Leonardo SpA

MIL:LDO

Earnings Call Analysis

Solid Growth in Defense Business Drives Positive Outlook

In the recent earnings call, the company reported a 12.4% revenue increase to EUR 12.1 billion, driven by strong demand and a healthy backlog of EUR 43 billion. EBITA rose by 15% to EUR 766 million, with a return on sales at 6.3%. New orders grew by 7.8% to EUR 14.8 billion. Segment highlights included 15% growth in helicopter orders and 10% in defense electronics. The firm confirmed its full-year guidance, expecting continued revenue growth and improved cash flows, while net debt decreased to EUR 3.1 billion, a 19% reduction from last year.

Solid Growth Amid Challenges

In the latest earnings call, the company revealed a resilient growth trajectory despite facing numerous external challenges, particularly within its Aerostructures and Space business lines. New orders increased by approximately 8%, while revenues grew nearly 12%, showcasing a robust performance within its defense and security segments. EBITA surged by around 15%, reaching EUR 766 million, with a slight improvement in return on sales by 0.1%.

Performance Overview by Segment

The company's performance varies significantly across its segments. The Helicopters division reported a 15% increase in new orders and a 13% growth in revenue, reflecting sustained demand. Cybersecurity exhibited a remarkable turnaround with a 21% increase in orders and 11% in revenues, improving its return on sales to 5%. Meanwhile, Leonardo DRS showed strong momentum with a 12% rise in orders and 18% revenue growth, highlighting its position in advanced technologies for defense.

Aerostructures Division Struggles

The Aerostructures division faced significant headwinds due to the ongoing challenges with the Boeing partnership, resulting in a substantial EBITA loss of EUR 129 million in the first nine months. The division is now undergoing a critical reassessment of its strategy, which may involve diversifying its production sources and potentially forming joint ventures or partnerships to stabilize future performance.

Debt Reduction and Cash Flow Improvement

A notable highlight from the earnings call is the progress in reducing net debt by 19%, now standing at EUR 3.1 billion, down from EUR 3.9 billion a year prior. The free operating cash flow improved by 13.7%, totaling EUR 550 million, demonstrating the company’s commitment to enhancing cash generation capabilities amid current operational challenges.

Confirming Full-Year Guidance Amid Caution

Despite the promising growth indicators, the leadership team is cautious in its guidance. They confirmed the full-year targets based on their current assessment of macroeconomic factors, geopolitical implications, and supply chain challenges. They expect to maintain a stable order intake and revenue growth while continuing to optimize operational efficiencies across divisions.

Focus on Efficiency and Future Growth

The company is on track to achieve savings of approximately EUR 190 million due to its ongoing efficiency initiatives, indicating a commitment to long-term profitability. The management team outlined a proactive strategy focusing on higher margins and diversifying product lines to mitigate risks associated with its exposure to commercial aerospace downturns.

New Ventures and Innovations

A key aspect of the call was the emphasis on creating a new Space Division and the integration of Telespazio, which is anticipated to open significant growth opportunities in the expanding space economy. The new strategy focuses on innovative technologies and partnerships to advance capabilities in aerospace and security solutions, positioning the company strategically for the future.

Market Positioning and Competitive Edge

With a record backlog of EUR 43 billion, the company is maintaining a strong market position. The leadership discusses their discipline in capital allocation to support growth while improving shareholder returns, emphasizing the importance of maintaining an investment-grade status. The emphasis on cost management, operational efficiency, and technology advancement are underlined as pivotal for sustaining long-term competitive advantages.

Earnings Call Transcript 2024-Q3

[Valeria Ricciotti, executive]

Good afternoon, everyone, and welcome to our Q3 and 9 months 2024 Results Presentation. I'm Valeria Ricciotti, Head of Investor Relations and Credit Rating Agencies.

Today, our CEO will take you through the progresses that we've got during the first 9 months of this year and how we are positioning looking forward. And our CFO, Alessandra Genco will then take you through the Q3 and 9 months 2024 results and performance across the group. We will then welcome your questions.

The call is planned to last no longer than 1.5 hours, including the Q&A. The supporting slide presentation is available for download by registering to the webcast and all the Q3, 9 months results materials are available on our website under the Investor Relations section. Please note that throughout the presentation, we will be making forward-looking statements. So I invite you to refer to our Safe Harbor Statement, which is available on our presentation and applies to this call as well.

And now I will hand you over to our CEO, Roberto Cingolani.

[Roberto Cingolani, executive]

Thank you, Valeria. Hello, everybody. Nice to see you digitally again. So let's go with the presentation of the third quarter 2024, trying to move the slides.

All right. Okay. This is the agenda. We'll start with the execution of the industrial plan. Before -- I'm sorry, I do have a problem with the remote. Can you operate from there? Thank you. Sorry. Go ahead, please.

So before showing you the data of the quarter, I would like to remind you that tomorrow, it will be exactly 18 months. So we are at the mid-term of this mandate. So it's a special occasion despite the Q3 normally is not so exciting. But this coincides with our mid-term report. And I would be happy to tell you -- I would like to be -- to tell you what we've been doing in this first 3 months.

So, first of all, I think we developed a technology roadmap that was rather innovative, giving a vision and some ambitious Industrial Plan that were actually timely and appreciated by the defense institution, by the peers, the other companies, and I would say also by the market.

So the Industrial Plan delivery was an important point of this mid-term report. Second, we set up the strategy for the internationalization and for the creation of industrial alliances. In this respect, the delivery -- main delivery is the new joint ventures that I'm going to introduce you later during the presentation.

And the third was we launched a deep SWOT analysis of Leonardo to start the transformation into a more profitable high-tech global security multinational company. And in this respect, the main deliveries were the saving plan that was started, the reinforced capital allocation, the divestment of core business and many other issues dealing with reorganization of the corporate.

The numbers are good. You will see in a minute. The numbers are very good, but we're convinced there is still a lot of work to do. And in the next 18 months, we are committed in pushing the Industrial Plan execution and creating new business sectors, accelerating on better efficiency, better margins, and improving our capability in handling and disciplined capital allocation.

And finally, we want to tackle the historical weakness of Aerostructures division that was amplified lately by the Boeing crisis and the new Industrial Plan of the Space division. All those things will be introduced to you in a few minutes during this presentation. Can you go ahead, please? Thank you.

So those are the numbers for the company. In the first column, you have the comparative column of the third quarter of '23. And the second column, we have the pro forma that includes Telespazio. I'm sure you remember that we consolidated Telespazio starting on January '24. So in order to compare the numbers, we'd like to propose you the third quarter of '23 and the pro forma quarter of '23, just like if we had included Telespazio in the KPIs. And those are the numbers of '24.

So you see the new orders growing by almost 8%. Revenues are growing by almost 12%. EBITA is growing by approximately 15%, reaching EUR 766 million. Return on sales is increasing by 0.1% compared to the pro forma. We are working on the efficiencies, as I said before. The free operating cash flow has been increasing by 13.7%. The net debt has been reduced by 19%.

So in short, the financial KPIs are positive. And to be honest, we would increase guidance if there were no exogenous problems, primarily the Boeing situation versus Aerostructures and the Telco business versus Thales Alenia Space that are not really positive for us. So we feel at the moment that we should confirm the guidance 2024, even though the numbers are quite promising and apparently, things are doing very well.

