Leonardo Spa Ord

Welcome everybody and thank you for joining us in our presentation of Leonardo's first half results. My name is Claudia Entrovigne and I'm the Investor Relations Director here in Leonardo. I'm really pleased to have here with me today Lorenzo Mariani, our CEO and General Manager, and Giuseppe Aurilio, our CFO. They will do a presentation of our strategy results and guidance. Then we will have a Q&A session. So let's start. I will hand over to Lorenzo.

Thanks, Claudia. And thanks, everybody. It's my first presentation of results as the CEO of Leonardo. And of course, I'm happy and proud to be here today with you, with all of you. I've spent nearly all of my professional life in Leonardo Group, former Finmeccanica. And I must say that today we are in a completely different and better group Not only if we compare it to what it was 20 or 25 years ago, but also comparing it to five years ago. It's different and better in terms of products, portfolio, in terms of market, and in terms of state of mind. And this is what makes me also quite optimistic on the future. I will spend just some minutes to go through the scenario we are operating in and the impact on our strategic and industrial plan. And then I will hand over to our CFO to go more in depth on figures and I will be available for questions. First of all, something I think we all know, lesson learned. We are in a new paradigm in our world and in our markets. Lesson learned from recent conflicts show us that we can have different wars in a single conflict. A traditional one, so with artillery, boots on the ground, Together with new cyber, electronic warfare, cognitive war and at the same time terrible new threats based on advanced technologies. Just an example for all the rest. High hypersonic missiles, gliding missiles. This has changed completely the need, the requirements of our customers, creating the need for faster and more resilient and mostly very integrated solutions. A second cardinal point. We have entered into a period of defense spending acceleration. This is definitely true in the United States, although with some confrontation sometimes, but also in Europe. Despite different countries behaving in slightly different modes, we are really convinced that we are in a structural long-term defense spending trend. Leonardo is in a good position to take advantage and benefit of this situation thanks to the breadth of the portfolio. We have platforms, helicopters, aircraft, after acquiring Iveco, also land systems. We are in the new domains, such as cyber and space, and we have electronics that goes transversely to all of that. And this is what really allows us to be really present in these new multi-domain requirements. In addition, we are also geographically distributed. Italy, UK, US, Poland and many other geographies. And this is also an additional opportunity for capturing new orders and acquiring new customers. Then, our vision. First of all, continuity. We have an industrial plan and we are sticking to that industrial plan. The only real point that I would like to stress is acceleration. We need to accelerate many of our initiatives because the world outside, based on what I've just said, is really going at a different pace and we have to be capable to meet the requirements, the changing and quickly changing requirements of our customers. This means also accelerate execution, program development, production, industrialization, engineering. And on-time delivery today means something really different from what it was a few years ago. Of course, accelerate means also scale up our capability to produce, our production capability, sometimes investing in capex, sometimes working on efficiency in order to have some additional capacity from the means we already have in-house. Then, technology. Technology is always a cardinal point for Leonardo, and in order to fulfill those operational new requirements, we have really to invest and to strengthen mostly new technologies, so data management using IA, for sure cyber, and many other high technology domains. At the same time, and related to this, also expanding strategic partnerships. We need to do that to access new markets, to guarantee in some cases sovereignty, and also to accelerate our entrance into new domains and new technologies. What does it mean in terms of specific initiatives we are following? Quite a big number. And all of these we are stressing acceleration. First of all, technology footprint and multi-domain capabilities. I can see three main dossiers that we are treating at the moment. G-CAP, the sixth generation system and aircraft where we had recently a great success signing the first big contract, international contract, so between the GIGO organization and Edgewing. The observer has been added with Canada, who has requested to be part of the programme and for the moment will be an observer. That is a very good sign for the follow-on of the programme. Then Michelangelo. Air defense, integrated air defense, strong focus on new threats. This is the basis on which Michelangelo has been conceived. All the activities are proceeding in order to have a demonstration for dead zone protection by the UN in Ukraine. We have added to the table two major components that Leonardo can One is the missile and anti-missile competence through MBDA. The second one is the link to our Guardian constellation, the Leonardo constellation we are developing, that despite being conceived initially for security reasons, can be extended also to defense capabilities in the frame of Michelangelo. Then, raft acquisition. As I said, there is an important, we declared an important acquisition in US through our subsidiary DRS. It's a company, medium-sized company, that operates in new technologies, namely IA applications through software for C2 in defense systems that can be easily matched with the need we have in Michelangelo as well. Then the partnerships, LBA, Leonardo Baicar. A few days ago we signed the final agreement for this JV after receiving all authorizations from regulatory bodies in Italy and Europe. We have the first aircraft ready and be already and many more. We are preparing together with Thales and Airbus partners our filing to Antitrust. We are working already as a team ready to build a space domain giant employing 20,000 and more people and really being a real actor in this developing scenario. Leonardo Rai Metal JV is already operational with a first running contract for Italy on the first requirement for the A2CS. We are envisaging already other two contracts for the new main battle tank on which I'm optimistic to finalize that in the next coming months. The action to optimize and scale up our industrial footprint and capacity. This means, as I said, restructuring our available capacity, building new one and sometimes acting on M&A. IVECO for sure provides us entrance in a new domain that is the land battlefield, gives us the capability to have a new division that is made by the joint capabilities of Iveco and Ottomelara addressing this strong market and at the same time provides us with some industrial footprints and manufacturing capacity that can be made available also to other businesses. Aerostructures, last but not least. Aerostructures for us is an important business and we are following two ways that are proceeding according to our industrial plan. First, restructuring. We need to make this business better and we need to improve the results and we are doing that through finding additional work packages with existing customers, moving work packages from one plant to another where this can be made more efficiently. Reducing in some cases the footprint, acting on subcontractors that can be duplicated, double sourcing can always help on that, and also working on our quality systems in order to make the reworking to zero. At the same time, we are following the path With the prospective partner in order to build a JV that should enhance the footprint of this business abroad and at the same time allow us to consolidate progressively it from our accounts. So, this was just a very quick overview. You can see that all the initiatives I see are accelerating and in any case supporting our ambitions in the industrial plan and this was clearly seen in the half-year accounts and were the basis for my optimism that led also to the revision of guidance not only for orders where it was evident but also on all the other parameters thanks to the contribution as you will see with from Giuseppe Aurilio of all the divisions the business divisions Now I will leave the floor to Giuseppe Aurilio who will go through the details of the different businesses.

