Good morning, everyone, and welcome to our full year twenty twenty live Q and A session. Before taking your question, I would like to hand you over to our CEO, Alessandro Profumo, for some initial remarks. Thank you.
Many thanks, Valeria. Good morning, ladies and gentlemen. Before starting Q and A, I would like to highlight some key messages. First of all, I would like to apologize with all of you for the fact that we are not meeting personally. But as you know, today is not yet possible to meet in person.
I hope that soon with the new vaccine that the campaign, which is in the process of being realized, that we will have the opportunity to restart personal meetings. In any case, also this way of meeting is quite effective. First of all, we have successfully steered and navigated the group through 2020 in this very challenging environment. We did this with a strong, solid and resilient business performance, and thanks to our people. We have a strong military governmental business, and we deliver on the fourth quarter as we said we would.
I'd like to stress the concept that since beginning 2018, we always achieved the target we gave to you. I think this is quite important. Clearly, the 2020 has been an incredibly different year vis vis which the expectation we had. But despite of that, we realized the guidance we gave you in July. Second, we are optimizing our portfolio for growth in our core business.
We continue to make strategic process. Third, we are taking actions to address issues where we are exposed to civil market, addressing all the challenges we have in front of us. Our 2021 guidance is robust despite the pressure of civil aeronautics and, you can be sure, are very solid. Fourth, we are also ready to catch new opportunities, leveraging existing transversal capabilities. All this make us look forward positively, and I want to emphasize really my strong confidence in our core business fundamentals, well positioned for the medium, long term.
And with this, we are ready to take your questions. As you know, here with me, there are Valerio Cioffi, our General Director and Alessandra Djoenko, our CFO as well as Valeria Ricciotti that you have already heard. Many thanks.
Our first question comes from Alessandro Pozzi from Mediobanca. Your line is now open. Please go ahead.
Hi there. Good morning, and thank you for taking my questions. I will make one at a time, if it's okay. So I think it's nice to see your delivery in Q4, strong cash flow generation. When I look at 2021, we also see a recovery in profitability.
Can you give us a bit more color on where you expect which segment do you expect to support the recovery in profitability? And also 2021 is not going to be a COVID free year, unfortunately. Can you give us a sense of how much that is going to weigh on the productivity in this year with the exception of putting the Aerostructure aside, especially in helicopter and electronics fleet?
Sandra, Marie, thanks for the question. On COVID, as you have seen from our presentation, the efficiency level in the fourth quarter is more or less aligned to the usual one. So we have been capable, thanks to the new organization, to be to have, for instance, people absent exactly in line with the average we always said is around 10%. So the productivity is really aligned to the normal one. We have some extraordinary cost, for instance, all the personal protection tools, the sanitization and so on and so forth.
But this is something we'll stay forever in our opinion. So clearly, it's becoming something that will be implied in the way we work. Having said that, the recovery for twenty twenty one is coming from the different division, but Aerostructure. On Aerostructure, I will give the floor to Alessandra financially and Valerio for the technical elements. Clearly, we have an incredibly resilient business in Helicopters.
Despite of the reduction in terms of deliveries, Helicopters performed quite well. Thanks to two key elements. One is the governmental and military programs, where, as you know, we are working heavily. It's important to say, for instance, that on the key program we have in helicopters, Qatar, we had the first flight for the Naval NH90 in January in presence of the Qatari authorities. And we are perfectly aligned with the time frame expected for the program that with the COVID has been is a great success.
But helicopter is also sustained by the strong customer support activity. Beginning this week, we have been confirmed as the number one in the pro pilot evaluation on customer support. As you know, we were already the last two years after many years where we were behind Bell. So it's really important. And overall, the customer support business in Helicopters is 37%.
Then we will continue to have the pickup in aircraft, thanks to mainly the Kuwait program, which is proceeding. It's clearly an important program. In terms of return on sales, it's slightly dilutive because, as you know, we are prime, but there are activities which are performed by our partners. So clearly, the composition of the overall program where we are not prime is less profitable, but in absolute terms is contributing quite well as well as electronics that will continue to grow. Electronics is partially affected in terms of EBITDA by the fact that we have a huge number of small customers, the so called merchant supply.