Just in short, because then Alessandra will give you much more detailed information. Helicopters continue the strong orders and revenue growth. We're focusing on efficiency to improve order -- actually revenue versus margin increase. We have double-digit 15%, 13% growth in orders and revenues, 7.5% return on sales.

Cybersecurity is undergoing a strong increase of all KPIs. This proves that the so-called intensive therapy or intensive care we did at the beginning of the year is giving good results. And apparently, the shift towards a very attractive market of the Cyber division is returning very good results, 21% increase in orders, 11% increase in revenues. We moved towards 5% return on sales. Those numbers were by far worse 1 year ago. DRS confirms a strong momentum, 9% return on sales, 12% return on orders -- increase of orders.

Aircraft still confirms very high margins. I should say the best in the company. Orders are affected by a shift of some commercial operation dealing with the 346 and the C27J, but this is just a temporary shift that has nothing to do with the performances. And so, we are confident that things will grow as usual. We just have to wait for a few months because some of the campaign are shifted by a few months because of political reasons in the customer countries.

About Aerostructures, I will talk to you later. We have a plan to show. Telespazio is giving good numbers, fortunately. You remember, Telespazio has been consolidated from January. So it's 1 year -- almost 1 year now. It is experiencing good momentum after consolidation.

The new Space division is under construction. This was launched officially September 30. So the other components of the Space division will be accounted for in a few months. I will show you what is the situation. But we should commend Telespazio, because the orders are increased by 12%, revenues by 10% and return on sales is approaching 8%, much better than in the recent past. So we are very happy about this performance. But of course, Alessandra will tell you much more in about 20 minutes. This was just to give you a flavor of how things are doing.

All right. So let's go to the next slide. I want to remind -- but I'm sure you remember very well, we have 2 pillars, strengthen the core business and pave the way towards new technologies and products for the global security challenge. This is primarily Space and Cyber. Those are the legacy product, aircraft, helicopters, electronics and so on and so forth. And I'm sure you remember, we were separating the organic growth, the efficiency boost and the inorganic growth as the 3 pillars onto which we create the financial strategy.

Now let's see the execution of the plan so far. About digitalization, main delivery in organic growth was increasing the digital content of all our products, data fusion and data analytics. This is now being applied primarily on helicopters and aircrafts, but it's being extended to many other areas such as Space and Cyber. And we launched very recently a new multi-domain innovation hub that is a physical place where our engineers are coexisting with the military forces of the country to develop the multi-domain picture that will be for the national defense.

This is located in the Tiburtina plant where we have the electronic facility. And it's a very important point for us because we are mixing the military expertise with the engineers and the technical expertise to be very practical in the implementation of the multi-domain strategy, which is the basis of the future development of the company portfolio.

The portfolio streamlining this has something to do with the efficiency boost that we promised. I'm sure you remember that recently, we sold the under marine business unit, rationalizing the portfolio of electronics. And this is actually doing very good numbers at the moment.

According to the best forecast, the orders were growing. You remember this, I'm sure you remember that the conclusion, the finalization of the sale is supposed to be in the first quarter of '25, and the orders are already exceeding the expectations. So we should be at the maximum value of evaluation that was EUR 415 million. So we are quite satisfied with this.

And also, we exited non-core business such as divesting the Industria Italiana Autobus for electric bus fabrication and Skydweller, the solar-powered drones. And you will see later in another plot that has to do with the Saving Plan that this brings in a remarkable saving of money that contributes to the good performance in terms of free operating cash flow and savings.

Organization and governance. The main deliverable here is the definition of the new integrated division in space. There will be a specific slide for that in a minute -- in a few minutes. So I'll give you the details. This is again part of the organic growth. And about the Saving Plan, so again, on the efficiency boost, I will show you in more detail what the job we did about accelerating the efficiency plan, developing a new class of KPIs to measure in a quantitative way how money is saved basically. And at the moment, we expect -- we confirm the expectation for the fiscal year 2024 of saving approximately EUR 190 million. The original forecast was EUR 150 million for the current year. But apparently, we cannot outperform this number. Of course, this will be -- this means having more flexibility over the next years. We'll give you details in a few minutes.

Concerning Aerostructures, this is, again, organic growth. You will see in a few minutes in the continuation of the presentation, a new reactive strategy for the Aerostructures division. In a nutshell, we realized we cannot go inertial anymore. We cannot trust anymore, a single customer, undiversified production. So we decided to elaborate a new scenario. This will be officially presented at the beginning of '25 with the update of the Industrial Plan, presumably before the end of Q1 '25. But I will give you some of the elements we are working around.

And now let's go on the inorganic part. Actually, those are left at the bottom just because now we will start with a presentation on those specific initiatives. I would say that the most important initiative that we launched recently was the creation of the joint venture with Rheinmetall in the land domain. That's paving the way for the land defense strategy that Leonardo's launched as a concept a few months ago or 1 year ago.

And on the same footing, we are progressing quite fast on the finalization of the GCAP joint venture, and we can anticipate the GCAP joint venture will be very likely signed between the end of November and December because the 3-member state and the companies finally found a good agreement. I will give you the details in a few minutes. So those are very important actions in terms of inorganic growth and merging to create a giant that can compete at global level with the other giants of defense.

And finally, about merger and acquisition, I'm sure you remember, we had in the inorganic growth, we had a component that was merging with giants and another component that was acquiring small companies, keeping the concept that the cost of the operation should never exceed 15% to 20% of the turnover of the division that is acquiring a start-up or a company. So I will update you in the course of this presentation.

There are a number of opportunities at the moment, 14 due diligences, 1/2 of those are already completed. So we are waiting for response from the companies. And those are primarily in Cyber, then in Space and one on unmanned systems. So this is actually what has happened over the last 9 months.

Let's go -- let's start with the description of the Leonardo-Rheinmetall joint venture. I think you have read extensively on the international press. So this will be named Leonardo Rheinmetall Military Vehicles Company. It's a light joint venture established on October 15. The headquarter will be in Rome and the production site will be in La Spezia, in Rome and in Dusseldorf. The aim of this initiative is to create a new player in EU tank production, and in general, land defense vehicles.

Just for your practical information, if we can turn the camera. The key point will be as a first set of orders will be to satisfy the request of the Italian Army about renewing completely the arsenal of land defense machines and there will be approximately 100 large main battle tank systems based on the Panther platforms and approximately 1,050 infantry vehicles based on the Lynx platform, this smaller machine here. And actually, you should be aware of the fact that those will be multipurpose machines, having more than 16 variants for different applications from infantry vehicles to logistics, anti-aircraft, anti-threat and so on and so forth.

Actually, the program for the Italian initiative has a value of approximately EUR 23 billion, depending on whether we are dealing with the main battle tank or with the infantry vehicle, the small one, this one here. This bunch of money will be spread over 10 or 12 years.

I mean, generally speaking, we're talking about a long-term plan that will start essentially now and being completed between the '35 and in some cases, up to the '40. Of course, this is only the Italian part. We aim at acting like a catalyst for European cooperation. The machines will be state-of-the-art.

