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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello to everybody. Good afternoon. Welcome to Montana Aerospace Q1 2022 Earnings Call. I'm happy to provide some, I guess, nice development of Montana Aerospace. I'm here together with my colleague, Head of M&A and Investor Relations, Marc Vesely. And after presentation, which we will guide through, we will later then be available for Q&A and happy to provide, hopefully, good answers to, I think, intensive questions.
Yes, Q1 presentation, within very turbulent times. I don't have to describe the situation we are right now within. And I guess, if you look at the page of our net sales and also adjusted EBITDA development, we can be proud of the development and upfront, we also guide for the full year to keep our guidance as provided during the annual report.
We had net sales of over 43.6% increased growth rate in comparison to last year. Most of the effect is out of what we see then later automotive e-mobility and also aerospace, where we provide constantly on a monthly basis more and more our large contracts on a fuel production. So definitely, I guess, a very far, very constant solid development in holding comparisons to other companies or our peers.
Adjusted EBITDA rose over proportionately. So we see an adjusted EBITDA of EUR 15.9 million. Still not at the level where we target into it. But on a monthly basis, on a better and higher scale, the 68.2% growth rate over proportionate growth in comparison to net sales in comparison to last year's first quarter 2021.
Let's step into some details of the segments. If you are all, I guess, aware, we, in the meantime, on a regular basis, also report segment reporting based on the 3 segments: Aerospace, e-Mobility and Energy. And if you look at the sales development, all segments are developing in the right direction, where there's a growth of more than 66.5 in percent in aerospace, mostly driven upfront by the large contracts, which are now gradually shown as a serial production. I'll come to that one later in detail.
E-Mobility, the ramp-up is more or less complete. So what we hear right now is optimizing the EBITDA margin. But with EUR 45 million on sales, it's 71% up in comparison to 2021. Mostly based the growth on these large contracts for battery cases and equipment within e-Mobility for German speaking or German-situated OEMs, mostly situated also in the prime market.
Energy, a bit weaker to be frank than expected, but still a growth, a solid growth of 22.2% in comparison to last year's first quarter. Why weaker?. What you can see also later on slightly in the result that we have 4 entities America-situated, Europe-situated, India and China and mostly China had faced again some serious lockdowns, and this was then also that the order intake for the first quarter was weak due to lockdowns of our customers upfront the statement for the second quarter within Energy, very solid order intake. So we think that we can take a good advantage of the, I would say, orders, which came in, in April already into Q2 2022. And then you should see also a slightly higher growth rates again also in Energy.
If you look on a quarterly basis for the last year and also for the last year and also for the first quarter of 2022, we see in all 3 segments, besides, as I said, in energy, a constant growth in sales. And this is also something we always claimed. We think that we are a game-changer within the industry, mainly based on large contracts. And those contracts -- and also, I would say the ramp-up of the build rates, for instance, in Aerospace. So the e-Mobility, the large drive from the market for e-Mobility solutions, and this drives us on a constant basis.
Aerospace, EUR 54 million in the first quarter 2021 and then gradually up to a level of around EUR 90 million. Short guidance also how -- what to expect for the next months. Here, we see for the first months, for instance, for total Aerospace in April, sales volume of over EUR 100 million, first time ever. So also here, we expect a constant growth and the most growth is coming out of Aerospace segment in 2022 and also for the consecutive months.
If we look in the details of the financials, here, we have discussed shortly the net sales over proportional adjusted EBITDA. CapEx spend on a level of around half of what we have seen in 2021. We guide this year for around maximum of EUR 90 million on CapEx, I would say, maximum of EUR 90 million, making very good progress with the last large CapEx program in Romania, the so-called SED Heavypress for European customers. Therefore, we don't think that we will end up at completely 90%, but below that amount for the total year.
Trade working capital and total assets is already reflecting the ASCO acquisition. As you are aware, we closed the ASCO transaction on the 31st of March 2022. So the balance sheet already includes the numbers of ASCO balance sheet. On the other hand, the P&L will reflect the ASCO acquisition only April onwards. And also the free cash flow, of course, is massively impacted by the acquisition of ASCO. We come to that one later.
Just to give you a short number concerning details of trade working capital. As you know, we have a very active strategic view on the inventory of the group. We think that with all the shortages in the supply chain, the threat in the supply chain, transportation issues, enough inventory is crucial to outperform within the different segments. So we have out of the EUR 409 million of trade working capital, EUR 342 million are inventory only. So here, it's still a very high amount of strategic mostly raw material to supply also in the future the growth of Montana Aerospace.
