Hello, this is Michael Steirer speaking from FACC. Good afternoon to everyone. We are very, very sorry for any inconvenience due to the delay. We had some technical issues with our provider. We hope to have a solution available right now. My name is Michael Steirer, and with me today are Robert Machtlinger, our CEO, together with Aleš Stárek, our CFO. As always, we have already provided some detailed financial information in our press release today morning. Today, the Q&A session will be a written one, so you have the possibility to raise questions during clicking on the question mark. Afterwards, I will read the questions as we have no pos sibility to receive questions from you, as we cannot hear y ou within this new tool and this sho rt-ter m setup.
We are very sorry for that, but nevertheless, you have the possibility to do it in a written format. If the time doesn't permit to answer all possible questions during today's conference call, we will be very happy to schedule additional one-on-one meetings afterwards, as every time. In this case, I would like to ask you to get in contact with our investor relations department. That means Tanya or myself, in order to coordinate all these appointments. I will now hand over to Robert Machtlinger, our CEO. Thank you.
Good morning, good afternoon to everyone, and I also would like to apologize for the inconveniences. As always, we prefer to talk to you in person, not doing chats and reading your questions and answering them. Again, also my apologies from my side. Will not happen in the future. Again, sorry, it's a one-time event which is a little bit more complex and I rather would have talked to you in person and having your direct feedback. Again, sorry. For the Q3, as Michael already said, we prepared presentations. You should have access to it.
If I can quickly jump into the Q3 highlights, and before doing that, I think, even in a quite rough environment, and we all know that, Q3 pretty much developed as we have thought it will be. A little bit of seasonality in the numbers. Very good was the top line. The EBIT development in Q3, not unexpected. I think we talked about in the previous call that, Q3 will be a little bit impacted, from the one or the other seasonal effects.
Nevertheless, after nine months, EBIT is in a ballpark where we have expected it, once we did the yearly business outlook and even in the unexpected environment caused by the Russo-Ukrainian War. I think so far the environment, which itself was managed okay. For the outlook, I will come later on. Overall, right now, coming to the bullet point, our customers are continuing to confirm market development with increasing demand. As you all are specialists, we know there is the one or the other issue also our OE Ms and other suppliers have to manage.
Still, I think what we receive from our customers and the demand that we get from our customers, even if it's a little bit lower, it meets our market expectation, which we have done exactly a year ago. Basically, we have planned for a higher demand. Right now it's a little bit lower, but still what we see from our customers is very much in line with what we have expected. Positive, and this was expected for some period of time right now, is the certification of the COMAC C919, which happened just recently. Why is it important for us? FACC has quite significant workshare on the COMAC C919.
We are producing the entire cabin for the airplane, but we are also producing aerostructures components for the wing. Right now we can enter the serial production ramp-up which will come over years quite soft, I would call it. Still good for us because the volume per airplane is around about $1 billion per COMAC 919. After development and certification, we're entering the ramp-up of a serial production. Overall Q3 was of course stronger than Q3 a year ago, and this is also not completely unexpected. Comparing the two quarters side by side, it was a 26.6% revenue growth. I think it's not specific to one program.
It's pretty much spreading out to the entire portfolio FACC has. Still Q3, we couldn't have any positive development from the seven eight seven reentering production that was announced in August. We are currently ramping up production of the eight seven again after a couple of months of low productions for the reason or for the reasons that are well known to you. Looking into the first nine months, EUR 61 million revenue increase compared to the same period of last year, whi ch is a 17.1% incr ease.
Lots of it comes from also new programs, we have to say, from the Airbus A220 ramp-ups, and this is the contract we have announced exactly a year ago in September, when we got the contract for the A220 elevator and rudder. Those programs are right now in the ramp-up phase. They are performing as we have expected. Still learning curve at the high end, but nothing unexpected. The other portion comes from the new model interior on the Bombardier business jet, the Global 3500, which is, in the meantime, pretty much replacing the well-established and learned out previous configuration. But also, of course, A220 and A350 an d other platforms that are seeing a ramp-up.