And clearly, this has been affected by COVID, but all the programs are performing quite well. I leave the floor to Alessandra in order to spend some words on Aerostructure financially and then Valerio for the other elements.
Thank you, Alessandro. Well, Alessandro, you have seen from our actual results that Aerostructures in 2020 had a negative return on sales of approximately 10%. That is the result of lower production volumes on our key programs, namely B787 and ATR, where we have seen the effects of the COVID and the drastic reduction in air traffic. And our customers, the largest OEMs have reflected that in the updated production schedules. So Boeing reduced the rate of production from 14 series per month down to approximately seven at year end and now five series per month throughout 2021.
ATR, as you know, delivered 10 aircrafts in 2020 versus 68 the previous year, and our production levels have also been reduced more than 50%. So the under absorption of costs and the inefficiencies in operating at production levels, production rates much lower than in the past, again, in half is the result of the figures. Airbus, on the other hand, has been more resilient. The Airbus programs have been more resilient. And the small components also of military programs that have that are part of the Aerostructures performance have also been performing well.
Valeria?
What I can add, as Alessandra said, mainly this year, the '21, could be considered the bottom in terms of volumes for aerostructures. Obviously, consider the recovery in civil aviation such as we can foresee now. Mainly, we have the Airbus product, which are coming back mainly to volumes of 2019. So it's a good answer in the civil market. While the B707, seven eighty seven remains lower and as Alessandro said before, only mainly at an average value of less than five for the whole year, five each month.
And this is a problem in terms of volumes, and it's one of the element that we are really analyzing in order to define actions and design our future.
The volume is low. You have to speak louder.
Okay. Is there any other program that could replace some of the lost volume from the B787? I'm thinking about the European drone. And also, is there any potential indication that the Boeing may increase monthly rate maybe in 2022 or 2023?
Okay. Relevant to the what we are doing in order not to have only one program in Apulia, in Grotale, as you said, is the positioning of the Eurodrone Composite Wing, which is a high level of technology component in Apulia. Really, so we are planning to do it even if the timing of the program and the timing of series production will not be in our plan in the next two years. So it's not something that can solve the problem of Boeing volumes reduction in the short term. At the same time, yes, we hope that, as we said, we are considering the recovery as it is now potential upside due to also to the effect of VINCI, could be in our plan as soon as our customer demand will be increased.
We hope to have an increase in 2022 of the volume foreseen by Boeing, which at the moment remain low, very low with respect to the volume that we have in 2019 that you remember were 14 ships per month, so the maximum rate.
Okay. Thank you. Just last one for me. Any estimate of nonrecurring costs for 2021, please?
Well, Alessandro, as you have read in the press release that we published yesterday and you have heard from Valerio earlier this morning, in Aerostructure, we will be implementing a plan that will resize the workforce in line with the workload. This will include 500 employees that will participate into a pre retirement scheme. This will account for approximately €100,000,000 of provision one off in 2021 non cash, and that may be accompanied by other nonrecurring costs such as those related to COVID, namely the purchase of protection devices and sanification of items. So I would say nonrecurring costs as a whole are expected to be in the range of 150,000,000 to 200,000,000 currently.
As Alessandra said,
first piece is noncash and we have a positive NPV.
Okay. Very clear. Thank you. I'll turn it back.
Our next question comes from Martin D'Ambroshi from Equita. Your line is open. Please go ahead.
Thank you. Good morning, everybody. Sorry to bother you on Aerostructures, but seems to be the most important topic. Just to have an idea on 2021, you already discussed it, but should we expect higher, lower losses, operating losses than in 2020? And I clearly understand there will be an event in the future when in which you will present the long term guidance.
But what's your feeling about the cash burn? So how long does it take to be significantly reduced? I'm not talking about a zero, but let's say, until when we will continue to see cash burn at the structure. This is my first question.
Okay, Martino. On your first question on operating losses in 2021 versus 2020, I confirm that 2021 losses will be higher than 2020, reflecting the fact that we are starting off with a lower production rate across programs. While in 2020, we benefited from a relatively pre COVID levels for Q1 and the level of production was downgraded quarter by quarter in a gradual manner. So those are the effects that are playing in the two years. Besides the fact that 2020 also incorporated a one off benefit from the termination agreement reached with Airbus for the termination of the A380 program, which is clearly not replicated in the current year.
