Ladies and gentlemen, thank you for standing by. Welcome to the Airbus Full Year 2019 Results Release Conference Call. I am Aurelia, the operator for this conference. Please note that for the duration of the presentation, all participants will be in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.
At this time, I would like to turn the conference over to your hosts, Guillaume Faury, Dominik Assam and Thorsten
Fischer. Thank you, Aurelia. Good morning, ladies and gentlemen. This is the Airbus full year 2019 results release conference call. Jurgen Faury, our CEO and Dominik Asam, our CFO, will be presenting our results and answering your questions.
This call is planned to last around 90 minutes. This includes Q and A, which we'll conduct after the initial presentation. This call is also webcast. It can be accessed via our homepage, where we have set a special banner. Playback of this call will be accessible on the website, but there is no dedicated phone replay service.
The supporting information package was emailed to you earlier this morning. It includes the slides which we will now take you through as well as the financial statements. Throughout this call, we will be making forward looking statements. The package you received contains the Safe Harbor statement, which applies to this call as well. Please read it carefully.
Now over to Guido.
Thank you, Dorsten. Good morning, ladies and gentlemen, and welcome to our full year 2019 results call. You've seen our press release earlier on the increase in our holdings in the A220 program. We will come back to that later on. But our call today is about our full year release.
I'm happy to be here with Dominique to run you through our 2019 results and provide our 2020 outlook. In 2019, we made good progress despite industrial challenges and a complex geopolitical environment. In Commercial Aircraft, we delivered a record 8 63 deliveries, ramping up our production by approximately 8%. Although we adjusted the deliveries guidance during the year, we demonstrated a strong underlying financial performance. In 2019, we delivered on EBIT adjusted at €6,900,000,000 up 19% year on year and free cash flow before M and A and customer financing at €3,500,000,000 up 21% year on year.
We also addressed some key files. 1st, compliance. Airbus has reached final agreements with the French PNS Parque Nationale Pensione, the UK SFO, SARIUS World Office, the U. S. Department of Justice and Department of State, resolving the investigations into Airbus and agreed to pay penalties of €3,600,000,000 plus interest and costs.
The corresponding charge has been recorded in our 2019 accounts. These agreements represent a very important milestone for us. 2nd, on the A400M, while we baselined the program and made significant progress on technical capabilities, the outlook is increasingly challenging on exports during the launch contract phase, also in light of the repeatedly prolonged German export ban on Saudi Arabia. We have reassessed our export assumptions on future export deliveries for the launch contract phase, and we have booked a charge of €1,200,000,000 in Q4. Whilst the agreement with the authorities and the charge for the F119 have pushed our 2019 results into a net loss and will heavily weigh on our 2020 free cash flow, we remain confident about sustaining our operational improvements in EBIT and cash generation in the coming years.
Taking this into account together with good prospects in 2020, we propose a dividend of €1.8 per share, which is plus 9% versus 2018. In 2019, we had again a strong finish to the year, thanks to a tremendous team effort, but we cannot be satisfied again with the back loaded delivery profile. For 2020, we remain fully committed to take the necessary steps to position Airbus for growth, which is more sustainable. At the same time, we're facing a heavy burden on free cash flow in 2020 from the penalty payments and the consumption of compliance related provisions. But before we come to our 2020 guidance, let's take a closer look at 2019.
First, I'd like to kick off on Commercial with a short update on the WTO situation. Let me remind you that in October 2019, the U. S. TR levied tariffs on Airbus aircraft imported from the EU into the U. S, which impacts our U.
S. Customers. We continue working to manage the consequences of these tariffs. This year, the WTO is expected to authorize the EU to impose tariffs on U. S.
Products. The financial decision whether and in what amount to impose tariffs would be made by the EU and its member states. I'm hopeful that the U. S. And the EU will find and negotiate its settlements to avoid further damage.
Now let's take a look at our commercial positioning, starting with Airbus. We continue to see a robust demand for our products. Despite geopolitical and trade tensions, the global economy grew by about 2.5%, passenger traffic grew by more than 4%, passenger load factors were above 82% and airline profitability remained strong at about $29,000,000,000 Of course, we are closely watching how the coronavirus situation is evolving to anticipate its potential impact on our customers, employees and stakeholders as well as on our aircraft production and deliveries and to define co create contingency measures to be applied if and when necessary. In 2019, we booked 11.31 gross orders underlying customer endorsements in all market segments. Cancellation of 363 units reflect specific airline situations in 2019 as well as the A380 production stop.
Net orders reached 768 compared to 747 in 2018, taking adverse overall historical cumulative net orders over the 20,000 mark. While the book to bill was 1, the value of the backlog has increased year on year by around 12,000,000,000. Dollars In units, our backlog reached 7,482 aircraft. On the A220, we booked 63 net orders, including new customers, confirming the A220 as the leader in its category. Our backlog stands at 4 95 aircraft.
The A320 family continued its success with 6 54 net orders. The A321 Accelera received an outstanding market response with a backlog of more than 400 aircraft at the end of 2019. Our total single aisle backlog of 6,068 aircraft supports our ramp up plans. Now on the A330, where we booked 89 net orders, including orders from existing operators and the new neolessor, our backlog stands at 331 aircraft. On the A350, we've recorded 113 gross orders, including some major campaigns.
Net orders stand at 32 aircraft with a backlog of 579. In Helicopters, the team achieved a book to bill of more than 1 in value for the 3rd consecutive year, a very good performance in other difficult market environments. Other intake amounts to €7,200,000,000 of which about €3,000,000,000 from services. So despite the current soft civil and parapublic market environments, we maintained our leading position in the civil and parapublic sector. We booked 310 net orders in 2019, including 25 Superfuma, 23 10H-90s and 10 H-160s.
Sea Services contract wins include a support contract extension for Australia ARH Tiger and support contracts for the French forces. In 2020, we expect the civil and parapublic market to remain soft, particularly in the oil and gas. And we continue to see good prospects in military. Finally, in Defense and Space, while we see significant opportunity in the long term, the book to bill was a disappointing 4.8 in 2019. Our 2019 order intake of €8,500,000,000 was supported by V400M service contracts and key contract wins in space.
In defense, we've seen some acceleration on major campaigns. But as communicated before, exact timing of contract award is and remains difficult to predict. The FCAS, Future Combat Air Systems First Demonstrator Contract, the so called Phase 1a, was finalized and approved by the German Parliament yesterday. We've also submitted the Odonto proposal together with our partners in 2019. The contract negotiations are underway.