Let's deep dive into some of the key KPIs, discuss net sales and also adjusted EBITDA. The adjustment is mostly the so-called MSOP, the management share option program with an adjustment, which is split to 4 years period. And therefore, it's more or less a constant adjustment besides that one more or less no adjustments were effectuated. Net income reflects the positive development of the EBITDA. And therefore, we had again in the direction of coming back again like 2019 and '18 and the years before, to a positive net income on the total P&L of Montana Aerospace gradually quarter by quarter.
Details on segments and EBITDA splits by segments. The main driver of the EBITDA growth is in the first quarter, e-Mobility in the aerospace. Absolute numbers, Aerospace, e-Mobility concerning the percentage growth, so the growth rate. Even so I have to say that e-Mobility is already impacted by the high inflationary costs and energy. I guess, something we will also later on discuss in detail concerning us in the Q&A.
So there would be even more potential concern with, I would say, more grid and more stable development of the energy prices. But I guess all in all, a very positive development of the EBITDA margin within e-Mobility. Aerospace, still a lot of costs due to the ramp-up in the places where we are back, I would say, to reduce normal concerning utilization of the old plants like in the U.S. or one in Romania. We are back at the level of around 25% margin level on a quarterly basis. But still those plans, which are in steep ramp-up phase like the BioMar Airport plants like the Vietnam plant, those are definitely not at this level yet, but on a constant level, increasing the EBITDA level. So also here, we see a positive trend concerning EBITDA level within Aerospace.
Short walk into energy. Energy, as said, had not only suffered slightly from Chinese lockdowns and the strict to COVID policy we face in China, but also from a delay of inflationary costs to customers. Just to give you a bit of a detailed number on that point, only in the Austrian or European entity we suffered on a monthly basis, 600,000 of additional energy costs in comparison to our, I would say, average price we have here for the guidance of 2022. We will be able to pass this through to our customers. But if energy is a project-based business, there is usually a delay of around half a year.
We started price increases in the fourth quarter 2021. So the price increases will show their effect in the second quarter of 2022 onwards. And then we should see also here again to come to, I would say, normal rate of EBITDA. And then hopefully for the certain fourth quarter was an increase in the EBITDA percentage in comparison to what we saw in 2021.
The leverage of percentages, and let's go into some more operational KPIs. Production performance in line with the sales plus/minus, so over 40%. Personnel expenses at the level of 34%, slightly underproportional but still take into consideration that we do as we have the steep increase in the ramp-up and also in the production rates and also in the, I would say, the sales.
We do have upfront to higher around half year, staff and engage them before they show them the operational skills on a daily basis. And have them there, I would say more or less effect in the sales. But still, personnel cost is in line with our expectation, with our budgets. And on the other hand, under-proportionate development and this under-proportionate development should increase concerning on the proportional ratio also for the next quarters from now.
Other operating expenses, highly impacted by freight and energy costs. Just to give you an idea, in comparison to last year's energy costs, they were 3x higher this quarter in comparison to what we saw in the first quarter 2021. A bit detail on that point, we had around EUR 70 million on Energy costs for the total year 2021, shown in our annual report. This first quarter and the whole year, we had slightly more than EUR 10 million on energy costs to account for. This is mostly the driver of the operating expenses.
The other major driver is freight. Here plus/minus the same, I would say, impact. They doubled in comparison to what we saw in the first quarter 2021. And even so most of it, I would say the majority of it, we can pass through to our customers. Of course, they show the impact in the operating expenses.
Net debt reflects the ASCO acquisition mostly and also the strategic increase of the inventory. Same debt, we think that we have reached a good level of inventory now. So there is at this level, no further increase right now planned. But however, as long as there are this, I would say, very uneasy situation concerning supply chain on raw material and unstable situation on the worldwide market, we would like to keep this high inventory for security and also for materializing on that one concerning market share.
Within that net debt position, there is still a vendor loan, which is much less shifted into equity by 7th April 2022. So the net debt guidance is to be reduced by the next quarters from now. Number of employees already reflect the ASCO acquisition. You see the organic growth is in comparison to 2021 slight. The majority of the growth from 5,500 to more than 6,800 employees is impacted by the acquisition of ASCO. ASCO for around 1,100 people worldwide in the 4 sites they have.