Still, in a touch base on it at the beginning, the environment is still complex with a complex raw material supply, which we see still ongoing. In the later phase of the presentation, I will come back to it. We are expecting a more solid raw material supply chain in demands to come, but still not back to pre-COVID-19 stability as we have seen it, but still manageable. How do we manage it? We stayed in run rates, but also a lot with inventory, labor increases. We have to do that to protect ourselves from not entering a stop-and-go production, which would cause us pain.
We also have to do this to protect the ramp up of our OEM customers. To touch briefly on the new interior project ramp-ups is a little bit of having an impact on profitability. There is two issues are causing it. Also, nothing new. It was planned and not a surprise to us, but it's a new configuration which are normal once we're ramping up a new configuration, because of resales of versions, every customer wants to get his new interior. We are managing through that phase as always in the past, but of course, learning curves are at the starting point. Already here, we see a stabilization in the last couple of months.
The resourcing of the one or the other material supply chain takes slightly longer because of global issues. Also here, it's on its way again for new programs, not on our learned out programs. That's something we are watching quite carefully. Again, I would say a three-month shift going into the end of the year, early phase of next year. Also these resourcing activities are up and running. I think, Aleš Stárek, if we can ask you to go into the financial details before I'm returning the conversation with the outlook and the priorities for the year. Aleš Stárek, please.
Yeah. Thank you, Robert. Good afternoon from my side to everybody as well. Let's switch to the financial section of the presentation. Slide number five, which shows us in the usual way the revenues, the sales development, and the EBIT. We see that on the sales side, after some kind of a weaker first quarter, we are now on the increasing way, almost EUR 150 million turnover in Q3. As Robert already mentioned, the market is developing according to our expectations on the top line.
When we look at the bottom line, the EBIT then, for the first time in some time, we have indeed realized a slight negative EBIT of EUR 1.9 million in Q3. Pretty much driven by the interiors division, as we will see later. The reasons for that have been already explained by Robert in detail. The challenges on managing the supply chain and then the ramp up is basically reflected mainly in the interior sections. On the next slide, you have a quick look on the aerostructures.
Here, probably the sales increase is the most dominant, as we've already mentioned a couple of times. This is the division with the highest growth rates for now and for the time in the future. At these levels of sales that we are now looking in, we have a pretty much stable, let's say slightly positive break-even profit situation. As the sales will increase continuously, then basically we are expecting to benefit from that on the aerostructure side. On engine nacelle, pretty much a similar picture, except for Q4 in 2021. We had a couple of one-off impacts, and then we had a higher profitability.
Now on these levels, they are pretty much flat when you look at it, like, over the last eight quarters. Sometimes higher, sometimes lower. If you put a trend line, then it will be a pretty much flat trend line. And with that also, the EBIT, the operational EBIT is kind of stabilizing in a slightly positive break-even way with a pretty much similar upside potential for profitability as we grow the business, especially with 787 now goes into production and then from here, we'll see some growth in top line and accordingly in the bottom line.
On the cabin interiors, actually over the last four quarters, the sales have been stabilizing and not really growing, a little bit mixed picture here, with slight increases in 2021, but 2022 pretty much on a stable basis. As we said in this quarter, the challenges that we are experiencing are kind of depressing the profitability, and therefore, a negative EBIT of EUR 4.2 million in Q3. Coming to the next slide, free cash flow. That's a picture that we've probably seen for the last three quarters.
Again, basically underlying, underpinning what Robert has already said on the working capital management, on the working capital situation. Quite a lot of the negative cash flow impact in the working capital is coming from inventories. We are still in Q3, we were still dragging on the receivable side with the legacy issues, or let's say, yeah, with the legacy issues of Q2, and then the lockdowns in Shanghai. The resolution of these has been taking some time by now. We are in a much better shape by the end of October, with quite a lot of cash collection from China. These issues are kind of smoothing out and sorting out.
We are on a recovery with respect to accounts receivables, but the inventory part will still remain challenging for some time. As Robert mentions, safeguarding and ensuring delivery to the customer is one of our top priorities. Looking at free cash flow from the cash flow drivers in more detail, on one hand side investments. What we have done here since there is quite a lot of back and forth going how to look at them. We traditionally look at fixed assets, investments, and capitalized engineering.