And in Space, we focus on strengthening our position in a competitive environment. We've seen some positive signs in terms of budget commitments at the latest EASA conference. Now Dominik will take you through our financial performance for
the year. Dominik? Thank you, Guillaume, and good morning, everybody. Our 2019 revenues grew to €70,500,000,000 up 11% year on year, mainly driven by higher deliveries and a favorable product mix at Airbus and to a lesser extent, a favorable exchange rate development. As a reminder, throughout the year, we guided an approximately 15% increase year on year on EBIT adjusted.
We actually exceeded that with €6,900,000,000 up 19% year on year despite the revised delivery target we gave you in October, showing approximately 20 aircraft less than we initially targeted. The strong conversion of deliveries into profit was largely driven by the A320 ramp up and Neo premium, good progress on the A350, partially offset by Defense and Space performance and additional ramp up costs. We also continue to increase our investments in innovation and digitalization. Our earnings per share adjusted stands at €0.06.07 per share using an average 777,000,000 shares. We generated free cash flow before M and A and customer financing of about EUR 3,500,000,000 up 21% year on year despite higher A220 dilution and some initial progress on linearization, in particular on trade receivable trade liabilities.
This mainly reflects our recorded deliveries, record deliveries and our earnings performance. Now turning to Page 7 on our profitability. Our EBIT reported was around €1,300,000,000 The level of adjustment was a net negative of €5,600,000,000 of which €700,000,000 were already booked in the 9 months. It includes the following negative adjustments: about €3,600,000,000 related to the penalties about €1,200,000,000 related to the A 4 attempt charge, €221,000,000 related to the suspension of defense export licenses to Saudi Arabia now prolonged to March 2020, euros 202,000,000 related to the A380 program costs, €170,000,000 related to foreign exchange and balance sheet revaluation, euros 103,000,000 related to premium aerotech restructuring plan launched to improve company competitiveness and EUR 101,000,000 negative of other costs, including compliance costs, partially offset by positive capital gains from the sale of Alastis and PFW. We are clearly not satisfied with this exceptionally high level we still have work to do in 2020 in terms of defense and space restructuring, A380 ramp down and the consequences of the compliance settlement.
And obviously, FX and balance sheet revaluation may continue to reduce some volatility in our adjustments. EPS reported includes a negative impact from financial results, mainly driven by revaluation of financial instruments. The tax expense of minus €2,400,000,000 is mainly due to the fact that adjustments were largely non tax deductible. For 2020, you should assume a tax rate of around 28% on the core business results. The resulting net loss of is about minus €1,400,000,000 with loss per share of about €1.0 7 5 Now our hedging strategy provides good visibility for the coming years.
Our annual hedge rates have significantly improved versus the prior year. In fiscal year 2019, we implemented $40,600,000,000 of forwards at an average rate of $1.20 per euro mainly for 20222023, while $24,000,000,000 of hedges matured at a rate of $124,000,000 We also adjusted the phasing of our hedges to better reflect our delivery profile. We rolled $4,100,000,000 of hedges into 2020 and about $7,100,000,000 out of 2020. In addition, we continue to restructure our colors by converting them into forwards. In 2019, we restructured the total amount of 2019 colors and a significant portion of 2020 colors, resulting in a positive impact on the 2020 average hedge rate.
We also started hedging British pounds versus euro, which will progressively replace our British pounds versus U. S. Dollar portfolio. Our total hedging portfolio in U. S.
Dollar stands at $97,100,000,000 with an average exchange rate of 1.23. We will implement new hedges based on the overall foreign exchange environment in line with our policy. Let's look at our cash evolution in 2019. Our strong gross cash from operations of about €7,000,000,000 up from €5,500,000,000 in 2018 reflects our EBIT adjusted and record deliveries. In 2019, the significant cash out from our linearization efforts, both on single aisle inventory and payment terms with suppliers, has been partially compensated by healthy PDP inflows and disciplined inventory management on widebodies.
As cash neutral in 2019, the impact from recognizing the penalties has been netted in our cash bridge from both gross cash flow from operations and change in working capital. A220 impact on free cash flow was around €500,000,000 as expected. The net cash impact was largely covered by the ACLP funding agreement by Bombardier. This funding was recognized as a financing cash flow and therefore outside free cash flow. A400M continued to weigh on our free cash flow before M and A and customer financing, but less than in 2018.
At around minus €2,300,000,000 CapEx was stable versus 2018. We expect our 2020 CapEx to be around €2,600,000,000 Free cash flow reported was €3,500,000,000 Customer financing contributed €100,000,000 while M and A activities accounted for minus €100,000,000 The 2018 dividend pay in 2019 amounted to €1,300,000,000 We contributed a total of €1,800,000,000 to our pensions in 2019 thereof €1,000,000,000 of top up funding to reduce the deficit. The net pension deficit stands at EUR 8,400,000,000 at the end of 2019, and we are committed to further fund this deficit in the future to secure a funding ratio at benchmark levels. As a reminder, on January 1, 2019, we adopted the IFRS leases standard, which increased financing liabilities by 1 €400,000,000 and reduced the opening net cash balance to €11,900,000,000 On a comparable basis, our net cash position has slightly increased by about €500,000,000 to €12,500,000,000 Before we move to Airbus business, I would like to give you a little heads up. Beginning this year, we will adapt our segment structure to reflect our internal reporting.
As a result, you should consider that the bulk of our transversal activities will be included in the Airbus segment. Eliminations will be reported separately. We'll start reporting on that basis from Q1 2020. Now back to Guillaume for a closer look at our businesses.
Thanks, Dominique. Starting with Airbus, we delivered a strong set of results based on record deliveries and solid operational performance. Despite the challenging and steep ramp up we are faced on the ACF, we delivered an industry record of 863 aircraft, which is 63 more than in 2018, as I said, an 8% increase. Let's take a closer look at where we stand on each of our programs, starting with the A220. In 2019, we delivered 48 aircrafts.
Our focus continues to be on cost reduction as well as growing the backlog to support the ramp up plan to a max target rate of 10 in Mirabel and 4 in Mobile by the middle of the decade. At that rate, we will be in a position we should be in a position to reach operational profitability. In 2020, we target to deliver around 55 aircraft. A220 will continue to weigh on free cash flow in 2020 at a higher level than last year. Now coming back to our announcements from earlier today.
