Hello to everybody. Good afternoon. Welcome to Montana Aerospace Q1 2022 earnings call. I'm happy to provide some, I guess, nice development of Montana Aerospace. I'm here together with my colleague, Head of M&A and Investor Relations, Marc Vesely recte Riha. After presentation, which we will guide through, we will later then be available for Q&A, and happy to provide hopefully good answers to intensive questions. Yes, Q1 presentation within very turbulent times. I don't have to describe it, the situation we are right now within. I guess, if we look at the page of our net sales and also adjusted EBITDA development, we can be proud of the development. Upfront, we also guide for the full year to keep our guidance as provided during the annual report.
We had net sales of over 43.6% increase growth rate in comparison to last year. Most of the effect is out of automotive, E-Mobility, and also aerospace, where we provide constantly on a monthly basis, more and more our large contracts on a serial production. Definitely, I guess a very favorable, very constant, solid development also in comparisons to other companies or our peers. Adjusted EBITDA rose over proportionately. We see a adjusted EBITDA of EUR 15.9 million, still not at the level where we target into it, but on a monthly basis, on a better and higher scale.
The 68.2% growth rate, over proportionate growth in comparison to net sales, in comparison to last year's first quarter, 2021. Let's step into some details of the segments. If you're all, I guess, aware, we in the meantime, on a regular basis, also report segment reporting based on the three segments, aerospace, E-Mobility, and energy. If you look at the sales development, all segments are developing in the right direction. Where there's a growth of more than 66.5% in aerospace. Mostly driven upfront by the large contracts, which are now gradually shown as a serial production. I come to that one later in detail. e-mobility, the ramp up is more or less complete, so what we hear right now is optimizing the EBITDA margin.
With EUR 45 million in sales, it's 71% up in comparison to 2021. Mostly based the growth on these large contracts for battery cases and equipment within e-mobility for German-speaking or German-situated OEMs, mostly situated also in the current market. Energy, a bit weaker, to be frank, than expected, but still a growth, a solid growth of 22.2% in comparison to last year's first quarter. Why weaker? What is then seen also later on, slightly in the result, is that we have four entities. South America situated, Europe situated, India, and China. Mostly China had faced again some serious lockdowns, and this was then also that the order intake before the first quarter was weak due to lockdowns of our customers.
Up front, the statement for the second quarter within energy, a very solid order intake. We think that we can take a good advantage of the, I would say, orders which came in April, already in the Q2 2022. We should see also slightly higher growth rates again, also in energy. If you look on a quarterly basis for the last year and also for the first 2022, we see in all three segments, besides, as I said in energy, a constant growth in sales. This is also something we always claimed.
We think that we are a game changer within the industry, mainly based on large contracts and those contracts, and also I would say the ramp up of the build rates, for instance, in aerospace or the e-mobility, the large drive from the market for E-Mobility solutions. This drives us on a constant basis. Aerospace, EUR 54 million in the first quarter, 2021, and then gradually up to a level of around EUR 90 million. Short guidance also, what to expect for the next month. Here we see for the first month, for instance, for total aerospace in April, a sales volume of over EUR 100 million, first time ever.
Also here to expect a constant growth, and the most growth is coming out of aerospace segment in 2022 and also for the consecutive months. If we look in the details of the financials, here we have discussed shortly the net sales. Over proportional adjusted EBITDA. CapEx spend on a level of around half of what we have seen in 2021. We guide this year for around maximum of EUR 90 million on CapEx. I would say maximum of EUR 90 million. Making very good progress with the last large CapEx program in Romania, the so-called third heavy press for European customers. Therefore, we don't think that we will end up at completely ninety, but below that amount for the total year. Trade working capital and total assets is already reflecting the ASCO acquisition.
If you are aware, we closed the ASCO transaction on the 31st of March, 2022 , so the balance sheet already includes the numbers of ASCO balance sheet. On the other hand, the P&L will reflect the ASCO acquisition only April onwards. The Free Cash Flow, of course, is massively impacted by the acquisition of ASCO. We come to that one later. Just to give you a short number concerning details of trade working capital. As you know, we have a very active strategic view on the inventory of the group. We think that with all the shortages in the supply chain, the threats in the supply chain, transportation issues, enough inventory is crucial to outperform within the different segments.