Due to all the changes that we had in IFRS, the capitalized engineering is not really shown as a investment cash out. It's in operating cash flow, as additions into contract costs, but it's for sure a part of our investment. Now we chose to show a little bit more transparent differentiating picture. You see here a timeline in Q3 last year overall, we have invested approximately EUR 19 million. Approximately half of it was fixed assets, half of it was capitalized engineering. The picture is pretty much the same in the first three quarters of this fiscal year. However, the overall numbers are slightly lower.
It's a total of EUR 11 million and then 50% in fixed assets and 50% in capitalized engineering. When we look at the working capital standalone, we see a slight increase in Q3, only by EUR 5 million. There are other elements here not working capital in as inventories, accounts receivables and payables. There are a couple of other positions in there as well. The increase, it's a little bit contained on that level. Last but not least, on net debt, by the end of September, and it's pretty much the consequence of the free cash flow development.
Net debt has increased to EUR 238 million, and we see an increasing trend here from the thirty-first of December. However, as you may remember, we had a couple of extraordinary cash collections in December, as we basically usually have in Q4, and that picture will also repeat itself in Q4. We are expecting a decrease in net debt back to levels slightly over EUR 200 million. Around EUR 210 million. That's the expectation that we have. Along with that and the EBITDA that we are expecting to generate until the end of the year, the 4.5 leverage requirement that we have with the banks should be achieved.
With that, we are coming to the outlook section, and then I will hand over back to Robert for the outlook.
Aleš, thank you for the details. Well, quick outlook, next slide. You see three pages this time. We wanted to be a little bit more transparent and forward-looking. First of all, looking into the market, it's the larger airplane market. We see a continuous increase of demand, especially on the A320 family, with a 20% demand increase by the end of 2023, compared to the rate we are working today. The same is true on the A350, but of course, on a lower level. The A350 will step up in demand as well.
Nevertheless, if we increase the rate from what we are currently producing by one airplane a month, this is representing 25%. In terms of rate, it's not as significant in terms of numbers compared to the A320, but nevertheless, also on the A321, the share per airplane for efficiency, as you know from previous discussions, is quite significant. The 787, which was on a production pause in Boeing, but also FACC because of the known reasons, is right now starting production, which is good for FACC because since the first day of 2022, we have restructured our contract, as you know from previous discussions.
Starting production will help us to generate revenues and positive impact to the efficiency of FACC. A220, where we also are quite strong on the various products, is ramping up as planned in the last couple of months, even during COVID, with no downturn in rate. There was a continuous ramp up. We see that continue from what we have seen in the last couple of months, what we see already in the next 12 months to come. In the next 14 months, we see a 50% increase of the demand for that platform.
Looking into 2025, the production rates compared to what we have today we assume to double. The A220 will be a platform for FACC, quite significant and quite important looking into 2026, and we already shared the numbers with yourselves in a previous call, we'll reach a level of EUR 8 million per annum plus in revenue. Business jets, same thing. 17% of our total FACC sales comes from business jets. All platforms where we are working on with our customers are developing nicely.
The low end with the Phenom 300, but also the mid-size segment, which is the Praetor and the Bombardier Global 3500 is doing exceptionally well. Outlooks from our customers are quite promising. Also here, we pretty much see a good development. We are certainly looking into that segment a little bit more cautious into 2023, considering a cool down of the industry overall, with some indications of a recession. Here we are a little bit more cautious, I would say, but still outlook from the customers are reconfirmed as we speak. Again, we see it and review the market on a regular basis.
COMAC C919, we talked about still running at low rates, but stepping up in rates over the next couple of years. Also here we have a potential of organic revenue growth because the product is developed. Engineering is paid by our customer, and we are right now in steady production in a serial environment. Next page, supply chain. We talked about it. The environment is complex. I think we are maneuvering through it quite okay. We had no delays or production stops, so we are keeping up in pace with the demand of our OEM customers, which I think was well received so far with all of our customers.