Airbus and Investment Quebec have agreed to acquire Bombardier's remaining stake in the Airbus Canada Limited Partnership leading the A220 program. Following the agreements, Airbus becomes a 75% shareholder of ACLT with IP holding the remaining 25%. This agreement also includes the transfer of the remaining A220 and A330 work packages production capabilities to Airbus. Airbus will pay a total consideration of €591,000,000 net of adjustments of which €531,000,000 on closing. With this transaction, of its future funding capital requirements to Airbus Canada.
Now on to the A320, We delivered 242 A320 family aircraft, of which 551neo. Within that overall A320 delivery number, we ramped up the ATF Airbus cabin flex by nearly 100 aircraft versus last year, of which almost half were delivered in Q4. In 2020, we target to more than double our ACS deliveries with ACS header versions increasing in 2020. Our teams are focused on securing the ongoing KCF ramp up and improving the industrial flow on a sustainable basis to alleviate the burden in Hamburg. Locally, in Hamburg, we dedicated 2 lines, 2 out of the 4 lines for the ACF.
We also inaugurated the new A320 structure assembly line in October to help build additional efficiency in our production system. In the U. S, we delivered our 1st ACS in 2019. We will expand our industrial footprint by increasing the A320 family rates to 7 per month in Mobile by the beginning of next year as part of this year as part of our plan to reach rate 63 in 2021. And in Toulouse, we recently announced the launch of a new digitalized A321 file to rebalance the A320, A321 mix and further secure the global single aisle outputs.
First, aircraft delivery is targeted in 2022. Our single aisle backlog of 6,068 aircraft represents more than 8 years of production at current rate. We are in discussions for further ramp up beyond rate 63 with our supply chain, and we already see a clear path to further increase the monthly production rates by 1 of 2 for each of the 2 years after 2021. Switching to the A330, we delivered 53 aircrafts including 41 neos. Given the current overall demand in wide body, we have reviewed our production planning and will adjust the A330 deliveries beginning in 2020 to approximately 40 aircraft per year.
We will work to adjust over time the cost base of the program in line with this new production plan. On the type certification for the A330-eight hundred, we expect some news very soon. Moving on the to the A350. We delivered 112 aircraft and now have 33 A350 operators. We achieved our breakeven target in 2019, and we'll continue to progress on recurring cost convergence as we improve the performance of the program.
Rates, given the current market environments, we plan to stay between rate 9 10. On the financials, revenues reflect higher deliveries, including 551 A320 neo and 112 A350. Our 32% increase in EBIT adjusted reflects on A320, a strong performance driven by higher deliveries and Neo premium as the Neo mix has increased to 86% for the full year 2019. The improvement was partly offset by additional ramp up costs for the ACF. On A350, we delivered 19 more aircraft in total versus 2018.
The R and D was higher at €2,400,000,000 as expected. The year on year increase reflects mainly the DDMS ramp up. We will continue to focus on execution as well as competitiveness and deliver on the commitments to our customers. Now let's move on to our Helicopter business. Stable revenues were supported by growth in services offsetting lower deliveries.
4.6% margin expansion in EBIT adjusted mainly reflect an increased contribution from services and lower R and D reduced by less favorable delivery mix. Our 2019 performance confirms the resilience of our business in what remains the soft market. We continue to manage performance and the building blocks are in place in anticipation of a market recover. Finally, in Defense and Space, revenues were broadly stable with last year. Our EBIT adjusted came in at €565,000,000 a decline of 40% versus last year.
This mainly reflects lower performance in Space and our efforts to support sales. As a reminder, 2019 EBIT reported includes an adjustment of minus €221,000,000 due to the prolonged suspension of defense export licenses from Germany to Saudi Arabia. And 2018 included the net capital gain from the disposal of Airbus DS Communications, Inc. Business in the U. S.
So what's the status on the A400M? In 2019, we delivered 14 aircrafts in line with the latest delivery schedule, bringing the in service fleets to 88 aircrafts. In 2019, we achieved several key milestones towards full capability. This includes simultaneous deployment of paratroopers, certification of combat offload operations and helicopter air to air refueling dry contact. In 2020, we'll continue with development activities toward achieving the revised capability road map.
Retrofit activities are progressing in line with the customer agreed plan. As I mentioned earlier, we reassessed the export assumptions of the A400N in Q4, resulting in a charge of €1,200,000,000 The A400M is now expected to wait on cash by a total amount of approximately €2,000,000,000 until mid decade. Over the past 3 years, Airbus, Defense and Space order intake and financial performance have been impacted and have fallen short of our ambitions. As a result, we are targeting a restructuring program to address cost structure and restore profitability to high single digit margin. We started engaging with our social partners in December and expect a restructuring charge this year.
Guidance. As the basis for its 2020 guidance, Airbus assumes the world economy and air traffic to grow in line with prevailing indefinite forecasts, which assume no major disruptions, including from the coronavirus. The current tariff regime to remain unchanged. Airbus 2020 earnings and free cash flow guidance is before M and A. So Airbus targets around 8 80 commercial aircraft deliveries in 2020.
On that basis, Airbus expects to deliver an EBIT adjusted of approximately €7,500,000,000 and free cash flow before M and A and customer financing of approximately €4,000,000,000 before the minus €3,600,000,000 for the penalty payment and a negative mid- to high triple digit €1,000,000 amount for the consumption of compliance related provisions for tax and legal disputes. The Board of Directors will propose a dividend of €1.8 per share, up 9% versus last year. This dividend reflects the positive evolution of the 2019 underlying performance and our 2019 cash generation. It also highlights our confidence in our future financial performance as well as ongoing commitments towards sustained dividend growth and increasing shareholder returns. So in 2019, we've put a lot behind us.
Compliance investigations, A400MML lining, A380 end of programming Emirates A350 order, A220 ramp up and now buyout of Bombardier stake formation of the Future Combat Air System, which is a major achievement for the future management transition and the launch of the transformation platform to prepare the next chapter of Airbus. We also progressed towards a more linear financial profile. The cash we generate in 2020 from our underlying business will help satisfy the estimated compliance related obligations for the year. We'll continue to fund our pensions to benchmark levels, as Dominik said, and we'll need to explore opportunities for non organic growth. We will do all this while protecting our investment grade credit rating.