Trade working capital, as said, the majority -- the driver for the trade working capital, which also includes the numbers of ASCO already, are the inventories and here mostly the raw material. We think that to be able to provide even when other competitors are not able to deliver. We have shortages in all the different layers of the supply chain. It's a strategic advantage and not only short term but mostly midterm, we think that we can materialize it -- on it. We had a discussion for instance, 2 weeks ago with Boeing. And they stress the fact once again how important it is to deliver and to jump in and how they search for strategic partners on this point.
Balance sheet structure still stable, but already including, of course, the acquisition of the ASCO transaction. Coming to the cash flow. The operating cash flow negative impacted also by the increase of trade working capital, including also the ASCO transaction. Not showing any sales or EBITDA, of course, as the P&L will show its effect only from April 2022 onwards. But if you look at the simplified operating cash flow, as I would say, KPI to see how the performance is showing on cash flow development. This is in line with definitely -- even more than in line with the development of the EBITDA with an increase of more than EUR 11.8 million, while tripling in comparison to what we saw in the first quarter 2021.
CapEx, as I said, reduced in comparison to last year, where we had around EUR 120 million on CapEx cash out for the total year. So this year, we guided, we said with around less than -- slightly less than EUR 90 million. All the programs are good progress, and I would say, slightly ahead of our internal plans.
ASCO, the largest transaction Montana Aerospace ever did. So therefore, there is a key to have the PMI process performed as fast as possible into already and to have to set up in the Aerospace business as fast as possible transported to the OEMs. This is ongoing. And we'll rely on it, that we have the capabilities to position us together is the #1 aerostructure supplier concerning quality costs, reliability and also innovation. Having a very good, I would say, first weeks of PMI process and also, I would say, discussions with the customers with Airbus, Boeing, Lockheed Martin, you name them.
Here, again, the ASCO is the specialist for large moving parts of the airplanes and I would say so-called slaps and flats mechanisms for the plane and also large parts for of titanium and also aluminum like was similar topics. And here, the PMI process concentrates on providing instead of third-party parts and supply chain to be provided by the Montana Aerospace supply chain. And therefore, we think that we will have a good progress concerning the synergies and to outperform our own expectation, which is the goal of having ASCO back on a 15% EBITDA margin at a level of around EUR 300 million. And then on top of the synergy potential out of the group should be part of, I would say, difficult and complete consideration.
Saying that, knowing that we are living in very turbulent times, I don't have to tell you, on a daily basis, the new shocks, new information, new whatever political statements. We still keep to our guidance and think, therefore, I would like to repeat the guidance of what we showed within the annual presentation of the numbers of 2021. And here they are.
So we stick to a guidance of EUR 1.1 billion in case of -- EUR 1.1 billion in sales, which is more than -- 35% more than what we have seen in 2021. We see that most of it is organic growth and here mostly, I would say, from the new packages and also from the resurrection of the ramp-up of the build rates at different lanes and platforms. And the most part of the absolute numbers in addition to what we have seen, say, 2021 shall be shown by the Aerospace segment with slightly more than EUR 500 million in total sales expected for 2021.
Of course, the major driver for it is in Aerospace also the build rates. The build rates at the different platforms, once again, this is our expectation which is shown here of the build rate development. Even so we know, for instance, at the A320, there's a clear plan to show more than -- show a build rate of 65 by mid-summer 2023. Our Airbus targets a build rate of 65 per month for the A320 family by mid-2023 and even targets 75 build rate on a monthly basis by 2025. We still stick to financial guidance on a lower keeping rate because we still think that there will be tough to increase the build rates with the speed with all the implications the worldwide, very fragmented supply chains show. And if there will be a higher build rate, we are happy to provide or to jump in if other suppliers are not able to provide in the speed, which is asked for by the OEMs.
Again, slide, which we also more or less updated in comparison to what we showed in the first -- in the annual report presentation. The crisis in Ukraine, once again, we have minimal risk concerning direct sales with Russia or Ukraine. We showed around 2 million sales for Russia in the first quarter 2022. Precrisis, rated for the total year, we had in the budget around EUR 8 million or contracts of around EUR 8 million also in our sales pipeline. EUR 4.5 million of it is already prepaid, but the rest is at risk, which is, I would say, not material.
