At the front table here, we have Phil Underwood, who is the President, CEO, and Director of the Board, and Elena Milantoni, who is the CFO at the front table here. In the front row here, we have the remaining directors. Phil and myself are what we call non-independent related directors, so we're no good. We get kicked out of the Board means they do all the decisions while I was there. At the front, we have JP Veitch here. JP is a former colleague of me from the financial business and has been on the Board now for four years. JP, five years. Five years, right? Next to Beth Bandler, who's a lawyer by trade and met Beth originally in 1995, 1996, Beth, when we acquired Orenda Aerospace next year.
Beth was the Solicitor and General Counsel at the time, met her in over that acquisition and asked her to join the Board now, I think, what, six years ago, Beth? 10 years ago. Okay. Next is my long-term partner and colleague who went to University of Saskatchewan here, Larry Moeller right here, and then next to him is Steve Somerville, who also was somebody that we met back in 1996 when we acquired Magellan. Steve was the banker in the deal, and he told me, "Murray, you really want us to buy this business? I don't know if I want to finance it," but he did agree to do it, and it's been okay with Steve so far. So we appreciate your confidence. We'll lock the door up at the time. Thanks, Steve. Okay. The meeting will now come to order.
I'll ask Elena Milantoni, Corporate Secretary of the Corporation and Secretary of the Meeting, and Josette Kaufenberg from Computershare Investor Services, Director, Scrutineer. In order to ensure that the formal business proceeds efficiently, we've asked certain employee shareholders to make and second motions. This is designed to facilitate progression of the meeting and is not intended to discourage comments. Before we begin the meeting, we have to remind everybody that there are remarks today that we'll make. Statements about the information that is not historical factual information.
This information may be considered forward-looking information. Statements about the forward-looking information are, by their very nature and guarantees, Magellan's future operational financial performance are subject to risks and uncertainties. Actual results could differ from material for what is currently expected. While Magellan believes his expectations are reasonable, they are based on risks and assumptions regarding a number of factors.
Details regarding these assumptions and factors, as well as additional information about material factors, risks, assumptions that could cause our actual results to differ materially, what is currently expected can be found in Magellan's annual information form, which is available on sedarplus.ca. Magellan does not assume any obligation to update or revise any forward-looking information except in accordance with applicable securities law. Now, I didn't write that. So to be clear, that's for lawyers. I got to do it. Boy, but anyways. Okay. The first thing is we have a couple of housekeeping matters. The business matters to be conducted at this meeting are the items set forth in the Notice of Meeting and Management Proxy Circular of the Corporation, both dated March 21st, 2025.
Those mailed or emailed to shareholders, only shareholders of the close of business on March 21st, 2025, the record date, or their duly appointed proxy holders are entitled to submit questions and vote at this meeting. At the conclusion of the formal part of the meeting, Mr. Underwood will make a short presentation at Corporation's 2024 fiscal year and plans for the future. Notice of Meeting. We have received an affidavit from Computershare as to the mailing of the notice and access document and instruments of proxy to shareholders. We direct that this affidavit, the copies of documents mailed to shareholders, be kept by the Secretary with the minutes of this meeting. Okay. Next thing is quorum and scrutineer's report.
Under the bylaws of the Corporation, business may be transacted at this meeting if two persons are present at the meeting and hold or represent by proxy not less than 10% of the votes of the shares issued by the Corporation entitled to vote at the meeting. The scrutineer's report has confirmed that a quorum is present. The scrutineer's report shows that there are 56 proxies cast for shareholders holding or representing 49,504,477 shares, or 86.64% of the shares which are entitled to vote at the meeting. The scrutineer's report will be kept with the minutes of this meeting. As such, there is a quorum of shareholders present, and we now declare the meeting is regularly called and properly constituted for the transaction of business. Voting. All voting done today will be conducted by way of a ballot.
Voting on the resolution to appoint the auditors will be conducted by show of hands unless a shareholder or proxy holder demands a ballot with respect to the vote on such resolution. Thank you to those who have already voted prior to the meeting. These votes will be tabulated along with today's vote, and the Scrutineers will provide us with a detailed breakdown of the vote after the meeting has been closed, which we will post on SEDAR+. Okay. Next here, annual report, financial statements, and the auditor's report. The next item of formal business is the receipt of the 2024 consolidated financial statements of the Corporation as included in the 2024 annual report to shareholders for the fiscal year ended December 31st, 2024, and the auditor's report thereof.
