Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Avio full-year 2023 results conference call. As a reminder, all participants are on listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing Star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Giulio Ranzo, CEO. Please go ahead, sir.
Good afternoon. Good afternoon to you all, and thank you for joining the fiscal year 2023 results call. I am here, traditionally, with Alessandro Agosti, our CFO, and also with Nevio Quattrin, who is our new head of investor relations, and each of you will have a chance maybe to follow up with him, if and when you need it. He has recently joined and will be a point of contact, going forward. So let's go to Page 3. We have our agenda. As usual, we provide to you some highlights on the results of fiscal year 2023. Then Alessandro will go over the financials, and I will come back with some views on the outlook and opportunities. On Page 4, 2023 ended in line with our guidance, with record-breaking intakes and therefore net order backlog and an improved net income.
So in essence, what happened during the year is that the net order backlog reached a record high in the company history with over EUR 1.3 billion. In parallel, we worked heavily on the Vega C return-to-flight program, which is now fully on track. So as you may recall, we had to do work to redesign the nozzle of the second stage Zefiro 40. The new nozzle design has been approved. It has now been manufactured, and we are targeting for a static firing test on ground within the months of May and June. This is to secure a Vega C flight by the end of the year 2024, as it was previously announced. In parallel, Ariane 6 should have its maiden flight within June-July, as it was announced by ESA, Ariane Group, and CNES, combined. So that's also very important in March.
You know, it will mark an important milestone also for our future. Then we are working on the new technology development programs, which we have kicked off within 2023, and they are now on track towards the 2026 goals as they are supported, as you know, by the Next Generation EU funds. So they have a hard deadline by 2026, and so we are aggressively working to have them completed on track by that date. In the meantime, we have been positively surprised by a substantial growth in the Defense Propulsion segment, higher production volumes, more order backlog. So all positives from this point of view. The result of the year was an improvement in income, which exceeded expectation.
Based on that, we have proposed to come back to a dividend and to do an additional buyback program to reach the maximum of the buyback that we can possibly do, also recognizing the current levels of the stock value. On Page 5, we have a summary of the main results. So as you can see, the backlog, it's almost 30% more, what it was last year, so very substantial, 35% more. So a very substantial increase in order backlog, which means a lot of visibility over the future. You know, we were on a guidance between EUR 1.1 million and EUR 1.2 million, and so we went way, way above that level. Revenues were slightly less than last year but well within the guidance. And EBITDA reported also fell within the expected guidance interval. Same for the adjusted EBITDA.
The net income is better than expected. Why so? For two main reasons. One, because we were able to spread the depreciation on a longer period of time and therefore free the net income from the higher impact of the depreciation. And also because we had a very positive result from a financial standpoint. So we were able to use the available cash to generate positive interest rates, and that has obviously contributed to a better bottom line. The net financial position remained extremely high. That is also largely due to the accumulation of cash advances on new customer contracts. So the accumulation of so much backlog also came along with a lot of cash advances, which have fueled a very healthy net financial position. Yet maybe one warning on that, the cash position is to be used to support suppliers in the production phase.
So now our task is to use a good part of this cash to feed downstream our supply chain and make sure that we start the conversion from backlog to revenues and profits. So moving to Page 6, first and foremost, Vega C return-to-flight, which is well on track, for the end of fiscal year 2024. As I said before, you may recall that we have had a problem on the second stage Zefiro 40 due to the fact that we can no longer use a Ukrainian component that we used to have, and we were forced then to switch supplier to a French one. And therefore, we had to redesign partly the second stage motor to take into account the use of this sophisticated component, which is a slightly different material, not exactly identical.
Therefore now we have to retest the motor with the use of this particular carbon-carbon nozzle throat insert that you see here on the right side of the page. But as you can see, the design has been approved. The parts are already manufactured, and so we are preparing the test facility to conduct a static firing test on ground between May and June to secure then the flight by year end. Between now and September, October, there will also be a second static firing test for verification of the good design. But I would say that the test we are conducting in June will be very telling from this point of view. On Page 7, I mean 6. Ariane 6 maiden flight is finally coming, long awaited.