Speaking about cash burn, we realize the number is big, is big for has been big for 2020 and is projected to be big in 2021. What are the main drivers? Clearly, the main driver is the pace and level of recovery of air traffic and of demand for new aircraft. And that is an element that we are, in a way, taking from the general market and from our clients, the OEMs. What we are addressing today is what it is directly in our control, which is the adoption and the resizing of the workforce compared to the new workload that we're facing.
And we are also continuing to work on our productive assets to make them more flexible so that as soon as recovery comes in, we'll be able to produce at lower rates, at lower costs in a more efficient manner from a working capital standpoint, and we'll have more flexibility to also onboard new programs such as the one that Valerio was mentioning before in an effective manner. Nonetheless, we acknowledge that the market continues to be soft. And as you well know, our clients are referencing a time frame between three to five years for full recovery.
Only one detail. Really, as Alessandra said, we are not only resizing workforce on the basis of workload. We are working you heard before, we are working on the industrial optimum setup in order to increase the flexibility and profitability, Alessandra already said. Mainly, you know that we have a couple of center of excellence, one for the fabrication of metallic structure and the other for control surfaces in composite, which also driven by Airbus volume have a good number of volumes for the next two, three years, recovering faster than the seven eighty seven. And one detail, you said that later this year, we will revise the guidance or we will provide guidance for a structure.
We will provide a detailed plan not affecting the guidance.
Martino, if I can add one element. Clearly, the focus is on Aerostructure and is fully comprehensible. If you look to our guidance, it's important to say that the other part of the group is performing quite well, which I think is a key topic. Clearly, the free operating cash flow is affected by the Aerostructure. And we are working, as Valerio said, very heavily on this division with the ideas we have presented to you because, for instance, we are talking of 500 people in terms of reduction with early retirement plan, but we are working as well on other 500 people that will be moved to other divisions or will be utilized in a different way.
So overall, we have a reduction in the division of 1,000 people. So we are really working on that. We are also discussing proactively with our key customers. So it's an area in which there is a strong focus, but and I think it's quite important, the remaining part is quite solid, and we will continue to have a growth of the results as well as in terms of cash flow in the other components of the group. In the meanwhile, the absorption of the Aerostructure division will lower, so the numbers of the overall free operating cash flow will go up.
Thank you. Changing subject, How do you plan to use to reinvest the cash coming from the DRS listing? We had speculations about the interesting potential acquisitions. I don't know if you can elaborate on which business, which area, which field you are interested in, if any.
I've been always very transparent on that, so I'm not speculating. I think that you have always to consider the group with three legs. The two platform helicopters and aircraft, which are key and the electronics with a sort of connecting elements more and more important for the platform as well. You know that we are involved in the Tempest program, for instance. When we are talking of Tempest, we are not talking of an aircraft.
We are talking of an information system that will fly. Strategically, it's completely different. It's incredibly important that we are quite strong in this area, and this is the area in which we are focused.
Okay. Thank you. If I may, just very last on what you commented, new opportunities post COVID leveraging on transversal capabilities. We saw a lot of examples, but what's the potential of these new businesses, dozens or hundreds of millions euro? I know it's a difficult question right now, but just to understand if there is a potential new business.
Clearly, then I leave the floor to Valerio, who is overseeing these areas today. To quantify the opportunities is really difficult because as Leonardo, we are not presenting a program that we want to be funded by the National Resilience and Recovery Plan. We are presenting programs where our capabilities are key. The strongest example is, for instance, the one on global monitoring, where we feel that there are huge opportunities. We are talking with the government.
It's incredibly important that Leonardo is not only perceived, but is also an actor for these growth opportunities for the country. But Valerio, maybe you can be more precise.
I think that as Alessandro said, we are not in the condition to quantify which is the real impact above all now in the short term. What is important, the first thing is that, as you understood, we are using technologies and capabilities that at the moment does not require any investment. So we are using what we have in our portfolio, trying to puzzling any of this capability in order to answer to a real new customer need. And this is the reason for which Alessandro was mainly focused on the global monitoring on which we have several of these elements. And I shall underline that we have all some technological enablers such as the high performance computing and the Secur Cloud, which are the base of several of the main pillars and areas on which we can find opportunities in the future.