We have out of the EUR 409 million on trade working capital, EUR 342 million, inventory only. Here still a very high amount of strategic, mostly raw material to supply also in the future the growth of Montana Aerospace. Let's deep dive into some of the key KPIs, discuss net sales and also adjusted EBITDA. The adjustment is mostly the so-called MSOP, the Management Share Option Program, as an adjustment, which is split on to four years period, and therefore it's more or less a constant adjustment. Besides that one, more or less no adjustments were effectuated.
Net income reflects the positive development of the EBITDA, and therefore we head again into direction of coming back again, like 2019 and 2018 and the years before, to a positive net income on the total P&L of Montana Aerospace gradually quarter by quarter. Details on segments at EBITDA split by segments. The main driver of the EBITDA growth is in the first quarter, E-Mobility and aerospace. Absolute numbers, aerospace, E-Mobility concerning, the percentage growth, so the growth rate. Even so, I have to say that E-Mobility is already impacted by the high inflationary costs on energy. I guess something we will also later on discuss in detail concerning also in the Q&A.
There would be even more potential concerning EBITDA with a, I would say, more great and more stable development of the energy prices. I guess all in all, a very positive development of the EBITDA margin within E-Mobility. Aerospace still a lot of costs due to the ramp up in the places where we are back, I would say, to a reduced normal concerning utilization of the old plants, like in the U.S. or one in Romania. We are back at the level of around 25% margin level on a quarterly basis. Still those plants which are in a steep ramp-up phase, like the Baia Mare plant, like the Vietnam plant, those are definitely not at this level yet, but on a constant level, increasing the EBITDA level.
Also here we see a positive trend concerning EBITDA level within aerospace. A short word into energy. Energy, as said, had not only suffered slightly from a Chinese lockdown, so the strict COVID policy we face in China, but also from a delay of inflationary costs to customers. Just to give you a bit of a detailed number on that point. Only in the Austrian or European entity, we suffered on a monthly basis, EUR 600,000 in additional energy costs in comparison to our, I would say, average price we have here for the guidance of 2022. We will be able to pass this through to our customers, but as energy is a project-based business, there is usually a delay of around half a year.
We started price increases in the fourth quarter 2021. The price increases will show their effect in the second quarter of 2022 onwards. We should see also here again to come to I would say normal rate of EBITDA. Hopefully for the certain fourth quarter also an increase in the EBITDA percentage in comparison to what we saw in 2021. The levels of percentages let's go into some more operational KPIs. Production performance in line with the sales, plus minus, so over 40%.
The personnel expenses at the level of 34%, slightly under proportional. Still take into consideration that we do, as we have this steep increase in the ramp up and also in the production rates and also in the, I would say, the sales. We do have upfront to hire up for around half a year staff and engage them before they show them the operational skills on a daily basis, and have them there, I would say, more or less effect in the sales. Personnel cost is in line with our expectation, with our budgets. On the other hand, under proportional development, and this under proportional development should increase concerning under proportional ratio also for the next quarters from now. Other operating expenses, highly impacted by freight and energy costs.
Just to give you an idea, in comparison to last year's energy costs, they were 3x higher this quarter in comparison to what we saw in the first quarter, 2021. A bit detail on that point. We had around EUR 17 million on energy costs for the total year, 2021, shown in our annual report. This first quarter alone, we had slightly more than EUR 10 million on energy costs to account for. This is mostly the driver of the operating expenses. The other major driver is freight. Here, plus, minus the same, I would say, impact. They doubled in comparison to what we saw in the first quarter, 2021. Even so most of it, or I would say the majority of it, we can pass through to our customers.
Of course, they show their impact also in the operating expenses. Net debt reflects the ASCO acquisition mostly, and also the strategic increase of the inventory. Saying that, we think that we have reached a good level of inventory now. There is, at this level, no further increase right now planned. However, as long as there are this, I would say, very uneasy situation concerning supply chain on raw material and unstable situations on the worldwide markets, we would like to keep this high inventory for security and also for materializing on that one concerning market share. Within the net debt position, there is still a vendor loan, which has been much less shifted into equity by seventh April 2022. The net debt guidance is to be reduced by the next quarters from now.
Number of employees already reflect the ASCO acquisition. You see the organic growth is in comparison to 2021, slight. The majority of the growth from 5,500 to more than 6,800 employees is impacted by the acquisition of ASCO. ASCO accounts for around 1,100 people worldwide in the four sites they have. Trade working capital, as said, the majority, the driver for the trade working capital, which also includes the numbers of ASCO already, are the inventories, and here, mostly the raw material.
