The conference is now being recorded.
Ladies and gentlemen, welcome and thank you for joining the SMA nine months financial figures for 2024. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may click the Q&A button on the left side of your screen and then raise your hand. For operator assistance, please press the operator assistance button on the bottom left side of your screen. I would now like to turn the conference over to Barbara Gregor, CFO. Please go ahead.
Thank you, Operator, and welcome everyone. We very much appreciate that you are taking the time for this investor and analyst call on our nine months 2024 results. Today, my colleague and SMA's CEO, Dr. Jürgen Reinert, joins to provide details on our transformation and restructuring program. Welcome to the call, Jürgen.
Thank you.
This conference call is scheduled for up to 60 minutes and will be recorded. After the management presentation, we will be happy to answer your questions. Today's presentation is available on our investor relation website. The replay will also be available on the investor relation website shortly. Our agenda for today: First, I will give you a review of our nine months figures. After that, Jürgen will talk about the most important elements of our restructuring and transformation program. Last but not least, we will have a look on our adjusted outlook for financial year 2024. I expect the presentation part of the call to last about 30 minutes. After the presentation, we are happy to answer your questions. I refer to our disclaimer on page number two. Let's move to the following page: Summary of key financials.
Group sales reached about EUR 1.1 billion and were below last year with EUR 1.3 billion in the first nine months. Large scale continues to perform strongly, while home and CNI revenues are still affected by the continuing market weakness. I will provide more insights on the individual segments in a moment. EBITDA came in at EUR 84 million after EUR 231 million in the first nine months 2023. Free cash flow of minus EUR 220 million resulting from an increase of net working capital related to the reduced sales in home and CNI, and order backlog stood at EUR 1.4 billion per end of September. Let's move to the page number five: Sales by region and by segments.
On the left-hand side, you can see that EMEA is still our biggest region, but came down to 50% from 72% last year due to the soft sales development in home and CNI from January to September. Americas revenue share increased from 22% to 41%, mainly driven by the large scale segment. The large scale segment remains the strongest in this region with more than 53%. The APEC region's share increased from 6% to 9%, also from strong growth of the large scale business. Here Australia again showed a very strong and positive development. The top three markets for SMA Group in the first nine months were U.S., Germany, and Australia. Now let me walk you through the sales per segment on the right side of the slide.
As you all know, the sales development in home and CNI is still driven by a delayed increase in order intake due to the slower than expected reduction of inventories at the distributors and installers. Additionally, lower electricity prices and still high interest rates led to postponement in investments. Further, the overcapacity of products and price pressure from Asian players are determining the current market environment. Against this backdrop revenues in home segment decreased by 70% from EUR 486 million last year to EUR 147 million at the end of September. The segment's share of total sales thus came down to 40% compared to 36% in the first nine months of 2023. EMEA remained the biggest region for the segment. CNI achieved EUR 149 million compared to EUR 334 million in the first nine months of last year.
EMEA also remained the strongest region for the segment with 76% share of the total revenues. Large Scale again showed a very strong revenue development from EUR 518 million in 2023 to EUR 764 million end of September this year. Americas remains the strongest region, making up to 43% of the segment sales. As expected, the strong project pipeline built up since H2 of last year is still being realized in our revenues. Now let me provide you with some more information on the first nine months profitability. Profitability of the group was affected by product mix, lower utilization of production capacities, as well as increased cost factors, including effects from inflation, so that EBITDA came in with EUR 84 million compared to EUR 231 million in last year.
EBITDA includes a positive one-time other income, which was booked in Q1 for the sale of SMA elexon stakes in the amount of EUR 19 million In addition, SMA Altenso GmbH completed a sale of a project entity in September. The contribution to earnings from the sale recognized in other operating income amounted to a figure in the low double-digit million EUR range. EBITDA margin reached 8% compared to 17% last year, where last year's margin was strongly influenced by a positive product mix and lower operating costs. With about 38 million, depreciation was above last year's level of EUR 30 million, mainly as a result of amortization of intangible R&D assets from our new product platforms. Now let's have a look at the segments in detail.