So now it has been announced by ESA to occur between mid-June and end of July. This follows a number of very important milestones achieved by Ariane Group, in particular the successful completion of the long-duration hot firing test, of which you see a photo on the bottom left part of the page, and also the physical transfer of the flight items of the launcher to the launch site. You see a picture of the ship that has actually moved the parts recently to the assembly facility, which you see in the bottom right side of the page. So the one launcher that will fly between June and July is currently being assembled and will be on the path very soon. So we will follow the news flow from Ariane Group and ESA.
If you follow the ESA news, you can very much see, you know, how close they are to the maiden flight. On Page 8, we have worked hard this year on preparing for the new P160C booster, which is an evolution, an upgrade with respect to the P120 first stage that you may recall, will equip both Ariane 6 and Vega C starting from 2026. It's a, let's say, an upgraded version of P120 with more propellant insides, therefore delivering more thrust for both Ariane 6 and Vega C, therefore providing more payload performance to both Ariane 6 and Vega C and making both core products very competitive. What you see in this page is already the manufacturing of the first item, which has now completed the so-called critical design review very recently.
Therefore now we are preparing the first item to go for a static firing test, which will occur sometime this year in French Guiana at our test facility in French Guiana after, of course, the completion of the manufacturing cycle. If I go to Page 9 , we report progress on the Vega E program, which will be the successor of Vega C, featuring some 25% more payload performance. As you know, Vega E is intended as a further upgrade to Vega C to capture an even wider part of the market.
What we have done this year on Vega E, that is, in my mind, remarkable is that we have completed all the wind tunnel testing, as you can see from the photos here, and we have completed the second round of 25 tests on the upper stage, liquid oxygen and methane engine M10, of which you see a page here. During the summer, you may recall, we have reported a successful result of extensive testing on M10. And so this is very important because these are the core elements of the new rocket that are slowly coming together. There was one part missing in all this story, which was the launch pad. So where would we launch Vega E from?
So in November, you may recall that we have been assigned the so-called ZL3 launch zone in French Guiana, which was the former Ariane 5 launch pad that has been essentially discontinued at the end of the Ariane 5 operating life. And so now it will be repurposed to serve as the launch pad for Vega E. So that's very important. Now we have all the parts coming together, the rocket being designed, and then now we also start the activities to repurpose the launch pad. And we shall be ready for that anywhere between 2026 and 2027. On page 10, another important evolution on Space Rider. You know, Space Rider is our innovative spaceplane, which the European Space Agency has contracted with us for development, with us and Thales Alenia Space.
We are developing this very peculiar spaceplane, which will be launched with Vega C, and will have the capability to fly in orbit for a few months and then reenter atmosphere and land on an airstrip on ground. Now this project has entered into an execution phase following the positive critical design review. Now all main items have been manufactured there and are undergoing so far the so-called hardware-in-the-loop test campaign, which means practically that we take all of the hardware as if we were flying, and we simulate flying missions to see that in operating conditions, each part will fly. So it's very interesting because in Colleferro, we have built a simulation laboratory where we can test each and every part of the vehicle. And then together with Thales Alenia, we will obviously test simulate the in-flight performance before launching it to space.
Very quickly on Page 11, initial progress has been made also on the so-called technological development projects, all of which are funded by the Next Generation EU fund. This covers lots of different areas. First and foremost, the so-called space transportation system for the European Space Agency. It's a concept to develop an in-flight demonstrator of our liquid oxygen methane propulsion technologies. This will take place in flights between 2025 and 2026. So far we are preparing the propulsion systems for that to happen. So we are very. You can see some pictures here of the engine parts that will actually fly. The thrust engine for the European Space Agency is a concept to develop a larger liquid oxygen and methane engine, six times bigger than the one we're making now for Vega E.