Thank you, Lorenzo. I'm very pleased to comment our Q2 and first half results for 2026. Very good performance, outstanding first half of the year. We see a very strong commercial momentum with orders at plus 40% compared to first half of 2025. Free operating cash flow plus 40% again, which is the KPI we are focusing a lot on and where I see the difference compared to my previous experience in Leonardo. So very strong performance now also in the cash generation. Profitability has increased up to 7.6% in terms of ROS plus 30% compared to the corresponding period of the prior years. And our just net income has increased by 74%. So, very solid results, very good performance. We see a strong commercial momentum and that is leading us also to upgrade our guidance, as we will discuss in a second. So, now let's focus for a while on our results. We see that, as you can see, we are providing all the data without IDV. IDV has been consolidated in all of our financial flows and income statements since April 1st, so it is contributing for three months to the results. To allow you to make a like-for-like comparison, we have provided all these tables, including the following ones, without the contribution of IDB, which is separately disclosed. So, as I said, orders. Orders are around 16 billion euros. Strong increase overall the division. Revenues are plus 10% compared to 2025. Again, it is a positive contribution from all the divisions. Perfectly in line with our expectation for the full year. You may remember that we projected a plus 8% on a year-by-year basis. EBITDA, we closed the quarter at 0.73, so around plus 30% compared to the previous year. And free of adding cash flow, it is negative as it is usually in our business, but much less compared to the past. So it is around plus 50%, 45% compared to the previous year. And it is very, very improving compared to the past. So our net debt has increased. Obviously, as a consequence mainly of the acquisition of Iveco Defence Vehicles. So let's focus on orders. We said we see a very strong commercial momentum. Orders up by around 40%. A total backlog, including Iveco, of around 59 billion euros. And the book could be at 1.6, so very strong compared to the previous year. It was 1.3 in 2025. So if we look at the different division and the performance of the different division, we can see that we had a very strong performance in defense electronics, helicopters and aeronautics, of course, but also on the smaller division, cyber and space, the performance was very good. So, defense electronics, we had very significant results, both in Europe and in the U.S. If you look at the euro comparison, Leonardo DRS sounds flat, but of course it is only because of the negative impact of the translation of the U.S. dollars into euros. So, excluding that impact, DRS has increased by 7%. So, very, very significant performance. A number of very important orders to us, so in electronic defense, Sampd for Italy, we had ballistic missile defense, Griffin, so a number of significant orders. Helicopters, we have a peak clearly like for aeronautics and we will discuss in a second. Here we booked the NMH order for UK MOD, so the 149, 23 149 for the UK MOD. You know that that was a key milestone for our commercial plan because of the situation on the Yovil site, so it was fundamental for us to get this order in the first half as we did. Aeronautics, here we have the aircraft components, which has recorded outstanding performances, a number of significant orders, M346 for the Austrian Air Force, M346 again for the Italian acrobatic team, but also orders on IFA Germany and IFA on Italy. So some very significant orders driving the division up by 2 billion compared to the 2025 first half. Aerostructure is the only red number you see on the table, but it is just because of a different phasing compared to 2025 in the orders from B7A7. So we know the accumulated amount for the year. In 2025, the phasing was different and more concentrated in the first half of the year. Cyber and Space has said very good performance, so we are at around plus 15% and plus 12% compared to 2025, with a number of important orders distributed over the different business. And this is leading to a very good performance also in terms of revenues, so excluding again the negative impact from the translation of the dollars. We have a plus 10% compared to last year. Again, we are projecting a plus 88% on the full year, so a very positive performance. We see electronics. Again, we are here affected by the negative impact of the dollar, so we see again DRS flat. but instead in dollars it is growing by 8% so very significant performance. Electronics Europe is growing by 15% and we will see this point also when commenting about the profitability. You can understand how brilliant this performance is. Helicopter is growing at a 4% pace which is perfectly in line with the target that we have for the full year. As you may remember, in the past, Helicopters