Due to the lower sales and price level, the reduced utilization, and the corresponding lack of coverage of fixed cost, the EBIT for home segment amounted to minus EUR 47 million compared to EUR 137 million last year. CNI came in at minus EUR 77 million versus EUR 16 million in 2023. Thus both were significantly below the value of the previous year. Our large scale segment showed the biggest earning improvement in the first nine months of 2024, reaching EUR 154 million compared to EUR 47 million in 2023. The increase in sales and the associated fixed cost degression combined with the profitable product mix contributed to this very positive margin development. Thus EBIT margin increased to 20% after 9% last year. The overall EBIT margin for SMA Group amounted to 4% compared to 15% in 2023.
Now I will move to the balance sheet and net working capital development on the next slide. Net working capital, which is shown on the top of the left page, reached EUR 584 million and is above the 2023 year-end figures of EUR 392 million, but stable compared to Q2 2024. This leads to a net working capital ratio of 36%. Let me explain the net working capital development. Inventories end of 2023 were at EUR 559 million and increased in the first nine months to EUR 746 million due to the necessary inventory increase for the fast-growing large scale and project solution segment. Additionally, the development is also resulting from purchasing commitments made last year for home and CNI, which are above our current demand after adapting the planning given the high inventory level on the customer side.
As already explained in our call on August 8, we continue to implement measures such as sales activities, including additional bonus programs for our existing and new customers, as well as several additional activities to win new customers to reduce the inventories for finished products and raw materials relating to home and CNI segments to free up cash. Trade receivables decreased in line with the lower revenues. Trade payables also decreased compared to year-end, also reflecting our lower purchasing volume for home and CNI. Advance payments received from our customers increased compared to year-end 2023 in line with the strong performance of our large scale segment. Net cash came down from EUR 283 million end of 2023 to EUR 45 million, mainly as a result of the buildup of net working capital in the first nine months.
Now let's have a look on the group balance sheet on the right side of the page. As I have already explained the change in net working capital position, I will now focus on the major changes in the other balance sheet positions. As I just explained the change in net cash, I will start explaining the change in the total cash and financial liabilities. In order to ensure that we are constantly sufficient cash for running our operational activities, we have utilized EUR 145 million from our revolving credit facility, which we negotiated with our banks last year as short-term financing for changes in net working capital, so exactly for our current situation. You find this under financial liabilities in our balance sheet. This also explains the difference between our net cash of EUR 45 million and our total cash of EUR 191 million
Regarding the other balance sheet items, non-current assets increased to EUR 482 million, mainly as a result of ongoing investments into our product pipeline in the form of capitalized R&D project costs. Shareholders' equity increased from EUR 686 million to EUR 703 million as per our net profit in the first nine months of the year. Provisions decreased from EUR 201 million at the end of last year to EUR 172 million, mainly as a result of the payment of 2023 performance-related bonuses in the second quarter. Other liabilities increased slightly to EUR 449 million due to the higher advanced customer payments and customer bonuses resulting from our sales initiatives. That concludes my explanation of the balance sheet. Let's now have a look at our summary of cash flow on the next slide.
In the reporting period, gross cash flow came in at EUR 53 million and compared to EUR 253 million in the first nine months of 2023, as our operating result was below the extraordinary level of last year. As a result of the lower gross cash flow and the increase of net working capital, cash flow from operating activities amounted to minus EUR 167 million compared to plus EUR 230 million last year. The group invested EUR 72 million in net CapEx after nine months, which mainly composed of investments in our product portfolio, including capitalized R&D project costs and investments into fixed assets. The increased level of investment spending was mainly related to our new platform in large scale and project solutions, which also included the expansion of our product capacities and capabilities here in Germany.
Considering all these effects, our free cash flow decreased from EUR 79 million last year to minus EUR 220 million in the first nine months of 2024, mainly from higher net working capital. Looking at the left side of the slide, you see that our order backlog reached a level of about EUR 1.4 billion at the end of September 2024. Product order backlog stood at EUR 1.1 billion . On the right side of the page, you can see that our large scale product order backlog remains very strong, with nearly EUR 1 billion followed by CNI with about EUR 64 million and home with EUR 49 million . For the group in total, order intake in Q1 to Q3 was higher than Q2, mainly driven by an even stronger development in the large scale segment.
Order intake for home and CNI remains very soft, and the market environment in home and CNI will remain challenging also in the next month. Therefore, we do not expect an uplift in order intake before the second half of 2025. This is it for the moment from my side, and I would like now hand over to Jürgen for the restructuring and transformation program, which we have initiated in September.