And while A400M, A220 and compliance will continue to weigh on our free cash flow, the business supports our cash conversion target of 1. And now a few words to wrap up. 2019 was a year where we progressed on a number of topics in an environment that has become more complex with Brexit, tariffs and trade bans, which should carry into 2020. We laid out the foundation of our next chapter for a stronger and more sustainable Airbus and we'll continue to build on it. In 2020, we further enhance the efficiency of the single eye delivery flow, including the ACF ramp up to leverage the full potential of the program in the future.
Linearizing our collection is a key priority. We know the coronavirus could make it a bit more difficult. We will also continue to improve the A350 product profitability, while at the same time, we're going to address the A330 cost base given the rate adaptation in line with wide body customer demand. The A220 focus will remain on commercial momentum and securing additional cost reduction. In Helicopters, we'll continue to leverage our military and services business while positioning the company for future civil and parapublic market recover.
In Airbus Defense and Space and Premium Aerotech, we take the necessary measures to restore profitability. We'll continue our investment in digitalization and innovation to prepare the future. Our focus is and will remain on program execution and delivering on our commitments to our customers, paving the way for stronger financial performance and free cash flow growth, always with quality, safety, integrity and compliance in the forefront. Now let's turn to your questions. Thank you.
Thank you, Liam. We now start our Q and A time. Please introduce yourself and your company when asking a question. Please limit yourself to 2 questions at a time. This includes sub questions.
Also as usual, please remember to speak clearly and slowly in order to help all participants, particularly ourselves, understand your questions. So Aurelia, please go ahead and explain the procedure for the
And we've received the first question from Ben Heelan, Bank of America. Your line is now open. Please go ahead.
Yes. Good morning, everyone. Thank you for taking my question. My first one was on A320 rate rises. Can you help us understand where these aircraft are going to be produced?
And how should we be thinking about the mix of A320 versus A321 within those rate rises? And then secondly, on Defense and Space, I think in the statement, you flesh out that it's space, which is where you're seeing primarily the weakness. How should we be thinking about this going forward?
Hi, Ben. Thank you for the questions. I'll start with the first one. Well, A320 family will continue to be produced in our main sites where they are produced today. We have 4 final assembly lines in Hamburg, capable of A320 and A321.
We have 2 assembly lines in Toulouse. They are A320 only. And as we have announced earlier, we'll set up a new final assembly line that will be an A320A321 assembly line. So we gain flexibility on our ability to grow the mix of A321 moving forward in the single aisle. And we have the 2 assembly lines in Tianjin and Mobile, and we continue to raise the rates as well on those assembly lines.
That's why that supports the plan to go to rate 60 per month overall for the A320 family by 2021 and as well to increase the rate, as I said, by 1 or 2 points of rate in 2022 and again in 2023. So I hope it answers your question. And now on the mix between A320 and A321, Dominik under your control, we were around 30% A321 deliveries in 2019. And we have in the backlog a much higher percentage of A321. So we keep growing the percentage of A321s moving forward.
You want to take
the one on this and to the base? Sure. I mean, you've seen that the profitability in defense and space has significantly declined. You've also seen that the order intake was again significantly below the revenue line. So the plan is currently to say, let's assume that many white elephants we have in the pipeline would not materialize just as a stress test and assume that the kind of €8,500,000,000 €9,000,000,000 level would be kind of rock bottom where we could end up.
How do we need to adjust the cost base to bring the return on sales back to a high single digit margin. And that will take a couple of years. So this year, you will not see a lot of improvement on that because the restructurings are starting next year, gradual improvement. And thereafter, in the year 3, so to speak, we want to be back to that kind of high single digit margin we've seen in the past because of the restructuring.
Okay. Thank you.
The next question is from Tristan Sanson, Exane BNP Paribas. Your line is now open. Please go ahead.
Yes. Good morning, Guillaume Dominique. It's Tristan from Exane. So I will limit myself to 2 questions. The first one would be on your ability to provide mid term visibility to the market.
Remember that the Paris Air Show last the year, you commented that you needed a few conditions behind like Brexit, the settlement of the SFO case and the completion of operating planning exercise before you can provide midterm to The Street. I suspect the environment has evolved quite a lot since then. Can you tell us what would be conditions required for you to be able to use this kind of commitment? That's the first question. The second is, can you provide to us an update on the cash flow pattern of the A400M program going forward?
Thank you.
On the capital allocation question, I think it's worthwhile first looking at the cash flow development of I should start with the kind of target capital structure. And we really like the rating position we are in. We think it's a little bit of a slippery slope to go back or down to a BBB type rating in such a business as ours with a lot of PDPs from the customer. We really have to be a safe haven for our customers. And also in case ever capital markets would drive a little bit on the vendor financing, we really would like to be able to also support that if needed.
And for that reason, we really like the rating category we are currently in. Now in terms of the cash flow you've seen last year bringing in €3,500,000,000 and we had also mentioned there is a CHF 1,800,000,000 funding of pension liability to be deducted. And then we're going to pay a dividend for last year. So if you take that together, you see that basically that is already kind of washing it out. And then for next year, we are extremely burdened sorry, the current year 2020 now, I'm talking, we are extremely burdened by the fine and the consequences of the fine and the SEK 4,000,000,000 guidance on the operating side is already kind of eaten up by that.
And of course, we want to also continue the dividend policy, which is very much geared around the net income and 30%, 40% cut of the net income. And as we have now all the fine related topics in our balance sheet already, it means that, of course, we would like to sustain the dividend policy. So there's a clear commitment to sustain the dividend policy increasing dividend. But it's also clear from the kind of cash bridge I gave you that we have no room for 2020 to think about shareholder returns in terms of share repurchases. The second question was on the F1 and M cash profile.
For last year 2019, we had previously guided that we want to go to about €500,000,000 and that kind of €500,000,000 is now slipping into next year. Last year, we did more than that. It was less than the €1,000,000,000 in 2018, but kind of in between the two numbers. So I think it will be €500,000,000 for a couple of more years, maybe 3 years and then tapering off. So this gives you the roundabout SEK 2,000,000,000 we've mentioned.
Okay. Thank you so much. If I may, the first answer was very helpful, but actually not exactly my question. I was wondering when basically you would be able to hold the Capital Market Day that would be enable us to get a bit more visibility on the earnings trajectory of VCO of your programs and the midterm ambition that you have for the group. And I'm not looking for timing, but for the conditions that need to be gathered for you to be able to hold such a kind of event, if you want to.