We have successfully tested the subscale preburner and the combustion chamber. So we are very happy with that. It's an initial part of the development process, but quite happy about that. For the Italian Space Agency, we are developing a new orbital engine. Also in this case, you know, initial 3D printing and manufacturing has occurred on the different parts, and we are preparing for a first ground test sometime this year. In parallel, we have also started with Thales Alenia the development of the in-orbit servicing module that will equip Vega C going forward. And also this is an interesting application that we look at with great interest. On Page 12, as I said, a continued positive surprise from defense propulsion. In this page, we report the evolution of the propulsion net order backlog in defense propulsion, and on the right side, the production volumes.
So you can see that in the course of the last five years, we have observed a very substantial growth in the demand, which is evident from the growth in net order backlog. And in the meantime, we have gone back to production volumes that are more than 3x what we used to manufacture just in 2018. So as you may recall, we have not discussed much about this business line because this was something like 3% of our revenues. Now this is coming back as a very relevant part of the business. And it used to be like that. So if I go back to the early 2000s, this was a very important business line. We have a production capacity that far exceeds what we are manufacturing right now.
We are very happy to come back to a more balanced mix between defense and space. So we will talk more about that in the coming sessions. With this, I would leave you to Alessandro to go over the financials of 2023.
Thank you, Giulio. Good evening, everybody. Shall we move to Page 14? We reported the backlog. As commented before by Giulio, backlog reached a record in the company history in 2023 of EUR 1.4 billion. That means it's more than 4x the 2023 revenue, thus providing strong visibility in the medium- term. The record high backlog is the result of new contract order intakes of EUR 0.7 billion, which is another record in the company history, which is mainly related to technology development project for about EUR 0.4 billion, basically for in-flight demonstrator, High Thrust Engine , Multi-Purpose G reen Engine.
Then defense propulsion intakes, as commented before, reached more than EUR 100 million in order intakes, basically for CAMM-ER and Aster. And then we had more than EUR 100 million each for P120C and Vega C and Space Rider. In terms of breakdown by line of business, the EUR 1.4 billion backlog accounts for 50% for Vega and 20% for defense propulsion in the light of the increase that we, Giulio commented right before. 60% of backlog is for production activities, and 40% is for development activities. On Page 15, we reported net revenues evolution in the last two years, considering the multi-year business cycle of our work in progress. In 2023, the production revenue were lower than 2022, basically for slowdown in production for Vega C due to return to flight activity and P120 awaiting for the maiden flight of Ariane 6 in June, July 2024.
A positive contribution in 2023 compared to 2022 was basically due to technology development project and defense propulsion activities commented before. In terms of breakdown by activity, production activity accounted for 60% of revenue in line with 2022 and development activity for 40%. On page 16, we reported the main financial result of the 2023 compared to previous year. Slightly lower revenue, -5%, was a result of lower Vega C production and P120, offset by a significant increase in technology development project and defense propulsion. EBITDA was substantially in line with previous year for the combined effect of lower energy cost and lower utilization rate of production facilities for slowdown of launches production activities as commented before. Non-recurring costs mainly related to Vega C return to fly and exploration of new potential business as, as we will comment ahead of this, presentation.
Positive effect on EBIT were on compared to EBITDA is also driven by lower depreciation following the review of economic usable life of certain production assets in connection with the phase out of Ariane 5 and phase in of Ariane 6, and the phase out of Vega and phase in of Vega C occurred basically during the year. In terms of net result, you can see that net result is EUR 6.6 million. It's higher than EBIT reported of EUR 5.2 million, basically for the positive contribution of financial incomes and neutral tax burden tax to the deferred tax assets. On Page 17, we report sources and uses. As you know, typically our working capital is structurally negative thanks to cash advances, particularly that we obtain on order intakes during the year.
