Half Year 2021 Airbus SE Earnings Call
Q1 results release conference call you on fully our CEO and Dominik, Adam our CFO will be presenting our results and answering your questions on.
This call is planned to last around 1 hour. This includes Q&A, which will conduct after the initial presentation.
This call is also webcast.
We accessed via our homepage, where we have set a special banner.
<unk> of this call will be accessible on the website, but there is no dedicated phone replay service.
On the supporting information package was emailed to you earlier. This morning. It includes the slides, which we will now.
It can take you through as well as the financial statements.
Through this call we will be making forward looking statements. The package. You received contains the safe Harbor statement, which applies to this call as well.
We did carefully and now over to Bill.
Thank you Justin good morning, ladies.
Now <unk> will come to our Q1.2021 results call and thank you for joining us today.
Together with Dominik will take you a score on financial results.
It is now more than 1 year since we were on the thrust heated by the COVID-19 pandemic and the status of the overall market environment in Q.
This clearly demonstrates that the crisis is not yet over for our industry.
Today, the global landscape very significantly and the path to recovery.
What we call not necessarily linear.
We see that countries around the world are progressing.
1 from National vaccination campaigns. However, they are doing it at different speeds and newly emerging volume of the virus make the sanitary situation more complex and more difficult.
However, some regions show encouraging signs of domestic air travel returning although regions like Europe.
We've maintained or even the handful that travel restrictions.
And travel restrictions.
Especially if and when they are not well coordinated among countries.
Our net impact on this traffic recovery.
So we continue to face significant incentive fees, which results in a lack of predictability.
On the at least over the short term and we think we need to continue to demonstrate our resilience.
In the first quarter, we delivered on that 125 commercial aircraft, which gives us a good start in 2021.
This year in 2021, and we do not expect the.
Entire delivery profile to be the same as pre COVID-19 on all of course, not the same as last year deliveries continued to be driven by the agreements negotiated with our customers.
Covid time.
Let's now look at our financial results.
Due to this.
Uncertain environment, we maintained in Q1, a strong focus on cost and cash containment, while making progress on our restructuring plans.
<unk> is clearly reflected in our Q1 financials together with our Q1 delivery performance.
As a result on Q1.
1 EBITDA adjusted was $8.7 billion euros compared to $8.3 billion euros in Q1 last year.
Our Q1.2021 free cash flow before M&A interest on our financing was plus 1.2 billion euros and it includes a <unk> <unk> positive.
Phasing impact from working capital.
Our net cash position increased to.
$5.6 plus $5.6 billion euros as of end of March 2021.
During.
Our full year of 2020 disclosure so by mid of February we obviously.
2021 guidance to provide some visibility in a complex business environment and based on everything we see today, we keep on guidance unchanged.
Let's look at our commercial position in more detail.
Global Air traffic.
Tableau to weaker into 2021, then industry forecasts on keep 18.
This weakness was driven by detailed operations in most international markets, including domestic China, where citizens were requested to stay at home during the traditional Chinese new year traveled opinions.
Stop waiver since March and based on a escape available seat kilometers, we see different developments across region.
Domestic China is now above pre crisis levels.
Positive signs of recovery also coming from domestic North America.
Domestic Europe.
On the contrary consider have the lagging behind with not even half of the pre crisis level reached in the last months and weeks.
Addition.
International traffic globally remains at a very low level and the recent deterioration in.
The sanitary situation in India reminds us of the fragility of the recovery.
In this mixed commercial environments, we are managing different priorities with different time horizons.
For 2021.
We maintain our focus on managing deliveries to our.
Customers in this volatile situation with limited visibility, while we closely monitor all the health in particular on the financial health of our customers.
For the payer the beyond 2021, we are now in a position to define the appropriate single aisle ramp up profile with <unk>.
We expect.
The market to recover and with a full recovery expected between 2003.
And 25 with domestic and regional market leading that recovery.
Net humpert profile needs to take into account that some customers will have to restore their balance sheets when.
Exiting the crisis.
Let me remind you of all orders and backlog in Q1, we booked 59 gross orders, including $38 in your line.
We sold 1 on what cancellations, which were already largely embedded in our backlog valuation.
Continuing that we shared with you as of year end 2020. This number included 88 cancellations from 1 specific customer, which we recognized in February.
As a result net all those stood at -61 aircraft in our backlog in units.
Wanted to 6.
998, so very close to 7000 aircraft.
Looking at helicopters in the Q1 'twenty 1 we booked 14 net orders <unk> 54 in Q1 last year in.
In 2021, we see good momentum for <unk>.
Campaign in our home countries, especially in public services, while the commercial helicopter market remains soft.
We welcome the most recent governmental orders such as the order from force to purchase 8 additional <unk> M and the Sigma prototype of the so-called VHF 700.
The demand I know youll see stem as part of the French stimulus plan to the <unk> industry.
Finally in defence and space.
In Q1.2021 on order intake was up to 2 billion euros, representing a book to bill of around <unk>, 9 which is good for our first quarter.
During.
During the quarter.
<unk> orders were booked in space systems, including the Eutelsat order to build a geostationary telecommunications satellite.
