FACC AG

VSE:FACC

Earnings Call Analysis

FACC Reports 25% Revenue Growth Amid Challenges, Guidance Updated

FACC showcased a significant 25% year-over-year revenue growth, reaching EUR 204 million in Q3, bolstered by a strong September. They updated their full-year revenue growth guidance to 10%-20%, estimating revenues between EUR 810 million and EUR 885 million. However, EBIT remained flat, slightly negative at EUR 0.8 million, with a revised margin guidance of 3%-4%, projecting EBIT between EUR 24 million and EUR 35 million. Despite concerns over free cash flow, management plans to enhance cash reserves by EUR 10 million by year-end through a focused inventory reduction strategy. Overall, FACC remains optimistic about continued demand particularly in the aircraft segment.

Solid Revenue Growth Amid Industry Challenges

FACC AG reported a robust revenue growth of 25% year-over-year, reaching EUR 642.6 million in the first nine months of 2023. The third-quarter revenue of EUR 204 million showcased a strong performance driven mainly by a surge in September, compensating for weaker sales in July. The company has adjusted its full-year revenue guidance to forecast a growth rate of 10% to 20%, translating to an expected revenue between EUR 810 million and EUR 885 million.

Earnings Before Interest and Taxes (EBIT) Recovery

Despite the strong revenue growth, FACC's EBIT showed a slight dip, reporting a year-to-date figure of EUR 21.8 million and a negative EBIT of EUR 0.8 million for Q3. The company has set an EBIT margin guidance between 3% and 4% for the fiscal year, equating to an EBIT range of approximately EUR 24 million to EUR 35 million. This variance depends on final deliveries and customer settlements anticipated by year-end.

Strategic Projects to Enhance Cash Flow

One concern highlighted during the call was the weak free cash flow, which negatively impacted FACC in Q3, reported at EUR -22.4 million. This reduction was primarily due to working capital shifts, particularly inventory buildup, which increased by EUR 10 million to EUR 190 million in Q3. The management is keen on addressing this through a structured inventory reduction program, targeting to free up at least EUR 50 million by the end of 2025, with a short-term aim of achieving EUR 10 million by the end of this year.

Operational Improvements and Cost Reductions

FACC's management outlined their transformation process focusing on four main pillars: transferring work to cost-effective regions like Croatia and China, reducing general cost expenses, lowering working capital through inventory management, and achieving productivity gains. Additionally, FACC hired over 1,200 employees over the past two years and established a training academy to improve workforce efficiency, aiming to capitalize on the learning curve to enhance productivity and mitigate labor-related costs.

A Promising Outlook With Market Recovery

Looking ahead, FACC anticipates continued demand within the aviation sector, expecting to see robust deliveries, particularly from major customers like Airbus, which accounts for approximately 60% of their sales. The company also reported a favorable stability in their order backlog, valued at USD 5.8 billion, driven by increased orders and the ramp-up of series production related to new projects, including urban air mobility initiatives and the COMAC 919 program. Management is optimistic that this environment will support their EBIT growth trajectory across the next few years.

Navigating Industry Volatility

Despite promising trends, FACC noted ongoing challenges in their supply chains, especially in lower-tier suppliers creating uncertainty in material costs and delivery schedules. While there have been improvements, management acknowledges that stability is yet to be fully realized, which could impact operational efficiency in the near term. They remain focused on collaborating with suppliers and internal improvements to sustain performance.

Earnings Call Transcript 2024-Q3

[Unknown Executive]

Welcome to the FACC AG's Earnings Call for the Third Quarter of 2024. I'm pleased to introduce you to the CEO, Robert Machtlinger; CFO, Florian Heindl; and Michael Steirer from the Investor Relations management team.

They will lead us shortly through the presentation, and after the presentation, you will have the time to ask all your questions in the Q&A session.

And with this, let's start. Mr. Steirer, the stage is yours.

[Michael Steirer, executive]

Thank you, Franziska, and hello from my side as well to everyone. Welcome to FACC's Earnings Call for the Third Quarter of the Fiscal Year 2024. As already mentioned, my name is Michael Steirer and with me today are Robert Machtlinger, our CEO; and Florian Heindl, our CFO.

