Earnings call transcript: FACC Q1 2025 shows revenue growth, EBIT decline

FACC’s earnings call for the first quarter of 2025 highlighted a mixed financial performance from the €376 million market cap aerospace component manufacturer. Revenue rose 14% compared to the same period last year, reaching €231 million. According to InvestingPro analysis, the company appears undervalued based on its Fair Value model, with strong momentum shown by its 23.62% year-to-date return. However, the company’s operating EBIT fell to €4.3 million from €9.9 million in Q1 2024. Despite the EBIT decline, FACC reported a positive free cash flow of €3.5 million, a significant improvement from the negative €37 million recorded in the previous year. The stock price experienced a modest increase of 0.77%, reflecting cautious investor optimism.

Key Takeaways

• Revenue increased by 14% year-over-year, reaching €231 million.
• Operating EBIT decreased from €9.9 million to €4.3 million.
• Positive free cash flow of €3.5 million, compared to a negative €37 million last year.
• The stock price rose by 0.77% following the earnings announcement.

Company Performance

FACC reported strong revenue growth across all divisions, contributing to a 14% increase compared to Q1 2024, building on its impressive 20.15% revenue growth over the last twelve months. Despite this, the company’s operating EBIT suffered a decline, attributed to increased operational costs and ongoing investments in efficiency projects. InvestingPro data reveals a challenging profitability environment, with a gross profit margin of 10.24% and an EV/EBITDA ratio of 14.32x. FACC’s presence in key aerospace platforms, such as the A320 family and A350, continues to bolster its competitive position in the market.

Financial Highlights

• Revenue: €231 million, a 14% increase from Q1 2024.
• Operating EBIT: €4.3 million, down from €9.9 million in Q1 2024.
• Free Cash Flow: €3.5 million, a significant improvement from a negative €37 million in Q1 2024.
• EBIT Margin: 1.9%.

Outlook & Guidance

FACC maintains a growth guidance of 5-15% for the upcoming quarters. The company anticipates a stable ramp-up in production rates, particularly for key platforms like the A350, which is expected to double its production in the next 2-3 years. Analyst consensus from InvestingPro supports this optimistic outlook, with targets ranging from €8.64 to €13.65, suggesting potential upside. Subscribers can access detailed analysis and 12+ additional ProTips about FACC’s growth prospects. The 787 platform also shows potential for increased volumes, aligning with FACC’s strategic growth objectives.

Executive Commentary

• "We see a very intact demand signal from all of our customers," stated Robert Machtlinger, CEO, underscoring the strength of the market recovery.
• Florian Heinle, CFO, commented, "The market recovery for FACC continues," highlighting the company’s resilience and strategic positioning.
• Robert Machtlinger added, "Our strategic long term is definitely producing components where it makes best sense," emphasizing the company’s focus on strategic manufacturing.

Risks and Challenges

• Supply Chain Optimization: Continued focus on inventory management and supply chain efficiency is crucial.
• Tariff Impacts: Potential tariffs could affect cost structures and market access.
• Industry Recovery: Although demand signals are positive, the broader recovery of the aerospace industry remains a variable factor.
• Operational Costs: Rising operational costs could further impact profitability if not managed effectively.

FACC’s strategic initiatives and market positioning appear strong, but the company must navigate several challenges to sustain its growth trajectory.

Full transcript - Facc AG (FACC) Q1 2025:

Jana, Moderator: Good morning, ladies and gentlemen. A warm welcome to today’s earnings call for the FACCAG following the publication of the Q1 figures of 2025. I’m delighted to welcome the CEO, Robert Machtlinger the CFO, Florian Heinle as well as Mikael Steier from Investor Relations, who will start the presentation shortly. After the presentation, we will move on to the Q and A session in which you will be allowed to place your questions directly to the management. We are looking forward to the numbers.

And having said this, Mr. Steira, I hand over to you.