Decrease in provision is mainly related to the extraordinary cost of Vega C return to fly activities, net of European Space Agency compensation, and for the execution of future programs provided for in the previous year, 2022. Increase in fixed assets is mainly related to CapEx of the year, basically for Vega cadence increase, technological innovation projects, artificial intelligence, and development of new launches of the Vega family, net of depreciation of the year. Net cash position is in line with 2022, and increase in equities is basically as a result of net income of 2023. On Page 18, we reported the bridge of the net cash position between 2022 and 2023.
You can see the cash was cash generated by EBITDA reported and advance from orders intake within the working capital was substantially balanced by the CapEx that sustained in the year for about EUR 38 million. So we landed to a net cash position in line with end of 2023, in line of 2022. On Page 19, we reported the quarterly evolution of EBITDA adjusted and net cash position, which is EBITDA adjusted is typically concentrated in the last quarter of the year, and this was the same as the previous couple of years.
On Page 20, finally, we reported that in light of the robust net income of 2020, this morning, the Board of Directors proposed to the annual shareholders meeting called on the 30th, end of April a capital return in terms of dividend distribution of EUR 6 million, which a dividend yield of 2.55%, and a new share buyback program for an amount of about EUR 5 million. Share buyback program started in 2019, but it didn't reach the maximum level allowed by Italian Civil Code. So at the end of the day, the total capital return proposed by the board of directors accounts for almost EUR 11 million for this year. I leave back the floor to Giulio for outlook and further opportunities for the future.
Thank you, Alessandro. So the outlook for the future. Let's start on Page 22 to look at what flight activity shall look like in 2024. Now, to illustrate that, we have put together this chart with a combination of information from 2023, 2024, and 2025, what we estimate for 2025. Why that? Because 2024 will practically mark a transition, a real transition from Ariane 5 to Ariane 6 and from Vega to Vega C. In particular, Ariane 6 shall have the maiden flight, as we said, between June and July. There might be another flight before the end of the year. It's still unclear whether it will happen or not. This will largely depend on the outcome of the maiden flight, of course. That's why we put it a little bit in gray.
For what concerns Ariane Vega, you know, the situation is quite, quite complex in that we have a Zefiro 40 firing test to be carried out now in May, June. Then in the course of August, September, we shall have the last Vega flight, VV24. Then we should perform another verification static firing test for Zefiro 4 0 and then fly Vega C by the end of the year. But why do we do this flight activity? We would have to keep in mind that the expectation of our customers in depending on the contract that we have already signed asks to deliver 4 Vega C in 2025 and 6 Ariane 6 in 2025. This means that practically, we need to be engaged in manufacturing these items right now, I mean, in 2024, in particular for Vega C.
For Ariane 6, we have advanced a lot of production in 2022 and 2023, so items are essentially available in stock, to support the flights of 2025, while for Vega C, we need to catch up with a lot of production because Vega and Vega C have had quite a slowdown in production in the last, let's say, 12 months. So we need to catch up in 2024 with production to make sure that we can support the schedule of 2025. In fact, on Page 23, let me allow for a broader consideration of where we stand, I mean, where 2024 stands with respect to the overall business cycle. So if I take a decade-long view, okay, this chart depicts a number of things that are worth for you, keeping in mind.
So first of all, we have spent the five years between 2028 and 2023 accumulating a lot of backlog. You have seen that backlog has always been increasing in the last five years, and so has cash because cash has come along with the new orders. Now, what we need to make happen between 2024 and 2028 is to roll out this backlog into revenues and profits, okay? Yes, we will be having additional order intake, but most importantly, we need to convert that into production revenues and therefore margins. In the meantime, the curve, the V- curve that you see in this page shows you qualitatively what is the level of production capacity that we have actually been utilizing over the last few years.
And in the last five years, with the rampdown of Ariane 5 coupled with a delay of Ariane 6 and a slowdown on Vega due to the failures and the various issues occurred, I mean, you name it, the COVID, the Ukraine war, and so on, the capacity utilization has gone down, okay? Now, the utilization of capacity will ramp up from now on because obviously, the Vega program will have to deliver at least four flights next year and maybe more in 2026. Ariane 6 will need to rapidly ramp up to cope with the contracts and the commitments that they have signed. And also, as you have seen, on top of it, the defense propulsion activity is growing in production volumes very rapidly.