As always, we have already provided some detailed information -- financial information in our press release issued earlier today. And if at the end, of our session, there are any open questions remaining, which cannot be covered on today's call, we will be happy to schedule any additional one-on-one meetings afterwards. In this case, please let us know.

I would now like to hand over to Robert Machtlinger, our CEO. Many thanks.

[Robert Machtlinger, executive]

Michael, thank you for the introduction. Franziska, thank you for organizing, and hello, everyone. Warm welcome from my side, too, for the FACC -- Q3 earnings call of FACC AG.

Next page, please. As always, we start with a quick review of the aviation industry, and well, I think, as you all know and we can watch nearly on a daily and weekly basis from the industry, media and the information from our customers, the good news is that the aircraft build rates for all major aviation programs are still increasing, here and there with a little bit of slower pace than expected, at the beginning of the year. But overall, if we look into our forecast for 2024 and what we see, right now is pretty much aligned, I would call it.

As you also know, there have been a couple of announcements from major OEMs, especially Airbus, in June when they dropped the forecast from 800 to 770. This is all factored into our planning and had no impact to our guidance we have given early in the year. Very promising, and still even if it's a little bit of a slower pace, the stepped-up increase of short and mid-haul aircraft is progressing.

Also, business jets is doing quite well. We're expecting a strong delivery in the Q4 for all of our major customers, especially, of course, Airbus who is our most important customer, which with a volume share of close to 60%, but also business jets, namely Embraer and Bombardier, we are expecting a very strong Q4 delivery opportunity.

We also see a continuous demand in wide-body aircraft. As you all know, this wide-body aircraft families have been a little bit slower in development compared to the single-aisle airplane. But also here, the forecast from our customers, we are quite strong on the Airbus A350 as well as on the 787. Those airplane programs are coming back, nearly close to the numbers we have enjoyed before the downturn in 2020 whereas Airbus is asking for a rate significantly above 10 on the A350 and the Boeing 787 with the forecast in the 3 years to be around 10 airplanes as well.

So this will give us another natural growth because, as you know, those contracts are in FACC long-term contracts. The equipment is in place. We are running those programs currently in a one-shift environment with the growing rates. We already see and we've seen the years to come the utilization of that equipment will further improve in the next 3 years.

COMAC 919, serial production ramp-up is ongoing very well. Especially yesterday, I think good news from China. COMAC has sold 130 additional airplanes for the A321, which is right now [ re-called ] COMAC 909, but also the 919. So this 130 new orders, fresh orders, is increasing the order backlog for FACC by around about EUR 120 million, which is, of course, good because those contracts always are long term.

And urban air mobility is developing, as expected. I think it's more and more evident who will have a stronger saying on that market. I think a couple of dropouts are happening and happened also in the last quarter is natural. With those customers we are working closely, which is mainly EVA, but also [indiscernible] and 2 other customers. We are watching very carefully, we are well aligned and the progress we see here is certainly also helping the growth of FACC.

With all the good news, the operating environment remains a challenge. This is not different for FACC and it's also quite well expressed, I think, by our OEM customers. Supply chains, at the time being, this is not the Tier 1 as FACC is one besides a couple of other ones. It's more the lower tiers that are causing the one or the other issue.

I would say it's not chronic. Situation is improving, but it's a handful of supplies that are still not stable, that are volatile and that are impacting FACC to a certain degree, not in terms of delivery to our customer. Here, we are well aligned. But of course, that's the second point in operational efficiency.

On top of that, and supply chain is certainly something which is like a chain. If the one or the other supplier has a problem, it might surface with our customers. Then our customers need to address their demand, which again is certainly impacting also FACC's operational performance to the one or the other degree.

On the other hand, and that's the good side of the coin, we see a continuous improvement. And once we are back in the industry and also FACC to stable processes, efficiency will be back and we see this one in the board as an opportunity for margin growth.

Next page, please. Well, in terms of delivery, a quick summary. Airbus are pretty much to the same level as last year, a little bit higher with a strong expectation for the last quarter to meet the forecasted airplane deliveries.