Thank you, Barbara. A warm welcome also from my side. Now that Barbara has reported on the nine months figures, I would like to take this opportunity to say a few words about SMA's restructuring and transformation program. Despite a very successful 2023, 2024 has proven to be a more difficult year, and SMA's outlook for the years 2025 and beyond is not quite as positive. 2023 has been extraordinarily successful.
This year, we are facing a general economic downturn in our core markets and industry-specific challenges. These challenges are not only affecting SMA, but all our competitors right now. As you are well aware, some of our competitors have been hit very hard in the last months. While the large scale segment, including daughter company Altenso, is continuing to develop very successfully, sales in the segments home and commercial and industrial have declined significantly over the course of 2024. We and all of our peers have previously thought that this was a temporary phenomenon, but have now realized that there is a more underlying structural change in the market, which will likely not blow over quickly. In the light of these changes, we initiated a company-wide restructuring and transformation program in September, focusing on the years 2024 until 2026.
This program is now being implemented in a structured way across the whole company. The goal of the program is to significantly reduce costs, improve our cash situation, and make SMA's structure sustainable, future-proof, and successful in a changed environment in line with the new challenges. An important aspect in this is to implement the long-term strategic vision for the company and grow with an even better performance portfolio, a new market approach, and a strong service and quality promise. The program works along four guidelines. Firstly, development of measures to improve cost efficiency and to reduce liquidity needs. Secondly, increasing agility in service delivery to quickly and efficiently respond to volume and mixed fluctuations. Thirdly, establishment of an organizational structure and culture that ensures comprehensive accountability. And fourthly, development and implementation of strategies and measures to ensure the company's long-term competitiveness and sustainability.
However, our first focus and priority right now are to get SMA back on track financially. That means that we have initiated strict cost savings measures aiming to realize a potential of EUR 150 million-EUR 200 million. This potential includes changes in SMA's current portfolio and business model. At the same time, we are focusing on the future of SMA and our portfolio. We have successfully completed the baseline in September and are now in the middle of phase II of the program, where detailed restructuring and transformation concept is being worked out. The second phase will be concluded in December to enable the start of a new and improved organization in Q1 2025. One part of the transformation is to have a very close look at how our segments home and CNI are currently set up.
While we will continue and further develop the large scale segment and see great potential here, home and CNI have shown to struggle with a cost base that is too high for the expected sales. The ongoing restructuring work includes, on a company level, the introduction of a new operating model with an end-to-end accountability of the segments, the establishment of a lean corporate center, the exit from unattractive country markets, and the analysis and a potential update of our product portfolio and development efforts. For a future home and commercial business, the restructuring includes, and due to the large synergies between the two segments, we are investigating the potential to merge home and CNI into one segment, pending on co-determination process here in the company, right-sizing along all business functions.
And we will analyze and potentially consolidate the staff for the two segments, which includes a leaner headquarters and the option to transfer transactional services into a shared service center. In parallel, we will start a comprehensive transformation program mid-2025 that will ensure SMA's future viability by transforming the company into a prime system player in core markets and establishing a flexible and competitive business model. The Large Scale segment will continue and accelerate its successful path by ensuring long-term differentiation and sustainable profitable growth and strengthening of service business in North America. While further developing the position as a system and solution provider, additional potential for flexibilization and efficiency is going to be thoroughly investigated.
Given a possible merger and other efficiency effects, but also the investigation of our development and production footprint, we are planning for staff reductions of up to 1,100 FTE globally, thereof approximately 2/3 in Germany. Some of these needed restructuring reductions have already been started or implemented, such as the termination of time-limited contracts or layoffs in the subsidiaries. In all of these efforts, our long-term strategy and vision remain unchanged. SMA is positioning itself to be a leading global specialist in photovoltaic systems and solution technology. And in the future, we have a diversified business focusing on energy systems in the residential and commercial markets and on energy solutions in the utility scale markets. We will drive sustainable profitable growth by leveraging its innovation capabilities.
We differentiate with an integrated system offering and digital services in the residential and commercial markets, and we will ensure competitive energy solutions for large scale projects globally. Of course, this is a very intense phase, but we are very optimistic that this restructuring and transformation will set SMA up for success in the coming years. Now, I would like to hand back to Barbara for some words on the adjusted outlook for 2024.