Division has experienced a significant growth, both in 24 and in 25, a plus 11%, a plus 11%. So in 2026, we projected a more moderate growth by 4% and we are perfectly on line to achieve that target. Positive contribution from the customer support business, which is key for us to improve our profitability, as we will discuss in a second. And very good performance in terms of deliveries, up from 72 to 81, with a different mix, so bigger helicopters compared to the deliveries we made in 2025. Aeronautics, we had a very strong contribution from the aircraft division, solid performance. So we know on our key programs, we are performing very well. So GCAP, IFA, but also on our proprietary platform. So M346 and C27J, we see a small difference compared to 2025, which is mainly due to the lower activities we are doing in the Gulf region. So not a big number, not an issue for the full year, but just reducing slightly the contribution of aircraft in terms of revenues in Q2026. On the contrary, aerostructure is marking a significant progress compared to 2025, plus 44%. This is mainly due to the increase in the rates of production of B7A7. You know how key it is, the rate of production on that program for us in aerostructure. So in 2025, we started the year at four deliveries per month, four fuselages delivered per month. Over the year we increased up to 7, this year we started at 7, then up to 8 and we target 10 by year end. So significant progress on deliveries on B77, clearly implying a plus 44% in terms of revenues for the semester. Cyber and space, again, growing a lot, like for orders, plus 17% in cyber, also due to a number of programs, very important programs acquired in the past. And space, which is doing very well both in the payload and robotics business and in the service activities. So overall, strong performance in terms of revenues, plus 10% year on year. Profitability, I said we have increased our return on sales by 110 basis points from 6.5 to 7.6. As you see, most of the increase in terms of EBITDA is the margin effect and only one third is driven by the additional volumes we were commenting earlier. So, very good improvement in profitability. If we look at the breakdown by segment, starting from Defence Electronics, outstanding performance, plus 20% compared to the previous year, with outstanding performance in all the different building blocks. You may remember that inside the habitat of Electronic Defence we have four building blocks. We have Electronics Europe, strong performance, plus 16% compared to last year. We have DRS, plus 25%, so very good results. And we have the contribution of our strategic JVs and investments, MBDA and Ensold. Again, plus 20%, very strong results in MBDA, very good results also in Ensold. Helicopters, we have an increase which is linked to the increase in volumes, so in line with the target for the full year, which is to increase our return on sales up to 9.2%. It was well below 9% in the past, so that's the target for the year. Aeronautics, we see a big increase, almost plus 100%. Aircraft stable for the mix I said earlier, so very good performance on our key programs. Some lower activities on programs in the Gulf area. On the contrary, aerostructuring, and that's the benefit that you are seeing on the net income of the division, on the contrary, aerostructuring is partially recovering its loss. So if we compare to 2025, thanks mainly to the increase of the rates of production, both in B77 but also on ATR, we are reducing the loss by around 30 million. The same applies to ATR. where we have reduced the loss by around 20 million. So it is still a loss but overall 50 million lower than 2025. Cyber is benefiting from a positive mix in terms of programs, so it is growing by 34%, but also by operational efficiency. So we are increasing the scale without increasing the cost in a corresponding way, and that's driving such a big increase. Space is increasing by 6%. Very good performance, again, on payload robotics and service. Solid growth. In Thales Alinea Space, which is the manufacturing portion of our space alliance JV with Thales, we see still a loss at net income level, minus 14 million, in line with the last year. At operating level profit, TAS is improving. We see here the net result, which is instead in line with last year, mainly because of below the line items, which are higher compared to the corresponding period of the previous year. So overall, a very good performance, strong increase in return in sales, strong increase in revenues, driving a portion of the increase in EBITDA. And free operating cash flow, as said, we see a very significant improvement, so up 45% year on year. Of course, we are benefiting from our increased profitability, but we are benefiting also from a number of actions to make our management of working capital more efficient and more effective. So we see strong improvement. It is still negative. I said that it will always be negative in the first