases, especially if you go to the airplanes, you also need the long qualifications. The process is not as fast as it may seem to the outset that the money is immediately invested. But for sure, we are in many discussions with different companies and big companies in that regard in also different countries in order to benefit from that upside. But as said, I mean, it will take some time, but we clearly see potential in that market.

[Operator Instructions] We have a follow-up question from the line of Christian Bader from Zürcher Kantonalbank.

First of all, Alpine Metal Tech, a new segment, I mean, I believe not all of us know much about it. So I mean, what's the kind of growth trajectory that we should model for this business?

Yes. So basically, it was always part or most of the time part of Montana Aerospace, just the sales figure was below 10% in the past. So it was not shown as a separate segment. And now it just achieved basically this 10% with a bit different profile than the Aerostructures segment from EBITDA margins and CapEx investments, so there are rarely any. And we also don't see there the growth that we see in the Energy -- in the aerospace Aerostructures segment. So basically, that's a segment that we see quite flat and the growth and the margin expansion comes from the Aerostructures segment. And just to amend, so basically, AMT is our -- provides internal automation and robotics to the company and to the Aerostructures segment. And that's, let's say, the strategic value behind having them in our group.

Okay. And a follow-up on your intercompany loan, which is in U.S. dollar-denominated, is the, let's say, the overall scope of this intercompany loan, does it remain flat? Or is it decreasing? Or what -- how should we think about it, please?

Yes. I mean, we are quite flexible on when to make a repayment within the group, but it's not planned to be enhanced substantially. So the leverage should stay the same, but obviously, if you compare 2024, where the exchange rate was 1.8, I think, and then 2025, where I think it was 1.15, 1.16 range, that big movement from the U.S. dollar at the end dates resulted in this, let's say, EUR 28 million noncash related losses in the finance result.

Okay. So this FX effect in the financial results will prevail if some currencies move, right?

But if the currency stays as it is, which is a bit lower than end of last year, then we would get a gain again like we have seen in 2024, but if it's flat, there wouldn't be any impact from those loans basically. And to reiterate, that's really a noncash impact, and you have the same with the assets that we have in, I don't know, U.S. dollar companies, but those are going directly through the balance sheet, while the IC loans, they have to go through P&L. So that's the only reason there from a technically IFRS standpoint, why we see that loss.

The next question comes from the line of Aymeric Pula from Kepler Cheuvreux.

I apologize if the question has already been asked, but I was cut while I was trying to lock the first question. So the first question is actually on the cash proceeds from the sale of Energy. I'm still very confused by the absolute amount that you expect to receive in total when taking into account what you received in 2025 and what you expect to receive in 2026, especially when I look at the cash flow, it seems that there are -- you discontinued some cash flow from the Energy. So the net proceeds seems very low. So I just wanted to check exactly how much you got both gross proceeds and net of some extra cash out and same for 2026, what's left to be received, just to be clear on the exact number of this disposal? And secondly, on the 2027 sales and EBITDA guidance, it looks to me that it was a bit of a cautionary cut compared to what you had previously assumed, and I just wanted to be clear also about what assumption change, what actually triggered that cautionary cut to the '27 guidance for sales and EBITDA on the aerospace business?

Thank you, Aymeric, for the question. So let's start with the '27 guidance question. Yes. So the main assumptions, I would say, that have changed is obviously the speed of the growth in the OEM build rates. They both have reiterated their numbers and delayed them to the years later, basically. And the second biggest aspect that I'd like to highlight here is that the FX rate has changed substantially compared to 1.5, 2 years ago. And since the Aerostructures sales are largely in U.S. dollars, and we have -- we are U.S. dollar long, we have a U.S. dollar long exposure, that is the second aspect that has led us to reiterate the guidance slightly. Yes, sorry, the first question with the cash proceeds. So overall, we expect a 3-digit million amount. And that, as said already, largely in 2026, potentially a small amount in '27, which is basically to reiterate what has been said there before.

But again, sorry to insist on that, but my impression that you said that you were selling the business at something around 5x EBITDA, which my calculation was around EUR 200 million proceeds, but when I look again at the cash flow from 2025, I'm struggling again, there's been some discontinuation effect and you paid an extra cash to the ASCO shareholders. So I'm just trying to reconcile some of the number and understand exactly how much you received in '25 and if the gross amount actually equals to EUR 200 million at the end, or if it's lower than was previously assumed.

Yes. So the above EUR 200 million is an enterprise value, of course. So that there's always a bridge towards the equity portion of that. But as said, I mean, what I would like to point out again, there is that with this transaction, which was very value accretive, because we could, also on top, avoid CapEx going forward in the amount of EUR 15 million -- EUR 20 million to EUR 30 million per year. And on top, we were able to transfer the EUR 65 million of profit certificates into equity. So in a total consideration from an enterprise perspective, we have seen -- or we see well above EUR 300 million from that divestiture.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Patrick Maurer for any closing remarks.

Yes. So thank you again for joining today's call. And we very much look forward to presenting the Q1 results in the beginning of May and talking to all of you again in the meantime. Have a good day. Bye-bye.