Thank you, Jürgen. Let's turn to the last page, our adjusted guidance for 2024. As Jürgen already explained, after this exceptional year, 2023, we are facing challenges, especially in residential and in commercial segments, and we initiated a group-wide restructuring and transformation program with cost savings and also with possible job cuts of about 1,100 full-time positions worldwide.
Under these expectations, we had to see what are our savings already and which have been achieved already since September, for example, termination during the probationary period, as well as at foreign subsidiaries. Workforce reduction measures are still pending the approval from the employee representatives. The sustained slowdown in home and CNI and the initiatives driven for the restructuring are resulting in several one-off effects for this financial year. These include inventory value adjustments as well as restructuring provisions amounting to an estimated effect of around about EUR 100 million-EUR 140 million. Therefore, the management board of SMA expects an estimated EBITDA after restructuring of minus EUR 20 million to plus EUR 20 million for the financial year 2024. Due to the market weakness, the group revenues will be slightly adjusted downwards to a range of EUR 1.45 billion-EUR 1.5 billion.
Last but not least, a note for the upcoming events. We will attend the German Equity Forum in Frankfurt on November 25, and preliminary figures for the full year 2024 and guidance 2025 will be released in February 2025, and on March 27, the annual report 2024 will be published combined with an analyst and investor call. With this, I conclude my presentation, and we are happy to take your questions.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may click the Q&A button on the left side of your screen and then raise your hand. If you wish to remove yourself from the question queue, you may press the lower your hand button. Anyone who has a question may click the Q&A and raise your hand button at this time. One moment for the first question, please.
The first question comes from Constantin Hesse from Jefferies. Please go ahead.
Hi there. Thank you for taking my question. Can you hear me?
Yes.
Yes.
Great. Thank you very much for taking my questions. I have two. So one simple one and one a bit more complicated one. So the first one, if you could please provide us with a breakdown, if you can, on all these different one-offs. So what exactly is provisions? What exactly is the write-off included in the EUR 102.4 million? And then the second question. So obviously, look, I don't want to, I don't want you to give guidance or anything. Clearly, I wouldn't ask for that, but I do want to get a bit of a feel for 2025. If we look at, we've done some channel checking, and it seems that the destocking in residential is far from over.
So we spoke to a few distributors that are still talking about the destocking cycle lasting another six to potentially nine months. So things don't really seem too good on that front. So if you could provide us your view there, I would love to hear your view as well on the CNI business, but also on how sustainable this current momentum that you have in Large Scale going. So how sustainable really is that? So that's a little bit on the top line. So a bit of your view on the three segments. And then also, I want to understand in terms of the cost base for next year, how should we think about these savings being implemented, and how should we think about the cost base next year? Just so we can talk a little bit about your views into next year. Thanks.
Thank you, Constantin, for your question. Let's start with the one-offs for this financial year. So before any one-off, we currently expect an EBITDA of around about EUR 120 million This is our current estimation. Then we have to take into consideration provisions on inventory, which we currently estimate between EUR 70 million-EUR 80 million and accruals of around about EUR 40 million-EUR 50 million. So this then impacts our EBITDA and will come out with a range of +EUR 20 million to -EUR 20 million. Additionally to this, in the EBIT, we will also calculate on any impairments concerning R&D and also depreciation of fixed assets. And this will then lead to also additional reduction in EBIT of around about EUR 25 million .
These are the current estimations, and you can also, or you have to be aware about the ongoing development and the ongoing negotiation with the representatives, which we have currently started today and with the labor representatives, which is ongoing. And therefore, all these estimations are with a disclaimer that we will come out in the right timeline and with the right result we are currently trying to achieve in our negotiations.
All right. And hello, Constantin, also from my side, just some answers on your questions on 2025. So if we first look at the combination for the distribution, meaning home and CNI in our case, then you know, of course, that some of that is coming today from the distributors, and only a smaller portion is being filled up by us to the distributor as the destocking is still taking place.
So we have always thought that once that is depleted, then of course we will make a jump in revenues due to the fact that then there is a normal buffer distribution. But as you rightly said, we see this buffer between six and nine months on some products, even longer, taking the whole year, depending on product, of course. And that will actually mean that we do not see a big growth, but we also don't see a decline. If I then look at Large Scale and you asked how sustainable is that momentum, then we are happy with the order intake we have this year, meaning we see no decline in momentum for Large Scale as we speak.