A copy of the annual report and the auditor's report contained therein has been made available to every registered shareholder either in hard copy or electronically. The financial statements of the Corporation for this year ended December 30, 2023, can also be found on the Corporation website or SEDAR. We now place before the meeting the consolidated financial statements of the Corporation and the auditor's report thereon for the year ended December 31st, 2024. I think, are there any questions on those? Hearing none. Next item is the election directors. The Board has been fixed the number of directors to be elected at meeting at six. We will now entertain nominations for directors of the Corporation. Do I have a nominator, please?
Mr. Chairman, my name is Karen Yoshiki-Gravelsins , and I am a shareholder.
How many shares do you own?
A number.
You're fine. You're inside the report?
I nominate N. Murray Edwards, Phillip C. Underwood, Beth M. Bandler, Larry G. Moeller, Steven Somerville, James P. Veitch as directors of the Corporation to hold office until the next annual election of directors or until their successors are elected or appointed, subject to the provisions of the Business Corporations Act of Ontario and the bylaws of the Corporation.
So, Karen, what do you do at the company?
Vice President of Corporate Stewardship and Operational Excellence.
Okay. Great.
What that means.
Yes.
It's quality, environmental, health and safety, continuous improvement, export compliance, and our Magellan Operating System.
Do you think you need some more, Beth?
No? And how would you report to the shareholders? Those areas of your response, how do you feel about our sustainability and practices around that?
I think that we've taken a very smart approach, and that is to focus on efficiency, operational efficiency, and if we do that well, the gains to be made in electricity reduction energy usage will follow.
Problem. So you think in many times these investments in sustainability actually pay for themselves through efficiencies gained, right? And every one of our plants now is certified to ISO 14001, is that right? All of our plants around the world, is that right? And so you do metrics to the Board every year or to the Health Safety Committee every year showing how we compare a number of our peers in terms of sustainability metrics. And what does that chart usually show Magellan relative to our peers?
It doesn't show only our peers, but our customers.
Customers, yeah.
Yeah, and our customers, and we're right up there with the customers, and we are ahead of our peers.
Right. So when we look at the metrics, would you rate us on our performance using this number of categories? We tend to be comparable with a lot of our customers. Our customers would be people like Boeing, Airbus, General Electric, and we tend to be ahead of most of our peers, only as mentioned there. Is that fair? Yes. We're lucky Karen does those standing jobs, so thank you, Karen. Do I have a seconder for that motion now?
I'm Brian Oakley, and I'm a shareholder.
Do you want to share with Brian? How long do you own the shares for?
Shares for three years.
Three years. Okay. When did we first meet, Brian?
The second.
When did we first meet?
We met in a boardroom when I presented you with Fleet Industries, the first acquisition of Magellan.
Back in 1995, wasn't it?
Time.
Boy, time goes by so fast, right, John? That's right. Okay.
You used to call me every week and say, "Did you put the duck in the net?"
I did, yes. I know. Did you?
Yeah.
Some days. You're still here, so that's a good sign, right? You didn't get sent to the miners. Thank you, Brian. Are there any further nominations for directors? As there are no further nominations, we now declare nominations closed. To vote for or withhold for voting for each nominee, you need to mark and sign a ballot provided to the representative from Computershare. If any registered shareholder or proxy in attendance today has not received a ballot, please identify yourself to the scrutineers now. Seeing none, since all the ballots are now being collected, we'll now allow the scrutineers time to tally the ballots and in the interim. However, I've been informed by the scrutineers that every director has received an excess of 95% for and none against, just some withheld.
I can declare that all directors nominated today are duly appointed directors to hold the office until the next annual meeting of shareholders pursuant to the Business Corporation Act of Ontario. The next item of business is the appointment of auditors. Do I have a motion in that regard?
I move that the firm of BDO Canada Chartered Professional Accountants be appointed auditors of the Corporation until the next annual meeting or until their successors are appointed and that their remuneration, as such, be fixed by the Board of Directors.
Are you Karen, the only two shareholders we have here today? So, Brian, what do you do at the company, Brian?
I work in business development.
Right. And how is business developing?
Business development is exploding. It's a different time for us right now, as will be attested by my boss, Mr. Martin. The flood gates are open, and the business is going to grow, and we're positioned well.
Why do you think that? What's changed? Is that a macro? Does it have to do with our own performance? What do you think that is due to, Brian?
What is causing it?
Yeah.