Contract signed with Intelsat to 2.1 set satellites and VLDL from <unk>. The main operator in Japan that has become the first Japanese telecom.
Patients parental 2 older satellites from Europe.
We also booked on items worth $1.8 billion euros immediate value aircraft, including recurring orders immediately services and <unk> 3 billion euros in connected intelligence.
On <unk> the future combat Air system.
Relative work has been done in an hour by the states and manufactured on iOS, We have achieved agreement with our partners in all P loans.
Airbus lead flow this record demonstrator phase 1.
Negotiations are now with a free customer nominations and duties and it remains on joint ambition to fully convert soon in order.
So to move ahead from a timing cutting of this very important.
So the phase 1.
On your hold on we are pleased with the progress made between the industrial partners and the governments.
And we welcome the decision of the budget Committee of the German Bundestag, which is a key milestone.
Achieving contract signature. So overall good progress in Q1, so now Dominik will take you through our financials Dominik the floor is yours.
Thank you Liam and good morning, ladies and gentlemen.
Our Q1.2021 revenues were broadly stable year on year.
Our.
Q1, EBIT adjusted increased to $8.7 billion euros. This reflects the cost containment, we continue to apply as long as we have to cope with significant uncertainties in our commercial environment.
It also reflects a favorable mix and the positive impact from hedging.
Going forward, we aim to make our cost savings.
These favorable end to underpin our earnings and cash growth trajectory for the periods beyond 2021.
Our research and development expenses decreased by 6% year on year, we continue to expect our 2021 full year research and development expenses to be at a similar level as in 2020.
Our Q1 earnings per share adjusted stands at 58 Euro cents per share based on an average of 784 million shares.
Our Q1 free cash flow before M&A and customer financing was $1.2 billion euros.
This is mainly driven by a strong positive phasing impacts.
From working capital.
It reflects our continued efforts on cash containment.
Now on to this next slide regarding our profitability.
Q1, 2021, EBIT reported was <unk> 5 billion euros, the level of EBIT adjustments totaled a negative $4.2 billion and included 20.
<unk> 9 million related negative related to 888 program cost minus $177 million impact from foreign exchange mismatch and balance sheet revaluation and minus $26 million on other costs, including compliance costs.
Earnings per share reported includes $59 million.
<unk> financial results. It mainly reflects the revaluation of financial instruments, and the evolution of the U S dollar as well as $43 million related to a vessel of <unk>, partly offset by a net interest result of -82 million euros.
The tax rate on the core business is around 27%.
The effective tax rate on net income is 34% impacted by impairments of deferred tax assets in certain tax jurisdictions and on certain investments.
The resulting net income is <unk> 4 billion euros with earnings per share reported at 46 year assets.
Now on to our hedging.
<unk> activities in.
In Q1, 2021, $4.5 billion of hedges matured at a rate of 116.
With associated EBIT impact as compared to $1.19 in Q1.2020 for the full year 2021, we expect an average hedge rate of $1.21.
<unk>.
<unk> 19 in 2020.
As a result for the remaining 9 months, we expect a negative year on year impact.
During the quarter.
Further adjusted the phasing of our hedges by implementing $4.8 billion of roll overs, we also implemented $4.6 billion of forwards.
<unk> rate of $1.22.
And $1.2 billion of hedges were disqualified as a result, our total hedging portfolio in U S. Dollar stands at $79.8 billion.
With an average hedge rate of $1.26 vs 81 billion also at $1.26 in December.
Hello <unk>.
Now, let's look at our cash evolution in Q1.2021, our gross cash flow from operations of $1.6 billion euros, mainly reflects our EBIT adjusted and includes a $4.3 billion provision consumption related to the restructuring plan.
Our working capital has decreased by.
<unk> 20 billion euros and includes a strong phasing impact from working capital also on our divisions.
Year to date, the <unk> 4 on it and continue to weigh on our free cash flow before M&A.
But less so than in Q1.2020.
Q1, Capex was around minus $4.5 billion euros.
1 <unk> versus Q1.2020.
For 2021, we expect our capex to be at a similar level as compared to 2020.
Free cash flow reported was $1.2 billion euros M&A activities accounted for -7 million euros on customer financing.
Presented an outflow of minus.
The 1 million euros. This low level of customer financing may not be sustainable going forward, we intend to mitigate the impact from cash consumption via external financing sources.
With support from export credit agencies.
Our net cash position has improved to $5.6 billion euros as end of March in.
With 30 day position remained strong and stood at $34.8 billion euros.
We've extended the maturity of our supplemental liquidity line by 6 months, maintaining a high level of flexibility in the uncertain environment caused by COVID-19 are back to Gill.
Our net thank you Dominik now on to commercial aircraft in Q1, 2021 say do we deliver on the 125 aircraft.
244 customers.
Slow start at the beginning of the Euro we delivered 72 aircraft in March.
When we look at the Q1.2021.
And by aircraft SME.
On April 20, we delivered 9 aircrafts.
Production rates increased from 4 to 5 per month from.
The end of Q1.2021.
<unk> announced.
The <unk> hundred 20 continues to show high utilization rates, while the pandemic due.
2 low operating cost and is expected to emerge as 1 of the strongest post crisis solutions.
