Renk Group Ag

Welcome to the Rank Group H1 2026 conference call. Please note that the call will be recorded. During today's call, webcast participants will be in a listen-only mode while we conduct the question and answer session. If you wish to ask a question, we ask that you please use the raise hand function at the bottom of your Zoom screen, or if you've dialed in, star 9. Further instructions will follow at the time of Q&A. I would now like to turn the call over to Maximilian Prunich Senior Investor Relations Manager Please go ahead

Thank you very much, operator. Good morning and welcome everyone to our H1 2026 Results Conference Call. With me today are our CEO, Dr. Alexander Sage and our CFO, Anja Menzier. Alexander and Anja will guide you through today's presentation. Afterwards, we will open the floor for your questions. Let me now hand over to Alexander. Alexander, please go ahead.

Thank you very much. Ladies and gentlemen, also from my side, a very warm welcome and many, many thanks for joining today's H1 2026 conference call. For the sake of time, let me start directly by going to the presentation. However, please allow me just some very quick personal remarks up front. The last six to seven months were very successful in regards to financial performance, credibility, technological milestones and major steps forward towards strategic execution. We are fully on track to deliver our 2026 guidance and to position us, as always communicated, in the upper half of the adjusted average range.

Having said this, ladies and gentlemen, let's move now to slide 1, showing us the selection of highlights for the second quarter. The strong order intake is clearly one of these highlights and therefore let me start directly with a quick review of some of the larger key order intakes during Q2. First, we extended our framework agreement with Rheinmetall and the LINX program, including transmissions and final drives worth up to €270 million, including further options in the range of €63 million.

Furthermore, Rank America was awarded the following ones of a four-frame contract by the U.S. Army, up to 691 million U.S. dollars over five years and also including further upside options. In Q2, we already booked around 121 million U.S. dollars of intake according to contract terms. In addition, and staying in the domain name for a moment, we saw further orders from engines, from international customers, more spare parts orders in our lead plant here in Augsburg, and the very first Atria Track Series orders, which were further supported by the recent collaboration agreement between Finland, Norway and Latvia during the NATO Summit in Ankara. Last but certainly not least, although our Navy business showed strong water momentum with waters from various international frequent programs.

For example, FRAM in Italy or in Turkey, just to name a few of them.

In total, we enjoyed a record H1 water intake of roughly 1.2 billion Euro, clearly demonstrating continued strong and international demand for our products and technologies. For your information, approximately 13% of the order intake from H1 comes from the German customer.

Also true to be proud is the celebration of the 4,000th Level 2 transmission going into production.

Needless to say, the Level 2 is one of the most relevant MPT platforms worldwide. And REN truly is a proud sole supplier for this program in over 20 countries in over 40 years. A very important highlight of the second quarter was certainly the Eurostory in June. Together with Patria, we presented our concept of a heavy-track UGB, where the digitalization of our translation is the core enabler for future unmanned ability.

The strong interest from various customers, MOVs and the media was not only very impressive, but also underlined the leading role of rank in this new product segment in combination with our today's strong market position. One milestone I am personally very, very proud of, the signing of David Brown Defense, where we are doing nothing less than building a global leader in naval power transmissions with unique access to the five ice markets.

And so far, at least for us, uncovered new product segments and technologies, or in different words, consequently executing our M&A strategy. Ladies and gentlemen, let's move on to a slide to summarize the group performance for H11. Before we go into a more detailed discussion, as you can see, the orange boxes at the top of all relevant KPIs are showing a quite positive development, starting with the order intake. As mentioned before, a very strong H1 performance with a book-to-bill ratio of 1.9, where the approximately 1.2 billion Euro order intake is almost on a similar level as 2025 after 9 months. On the revenue side, CROSS is fully in line with our fixed order backlog and customer delivery schedules.

Please let me remind you at this point of our well-known Israeli effect.