Boeing, also driven by the strike in the last couple of weeks, not at the level we have seen last year. Right now, operations is restarting up, but this will certainly drag into Q4, but also into the next quarters of last year.

The Boeing impact to us, well, we have compensated what caused the Boeing over the last couple of years with other projects. The good thing here is if Boeing ramps up, we are ramping up. And any volume that comes from Boeing airplanes is an add-on to the FACC business.

In terms of airplane sales, net orders, well, last year, 2023 was extraordinarily strong with of 3,400 airplanes ordered by airline customers. This, of course, is unbeatable. Nevertheless, the book-to-bill ratio, especially for Airbus is at the rate of 1.3. So more airplanes are, in terms of net orders, added to the order book.

With Boeing, it's to the opposite, hardly any sales. But still, the order backlog is there, which is close to 17,000 airplanes. And the industry, I think, today is more focused on delivering on the order book instead of adding new orders, which, of course, is good like the COMAC orders but that's not the main focus of the industry at the time being.

Next page, please. So overall, I think a pretty unchanged in terms of the order book by itself. So as I said before, close to 17,000 airplanes are ordered with our customers. 51% is with Airbus, the strongest market player for this year, but also in the past years. 36% Boeing and the rest spread between COMAC, Embraer and the others.

In terms of market, in the airplane market portfolio, no change. Roughly 80% is the single-aisle airplane category. So short- and mid-haul airplanes. And the rest 14% is wide-bodies, namely, the A350, the 787, the A330 but also the 777 and 5% is regional jet and turboprops.

And the market's view where are those airplanes are ending up also pretty unchanged with a big share in Asia and the second 2 big markets is unchanged, North America and Western Europe.

Next page, please. And the next page, how does this will translate into FACC. Overall, the positive thing, order backlog is stable at USD 5.8 billion. So just by the announcement of yesterday, we could add another EUR 120 million, which is nice and certainly helps us.

So the market recovery is constantly continuing. Aircraft production rates are raising, but the ramp-up environment is improving, but still has the one or the other challenge.

In terms of FACC, EUR 642.6 million revenue over the first 9 months, which is a 25.1% increase compared to last year. I think we are benefiting from all aircraft ramp-ups at the time being because we are represented on all airplanes with all OEMs.

And of course, then I would like to mention that the ramp-ups and the development milestone payments we are getting from the urban mobility market is quite sizable at the time being, and you might remember, we have booked EUR 90 million in development costs between 2024 -- or contract between 2024 and 2027, constantly growing. And the good thing is on the 3 programs we are currently also in the serial production starts. So we are producing the first year production components with a ramp-up to come in the years 2025 to 2027.

EUR 21.8 million operating EBIT. Well, at least, I think the trend was in the right direction. It's significantly higher than last year, but not at the level we would like to see our EBIT. And Florian will talk a little bit more in specific in his slides what we intend to do in the next periods to come and what we are currently doing.

We added 335 employees in the first 9 months, hired locally but also internationally. Good progress made by our departments. Good quality improvements by bringing the people on board, trained and our new training center we have invested to in the last 18 months is right now up and running. Again, supporting the hiring process in FACC and the qualification process we need in aerospace.

Free cash flow was negative with minus EUR 22.4 million, mainly driven by working capital, but also here Florian will guide you through.

And the 2024 guidance, we are able to be more specific. So we are looking into a growth that is between 10% and 20%. So again, significant compared to last year. And the EBIT for the full fiscal year will range between 3% and 4%.

Next page, please. In terms of revenue split, very stable. I have to say the A320 family airplanes is still the backbone of our business, 36% come from the A319, -20, -21, mainly -20, -21 airplanes, because that's the majority of the family at the time being and still growing.

Represented in all divisions, in Aerostructures with winglets with winter body bearings with other aerostructure systems, but also in interiors with the [ headrest ] system, the ceiling panel and the entrance area, but also in the nacelle area with parts we are producing for the A320 nacelle system.

Business jets, round about 20% plus/minus. I think at the end of the year, the ratio will slightly jump above 20% again because the last quarter always is a strong quarter for business jets deliveries.