Well, not sure I can answer your question precisely. As you have seen, we've put a lot behind us in 2019. Brexit remains a risk. Unfortunately, we thought the no deal Brexit was of the table with the new negotiation situation. It's not completely sure.
We have the WTO situation as well, quite dynamic. SFO, P and F, all of this is behind us. I think it was a very important objective we had in the team to come to an end and move to the next phase and that this is done. So I think we owe you a more precise answer on that question. As we move forward in this year, we think we have a lot of things again to put behind us, but we see a clear trajectory on operations, on linearization, on the ramp up of the single aisle and profitability of our program.
So we take the question maybe to be answered a bit later. But it's understood, Christian. Thank you.
Thanks for your answer.
The next question is from Celine Fornaro, UBS. Your line is now open. Please go ahead.
Yes. Good morning, gentlemen. Thanks for taking my questions. So I will start with the first one, which is coming back to one comment that Guillaume made at the end where you said that you can still see that the business supports a cash conversion target of one time? And I guess you were talking at group level.
So should we infer from that that Airbus commercial?
Yes. It's Dominik here. Hi, Celine. So the cash conversion of 1 is clearly the target for the group. There are 2 caveats we have highlighted.
1 is the A400M. We gave you now the sizing of the cash that's weighing still going forward. It's clear in 2020, we have the compliance topics ahead of us, which is also depressing cash conversion in 2020. And then there is the J curve of the A220. The program is ramping.
I mean, you've seen that we have delivered, I think, 48 aircraft last year. If you think about the rate potential, you see that it should go up mid of the decade to 160, 170 ish. That's a very steep ramp and that ramp eats cash. So there is also a significant cash requirement, which will actually for 2020 be in the high triple digit $1,000,000 So these 2 are the ones we have to still bring behind us, but then we should have the group on a cash conversion of 1.
Celine, sorry, the line was disconnected. So operator, maybe you can go to the next question.
Sure. The next question is from Christophe Menard, Kepler Cheuvreux. Your line is now open. Please go ahead.
Yes, good morning. Two questions. The first one on the A330 production rate decrease. Can you explain the reason? So I guess it's probably the demand, but the reason why you move from 50 to 40 and how sustainable is this beyond this?
And second question is on the timing of pension funding and the amount that you intend to actually pay or fund in the coming years, also kind of the timing you envision?
Yes. So I'll take the first one and Dominik you take the second one. Yes. On the A330, behind the delivery figures, it's important to have in mind that a lot of the planes that were delivered in 2019 were actually produced in 2018. You remember that we had delays on the entry into service of the NIO into engine issues.
So the underlying production is more linear, is more stable than what we see in the deliveries. Now back specifically on your question for 2020 and moving forward to 2021. Yes, that's basically driven by the demand. We want and we said it already a couple of times in the past, to have a level of projection that is reflecting the demand moving forward, not to be in a situation of overcapacity on our side. And what we have said on the and on the A330 reflects our understanding of the capacity of the market and mainly reflecting the backlog capacity of the backlog and the market to take our planes in good conditions.
That's basically what we think is the right level of deliveries to fit with the current market environment and the success of our product because we had a very good booking record last year on those products. So we remain very confident, but we want to be, I mean, according to market expectations. Dominik, on the pension? Yes.
On the pension, we now have a pension liability, DBO defined benefit obligation of about SEK21 billion as of end of the year and deficit of about SEK8 1,000,000,000 We said we want to bring that to benchmark level. You should take the kind of benchmark levels in a blend of our countries. It should be maybe around 80% funded. So if you do the math, given the funding ratio we currently have, you will require another SEK 4,000,000,000 or so at current interest rates. Of course, interest rates can move.
And in case they ever moved up again, the deficit would close quickly. But if they don't, we need to fund. So the idea is now to basically gradually over several years do that. I mean, the kind of rate at which we do that, you've seen last year, which is a billion in case interest rates stay where they are, it could be a similar rate going forward until we have that gap closed to the 80% funding ratio.
Thank you very much.
And we have Celine van Aelbeck on the line. Your line is now open again. Please go ahead.
Celine, we don't hear you. I don't know if you can hear us.
Hello. Can you hear me?
Yes, we can hear you.
Okay. Hello. Hi. Well, I could hear you. Nice and clear.
Here we are. So I heard the answer on the free cash flow conversion. So thank you for that. And I suppose on that one, Dominik, you were assuming a neutral defense contribution if you exclude A400M, which probably is already a progress from the situation that we've generally had.
I mean, if you think about the cash we mentioned, it should be better than neutral over time. I mean, we do the restructuring to also bring defense and space gradually. It will take a time to a much better cash conversion.
Okay. And then my second question would be regarding an update on the A320 delays that were mentioned by some airlines in the U. S. Last week and also the progress on the A321 ACF? And in terms of head up versions, how much is that increasing in 2020 compared to 2019?
And on the A320 delays, maybe you want to comment on some GTF issues that have been flagged as well? Thank you.
So a lot of questions in one. Celine, I'll do my best to answer. On the A320 A321 ACF, you remember that this was considered by us as a major risk or challenge in 2019. Well, basically, we have managed to do the ramp up of ACF in the second half of twenty nineteen according to the revised plan, I have to say. And we delivered sort of 100 ACF more in 2019 compared to 2018.
So that's a very, very significant ramp up and with a lot of head up versions. So I feel by far more comfortable on that challenge for 2020, but still it's another wave of ramp up as we intend to sort of double the number of ACF planes we deliver in 2020 compared to 2019. So in terms of mix, in terms of complexity, in terms of standard of the planes we deliver, actually, this is much higher. We increased as well the rate sorry, the share of the A321 in the family. So this is going, I mean, quite well compared to where we were a year ago, obviously.
And we have gained a lot of comfort, but we want to further ramp up the A320 family at a pace that enables fulfilling our plans and delivering as we expect. We run actually around 6 months late on the production of the NEO compared to a large number of contractual commitments to customers. And we expect to recover this over the next year or 1.5 years. So this is not progressively get better. We are victim of our success on the product and the complexity of the ramp up, but we think this is something we're really focusing on efficiently.
And I have to say, I'm satisfied with what the team has delivered, especially in the second half of twenty nineteen. We continue to have difficulties with engines and service. The GTF situation is known and transparent, and this is waiting on our capacity to deliver more planes in H1 as there is a lot of the production that goes to MRO to support our customers and make sure we keep priority to planes which have been already delivered to customers and our customers that need to fly. But this is something that is also been normalized over time and we're making progress on that front too.