In the first two quarters of 2025, we had approximately 20 to 25 million euros of revenues per quarter related to Israel. For 2026, the deliveries were and are scheduled, according to our customer contracts, to start at the end of Q2 and begin during H2. For your information, the deliveries have started as planned. Adjusted grew strongly by around 10% year-on-year, once again continually outpacing revenue growth, and the margin continued to expand to 15.4%, driven by the operating impact of our modular production line and group-wide performance measures. Finally, our defense business is slightly up to 75%, while our aftermarket share remains stable with a strong aftermarket performance in Q2.

For your information, we are currently in the process to finalize our aftermarket strategy in 2035.

From today's perspective, we are confident to secure a stable aftermarket share of approximately 35-40% by 2030 despite a significant increase of new business.

Beyond 2030, we do see further substantial growth potential of in total up to 2 billion Euro revenues per year towards 2035.

Ladies and gentlemen, before we are going into a more detailed discussion of our business performance, please allow me to briefly put a couple of recent and important events during H1 into our range perspective. The bigger picture is straightforward. NATO and well-evaluated member countries are clearly on the move, committed to increasing its spending and defined capability requirements and growing into a new role of responsibility, or so-called burden-sharing. The NATO Summit in Ankara confirmed the 5% total defense spending target from last year, and the focus has shifted from prepaid to implementation, with faster execution and faster delivery expectations. The United States will further increase defense spending, and the same is true for countries like Germany and the UK, which are planning to invest more than 900 billion euros during the next four years. Equally important is the so-called capability mix the Alliance had defined already during last year's summit in The Hague, including, besides air defence, long-range resistance strike, ISR and space, the so-called conventional mass, which covers land and sea platforms, ammunition, drones and unmanned platforms. Nothing more but also nothing less was confirmed in Ankara.

From a strategic perspective, it is important to understand that Armored Land and Sea Platforms continue to play a key, important role in the future combat readiness of the Alliance.

Germany, for example, already awarded during the last 12 months contracts for Armored Land Platforms of more than €18 billion. while the so-called procurement authorizations are with more than 44 billion euros still on a very high level. From a rank perspective, it is important to understand that the current budgets and capabilities are fully in line with our scenarios and mid-term targets for 2030 and beyond.

Let's move now to slide number four.

As you all know, defense is the core of our business and the main driving force behind our performance. Defense-related order increased strongly to roughly 1 billion in H1, plus 48% of last year, driven by strong and ongoing demand across our international core markets. On the red and blue side, defense grew to around 488 million euro, plus 6% versus H1 2025. Normalizing the H1-2026 defense revenue for the before-mentioned Israel effect, the underlying growth would be higher than the teens. Ladies and gentlemen, please allow me to have a quick, quick, really, really, only a quick few moments. More details will come later on from us from Anya. VMS is once again our clear and absolute growth engine. Revenue grew by 8% in H1 2026, fully in line with customer contracts and delivery schedules. Ordering total new record H1 of 970 million, which is plus 43% D on year and related to a book-to-bill ratio of 2.3. The modular assembly line in Augsburg, no news, is up and running, showing good performance and supporting strong margin improvements. Moving now quickly to our marine industry division. Regarding revenues, 2026 started slow during Q1, but showed a significant better performance during Q2, including a part-time recovery of customer-induced delays from Q1. The Navy business is really the driver of the MDI performance, while the industrial part remains under cyclical market pressure. As a result, H1's revenues came in 6% below last year's performance. Regarding OTA intake, we do see a similar picture. Strong Q2 performance compared to Q1, but over 164 million euro for H1 at a lower level compared to H1 in 2025. Last but not least, a few words on slide bearings. Revenues came in slightly below prior year, reflecting ongoing headwinds from weak industrial end markets and lower aftermarket business in H1 2020-26. Ladies and gentlemen, let's move now to the last slide line of my introduction, our total order backlog. Despite a strong revenue conversion, our fixed order backlog further increased to now 2.18 billion euro, driven by a strong order intake, and finally leading to a total order backlog of 7.4 billion euro, which is roughly 5.3 times our LTLTM revenues. Also important to note that approximately 75% of our total order backlog is widely spread across our international customer base, while Germany contributes approximately 24%. This geographic diversification truly is, besides our strong aftermarket business, a very important USP of rank. Having said this, I would like to hand over to Anja for looking into our Q2 financials. Anja, Anja, over to you.