A350 are slightly picking up in rates and growing with the other markets, so are concurrent with the A320. The other markets in developments, pretty stable.

On the ARJ21/919 with a 5% share as we see it right now, we are expecting a growth in the next 2 to 3 years towards 7% to 10% depending on the rate ramp-up of the 919, which is in front of us.

So very stable. Still a significant amount of business linked to Airbus airplanes, which is not a bad thing, as we speak. Boeing will pick up once the ramp-up of the 787 and the 737 MAX and the other platforms are developing quite stable, too.

Next page, please. In terms of highlights for us, very important Plant #6, our Croatian facility, which is mainly built to produce aircraft interiors in a best cost country for FACC. As you know, 2022, we did a first installation, starting operation in 2022 as well.

During the last year 2023 until the mid of 2024, we tripled the size of the Croatian facility to the north and to the south expansion. Facilities are available. They are certified. We are currently in loading work as we speak. We have a capacity of around about 1 million labor hours with the current setup, which will be filled up in the next 24 months, of course, helping us to lower cost, especially in interiors and supporting the FACC interior transformation process significantly.

It's not just a labor-intensive facility, we also have put in a quite nice automated paint line systems replacing manual labor with a fully automated paint line not only because of saving costs, but also to improve quality and offering, let's say, other surface opportunities in terms of customization to our end customers.

So we are very happy with what we have. People onboarding runs very smoothly, great learning curves, good quality. And as I said before, one of the backbones of the FACC interior transformation projects.

Next page, please. Well, in terms of onboarding and hiring people. With the growing demand of customer requests and growing rates, we have strong demand of new employees. Over the last 24 months, 1,200 people have been onboarded, trained, qualified and moved into operations.

Quality for us is not to be compromised at all. So we have opened up an FACC Academy, a training center focusing on the onboarding and the training of new employees from the local area, but also international hires, but also the retraining and continuous education of the current crew.

The training programs are very wide from basic training, quality, down to process qualifications, quality trainings, safety and many other things. And what we also do there is language courses and onboarding support for all new international employees, including the families, to work against the demographic change that we have in Europe. I think at the time being, we managed it quite well. And we bring the people on board we need to perform today and in the future.

Next page, please. COMAC 919, also important for us. As you all know, it's a Chinese program with facilities and files in Shanghai. Development of the product was mainly done in Europe, in Austria. We have produced the first 20 airplane sets in the Austrian facilities following with the planned offload into a China supply chain. The supply chain for us is a company belonging to our shareholder. It's a blueprint company we have developed following the principles of the FACC production system.

In the first half year and first 9 months of the year, we have offloaded all of the Aerostructures programs from the COMAC 919 from Austria to China. We have offloaded half of the interior scope of work as well.

The second half is currently ongoing with the completion of the offload in the first 2 quarters of 2025. Ramp-up in the new facility is also progressing very well.

Well, what is the strategy objectives behind it? Of course, local-for-local production, close to our customers' assembly lines. We are changing the supply chains from European supply chains to Chinese supply chains to lower material cost and process cost. And of course, the in-loading to the facility in China helps to reduce cost, not only labor, also material, but also logistic costs. And it's another push for our interiors business to increase our margin in that segment.

So overall, we are quite happy with what has been done. Still progressing, but progressing very nicely as planned.

Next page. That was my last one. So Florian, it's yours right now. The floor is yours, please.

[Florian Heindl, executive]

Thank you, Robert, for handing over to me. Good morning, everyone. Hello. I will now guide you through the financial part of the presentation.

Starting first with revenue and EBIT. What you can see in this slide is solid revenue year-to-date with 25% growth year-over-year with a quarterly revenue in Q3 of EUR 204 million, mainly driven by a very strong September that compensated for weak July numbers.

Overall, that led to a slight [ adoption ] of the revenue guidance, as Robert already mentioned, for the full year. So now we expect a revenue growth of 10% to 20%, giving us a range, if you calculate, of roughly EUR 810 to EUR 885 million.

Shifting to the right side of the presentation, we see our EBIT recovery in place with an expected more or less flat Q3 EBIT, slightly a red number with minus EUR 0.8 million, providing us with year-to-date EBIT of EUR 21.8 million.