Internally, we still think this will be ongoing for at least the next 12 months. We keep a fair amount of safety stock to protect us and our customers. We might see a little bit of a normalizing trend in the second half of next year. We will adjust as we think the situation is getting more stable. Linked to it is of course our vertical integration programs, which are up and running, fulfilling the expectations as we've planned it.
There is more to come in our local for local insourcing, which and this is, I think, what we see currently already. We remove pressure from ourselves because of our cost increases, so we can level out some of the increases internally and be more flexible. I think the decision to do so was good. Even in this complex environment, it gives us more flexibility and more safety. A quick word on energy supply, which is all over. I think we have put in investments, not just recently, but over the last 10 years, into non-fossil energy sources. 80% of the heat energy we are currently consuming still is depending on gas.
This was 100% some 10 years ago, so we did a lot. We have certainly a roadmap developed for the next couple of years to be independent from our fossil energies. As a mitigation in terms of gas supply issues, which is more an issue for Europe, not that much for other markets, we have set up the investment and we can change to oil burners. In that case, if there is pressure coming from Russia, we already have mitigated that tendency quite a lot. Going to the last page, in terms of guidance, we are keeping our guidance in terms of growth.
There is certainly a little bit more growth shown in the first nine months. We still think Q3 or Q4 will not deteriorate significantly from what we have seen in the last couple of quarters. The 10% volume growth top line is reconfirmed and I think that's good. On the EBIT targets, even Q3 was loss-making, which was expected as we have reported out in previous statements, the guidance in EBIT for the year end we are reconfirming. Plant number six is nicely ramping up, it is doing its job as expected. We are currently having around about 230 people.
This number will go up before the year-end to 250 people. All in line, and we are moving more and more work from Austria to our Zagreb facility. Learning curves in the Zagreb facility are as expected and will help us in the next period to come. Liquidity and cash flow, Aleš Stárek talked about. I think we are peaking right now. October already had some good customer payments, also linked to the C919 certification, which triggered the milestone payment. Overall, I think we're expecting more cash to come in because our payment terms from high volume of production we had in Q3 will also be paid by the customers before the end.
In terms of market positioning, we are out on the market, not our biggest focus at the time being, because rates are ramping up anyhow, but still, we're working with all of our clients to do so. Archer was announced already Q2. That's pretty much what we can share at the time being. I would like to thank you for listening. Again, please apologize for not having a dialogue orally right now, so we have to do it with chats right now. Again, my apologies, but we are here to answer questions in the new environment as well, which will be a one-time event. Michael, I hand over back to you.
Okay. Thank you, Robert. So far, we have received two questions. I will read them and then hand over to the responsible colleagues on our side. First question is, has been received by George McWhirter from Berenberg. He's asking, please, can you comment on whether there was any cash payment in the third quarter due to the legal charge? Or is this expected in future quarters? What is the expected total cash charge linked to the legal case? I'd like to hand over to Aleš Stárek to give you an answer on that.
George, good afternoon. Indeed, we have already indicated in our last call, we did have a cash out for the legal case in September. We paid around EUR 10.6 million, which is approximately 50% of the total cash out. If you remember back then, the provision that, let's say not provisions, the overall negative impact in last year was EUR 25 million. Approximately EUR 4 million were linked to a write-off, and the remaining EUR 20 million-EUR 21 million were linked to a potential cash out, and EUR 10.6 million has been paid out in September.
For the rest, I'm pretty sure we will not have any cash outs on that in this fiscal year, and then the cash out of the rest will most likely shift to 2023. It's early to say when exactly 2023.
Okay. At this point, I'd like to further go on with the question from Peter Helfrich from the Baader Bank. He's asking, what makes you so confident to achieve so good Q4 result to fulfill the guidance of a two-digit million EBIT? Do you expect one-off profits? How is the situation regarding price negotiations with OEMs? Are price increases possible? And what is the reason for the high tax payment in Q3? Maybe the first questions I would like to hand over to Robert Machtlinger for answering this question.