Michael Steira, Investor Relations, FACC: Thank you, Jana, and good morning to everyone again. So welcome to FSCC’s earnings call for the first quarter of the fiscal year twenty twenty five. As already mentioned, my name is Michael Steira, and today with me are our CEO, Robert Marklinger and our CFO, Florian Handel. And as always, we have already provided some more detailed information in our press release issued earlier today. And in case that we cannot cope with every potential question raising during the session today, we will be happy to schedule additional one on one meetings afterwards.

In this case, please let us know, my colleague, Tanja Meissenberger or myself, and then we will arrange appropriate. Now I would like to hand over to Robert Markling, our CEO, in order to start with the presentation. Thank you.

Robert Machtlinger, CEO, FACC: Michael, thank you very much for the introduction. Good morning, ladies and gentlemen. From wherever you are dialing in, a pleasure to talk to you and giving you together with my colleagues a quick update on our first quarter twenty twenty five results. Next page, please, Michael. So overall, a few highlights we would like to address on and above the financials.

As we all know, this knowledge and innovation is very key to the development of FSCC. This was the case over the first thirty five years of our existence, but also is very key for FSC in going forward. As you know, we have very strong r and d capability, and we are today working with our teams to define the technology for the future. We are very proud to say that during the Czech Composite exhibition that took place in Paris early in the year, which is the most important composite trade event that we have been selected to be one of the three finalists of the Czech Composite Innovation Award. So big honor to us and what the innovation was is a joint development with one of our engine customers where we have developed a high performing turbine blade out of composites, out of the materials, which will make it as we see it today on the next generation engine platform.

So very key for us in order to have a technology step advantage compared to some of our peers. So well done from our teams. I think we also have been engaged with two customers, Collins and Airbus, in a new standard, which is called the aero excellence. Aero excellence is a new requirement that was implemented where manufacturing processes and quality standards are refueled to new standards. Also here, we have been one of the top five worldwide suppliers to the aerospace world where we have been qualified to these new processes.

So this is an indication that what we do and how we do it can guarantee safe and environmental protected manufacturing processes. On and above, safety is a big world world in the aerospace industry as we all know. And also here, we have shown as a front runner how stable and resilient the FCC is. Then the CEO contract was extended by another five years. We published that talk, which, of course, is a big honor to me and being able to support the FSC in the next five years together with my colleagues running the business, changing the business in a very dynamic, challenging, but also I would say a promising environment.

And a little bit more to the point right now, this is why we need, it’s the company development. On the top line, I think we are very much in line with our guidance still in the first quarter to the upper level of our guidance. As you all know, we are guiding the business here on the top line with the five to 15% growth for the first quarter. Is pretty much to the upper end of the guidance. I, however, would like to elaborate a little bit on the industry dynamics.

So we’re still in the entire industry are working in a very dynamic environment. It’s not only, I would say, the geopolitical discussions. We’ll have a slide for yourself later on in the presentation talking about tariffs and what does it mean to us. But it’s still supply chains. It’s still cost pressure from various angles.

We are managing every day. We also have seen quite the dynamic with the customer input signal. So there were also adjustments made that are very much in line with the outlooks our main customers have provided to the public. So we have seen a shift in demand. I would not call it, let’s say, too much cuts, but it’s definitely shifts from from periods to the other.

We’ve seen the one or other working capital reduction program with one or the other customer for efficiency where they are confronted with the same issues we are having. Our working capital is high. We all know there is a couple of of flagging supply chains in the industry. And what we see at the time being is that all of our customers are adopting plans to make them execute table, considering the one or the other issue that cannot be solved within weeks or months. And what we see at the time being is still a very stable ramp up, but a little bit of a lower speed.

Still, what we see from the order intake is fully in line with our overall guidance. But this short term adjustments we’ve seen in the first quarter is is has to be managed and was managed with the one or the other extra cost we had to carry. Of course, I think Florian will talk a little bit more during his presentation of the financials. Next page, please. A little bit insight from the market as we always do.

Next page, please. So overall, we have the input from from the 2024 deliveries. This is not new to you. We shared with you, I think, a pretty much repeating statement from FSCC. We all see that there is room for more in the industry because 2024 total output was even slightly less compared to 2023 driven mainly by by one major OEM.