Thank you, Alexander, and a warm welcome from my side as well. The first half of 26 combined record momentum with further progress and profitability. Group order intake reached almost 1.2 billion, book-to-bill improved to 1.9 times, and fixed order backlog increased around 2.8 billion. Revenues grew more moderately, reflecting a strong execution in BMS and lower volumes in M&I and side bearings. Adjusted EBIT increased by 10.1%, clearly ahead of revenue, and the margin improved to 15.4%. This was driven by higher output and better capacity utilization in VMS. Reported earnings, however, were affected by higher M&A and transformation-related expenses. At a divisional level, VMS delivered strong growth across other sources, revenues, and earnings. M&I remained below the prior year for the first half, but improved materially in the second quarter. Slide bearings continue to face pressure from peak industrial demand, your lower utilization and product mix. Free cash flow increased to approximately 42 million, while net capital remained broadly stable and leveraged state at 1.5 times. Overall, the first half confirmed strong demand, improving operating leverage, and significantly strong cash generation. Let's start with our performance in the first half of 26. Order intake increased by 29.7% year-over-year from 921 million to a record high of around 1.2 billion. The second quarter was particularly strong with order intake increasing by 64% to 630 million. As Alexander described already in more detail, this development was mainly driven by BMS and continued high demand for land-based defense mobility solutions. Revenue increased moderately by 2.7%, from 620 million to 637 million. In the second quarter, revenue grew by 2% to 354 million. Higher output and continued execution in BMS, more than compensated for lower first half revenue in marine industry and slide bearings. As a result, our book-to-bill ratio improved from 1.5 times to a very strong 1.9 times for the first half year of 2016. With a second quarter ratio of 1.7 times, order intake remained at a high level. This strong demand environment translated into further growth in our fixed-order backlog. Compared with year-end 2025, fixed-order backlog increased by 25.9% from approximately 2.3 billion to approximately 2.8 billion. This provides us with a high degree of visibility for the coming periods. The key takeaway is that Rank continues to strengthen its future business base. Demand remains very strong. Backlog reached a new level and we are progressively translating this demand into higher revenue through the ongoing production ramp-up. Moving on to profitability and leverage. Adjusted cross-profit increased by 7.8% from 171 million in the first half of 2025 to 184 million in the first half of 2026. The adjusted cross-profit margin improved from 27.6% to 28.9%. This development was primarily supported by higher output and positive scale effects in VMS, which more than offset the volume and mix-related pressures in MSI and slide bearings. The second quota confirms the same pattern. Adjusted cross-profit increased by 8% to 100 million, while the margin improved from 26.7% to 28.3%. Adjusted EBIT increased even more strongly, by 10.1%, from 89 million to 98 million. As a result, the adjusted EBIT margin extended by 1%, from 14.4% to 15.4%. In the second quarter, adjusted EBIT increased by 10%, to 56 million, with the margin of This is an important point because earnings growth again clearly outpaced revenue growth. It demonstrates the operating leverage within the group and in particular the benefit from the continued production ramp-up and higher capacity utilization in VMS. On the balance sheet, net debt increased moderately by 16 million, 0.14% from 391 million at year end to 400 at the end of June 26. At the same time, leverage remained stable at 1.5 times last 12 months adjusted EBITDA. This development also needs to be seen in the context of the 58 million dividend payment during the first half of 26. In summary, rank continue to deliver profitable growth and margin expansion while maintaining stable leverage and a disciplined financial position. Let us turn to VMS, where business momentum strengthened from the first half of 26. Its role as our growth engine was already highlighted by Alexander. The division secured 970 million of new orders, an increase of 42.6% compared with the prior year period. Almost half of this amount was booked in the second quarter, when order intake rose by 73% to 492 million. This reflects the sustained case of customer demand for land-based defense application and further enhances already strong revenue visibility.