I can, yeah, I can do that. Well, I think we have a couple of milestone payments still in our last quarter, which are linked to program milestones. That's pretty much developing as planned. We have certainly, I think, prepared for the year-end deliveries, so there is some inventory already produced but not yet handed over to customers. We have the cost, but not the revenue and not the gross margin in between. Here we are quite confident what we see and what the customers are demanding, that it lines up as planned, making us quite confident.
Again, even if you hear the one or the other discussion, which is okay, and which only can reconfirm that the one or the other production rate will soften a little bit because of industry development or a pricing development. In our planning, we have planned a little bit more conservative, so everything we see today is still pretty much in line with our budgets. In terms of price increases, well, as usual, I think, if there is a price increase or an industry change and logistics, of course, was something that also impacted FACC. In normal cases where we are responsible for logistics, we have to pay for it.
In a year where it happens, we have very limited opportunities to back charge to our customers with one exception if it comes to spare deliveries. This is normally depending on where we have to send the spares, we certainly can pass on the extra cost to the customer who is receiving it there. Looking forward, I think, we have 31 opportunity in our contract, which we are currently negotiating, but this will not have an impact to 2022. This will have a new condition applied for 2023 in later delivery.
Okay, maybe to the last point, which is the question in regard to the high tax payment in Q3, I would like to hand over to Aleš.
I will try to be as little technical as possible. First of all, it's not a tax payment. It's just a tax expense. When you have the opportunity and you take our Q3 financial report and you scroll to the changes in equity section, and then there, basically, you take a look at the cash flow hedges. This is the biggest driver for this position. What we have is, we have a portfolio of hedges that we have conducted over the last probably two years.
Especially due to the increase in USD, most of these hedges that we have in our books for future cash flows have turned to negative market value. You see the turning point was actually already in 2021, where we basically started the year with EUR 8.7 million in OCI from the cash flow hedges, and then turns to -EUR 1.6 million. You see that basically year to date we had another charge of EUR 28.9 million in negative cash flow hedges as basically the real strong move has basically happened in 2022.
The biggest portion that we have now not realized of these, that we have revalued. The revaluation, the strongest impact in the revaluation happened in Q3. Where we basically saw another move in the U.S. dollar below parity. On the net side, the increase in the negative market values was EUR 28.9 million, but this is the after-tax number. The gross number is approximately EUR 35 million. At the offset for this tax credit in the OCI, you see as a debit on the tax side in the P&L. Out of the eight point, let me scroll up.
Out of the EUR 8.5 million, EUR 8.4 million in income taxes, approximately EUR 7 million, slightly more than EUR 7 million is coming from, let's say the credit and debit on the tax side, for the negative valuation of the cash flow hedges. It's basically just a valuation number. It's not a cash out. It's not a cash out in Q3, and not a cash out in the future. I hope that this answers the question. If there is a need to have a follow-up discussion on the booking for the OCI, then please let us know and we can have a one-on-one meeting in sometime later this week or maybe next week. Yeah.
Just let Michael or Tanya know and then they can schedule a call.
Okay. I'd like to further go on with a question raised from Bernd Maurer, RBI. He's also asking the reasons for the high tax payment. I think the answer was already given by Aleš. The second question is in regard to the aerostructures sales, which is obviously driven by milestone payments. The question is, how much have these been in Q3, and what do we expect in the fourth quarter?
I can answer it, or Aleš, you can answer it. I think in aerostructures, we had one milestone payment linked to an aerostructures program, which was in the ballpark of EUR 5 million.
Expected, honestly, say, in Q4, but was pulled forward because of an earlier milestone achievement. I think for Q4 in aerostructures there is no further one-offs. So it's a little bit of a change in period. It was planned later, but came a little bit sooner. Aleš Stárek, if you would like to add something to it, please feel fre e to do so.
Yeah. I was a little bit going through my memory. The EUR 5 million settlement that we had, it was EUR 5 million on the sales side, but the P&L was lower. Michael and I, we were just looking at each other. I think it's around EUR 1.5 million, that P&L impact out of the milestone settlement with aerostructures in Q3. Yeah.