<unk> <unk> hundred 20, we delivered 105 aircraft out of which 46 were <unk> hundred 20 ones.
We redeemed 100 increase on FY 'twenty production rate to.
43 in Q3 and 45 in Q4 as planned.
And the <unk> hundred 21 X at all.
The development of the <unk> remains on track.
Let's move to wide bodies, we delivered on each.
11 aircraft of which 10 <unk> and.
130, new.
On March 18.
AC 50 test flight with 100% sustainable aviation fuel to Cook with very reasonable demonstration of our ambition to lead the decarbonization of the aviation industry and a demonstration that it's possible.
Now, let's look at Airbus commercial financials.
Loans for the first quarter.
Revenues did.
Decreased by 4% year on year, mainly reflecting.
Lower volumes in services.
The increase in EBIT adjusted mainly reflects on cost containment.
Well as a favorable mix.
It also includes.
The positive impact from.
Aging.
Looking at helicopters.
In Q1, 'twenty 1 than we did 39 net crops are helicopters in total 8 helicopter is less than the first quarter.
2020, this is mainly due to.
The anticipated lower H 145 deliveries in Q1 following the introduction of the new version the so called the 5 Lady diversion of the 145.
Revenues reflect these lower volume in commercial helicopters, partially offset.
By growth in services EBIT adjusted increased.
<unk> 262 million euros driven by services.
From execution and lower spending on R&D following the certification of the <unk> and the new 5 blade edition of the <unk> hundred 45 in 2020 saw last year.
Now on to <unk>.
And space.
Revenues are stable compared to Q1.2020, the increasing EBIT adjusted mainly reflects the continued cost containment in the <unk> in the first quarter.
For the year falling within 1 day easily to the French customer on was achieved in Q1, we.
We will.
Continue with development activities towards achieving the revised capability roadmap.
Retrofit activities are progressing in close alignment with our customers.
Some risk remain on the development of technical capabilities and associated costs on aircraft open Hoffman on reliability.
DDT in particular on with regard to power plants on cash.
Cost reductions and on securing export all deals in time us payout the revised baseline.
Now.
Let me remind you of the guidance, we have issued and simple.
<unk>.
As the basis for its 2021 guidance the company assumes no further descriptions to the world economy and air traffic.
Companies internal operations.
BTT to deliver products and services.
The company's 2020 wide guidance is before M&A and on that day.
The company targets to at least achieved in 2021 same number of commercial aircraft deliveries as in 2020, EBIT adjusted of 2 billion euros and breakeven.
So on breakeven free cash flow before M&A and customer.
Financing.
King.
Last slide to summarize our key priorities, which are obviously not changed since our full year disclosure. After a good start in the first quarter on we will continue to focus on delivering aircraft as agreed with our customers.
And managing the backlog signed.
<unk> the implementation of our restructuring and preparing the senior line of hump up to be ready for when the market recovers.
And Thats good news soon they'll know.
It is abused at our priorities go beyond 2021, we aim to become more resilient towards an expected.
Changes that.
<unk> be happened from time to time in these complex and fast changing world to enable the ramp up of <unk>.
More complex and more innovative products much faster than before and to drive our competitiveness by consolidating and simplifying our industrial setup.
Which today is still partially fragmented across the company our subsidiaries and suppliers.
We want to take advantage of the currently low production rates to best PPA on the Airbus industry on system of the future.
In that context, we decided to place fuselage I host click share their assembly at the heart of.
Airbus production system, and we intend to create 2 new oil such as entities, 1 in France, and 1 in Germany, and a third NTT and called in Germany as his total global player for detailed pumps.
We believe that it's the right time to transform our industry on system into 1.
Non digital design and production stream, which also <unk>. The next generation aircraft that is likely to have a different architecture on as compared with today.
This will also support and contribute to our ambition to lead the decarbonization of our industry.
This ambition is underpinned by Airbus.
Crosstie cost manufacturer that is disclosed its so called scope free use of saw good emissions.
There are 2 established a firm he said on points the against which improvements will be measured.
At the same time, we are investing in innovation and in the transformation of our company to.
Deliver on our long term ambitions.
Across the portfolio.
I think Boston and looking at you know we are ready to take your questions. Following the newly we now start our Q&A time.
Please introduce yourself and your company when asking a question please limit yourself to 2 questions at.
At the time. This includes sub questions also as usual please remember to speak clearly and slowly in order to help all participants, particularly ourselves to understand your questions. So please go ahead and explain the procedure for the participants.
Thank you, Sir ladies and gentlemen.
A question and answer session and you wish to ask a question May Christie on your today.
Thanks.
If you wish to remove yourself from your question and answer session. You May press zero on todays. Thank you bet participant of request to use only handsets what asking the question again anyone who has a question with.
He will run on the ticket.
You bet, we have 1 first question from net I'm speaking from the hole from UBS.
Sure.
Oh sure and.
Thank you for taking my question so.
A really good start to the year, you'll note on the weekend the rest of.
Jim So I would say you know could you please share our thoughts on what happens next in terms of how we think about the I would say quarterly or at least first half second half.
Thoughts on for example, the cash.
You seem to be able to sustain breakeven as long as.
Production is low, but maybe do we need to start thinking of a potentially a cash headwind.