So mainly, we are not able now to quantify even if we have a very spread field of application of our technologies.
Our
next question comes from David Barker from Bank of America. Your line is open. Please go ahead.
Good morning, everyone. Thank you for taking my questions. The first one is on ATR. You delivered 10 aircraft in 2020 versus 68 in 2019. And what is the current backlog for the program?
And what are you expecting in terms of deliveries in 2021? And then I guess a follow-up from that is, are you expecting the EBIT contribution from ATR to be better or worse than the €69,000,000 loss in 2020? Okay.
Well, ATR, as you know, remains the key player and market leader in turboprop regional aircrafts. And this is even more so the case post COVID because the other platforms that were competitors of ATRs has somewhat disappeared from the scene. Clearly, it has been hit in 2020 by the fact that many of its customers are small airlines that had financial troubles and that were not able to sustain themselves and therefore, had also generated a certain level of secondary market for the aircraft. Now what we imagine is that the 2021 number of deliveries will be at least double compared to the 2020. And the profit and loss, the loss generated in 2021 will be lower than the one produced in 2020.
We have a backlog of approximately 176 machines. And the positive news is that we see vibrant customer demand clearly in a very complex context. There have been new routes opened, and we have engaged in a number of new dialogues with new customers, which is a testament of the fact that the platform remains the best seller in its market. I leave the floor to Valerio to articulate this point.
I think that I can add only a few element to what Alessandro said. We have in the market, really, have airline in difficult due to cash situation. We have an aircraft oversupply, which is really high in terms of used aircraft. And we have the problem of low forward booking rates, which affect really airlines. So the small companies had a big difficulty during this year.
But ATR is the leader in the market and 800 of aircraft are flying and have been flying during last year. And this is something also reflected in the backlog. We have really less than 200 aircraft, 176. And this backlog is also based on strong customer. One of that is FedEx, on which we delivered the first aircraft end last year, and we have 30 order plus additional 20 option.
So this year will be better. We are planning to more than double deliveries. And as you know, we are also investing in the program in order to make it more profitable in Pomiliano with a dedicated automatic plan in which we will reduce by onethree our working hour for each fuselage in order to reduce time, reduce WIP and make the program more profitable.
Fantastic. And I just have a second question, if I may. Are you still facing an inventory drag from undelivered civil helicopters in 2020? And if you are, do you expect all of that to unwind in 2021?
Well, I mean, in 2020, we did have a certain level of inventory drag in helicopters, and that is planned to be unwound throughout the year, yes.
Understood. And then just one final one, if I may. You talked about CapEx and R and D stepping up in 2021 versus 2020. Should we assume that you're returning closer to 2019 levels of CapEx and capitalized R and D in the cash guidance?
I would say it is a fair assumption, the one you're making. We will be around €600 to 700,000,000 in 2021, 2022. And that is the result of the fact that we want to continue to invest in completing key programs that will position us strongly in a number of sectors, primarily helicopters, aircraft continuing to build platform as well as defense electronics across the board sensors and systems. What we have experienced in 2020 is an exceptional inflow coming from multi cash in of multiyear grants on investments. And that is a phenomenon that will be normalized over 'twenty one and the year to come with a steadier contribution of government grants versus the total level of CapEx.
Understood. Thank you very much.
Our next question comes from Tristan Sandsson from Exane BNP Paribas.
Question. Actually, I had a follow-up on the capitalized R and D movements in 2020. It were a bit more complex than usual. Can you tell us maybe, Alessandro, what's the impact of net R and D capitalization in EBITDA in 2020? I calculate it's about low two digit, maybe €25,000,000 Is that correct?
And second, can you explain a bit to us this movement of accelerated cash in of grants from the government in 2020? That's the first question. The second question is on the Aerostructure cash outlook. So if I understand when in 2021, you will book restructuring provisions for Aerostructure that will have a cash out over in 2022, does it mean that you can still see an improvement in the restructure in the cash out of the business in 'twenty two versus 2021 net of that. So should we assume an underlying pattern of annual progress in cash generation of the asset?