Leonardo will be in charge of mission systems, electronic suites, weapons integration. And there is a very clear work share that has been established with the partners of Rheinmetall and it's a work share that is approximately 50-50, for the specific case of the Italian supply, it will be 60% of the job will be done in Italy, 40% in Germany. But of course, we kept this very flexible for export because we know that being those machines state-of-the-art in terms of interconnection, defense, electronics and all kind of technical characteristics, we expect those to become very important for export.

And we evaluate that the joint platform for future land programs should serve customers in other EU countries, identifying a market in the range of EUR 50 billion. So actually, we better do a very good job in terms of new technology on those platforms because this will open up a much bigger market than the Italian one only.

Now this is how the joint venture Rheinmetall-Leonardo will start working, and we expect to deliver the first machines in a couple of years, the light machines and maybe in 3 years, the first machines for the main battle tank. And we are already working and we're now fixing some of the details of the joint venture, appointing the CEO and the Chairman that will be rotating between Leonardo and Rheinmetall. And we are very happy because this seems to be very fast. I mean, I'd like to remind you that this started in June. So and after 5 months, we are up and running. It's very important that we deliver fast what we promised in the plan.

The second important initiative has to do with the GCAP. There was an acceleration recently. Member states, U.K., Japan and Italy have been working hard and the companies, Mitsubishi Heavy Industries in Japan, BAE in U.K. and Leonardo in Italy found a very good agreement at the moment. So very likely, we're going to sign and create a joint venture before the end of the year.

The development contract is for 10 years at the moment. The Italian Ministry of Defense has already allocated EUR 8.8 billion. I roughly estimate more than EUR 40 billion overall already allocated for the entire contract.

The governance has been defined, and we have also set up the rules for the appointments of CEO and managers. The workshare allocation and the key terms have been agreed. There has been a lot of work over the last couple of months. There will be 4 sites, the headquarter being in U.K. and NATCO, the national headquarters will be in all 3 countries.

There will be equal rights among all partners. And actually, the part of workshare that will deal with Leonardo is about flight system integration, weapon integration, training integration and a number of activities for the mission system, weapon effect management system, flight system, such as the flight control systems. All of this becomes very important for the future extension development of the GCAP as a system of system technology.

So, we are particularly happy of this agreement because, of course, this is also very important for future updates and upgrades. It takes value of the technology developed by Leonardo in a central way. And of course, it opens a lot of future technologies within the system or system frame.

This is the plot, the image, the rendering of the GCAP that you might have seen already at some international exhibition. So, we are finally entering in the hot phase of the program. Hopefully, by -- at the presentation of Q4, we'll bring you more data on the final JV after signing the final agreement.

Let's go now on the Merger and the Acquisition activity. This is a very dense -- it's a very dense slide, but don't worry, I'll be very quick. There are approximately 7 targets. For obvious reasons, we can't disclose names and many details from different countries. Overall, the due diligence are 14, 7 are quite ahead. The business is primarily in Cyber. Those are the issues, service and solutions, cross-domain solutions, network security. One is in Space, another one is in drones. The other one is also Cyber. They are all quite ahead. So, due diligence either ongoing or completed. And in some cases, we are finalizing the agreement or waiting for a go/no-go decision by the counterpart. So, that has been the effect of the intensive work done with those companies.

For your information, I'm sure you remember, we promised to stay within 16% to 20% of the turnover of the divisions. And indeed, we report here an indication of the turnover of those companies. You see those are from very small to, let's say, mid-sized around EUR 60 million. So if you accept the idea that there is an EBITA in the range of, I don't know, 10% or so and you have multiplying factors in the range of 8%, 10%, 12%, depending on the sector.

You see that we made a specific selections of companies that will bring in new technologies, new capabilities or new products that it is at this point, easier and cheaper to buy than to develop in-house. And this was a criterion that we promised since the very beginning. That's why we did such kind of selection. It's a lot of work, of course, but I think it will pay back.

Okay. Let's go now on the other important delivery and the other important promise that we did, it's cost and efficiency. Now you remember that, that was the plot that you still find in the presentation of the Industrial Plan. The idea was to realize to accomplish savings for approximately EUR 150 million in year 1, this current year.

Well, to be honest, we started -- we launched the program, the Industrial Plan in March. So it's only 7 months from now. So this is not even not 1 year. But okay, we are accelerating. We were pushing like crazy. Now for the 9 months that we are considering now, we can expose approximately EUR 150 million of savings with a forecast of EUR 190 million after 12 months.

Now let me tell you which was the difficulty. Making a quantitative assessment of the savings is not that easy, because you cannot simply compare what you spend this year compared to last year because conditions are changing. Headcounts, number of travels or consumption of energy, inflation, raw material costs and so on and so forth.

So we need KPIs. Most of the effort done so far was not only saving money, but also identifying KPIs that are significant enough to have a reasonable estimate of the savings. For this CFO, planning and control, engineers, strategies have been working together, including the procurement organization.

Just as an example, this is a bit boring, but I would like you to understand how much work there is behind. For instance, travel rationalization, I remind you that there is 58,000 people in Leonardo. So travels, it matters. Travels optimization, rationalization brings in EUR 30 million savings.

In order to evaluate this, we have to develop a metrics. For instance, we found out that the average cost per day in the lodging is diminished by almost 9% on average. International flight cost diminished by 4%, national flight cost by 3%, average train cost by 16%. Even revisiting agreements for roaming and international phone calls, mobile devices and so on and so forth has been -- as a resulted in a reduction of 34% in the total cost.

Real estate has been optimized. And now we can estimate 24% reduction in cost per square meter. Of course, this includes all services, cleaning, securities and so on and so forth. So it's a huge effort for a company having 100 -- and more than 100 sites in the world with different buildings, quite complex logistics and so on and so forth.

The corporate cost has been kept under control in the 7 months. We can ensure that this year, we will spend the same amount of money that we spent last year for a corporate that, by the way, had much more expenditure for security that has become an important central cost because of the international situation.

For personnel, and for information technology because the digitalization has a big cost actually and to keep under control inflation. This will improve, and we will see important savings now with the new budget for year '25 on which we are already working after having learned the lesson and having developed the right KPIs.

Direct procurement so far has been under control, primarily savings were aimed at the containment of inflation that was successful, fortunately. And then business and product disposal that I told you before, exiting Industria Italiana Autobus and Skydweller account for approximately EUR 30 million per year Industria Italiana Autobus, and EUR 50 million per year the Skydweller. So those were non-core business programs, and that was fair to quit them because they were never taking off as products.

Now least but not last, the organization streamlining was very important. We have reduced the participated and associated company that we have in all countries where we do have representative offices from approximately 151 to a bit more than 100 by clusterizing and making efficiency.

And this has resulted in EUR 2.5 million savings. And the complete redesign of the foundations controlled by Leonardo, the Leonardo Foundation, the Med-Or Foundation and the Ansaldo Foundation that they are making outreach and geopolitics and so on and so forth, has actually cut by a factor of 2 the investment. We saved EUR 4.5 million starting from EUR 9 million yearly investment.

So, this is just an example, but I think it gives you an idea on how specific and how detailed and serious was the job we did in order to make a quantitative assessment that is as reliable as possible.

Let's go now to see the new Space Division. That's another important delivery. We promised -- you remember in the Industrial Plan, we promised to create a new division because Leonardo has to be perceived as a company that makes space technologies, space economy.