On the other hand, they don't have any direct supply. Of course, there are indirect risk which we have to manage on a daily basis. What are they? Once again, the impact on the raw material prices, even we see that some of the prices already decreased again, like, for instance, aluminum, which went down from 3,700 on a peak time a couple of weeks ago to around 3,000 per ton back right now. Or the impacts on the energy, which we think that we have already a very good number within our calculations for the guidance 2022 and already calculated with this amount during our budgeting and guidance phase.
Therefore, once again, over here, something I want to clearly state, we don't have any offices or facilities in Russia or Ukraine or countries impacted by the embargo. So therefore, the direct risk is definitely limited to what we see on this upper part of this page.
The so that, we would like to close the, I would say, the short presentation for the Q1 numbers with the rest of the guidance for 2022. As said, a cash out for CapEx lower than EUR 90 million for this year is to be expected, a good sales increase of over 45% and also the adjusted EBITDA. We keep to the guidance, as I said, in the annual presentation. And therefore, our clear goal is this year execution, execution of the large contracts we have, execution of the demand, the POs and the higher build rates.
We see in the market of the integration of ASCO. And hopefully, with the second quarter then onwards, mid-second quarter also with the integration of Samarco. With then the ongoing massive CapEx reduction and therefore, clear goal for 2023, as already said in the presentation of the full year report is of a positive free cash flow and the over proportional growth on EBITDA was around 1.4 million -- EUR 1.4 billion on sales by 2023.
Thank you very much for attending, I would say, the short presentation on the Q1 numbers. And now I would like to hand over to you and your questions.
[Operator Instructions] And the first question is from the line of Richard Frei from ZKB.
I have 2 on ASCO. The first one is regarding the synergy potential. I'm quite curious to get some more color on this if it is possible by this time. And then the second one, regarding the goals of profitability on EBITDA levels of 50% margin and sales, EUR 300 million. Where do we need to put that on the time line? Is it rather '24 into '25 or even earlier?
Richard, thank you very much for your questions. Yes, I'm happy to answer those. I'll start with the second one, the EUR 300 million on sales, depending on the build rates, but with our assumption of the build rates around '24. So of course, if there's a large, I would say, impact to the sales from Airbus build rates to ASCO. Just to give you a rough guidance on that point, around 65% of the sales of ASCO is based on Airbus, build rates at Airbus platforms.
So of course, if they really raise faster or like the announcements, the build rates, then we would see definitely '24, the EUR 300 million within the sales of ASCO. Concerning synergies, yes, ASCO on a stand-alone basis as it is, with the supply chain as it is right now, it's good for around 15% of EBITDA margin. It's also something they had in the past before they, I would say, the COVID crisis and the reduced build rates of the last 2 years. The synergies, on the other hand, we just had today in the morning, our weekly steering committee, steering topic concerning PMI process seem to be higher than what we expected, and we expected around EUR 50 million on additional synergies on a yearly basis. Then also by 2024 onwards.
So now calculating roughly EUR 300 million, 15% is EUR 45 million EBITDA plus around EUR 50 million minimum on synergies with EUR 60 million, which is then reflecting around 20% EBITDA.
The next question is from the line of Virginia Montorsi from Bank of America.
I actually have 3. The first one would be on EBITDA for your Energy business. Could you give us a little bit more color on your Chinese market and the challenges that you've highlighted there? That would be my first question. Second question would be on financial charges for full year 2022. How should we think about those? And the third one would be a very quick, could you just confirm, have I understood correctly that some of your plans are already bringing 25% margin for Aerospace like the U.S. ones?
Virginia, yes. I start in the same order like with Richard's questions, with the last one. Yes, you heard correctly. Those plants, which are right now back, I would say, decent utilization like the U.S. plant, we are back to around 25% EBITDA margin. So therefore, we have the confidence to bring also back the EBITDA margins or bring the EBITDA margins of the other companies to the good level, a good level of over 20%. Constantly with the would say, the increase of utilization and the ramp-up, which is right now taking place there.
Concerning the financial target of financing for 2022, we have -- the net debt is quite, I would say, stable. There is some revolvers within the so-called commissioner nodes in those revolvers. So on a constant basis, revolved or renewed. They're right now in the process of being renewed, but we don't see any implications that there should not be renewed. So a stable net debt position by the -- excuse me, stable debt position by the year's end with changes of interest rates. As the interest rates, most of the promissory notes are based on the fixed interest rate.