It's just demand for aircraft and demand for companies like ourselves that can do it from start to finish, and our biggest accolade from our customers is, "Yeah, you might show signs of stress, but we don't have to send a team in to fix it. You're capable of doing it on your own," so it's a good time.
So you think our customers are better today than you've seen in previous years?
Absolutely.
The opportunities are better, you think?
Yeah, and they're recognizing that, and it's evidenced by the opportunities we have.
Right. Would your boss agree with that, Haydn? Would you agree with that, Haydn? He calls you your boss. I didn't know that.
I think customers see us as a fairly safe pair of hands, and with the global footprint we have, we're able to offer solutions that fit the goals of the corporations. Airbus, Boeing, Pratt & Whitney, Safran, they're all approaching us to expand their work content with us, so I think over the next couple of years, we should see some significant growth.
Give us a generic example, not specific, but how does this global footprint help you in what you do.
There's a huge downward pressure on pricing for small, simple components. And historically, we would have lost those. But with the development of our low-cost footprint in India and Poland, we're able to still hold our margins and in some cases improve them and offer those pricing that's attractive to the customer.
So we're seeing our customers also go to those markets too then?
Our customers are going to those companies in India directly. But the advantage we have is they see that safety of being with somebody that they've been dealing with for 30, 40 years. And that gives them a level of confidence that a new startup in India directly can't be.
Would you agree with Brian's words? Your wording is exploding. Would you agree with that word? Is that a little bit more?
I think there's a lot of uncertainty in the world at the moment. But I think the underlying trends are really strong for us, particularly with the diversity of our business between Defence and civil aerospace. It's one of the real strengths of the business. We're able to weather storms by focusing on Defence, commercial aerospace. So I think the team's done a great job in the last couple of years in positioning ourselves with some of the Defence manufacturers where I think over the coming years, with places like Rockwood, we're going to see some real growth opportunities.
Okay. Good. Thank you. Do I have a seconder for that motion?
Second.
I won't ask you a question, Karen. Don't worry.
Thank you.
I'll signify in the usual manner by raising the right hand for the appointment of BDO Canada as the chartered accountants for the Corporation for the working assignment year. All in favor raise your right hand. Any opposed? Hearing none, I can confirm also that that resolution has been passed. We therefore direct that the Scrutineers' report and results of the voting be kept with the minutes of this meeting. Is there any other business for this meeting? As I see, there are no questions on the form and conduct of the formal business meeting. I will now take the motion that the meeting be terminated. So moved. Is there a seconder for the motion? Guess who?
I second.
Thank you, Brian. All in favor, please signify by raising the hand. Any opposed? Carried. I now declare that the meeting is adjourned and now passed to be an order under which we'll provide a business update on the presentation and results of the corporation. So I'll pass to you, Phil. Thank you.
Thank you, Murray. Good afternoon, everyone, so I will be presenting the business and strategic highlights for 2024 with Elena Milantoni, our Chief Financial Officer, presenting the financial summary. Starting with the business overview, so Magellan is a global business with 19 divisions and over 3,800 employees worldwide in those three main regions, so in this section, I will update on the commercial and Defence markets and starting with the commercial market, so commercial air travel continued in 2024. The International Air Transport Association reported that industry-wide travel grew by 8.6% year-over-year in 2024, with domestic travel growing by 5.5% and international travel by 10.6%. China and India experienced the largest domestic travel, with growth at 12.3% and 6% respectively. The International Air Transport Association forecasts growth of 8% in 2025, with demand for new commercial aircraft driving strong with the strong order backlogs.
Airbus and Boeing both ended the year with strong order backlogs, with over 14,800 aircraft on order. However, supply chain delays, labor shortages, and market disruptions continue to affect the industry's ability to capitalize on this pent-up demand. Also, the three-month Boeing strike in the later part of 2024 impacted the industry. But despite these persistent headwinds, the industry is stabilizing and improving. Boeing is working towards their rate above 38 737s per month, with a goal to reach 57 per month by 2027. Boeing's 787 is increasing to five per month, and the 777X certification is now planned for early 2026. Airbus is ahead of Boeing with their single-aisle production. They plan to reach 65 A320s per month late this year and 73 per month in 2026. A350 rates will hit seven per month in 2025, and the A380 will increase to 4.3 per month.