Of course, we cannot fully judge what is going to happen in our biggest market in America with a change of presidency at the beginning of next year, but we anticipate that this will not make a big change directly in the first year at least. So we see a constant to very slight increase in both segments, meaning in the distribution, home and CNI, as well as in Large Scale right now, calculating cautiously with roughly the same revenue, but see a small growth in both of them, actually. So this is a rough guidance of what we think for 2025, and as it comes to the cost base, of course, as Barbara said, we have already started with some of that several weeks and sometimes months ago. So we see the cost base already going down, and we will continue the whole of 2025.
Of course, we would like to get it as early as possible, but for some of those effects, especially on material cost negotiations without having high volume, some of those effects will only come later in the year, and then be effective only in 2026 or maybe after the first quarter in 2026. So this is a gradual part with, of course, our focus, as you can imagine, that it comes as early as possible. I must just say that I think we are in a good mode now. We have a clear picture in front of us. We have a clear target picture and think this will come as we have planned for it and then also in due time come back with a guidance for 2025.
Okay, can I just ask one more thing, Jürgen?
In terms of Large Scale, is there any reason to believe, well, I mean, obviously, it seems like you're going to be running close to a billion euro business next year again in terms of the profitability that you're clearly generating this year, which is clearly very good. Is there any reason to believe why this profitability levels wouldn't be able to be held next year? Is there any pricing pressure or additional costs coming in on the Large Scale side only?
We kept just saying we are not expecting any huge differences. Of course, there are some markets that are getting more tough. We have the situation that battery prices are fluctuating. But on the other hand, as you know, of course, we are already quite well booked for the next year with prices that have been fixed.
So I would say that it cannot be a huge deflection in the one or the other direction.
Okay. Thank you very much.
And the next question comes from Lasse Stüben from Berenberg. Please go ahead.
Hi, good afternoon. Just a question on sort of how you see working capital developing over the next few quarters. Do you expect the inventory to perhaps reduce, just given your comments on home and CNI? Just be interested to hear your thoughts. And then related to that, you mentioned the EUR 70 million-EUR 80 million of inventory write-offs. Are you anticipating that to potentially be more of those, just given the further delay in destocking in those markets? And then finally, can you just confirm what's still available in terms of the credit lines and on the RCF? Thank you.
Thank you, Mr. Stüben, for your questions.
As you can assume, working capital development is one of my major targets for everyday work currently, and we are focusing also in our new transformation and restructuring program really substantially on the development of cash and net working capital. We can see that what we have started already months ago, now we will see a slight progress, and we will see increasing progress over the next months. As we already mentioned, the purchasing volume, which we are currently facing, currently depends on purchase orders, which have been ordered at one or one and a half years ago under different circumstances. Now we have done a lot of things to negotiate, to postpone, or to find other solutions with the incoming material. Now, since a few months, we see a slight progress, and we will absolutely see an increasing progress over the next months.
So inventory measures are still ongoing and will help to reduce our net working capital. However, the most important focus is really how fast and how far will the destocking at our customer side? As Jürgen already mentioned, we do see slight sales increase, but currently we do not really see a turnaround in the market, and we expect an order intake increase not before second half of next financial year. So it's more now stopping every incoming material because the outgoing material is still on a very, very low level. But nevertheless, we see that inventory remains on a high level also until middle of next year, but we see already slight progress.
On the other hand, which is then reflected in our RCF, the RCF utilization, as we reported in the Q3 report, is at a level of EUR 145 million, and we are currently managing everything with this level of financing, and we currently do not see that there are any necessity to increase this RCF usage. We expect from the transformation and restructuring program that we will be able to reduce the RCF in the line of the next year. Currently, we are planning and also calculating in which quarter which can be done. It is too early to give any detailed information, but our main target is to reduce the RCF during the last year, latest until end of the year significantly. This is what we are currently working out together with the finance and controlling team on a week-to-week basis.
Then the next question comes from Sebastian Growe from BNP Paribas Exane. Sorry, it seems like he either withdraws his question, then we go on with the next. Oh, there he is again. So Sebastian Growe, the line is open for you.
Thank you. I hope you can hear me well.
Yes.
Okay, good stuff. Thanks for taking my questions. And I would have a follow-up question to Constantin's question. And it's considering greenhouse-related pressure on demand around LSPS. I was really surprised to see that strong order intake in the quarter. So maybe you can walk us a bit through the root cause here, and especially also it would be great if you could talk around the pipeline and whether you regard the EUR 300 million-EUR 400 million run rate per quarter sustainable or if there are any sort of upcoming clouds that we should be aware of. We could start there.