Thank you very much.
Thank you, Selim.
The next question is from Jeremy Brack, Redburn. Your line is now open. Please go ahead.
Good morning, guys. Two questions, please. Firstly, on A350, where the rates are 9 to 10 per month versus 10 previously, and you kind of made the comments, Guillaume, about the market conditions. I just wanted to ask the question, how do you feel about the long term margin that you can achieve on that program kind of visavis lower rates and the market conditions, please? And then the second question was a bit of a geeky one on A220.
I mean previously, the losses were backstopped, but you've bought the rest of the program or bought a high stake in the program at a phenomenal price. But I'm guessing that the backstop arrangement no longer continues and that program, as you hinted, will be loss making on a cash basis until the middle of the next decade because of the J curve that you talked to. Just wondered if you could help with those two things, please. Thank you.
Thank you, Jeremy. I'll take the first one and Dominik, you take the second one on the 220. Well, on the A350, I would like to say we keep moving forward and maintaining our trajectory on the cost reduction. It's not really a I mean, a rate increase. We touched the rate 10 last year.
We want to maintain between 9 10, so that's in the same ballpark. And we continue to see a strong demand for the A350 as a plane in this market environment, which is more difficult. You've seen the several announcements from our main competitor bringing their rates down significantly on their own wide bodies. So we think it shows a strong resilience and performance of the 350. And as I said, it doesn't change our trajectory on cost.
We'll keep growing at the same pace.
So on the A220 funding, yes, you mentioned that Bombardier has backed up some of the cash consumption in the joint venture. There was there's 2 type of shares. There were 2 type of shares and the very interesting one for us was the so called B shares. The funding commitment still outstanding was now $250,000,000 so it was quite limited given what is still ahead of us. And of course, the purchase price you referred to, one of the components embarked on that was the fact that we left Bombardier of the hook for that funding.
Now going forward, the joint venture will fund everything. We have agreed with the other shareholder IQ and the joint venture that they will first try to write funding on a joint venture basis. But of course, we then have also the option to fund all of our own treasury. And for anything that Airbus would support in terms of guarantee of the joint venture, there would be a fee associated with that. So basically, this will be on our balance sheet right now.
And don't forget, the whole joint venture has already been consolidated before the transaction we announced overnight.
Great. Thank you very much, guys. Very clear. Thanks.
Thank you, Jeremy.
And the next question is from Olivier Brochet, Credit Suisse. Your line is now open. Please go ahead.
Yes. Thank you very much. Good morning, gentlemen. Olivier from Credit Suisse. I have two questions.
As you can see today like deferrals or things like that already? And the second one is you mentioned at the end of your non organic growth opportunities. Can you maybe put a bit of color around how you think about these in terms of financial discipline? What sort of things you could be looking at? Thank you.
Okay. Coronavirus, so it's a very dynamic situation. We are very much looking at it. We have organized a couple of crisis sale to try to better understand the situation and the likely scenario moving forward. The traffic in China, inside China or from or to China has been very significantly reduced in the last weeks, seems to pick up a bit now.
There was the Chinese New Year holidays where we had most of our plants that were closed. And you know that this has been extended by a week by the authorities. So we have respected the guidance of the authorities and the recommendation from the World Health Organization. But these plants have restarted to work beginning of this week, and we are monitoring that the restart is efficient, and this is the case. We do this for our own plants and for the one of our suppliers.
So that's on the supply side. Obviously, we are very much focusing on the safety, on the health, on the protective measures against the coronavirus in the plants for our employees and our partners. That's super important for us. And we are as well in contact with our customers. On the customer side, well, on the very short term, that has to defer the deliveries.
That's very short term. So it's very difficult for us to give an indication and just to know whether this will last a bit or not. We are all monitoring that very dynamic situation that seems to be going better from an industrial perspective. But still, this is work in progress, I shall say. And obviously, we are very much looking at it and carefully monitoring and anticipating to define the appropriate mitigation measures.
This is where we are at this very moment. The second point, M and A,
I mean, the organic growth. I'm
not sure I got the question exactly.
The question was on the non organic growth opportunities that you mentioned. If you could put a bit of color on how you think of them in terms of financial discipline and the areas that you could be interested in?
Well, we have clear priorities when it comes to developing our business. We have a lot on our plate, and the main priorities for Airbus, at least on the Airbus commercial side, are on the digitalization, on the transition to more automated and robotized production systems and on the preparation of the technologies for the future, which are around environment, decarbonization of the flight. And we are very disciplined on focusing on those priorities. So when we have needs or opportunities to go faster on our strategy, This is something we would consider, but we are mainly focused on those priorities, which are mainly internal priorities. When it comes to Defense and Space, where we've been rather clear on our trajectory of restructuring and turning around the business to make sure it delivers the profitability we expect from that business moving forward.
So basically, that's the situation, and we will look at all opportunities to be performing in that direction. There was no specific intent in my comments in a way or the other. But what remains important for us is the strategy of the existing pillars of business of Airbus.
Okay. Thank you very much.
And the next question is from Andrew Humphrey, Morgan Stanley. Your line is now open. Please go ahead.
Hello and thank you. A couple of questions from me. The first is a clarification just looking at 2020 guidance. Can you confirm €4,000,000,000 of free cash flow includes both some additional cash costs from the A220. I think you highlighted that, that could be high triple digit million longer term.
Some additional A400m costs in the region of maybe €500,000,000 but obviously excludes the unwind of the additional provisions you've taken today in relation to regulatory issues. I'm sure I've misunderstood parts of that, but I'd be grateful for clarification. And then the second one is around the rate increases that you've highlighted. Would it be fair to assume pretty limited and maybe will include some reallocation from other programs?
The answer to your first question is shortly yes. You're absolutely right how we defined it. So when we guide the SEK 4,000,000,000 we, of course, fully include the consolidated business then, both A220 and A400M are part of that. We just wanted to kind of separate the impact of the compliance issues and this is why we kind of put it in 2 pieces in the guidance.
As far as the rate increase is concerned, and you understood my statement beyond the rate 63 for 2022, 2023. This is coming from the existing supply chain and at the level of increase that is sustainable by the supply chain, it is very important for us. We've seen the challenges on that front. It's a rate that supports regularity and predictability in deliveries. That's very important.