The third question is on automation. So Mr. Profumo, you mentioned options would be considered for the for this asset. Can you remind us first if all technical difficulties that you've see in the past in these businesses are well sold and how this business went through the COVID pandemic? And if you can explain what would be the type of option you could consider for the assets that would be useful?
And final question is on factoring activity. If you could comment I'm not sure you addressed that so far. If you could comment on the level of factoring activity that you had at year end, whether it was business as usual or whether this has been a way to one of the levers used to support your cash flow generation this year? Many
for the questions. I will start from automation, so that then I will give the floor to Alessandra in order to answer to the other questions. I'd like to say one word on factoring. He's business as usual. So it's important, but Alessandra will be more precise on that.
Automation. Technical issues have been solved. As you know, we're technical issues mainly in the implementation of the one key program with DHL. The issues have been solved and I can call the factory is working quite well. During the COVID, there has been a reduction on the business.
As you know, airports are heavily affected by the civil aeronautical crisis. We won as well one new contract, but another one has been canceled. We won a contract in Italy and there has been canceled a contract in Greece. But anyway, division is performing well. What is the issue with the division?
Of all, it's not a core business. We always said that. And we had the problems and now have been solved. So we are ready to take a strategic step. And the hypothesis we are working on is on a disposal of the business.
So I'm very clear with that. We are going through all the portfolio, and this is the first step we will do. We are also analyzing other business lines in order to understand if there is something feasible. This is the overall situation. Clearly, the customer on parcel distribution are more proactive.
As we know, there is a huge activity ongoing. So we have many negotiation on the table for new businesses in this area. Alessandra?
Thank you, Alessandro. So Tristan, going through your question, I guess I'll go in the reverse order. On the factoring, as Alessandro said, the level of factoring in 2020 versus 2019 has been stable. And also the outstanding factoring at year end has been fundamentally in line with the previous year. So no news stable context in a very extraordinary and unstable year as the one we have experienced.
Now easier question on R and D. R and D, I understand that Page 37 of the presentation or the appendix of the presentation is a bit complex to be read. Just to clarify a point, that represents the amount of R and D capitalized, net R and D capitalized. The R and D expense in the income statement is roughly €200,000,000 has been €200,000,000 in 2020. What you see in that specific page is the R and D capitalized.
And the amount that is negative is showing up as a negative is due to the multiyear grants that we have cash in that I was referencing before. And those basically are netting out the gross level of R and D spending. Then you see another line, which is €179,000,000 in other changes, self funded, and that is related to the R and D that we acquired when we bought Copter that had already developed big portion of the program, the SH-nine, that was the fundamental purpose why we bought the company. There was a development program in advanced stage. Aerostructure cash outlook and restructuring provision in 2021.
So 2021 provision will be a noncash P and L charge that will have a cash deployment over the years. So it will not be deployed in 2022 specifically, but it will follow the timing in which the employees will be retiring, which is probably going to be between three years roughly three to actually three to seven years, so over a longer time frame. The cash outlook for 2021 is the reflection of what we said before, mainly production volumes and under absorption of fixed costs, which we are addressing with what we have discussed thus far with the actions that we have taken. And it fits into a broader setup where, as Alessandro reminded you, we should not lose focus on the rest of the business because if our structure is absorbing $350,000,000 to 400 and we have a guidance of 100,000,000 it means that the rest of the business is generating close to €500,000,000 of cash with a strong cash conversion that is associated with the fact that there is an increase in profitability throughout all the main businesses: aircraft, defense electronics and helicopters, accompanied by a strong working capital management that will determine a step up in cash flows from all the main businesses.
We're very happy about it. Everyone within the group is working really hard. All the division heads are working really hard and all the teams to achieve these targets. And that's something that we have to have clear in our mind, expressing the resiliency, the strength of the main businesses of the group.
And Alessandra, if I can add, we consider the period of the plan, as you know, every year, we have to perform a planning activity also in order to manage the impairment process. So in the period of the plan, the free operating cash flow generated is more or less equal to the actual debt level. So at the end of the plan, considering in these numbers also the impact of the aerostructure in the period will be down to zero in terms of debt. This is always something that we must have in mind unless we lose the right perspective on the overall company. Then clearly, we know that we have our structure.