Yes, so thank you, Sebastian, for the question. Yes, the order intake is actually higher than in the quarter before, as you noted, and the first time a positive book-to-bill ratio, which also is due to low sales, of course, but we are very confident that we have a good and strong base of orders coming in and also coming in this month and the next month. So we don't see at this point in time any trend that is diverting from that totally. Of course, there's always discussions in the different markets, then changes more a little bit back to PV or more to storage, depending on the prices, etc. That is happening. But we are very happy with the run rate on the order intake, with the price stability on the order intake.
And you were asking about the reasons, but I think that is what we are very proud of because the reasons behind it we see is that we have really positioned ourselves and were able to position ourselves as the company that knows most about grid forming, grid stability, really making sure that it's not only the product we sell, which is a hardware against a certain price, but the functionality in it that actually makes it possible to really drive these projects successfully for our customers. And that's why we are very happy with the outcome, and also we are very confident about how it's going to continue.
If you just look at the guidance, even if we adapted it a little bit to the lower part, as you of course noticed, we are very confident also to have a good Q4 in the segment and in the group in this quarter. No changes. The reason is really that we think we are in a very good position when it comes to grid stability, grid functionality against our competition.
Okay, sounds good. We can then move on to free cash flow. The first one would also be around working capital, I think, on the quarter two call. Barbara, you mentioned that an EUR 80 million-EUR 100 million working capital release might come through in still 2024. How comfortable are you with that statement as of today?
Currently, we are working really hard to reduce the net working capital.
So we stopped everything incoming material for home and CNI, what is possible. So we do not let any material in which is not needed for the future, but we had also some negotiation with very old purchasing orders which we have to handle. So on the other hand, as I already said, the most important aspect is how can the top line be increased? We reduced net working capital. We tried to reduce net working capital, and we currently see that the best income and the first results from our really deep restructuring project will take the positive efforts in the Q4. So therefore, we expect net working capital reduction and also not only inventories, but also in the terms of our receivables, we see positive results from the project and also payables and advance payments.
Also, the increase in advance payments is also part of our current negotiation with every of our customers. So we work on every item of the net working capital, and we see that there will be positive results out of this negotiation and out of the restructuring program resulting in a positive development in Q4 and ongoing.
So take a comment as we should expect that the execution on projects, especially in LSPS, should ultimately then lead to a net reduction in inventory. So what you have in terms of procurement commitments to suppliers, etc., should be a lower part. So we should walk down from the, well, we're EUR 470 million or so in the third quarter towards, sorry, EUR 750 million roughly, towards lower levels towards year. And that is the right understanding, right?
Yeah, we see very, very strong Q4 sales, especially in our large scale.
And we have, year by year, that the last quarter is the strongest over the financial year. And so this is also what we expect from the Large Scale business, that we will see a very strong quarter. And several key large projects are being realized in this quarter, while Home and CNI are expected to stay on the similar level as Q3. So therefore, an inventory reduction is our main target, of course. And however, some purchasing commitments are still there for Home and CNI, but we will do our best to reduce it at the lowest level as possible.
Okay, understood. And then the last one around the restructuring. So from the earlier answer you gave, I take that the layoff-related cash outflows should be around EUR 40 million-EUR 50 million. You made a reference to the accrual and that amount. So is that understanding correct to start with?
Secondly, then should we be aware of any other restructuring-related cash outflows going into, I would assume, mainly 2025? And I'm asking this question because you made a relatively, I think, bleak comment, if I may say so, for any restocking at HS and CNI not to kick in before the second half of 2025. So ultimately, what this is all about is simply if you would, from today's perspective, consider a further cash burn quite likely in 2025 and what that might then ultimately do to any refinancing needs.
Yep. No, but as you said, and Barbara already explained that we are positive with the inventory level of that we will be able to get that down slowly but surely, even if something is still coming in, even for home and CNI.
On the other fronts also, we are positive that we have, with this announcement, taken the substantial part of what is needed for the restructuring and that we will be in a good position to take it from there next year and have a business, as you mentioned, that is not really picking up quickly in the first half of next year. That's what we explained already. Anyway, that we will, with these restructuring costs that you rightly mentioned, between EUR 40 million and 50 million, be able to serve the needed cost reduction, and we will try to account for that in this year's accounts.