Into the last quarter as the funds for the future ramp up for next year and low.
Also.
I would say how do you think in terms of cash on.
Balancing the cash which was a you know.
Challenge for the last years on being so much H 2 weighted do you think the V series a bit of a weird profile on it also enables you to say, okay. We've rebased and now we're going to we're not going to go into this muscle of interest to skew again.
For the better and making this company more resilient.
On the deal.
Of dealer set thank you.
Thank you sitting on them.
There is a pleasure to start Christian with your questions.
Yes, indeed, it is a good start in Q1 in terms of deliveries.
And we're flow in terms of free.
Non shoals.
<unk>.
I would say I.
I mean, we'll continue to work hard.
<unk> made progress in the euro.
Q1 start was weak you will remember we had week deliveries and Jonathan we've recovered very.
Very significantly in March.
I.
I guess.
<unk> will also.
Be very linear low and we see that it's a complex environment. We had in April new Lockdowns in new restrictions in Germany, and France, which has made on life a bit more difficult. So I want to remain prudent.
We want to believe the situation will improve.
Probably in the second half of the year on the progress of the vaccination campaigns. So again, we don't have that much visibility on the short term, but we think we're getting visibility on the more midterm and that's probably what's driving the fact that we maintain our provisions to start the ramp up of senior line in <unk>.
In Q4 on modestly.
But.
That's an important point for us that certainly throw on points and Thats, a big inflection point now.
Now if I may a free cash flow is to sell used for a CEO. So within the rest of my CFO to answer your questions on that topic.
Aside from you on when I go through the pluses and minuses.
Free cash flow. So yes, indeed, we had a very exceptional Q1 in a certain way compared to prior years I think it was 2011, when we last had a positive free cash flow.
But I think it's always worthwhile diving into the balance sheet to really look at where it came from and you'll see the biggest item. That's changing is really on the trade liabilities. So it's really.
The question of the phasing when we receive goods for our production system and when we pay them.
That was a $2.5 billion increase the other topic.
Noteworthy is that we still have because.
Certain customer discussions from advanced <unk>, So that's a situation where the customer.
<unk> is giving us the cash flow the delivery, but it is not taking delivery and thats of course for us better then.
They're not taking it.
And the last topic I think was positive of course also for Q1. If you can if you look very carefully.
Little bit on the current liabilities current contract liabilities that they go up.
So on liability going up as cash in.
And then the last point is really the overall picture on the.
The cash phasing related to the PDP.
You remember at the end of last year, we already have that.
We deferred a little of aircraft, but we.
Keep the PDP.
So we set that in 2021, there will be.
In a difficult situation with a significant negative impact from the overall balance and this is still to happen in this year. So this will be kind of weighing more on the outer quarters. So just just to give you the color on why it does not make sense to multiply Q1 buy forward.
It would not be the right way to think about it and Thats Indeed, you're right the cash challenge will be much more.
Head of us.
The linearity on the free cash flow yes.
It has improved in some ways from the production system I mean, it's not really the production, but with more of the commercial customer interaction and even fine tuning on the supply chain.
Train, where we need to make sure that we're really synchronized.
And sorry, just a follow on on that the linearity on the cash do you think that could be sustainable.
I think from a production side, yes, we are more sustainable but again.
Not expecting that you will have a kind of.
Very strong positive Q1 free cash flow I think what we see in this quarter was kind of.
A little bit unusual.
Well, if I may add.
Actually we had started to see a better on linearity of the free cash flow already in Q1.2020, but we will hit mid of March beginning of March.
<unk>.
On the mix in China, and finally, it was noticeable in our Q1 zone, but would we not have had.
The funding that we would have started to see these better on linearity compared to previous heroes no everything is.
Opened on and it's difficult to identify the long term trends, but we believe we are doing much better.
And we will do much better on that front moving forward.
Thank you very much.
And your net only we have a next question from Mr. Christian Hansen from Exane BNP Paribas. Please go ahead.
Okay.
Yes, good morning.
And so often.
Thanks for taking my question.
Just 1 would be on.
The 2 commercial relationships Europe was down on today can you give a bit of quoting on.
What type of feedback you have on Mt.
On slide 2 blue squarely on track with Airlines.
Kevin This is low cost who wants to give Phil wants to accelerate.
Especially given your comment.
Did.
You need to take into account that some questions on we need to restore balance sheets did we cover each day.
Yes.
So it would be helpful.
And.
The.
Second question is.
So it's a good question on on the margin trajectory. So you had a pretty good.
On cost management performance in Q1 as you flat.
<unk> seen cost control mode, although to your you're going to stretch on where you have a low fixed cost absorption and you said that you were expecting to be on the steps will attempt to be able to get a smooth ramp up going ahead.
So I don't know if still stuff to do.
50, or 55 to treat with you most of the DPP more than 40.
It's always been that the margin progression on a it would not be linear low and quite frontloaded in the recovery phase is it the right way to approach margin development.
Thanks.
Okay.
I can take the.
The first 1 and maybe sort of share the second question on demand.
Commercial relationships.
Yeah.
It's very diverse.
And it's very connected to the comments I made on the very different situations, we see in the market.
Yeah.