On the next slide, you will see how the two big OEMs are are more converging. Nevertheless, looking into the 2018 figures, there is a 400 to 500 airplane gap that has to be filled up in order to have the same output we enjoyed already in the past. So the momentum is there. We all know demand is there. Airlines are asking for airplanes, and the industry has to manage the demand.

Overall, the firm order booking from the two main OEMs is at 14,800. No change to what we have already shared with all of you during the last call in March. Next page, please. A little bit of insight to the first quarter with the two main customers in the industry or OEMs. We see two sixty six airplanes have been delivered in the first quarter.

We always know that the first quarter of the year is a little bit weaker with both our customers. So there is a momentum in the industry in the next quarters to come in order to pick up on deliveries, but also production. And we all know, I think, the guidance that has been provided by the industry. Looking a little bit into comparison between twenty twenty four first quarter and twenty twenty five first quarter, it’s get it’s getting very evident that Boeing is picking up. So in the last years, Airbus always was leading in terms of output and delivery.

We are expecting this will still be the case, of course, during the full year of 2025 because the gap that has to be closed is is certainly significant. But in the first quarter, it’s getting evidence that Boeing is ramping up its production, and it’s pretty much equal in terms of deliveries between Airbus and Boeing. So that’s indicating that I think the direction is good, also good for the industry and also good for efficiency. Next page, please. In terms of the long term forecast, also no change.

I will not talk about the twenty year forecast. This is many times reconfirmed and is proving to be right. Still interesting, and I would like still to have a quick review on the midterm forecast of the major platforms in the industry where we are having significant share on it on the a three fifty. It reconfirms that the production rate will double in the next two to three years from currently six airplanes to 12 airplanes a month, which is doubling the requirement and also the business model FSCC has on the platform. Again, FSCC has quite significant amount of value on the on the a three fifty.

Depending on the configuration, it’s between 2,000,000 and 2 point 5 million per year plan. So we see there is natural organic growth with investments we have made in the past, which will come back up over the next two to three years. Again, helping efficiency to be well utilized. Seven eighty seven, pretty much the same, doubling the size of of the demand in the next three years. Volume of the airplane is not as big as on the a350.

It’s a little bit less than half. But also here, nice organic growth potential without further investments. The February is

Florian Heinle, CFO, FACC: a little bit

Robert Machtlinger, CEO, FACC: late in entering into the market. But also here, we see a slight increase in rates, not as big in requirement to the other two. And the single air airplanes, which is 80% of the market, still continuous growth. And as I said before, at a little bit slower pace as we have received the latest updates from all of our customers. But again, the top line numbers where we are targeting to be in the next two to three years are unchanged.

A three twenty family, as you all know, most important platform for AFSCC, thirty six percent of the revenue. We’ll see another 21% growth potential in the next three years. The two twenty with the 40% potential in organic growth. On the seven thirty seven, this airplane is again picking up in monthly production rate increases, targeting a rate of 55 in the next years to come and also the Comac nine nineteen, the Chinese platform where we have roughly €1,000,000 of revenue per airplane is also stepping up quite significantly between twenty twenty four deliveries and the next three years. Overall, we see a very intact demand signal from all of our customers.

Again, a little bit normalized compared to previous forecasts, but still in a very stable ramp up scenario. Next page. And saying that, I would like to hand over to Florian to fill more details on our financials.

Florian Heinle, CFO, FACC: Thank you, Robert. Thank you, Mikael. I will now go into the details of our financials in q one twenty twenty five. Next page, please, Okay. So overall, in a nutshell, and Robert just touched it a little bit, the market recovery for FSCC continues.

We have followed our planned development in our core business and also in our new markets business, especially the AEM business, the drone business. In terms of revenue, Robert also just mentioned before, euros $231,000,000 of revenue, a 14% increase compared to Q1 twenty twenty four spread across all divisions that we have in our company. The operating EBIT, 4,300,000.0 in Q1, is, of course, a setback compared to the 9,900,000.0 that we enjoyed in Q1 twenty twenty four. Reasons for that, of course, the challenging environment in the supply chain coming together with material cost increases that are hitting us right now. In Q1, we have grown our employee base by another 46 FTEs for the ongoing ramp up.