We had our challenges in the last 2 years. We want to put this behind us. There is a new final assembly line that we are putting together and that we're creating in Toulouse for the A320, A321 to be able to produce more A321s and debottleneck emeralds. So that's part of our plans to be able to manage that ramp up and be what we call the linearization of the production on the A320. Don't underestimate the change of mix.
I mean, we have close to 50% of 321s in the backlog. So we are ramping up the 321 overall. And we intend to increase the CapEx in 2020 compared to 2019, sort of EUR 300,000,000 more in 2020 compared to 2019. So we continue to prepare, including with investments, the ramp up of the single aisle in numbers, in mix and in efficiency.
The next question is from Robert Stallard, Vertical Research Partners. Your line is now open. Please go ahead.
Thanks very much. Good morning.
Just a couple from me. First of all, on the Asian market, before the coronavirus outbreak, we had already seen a slowdown in RPM growth versus what we've seen in recent years. And I was wondering if you had seen any pickup in airline deferral discussions or airlines adjusting their airline capacity plans going forward in terms of new aircraft requirements. And then also following on the last question, there had been conversation in the supply chain about the A320 family going to 70 a month. Is that still a possibility?
Or is that rate too high? Thank you.
On the 70, I'll answer later. So I start with the Asian markets. I mean, you've seen our booking record in January. It was a very strong one, and we continue to see a lot of demand for Airbus products, including from all regions. Answer to the coronavirus and if it has an impact, I mean, it's really premature.
The only, I mean, effect that is visible is the 1 or 2 weeks of the Chinese airline just telling us that they would like to postpone the deliveries, but it was more for logistical reasons and the situation we had in the 1st 2 weeks of the outbreak. So I'm not able to answer on that answer more specifically. And you remember that all what we say today, I mean, is before coronavirus because coronavirus is really too new, too recent to be able to fully understand the magnitude of and the consequences of that situation. But we're very active on managing that situation with suppliers, with partners and with customers. This is obviously something we'll continue to discuss and monitor as the situation develops.
Now on the A320, you remember that in 2018, we assessed 70. At that time, end of 2018, we had a very strong pullback from the supply chain on that rate. And that's why we decided to move from I mean, to reach the rate 60 in 2019, then go to rate 63 in 2021. We have reassessed the capacity of the supply chain last year, and that's why we guide on 1 or 2 points of additional rates for each of the years after 2021. And this is supported by the result of the supply chain assessment.
And we'll keep looking at the ramping of the product, balancing between demand and supply, on demand and supply chain capacity. Now on the symbolic 70 per month, I don't want to answer your question in a very specific way. But basically, if you take 63 plus 1 or 2 for 2 years, it brings between 65 to 67 by 2023. So we are not far. This is what we have in our plans now.
So I would like to remain on those figures, which are moving progressively upwards at a pace which we think is sustainable and we put sustainability of what we do very high on our agenda.
That's great. Thank
you. And the next question is from Doug Harnett, Bernstein. Your line is now open. Please go ahead.
Good morning. Thank you. Going back to single aisle, when we look at Hamburg, you've got complex variant mix there, which seems to add to the ACF challenges. And so how are you thinking about addressing that complexity? And when we get out into 2021, when presumably a lot of the issues around the ACF are resolved, should we expect to see a margin benefit come then?
That would be the first question. And then second, you talked about guidance, assuming that the tariff regime stays in place. What are you seeing as the cost of those tariffs now? And what are the prospects that you see for getting that resolved?
You want to take the first one?
The margin benefit question. Yes, I mean, I first would like to point out that you already see the kind of margin potential of the ACF to a certain degree in what we've delivered in 2019. And you see that and the guidance also now is for €880,000,000 and we EUR 102,000,000,000 to €200,000,000 of EBIT adjusted on that number, which is significantly higher than what was previously discussed on a similar level. So you see that while it's a kind of slow ramp in units for 2020, there is margin expansion from a single aisle, and we think it's not the end of it because as Guillaume has already highlighted, the mix shift is just starting. So yes, we think there is potential there.
Yes. And on Hamburg, well, they are heavily loaded with the 321s and the opportunity to share a bit better the 321s between Hamburg and other sites and mainly Toulouse later when the new file will be in place We'll obviously simplify, help ease the situation and should help having a better flow and more efficiency. Now the margin itself, I mean, we are developing with the product and the mix that Dominik mentioned before. On the tariffs, well, that's a very dynamic situation. We could expect, by the way, changes in the situation from the U.
S. In the next days potentially. But what is very important for us is the May, June ruling from the WTO where the EU is expected to be granted the right to put tariffs on U. S. Goods coming to Europe.
And this will finally rebalance the situation. Think you have the history of these long lasting claims across the Atlantic. And this will be the moment where we will be able to, in our perspective, come to the table of negotiation and put this behind us because honestly, it's nonsense and it's a lose lose situation that is just slowing down the industry. So we manage the situation for the moment. We keep managing it.
The burden is on our side for the moment. Might be on the other side moving forward. We think 2020 is the year to put this behind us and move forward as an industry with good competition and no tariffs.
Is it possible to give us a sense of what that cost is for Airbus with this current tariff regime?
The cost is mainly in managing the situation, in the relationship with the airlines and the complexity and how we deal with the situation. This is for planes going from Europe to the U. S. It's customer by customer and it's I mean, it's not new, but it's something we have managed to keep at a quite reasonable level for the moment. So that's for 2019 2020, we'll see.
It's still dynamic as well.
Okay. Thank you very much.
Thank you.
The next question is from Carter Copeland, Melius Research. Your line is now open. Please go ahead.
Thank you and good morning. Dominic, I wondered if you might give us a little bit more color on the year over year cash bridge. I think
you gave us most of
the pieces on A400M and pension and 2 20, but somewhere there the D and S restructuring cash costs. And what I'm really just trying to get to is what sort of growth do you expect in the core cash flow year over year? I think with those pieces, it looks like it's still pretty strong, high triple digits or $1,000,000,000 And how should we think about the pieces there, 320 family versus 350 versus working capital or something else we can't see? Thanks.
Okay. I think I want to make the caveat first that we put the whole compliance related cash flows out of the equation. So we only talk about the €4,000,000,000 here and it's €500,000,000 increase relative to what we have done in the last year. And there are some headwinds. For instance, I mentioned the May 2020.