On China is mix improved and he is looking positively at the next month's in euros. So that's 1 situation. The U S is also.
Quite bullish.
And he is looking for a very strong summer so the airlines on getting.
Market, there and ready and.
We see as well that they are willing to start considering accelerating.
Some airlines on considering accelerating deliveries of planes 23, 2012 prudently, but it's a good start.
And on the contrary, we see in Europe that the scenario of recovery is mature.
And then what airlines, we're expecting and therefore, it leads to a very difficult situation for them and therefore for us. So I would say huge diversity of situations and I tried to reflect that diversity by saying that on average for us each day stays consistent with what we have said a couple of months ago.
Worse on results.
But when you look at the details.
Different so I call it low volatility and uncertainty because it could go up on go down on the short term, it's very difficult to assess.
Now to your question of.
Being prepay on for our own book, Yes at Airbus.
We argue.
Full year per ounce fall there.
Ramp up to come on the senior Leila later this year.
Indeed, we have the stuff we need for the beginning of that ramp up.
On the Overstaffing youre, referring to.
I would like to put more color on that 1.
It's not on the wide body than on the wide bodies, we have considered.
Getting at low rates for a long period of time and therefore, we are fully adapted to the new situation in the priority on the wide bodies is to be back to breakeven as soon as we can.
On senior line that's different.
We consider on and I think we were right to consider that we had a big deep and then.
Ramp up.
We are and we want to make sure we can deliver on that from both from an internal perspective and from the supply chain perspective.
The overall staffing is to a large extent financed by.
Our governments with the so called quote soundbites.
<unk> force the furlough schemes, that's all although short term.
So they would expire by end of this share for the majority of them, but thats the point, where we start to see the ramp up so we think so far that day.
Even to keep.
Thousands of people with us.
Largely financed by governments to be able to ramp up is a good deal for governments for our employees.
And for US and therefore, we think that will help us in the ramp up for the long term ramp up we'd be back to a traditional 60.
Situations for hiring training and so on.
Did I need something on your question.
Okay.
Maybe it's just a thank you. Thank you very much.
<unk>.
Thank you Sir on this Chris next question is from Mr. Benjamin Hogan from <unk>.
So from America. Please go ahead.
Yes.
Hey, guys. Thanks for taking my question I had 1 on at 2022 production and when you expect to make a decision.
You mentioned in your prepared remarks that you see you still see demand improving in 2002. So I'm just keen to understand when can we be thinking about a decision being made.
Then a second question in terms of the average structure of announcements you talked about it a ban on your prepared remarks, but just wondering if you could develop on that a little bit more you.
It means for the group were there any cost savings that we should be thinking about on.
Why why is that decision being made now rather than 5 days ago. Thank you.
Okay.
Good morning, Ben.
Pleasure speaking to you.
Well.
When.
What is 2020 production rates.
Planning now and.
We will for the senior line continue to ramp up so you'll see the 43 Q3 to 45 Q4 and it will continue to ramp up in 2022, we have already given indications too.
It comes to supply chain, but that's outside of what we call. The film Aurizon. So we solidify those numbers and communicated at a later stage once we enter into the from horizon, but it's a it's a steep comfort from 'twenty, 2 and 'twenty 3 focusing your time.
I hope <unk>.
Why didn't we make the decision 5 years ago I don't know I think they are on a couple of <unk>.
Figures, which.
From today 1 is.
The progress we have made on the <unk> project, which is the digital backbone of the company we have more visibility on what we wanted to.
Are all of the next generation of products.
And the better understanding of.
The depth of the changes in architectural and therefore, the the nature. The core nature of it also has some needs to enable the digital design and production.
These airplanes and Def production systems and.
The thing that's causing the 19 and the low level of prediction is providing a window of opportunity to accelerate to change now.
This will provide.
Lot of.
Capacities.
<unk>.
Sure.
Enter into service.
Modern products in it.
Mitch from an efficient way in the future.
This will improve the cost base at that point in time on the short term there is no major or evolution to be expected, except that it is creating the conditions for us to be successful when this will be coming and to focus our investments on iOS picture has some of these.
As weighted with life too.
Detailed path to give you an opportunity to grow to get investments, but not as a core activity of Airbus considering that this is not the priority for our investments we have so much to do on what teasing off play to all the technologies of the future products for the digital systems that we want to concentrate on this.
And.
Okay.
The plan to dispose of that detailed pump business at some point in the future that.
This is 1 of the scenarios, we would investigate with the.
I'll talk now is moving forward, but you know we have a we have just started the project.
In this.
1 of the scenarios that will be considered.
Okay. Okay, great. Thank you.
Thank you Sir our next question is from Mr. Chris <unk> from Goldman Sachs therapy.
Good morning, everybody. So in the full year call you referenced that deliveries this year it would depend upon the industry, reaching a tipping.
Tipping point in commercial demand. So I suppose is it too early to say that the March delivery performance was that tipping point.
And then second you mentioned that you now have a better view on the pace of an appropriate ramp up beyond 2021 could you give us some pointers on what pace of ramp up is deliverable from a supply chain perspective on from a demand perspective.
<unk> will be should we assume a similar pace as youre doing this year <unk> hundred 20 rates moving up by 5% every 6 months. Thanks.