And the big difference compared to Q1 in 2024 was a free cash flow positive free cash flow of EUR 3,500,000.0. Next one, Marcke. This slide you all well know. On the left side, we have the revenue compared to the last couple of years in the Q1 with $231,000,000 I think enough said about that. And on the right side, the EBIT for Q1 with €4,300,000 which equals a 1.9% EBIT margin.

Next one. In terms of our divisions, as I said before, the revenue increased spread across all divisions, Aerostructures, Engineer Sales and Interiors. Next one. And the EBIT development as well, aerostructures and engine nacelles with positive EBITs, of course, a setback in aerostructures divisions with 1,500,000 EBIT in compared to EUR 6,700,000.0 in Q1 twenty twenty four. Reason for that is a material price issue, especially in the fastener environment, currently very dynamic and challenging in the Aerostructures business.

Interiors in Q1 with a negative minus 3.5. So of course, we are still working on the recovery plan, which is in place and we should see a continuous improvement over the next couple of quarters going forward. Next one. Free cash flow, as I said before, an improved picture compared to Q1 twenty twenty four. We have enjoyed a positive free cash flow of 3.5% EUR three point five million in Q1 compared to a minus EUR 37,000,000 in Q1 twenty twenty four, so an improvement on that side as well.

Next one. Investments, pretty much nothing surprising here, very well controlled investments that we are taking also in connection with our core efficiency program that we are right now running. We really have to control the investments that we are doing and only spend the necessary euros that we really, really need. On the right side, the inventory, which is still our biggest pain in the company, which has a slight increase compared to Q1 twenty twenty to full year figures 2024 with 178 going up slightly to 185,000,000 roundabout. Reason for that is, of course, and again, challenging supply chain environment, but also some kind of shifts, and maybe Robert will touch a little bit later in the outlook in the first two months, January and February, on the customer side where we had causing us some inventory issues.

Issues. We expect still sticking to our target for year end, a very big improvement in terms of our inventory going down to SEK 148,000,000 for the year end.

Robert Machtlinger, CEO, FACC: Next one. We’ve seen that, handing back to Robert for the final outlook. Thank you, Florian. Outlook, next page, please. Well, overall, I think, as we already said and, you know, the the aviation industry, I even would not say is recovering because on the top line, I think we we are we are doing well better than before COVID.

Still, I think on the airplane deliveries, there is a gap to be closed. So rates are ramping up. So recovering may be still a fair statement. We will increase the group rates for short and midterm medium haul aircraft. And what we see, and I already touched a little bit before, we see a ramp up curve that is slightly reduced at a slightly lower speed as we have been told during 2024.

I think this is a necessity to harmonize the global supply chain because there is a couple of lagging supply chains impacting the industry. I think by level loading and harmonizing and going in the same speed overall is is not the best thing to do because we we need to have stability again and not signals that ramping up and then slowing down again. So overall, we see this not negative. I think it’s helping to stabilize cost, and it’s also helping, I think, the overall supply chain. And as Florent said, we always have to prepare for high rates.

If a rate is then slightly postponed by a couple of weeks or months, the material inflow is already ongoing, cannot be stopped because it’s either on the ship or it’s a long lead item, which is then driving our inventory levels to the levels we’re having. So I see this not always positive, but overall, I think if we’re stabilizing the industry in the month of 2025, this might have positive impacts on the efficiency of how we run the overall business, not we as FSCC, but the entire industry. We are still speaking to our guidance, which is a 5% to 15% growth. Again, I think we will be more specific after the second quarter. We see some dynamics still in the in the second quarter, but the one or the other shift already planned also in the material inflow, and we see a more stable ramp up then in the second and third quarter.

So overall, we will grow in this in this spread. Again, more specific guidance, and please be patient with us after the second quarter. Our priorities are very unchanged, continue to ramp up in line with our pull rates of our customers. We are very well aligned. We also can state here our customers are very helpful if the change in demand is too significant.