So going into the year-end raise, we also specified our guidance, Robert also mentioned that before, now expecting a 3% to 4% EBIT margin providing us with a range of around EUR 24 million to EUR 35 million. A little dependent, of course, and also Robert mentioned, that on the December year-end deliveries raised the final NRC milestones and customer settlements that we may -- can achieve in the year-end run.

Next page, please. Looking on our divisions on the next slide. On a year-over-year comparison, we see the strong growth rates for all 3 divisions. Quarter-over-quarter, we have a little bit of swings that's naturally, as you know, from FACC in the past, specifically with the weaker Q3s that we always expect.

What we can also see here is that in absolute terms, Aerostructures division is gaining ground again against Cabin Interiors division. Depending on next year's product mix and spares demand from our customer side, it is possible that Aerostructures will be again our biggest division in terms of revenue.

Next slide, please. And this is something that we also talked in the half year presentation already. Here, you can see one of the current pain points of the company, as we have already outlined before. The weak free cash flow remains a concern for the management board. And this is a key topic on our agenda for the transformation process that we are working on.

Free cash flow in Q3 is again impacted especially by working capital with a reduction, on the one side, affected receivables, so a lower number of affected receivables; and another, inventory buildup that we can see on the next slide.

Next slide, please. Here, I want to focus on the right side of the slide, where you can see the inventory buildup over the last couple of years. For Q3, we are now at around EUR 190 million. So this is around about another EUR 10 million increase from Q2 reporting end of June.

So management board already reacted to this development, and we put the project in place -- or a project team actually in place that tackles the topic together with an external consulting and interim management company. This is one of our core projects moving forward because we expect to free up cash in the amount of at least EUR 50 million until the end of 2025. And in the short term, out of this EUR 50 million improvement, we want to raise EUR 10 million until the end of this year.

Investments, on the left side, just a quick word, more or less stable. Very well managed and controlled by the management board. So we are spending what we need to spend because it's also, of course, a careful item in terms of free cash flow.

Next page, please. So this is also a very familiar slide. And net financial debt is also, of course, one of our key items that we want to address in the future. Why is that? An improvement is definitely necessary as we want to delever the company going forward. 2025 will be a more or less standard year in terms of refinancing. I don't want to call it easy because there are a couple of refinancings. But we cannot -- we generally can use the time for next year to do our homework: reduce our costs, improve our cash flows and delever the company again.

Robert already mentioned a couple of items. Myself, I also mentioned a couple of items. And if you put everything together, I think we can say we are, in the management board, right now tackling 4 major pillars of a kind of a transformation process within FACC, which are: the first pillar, the transfer of work, specifically described by Robert in terms of moving work from Austria to Croatia and to China.

The second pillar is a reduction in general costs and general expenses, also a little bit streamlining our head count. And we need to bring down our material costs as well.

Third pillar, and I already talked about it before, is the reduction of the working capital, specifically the inventory levels, meaning that if we can bring inventory down, direct impact, of course, in terms of cash flow, but also a direct impact on EBIT in terms of less material consumption, less storage costs, less funding costs, et cetera, et cetera.

And the last, but not least, pillar of our recovery process is, of course, productivity gains that we have to achieve to cope with the ever-growing cost environment in Europe and especially in Austria.

Last word on the leverage ratio on the right side of the slide. So for Q3, we ended up with around 3.3, which is definitely also the figure we are aiming for the end of the fiscal year. We have certain KPIs with the banks in place. The leverage ratio for end of 2024 must be below 4.25. So this should be no issue at all.

With that said, I will hand over to Robert for the outlook and the final wrap-up for the remainder of the year.

[Robert Machtlinger, executive]

Thank you, Florian. Next page, please. Well, market outlook, I think everything is said. And Florian, thank you, you specified the range of the top line, 10% to 20% compared to last year.

3% to 4% EBIT expectation based on current forecasts.