Last year, when we started, we were only a controlled company, we didn't consolidate anything. And so in the balance sheet, there was no real existence, no real presence of the space activity, but for the dividends. So we made a new division. We are creating -- we are preparing the Industrial Plan. The new division, the new Space Division relies, first of all, on the financial consolidation of Telespazio. That's very important. You remember this was the first good news in '24, yes.

Then we carved out a business unit of the Electronic division that was entirely dedicated to space electronics and space robotics. This is now -- it's about 500 people carved out and moved into the new Space Division. Of course, we rely on the Thales Alenia Space Italia factory with the exploration capability. There's a lot of hardware, very high-end capability.

We have incorporated e-GEOS, which is a company, 80% Leonardo and 20% the Italian Space Agency primarily dedicated to geoinformation and ISR capability. And of course, we have allocated a substantial part of the high-performance computing and AI capability to the Space Division because this will be a data-driven division for data collection and analysis for end-to-end satellites.

Now end-to-end satellite services. Now the new business model, as I reported to you at the very beginning, will be no SATCOM for us, no launches and a specific choice on end-to-end satellite services, primarily geoinformation and satellite services such as energy, governmental services, maritime, different utilities, space awareness domain, space traffic management, mission operator in ground infrastructures. There will be, of course, defense and intelligence application. Those are mandatory because we are also using important public as in any country, institutional money.

There's a lot of work in cloud in space and exploration. We are trying to move computational capability directly in orbit. And of course, exploration is one of the key points, the key capability of Leonardo through the TASI components. And then a lot of work on low earth orbit and lunar space economy with new programs that have been recently accepted. So this new business model is being now elaborated and transformed into a business plan. We will present the new Industrial Plan. We will release on the first quarter of 2025 when -- together with other news that I'm going to tell you in the next few slides.

So far, the organization of the division is almost completed. The new Division Director has been appointed. He is a world-class space expert, Massimo Comparini and he has 25 years, 30 years' experience in the field at a European level, definitely one of the key characters.

We have appointed the new CEO of Telespazio, the new CEO of e-GEOS, the new CEO of the Thales Alenia Space Italia. And we are now working quite intensively with our partners in Thales, because we have now a few ideas that we are sharing, we are analyzing together in order to modify and evolve the space alliance towards a more oriented Industrial Plan, such as the one I told you, the end-to-end satellite services, which is a common interest because, of course, we need constellations we need added value -- high added value services, primarily based on capability and computation, AI and a plethora -- there's a plethora of application domains that I've shown you before. And I think this is of common interest.

And of course, there is an ongoing discussion with peers at the EU level because we are all aware of the fact that space needs to be boosted in Europe. And I think big companies should consider together how to ally and how to do something with big critical mass. This is a discussion ongoing. I can't say much more than that, but just be aware that we are discussing on a very solid and grounded basis about future potential alliances and collaboration to be competitive with the American space industry and also with the Chinese and Indian space industry.

So, next appointment will be Q1 2025 when we will release completely the business plan and the strategy.

All right. So let's go now quickly to another important point, which is Aerostructures. About Aerostructures, basically, we have to focus a little bit on the problem we are having, on the -- related to the Boeing events in 2024. There is a short story here that you can see. In June '24, there was a reduction in the volumes of the 787 by 25%. In September '24, there was a strike on the 737, 767. On October '24, there was an additional delay in the 777x and 767.

In November '24, there was a labor contract renewal approved after 7 weeks of strike. And in November '24, so after a few days, there was a second 787 volume reduction by 11%. So to be -- I mean, to simplify a complex story, if you see the total shipment we rely on, we went through 3 plants, Z59, Z60, Z61. And the shipment for 2024 were 80 components according to the first plan, 55 according to the second, reduced to 49 according to the third version. And considering 2025, the forecast originally was 112 shipment, then went down to 97, then went down to 81.

The collaboration with Boeing is actually -- I mean, we have to acknowledge the very goodwill of Boeing to find an agreement. Our teams were working together trying to find a solution. And I think we both made our best. But unfortunately, this is not enough for us to keep the division running. I mean it's true that we have essentially 5 plants, 4 plus a minor 1, 3 of those are doing relatively well. The one in Grottaglie, which is primarily involved in the 787 is the one having more problems. But the point is that the civil aviation technology in this moment is rather critical at global level. And of course, we are impacted by the situation.

In a few words, in a nutshell, we did a strong assessment, a very detailed assessment of the Aerostructure capability in Leonardo and the industrial challenge is very clear. Our maximum industrial capability is based on 4.5 million hours of engineering and capability basically. The average workload that we might expect in the best case between '25 and '29 amounts to 3.2 million hours.

So that part missing, which is 1.3 million hours, is hard to replace if we stay on an inertial scenario. So the unused capacity is a burden to the economic and financial position of the division. And of course, on op, you have to consider the impact of inflationary pressure on materials and labor costs. So the combination of those things, it's, of course, not very easy. And I think it was time to make a very detailed analysis such as this one because we need -- let's say, staying still is no longer an option. We cannot continue with this -- with the pace we kept so far based on a single provider and a supplier.

So the scenario -- we have a team with international advisors, our engineers, the people in the division, people, financials, and we're trying to study different scenarios. Scenario #1 that was the inertial one that was kept for many, many years is no longer an option. So we are not able to wait anymore for the solution of the situation of Boeing or any other supplier. We're going to wait. We cannot survive otherwise.

The second scenario is an improvement scenario. We're introducing new programs, including military product. We're enhancing the industrial efficiency with a strong focus on automation. And we are starting incremental optimization of the cost base and supply chain. That's a big, big issue. I mean, I can tell you that after our analysis, we found out that 80% of our supply chain is based on suppliers that operates in countries where the cost of labor is very high. I mean maybe the quality is good, but the cost of labor is very high. So we have to find the trade-off for that.

Our competitors are relying on the opposite fraction. 80% are coming -- approximately 80% are coming from countries that have low labor cost. So this is, of course, an optimization we are working on. It's already ongoing, but very likely it's not self-sustaining, though necessary in the short-term will not be enough. So we decided to go ahead.

And we're now elaborating an end-to-end industrial transformation, which includes cost structure repositioning, the reconfiguration of the footprint of the division, restructuring of the supply chain, which is not simply optimization, restructuring. We are analyzing new business opportunities. There is a focus on diversification on higher profitability segments. Of course, those things are still under study. I mean, but the important point is that all this would be implemented with financial and/or industrial partners.

Basically, we have to think in a totally different way and preparing alliances that can make the division very attractive on international level. The quality of our manufacturing is outstanding. The situation, however, needs an evolution that goes towards maybe a carve out and the creation of alliances to do something that can compete at global level on the market. So we are working on that. This is under construction.

The team of people that we constituted together with the international advisors is already in contact with financial partners and other partners. So we are studying all the scenarios. And this will be presented again in -- at the update of the Industrial Plan, first quarter of '25 together with the Space division and a few other news. So this is to tell you that we decided to accelerate no longer an option is the inertial scenario. I mean the inertial cannot be any more used as possible scenarios for the future.

Now I conclude with some good news about the sustainability. This is an important part of our sustainability action. You have the slide. I don't go through this. But it's very important to see that Leonardo is making an effort on all the most important ESG parameters. And we are always among the best, maybe the first-in-class among the top 3, top 4, sometimes top 10 in a very vast plethora, vast group of companies, not necessarily only in aerospace and defense.