They’re even willing to take some of the inventory earlier in order to help efficiency in managing inventory. We are maximizing our focus on core. This is the key project we are working, and I think the good news in the first quarter, significant improvement in the cash flow as as Florian already mentioned from a significant negative cash flow last quarter one to a positive cash flow in q one. So overall, 80,000,000 efficiency project is fully up and running in all areas in terms of material, internal efficiency, cost savings, but also inflation cost compensation requests with our customers. So up and running for the next two years and progress made as we speak.

And overall, the challenges are very much unchanged. Supply chain stability remains an issue for the entire industry. We see less critical supply chains, but those ones that are still critical needs special attention. Where the rising cost is normalizing, I have to say, even in Europe, in Central Europe. So the years of 8% inflation with significant personnel cost increases is behind us in Austria and in our industry applicable for for FSC.

We just finished the labor increased negotiations for 2025. I would say very fair conditions for us as the company, but also for our employees. And the increases we are seeing this year is back to normal years in the years before 2020, and this is increases. If you see, it was able and would be able to compensate with efficiency increases from one year to the other. Geopolitical situation, we all know it’s still dynamic, and that might pretty much brings us to the last page, Michael.

The biggest challenge in the industry worldwide, not only aerospace in general, is the tariff discussion that is ongoing between United States and the rest of the world. We did a deep dive into the subject, what tariffs means to the FCC directly in terms of our contracts. And here, I think our contracts have been set up over the last years and decades that any customs that are related to import tariffs is not the responsibility of efficiency. It is the responsibility of our customers. So directly, I would say, if we deliver product, and this is again impacting our deliveries to The United States, which is round about 15% of our revenue, our customer has the obligation to pay for those duties.

So far so good, I would say. In the short term, so no, let’s say, surprises in terms of our cost structure. However, and we are aware about that one, the products we are producing for our United States customers, of course, from a pricing standpoint, is getting less favorable. Also, here, looked into it, and we are in very good and open discussions with our customers. And there should be no fear because there will be no change in the setup.

Our products are qualified to specifications and locations where we are producing today. So there is switching cost and time that is not at all yet considered. So based on our IPs and our production setup for the current product portfolio, we we are in a well alignment with our customers. In the long run, of course, and this is also what we have considered in our overall long term strategy, our global manufacturing footprint. You might know about it.

We have a strong footprint, of course, in Europe because of our Austrian and Croatian facilities. However, we are actively having set up organizations in all the other markets like United States, in Wichita, in Florida. We also have set up Canada, in Montreal many years ago to be local. And we also have set up operations, of course, in China, the biggest market at the time being in terms of airplane demand, but we also are very active in India since fifteen years. So this strategy will pay back also in the next generation airplane manufacturing.

So if tariffs still remain an issue in going forward, Our strategic long term is definitely producing components where it makes best sense. In the mid term, I I need to have a statement here as well. We all know that political uncertainty is not welcome in the overall capital market area. So there is there is some adjustments made as you will watch them. But also the aerospace industry is very sensitive in terms of political instability.

So we are watching the booking behavior in the market very closely. In the short term, all is is as it was. In the longer term, however, there is a slight reduction already visible that business travelers between certain markets are booking less. At the time being, not too big of a concern because there is an over demand compared to the supply capability the industry currently has. But, again, we, together with our customers, we are watching the situation very carefully.

We’re not yet concerned because a slight reduction in demand would not impose a reduction in supply signal because we as I said many times before, could deliver more airplanes to the market if we could. In the long run, and again, I talked already, we have a very solid plan, not set up yet, but already set up in the last five to ten years. So we are close to this subject. We are watching it. And as of today, there is changes every day, and we are at the time being on top of the issue.

But in saying that, that’s what we can tell you about tariffs and impacts to FSC. Again, no impact as we speak. In the long run, our global strategy already takes care about it. In saying that, I would say thank you for listening to us. And right now, the floor is yours for raising your questions to us.

Jana, Moderator: Thank you very much for your presentation. We now move on to the Q and A session. To keep the conversation engaging, we kindly ask you to place questions via audio line. To register your question, please raise please click the raise your hand button below. If you’ve joined via phone like some of you have, please use the key combination star nine followed by star six.