We are managing our structure. We are considering any possible activity on aerostructure. We have also to remember on aerostructure since I've seen many comments by analysts that there are different programs in which we are sole source for the program. And you know what this does mean in terms of responsibilities we have with the Visa program so that also to consider so it's impossible to consider some of the potential options because when you are a sole source on the seven eighty seven, you are sole source on seven eighty seven. Without us, the seven eighty seven doesn't exist.
And so just to make sure I really understand your latest point, you said that over the length of your industrial plan, which is five years, if I understand correctly, the free cash outflow of our structure should be fairly stable. And despite this, you should get rid of net debt at completion of the
No, no. I haven't said that it is very stable. I said that considering the overall free operating cash flow of the group, where Aerostructure will improve, the other business will grow and so on and so forth, overall sum of the period, starting from the €100,000,000 of 2021, going ahead down to 2025, we will generate an overall free operating cash flow, which is at the level of more or less of the debt we have today, so that the overall cash generation is quite strong considering also the fact that aerostructure in the period will improve, but as we have seen for 2021 do have a negative impact.
Our next question comes from Andrew Humphrey from Morgan Stanley.
Just a couple of questions from me. One is on the debt forgiveness with DRS that we've seen some coverage of. Can you confirm your net debt guidance or kind of what the treatment of that is in your net debt guidance for 2021? Does that effectively still net off if you plan to be fully consolidating DRS at that point? And the second question is, and apologies if I missed it, you highlighted the likelihood or the assumption of $350,000,000 to £400,000,000 of cash absorption in Aerostructures in 2021.
Could you break that down a bit more? I mean I suspect there may be some working capital reversal on EFA Q8 baked into that. But if you could kind of let us know on that, that would be great. Before
leaving the floor to Alessandra for the answer on the arrest, I'd like to stress an element because this is important. 2018, you remember the first presentation of the plan, we said what we should do, and we have always done or what we promised or something better. When we are saying that in 2021, we have a guidance of €100,000,000 and the expected cash absorption from the civil aeronautics is between $350,000,000 and 400,000,000 is a very solid number. I'm not saying that we are conservative, but we are saying what we are sure we can achieve so that there are no back charge or other elements. This is really a key topic.
Having said that, Alessandro, I leave the floor to you.
Yes. Thank you, Alessandro. So, Andrew, the guidance we're providing for 'twenty one on net debt is at stable perimeter, at constant perimeter. So it does not include the effect of any potential changes in the perimeter via capital market transactions, namely the one you were referring to, the DRS listing, nor any potential private M and A transactions. On the guidance for 2021 on free operating cash flow, no, I think you're right.
I mean, you are on the right track, meaning there are a number of elements that come into play when we look at what is driving the figure in 2021. One is related to the increase in operating profitability, which is consistent across all our main businesses. The other one is the working capital. And on Kuwait, which is not part of Aerostructures, IFAA Kuwait as a program belongs to the Aircraft division. Within the Aircraft division, we plan to see an unwinding of working capital buildup on IFAC weight program.
And then throughout the group, there are a number of drivers that are plus and minuses. We already talked about the investments as a minus and in general, level of operating expenses, will be normalized compared to the particularly low levels that we experienced in the COVID year 2020.
Okay. Thanks very much.
Our next question comes from Chris Hallum from Goldman Sachs.
So two quick questions on leverage and cash conversion. So first, just a clarification on cash conversion. You mentioned earlier in your answer to Tristan that the cumulative FOCF across 2021 to 2025 will be equal to the 3,300,000,000 of net debt at the 2020. Did I understand that correctly? I'm just trying to solve for where numbers might be in 'twenty three through to 'twenty five.
And then secondly, on leverage, I suppose depending on how you treat nonrecurring costs, you're at around 2.5x net debt to EBITDA. And so what level do you aim to get to before you'd consider making some of the acquisitions you discussed earlier, Alessandro?