We think that to be able to provide, even when other competitors are not able to deliver, we have shortages in all the different layers of the supply chain, is a strategic advantage. Not only short-term, but mostly mid-term, we think that we can materialize it on it. We had a discussion, for instance, two weeks ago with Boeing, and they stressed this fact once again, how important it is to deliver and to jump in and how they search for strategic partners on this point. Balance sheet structure, still stable, but already including, of course, the acquisition of the ASCO transaction. Coming to the cash flow.
The operating cash flow negative impacted also by the increase of trade working capital, including also the ASCO transaction, not showing any sales or EBITDA, of course, as the P&L will show its effects only from April 2022 onwards. If you look at the simplified operating cash flow, as I would say, KPI, to see how the performance is showing on cash flow development, this is in line with definitely the even if more than in line with the development of the EBITDA, with an increase of more than EUR 11.8 million or a tripling in comparison to what we saw in the first quarter, 2021. CapEx, as said, reduced in comparison to last year, where we had around EUR 120 million on CapEx cash out for the total year.
This year, we guide, as said, with slightly less than EUR 90 million. All the programs are in good progress, and I would say slightly ahead of our internal plans. ASCO, the largest transaction Montana Aerospace ever did. Therefore, there's a key to have the PMI process performed as fast as possible and to have the set up in the aerospace business as fast as possible transported to the OEMs. This is ongoing, and we rely on it that we have the capabilities to position us together as the number one aerostructure supplier concerning quality, costs, reliability and also innovation. Having a very good, I would say, first weeks of PMI process and also I would say discussions with the customers, with Airbus, Boeing, Lockheed Martin, you name them.
Here again, the ASCO is the specialist for large moving parts of the airplanes, and I would say so-called slats and flaps mechanisms for the plane, and also large parts out of titanium and also aluminum, like blocker doors and similar topics. Here the PMI process concentrates on providing instead of third-party parts and supply chain to be provided by the Montana Aerospace supply chain. Therefore we think that we will have a good progress concerning the synergies and to outperform our own expectation, which is the goal of having ASCO back on a 15% EBITDA margin at a level of around EUR 300 million. Then on top, the synergy potentials out of the group should be part of, I would say, the complete consideration.
Saying that and knowing that we are living in very turbulent times, I don't have to tell you on a daily basis, there are new shocks, new information, new whatever, political statements. We still keep to our guidance, and therefore, I would like to repeat the guidance of what we showed within the annual presentation of the numbers of 2021. Here they are. We stick to a guidance of EUR 1.1 billion in sales, which is more than 35% more than what we have seen in 2021.
We see that the most of it is organic growth and here mostly, I would say, from the new packages and also from the resurrection of the ramp up of the build rates at different planes and platforms. The most part of the absolute numbers, in addition to what we have seen on sales 2021, shall be shown by the aerospace segment with slightly more than EUR 500 million in total sales expected for 2021. Of course, the major driver for it is in aerospace, also the build rates. The build rates at the different platforms. Once again, this is our expectation, which is shown here of the build rate development.
Even so, we know, for instance, that the A320, there's a clear plan to show a build rate of 65 by mid-summer 2023. Airbus targets a build rate of 65 per month for the A320 family by mid 2023 and even targets a 75 build rate on a monthly basis by 2025. We still stick to our financial guidance on a lower build rate because we still think that will be tough to increase the build rates with this speed, with all the implications the worldwide very fragmented supply chains show.
If there will be a higher build rate, we are happy to provide or to jump in if other suppliers are not able to provide in the speed which is asked for by the OEMs. Again, a slide which we also more or less updated in comparison to what we showed in the annual report presentation. The crisis in Ukraine. Once again, we have minimal risk concerning direct sales with Russia or Ukraine. We showed around EUR 2 million sales for Russia in the first quarter 2022, pre-crisis, effectuated.
For the total year, we had in the budget around EUR 8 million or contracts of around EUR 8 million also in our sales pipeline. EUR 4.5 million of it is already prepaid, but the rest is at risk, which is, I would say, not material. On the other hand, we don't have any direct supply. Of course, there are indirect risk, which we have to manage on a daily basis. What are they? Once again, the impact on the raw material prices. Even here we will see that some of the prices already decreased again, like for instance, aluminum, which went down from EUR 3,700 on a peak time a couple of weeks ago to around EUR 3,000. That's the peak right now.