portion of the year because of the nature of the business. But it is much better compared to the past. And it is even better if we consider that this year, as planned, it was in the plan, so it is not a surprise, we had to offset a couple of significant negative items. which is the payment of the NH90 litigation we settled at the end of 2025. You may remember that we discussed about this point. So 113 million cash out in the six months. and we had also a significant increase in taxes paid because you know that in the past in Italy we had a significant amount of tax losses which now we have fully used so we are starting paid taxes without any tax shield and so we had around 100 million of additional taxes paid compared to previous years so very good performance even better if we consider that we've been Able to more than offset these two negative items. And now let's focus for a second because we have been commenting the results without IDV, but IDV as well is performing very well. So if we look at the results, we see that they are contributing to Leonardo a backlog of 6 billion, around 6 billion. and orders at 0.6 and 0.7 which are in line with our full year expectation of 1.2 for the nine months. You may remember that we will consolidate IDV for nine months in 2026 starting from the acquisition date. Revenues were at 0.4, so in line again with our expectation of 1.1 for the nine months, with an EBITDA which is slightly better than what we see in the full year because of a different mix. So, you know, we have inside IDV two different business, the armored side and the truck side with different margins. So the mix in Q2 was different from the mix we're assuming for the full year, for which we confirm 11% return on sales over the nine months. Free operating cash flow was negative. As we said, the same thoughts apply also to Iveco, of course. So it is a business where it is normal to be negative in the first half of the year, much less compared to the Q1 of Iveco, which was not consolidated by Leonardo, but it was significantly negative. On the same time, we are working a lot to integrate IDV in our business. So there is an integration program team, project team, which is working to fully integrate Iveco Defense business with our activities. and the consideration paid for Iveco is driving our net debt as expected 3.2 billion on net debt so the total consideration was 1.6 billion and of course we had the payment of dividends for 0.4 and the negative free operating cash flow smaller than we thought but of course we have a negative debt of 3.2 excluding Our share of cash in MBDA, in our joint venture, we have a net debt of around 1 billion, so fully compatible, very solid balance sheet. We think we are perfectly in line also with our target of leverage we gave for the three years, 26-28. And as Lorenzo was describing, the DRS has signed the acquisition of Raft for around 400 million, with a tax benefit of around 50 million. That was part of our capital allocation we presented during our industrial plan. You may remember that we said that we were setting up a budget provision of around 1.8, which included also some potential opportunities in the US. So this acquisition is fully compatible with that capital allocation strategy and of course we think it can bring very significant benefits for DRS but also for the whole and wider Leonardo Group. Closing is expected in Q4 2026. Guidance. Now let's focus on the guidance. I will walk through for a while because it is quite complicated this year because of the inclusion also of IDV. We started with a guidance of orders of 25 billion. This is what we presented as part of our industrial plan, revenues 21 and EBITDA 2.03. We have included in May our preliminary view, which is fully confirmed, of the contribution for the nine-month 2026 coming from IDV. and this is leading to the updated guidance you see in red. So new orders 26.2, revenues 22.1. Now, as you know, given the very solid performance of the first half of the year, the strong commercial momentum we are seeing, the significant pipeline also we have and we are seeing, we have decided to upgrade our guidance. So on orders, we have increased from 26 to... We see revenues stable compared to our budget assumptions, so we confirm the 22.1 guidance. We see that EBITDA is increasing and therefore we have upgraded our guidance up to 2.21, which is a double-digit return on sales. So we are targeting to anticipate the target to be a double-digit return Ebitail Company in 2026, it was supposed to be in 2027, and that's a very important milestone. Free operating cash flow has been a consequence of the good momentum in orders and the improvements we see on profitability. We're increasing the guidance up to 1.37%, and as a consequence of that, of course, we see a reduction also in net debt down to 2.2%. So this is our updated view about the year and the situation in June was very good and so makes us confident to upgrade our guidance.