Okay. On cash conversion, Chris, the plan is to see that figure, that target gradually increase and achieve the plan and the target that we had in the pre COVID plan, meaning we are targeting a 70% to 75% cash conversion, which clearly will be achieved in steps in gradual incremental steps year over year. On the leverage and the acquisition making acquisitions versus leverage, I would defer to Alessandro.
Yes. Chris, clearly, we would like to leave in a perfect world, but we know that opportunities maybe are coming not exactly when you are in a perfect position. What does mean that, that we continue to work in order to become investment grade. But if there is an opportunity, have to consider. We feel that considering the plan we have, considering the solidity of our plan, considering the strong cash position we have.
So analyzing everything is that the ratio slightly higher than the one you are talking of as it is this year is not perfect. We want to go down, but we have to analyze all the opportunities. As I said before, clearly, we have to manage proceeds eventual proceeds with opportunities. Opportunities are not only in our hands, so maybe that we are not capable to suggest opportunity. We are also going through an analysis of all the portfolio in order to identify on top of automation other pieces that can contribute not to free operating cash flow clearly, but to the debt reduction.
That's very helpful. So just one follow-up on the cash conversion point. The big lump sum of taking down the debt, that excludes any disposal proceeds, suppose, that's the first point. And then the
plan sorry, Chris. Alessandro already said, the plan is without any extraordinary move.
Clear. And then the cash conversion of 70% to 75% is an eventual target. That's your EBITA effectively less cash tax and cash interest?
Yes.
Yes. Okay. I
will take
the final question on behalf of Christophe Menard, who is not able to connect. So first question is on Aerostructures. Is pricing a potential driver for free operating cash flow improvement with B787 ships at an A220 potentially seeing pricing revision by 2023, 2024?
Valeria?
Pricing revision was the question, Yes.
You On ALEXANDER know that we are in process of closing our agreement, which will provide mainly starting from the 2023, an increase in profitability and in financial performance of the program. And it's one program which has higher volume with the other with respect to COVID resilience. So really, it's a good news that we have also considering that we have optimized our site in Foja in order to be efficient and more effective on the program.
Valerio, maybe we can be more precise. When Valerio is saying we are in the process of finalizing, it means that we are in the process of signing. The contract is already finalized. There are the technical, but the process for having the new contract is done.
And
relevant to July, you understood also from the first question and answer that we have, we are working with Boeing in order to analyze point by point, which is the situation in Grotale. Considering that the reduction we had in volumes and in ships per month is not something that can be ignored starting from 14% and going to only to 5% and considering the cost that we have in our site, which is only devoted to the seven eighty seven. So we have a discussion with Boeing in order to understand on the basis of volume increase or price increase, what we can do in order to improve the number that you have in your plan?
Okay. We already made comments around the conversion target, so I'll skip it. Then there are the final two. Full year 2021 guidance, is our guidance based on 100% of DRS ownership? And the answer is yes.
And can you update us on the ambition you had on partnership in Torpedoes and Otomelara?
In Torpedoes, as you know, we were having a discussion with a potential partner. This potential partner today, the change a managerial change, so it's not anymore interested. They had also some discussion within the country on specific elements. Maybe that this is as well a good news in the sense that for us, Torpedo was important to be combined in order to have a stronger capability. Interventional, Despite of the fact that we have not finalized this agreement, we are closing some very important contract, which is based on our technology, mainly the technology on the Black Shark and the engine based on fuel cell, which is quite peculiar, so very good.
So today, we are very satisfied with the activity. On Automelaara, today, we are really focused on understanding a potential important program, which is in discussion with the Italian Army, the so called advanced infantry fighting vehicle. This could be a very relevant program. It's not yet defined, but there are hypotheses on the table. Could be a very, very important program since there will be a huge demand of turret and all the electronics, which is related to that.
So today, OTOMELARI is performing quite well. Clearly, potentially, it's an area that could be combined. But again, we don't have to lose the great momentum we have.
Okay.
I think there are no additional questions so far. We are always at your disposal for any follow ups. And I would like to thank you all for being with us today.
Many, many thanks to all of you.
Ladies and gentlemen, this now concludes today's call. You may now disconnect your lines.
Thank
you for joining, and have a lovely rest of your