This is important for our sustainability balance sheet. This is the complete report that we have every year. We will insist. We'll invest. We'll insist, try harder because we want to keep this leadership. We want to improve where we can improve, where we already have leadership. We want to stay at that position.

I mean, one for all, Standard & Poor Global Corporate Sustainability Assessment, we are in the highest of score in the entire compartment of the A&D. And I can tell you, the data are very interesting, very good. And I think our sustainability division -- the sustainability unit is doing a very good job. And I think this contributes to increase the reputation of the company together with the KPI -- financial KPI that I've shown you before and together with the technology roadmap that we have established.

I stop here. It was a bit long, but as I told you, this was a mid-term report, not simply Q3. And I think in a mid-term report after -- the half of the mandate, you have to be aware that we have a great attention on delivery, great attention of capital allocation, great attention on saving the money and great attention to future technologies, innovation because without innovation, Leonardo will never take off, will never take the right position in the international scenario. And least but not last, great attention in joint ventures and internationalization. As I told you, no one can make it on its own. We have to think bigger, and I think we are on the right track for that.

Thank you for your attention. And now I give the stage to Alessandra. See you later.

[Alessandra Genco, executive]

Thank you, Roberto, and good afternoon to everybody. I'm very pleased to be talking to you through the solid Q3 and 9-month results. They show continued commercial and financial progress, especially in our main Defense and Security businesses.

We're seeing orders coming through at a good pace, leading to sustained good growth in order intake. We're delivering off a record backlog of EUR 43 billion, driving volumes and double-digit top line growth and double-digit operating profit growth, driven by good performance in defense and acceleration of the efficiency plan.

Improving free operating cash flow is on track, and it's driven by better operational performance. We're also reducing net debt. And we have, as Roberto recalled, a disciplined capital allocation that is aimed at supporting growth while continuing to deleverage and improve shareholder returns.

In this framework, we're continuing to see positive trends as we saw earlier in the first half results, and we're seeing good performance across in all core businesses, and we have been accelerating the efficiency plans, meaning that we expect to offset the recent exogenous negative contribution of Aerostructures and the Space Telco business, thus confirming our full year group guidance on all our key metrics.

As you can see, the solid performance at group level resulted in order intake of EUR 14.8 billion in the first 9 months, an increase of 7.8% year-on-year on a pro forma basis, including the consolidation of Telespazio starting from 2023 pro forma.

We had good commercial performances across Defense & Security, especially in Electronics and in helicopters, reflecting good positioning in domestic as well as export markets. This growth in new orders is again well balanced with a good spread geographically and across business areas and without any concentration in any single country or any single customer and no jumbo orders.

Book-to-bill was again above 1x at 1.2x. We're seeing sustained demand all across Defense and Security with good traction for our products and solutions and growth in areas like cybersecurity. We can also see growth opportunities across our main business areas in defense, especially and also governmental plus civil areas like helicopters.

Group revenues increased 12.4% to EUR 12.1 billion as we delivered off our solid backlog. Higher EBITA across the Group, especially driven by defense volume as well as efficiencies with an increase of 15% to EUR 766 million and the return on sales improving slightly to 6.3%.

As you can see, the continuously improving cash flow and reduction in net debt, delivered a free operating cash flow of absorption of EUR 550 million. As of September, our Group net debt was also lower at EUR 3.1 billion versus EUR 3.9 billion in September last year, also reflecting the monetization of the DRS stake we did last November last year. So, a good first 9 months on track and underpinning our confidence in our full year targets.

Now let's go deeper into the results and performance at business level. In helicopters, we see positive momentum with continued demand across the business. In particular, in this segment of the business, we saw that we achieved the new order intake in the first 9 months of EUR 4.8 billion, up 15%. Revenues also grew 13% to EUR 3.6 billion, and EBITA is up 8.4% to EUR 271 million with a return on sales of 7.5%. Order intake continues to be strong in both governmental and civil sectors in addition to the defense market.

Just to mention a few of the major orders included, we have 20 aircrafts, 139 for Saudi Arabia, 4, 189 for the Malaysian Maritime Enforcement Agency and 9, NH90s, plus a good spread of orders across defense, governmental and civil across customers and across geographies. Revenues grew mainly driven by the delivery of backlog, which now stands at over EUR 15 billion with further increased activity on dual-use helicopter as well as on customer support services and training.

EBITA growth reflects higher volumes and also our continued management of some supply chain constraints that are affecting the wider industry. So a good performance from helicopters and continued commercial momentum with good demand across business areas.

Next, Defense Electronics. We see also here continued solid performance across both the European portion of the business and the American side. Double-digit growth in new orders and revenues and a step-up in profit. As we showed you at the half year results, the numbers on this slide for Defense Electronics have been restated to exclude Cyber & Security Solutions, which is now a separate segment standalone and also to exclude the Space business line, which is now included in the Space Division. So there's been a certain level of portfolio restating.

Starting with Electronics in Europe, you see that order intake was at EUR 41.9 billion, up 10% year-over-year, and book-to-bill was at 1.5x, showing good growth across all domains and leveraging on our key strengths in our integration capabilities.

To mention some of the notable orders, let me refer to the combat systems for the Italian Navy surface patrol ships. Orders for combat system for the next-generation minesweepers and next-generation communication systems for light tactical vehicles for the Italian Army, plus several export orders for naval guns.

Revenues were up 10.4% at EUR 3.2 billion, reflecting mainly the delivery of backlog across segments. The EBITA grew to EUR 381 million, an increase of 23%, with return on sales stepping up to 11.8%. Thanks to growing volumes, the good performance of the business and of our joint venture MBDA. So Electronics Europe was again a key growth driver with continuing very good performance and momentum.

At the same time, Leonardo DRS also had a very solid first 9-month with significant increases in new orders, in revenues and in profit. New orders, in particular, were EUR 2.8 billion, up 12%, with DRS seeing good demand for its naval network computing, its electric power and propulsion activities, force protection and advanced infrared sensing technologies, which you know are the core of their product suite.

They have also won important orders for electric propulsion component for the next-generation Columbia-class submarine for the U.S. Navy, where they have established a very strong position within the market and with the key customer. Plus, the order of the family for weapon sights and systems for the new U.S. Air Force tanker aircraft.

Revenues at DRS were up 18% to over EUR 2.2 billion on the back of the delivery of key programs in key strategic areas, such as advanced infrared sensing, force protection, tactical radars. EBITA also grew to EUR 204 million, an increase of 29% with increased return on sales of 9.1% reflect higher volumes.

Moving now on to our new segment, Cyber. You can already see that the first 9-month, there is a growing business with new orders up over 20% at EUR 586 million. Revenues also were up 11% to EUR 447 million, and EBITA was up 22%, EUR 22 million. Book-to-bill well above 1 and continuing its positive trajectory with increasing volumes and profitability, as Roberto explained to you earlier.

The first 9-month order intake growth was mainly driven by domestic markets and included in the area of defense and governmental, the implementation phase of the JOC-COVI, the Joint Operation Center, and the Cloud Infrastructures for the Italian Public Administration through the national entity PSN. Revenue growth is reflecting higher order volumes, while improved profitability is mainly driven by operational leverage.