Okay, thank you. Thank you, Lorenzo and Giuseppe. Now we are ready to open our Q&A session. The first question is coming from Sebastian Gros from Exxon BNP Paribas. Please go ahead.

Hi, good afternoon, everyone. Thanks for taking my questions. The first one would be on IDV. You mentioned the strong quarter two profitability, which was owing to a favorable mix So my question is if you could comment on the phase mix between tactical vehicles and trucks in the quarter and also how you see that mix evolving for the full year. And as a follow-on question to IDV, can you remind us please where you stand with regard to the discussions when it comes to potential divestment of the trucks business to Rheinmetall? And lastly, if I may, on the order pipeline, the guidance implies meaningful slowdown in orders in the second half compared to H1, but also compared to the prior year. So I was just curious to hear your thoughts around the order pipeline that you see out of here.

OK. So on the split of revenues between trucks and armoured, we see the full year at around 50% or 55% armoured trucks. Thank you very much. On Rheinmetall for trucks, I think, as you know, there was a gentleman's agreement about nothing formally binding or something like that with Rheinmetall for them to look at this opportunity. It is still one of the options, so not the only one, it is one of the options. We are seeing that the truck business is growing, it is profitable. We have been working as part of that integration team I was mentioning earlier to make safe the supply chain, which was an area of concern for us, not being an automotive group. I think we are now in a position to better evaluate the different alternatives and decide based on the most convenient option we can have.

If I may add, Giuseppe, we are continuing in any case our talks with Rheinmetall in the frame of the continuous contact we have with them within the joint venture. No hurry, no hurry, but it is still an hypothesis. And in the meantime, we received inquiries from others who would like to discuss potential buy-in.

And for the third question, of course, as you know, the trend in orders is not linear. So we have seen that there are a number of jumbo orders in the first half. We mentioned NMH in UK, M346, the orders for the acrobatic team in Italy. So orders are not linear. I think that the target for the full year is a balanced target.

Okay, thank you. Let's proceed. The next question comes from Ross Lowe from Morgan Stanley. Please go ahead.

Hi, afternoon, hope you can hear me, hopeful as well. So the first is on aerostructures, which is obviously appearing to do a lot better across orders, growth and margin. Lorenzo, when you spoke about the division in your initial remarks, you spoke first about restructuring and then about the potential JV. So I'm just wondering if we should interpret this as a more positive view on the business and maintaining the status quo, given that things are clearly dragging on with your preferred partner. And then secondly, just on the guidance, obviously you've raised EBITDA, but not revenues. So what's driving this higher margin? Is it just revenue mix or is there also operating leverage? or maybe Efficiency Games. Thanks.

As far as aerostructures, the plan is still the one of finding an agreement with the potential partner in order to build the JV, to have a branch in the second country as well, and to find shares and arrangements in such a way that the business will be deconsolidated. Not sold, but deconsolidated. Of course, as things have delayed a little bit due to the conflict in Middle East that prevents detailed negotiation, at least face-to-face in many cases, we are concentrating even more on making that business less... This is also providing us a benefit in the negotiations because of course when we negotiate with a less problematic business it is easier to find an agreement to build the JV. But the plan is in any case unchanged.

And on the EBITDA, of course, we are benefiting from operational efficiency due to the increase of scale. And we think the benefit can be higher compared to our initial estimates for budget. But of course, the most important point to me is the solidity of our program performance and execution. I think the main driver for the increase that we are seeing on the full year results is linked to the very solid performance on programs.

and in fact it was everywhere.

Yeah, and in fact, as Lorenzo was saying, it is spread across all the business.

Okay, thank you. The next question is coming from Alessandro Pozzi from Mediobanca.

Hi there, good afternoon. First of all, congratulations to Lorenzo, the first results call. Wish you all the best. The first question on the commercial pipeline, order intake has been really strong in the first half of the year. Can you comment on your thoughts about how orders will develop, where do you see most demand, and if you can maybe elaborate, especially on the Middle East? and also on the Michelangelo Dome. In your opening remarks, you mentioned that you want to accelerate on a number of programs. I guess the Michelangelo is one of them. The second question on the pipeline is defense spending in Italy. There's also talks about whether Italy is accessing full but safe... Sandinger, and Stasin Potentiulist in relation to the land platform. Can you give us an update on your specific program and whether you think not accessing the food safe will bring any delay?