In summary, there's cautious optimism that the commercial industry is finally stabilizing and growing. And this is, of course, contingent upon potential new hurdles that might appear. Moving to the Defence market, rising geopolitical tensions have been the main driver of recent growth in the Defence aerospace market. Additionally, the uncertainty caused by U.S. deglobalization and a pullback of international Defence support is changing market dynamics. Defence growth remains strong, with previous spending targets of 2% of GDP likely to be exceeded in the current climate. Within the Defence market, fighter aircraft represents the largest segment, with the F-35 making up 40%. In March this year, the U.S. Air Force awarded Boeing an engineering development to order for a sixth-generation fighter, the F-47. The growth in the fighter market naturally drives an increase in demand for pilots and therefore trainer aircraft.
And as a result, the trainer is becoming a strong segment and is projected to grow significantly. Engine manufacturers are expected to benefit from this growth as some trainer programs utilize the same engines as larger fighter aircraft. So in summary, the Defence market is potentially the strongest in some time, with growing segments in unmanned aircraft and trainer aircraft. So I'd like to briefly touch upon the recent tariffs. Based on our current business, approximately 75% of Magellan's revenues are unaffected by tariffs. Of the remaining 25%, virtually all is export from Canada into the U.S., which is currently exempt from tariffs under the Canadian, U.S., Mexico, and Free Trade Agreement. Primary impact to Magellan is on our U.S. divisions due to 25% U.S. tariff on steel and aluminum, which is less than 1% of our sales.
Should the agreement exemption be discontinued, Magellan's customers are mostly responsible to pay for the applicable tariffs as the importer of record. With the Canadian counter tariffs, the majority of our imports into Canada are exempt. So I'll now touch on the key announcements that we made in 2024. So during the year, Magellan announced a number of contract renewals and agreements. We secured the extension of our contract with Airbus for our U.K. divisions to manufacture major structural wing components for the Airbus single-aisle family. In support of NASA's Sounding Rocket program, Magellan will provide Black Brant vehicles and hardware to Peraton Canada from its facility in Winnipeg. As part of our growth strategy in India, we've signed an MoU with Aequs to explore the possibility of establishing a jointly owned engine maintenance, repair, and overhaul facility in Belagavi, India. Magellan also announced long-term agreements with Pratt & Whitney.
These important contracts cover the supply of complex castings used on a number of legacy and new engine programs. Defence Research and Development Canada is adding a new sub-satellite to the Redwing Space Domain Awareness Project. Through a partnership with Magellan, the UK's Defence Science and Technology Laboratory and the University of Manitoba, the design, manufacturing, and operations for Redwing is led by Magellan Aerospace. In 2025, we've also announced a few press releases. To help address the capacity constraints in the castings market, we've signed an MoU with Aequs to explore the possibility of establishing a jointly owned sand casting facility. Magellan also amended the long-term revenue sharing agreement with GE Aerospace to include the production of major components for the F414-GE-400K aircraft engine and for the Korean KF-21 aircraft program.
We've extended our long-term program with Pratt & Whitney Canada and secured new manufacturing programs award for our Tumakuru facility in India. Continuing with the business overview, these charts show revenue by customer and market segments in 2024. On the left, you can see that 36% of our revenue is directly with Airbus and Boeing, which is down from 2019 levels of 40%. Although Airbus is back to previous percentages of revenue, the revenue percentage for Boeing in 2024 continued to lag as production rates expected on certain programs were not achieved. On the top right, 56% of our business is Aerostructures, 25% Aeroengines, including repair and overhaul, 12% is Castings, and 7% is Specialty Products. On the bottom right, you can see 65% of our revenue is derived from commercial business.
Our Defence businesses, 35%, has decreased from prior year due to the increases in the commercial build rates. I'm now going to hand over to Elena, who's going to do the financial summary.
Okay. Touching on highlights for 2024, in terms of revenue, our consolidated revenues for the year ended December 31st, 2024, were CAD 942 million, an increase of 7% from the CAD 880 million achieved last year. Our revenues in Canada did decrease by about 1.8%, sorry, as a result of a labor strike last year that we had at one of our divisions. That was more than offset by increases in the United States by 12.1% and in Europe by 14.5%, mainly attributed to build rate recoveries on single-aisle programs. Our gross profit came in at CAD 108 million for the year ended December 31st, and that is a comparison to about CAD 89 million in the prior year. The increase in profitability is mainly a result of volume increases, contract rehabilitations on certain programs, and our favorable product mix offset in part by price increases on materials and supplies.
Elena, this year in 2025, we should exceed CAD 1 billion in sales on annuities.
That's our forecast, yes.
That's correct. And our previous peak sales are back in 2019, was it?
2019, where we just hit over a billion.
We just hit over CAD 1 billion, so we're finally getting back to 2019.