Revenue reached 419 million, up 7.6% year-over-year.

Second quarter revenue increased from 5% to 227 million. The progress reflects tangible improvements to input, including the modular setup in Augsburg, together with a strong contribution from our operations in Muskegon. The quality of this growth is particularly visible in earnings. Adjusted EBIT rose by 20.5% to 80 million, considerably faster than revenue, and the adjusted EBIT margin increased from 71.1% to 19.2%. In the second quarter, the margin reached 19.9%, supported by higher volumes and the resulting fixed cost absorptions. The widening gap between revenue growth and earnings growth illustrates how the ongoing industrial ramp-up is translating into stronger operating leverage.

VMS combined exceptional order momentum with higher output and a further step up in profitability.

Turning next to M&I, the first half year figures show a mixed picture with a noticeably strong second quarter. New orders total 164 million, 9.9% below the prior year level of 183 million. The quarterly development, however, moved in a positive direction. Second quarter order intake reached 94 million, up 57% year-over-year. This rebound was supported by the naval and aftermarket businesses and materially reduced the shortfall recorded after the first quarter. Revenue for the first month period amounted to 165 million compared with 176 million a year earlier. The decline narrowed to only 3% in the second quarter when revenue reached 100 million. Some planned deliveries were not finalized within the reported period and will therefore contribute in later quarters. Adjusted EBIT came in at 16 million versus 19 million in the first half of 2025, corresponding to a margin of 9.9% compared to 10.7% in the prior year period. Lower first half volumes limited fixed cost absorption and weighed on earnings. In the second quarter, adjusted EBIT increased by 5% to 12 million, and the margin improved from 11.1% to 11.9%, supported by a stronger business mix and higher margin naval activities. Overall, the first half comparison remains below last year, but the direction of travel improved materially during the second quarter. The recovery in order intake and profitability supports the view that naval business remains fundamentally sound, while the remaining revenue gap is predominantly linked to delivery phasing. Slide bearings continued to face weaker industrial headwinds during the first half with a limited top-line movement but a more pronounced impact on earnings. Order intake mounted to 64 million compared with 66 million in the prior year period. The second quarter was stable at 1,000,000, indicating that demand did not deteriorate fundamentally. Fundamentally, only has yet to see a mini-fungal recovery in its industrial and markets. Revenue came in at 60 million, 4.4% below the previous year. Second quarter revenue declined by 7% to 30 million. Overall, the top line remained comparatively resilient despite the lack of broader market growth. The earnings effect was more substantial. Adjusted EBIT decreased from 10 million to 8 million in the first half, resulting in a margin of 12.5% compared with 16.6% a year earlier. In the second quarter, adjusted EBIT was 3 million and the margin stood at 11.7%. This difference between the relative moderate revenue decline and the above average reduction reflects lower factory utilization and a less supportive product mix. With fewer volumes passing through the existing cost base, the division was unable to maintain the exceptionally strong profitability recorded in the prior year. In essence, slide barriers have brought these stable business days, but the current industrial environment constrained both operating leverage and mix. A more visible improvement in profitability will therefore depend on a recovery in volumes and a normalization of the product mix. Now let me move on to our bridge from reported operating profit to the underlying earnings performance of the Group. Operating profit was broadly stable at 58 million compared with 59 million in the first half of last year. Purchase price allocation effects were also virtually unchanged with 21.9 million. The main year-over-year movement therefore came from the remaining adjustments, which increased from 7.8 million to 18.2 million. around 10 related to M&A activities, primarily related to the acquisition of David Brown Defense. The balance mainly reflects the implementation of process standards, system improvements, and severance-related expenses. After accounting for these items, adjusted EBIT reached around 98 million, up from 89 million in the prior year period. Adjusted EBITDA increased by a similar rate of around 150 million. The important distinction here is between the repository design and the underlying operating development. Reported operating profit absolves a high level of transaction and transformation expenditure, whereas the adjusted figure reflects the clear earnings improvement generated by the business. Looking at Networking Capital, the overall position was virtually unchanged over the first six months. Networking Capital closed June 2026 at 344 million, compared with 345 million at year end. Relative to last 12 months revenue, the ratio adds down from 25.2 to 24.9%, despite the continued expansion of production activity. The composition, however, shifted Inventories rose by 71 million to 507 million as we increased work in progress and secured materials for the planned output ramp up for the second half year, particularly within VMS of the book. This build is therefore closely linked to scheduled custom deliveries and the conversion of our order book. This increase in inventory was offset by favorable movements related to the remaining components, mainly driven by cut-off effects. Customer receivables declined by 44 million to 331 million, while prepayments received increased by 25 million to 347 million. Frame payables also provided a modest conclusion, rising to 147 million. Taken together, these developments kept groups at working capital broad while enabling a higher level of operational activity. Going forward, our priority remains to control the elevated inventory position and to turn it into delivery revenue and cash as planned. The first half shows a market improvement in cash generation compared with the prior year. Adjusted EBITDA provided around 150 million. From this amount, 18 million of adjustments were deducted in the transformation-related items covered in the previous slide. Working capital contributed approximately 6 million to cash flow. The positive overall effect resulted from lower receivables and higher customer prepayments, which more than compensated for the continued increase in inventories required for the production ramp-up. Cash outflow was also included around 17 million to capital expenditure and around 20 million to campaigns. After other cash flow effects, unneeded fee cash flow amounted to $54 million, following the interest results of around $12 million.