Moving on to Aircraft. We see here continued good delivery of progress and profit continue to remain at really high standards. Order intake in the first 9-month was EUR 1.2 billion, lower than last year because of the phasing and delay of some export orders. And there are a number of international campaigns that the division is pursuing and that will progress and that will deliver the results and are progressing well.

Revenues were EUR 1.9 billion, in line with last year if we exclude pass-through activities. Profitability continued to be extremely good with an EBITA of EUR 246 million, an increase of 1.7% year-on-year and a return of sales of 12.9%. The division continues to be very profitable, anchoring its profitability on strong fighter business, both the Eurofighter and the JSF. With Eurofighter experiencing a renewed boost from potential additional supplies and upgrades to Italy, Germany and Spain and potential export campaigns as well. We can be positive looking forward as we see a natural step from Eurofighter upgrade business to the next-generation GCAP program.

Turning to Aerostructures. We made some further progress in the first 9-month. The order intake was approximately, well, order intake went up. Revenues were slightly higher in increased activities. As you have heard, the volumes on the B787 were higher with 37 fuselage delivered in the first 9-month versus 27 in the previous year. However, still below the rate we would -- should have had. And the Aerostructures EBITA loss in the first 9-month was EUR 129 million.

On a side note, the Aerostructures first 9-month results are not reflecting the full challenges that the business is facing and that has been widely commented by Roberto. So, in Q4, we expect to see a higher impact on the division from the slowdown in the B787 program with a lower level of full year deliveries than we had earlier had expected. And you have seen the numbers from Roberto that speak for themselves.

There is a comprehensive set of material improvement action that has been defined and is being implemented. Speaking about ATR, 20 aircraft were delivered in the 9-month versus 21 the previous year, and a contribution broadly the same as last year.

Moving on to Space. Here, we have been putting in place the building blocks for our new focused Space Division, which we see as a growth area for the future with sizable opportunities for the Group. We now include the full consolidation of Telespazio. We saw a good commercial performance in the first 9-month. And specifically, at Telespazio new orders were at EUR 383 million, which highlights some of the key activities that we have done, specifically the MoonLight initiative for the creation of lunar communications. And this is also reflected in the revenue line.

Revenues are up to EUR 527 million, driven mainly by satellite system operations and by geoinformation with an EBITA of EUR 41 million and a return on sales of 7.8%. So a solid performance of the business. The year-on-year EBITA fall is at sector level, reflecting the performance of TAS Telco satellite segment, which, as you have heard from us in the past few quarters, continues to face the same challenges with some complex development programs in a highly, highly competitive market.

And as we expected and mentioned at the half year, the TAS operating performance is impacting materially the segment results. And so, these are expected to be negative for the full year due to the combination of a fall in commercial telco activity, a high level of R&D and the impact of restructuring costs.

So that's the performance all across the group businesses. And it has also translated into a better bottom line performance. EBIT grew to EUR 636 million in the first 9-month, up 15% on a pro forma basis and restructuring costs were lower, EUR 17 million versus EUR 32 million.

On the other hand, non-recurring costs were higher at EUR 72 million versus EUR 49 million last year, relating to the favorable conclusion and termination of certain legacy contracts, namely the Doha stadium contract and some legacy ATC, air traffic control contracts signed back in 2016.

The ordinary net income was EUR 364 million versus EUR 290 million last year, while net result of EUR 730 million benefited from the capital gain on the consolidation of Telespazio. So that's an accounting element that is factored into the result on the back of a fair valuation assessment according to the accounting principles that we have followed.

Importantly, we have continued to make progress this year in improving our cash generation. You see a lower level of seasonal outflow in the first 9-month with free operating cash flow of absorption of EUR 550 million compared to EUR 637 million on a pro forma basis last year. This improved performance underpins our confidence in our positive trajectory going forward and our full year target.

And we continue to focus on executing on our disciplined financial strategy with our clear priorities here, fully committed to maintain investment-grade status while supporting growth and improving shareholder returns. That's the capital allocation framework that we want to stick with.

So now to conclude, we are pleased with the first 9-month, with a very good performance across all key metrics. We have seen continued stronger commercial and financial performance, especially in our main Defense and Security businesses, which are delivering strongly.

We are seeing orders coming through at a good pace, plus solid digit -- double-digit growth across revenues and EBITA and improving cash flows. For the full year, the performance in our core business and the acceleration of the efficiency plans are expected to offset headwinds from the exogenous negative contribution of Aerostructures and the Space Telco business.

So overall, we are confirming our full year guidance at group level, and that is based on our current assessment of the effects of the geopolitical and macroeconomic environment on supply chain, on inflation and on the global economy, assuming no major deterioration.

You can see it here on the slide. We expect this year continued commercial momentum, top line revenue growth delivering from our backlog, improving profitability and strengthening cash flows while reducing net debt, and all translating into the first important steps in delivering our Industrial Plan.

We are confident of our path forward, and thank you for the time we are spending together today. I'll now hand you over to Q&A.

[Valeria Ricciotti, executive]

Thank you, Roberto, and thank you, Alessandra. We are now ready to take your questions. As usual, you can ask questions via the webcast or via the conference call. Waiting for all of you, I would start with a question received from the web, and it's coming from Besik Sanaia from Lombardi Capital. The question is the following.

Now that you have closed the joint venture with Rheinmetall, could you update us on your capital allocation priorities and thoughts in the defense business, specifically on Iveco Defence, which you briefly discussed at the 2Q call? Have you started analyzing the synergy case with them? Any color on this would be appreciated.

[Roberto Cingolani, executive]

Sure. That's a very good question. Thank you. Of course, as soon as we finalize the JV, 1 hour after we were discussing how we should have handled the situation of the, let's say, domestic industry. So we discussed with, of course, with Rheinmetall first, and we are absolutely aligned and also with Iveco. Let's say, scenario #1 is very simple.

We already negotiated with the colleagues in Iveco Defence, the possibility that they act like subcontractors of the JV, and we can allocate some maybe 10% of the activity to Iveco Defence because we expect to have such a big amount of workload that, for sure, having synergies could help a lot in maximizing productivity and speeding up the production of the machines.

Another possibility, of course, is to consider merger and acquisition. But for this, we need to know exactly the numbers, open the data room. We know that Iveco Defence has expectations in terms of EBITA for the current year. We should see the multipliers. Number seems to be rather high. We are open to discuss anything. That was shared also with Mr. Papperger in Rheinmetall. We are absolutely aligned. But for the -- in the easiest case, I mean, the simplest solution is that we involve Iveco Defence immediately as a subcontractor or part of the job, and that will facilitate the life of everybody. Notwithstanding this, we can, of course, consider for the future other hypothesis, but we don't see any need at the moment.

[Valeria Ricciotti, executive]

Let's take the next question from the conference call, please. Let's take the second question directly from the conference call.

[Operator]

We will now take a question from Alessandro Pozzi from Mediobanca.

[Alessandro Pozzi, analyst]

The first one is on broader political landscape with the U.S. election, I was wondering, clearly, the conflict in Ukraine has been a wake-up call. But now with the new Trump administration, we could be in a different paradigm for European defense sector. And I was wondering with this new administration, how do you think what would be the implications or the impact on your business, on defense contractors in the coming years?