So this shall move, quite rapidly, Avio, to a much better utilization of installed production capacity, therefore counting on a much better operating leverage, thus delivering better margins. Allow me one last consideration. The energy costs in this decade have moved up and down for various reasons. You know, they have gone down during the COVID era, and then they have had an anomalous peak in 2022. Now, in 2023, they have gone back to what I call a new normal, which is much better than 2022. Yet, it's about three times the price of energy compared to 2019 levels. We don't know what's going to happen in the future, hopefully not going up.
I'm not sure they will go down, but if we make a very simple assumption that they will stay as is and we consider that the new normal, this would be good when coupled with an increased capacity utilization. So it's very good that it's very important that when looking at the future, you keep some consideration of where we stand within the flight. Now, let's go on Page 24 on the guidance for fiscal year 2024. So in terms of backlog, we expect to continue growing the backlog still in 2024 by some 10%-15%, so a little bit less than what we have grown last year, but still a growth in backlog.
This will come from new orders from the space propulsion business and also the tail, let's say, of the orders from the European Space Agency that we have not yet finished to account for right now, but they are in sight, essentially. Then we expect, as I said, this backlog to start a very substantial rollout. In fact, we target to have some 10% growth in revenues versus 2023, so anywhere between EUR 370 million-EUR 390 million, to grow revenues on the defense propulsion activity and on the technology development projects, which will come at full steam, let's say, now in 2024, 2025, 2026. Therefore, we target to have an EBITDA reported growing about 10% with respect to what we had this year, possibly more if we manage to execute well and if we have a little bit of luck, allow me to say.
But for sure, as we grow in production activities, the operating leverage is improved, and therefore, we have better sense. Regarding net income, we project to have an increase by some between 10%-20%. This will depend on a number of things. It will depend on whether or not we have some financial charges or not, what is the aspects of taxation, and so on. But no doubt that we have as a primary goal that of growing earnings. So we have heard loud and clear from investors that this is a fundamental parameter. So the whole work of the team is focused on growing the bottom line. Now, on page 25, as we traditionally do at the end of the fiscal year, let's look for 1 second beyond 2024. What do we have beyond 2024?
So we expect the net order backlog to remain high but stable beyond 2024 in spite of the growing annual revenues because obviously, the annual revenues will subtract from the backlog, but we pretty much expect to stay within a book-to-bill ratio that will keep the backlog stable beyond 2024. And then we think that in this time frame beyond 2024, there might be an opportunity for new product lines to become effective, for example, in the orbital service business that will maybe generate something new. In terms of revenues, we expect to have a sustained growth both in the space launch and defense propulsion activity. In the space launch, as we said, we will have a ramp-up in production volumes, but we will also have full provision of the technology development program between now and 2026.
We already know we will have a steady increase in defense production revenues associated with the backlog we have already accumulated and the one that we anticipate for 2024, which we already have shared with you. P120, P160 as a program will fuel a lot of the production volume increase, also the Vega C ramp-up. That's what we expect for revenues, essentially. Now, speaking about profits and margin in particular, we expect to be able to progressively improve the margins based essentially on three main drivers. First, we expect, as I said a number of times, to have a higher utilization of the installed production capacity and therefore to better amortize the fixed costs. Second, we expect some benefit from the insourcing of the launch service provider and launch operator roles, which will be moved from Arianespace to us.
So we expect that from this insourcing, we will have obviously a lot of work to do, but in the medium-term an opportunity to improve the margins. And last, and absolutely not least, a higher contribution from the defense propulsion business, which in nature, it's a business where we have a high work content in what we do. We don't have much coming from suppliers. Most of it is manufactured internally, and so it's naturally a business where we have an opportunity for a better margin. In fact, on the defense propulsion activities, upside opportunities may come from additional developments, which may be coming from existing customers, from new systems, which are already in sight, both with the armed forces and with our main customer, but also from new markets and customers that may provide additional opportunities for production activities.