Our goal is for H1 2025 to work towards a positive cash flow, but however, we currently see that significantly increasing cash flow will be happening in the second half of the financial year.
So the layoff costs and the layoff cash-affected items will be more or less in the first half of the year. This is our current estimation. As I said, it's all depending on the workers' council and other negotiations now ongoing, but our current estimation is that the negative cash out from the restructuring will come in the first half of the year, and in the second half of the year, the cash position will then be without this special aspect, and therefore, we will result in a positive cash flow over the next year in total.
Okay. All right. Thank you so much.
You're welcome.
And the next question comes from Jeff Osborne from TD Cowen. Please go ahead.
Thank you. Two quick questions on the timing of the EUR 150 million-EUR 200 million of restructuring or sorry, of savings. Is that in 2026 you anticipate achieving that?
Do you have any estimation on what the split is between cost of goods versus the operating expenses?
Yeah. Hi, Jeff. We cannot give you the full split down, of course, because these are also, to some part, changing month by month, but we have, of course, a total in this range of EUR 150 million-EUR 200 million, as you have said, and you can imagine there is one portion coming from personnel cuts. There is one portion coming from material, and there is one portion coming from OPEX. We are happy with how OPEX are developing because this is in our own hands. We can do a lot there, and we are doing a lot there, as you can imagine.
We will have the parts of the personnel cost, as Barbara said, cash flow-wise coming in next year, of course, because of the fact that that will happen over the year, even if we try to make most of that in the first half of the year. The third portion that I mentioned, meaning material, is the one that is most difficult because, as you can imagine, we can continuously negotiate on prices for incoming goods for large scale because we have a good turnover there. But you can imagine not buying anything and not letting anything come in from the supplier side makes it difficult to negotiate on home and CNI side when it comes to lower costs on incoming goods. So that is the part that will be prepared and will mainly come in late 2025, but also in 2026.
So that's why we say the restructuring is taken over 2024 to 2026. And of course, we are trying to have most of those parts in 2024 and 2025, as with personal costs as well as with OPEX. But some of that will also need to come in 2026 because then we only will start getting up, ramping up the volume on the procurement again. And then there's one more part, and that is, of course, volume and price that we can look at. Of course, we will do everything to keep the price as much as possible, meaning having a positive outcome against what we have planned. That would be one part. And the last one would be volume, where we have calculated, as I said, very cautiously, but we'll do everything that it comes out better than we planned. So this is the aspects that we are seeing.
OpEx very heavily on it already, successfully, as we think. Personnel costs being planned. Cash flow will come in the first half of the year then mainly. Material needs to come later, even though we see a part there also. Price and volume effects we will hopefully lift, but not calculate with it too much.
That's understandable, Jürgen. I appreciate it. Maybe just the last question. It looks like the capital expenditure budget for the year was cut pretty significantly. So can you just give us an update on the status of the German factory expansion? I think on prior calls, you had contemplated or considered building a factory in America in light of the election.
I assume that is on hold, but can you just give us a sense of what CapEx, the reduction, how that was achieved, and then how we should think about capital expenditures for 2025?
Yeah. So the CapEx expenditures for the factory, as you can imagine, as it's really nearing completion, so that is mainly taken in this year. We will be able to reduce the capital expenditures for buildings, etc., quite considerably next year. There's always things that are happening, but it will be getting totally back to normal values. And when it comes to U.S.A, we have decided, as I think we said already, not to build an own factory or a greenfield or a brownfield approach in that sense, but to work together with a partner who is doing contract manufacturing for us.
We will continue that path because of the fact that we want to keep it light on the CapEx and still have the same effects that come from IRA. With the changes in politics, this is even more confirmed that we want to reap the fruits, but we, on the other hand, don't want to make sure that we don't have too much expenditures on that.
Thank you. That's all I had.
Ladies and gentlemen, as a reminder, anyone who wishes to ask a question may press the Q&A and then raise your hand button on the left side of your screen at this time. It seems there are no further questions at this time, and I would now like to turn the conference back over to Barbara Gregor for any closing remarks.
Thank you for your participation.
Thank you for your interest. Thank you for your questions. And please do not hesitate to contact us in case of any further questions. Our investor relations team is happy to receive your questions and comments. Thank you very much from Germany. Have a nice evening. Goodbye and [foreign language].
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.