Yeah.
Okay.
So I confirm that it's too early on and off perspective to consider low we are at the tipping point, we might be coming closer.
<unk>.
And.
I would like to be at that place by the end of Q2, we see we would be just ahead of the summer on in the summer and it's not unlikely that we have that visibility.
Call it the tipping point, but.
End of March beginning of April that's going to wear.
On them.
What's the the fastest placebo ramp up.
That's a very important question and we are currently doing the work with our supply chain to give an answer to that question. So that's why I said, it's premature to give figures for 'twenty.
<unk> 22.
We have indicated synonymous to the supply chain, we on working with the supply chain to see what he then it would be possible and this would be 1 of the drivers for when we get visibility on 2022 and the pace of recovery in a ramp up of the secret that we will be targeting.
Sorry to be not more more explicit but slightly premature, but we'd probably be able to to say more on.
Next quarter.
That's helpful.
Thank you Sir next.
Question is from Mr. Chris <unk> from Deutsche Bank. Please go ahead.
Yes. Good morning, Thank you for taking my questions.
So first 1 is on the working cap, yes, indeed, the trade liabilities were up in Q1, but.
But I was also wondering about inventory, which was under I mean the inventory.
Total or the DRAM inventory level, which was pretty good under control on how do you see the true.
Out of the year. That's the first question and secondly is on the Irish structure reorganization.
Further details if possible do you intend to do more to do more make or buy.
Continuing on that basis of the reorganization and he's more capex needed for the <unk> I would say implementation or is the capex already spent on this.
Okay I have a goal on the working capital question.
Decision.
I mean first of all yes, we have from any increased aircraft.
On the storage.
Correct, so that should actually give an increase but.
You'll see that the what we've seen on the increase side is quite moderate. So it also tells you that to them in the work with work in process, we've actually been improving and the situations.
As for the outlook at the end of the year, that's kind of a tricky.
Tricky because it very much depends on the delivery number we have said that you wanted to the $5.66 assets last year like last year at least.
The more that we do the low of inventories will be.
And as you mentioned, we also want to be prepared for the ramp next year. So so that's the difficult balancing act.
Now you're on to find the right balance between reducing cash consumption on the other hand being prepared for the ramp. So this is why I'm not willing to kind of.
It really gives you a strong indication of where the inventories stand at year end because that would imply a strong guidance on what upside if any on the 566, there are and that's really premature at scale.
I've already indicated.
And on the second question, we are spending money on the Dms 2.
<unk> 2000, 22021, moving forward Thats part of the R&D credit.
Imminently and when it comes to the Capex required for.
I always picture transformation.
There will be some 2 limited extent that seemed to point to the point, we launch while we pay on the launch of the next generation products and he on each will come with a major capex and we want to prepay on the industry and will set up their legal entities.
The tools and the systems. So this can be done.
<unk> in an efficient way because the next generation of industrial systems and product, we'd be very very different so we need to be prepared and it takes time. So that's 1 of the reasons why we're doing this now.
And on the MC called by do you intend to do more on May call buys on existing programs. So on with this new structure.
I don't think thinking on us on what you mean by more make on value. We will do is going to do you want to internalize more.
Production that is external a day moments or Egypt.
Is it unrelated I would say.
It's it's unrelated.
Okay.
There.
It will be relative make but it will make and buy and the decisions will be taken 1 by 1 based on competitiveness of what we see in the market. So that's pretty much rates unrelated and premature to answer that question I'm sorry.
Okay. Thank you very much.
Thank you Sir our next question is from Mr. Charles Armitage.
Sure.
Go ahead.
Good morning, Thank you.
Just thinking about the <unk> phase.
Phase III.
So pre pandemic you were limited by <unk> hundred 20 <unk> supply.
So you wanted to deliver as many <unk> hundred 20 ones that you could that you would feel it.
Function of the lower end with day to 'twenty It seems a little closer.
Now engine supply is much less of an issue. So can you talk through how you think about the <unk>.
The more you sell the because of the lawsuit.
Potentially the closer you are to breakeven.
And.
Yeah.
Second question a related question is gateway 'twenty looks great play, but the volume is.
It is not profitable.
When do you think you'll achieve break even post pandemic and at what rate.
Very long term conceptually book drop through margins could you see them on the 220.
Each 1 of them and you can take the question because I start from the back maybe in terms on the 800000 turnarounds.
Maybe you want to answer that kind of fleet decisions of our customers with regards to choosing 820 <unk> hundred <unk>.
And on the profitability and indeed as I always say, we are on the J curve wherever you are still going through losses.
The benefit of.
Okay contract provisions from the purchase price.
Allocation. So we can bring the losses to a low triple digit million amount in the cash.
Usage is significantly higher because of course these loss, making contract provisions don't.
Help on the cash side.
We've always said that we need.
Last name basically both factories in mobile in mirabel to a decent decent loading level to come to a breakeven operationally.
No. That's the key question how quickly can we do with that.
You can make the math.
You will see that to come to them to fully loaded will be probably some 170 or so per year, but.
<unk> I don't need all of that for you, but you need probably slightly less of that to come to breakeven and some will take several years still to get there because the rates. We currently have a much lower than that and for that to be Frank we need new orders and then there's also a question about the pricing on the new on.