The impacts on the energy, which we think that we have already a very good number within our calculations for the guidance 2022, and already calculated with this amount during our budgeting and guidance phase. Therefore, once again, over here, something I want to clearly state, we don't have any offices or facilities in Russia or Ukraine or countries impacted by the embargo. Therefore, the direct risk is definitely limited to what we see on this upper part of this page. Saying that, we would like to close the, I would say, the short presentation for the Q1 numbers with the rest of the guidance for 2022. As said, a cash out for CapEx lower than EUR 90 million for this year is to be expected.
A good sales increase of over 45%, and also the adjusted EBITDA. We keep to the guidance, as said in the annual presentation. Therefore, our clear goal is this year, execution of the large contracts we have, execution of the demand, the POs and the higher bill rates we see in the market of the integration of ASCO. Hopefully, with the second quarter then onwards, mid-second quarter also with the integration of São Marco. With an ongoing massive CapEx reduction, and therefore clear goal for 2023, as already said in the presentation of the full year report, is of a positive Free Cash Flow and the over proportional growth on EBITDA with around EUR 1.4 billion on sales by 2023.
Thank you very much for attending, I would say, the short presentation on the Q1 numbers. Now I would like to hand over to you and your questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Richard [audio distortion] from ZKB Securities. Please go ahead.
Good afternoon, gentlemen. Thanks for taking my question. I have two on ASCO. The first one is regarding the synergy potential. I'm quite curious to get some more color on this if it is possible by this time. The second one, regarding the goals of profitability on EBITDA levels of 50% margin and sales EUR 300 million. Where do we need to put that on the timeline? Is it rather 2024 into 2025 or even earlier? Thank you.
Richard, thank you very much for your questions. Yes, I'm happy to answer those. I start with the second one. The EUR 300 million on sales, depending on the build rates, but with our assumption of the build rates around 24. Of course, if there's a large impact to the sales from Airbus build rates to ASCO. Just to give you a rough guidance on that point, around 65% of the sales of ASCO is based on Airbus build rates or Airbus platforms. Of course, if they really raise them faster or like the announcements, the build rates, then we would see definitely 24, the EUR 300 million within the sales of ASCO.
Concerning synergies, yes, ASCO on a stand-alone basis as it is, with the supply chain as it is right now, it's good for around 15% of EBITDA margin. That's also something they had in the past before, I would say, the COVID crisis and the reduced build rates of the last two years. The synergies, on the other hand, we just had today in the morning our weekly, I would say, steering committee topic concerning PMI process seem to be higher than what we expected, and we expected around EUR 50 million in additional synergies on a yearly basis.
Also by 2024 onwards. Now calculating roughly, EUR 300 million, 15% is EUR 45 million EBITDA, plus around EUR 15 million minimum on synergies would be EUR 60 million, which is then reflecting around 20% EBITDA.
Great. Thanks very much.
The next question is from the line of Virginia Montorsi from Bank of America Merrill Lynch. Please go ahead.
Good afternoon, guys. I actually have three. The first one would be on EBITDA for your energy business. Could you give us a little bit more color on your Chinese market and the challenges that you've highlighted there? That would be my first question. Second question would be on financial charges for full year 2022. How should we think about those? The third one would be very quick. Could you just confirm, have I understood correctly that some of your plants are already printing 25% margins for aerospace, like the U.S. ones? Thank you very much.
Virginia, thank you very much for your question. Yes, I start in the same order, like with Richard's questions with the last one. Yes, you heard correctly. Those plants which are right now back at, I would say, a decent utilization like the U.S. plant, we are back to around 25% EBITDA margin. Therefore we have the confidence to bring also back the EBITDA margins or bring the EBITDA margins of the other countries, companies, to the good level, a good level of over 20%, consistent with, I would say, the increase of utilization and the ramp up which is right now taking place there. Concerning the financial targets and financing for 2022, we have the net debt is quite, I would say, stable.
There is some revolvers within the so-called Schuldschein notes and those revolvers. It's on a constant basis revolved or renewed. They're right now in the process of being renewed, but we don't see any implications that they should not be renewed. A stable debt position by the year's end with changes of the interest rates, as the interest rates, most of the Schuldschein notes are based on a fixed interest rate. Concerning the cash position, on the other hand, as said, it's mostly impacted by also the acquisition of ASCO.