Okay. I will further go on with the questions raised from Harry Breach. Harry is asking first, should we still expect around -EUR 20 million of negative free cash flow for 2022? The second question is it reasonable to expect that cabin interiors should reach break even in the fourth quarter, or only at some point in 2023? The third question is, what are the volumes of U.S. dollar that you have hedged for 2022, 2023 and 2024, and what are the average hedge rates for each year?
This was pretty much.
The last question, and I will repeat it then again. The last question is, what P&L tax rate should we expect in the fourth quarter? More like 10% or 20%? First question was belonging to the -EUR 20 million of negative free cash flow for 2022. Is this still the figure we can expect?
Harry, that's that is pretty much the net debt discussion or let's say I would like to derive it from the net debt. We started the year with EUR 178 million in net debt. I'm expecting that we will be somewhere around EUR 200 million-EUR 210 million. So that would pretty much. The delta in the net debt is pretty much coming from the free cash flow. So I would expect that we will be in the ballpark of EUR 20+ million in a negative free cash flow by the end of the year.
Okay. The second question was, is it reasonable to expect that cabin interiors should reach break-even in the fourth quarter this year, or only at some point in 2023?
Yeah. Well, I think that's something that we have also already discussed and pointed. We see improvements and then positive impacts in cabin interiors from Croatia. Croatia is still ramping up and then let's say the full impact from Croatia we will see only in 2023. As I said, at some point in time in 2023, I would expect to break even in the interior division.
The third question is belonging to the U.S. dollar hedges for 2022, 2023 and 2024.
What are the average hedges for each year?
2022, our hedge ratio. What we have, and it's difficult to say because it's a rolling hedging. What we have currently in our books is a hedge portfolio of EUR 430 million. And then that's covering the remainder of 2022, the whole 2023, which is hedged approximately to 95%. We are starting building up the hedges for 2024. We have approximately, I would say, EUR 20-25 million in hedges that are due in 2024. That's a little bit of distribution of the hedge portfolio.
To go back and see how much what was the hedging amount in 2022, I would need to go retrospectively and see basically what the hedge portfolio was in the beginning of the year, but it was lower. It was lower than EUR 430 million. It was probably EUR 350-360 million. And then we build up some portion of the hedge portfolio throughout 2022. The average hedge rates for 2022, we are around 1.650, between 1.650 and 1.700. The hedge ratio for 2023 is improving, is around 1.13, I would say. Yeah. In that level.
A couple of hedges that we have done for 2024, they will be around EUR 106-EUR 107, in that range. Yeah.
Okay. The last question is then regarding the tax rate, what we should expect in the fourth quarter, more like 10 or 20%?
Yeah. Well, we usually, I mean, as you know, and that's just the thing, we do not actually pay taxes, because we are using the carry forward losses in our local GAAP. Yeah. What we are doing is, when we calculate deferred taxes then we calculate the tax credits, for example now for the hedges, for the market value of the hedges, then we assume a tax rate of 25%.
Okay, this has been the last question which was raised today.
I think there was one question on the content of the working capital that came per email. We had one question that reached us per email on the content of the working capital, which balance sheet positions exactly are part of the working capital calculation. As I mentioned it in my presentation, it's a little bit wider than what we usually or let's say is wider than the working capital, just inventories, account receivables, and account payables. Maybe a good idea for everybody that I guide you through it.
When you look at a balance sheet as we have it in our financial report, then the positions that we basically show as working capital in our presentation, it's inventories, customer-related engineering, it's trade receivables from related parties, and it's other receivables and different items. These five positions on the plus side and on the liability side, it's then the contract liabilities for customer-related engineering, it's trade payables, it's liabilities from related companies, and it's other liabilities and different items. Yeah. It's basically five on the asset side and five on the liability side. But that was definitely the last question.
Okay. No further question received. At this point, I would like to thank you. I think we are finished right now. If there are any further questions, as already mentioned initially, please get in contact with our IR team, and we will support you as best as possible. Many thanks for joining today's conference call. Again, please excuse the delay and any inconvenience. Have a good day so far and thanks a lot.
Yeah.
Thank you.
Thank you, and have a great day.
Have a great day. Bye.
Thank you. Bye-bye, everyone.