I think we mentioned about €500,000,000 cash in 2019, which will increase further. And I think that's the kind of trough of the J curve in the ramp of the A220. And then there is continued effort on linearization. If you look at our balance sheet, you'll see that there was some strong improvement already in accounts payable, meaning that in 2019, we've actually had some adverse impact on the free cash flow from accounts payable. I think that piece of the equation is now behind us.
And now it's all about the inventory mineralization and making sure that we end 2020 in a way that we can start with higher rates in the Q1 of 2021. And that will also require some cash. So this is I think these are the major changes which are weighing a little bit on the cash and kind of dampen the increase. But I don't want to comment exactly now on your SEK 1,000,000,000 more, but I gave you some hints so you can calibrate it.
Well, maybe just another way, do you expect you give us a sense of what the cash costs of the D and S restructuring are? And if you expect any material year over year change in PDPs?
Okay. So first of all, the cash out, the PAG restructuring is a little bit ahead of Defence and Space, and we have booked CHF 103,000,000 You see that in the adjustments for PAG. The Defence and Space restructuring is likely to be higher than that, yes, so significantly higher. And from a cash out point of view, that will affect 2020 2021. And PDPs?
Thank you. PDPs, you know that we have been blessed by a very strong year end rally. And also, as Guillaume said, there was an extremely strong January where we had a very high order intake, which compares very favorable to our competitor. And that, of course, drove also PDPs to some degree. We have a healthy ramp ahead of us.
But the kind of PDP delta, which has been a tailwind now for many years, will most likely not be sustainable as a tailwind going forward. So it will be a little bit of a kind of turning and not be such a tailwind as in the past, a little more of a headwind, I'd say. But it's also something that's already fully embarked in all these numbers we gave.
Great. Thank you for the color.
And the next question is from Harriett Breach, MainFirst. Your line is now open. Please go ahead, sir. Yes.
Hello. Good morning, Guillaume. Good morning, Dominic and everyone. Thank you for taking my questions. Can I just ask my 2 on, firstly, A321 ACF?
Guillaume, I think when we spoke in October, you mentioned that the first 30, 40 or 50 heads of versions were going to be the most challenging. Are you able to share with us how many heads of versions were achieved last year 2019 and the sort of pacing of how you're going to get through those this year in 2020? And then secondly, can I ask just on the A400N? Today, you've spoken about the adjustment in the estimate of completion due to changes in the export assumptions. Can I just ask, are there any export deliveries left in the plan that drives your estimate of completion on A400M?
Or are they now completely out of that plan?
So I'll answer for the ACF. I mean, we have achieved in 2019 what we wanted to achieve, and this is true that it was very challenging. It's a couple of dozens of head of versions that we have achieved out of Vainitude, and we'll keep doing more head of versions in 2020. I said we'll double the number of ACF planes that we'll deliver in 2020 compared 2019. But maybe giving a bit more color on the not the figures, but the situation.
The main challenge was this big increase in second half of twenty nineteen, and that was something I was a bit stressed about. We had a plan, but it was full of challenges. This has been achieved, and we feel much better moving forward on the ACF. So I would say we will probably less speak about ACF in 2020 as such. We'll speak about 3 20, 3 21 deliveries.
This is the industrialization of the ACF was the challenge. You remember in 2018, we were very focused on managing our engine situation, and we started 2019 being behind the curve on the ACF. I think we are back on track, and this is what matters in my perspective.
So on the A400M estimate as completion, first of all, we have to underline that this is really during the contract period of the Oka nations and nothing beyond that. And we have taken down the number now very significantly, and I don't want to give precise data, but what I can say is that we've taken them down by a much larger amount than what is still left in our calculation. So it has been significantly derisked.
Okay. Thank you. Thank you very much.
And the last question is from Safar Khan from Societe Generale.
Two questions from me, please. First one is on A380. Could you tell us what the contribution was from the program at the operating level in 2019? I imagine probably a negative contribution. And what this year, next year contributions are going to be?
Should we be looking for losses from the program in 2020 2021 through the operating profit line? 2nd question, just on the cash fluctuations, working capital fluctuations during the year. Obviously, with linearization, hopefully, the working capital swings through the quarters should become much less. Can you give us some idea of what you're targeting when you achieve linearization in terms of working capital strength through the quarters?
Okay. So on the A380, you might have seen that we adjust the A380 impact in our adjustments. So you'll find it in the bridge there. And I would hope to drive that down going forward because it's kind of protected by some loss making contract provisions. And but there are still some open pieces, but it should be kind of a diminishing topic in the adjustments over the next couple of years.
And then as the program ends, that will be out of the equation. So on the working capital, I think the way I want to stick to is to say for the group, if you look at 2021, we want to achieve a cash conversion of 1 before the A400M bleed consumption here and the A220 J curve funding. And then you can basically say on the working capital, there should not be any huge impact anymore in such a more linearized topic. There will be a gradual increase, but as the customers are also funding PDPs, and I mentioned it will become more difficult going forward, but it should not be such a big factor anymore. If you look at the prior years and you look at the changes in the working capital, they have been very huge.
I mean, really mid single digit billion swings over the year, and that, that swinging should be maybe half or linearized to a degree like that in a much more stringent way.
And just on the this one cash conversion that you're looking at, is that the adjusted net income that you're hoping to be the combination of 1
Well, there we talk about the EBIT basically EBIT adjusted multiplied with a certain tax rate deducting financial items. And yes, that's the way we look at it. But again, I mean, we mentioned we really over time want to drive out these adjustments. They have been very, very material and a great source of frustration for us. And there are some topics which will be never really entirely out like the volatility from the ForEx and the balance sheet revaluation topics.
But of course, it's our ambition to make sure that the delta between EBIT and EBIT adjusted is kind of converging.
Okay. So it's adjusted net income is what we should be looking at?
Yes, yes. You can say that more or less, yes.
Yes. Thank you. Thanks very much.
Ladies and gentlemen, this closes our conference call for this time. I would like to add a personal note. Nicolas, who has been working with us for almost 5 years is leaving the team for new challenges within Airbus. I thank Nicolas for his exceptional dedication and professionalism over the past years. And at the same time, I'm happy to welcome Philippe Gossard, who will take over from now on.
If you have any further questions, please send an email to Mohamed, Philippe or myself, and we will get back to you as soon as possible. Thank you and I look forward to speaking to you again soon. Thank you, Nicolas,
and thank you everyone. Have a good day. Thank you.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.