In fact, if I move to page 26 and I observe all this growth in the defense propulsion market demand, we have started to explore some upside potential opportunities outside the current perimeter of business. In particular, we have noticed that in Europe, a very substantial growth of the demand in our current products was coupled in the very same time with a very rapid growth in the U.S. defense market, which is probably the largest in the world, and it's accelerating very fast. So what we have done is we have started to explore the U.S. market for medium-term opportunities. We have established a fully-owned subsidiary in the U.S., Avio U.S.A. Inc., and we have equipped it with some initial capital to start operations.
We have hired a U.S. team with deep sector competencies and relevant experience, and we have started to map market opportunities to start discussions with some prospective customers. So we will continue to do that in 2024, and we believe this is quite interesting. It may be successful or maybe not, but it's definitely worth exploring in our view. So all in all, this is what it is at the end of 2023, a year in which we have done a lot of work, and we have had also a lot of challenges, but we have been able to end with a result that is fully within the guidance and exceeding the guidance for some important parameters such as the net income.
This is what led the Board of Directors to propose a dividend distribution, allowing for a dividend yield which is, let's say, in the average of what we have done in previous years, and we hope the investors will appreciate that. We will also maybe complete the share buyback should the stock value remain low as one other way to add liquidity to the market. With that, I would stop and open to your questions.
This is the Chorus Conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press Star and one on the telephone. To remove yourself from the question queue, please press Star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Martino De Ambroggi with Equita.
Thank you. Good evening, everybody. My first question is on the line number 26. Just to understand something more on this opportunity in the U.S. defense market in terms of I understand EUR 3 million capital injection to start the business, but I suppose there are also costs for hiring people, probably marketing activity. I don't know. Just to have an idea, what is the total cost, the amount of costs included in your guidance for 2024? Maybe not big, but particularly to understand what could be the potential of this market going ahead. The second question is referring to the operating leverage because if I consider 2024 on 2023, the operating leverage is extremely low, and probably part of the explanation is already in the costs that you are sustaining for the U.S. new initiative in the tactical propulsion, but I don't know if there is anything else.
The third is on the 2024 guidance because you are providing both EBITDA and adjusted EBITDA with EUR 7 million of non-recurring costs. So I was wondering what you are referring to if they are already predictable. Thank you.
Okay. So Martino, we'll address questions number one and three, and maybe Alessandro will cover the one on operating leverage. So the U.S. defense market is a way larger market than the European one. It's about 15x the European market. So it's very large, very competitive, very complex. And so it's early to say what the outcome could be. What we have started doing is we have established a subsidiary. We have obviously equipped a subsidiary with the capital sufficient to cover the running cost of the startup phase, which is largely people cost, consultancies, and so on.
So give or take, in 2023, we have put EUR 3 million worth of capital, and we have spent EUR 2 million-EUR 3 million worth of expenses, which obviously were not coupled with revenues. And so they were, in the course of 2023, part of non-recurring costs, as a matter of fact. It will become part of recurring costs as soon as and if we can generate revenues, and in fact, it's not just an initial exploration. So coming back to your third question for 2024, probably similarly, we will have to invest this order of magnitude in terms of expenses to support the team and whatever is needed to carry out this exploration. Voilà. So that's pretty much the answer to your question.
Yes. Thank you, Giulio. Yes. So operating leverage, Martino, as you said correctly, in 2023, has been impacted by the cost of exploration of new business in the U.S., but also of the return-to-flight cost for Vega C, and also, as we commented before, by the fact that we reduced the production P120 waiting for the maiden flight of Ariane 6 now expected in June-July 2024, basically.
Thank you, Alessandro. I was referring to 2024 guidance because I see a note at the bottom of the Page 24 where you are guiding for EUR 7 million non-recurring costs in 2024, if I'm not wrong.