We're getting back six years later.
Six years later. The impacts COVID really took a time to work through both our supplier base and our customers.
That's correct.
And so we're turning sales back to 2019 levels. However, if you look at the gross profit in 2019, our gross profit was 14%. In 2020 and 2019, it was over 15%. I'll have to say, right?
That's correct.
We're still lagging on the gross profit line, Elena.
We're still lagging on the gross profit line. We do expect to improve it year-over-year as the contract rehabilitations come into play, and we get back to some of our divisional capacities where we were back in 2019 when the levels were not there.
You're going to [audio distortion] say the message for them is their gross profit. Although our sales are back to 2020, we're still not back to gross profit levels.
That's correct.
We can still work through, so you're going to reinforce the message.
That is part of the strategic initiatives that we're going to be reviewing in the next few days.
Right, Phillip?
Yes. Absolutely, Murray.
Yeah. Absolutely.
Okay. The next chart is our.
That's the goal. I didn't mishear.
Our next chart shows our adjusted EBITDA percentages increased to 33% or $24 million. That was an increase of $24 million to $97 million from the year ended 2023. We did see improvements as a result of the increase in revenue and the increase in margin improvements. The next slide is in regard to our capital investment. We invested about 3.8% of our revenue in capital, which was about $36 million. Investing in new technology not only improves safety and lifespan, but also increases productivity and capacity requirements that we will need in the future.
Phil, as we're getting the rebound on our sales back to level we were in 2019, hopefully we'll see that in the next few years, Phil, EBIT starts to climb. But also more demands for capital for new programs, plus to retool some of our plants or modernize some of our plants. Right, Phil?
Exactly, Murray. Yeah. I mean, previous levels were between 4% and 5%, and that's what we expect to get to need going forward.
Right. Yeah, so the good news is the sales are going to go up, prop to the same number, and have more requirements, more capital spend, and hopefully, that capital spend will also be up for new projects, new programs, and more revenue growth.
Efficiency improvements, yes.
Yeah. Okay.
On the next slide, we'll touch upon our working capital. Our working capital requirements have continued to grow in line with the growth in our business that we saw over the last number of years. There are several factors that have contributed to the growth in inventory across the industry, not just with Magellan. OEM inventory destocking and the restrictions on certain production aircraft rates have built up inventory levels in the industry. Additionally, long lead times have necessitated companies to maintain higher levels of safety stock. Furthermore, inflationary pressures have played a role in driving up inventory costs.
Elena, back in 2019, when we had CAD 1 billion of sales last time, our inventory was about CAD 190 million?
That's correct.
Correct. And now our inventory is approaching CAD 280 million on the same sales. So we got roughly an incremental CAD 100 million of working capital invested in inventory today that we didn't have back in 2019.
There is some of that, yes, and some of that is the fact that we had enabled material from our suppliers, so we've now had to purchase the material. The fact that there's longer lead times, so yes, we are looking at that. That is one of the areas that we are heavily focused on in terms of inventory, as well as, you saw the next slide, the contract assets as well.
Right. And Phil, we did some studies, Phil, of our peer group, Phil. And this growth in inventory the last five years has been pretty well- consistent across the entire industry, Phil, right?
Yes, so the our peer group, where we were back in 2019, and stock turns were averaging between four and five, and now the average across our peer group is around three. So everybody's been feeling the same pressures as OEMs and supply chain buffer stocks and purchasing material and protecting deliveries. So we're sitting about the same as our peer group, but it's still an opportunity.
Phil, essentially what's happened, Phil, is our customers, Phil, are demanding more work in progress, more inventory and stocks to provide them buffer against disruption.
Yeah, especially with what's gone on over the last three or four years.
So that's the one consequence. And the second consequence is remember in the past, suppliers would provide materials to us to do the work of the projects. And they now trying to offload their balance sheets. They now say, "We want you to buy this material first and direct instead of us supplying it free of charge. You do have to buy it and hold it in your books," right, Phil?
That's correct.
So those are the two changes. The result is, Phil, we have to hold roughly another, if you look at the bottom slide, between 2019 and 2020, roughly another almost 100 million of contract assets and inventory that we held back in 2024, Phil.
Yes. That's correct, Murray.
Right, but you assured the board we're going to get that number down this year for the first time, Phil, right?
It will reduce this year.
Thank you.