If you do not have the opportunity to speak freely today, you can also place your questions in our chat box. We are now waiting for the first few questions. Mr. Poulain, I will give you the permission to speak now. You may ask your question.

Mr. Poulain, Analyst: Thank you very much. The question is on the guidance for sales because you I think you highlighted some of the question mark that you have, but you started the year on a stronger a strong note regarding sales. So is it because you have more pricing effect and the volume is closer to the lower end of the range? And you expect this pricing effect to be less pronounced in the coming quarter? Or is it because you still see some risk of disruption in the supply chain and you want to be prudent?

Or based on the start, should we assume that you’ll be closer to the higher end of the range as suggested by the also your peers, who seems to be a bit more confident in their ability to deliver higher volumes. Safran, last week, for example, OLISI commented on that, and they were quite confident in the track that they currently see for the ramp up. So could you elaborate on that, please?

Robert Machtlinger, CEO, FACC: Yes, of course. So overall, this is not a pricing discussion here. So the spread would be simple too much, I would say. So we the pricing is some some elements in there. As Florence said, fastener pricing and availability is a discussion at the time being where we have secured supply, but at the certain cost, and here we are engaging with our customers to find pricing agreements in in compensating for that.

So the the the spread is what driven by the demand signal, as you just said correctly. I’m also in line with with the judgment of Safran and many other ones. We see a stable ramp up in the industry. I think the adjustments we have seen on certain projects and platforms, I think, is harmonizing the supply signal across the industry. It doesn’t make any sense to go for a very high rate already knowing that the one or the other supply chain might not be able to deliver.

Because what would that mean if 95% of the supply chain is working to this higher demand and a few parts are missing, the airplane will not take off. This will drive inventory and cash outflow in the entire industry. And as always, at a certain point, also our customers have to readjust the inventory level, and that comes normally with a slowdown of demand. So by harmonizing the signal and working on this few critical supply chains, I think this is doing very good to the industry. And, again, I’m fully supporting the statement made last week by Safran and others that we see a very intact ramp up also in 2025 and beyond.

More harmonized, more considering the last critical issues, which all should help us to build down inventory because buying inventory for high rate and then keeping it for another two months because we are postponing delivery is cash consuming. So overall, I see the trend as well positive. And for the full year, the growth we have seen in the last three years will continue. Again, the spread will be narrowed down after the second quarter.

Mr. Poulain, Analyst: Thank you. Maybe a follow-up on the inventory reduction drive. Just to be clear, if you are cutting inventories to improve your free cash flow, it doesn’t compromise the growth rates for the year. You would be able still to achieve the year on year growth rate at the high end of the range if indeed there’s no supply chain disruptions?

Robert Machtlinger, CEO, FACC: No. I think in everything we do as a strong partner to our customers, we have to secure delivery because we are the only supplier partner who delivers the product. So not delivering because we have ranked down material below the need is nothing we ever do because that will trigger other costs in terms of liabilities. So we do this very structured. I think the more a normal drumbeat comes into place, the better we can claim and the less critical supply chains we see, and that’s what we are already recognizing, the less safety buffer we have to put in place.

We all need to recognize if there is instability, we need to secure our business and our customers by putting a little bit more inventory into into our stocks. And the reasons could be many. It could be logistics. It could be transportation. It could be, well, a raw material that might be critical in the months to come.

So this was the dynamics we have seen over the last three years. That’s normalizing everything we do and ramping down our inventory is very much in line with our customer demand signal.

Mr. Poulain, Analyst: Thank you.

Jana, Moderator: Thank you very much for the question. We are waiting for another question. It seems that we may not have another question. Therefore, thank you very much for your interest in FACC and your questions. A big thank you to also to the gentlemen for your presentation and the time you took to answer the questions.

Should further questions arise at a later time, please feel free to contact investor relations. I wish you all a lovely remaining day. Thank you and goodbye.

Robert Machtlinger, CEO, FACC: Thank you, everyone. Bye bye. Thank you, everyone. Thank you. Goodbye.

Bye.

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