Thank you.

I think I got the point, even if we cannot hear very well, but I think I got the point. As far as orders, I think there is a positive outlook on all divisions. There are even a few jump orders as an opportunity, but the timing of jump orders is always uncertain. We tend to factor them and not to put them entirely. In terms of divisions, if I had to rank them, I would say that the biggest opportunities for orders I can see in electronics. Electronics includes today also the armament automelara and all the armament component is has seen a strong increase in the market following the raise in defense spending. Middle East, yes, Middle East is one of the regions where we are pushing harder, not only with electronics and also with including air defense, but also with prospects in In space, we have significant opportunities that we think will materialize in the coming months, maybe within the year, maybe just after. But in any case, the outlook is very positive. Michelangelo Dome, I think I lost part of the question, but the acceleration is both on some streams that had already been launched. I was talking about the dead zone protection system, Thank you very much. There are large geographical areas that are the missile component to MBDA and the space division where we are investing a lot in our Guardian constellation that is a good basis for Earth observation even if the final version of Michelangelo dome will need quite a different capability in terms of satellite. The third was on SAFE. We could not hear very well but I will provide our understanding on the status of SAFE. First of all, SAFE is a different source of funding. So it's not necessarily an additional amount of money that could be used by the Italian government. It could even be substituted to other sources of funding. As far as we know, the government is still considering the use of a partial or total of the 14.9 billion that have been booked. If they use or they do not use, this is not having an impact on the major programmes that we have in our industrial plan, in our budget and plan, as those are already at most covered by the defence budget that is in place. There is a debate at the moment related with Italy exiting from The procedure for excessive deficit in Europe that would allow Italy to invest more, over 3% of deficit in defense and this is a debate that is probably taking place Thank you. Hi.

I saw the SAFE was supporting the contract for the Italian Army, the land platform contract. Can you give us an update on whether that could be signed?

I'm optimistic with signing the contract in the coming months. Both contracts, the follow-on of the links for A2CS and the new main battle tank based on Panther. These are two different contracts. They have an hypothesis of partial coverage by SAFE, but there is the... Thank you. Thank you.

We proceed with David Perry from JP Morgan. Please go ahead.

Hi Giuseppe, hello Lorenzo for the first time. Just a high-level question, if I may, for you. You talked about accelerating and I think sharpening up the industrial plan. Just in terms of the, and I'm not asking you for new guidance, but in terms of the Can you talk about the non-recurring costs in the first half what they are and what you're expecting for the full year? Thank you.

The industrial plan I have inherited for me is realistic and sound in terms of initiatives and figures. Of course, we are going to review that towards the end of this year, beginning of 2027. The fact that we are Revising our guidance, improving them is a good sign, but it's not a commitment to an improvement of the plan. Not because it is not possible, but because we have not yet looked properly at that.

Okay, and David, on the non-recurring debt amount includes a couple of items, M&A related costs, so you can understand that we are running in parallel a number of actions on that side, so we are including there the costs related to M&A. And the second one, we are continuing to review our portfolio to better assess whether there are areas of efficiency, so there are some non-cash write-off in that item.

Sorry?

The full year for non-recurring, any guidance?

The full year at the moment, in terms of write-off, that's all what we see is there. In terms of additional costs, you know that we, M&A mainly, we know usually we have around 100 million in total for the year.

Thank you, it's very helpful.

Thank you. So we will proceed with Alfonso Osorio from Barclays.

Hello, yes, thank you very much.

A few from my side as well, if I may. The first one is on the coverage program. You mentioned some delays in the second quarter, so can you quantify that impact? And also, if you can, share with us if you expect a catch-up in the third quarter because of that. That's the first one. The second one, in terms of the order intake in the second half, can you remind us if the Eurofighter order to Turkey has been already booked, and if not, would you expect that to fall in the second half? And the last one, just to keep on the exceptional charges, in terms of, you mentioned the evacuation, given that it's ongoing now, would you expect any incremental cash exceptional charges in the second half, or nothing to flag there? Thank you.