So, just to highlight on Contract Assets, Contract Assets is really just a subset of our inventory, really just recording our WIP on certain long-term contracts in the year. So, we did have an increase over the prior year. We do expect that to come down by this year, the end of this year. And really, it just represents the timing of activity as well as receipts from our customers. That concludes the finance section. I'll hand it back to Phil or.
So.
Okay, so I want to discuss the challenges and opportunities and an update on our current strategy, so Magellan's business has mostly recovered from the industry challenges of the last few years, as you've just seen, but today, in front of us, there are a number of growth opportunities. Customers are ramping up their build rates. They're asking us to take on additional new business, and delivery of these will lead to better utilization of our facilities and improved business performance. The majority of our existing contracts have now been renegotiated and agreed, addressing the inflationary pressures of the last few years. This allows us to focus on profitable growth. One specific area of growth is our sand castings business, and with the lack of capacity globally, our customers are asking us to invest and grow with them to meet the demand.
In parallel to seizing the growth opportunities highlighted earlier, Magellan is taking actions to improve our margins. We continue to grow our footprint in India to meet the price expectations of our customers, as announced, and we have signed MoUs with Aequs, our long-term joint venture partner in India, to explore and launch additional business in MRO and sand castings. SAP is now live in four of our divisions, with a roadmap to complete the rollout across all the sites, and we're further investing in automation, such as machining, welding, and painting robotics, and to improve the utilization of our facilities, we continuously seek opportunities across our factories, such as launching automated processing cells and more efficiently perform post-cast activities in our labor-intensive areas, such as sand casting facilities, so Magellan will continue to position itself as a global and key supplier to our customers.
In order to achieve this, the corporation will continue to develop its people, its technical expertise, and add value to our products to enable growth in selected markets. We will maintain a solid balance sheet through inventory and working capital management to support our business goals, and we'll leverage our technology and engineering capabilities and continue to assess our facilities and products to further exploit our low-cost footprint, thereby improving our financial performance and competitiveness. Continued improvement in our quality through our Zero Defects program has been deployed across all our sites, and we continue to drive 100% delivery performance, utilizing our Magellan Operating System. We want to continue to inspire, develop, and invest in our people to drive success. We continue to direct resources towards our employee engagement and developing our leaders of the future. We want to meet our ESG expectations.
Magellan will continue to provide information critical to our sustainment efforts and monitor evolving climate-related risks and the expectations of all our stakeholders. Magellan continues to uphold environmental, social, and governance principles in our conduct of business. Our environmental reduction and conservation programs are well established. We've achieved significant reductions in greenhouse gas emissions, water usage, and waste generation. We recently launched a program to showcase the climate change initiatives in place across our divisions, not only to recognize our employees, but to also spread ESG awareness to a wider audience through social media. Our focus on operational excellence continues to be aligned with our ESG principles. Under environmental, we're decreasing our demand on energy and water, generating less waste and lowering our carbon footprint through operational efficiency improvements.
Under social, we take measures to engage and train our employees and create a safe workplace to lower employee turnover and improve our ability to deliver quality products on time. And finally, under governance, our policies ensure we operate with integrity, accountability, and transparency. So in summary, revenue has continued its recovery path, increasing by CAD 63 million year-over-year, a 7% growth, contributing to a CAD 26 million improvement in profit, which is more than double the amount from the prior year. Our strong balance sheet has allowed us to weather the inflationary pressure and supply chain disruptions in the industry. We're fostering the principle of right first time and have made progress on our Zero Defects program across all our divisions. And we've renewed significant contracts with major customers and secured new work packages.
We continue to develop our employee engagement program with initiatives and action plans at all levels in the business. And we've established an ESG framework and aligned all our sites to ISO 45001. So looking forward, a key priority is driving the business to improving profitability through new business opportunities and improved efficiencies through better utilization of our divisions. We continue to improve our working capital. We will continue to improve our working capital through inventory optimization initiatives. And we're now in a better position to focus and meet our customers' needs with robust plans and continued focus on operational excellence, utilizing the Magellan Operating System. And we'll continue to enhance our engagement program with all our employees. And we'll continue to monitor evolving ESG standards and reporting requirements to strengthen our path to sustainability. So this concludes the presentation.
So I would like to take this opportunity to thank all our stakeholders, our customers, and our employees for the continued support and commitment to Magellan. So we're now going to open up the floor to any questions. Who wants to start? Yes.
Such a strong balance sheet question. It's amazing. It seems like you have a lot of firepower to do M&A. Are you actively looking for M&A? And what are the prospects for doing acquisitions?