Well, we are extremely focused on a couple of things. All and above, customer expectations have to be met. We are ramping up as we speak. We are not [ the pacing factor ] with anyone. So we are holding up, which is unfortunately also a little bit the price we pay on the inventory because we are buffering in order to have security, but that pays back, of course, with let's say, a well-trusted customer pay -- or customer base because they know that we can deliver. Safety and on-time delivery is, of course, not to be compromised.

Implementation of cost reductions. Again, Florian summarized, I will not repeat. I think it's a quite comprehensive, well-performing project.

In terms of productivity gains, what does it mean? A little bit more specific. As you know, we have onboarded more than 1,000 new people to ramp up our operations. This is certainly linked to learning curves. Those people are getting better trained every week, we speak.

And what we are expecting is that those learning curve effects will pay back right now because our hiring curve is already going down. It's not 20 people every day we have to -- every week we have to bring on board. So it's less, significantly less. And what we are planning and expecting is that the next 10% to 12.5% of revenue growth is executed with the workforce we have on board.

So we see volume gains by productivity increases by having better trained people. People that have been onboarded 18 months ago and we already see the positive effect.

The remaining portion of our efficiency is stabilizing supply chains. Stop and go is still here and there. If supply chains, again, are stable, this will again help us in efficiency increases.

Altogether, I think we are looking into EBIT margins that will continuously raise, not in, I would say, steps of many, many percentage. So this is a program we will execute in the next 24 months. Again, then meeting our guidance of 7.5% to 10% EBIT potentials starting in 2027, 2028.

Reduction of inventory, also everything said.

This is the focus points we are having. We are progressing as we speak. Together in the management board, the roles are defined. People are working on it. And so far, I just can say we are progressing. We are going in the right direction. Lots of work in front of us, but opportunities are definitely significant based on what we have seen in the last 24 months.

So there is room for more and I think our teams are working hard on it. And I'm very much committed and also convinced that what we have rolled out will deliver results in the next periods to come.

In saying that, thank you for your attention and the floor is right now yours. We are available for your Q&A.

[Unknown Executive]

Yes. Thank you so much for the insightful presentation. We are now moving forward with the Q&A session. [Operator Instructions] And we have a first question from Bastian Brach.

[Bastian Brach, analyst]

So my 2 questions are for Florian. So the lower end of the revenue guidance seems very conservative, implying negative year-on-year growth in the fourth quarter after 3 great quarters. So what is factored in, in reaching only the lower end of that guidance?

And then the second one, could you expand and elaborate a bit on the planned inventory reduction of at least EUR 50 million? What are the building blocks there? And how do you, yes, want to achieve this?

[Florian Heindl, executive]

Okay. Thanks, Bastian, for the question. With regards to your first question in terms of our new guidance of the revenue stream, 10% to 20%, and you are reflecting on the low end, certainly, what we see and also what you can see from FACC in the last couple of years, December -- especially December -- November and December are always very intensive months. This is not only valid for FACC, but for the whole industry.

And talking about the year-end races that we have so far is not specific of FACC, but we are also dependent on our customers, on a majority customer, so to speak, in terms of Airbus. We know all the supply chain restrictions that we have. And in the end, we'll have to see also thinking of NRCs. So meaning the development costs or the development projects that we have, what we are able to invoice in the year-end race, this is also sometimes a little tough to forecast and therefore we are a little bit on the conservative side in providing you a little bit of a broader range.

In terms of the inventory question, we are really reflecting on a very broad approach. So it's not a minor operation, so to say. So tasking a little bit of bringing our raw material down. It's really the whole process chain, meaning we are starting at the customer order intake, we are starting at the planning -- or we are looking at the planning process. We are looking at the operations process and also packaging and delivery process insight. And of course, material consumption and material purchasing, the whole procurement part.

How we do it is that we set up a team of 10 internal people from -- in a cross-functional approach assisted by an outside consulting group that also has interim management capabilities, so bringing an outside manager in to guide our team in terms of all the value streams that we are right now tackling.

And the interesting thing is, and Robert also mentioned that, in the last couple of years, of course, there were tremendous frictions in the supply chain and they are, to a certain extent, still valid in today's supply chain environment.

But the situation is getting better and better and we have to harvest on those improvements. And the goal with this operation in terms of bringing our inventory down is not only to reduce our figures, but also to change and improve the processes of how we are doing business in this company.