Concerning the cash position. On the other hand, as I said, it's mostly impacted by also the acquisition of ASCO. And this will -- should show for the next quarters, a reduction based mostly on the shift of the vendor loan into equity, which was effectuated by the 7th of April 2022. And last topic, energy. Yes, right. We are not happy with the EBITDA margin of 3% as we saw it in the year 2021.
We are also not definitely happy with the EBITDA margin like we have seen in the first quarter, which is 1 point something or 1.9, which is definitely underperforming, I would say. But as I said, there is -- we see it in the order books and also in the contracts already that our price increases are there. Therefore, we think that we will come back to the at least 3% within the next quarters from now on.
And yes, we still target to come to a gradually in 2025 to around 8% -- 7% to 8% EBITDA margin in Energy business. Please always take into consideration Energy business is large in sales. There's a lot of material implied with copper, but it's very low consuming capital employed. There's only a capital employed within the business of around EUR 50 million. But still, therefore, I would say, 7% to 8% EBITDA margin would show them a good return on this capital employed.
[Operator Instructions] The next question is from the line of Ross Law from Berenberg.
First one is actually a follow-up to Richard's question on ASCO. Just wondering how important volume and operating leverage is to bring that ASCO business up to a 15% margin. So do you need to achieve EUR 300 million of sales to this? Or is it possible to achieve that sort of profitability on a lower revenue base. That's my first one.
Yes. It won't be -- with build rate of what we have seen in 2021, it's not possible. Fair enough, right, the second quarter -- excuse me, second half of 2021 at ASCO was positive on EBITDA, but not at the level of 15%. The first quarter -- first half of 2021 was still negative on EBITDA. Here you see that the slight improvement of build rates already make a big difference if it's 100% aerospace business there.
I would say that the level of [indiscernible] what we see -- so for this year, we can [indiscernible] on a stand-alone basis with a double amount of positive EBITDA, but also a high BMI cost as we shift. As we said, it took a good portion of the complete supplies they have into our planes. And this is also then impacted by high costs. Therefore, we calculate consolidated level, nonadjusted on, I would say, 0 for this year.
The level of what is needed for having this 15%, I think that we should see the 15% plus/minus next year 2023. Again, based on the build rates we have, which would then show a level of around EUR 240 million, EUR 250 million, EUR 30 million to EUR 50 million on sales.
Okay. Great. Second one, just on orders. So obviously, you had a pretty decent order intake to date. But you've also flagged that you're working on several contracts currently. Can you give us some detail about those discussions? So potential size of these contracts, which market, which program, which customer when we could see those flowing through the P&L. Yes, any detail would be helpful.
Yes, I'd like to also answer this question because it's very important for us since we are working on it on a steadily basis. We would also like to publish a bit more concerning the contracted sales, and we will try to publish this once again or again then on a regular basis. But please take into consideration, now with the, I would say, daily changes of the build rate views of the OEMs, it's not easy to calculate. So we wait a bit for a more stable basis on that point. But however, we had an order to bill ratio in the first quarter of around 1.25. So also positive concerning the development here. We are working on large contracts and to give you a bit definite year of what they show that there's some 100 million on the contracted sales for the next 5, 6, 7 years. It's mostly based -- it's mostly Airbus-based business.
Okay. Great. And then just one final one before I pass it back, on M&A. Can you give us a quick update on where you are with the potential opportunities you've been looking at recently and when they might look to move on that.
There's -- this is a clear statement also in this regard. Good progress both of the -- we have look at some of the, I would say, entities. We had discussion, as you know, with potential targets, not only for a month, but for many quarters and sometimes years. It's more a partnership and then gradually take over plants, which you elaborate with those companies also mostly in consideration and coordination with the OEMs or the customers.
No M&A cash out to be expected in 2022. We would like to sign a transaction in the size of, I would say, mid-sized company at the second quarter -- second half of 2022. Here, I would say the progress is solid. But no cash out result having the funding on our own means, which means out of our free cash flow, which we think that we can generate in 2023.
So there are no further questions at this time. And I would like to hand back to Michael Pistauer for closing comments.
Yes. Thank you very much for attending. As you all know, we are always ready and hopefully, also available for further questions. If you have some detailed questions, please directly contact us. And maybe the last statement is last week, I have been in the U.S. I flew over Denver. After night flying, I was on the Denver Airport and the smiles, why? Because I've never seen such a crowded airport in my whole life. So you see that once there is the possibilities to travel, people will travel and do travel, and this gives us the big confidence in the future of not only the industry but also of Montana Aerospace. Thank you very much.