That will determine the breakeven.
On the.
On BT decisions April 'twenty versus <unk> hundred 20, Yeah, maybe I'll try to answer the question on engine being the limiting factor. It was the case in the ramp up of the <unk> hundred 20, new.
Both with the pattern with engine and the CSM engine, so what I'd say.
2019, beginning of 2020, you're right in saying that it was not on Gulf of case in the last 15 months, let's say.
As I told you just before we are currently.
Running the analysis of the supply chain readiness for.
The ramp up ahead of us.
And on engine supply chain is also a complex 1 with some specific parts.
Which always are.
At the edge so.
Premature to say that engines will not be the limiting factor.
Again in the Olympics.
Domestic.
Obviously on that front.
Was the case previously EBIT would be prudent and the choice between the 2 'twenty into 'twenty, we'll I think deals.
Deals on up in terms of market segments is very small.
Don't see in the recent heroes.
A multiyear campaigns, where we would have had 1 on the and the other it was always 1 of the other day on different market segments and.
I think thats good news that it shows that we have a good.
On positioning of the dish on products as we speak with standard products and we anticipate.
That good market momentum from both the 220 as we commented upon it was very very much used during a pandemic and for the FY 'twenty because it remains a very very strong product line, including the new developments. We have made on the free 21 with the X at all which May keep CD Super products.
Thank you.
Thank you Sir our next question from Mr. <unk> would you be able to share from credit Suisse. Sir go ahead.
Yes, good morning, gentlemen, and thank you for taking my questions.
2 if I may the first 1 on a number of disruptions, which are happening in the value of sponsors.
Also the supply chain in semiconductors.
Some suppliers flagging casting and forging issues that they've been facing in the quarter.
And.
Another 1 this morning mentioning productivity issues is this something that you are starting to see flow through your production system.
On something that we should be worried about.
On the second question is on the consolidation that is happening.
Well done.
With a number of deals.
Having been announced.
Is your reaction to these.
Okay.
Thank you <unk> and thank you.
Patients are.
Actually youre right to to put the finger on those topics.
In the last 12.15 months.
Issues came from the demand from the customers from the description on air travel.
I fear that the main.
For your claims the main risks ahead of us are on the supply chain.
I mean, the main reason that all suppliers have adapted to the pandemic situation with a lot of consequences and they will have on the senior loans in particular are lumped up now and this is a disorder of cluster of situations very difficult to manage for.
Publicly on industry like ours Thats why we are very focused on the.
<unk> of the supply chain on running scenarios and preparing with our suppliers.
<unk> put in place so cool to watch towers, which have given a lot of positive results gaining that transparency and what we.
We see coming in the different <unk>.
You have mentioned, but others is something we expect to see more unfortunately in the next 12 months and we will have to manage.
The situation. That's why we are also prudently commenting for the rest of the euro on because we are still with the.
On the wage.
Of the issues.
It's a big weight of the issues on the demand side and we start to see challenges on the on the supply so I would say.
Challenges complexity, we think we have a level of transparency, we need to see problem Cummings, and therefore to anticipate and resolve.
<unk> before it becomes a big crisis.
But obviously, we have to remain very humble and work hard because it's a lot about preparation when it comes to the consolidation.
With less loans.
My first observation on the resources that they have remained very strong.
Over the last.
Sure.
<unk> been instrumental in enabling that industry to keep moving forward.
Very very challenging situation.
It relies on.
On the stability of the financial system, and that's very important too.
Probably comment on there's no financial crisis.
And that's a very important for us.
There is some consolidation with the players that's important for us and actually we look at the consolidation. They are closing homes in these situations, but overall I would say we are fine with it.
Okay.
On the.
Supply chain issues are there any specific areas.
You've seen Colorado are.
Very much.
As for Ya.
Yes, I know there are a lot of specific areas is there a sectorial crisis on 1 domain.
I don't think so and what you mentioned on semiconductors is impacting many industries in particular, our friends in the car industry, but we are for the moment.
Not too much exposed to that to that crazy. So, but we are monitoring obviously the situation. So I would not point to any sector that I would consider on more critical.
By by its nature of today than others.
Okay. Thank you very much.
Thank you. Sir next question is from Mr. Jack Atkins from.
Thank you Sir please go ahead.
Hi, Thank you good morning.
First first question just following.
On.
On.
The financing environment, you said at the beginning that you may have to see an increase in customer financing.
And so.
It would be good to understand what changes youre seeing if any in third party in the ECA financing environment.
And then second.
Upgrade has been a hot market during the pandemic and this is 1 area that I would say it has not been an Airbus strength do you have plans to address freight more aggressively and if so how.
So I thought with the financing.
The situation is actually as you mentioned quite stable so we still.
Except the financing service providers on the life of kicking and on top of that you mentioned the export credit agencies, which have been really waiting in nicely.
I see a positive trend, but it's still a little too early to declare victory. So this is why we said that.
Keeping our.
See the vendor financing cash out to a kind of low double digit millions per quarter might not be sustainable in the current environment, but I'm not seeing a kind of a wave of financing hitting us either.