So I would say the majority of the tasks that we are tackling is really under the control of FACC. So there is no need for customer or supplier involvement, of course, to a certain extent, also might be in question, but there are really huge opportunities in our company to do things differently, recreate our processes, be more efficient, reduce idle times over the whole value chain.

And of course, this is not something that you do overnight. So changing processes take some time. And therefore, we kicked off the project in September with the first results that we expect by the end of this year. But the major results you will see during the next year 2025.

[Unknown Executive]

Yes. Thank you very much for the question, also answering the question. [Operator Instructions] So we have another question now. You should be able to speak now. Please say your name. Thank you.

[Aymeric Poulain, analyst]

It's Aymeric Poulain from Kepler. Just a follow-up question on the guidance for Q4. Your guidance, indeed, assume a material slowdown and point to some destocking by OEMs. So how long do you expect that destocking phase to last?

And you guided for EBIT, obviously, but what would be the implication for free cash flow in terms of sensitivity to the various point of the range? And do you see in this context your OEM customer a bit more supportive in terms of giving you cash early so that it doesn't impact your balance sheet too severely to start next year in good condition. That would be my main question.

And then perhaps on 2025, I don't know if you're able to provide a guide for the type of growth rate you would anticipate in light of the current supply chain issues that you saw in the second half?

[Florian Heindl, executive]

Maybe take a couple of parts of that question and maybe Robert also wants to add on some issues. In terms of your free cash flow part of the question, of course, we are aiming for -- you see in the Q3, we have a double-digit negative free cash flow. So depending on the year-end rate, of course, we are aiming for at least, let's call it, 0 or even positive free cash flow, but we will see how this we'll manage out also in terms of the impact of our inventory reduction program that we have.

In terms of customer support, of course, also valid that we are in close contact with our customers and discussing especially when it comes to the payment of invoices. We have our factory programs in place. So this is no issue in the end. So prepayments in that regard are not needed because of the factoring.

But of course, we have other customers not in a factoring program. And therefore, we, of course, have a close eye on the cash intake of open invoices, especially for the year-end race.

In terms of a guidance for next year, we are right now in the process of putting our budget together, finalizing it, discussing, of course, a little bit. And we also have to see or get a better feel, I would say, for some OEM developments that we have and this will be incorporated into next year's budget. As soon as we are, I would say, fixed and firm enough to communicate to the market, we will let you know.

Robert, maybe from your side, something to add?

[Robert Machtlinger, executive]

Well, I can add very briefly I think we see from the market by itself that the ramp-up is stabilizing. So I think the more stable the OEM demands are, and they are quite stable, still there is some volatility, I think our working capital will further reduce. So it's pretty much a joint effort we have to go through together with our suppliers, ourselves and customers. So overall, I think we shall have peaked, I think, inventory, as Florian said.

For the next year, I'm asking for being patient. I think after -- with the Q4 results, I think we have a very good insight on 2025. But as you watch the industry very carefully as well, I think the ramp-up is continuing, especially on the wide-body airplanes where FACC is benefiting.

But details, please be patient. Once we have our figures put together and with the Q4 results, I think we can be more specific.

[Unknown Executive]

Yes, thank you so much, Mr. A. Poulain, for your questions, also for answering. [Operator Instructions]

So no further questions have come in. So I thank you dearly for your attention. And should any questions arise in the future, please do not hesitate to contact us or the Investor Relations management team.

And with this, I hand over for some final remarks to the CEO.

[Robert Machtlinger, executive]

Well, I thank you again for being with us today. I thank you for dialing in. Thank you, Florian, you are abroad. You are in New York. So it's quite international right now.

Again, I think we're heading in a good direction. The market is behind us. People are flying. The demand for new airplanes is more than the current supply can fulfill. That's good, I would say. This is not the case in the one or the other industry.

That's the momentum we are using with the activities we have launched, not only Croatia and China, but also those ones Florian has guided you through.

In saying that, again, thank you for your participation. Thank you for your interest. And I wish you a great day, and talk to you very soon. Thank you.