So we're quite picky when it comes to what we look at because we know the segments where we're good and where we want to build on those segments. And when you look at our portfolio as well, there's areas that we can see opportunities for growth. We're being pushed heavily on there. If you look at what we've done with the two MoUs, we're also looking at growing generically with some JV partners. And there's two or three businesses that have come across that fit strategically with what we're looking at at the moment. Will they come to fruition? I don't know. But we have two or three areas that we're looking at at the moment. So, yeah, but we need to make sure the synergies are there. I mean, it's no good just adding something and not making it any better than it is.
So we need to make sure that it fits with our strategy. Okay.
Capital allocation. Otherwise, like the dividend and the buyback of the board cut the dividend a number of years ago. It sounds like the outlook is much more positive now. I mean, is there any thoughts of revisiting that?
Yes.
I'm Bob Tattersall. I'm a former institutional shareholder and currently an individual shareholder. I'm encouraged to see the big improvement in net income, although, to be frank, a large part of that comes from a lower tax rate. But even with the higher net income this year, the year just finished, return on equity is still only about 4%. And so I'm a little concerned that with all of this explosive growth, they'll bring in lots of revenues with pitiful margins. And the ROE has to get higher than that if the stock is ever to get above book value per share. And the poor guy that's held the stock for 30 years, if he's ever to make any money, you need to have a much higher return on equity. And I'm not sure it has to be margins.
I think your chairman, in his ad hoc comments, put his finger on it. There seems to be a lot of redundancy in the balance sheet. I'm retired so I have time on my hands. I Google Map every single location, and you can't tell a lot from Google Maps, but a lot of them must be small and dumpy and unadjacent to places where you could actually handle additional revenue, so my question, I guess, is, first of all, can you be confident that you'll have better profit margins on the new business you bring in? And secondly, don't you have an awful lot of redundant assets on the balance sheet that would improve the asset turnover without actually aiming to increase revenues?
So, answer to your first question, I mean, we only take on business that's going to give us the right profit margins, okay? So, obviously, through the bad years, shall we say, with inflation at record levels, what you put in a bid and the contracts that you've won, I mean, you can see most businesses that went out the window. So, we've addressed those, and when you talk about the new business, so we've renegotiated existing contracts, which is good. We lost very little work in that, and those margins will be what we expect them to be going forward, and when we bid new business, we're very careful to ensure that we are covering what we need to cover because material exposure has been a problem historically in a lot of people's contracts with certain materials and certain alloys have caught people out in the past.
So there's some areas that we've had to focus on to make sure we get it right business going forward. So everything that we bid, we're expecting to achieve the margins that we want. And then when we talk about our assets, yeah, I mean, we've got 19 facilities. And some of those are not fully utilized. Yeah? I mean, we know which ones those are. And our business development team are actively looking in those areas to ensure because if we've got a million-dollar machine sat there now, it's ready to grow. And if it's the build rates are not going to fill it for one reason or another, then the BD team are looking actively to make sure that we can fill those machines. And therefore, some of the bids have no cash flow in them. I'm not sure if that answers your complete question.
I think, Bob, that we do have some redundant assets in our books. We were sitting here today. We used to own this entire site at one time. We sold the site for CAD 45 million. They built an Amazon sortation warehouse. We now lease this plant long-term, which is on our books now as a, what do you call it? What?
Asset liability lease on here. We do have a number of pieces of property around the world that are surplus or we have a big ton of property down at Fort Erie, down the old Fleet plant down there. We've had appraisals that surplus was tens of millions CAD. So we are moving those things. The one thing I've learned in this business, it is that things don't move quickly in this business, and we have contracts that they go back 10, 15, 20 years that we're just getting resolved with clients today in terms of the final close of the contracts, and if you rush to a decision in this business, it costs you money. You got to be a long-term view, and so I think the opportunity we have is we have a lot of inventory and contract assets.
I think you guys think we can take some equity out of there. And I think that we do have now growth opportunities where in some of our operations, we are looking either we have excess capacity plants. The plants aren't full. We have lots of capacity to grow internally without a lot of incremental costs. And when you talk about our plants, I mean, we've had, I mean, we've gotten to work with the board today. We just had Airbus into one of our operations in the UK. They're looking at interesting new work. And they were very impressed by the nature of the operation internally of the plant. Is that right, Jeff? Airbus.
Airbus. Yeah.
So I think our operations are cross-border pretty well structured and pretty well set up from a customer's point of view. That was the reason you're not with Airbus, Jeff, right, Jeff?