And the second question is, is on the Aerostructures. You mentioned the financial partner potentially. Can you please elaborate a bit more on the timing and I appreciate that you will provide more color on during the Capital Markets Day. But I was wondering if you're looking for a partner for the whole of the division or for a subset of the operations. And clearly, I guess, you have to have a very good visibility on how you restore the profitability of that division. And I was wondering, yes, when we could have that?

[Roberto Cingolani, executive]

So the first question about the politics -- of the political scenario. My personal understanding of the situation is that the new President of the United States has stated clearly that he would like to see more active Europe in participating in the NATO global expenditure. Now even if the -- maybe the way this was stated was a bit colorful because under election -- in the election period, of course, statements are very strong. But I think the message is clear, they want to have a stronger Europe participating more effectively to the global investment in defense.

To be honest, this is consistent with what I told you at the very beginning when we didn't know anything about the future President of the United States. I think it's very reasonable that Europe get together, make synergy to create a European Space of Defense, even the commission is going in this direction.

We need to be stronger as a continent, but also, we need to be more reliable and stronger partners in the NATO alliance. So if the pressure from the new President of the United States will be, please increase the budget for defense up to the famous 2%, I think the defense companies will benefit of a positive situation such as this one.

On the other hand, you might argue that he promised that the war will be finished in 24 hours. I mean this is what he said. So you might argue that, but if the conflict will stop, there will be less business.

To be honest, this is not true for Leonardo. We didn't get any peak in our revenues or orders, because we didn't sell directly to Ukraine. But for sure, in terms of market and geopolitics, you could think that the 2 phenomena, increasing the expenditure to 2% and maybe stopping all the conflicts in that area of the planet could sort of balancing each other or contributing to the balancement.

W0e will see. But I have to say that we are a multinational company, for us, it's important in the politics, but the most important thing is to have a very competitive high-tech products. And I think as long as we can develop a brand-new class of products, very competitive through synergies, international alliances in Europe and also with new ideas, new contents, we're going to be competitive anyway. And don't forget that the paradigm is to move from simply defense to global security. And global security includes things that are not immediately related to war. And I think also this means opening a market which is much bigger than the traditional defense market.

So if you put all those things together towards a stronger European space of defense and of course, believing in the importance of the NATO alliance in which Europe and Italy have to be strong partners.

Last consideration, I think politically in this moment, as far as I understand, as a citizen because I'm not in politics, but I think our government has some good chance to be in a very good relationship with the new U.S. government. And I think this could facilitate, at least in the early stage, the discussion, the dialogue among the parties. So, I'm quite positive. Concerning -- I hope I answered, of course, I mean, this is a little bit mixed. It's a personal and also industrial.

Concerning Aerostructures, I promise that when we meet next time, we will disclose everything. In this moment, it is extremely important for us to be very confidential. We have NDA and we can with different partners and with the parties. And I'm really in difficulty in telling you more than I told you before. But you don't have to wait 6 months, 8 months because we are working and we will release the business plan and all the potential partnership, let's say, by Christmas. So at the next appointment, I will be much more outspoken. You know that I'm always very outspoken, but in this case, it would create me quite a problem. So please allow me not to give you more details.

One thing I can say, I would prefer, of course, a strong alliance, not simply a production line. I think to something infrastructure, okay? I would do something big, not simply taking a production line and finding a partnership. Should this big idea fail, well, we could see something smaller. But we think big.

[Valeria Ricciotti, executive]

Let's take the next question from the call as well. I think George from Bernstein is the next one. Could you please open the line?

[George Zhao, analyst]

Yes. First question on the Q4 impact. You said there will be a higher impact in Q4 from the slowdown. So I just wanted to clarify what that means? Should the Q4 losses be higher than the €58 million in Q3? Or should the Q3 be the peak when it comes to the quarterly losses for Aerostructures?

And second question for Roberto, kind of adding on to the kind of the last question. When you think about partnerships and alliances, I guess, what realistically can you do with the existing businesses? I mean, can those be carved out and separated? Or do your existing contracts with the OEMs prohibit you from even considering that?

[Roberto Cingolani, executive]

Okay. Alessandro, go ahead.

[Alessandra Genco, executive]

Sure. George, basically, at the end of the year, there will be some industrial phenomenon associated with the result of Aerostructure as well as some accounting elements to be taken into account, reflecting the agreement signed with Boeing, reflecting also the future trends in delivery rate that Roberto mentioned. And all of this will translate into a certain level of loss.

But the concept here is that clearly, as you look at the 9-month result, more than the 3 months, the 9-month result benefited from a first half, which was almost a going concern, while the last part of the year, Q3 and Q4 are actually mostly impacted by the downward revision in production. So, the comment was more related to the 9-month versus the full year, not necessarily the 3 months.

[George Zhao, analyst]

Okay.

[Roberto Cingolani, executive]

George, concerning your question, well, let me say something in a very -- maybe rude way. But this Aerostructure division, this is more than 10 years that has problems, okay? So it comes a time that we have to do something a little bit disruptive. As I said, we believe that the inertial approach would fail anyway, maybe sooner or later, but would fail. So I think it's time to be a bit more aggressive, at least in the way we develop, we conceive possible solutions.

To me, yes, carving out, trying to make as much as possible to protect as much as possible the workforce and of course, diversifying the business, having strong partners. And this is very important. I mean the partnership are important. And maybe in a couple of months, we'll be clear. There have to be partners that are in the field, not simply -- I mean, we don't need money. We need, first of all, partners that are important in the civil aviation market.

The problem is that there is a generalized problem with the civil aviation. I mean, this is clear. The margins for the supply chain, we are supply chain at the moment in the civil aviation market. The margins are very low. The competition is really tough, especially in countries with low cost workforce. Margins are low because the contracts are also long lasting. They are not very flexible.

And we understand that the cost and the request of the builders or the manufacturers are very strict, stringent because of security. So we need to do something, yes, very strong. So for the time being, I would stop here. But yes, we are thinking to something like carving out and creating something, a joint venture or something that is really competitive, and that is highly recognizable in the market.

[Operator]

Our next question comes from the line of David Perry from JPMorgan.

[David Perry, analyst]

Just 2 questions. I hope they're not too pedantic. They're just about specific use of language. So one of them is on your Slide 6, it's just a little bit curious to me that you described the international alliances, so GCAP and the Rheinmetall JV as inorganic growth. I would have thought they were organic unless you're actually planning to inject some money into any partnerships, maybe to equalize your stakes on the programs. So maybe you could just clarify what you mean by inorganic there?

And the other one is just when you use the term Industrial Plan, I mean, the Industrial Plan of 2024 was a very dramatic event. It was more than just a Capital Markets Day or a results release. It was something that gave us a new Savings Plan. And when you say a new IP, just to manage my expectations, is it a small update? Or do you think there is scope to actually expand your ambitions?

[Roberto Cingolani, executive]

Okay.

[Alessandra Genco, executive]

Okay.

[Roberto Cingolani, executive]

Okay. Concerning the inorganic growth simply because when we simplified our pillars, we said, everything dealing with mergers and acquisitions was gathered into under the umbrella of the inorganic growth. I mean, yes, maybe we can discuss a sort of organic growth. But if you remember at the presentation of the Industrial Plan in March, we said the big mergers will be essentially cash free. Otherwise, it would be gigantic investments, but this was not coherent with the capital allocation strategy. The acquisition was supposed to be within 15% to 20% of the turnover of the division that is making the acquisition.