As I said before, Martino, a part of the cost that we do for starting up new subsidiary and so on, we account for as non-recurring costs due to the consolidation of the reports, right? So a part of the non-recurring costs of 2024 will be startup costs for this subsidiary.
Okay. And I know it's very difficult to answer, but in the best case or in normal case, when do you feel to be able to get some orders, pre-orders? I don't know. Is it something expected in 2025, or maybe it takes longer?
It's difficult to say. Let's say that, as always, you try to start small to grow later. We will have to see. As I said, this is a competitive market. It's anything but automatic and captive, so we shall see. And as soon as we have news that we can share, we will. It's not a short-term opportunistic approach. This shall be a long-term effort because it's a challenging market. It's not an easy task, and so it requires focus.
So we have spent quite some focus in 2023, and we will put more in 2024, but we also have to penetrate a very complex, large, and competitive market.
Yeah. Martina, if I can comment on your question on non-recurring, these costs, by nature, are startup costs of a new business, so as expenses arising within the non-recurring cost. Unlike for basic non-recurring costs without this change of perimeter, it would have been lower in 2024 compared to 2023 as we discussed in the previous years. It's a different perimeter for the going forward.
Okay. So very roughly, we can say the majority of the EUR 7 million comes from this initiative in the U.S.
Yeah. A good portion of that. Okay.
Thank you. The next question is from Bruno Permutti at Intesa Sanpaolo.
Yes. Good afternoon, everyone. A question related to the evolution of the defense business.
If I look at the appendix added on P age 29, I see that, based on the current backlog, you have more or less 1.5 times the production in 2008. You will have in 2028, sorry, 1.5x the production you had in 2023. So I would like to understand if this translates in a proportional increase in revenue that we can assume between 2023 and 2028. And a second question concerns what could be a reported EBITDA margin target by 2028. So we can assume that, sooner or later, you will be able, more or less, to be in the 9%-10% range, which seems to be more normalized compared to the lower level that you expect for 2024, sorry, and that you had in 2023. And if I may, a third question concerns the possible collaboration with Thales.
If you can elaborate a little bit on this for what kind of services and what is the kind of partnership you could look for to have an eventual collaboration in the services business and what could be the Avio role in this aspect?
Okay. So let's start from the first question on the volumes for the defense propulsion business. In the appendix, we have reported only the production activities which are currently in backlog. So this means this is, let's say, an estimate of how we would roll out the existing backlog in the coming years. But this excludes all the backlog that is likely to come in 2024, which is already announced.
For example, we have talked about, in particular, the sale of the CAMM-ER missile to Poland, which was announced by MBDA and then needs to come as backlog, hopefully, in 2024, that will become backlog in 2025, 2026, 2027, 2028, and that's not in the picture. Plus, we have not put other activity that is currently in the pipeline with new developments and so on. We have put the production volumes in backlog because, as you were saying, Bruno, these are pretty much linked to revenues one-on-one. So on production revenues, it's price per quantity, more or less. Of course, the revenues from defense propulsion also will be slightly more than this because it will also have the effect of additional development activities for new products that are not incorporated in this picture of production volumes and also additional volumes that are likely to come very soon.
Now, I cannot tell you what are the margins by 2028, not because I don't want to disclose it, but because, considering all these evolutions on one side, and it's a more important role of the defense propulsion, on the other side, a completely different role in the commercial activities for Vega C, the change in operating leverage, and so on, this is causing us to review our industrial plan, which we will do in the course of the next few weeks and maybe come back with some more information for you as soon as we have completed the exercise. But for sure, the target is to improve the operating leverage to deliver a few percentage points more in terms of EBITDA reported or adjusted for the years to come.
For sure, we hope that this story of the non-recurring costs will slow down, that we will no longer have reasons for reporting so much non-recurring costs. If you remember, in 2019, we were not even reporting EBITDA adjusted anymore because the non-recurring costs had gone down, but we could not expect that in 2020, we would have had COVID and then the failure of Vega and then the war in Ukraine and all sources of unexpected costs. So for sure, the target is a few percentage point in improvement in EBITDA. Otherwise, there's no way to deliver a stably growing bottom line, which is our main goal. Regarding the Thales Cooperation, there are two main cooperations in place with Thales.