The line was not so clear. I think you were referring to the delays on the Kuwait programs. It is not a big number, so it is something we will recover in the second half, not a big number. Of course, the situation there has been critical, and so some of the activities have been deferred to the second quarter. On IFA, Antarki, it will be, you know, there is a flow down, a timing for the flow down to us where we are not prime. So it is not booked at the moment. Of course, it is in our estimates for the full year.

And IFA is one of the areas where we see opportunities for, not for this year, but for the remaining part of the plan.

I think that the line, we lost him. So we proceed with the next question from Martino D'Ambrogi from Equita.

Thank you. Good afternoon, everybody. The first question, Lorenzo, is still on the acceleration that you mentioned. So business plan confirmed, okay, many things to accelerate, but is there your priority list for the to-do things, cost-cutting, build-up capacity, M&A, partnerships? And by the way, the cost-cutting plan, 1.8 billion, where we are today. The second question is for Giuseppe. In your new free cash flow guidance, what is the impact estimated for down payments and the portion of dividends coming from the controlled companies, particularly MBTA and so on? Thank you.

As far as the priorities, I think that all the items you mentioned do not interfere one with the other, so they're all being treated as priority. Of course, some of them are fully in our hands. Now, this is the case, for example, for the joint ventures with Rheinmetall and with Baicar. Of course, as far as DRS is concerned, once the closing will be made, the integration and exploitation. Others are less full in our hands. This is the case of Bromo. So for me, it's priority, absolutely. And we are doing all what we can to accelerate the process in this case, accelerate the filing in the antitrust. But it's obvious that there is an external component that can be an element of acceleration or delay quite independent from us. But I would say that all of those are being pushed because aerostructure, for example, was a good example before I highlighted. We are absolutely accelerating the process of reaching a level closer to breakeven. But nevertheless, in parallel, we are pursuing the M&A case and the two are interlinked at the end of the day.

For cost-cutting, you know, the plan for 1.8 billion over a number of years is going in line with that plan. We are slightly ahead of the plan. Of course, we will need to amend and review as part of the new industrial plan also because clearly the situation is changing. So some of the assumptions... are now, you know, passed by the time and by the situation. So we've been discussing in the past about energy cost, for instance. Of course, now it is a different situation. But that plan, because we are not being impacted in 2026 by the situation, that plan for the time being is going in line with our expectation. As regards the free operating cash flow, of course, we are factoring in our risk and opportunities matrix also additional prepayments, mainly on the international export campaigns. So, of course, it is a mix of the two. Overall, we are assuming contribution from working capital to be neutral or slightly positive for the year.

Okay, thank you. Next question is coming from Adrien Rabier from Bernstein.

Good afternoon, thank you very much. My questions have been answered actually, but if I can just ask a very quick one, please. Do you have any update regarding the stake in Henselt? Is the plan still to potentially sell that stake and what would you do with the proceeds, please?

I think Hensolt is now going well, good results. The value is at the moment much higher than the one we had when we bought the shares. Of course, at that time we had a different plan that was about having the majority of that company today. It's clearly not possible. I'm not in a hurry to dispose for two main reasons. One, because I am confident that that market is going very well. It's a very dynamic one in terms of defense. So, in any case, we can really think about without risking to lose some value. The second and most important one is that the number of opportunities for Eurofighter and the movements around the sixth generation fighter suggest that it's prudent to wait a little bit and to seek further opportunities for collaboration between Hansolt and the electronics, both the Italian and the UK component. because should the Eurofighter continue to be very healthy, this is an opportunity and in any case the G-Cup offers potential opportunities that today we cannot evaluate. Given the fact that I'm confident we will not lose value, we are still having our foot on the German market.

Thank you. Next question is coming from Sasha Tusa from Agency Partner. Please go ahead.

Thank you, and thank you very much indeed for your last answer, because that feeds into my question. Your fellow CEO, Charles Woodburn, yesterday said that the window is closing for bringing another partner into GTAP quite rapidly if there is to be no change to the entry into service targets of 2035. I wondered when you think the window shuts industrially to bring another partner, for example, Germany, in. And then following on from that, there were quite a lot of comments at the Farnborough Airshow from the various meetings organized by the GGO and Edge Wing that Japan and possibly even Italy want to bring the entry into service forward for GCAP. Do you recognize those pressures and do you think it's industrially realistic to do so? Thank you.