So in this respect, we oversimplified the picture saying this is the inorganic growth. But yes, that was simply to show that there was some coherency in the delivery roadmap. You -- maybe you are right, this is not strictly inorganic. But I think, it doesn't change the spirit and the picture that we wanted to give. It was done in absolute good faith, okay? There was no specific back thought about this definition. Sorry, which was the other question?

[Alessandra Genco, executive]

Update of --

[Roberto Cingolani, executive]

IP?

[Alessandra Genco, executive]

Industrial Plan.

[Roberto Cingolani, executive]

Yes, yes. Sorry, yes, about the Industrial Plan. In March, we said that some of -- especially the new stuff connected to the new division or part of the Cyber and maybe some new business that is now quickly growing and Aerostructure, it was not new, but we felt the urgency to intervene. That would have been the subject of an update, that was a rolling update. So frankly speaking, I think we were quite fast in delivery. Some of the things were even faster than we expected. So I think it's quite okay. It's quite physiological that after 1 year, the things that are growing fast and well, such as the Space division or other things or those things that are urgent like the plan -- the new plan on Aerostructures will be presented as an update of the plan '24, 2028.

I expect this to be very likely the case every year. I mean, whenever we have something new or something that can be optimized, which is rather substantial, this will be the subject of an update of the Industrial Plan. The Industrial Plan to me is inherently rolling. And this was the reason why last year -- sorry, on March, we have shown you very transparently all the data of the divisions because division by division, there might be some corrections, some change during the course, during the development of the plan. And I think when we make an update, we give you all the forecast, we update the forecast, and you will follow with us, the roadmap that we try to present to the market.

[Valeria Ricciotti, executive]

Let's take a question received via e-mail. This is from Ian at UBS. Two questions. When should we see a profitability improvement in Aerostructures as a result of the actions you are taking? And the second one, Thales Alenia Space profitability continues to be challenged. How much cash does the JV have? And would you rather maintain your stake or contribute cash in the event that it needed capitalizing?

[Roberto Cingolani, executive]

Yes. Okay. Concerning Aerostructures, well, of course, we are doing our best to accelerate. Honestly, it seems ages ago, but in February, the turnover -- sorry, the breakeven point was really at reach. Things were doing well and apparently, in less than 12 months, and the forecast was very conservative. So we were very safe. After the COVID, there was a recovery and things were running well and no one could expect -- could predict what happens with Boeing.

Of course, we hope Boeing would recover very soon, but for Boeing, not for us, first of all, because the company deserves more fortune at the moment. But anyway, because those are exogenous problems, and it's hard to make a prediction.

If we say inertial, there will be a breakeven point maybe in '28 or '29, and we don't think this is affordable. Let's see what happens with our search for alternative solutions with other partners. And well, I think that when we finish the analysis and the work we are doing now, we will be able to give you a more precise answer. I can't say much more now because simply we don't control the exogenous factors.

Concerning Thales and TAS, yes, you're right. I mean the SATCOM part is losing money. We are constantly in contact with our colleagues in Thales constantly because we're trying to monitor this. From the financial point of view, Alessandra with a colleague in Thales and at CEO level and strategy level, because that requires some analysis in terms of product strategy.

It's a couple of years now that it is going down. There are countermeasures that are being conceived that will be presented soon. We are also discussing shifting a little bit the focus to the core of the space alliance activities on other areas that seems to be much more profitable. But of course, there are commitments that Thales has with the French government. And because we are together in the joint venture with the alliance, we have to respect those things on one hand. But on the other hand, of course, we are also worried about the fact that this should be fixed. This problem should be fixed.

The relationship with Thales is extremely collaborative. We are doing our best. I mean our teams are meeting continuously. And I don't think this will last very long. But it happened in the past that Leonardo was the component of Leonardo in the joint venture was losing money and Thales at that time had the bad part. And now it's the other way around. But this is -- I think, it's rather physiological in the market when you have big joint ventures. The point is to mitigate the impact and to be short and fast in neutralizing the losses.

As I said, this does not depend on Leonardo. It depends on, of course, on Thales, on the agreement with the French government. And we try to give all the support in this difficult situation. But I believe it's rather under control. I mean it's not something which is exploding, and we are working on that on a weekly basis.

[Operator]

Our next question comes from Gabriele Gambarova from Banca Akros.

[Gabriele Gambarova, analyst]

Specifically on aircrafts. You mentioned there are some delays on some important programs. I was wondering -- I mean, I think you are referring to the end of September. So I was wondering if, let's say, in the last 40 days, or you saw some more clarity on this front by way of some contracts. And again, on this Aircraft division, I was wondering if you have an idea of when, let's say, the award from the Italian Air Force for a further 24 Eurofighter may happen?

[Alessandra Genco, executive]

Sure, Gabriele. So I expect -- I think you're referring to orders. As you know, our orders are lumpy, and there is a matter of phasing. And especially, if we are talking about export orders, there are processes that clients are going through in order to get the purchase authorized within their governmental system. And the timing of this process may shift by a few months. So, there is no full control from Leonardo.

However, what I can tell you and this is clearly a very strong statement is that the customers are absolutely committed to the purchases. They have provided us constant evidence on the commitment to buy the platforms in the proprietary segment of the Aircraft division. So it's just a matter of timing. We have to be patient, and you will see the order included in the portfolio of the division.

Now, with respect to the Eurofighter, Italy, as you know, the need is urgent for Italy to renew the fleet of Eurofighter. Germany has gone through this renewal process. Spain, the same. So Italy clearly is very determined. It may happen between now and the end of the year, that would be the ideal scenario that we're all working for. In any event, again, it's a matter of timing, the commitment of the Italian government and the funds within the budgets are there.

[Roberto Cingolani, executive]

Yes. I'd like to mention one specific case. Sometimes exogenous problems are even very small, but they can create problems. There's a country that is a little bit under the spot. They're trying to purchase 2 machines for maritime monitoring. So no military applications, okay, whatsoever. But unfortunately, the 2 platforms that are built by Leonardo, 99%, are adopting a few components from 2 other member states of Europe. And those member states put the veto about selling these machines just because they are contributing with a small piece of electronics to a machine that is maybe 95% Leonardo's product.

And in front of those things, you waste weeks because maybe the diplomacy, Minister of Foreign Affairs, they have to talk to each other and trying to demonstrate that we're not selling a war aircraft, but simply a coast guard aircraft or stuff like that. And those things are shifting easily by a few months.

And then we are losing in the order portfolio and revenues portfolio because we don't get even the Letter of Credit, nothing. And when those things happen, okay, how to say, you should not be so much worried. This order will come, will come maybe 3 months later, unfortunately. And that is our life at the moment, especially in recent times, things have become very difficult. It's enough that somebody gives you one single screw in an aircraft. And because of that screw, they can stop you selling -- delivering the aircraft to a specific country. Sometimes it's very difficult to work this way. But it's part of the game. So we're not worried, to be honest.

[Valeria Ricciotti, executive]

Okay. This was the final question. So thank you, everybody. As usual, the IR team is available for follow-ups.

[Roberto Cingolani, executive]

Thank you.

[Valeria Ricciotti, executive]

Thank you. Bye-bye.