This should show for the next quarters a reduction based mostly on the shift of the vendor loan into equity, which was effectuated by the seventh of April 2022. Last topic, energy. Yes, right. We are not happy with an EBITDA margin of 3% as we saw it in the year 2021. We are also not definitely happy with an EBITDA margin like we have seen in the first quarter, which is one point something or 1.9, which is definitely underperforming, I would say. As said, we see it in the order books and also in the contracts already that our price increases are there.
Therefore, we think that we will come back to at least 3% within the next quarters from now on. Yes, we still target to come to a gradually till 2025 to this around 8%, 7%-8% EBITDA margin in energy business. Please always take into consideration energy business is large in sales. There's a lot of material implied with copper, but it's very low consuming capital employed. There's only a capital employed within the business of around EUR 50 million. But still, therefore, I would say 7%-8% EBITDA margin would show them a good return on this capital employed.
Thank you very much. Very clear.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by one on your telephone. The next question is from a line of Ross Law from Berenberg. Please go ahead.
Hi. Good afternoon. Thanks for taking my question. The first one is actually a follow-up to Richard's question on ASCO. Just wondering how important volume and operating leverage is to bring that ASCO business up to a 15% margin. So do you need to achieve EUR 300 million of sales to do this, or is it possible to achieve that sort of profitability on a lower revenue base?
That was my first one.
Thank you very much. It won't be able. With the build rate of what we have seen, 2021 is not possible. Fair enough. That's then the second half of 2021 at ASCO was positive on EBITDA, but not at the level of 15%. Their first half of 2021 was still negative on EBITDA. Here you see that the slight improvement of build rates already make a big difference as it's 100% aerospace business, yeah. They are in.
I would say that the level of around what we see, so for this year we calculate on a stand-alone basis with a double amount of positive EBITDA, but also at high PMI cost as we shift, as we said, to a good portion of the complete supplies they have into our plants. This is also then impacted by high costs. Therefore, we calculate with a consolidated level, non-adjusted on a, I would say, zero for this year. The level of what is needed for having this 15%, I think that we should see the 15% ± next year, 2023. Again, based on the build rates we have, which would then show a level of around EUR 230 million-EUR 250 million on sales.
Okay, great. Thanks. Second one just on orders. Obviously you had a pretty decent order intake to date, but you've also flagged that you're working on several contracts currently. Can you give us some detail about those discussions? Potential size of these contracts, which market, which program, which customer, when we could see those flowing through to P&L? Yeah, any detail would be helpful. Thanks.
Yeah. Yes, I'd like to also answer this question because it's very important for us, and we're working on it on a daily basis. We would also like to publish a bit more concerning the contracted sales, and we will try to publish this once again, then on a regular basis. Please take into consideration now, with the, I would say, daily changes of the book-to-bill ratio of the OEMs. It's not easy to calculate. We wait a bit for a more stable basis on that point. However, we had a book-to-bill ratio in the first quarter of around 1.25. Also positive concerning the development here.
We are working on large contracts and to give you a bit definite view of what they show, there's some hundreds of millions euros worth of contracted sales for the next five, six, seven years. Yeah. It's mostly Airbus-based business.
Okay, great. Just one final one before I pass it back, on M&A. Can you give us a quick update on where you are with the potential two opportunities you've been looking at recently and when y ou might look to move on that? Thanks.
This is a clear statement also in this regard, good progress on both of the. We have a look at some of the, I would say, entities. We have discussions, as you know, with potential targets, not only for a month, but for many quarters and sometimes years, as it's more a partnership and then gradually take over clients which we elaborate with those companies, also mostly in consideration and coordination with the OEMs or the customers. No M&A cash out to be expected in 2022. We would like to sign a transaction in the size of, I would say, a mid-sized company, at the second quarter, second half of 2022.
Here, I would say the progress is solid, but no cash out without having the funding on our own means, which means out of our Free Cash Flow, which we think that we can generate in 2023.
Very clear. Thanks very much.
There are no further questions at this time, and I'd like to hand back to Michael Pistauer for closing comments.
Yes. Thank you very much for attending. As you all know, we are always ready and hopefully also available for further questions. If you have some detailed questions, please directly contact us. Maybe the last statement is last week I've been in the U.S. I flew over Denver. After night flying, I was on the Denver airport and I smiled. Why? Because I've never seen such a crowded airport in my whole life. You see that once there is the possibilities to travel, people will travel and do travel. This gives us also a big confidence in the future of not only the industry but also of Montana Aerospace. Thank you very much.