Yeah, absolutely.
What did Airbus guys say?
We had a delegation from Airbus to one of our facilities in Europe. We submitted about, I don't know, about 12 people in total. They wanted to take a look at our operation and the opportunity to grow and expand it. They came from there with some of the positive comments I've heard here from customers, which is great because it gives a sense that our strategy is clear, but also the presentation of our facilities is excellent.
So clearly, COVID, Bob, was really what hit the sector. I mean, it knocked the shit out of this entire sector in terms of problems going down. Our customers weren't flying as much. They all downsized their bid. This sector, we'd had, it's taken us three or four years to get through the restructuring that was required in the new world. I think now we're seeing a light at the end of tunnels. Hopefully, it's a good light, not train coming at us. I think that you wrote our balance sheet comment. I think the lesson I've learned is you want to have a strong balance sheet in this sector to get through the ups and downs, right? We went through dividend a number of years ago because I thought it was important to pay the shareholders. I was not a shareholder.
I wasn't 100% happy that we put the dividend down, but I think it was a good thing to do at the time.
Any more questions? Yeah.
Sounds like 2025 is shaping up well. We talked about revenue getting above 2019 and still some work to go on the margin side. If you look at a couple of years beyond 2025, what's the sort of blue sky in terms of revenue? And could margins go even above where they were in 2019?
Our forecast is showing that we're going to continue to grow the top line and continue to grow the bottom line. I'm not going to give you exact numbers, but yes, both of those are growing.
What are the main opportunities and concerns that you have from both the top line and bottom line perspective looking out to?
I would say on the top line, it would be Airbus is a bit slow at the moment with a lot of stock around them. Boeing getting above rate 38 and getting approval on the FAA to go above rate 38. Boeing have been really slow. Therefore, when you look at where we're performing and where we've got capacity, it will be in those facilities that were working predominantly on the Boeing aircraft at rates around 50. Now they're doing with the strike and everything that's gone on, it's been very slow. Our numbers don't have the benefit of Boeing getting back to where they want to get to and their growth.
If you look at Airbus talking about growing from the current rate of around 50-60, going up to 75 in the next few years, those contractors alone, those contracts that we have alone will show significant growth. We have other areas of opportunities. Then we talk about our Rockwood plant and our Winnipeg facility and our Defence business. We are following up on a lot of opportunities there as well at the moment. We want to grow both sides and take advantage of customers needing capacity and suppliers like ourselves.
And Castings.
Yeah, and Castings, we mentioned Castings is a great growth opportunity. There was a lack of capacity out there. Hence the reason we looked at potentially a low-cost source for those as well. Plus, we're looking at growing both of our U.S. and Canadian divisions. So we're looking at additional facilities and additional equipment to meet that demand. It's significant.
So we have got built-in growth essentially, I mean, the world. I mean, I've talked to some airlines recently, and their bookings are down between 10% and 15% year-over-year right now. So when you've heard some of the [audio distortion] , they've withdrawn their consensus forecast. The market's so uncertain now given the whole, so there may be some pullback. But assuming that that stabilizes on the air travel, right now, Airbus is at 50. They're going to go to 70, Boeing to 37. On the 737, they're kind of going back to 50 or 60. We're on both those platforms in a material way. So that's built-in organic growth right there or inherent growth. I don't call it organic growth, it's inherent growth.
Then on top of that, we do have probably. I don't know if I use the word bursting, but we're used to bursting.
We do have a number of.
[crosstalk]
We do have a number of organic growth opportunities that are a force that we haven't seen in some time. I think that because of the growth, and I think it's evident that governments around the world have all stated they're going to increase their Defence spending materially. Some of it's going to have to flow back to the supplier base, and Canada is probably one of the real laggards in that. In some ways, we should be better positioned in Canada than elsewhere. There are some positives on the horizon, it looks like. But I'm always cautious because there's always the uncertainty with tariffs. We don't know right now what's going to happen there in terms of. Right, so.
Yeah.
The ongoing recovery, is that mostly just the ramp that we're talking about in commercial aircraft production, or is there a lot of contract renegotiation still to go?
Most of our contracts have been renegotiated now. We haven't seen all the benefits of those renegotiations yet. But a lot of it is better utilization of our facilities as you put more volume through an existing machine that costs you CAD 3 million. And as the rate goes up, you get the benefits with no additional cost. Any more questions? Okay. In that case, I'd like to say thank you for everybody for attending. And if there's no more questions, have a safe journey home. Thank you very much. Thank you.