One is on Space Rider, which is an ESA program for this spaceplane, where they do the flying object, the orbiter, the spaceplane, and we do the propulsion and power system for the spaceplane. And then we have a project with ASI for the in-orbit servicing module, okay, where, equally, they do the service module, meaning the robotic arms, the docking technology, the proximity technology, and so on, and we do the propulsion and power system. Now, these two projects have something in common that they target to provide some activity that today doesn't exist, which is providing services to objects that are already orbiting around the globe.
So we don't know exactly what business model this will have in the future, but for sure, our technologies, if we successfully complete the development together with Thales, will provide both ourselves and Thales the opportunity to enter into business streams that do not yet exist. And therefore, we think this is quite interesting and sometimes also innovative because, in some of these applications, we are ahead of others. There are not many others who do this. For sure, nobody in Europe yet. In the U.S., there are some examples, but not many. And so we believe that this may provide us with quite an advantage.
Thank you. And if I may, just one more question on the CapEx.
So with the current production, with the current utilization rate of your production capacity, do you expect the CapEx will remain more or less at the level of 2023, or there will be changes in the coming years? So you probably have reached the peak and then will go down or what?
I think we will have to, as I said, elaborate the review of our plan to be more precise on this aspect. For sure, we don't plan on increasing CapEx because it's non-sustainable to go beyond this level. Rather, we should seek to reduce the CapEx effort, having incurred so much CapEx so far to prepare ourselves for the future, okay? But we shall also see in the 2026, 2027, 2028 timeframe what will come in terms of new activities to be done.
But if everything stays the same, we should definitely not see CapEx increasing, hopefully, slightly decreasing, unless something new happens that takes us to do activities that are outside the current perimeter for potential growth outside the perimeter.
Yes. Bruno, to date, we have already sustained the CapEx for the production future, production expected ramp-up of both Vega and Ariane 6, as we discussed before. So the CapEx to be equipped for that production has been already sustained by us. And also, in 2023, we completed the investment of technological innovation project, artificial intelligence, industry 4.0. So we are well equipped. So increase in production does not reflect an expected increase in CapEx because it was already sustained in the previous year. That's why, as Giulio also mentioned before, we expect a ramp-up in the operating leverage in the future.
Thank you.
A reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. The next question is a follow-up from Martino De Ambrogio with Equita.
Yeah. Thank you. Again, on the U.S. initiative, are you planning to go ahead alone, or maybe a partnership is the right way to speed up this opportunity? And on the energy costs, could you remind us what is the benefit in 2023, and what do you expect it is embedded in your 2024 guidance just for energy? Thank you.
We leave the energy question to Alessandro. Regarding the U.S., of course, both things are possible. I mean, going all alone or having partnerships, we will see along the way. At this point in time, we are not able to share with you what we are doing, but it is always possible to do a little bit of both, work on your own and partnerships. So we will be more precise as soon as we have the possibility to do so.
Thank you, Giulio, for the what energy cost is concerned for the benefit of everybody. Energy costs have an impact on our activity, in particular for the cost of gas that is used to produce steam, which is then used in the industrial production processes for casting activity, and then the cost for electricity for large-sized buildings. In 2023, we had a relief on energy cost, as we discussed during the year, in the range of EUR 5 million-EUR 6 million, more or less.
As commented before, we expected the gas price and energy price to be stable in 2024, so we will remain at the same level of cost as in 2023.
Okay. No benefit. Okay. Thank you.
For any further questions, please press Star and one on your telephone. Gentlemen, there are no more questions registered at this time. Mr. Ranzo, I turn the conference back to you for any closing remarks.
Thank you very much for following the call and look forward to follow- up with you. Again, feel free to reach out for Nevio Quattrin if you have any further questions. Bye-bye.
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