I will start with the second one. It's true that there is quite a strong push to bring forward the first entry into service of GCAP that was initially stated, still stated, in 2035. This is something that has been said in meetings by the ministers and has been motivated correctly, in my view, by the urgency of having such a multi-domain system starting to operate as quickly as possible, as early as possible. This is feasible, yes, but by making that entry into service even more gradual than it was supposed to be. So probably modulating the requirements that this initial version will fulfill. It's always possible to be progressively meeting the final requirement, as it has always been the case in such complex programs. So, absolutely yes. And as far as the window, I fully agree with what my friend Charles said. The window is closing because otherwise confidence in timescales will be lost. This is the main reason. Then, to be really honest, one should think if there is a point in losing some time now to reach a more stable and more healthy consortium and then maybe gain time in the second part of the development. But I recognize that normal decisions are taken on what we have on the table today. So, yes, the window will close very soon.

Thank you. Next question is coming from Gabriele Gambarova from Banca Intesa San Paolo.

Good afternoon, Lorenzo, Giuseppe, and Claudia. Thank you for taking my questions. The first one regards aerostructures, because in the second quarter, the loss at EBITDA level was very, I mean, it narrowed to around 20 million, and you are going to accelerate on rates up to 10 by the end of this year, as Giuseppe said. So I was wondering if we could assume that... The break-even point for aerostructures will be reached sooner by comparison vis-à-vis the 2028 target that was, let's say, indicated in the past, maybe in 2037. The second question regards the M346. It seems that he's really living the time of his life in terms of new orders. I was wondering if you could comment on the UJTS, U.S. Navy program, where apparently you remained almost alone because there is just another competitor that has just a project and not a proven platform. And that's it for me. Thank you.

I will start with the second one. I fully share your point that 346 is living a fantastic moment and I think this is also related to correct decisions that have been taken in the past years. I mean the armoured version The Light Fighter, the new cockpit and so the upgraded versions are all features that helped to have success in this market. So yes, I think and I think this moment will continue for a while. UJTS... Unfortunately, one plus one makes two competitors. So we are competing. The U.S. market is a very challenging one. We know these are competitions where every time you learn something very important in terms of process and in terms of product, and we are, we want to pursue that very, very seriously. Seriously, till the end. And we think we have possibilities, but the way is still ahead of us.

Okay, on our structure we see around 20 million of additional losses in the second half, you know, we confirm the budget we gave, so based on that we see that there is still a loss on that, also benefiting from the closure of some programs in the second part of the year, so overall We are doing well. B787 is key to improve the performance of aerostructure. But as Lorenzo said, the restructuring plan is much wider. So the solution of B787 is part of the problem. There are other items we are working on. So at the moment, we know we are fully engaged on the tough restructuring plan to be back at break-even, as we said not earlier.

Thank you very much. Thank you. We have a last question from Christoph Menard from Deutsche Bank.

Yes, good afternoon. Thank you for taking my question. I had two. The first one is on bro milk. There was an article in EFT during Finebro where you seem to express some concerns around antitrust. Is there anything incremental that you can comment on, or was it just a recommendation that you wanted to express? And the second one is on helicopters. The performance in Q2 was actually very strong, and it is one of the divisions where, in my view at least, the industrial plan was at kind of normal targets. Is it helicopters, something that could surprise positively when you revise or when you have a second look at the industrial plan update? Thank you.

As far as Bromo, I remember the article that was reporting just a part of my comments on antitrust, but in any case at the moment the filing with the EU for the antitrust is always a complex process, especially when The business is a complex one, like it is for space. Of course, there are other actors, other companies who do not see an opportunity in Bromo, although I see in Bromo an opportunity for the whole European supply chain very clearly. What we are doing now is working really in a very transparent way with the EU on the filing in order to accelerate the process. Nothing more, nothing less. Very honestly and very transparently. And all three parties, Airbus, Thales and Leonardo, are contributing in good faith to this process.

On helicopters, as you have seen, very strong performance, very good commercial momentum, so results are good. The focus on 2026 for us was improving profitability, so we are targeting to have our return on sales up to 9.2% and then over the plan up to 10%. This means we are working a lot on the processes, on the engineering, on the production and of course this takes time. So of course we are optimistic about the future and we will see when preparing the new industrial plan but the results of this action of course are spread over time and not in the short time.

There are important actions in progress already on manufacturing and supply chain. Because the demand is there, we think we are very successful with our portfolio and manufacturing and supply chain are the key elements in order to grow revenues and profitability.

Thank you. Thank you. So we now close our Q&A session. Thank you. Thank you to all for your participation. The IR team is available if you have any further questions. Have a nice evening and enjoy the summer. Bye.

Thank you. Bye bye.