Due to the mix on the final question.
It is indeed the case.
Sure.
Sure.
It's been weak on the freight market segments in the past in particular on wide bodies.
And I don't like the idea and we don't like the idea to remain weak on that segment in the future. So indeed, we will be more aggressive and we think we have the products too.
To be able to be more on receiving.
In the future.
But which products are you referring to there.
I was mentioning the wide bodies. So it will be in the segment on the wide bodies moving forward.
However, when the when it comes is not clearly defined today that we're looking at that segment very seriously and we want to play a.
Moving forward, we think it's not it's not healthy to have only 1 player on exclusive in the market.
For a segment that is actually a very significant and has been.
Resisting well independent so we want to bring a contribution to that market segment.
Okay. Thank you.
Thank you. Sir next question is from Mr. Carter Copeland from research Sir. Please go ahead.
Hey, Good morning, gentlemen Cup.
Couple of questions from me 1 on the Airbus commercial and just the profitability and the implied in our profitability by program is there anything.
To call out, that's particularly unique about the customer mix in.
In the quarter that shouldn't repeat in the future that.
We should be mindful of and then secondly, just give them on the conversation around the tipping point.
And specifically when you look at in a wide body markets.
And what you're watching there from an incremental risk standpoint can you give us some color around you know what.
What that tipping point is and what the decision markers are there any color would be helpful. Thank you.
Do you think you can take the customer on me.
I think you probably referred to as a question.
Given the Q1, we had.
On the birth of the guidance on was it something that was kind of boosting profitability in Q1 and was it the mix or other things I would say.
Not the predominant effect of the customer of course, a V. We sometimes have a stronger mix and better margin the aircraft, but I would say, it's not the biggest driver on the.
The 3 big drivers, we see on the phasing side of first and foremost the currency issue that we had a 116 effective hedge rate in Q1 versus the remain to do which will be from today's perspective at the $1.22.
You've seen the phasing of the R&D investment, where we said that we are going to spend about the same amount as last.
Last year for the full year and we have on the proportionately spend on that in Q1 and the last 1 is you should not forget that the ramp of activity on the resources required for that but very much loaded towards the second half of the year and so this is the predominant driver of the phasing theyre going to see and not so much the customer mix.
I wouldn't take the.
Second on Sir and thank you for from raising the question gives me the opportunity to maybe.
With more color on this notion of tipping points.
As I said.
And I believe we will see that tipping points.
For regional.
I think this year.
So far on senior lifestyle.
I would be happy moving forward. This later on in the year on we can tell you where we think we have reached the tipping point I don't see the tipping point this year for the wide bodies wide bodies on relying on the international market recovery, which we see.
B not significant.
At least before some of on next year.
And due to the complexity of the situation and the big different season in the pond and institution on the way it's been managed around the world with some regions.
A lot of stipulation of the environments, others, where there is no shift relation of the virus somewhere on the vaccination is moving forward on that's in interest base.
Of those way, it's not the case, so I believe before we see an international on the market back to older. It will take more time, so tipping point this year, yes, probably likely for senior line for wide bodies in my view not before 2022.
Okay.
Great. Thank you for the color.
Thank you Sir we have 1 last question is from Mr. Andrew and free from Morgan Stanley. Sir go ahead.
Yes.
For taking my question and congratulations on a very strong start to the year.
Just a couple of follow ups on on early.
Your points.
You've highlighted in a couple of places in your prepared remarks.
Marks are really customer situations on on financing first indicating that customers will need to balance sheets, and secondly, indicating that.
You're more open to customer financing, where you would expect that to increase.
Is the situation.
West and west.
Western It was when you were giving full year guidance and by implication is the delivery number more challenging.
And my second question is also around kind of infrastructures and supply chain I think that the rationale for longer term integration of.
Aerostructures businesses.
It's very clear in terms of future architectures.
But clearly we have a situation at the moment, where there are parts of the Aerostructures supply chain.
Europe at all.
Some distress or have a lot of challenges.
Would you anticipate any emerging problems, there and I guess, what do Airbus.
Airbus strategic decisions meaningful the rest of the European supply chain and infrastructures.
Dominik I suggest you take the question on the customer sign on the financing sure.
I would say no it has not gotten worse.
I would if anything very very slightly more positive there was 1 or the.
The other financing looming, where we thought we need to chip in and we're able to secure funding externally.
But I think again on <unk>.
And permit tours, so I would not call it a trend yet, but I am not seeing a need of any trend down definitely not.
On the second question I always picture companies, having challenges in Europe.
Oh, yes, and no I don't see a situation and back to the previous question institution that would be worse.
And on more challenging than others.
6 out of our supply chain and I don't see the need.
For a structural decision on our sector.
All of this year and on a always touch on somebody's all sectors in Europe at the moment. It doesn't mean that we won't have to take it case by case decisions and actions, it's likely that it will be the case, but I don't have the same perception that what you were suggesting that we have a particular problem in almost electrodes.
<unk> Europe at the moment.
Thanks, Jim.
Closing on our conference call for this time.
If you have any further questions. Please.
E mail to sleep on myself, and we will get back to you as soon as possible.
Thank you and I look forward to speaking to you again soon.
Thank you very much have a good day.