Reported fee cash flow reached around $42 million. Compared with $11.5 million in the first half of last year, this week presents a substantial step up.

The improvement was supported by stronger working capital performance, although part of the or part of the development effects, payment patterns, and reporting date effects. On the last 12-month basis, the cash conversion rate reached 65.9%. It is also worth noting that on a standalone Q2 basis, cash conversion rate reached an outstanding 130.1%. This demonstrates that the group generated meaningful cash while continuing to fund higher output, inventory requirements, and future profitable growth. Overall, The first half bridge shows that ranks earnings were converted into significantly stronger free cash flow.

Let me briefly cover the refinancing we successfully completed after the reporting date.

We replaced our previous refinancing structure with a new unsecured financing package of around 1 billion. The package consists of 450 million term loans, a 225 million rewarding credit facility, and 375 million of syndicated guarantees. With a five-year maturity and two one-year extension options, additional bilateral guarantee lines of 80 million were also agreed. were also agreed. The refinancing was strongly supported by our international banking consortium, with commitments clearly exceeding the required volume. We see this as a strong sign of confidence and strategic positioning and Future Growth Path. Economically, the new structure comes with significantly improved credit margins and is expected to reduce annual financing costs by around 7 million. This compares with around 2.5 million for the new financing and around 1 million for the unwinding of existing interest rate hedges. Equally important, is unsecured. In summary, thanks to the trust of our banking partners, we prolonged our robust capital structure, lowered financing costs, and gained more strategic flexibility. Said that, I would like to hand back to Alexander who will proceed with our offer.

Thank you, Anja. Thank you, ladies and gentlemen. Ladies and gentlemen, let me now come back with a few concluding comments straight to slide 20.

Starting first with our guidance for 2026.

To make it short and crisp, we confirm our 2026 guidance with revenue of 1.5 billion and adjusted EBIT between 255 and 285 million. And we are clearly targeting the upper half of the adjusted average rate.

The main operational levers are unchanged and should be familiar to you from our Q1 call. Full focus on operational execution, performance and delivery, while in parallel moving straight forward with our capacity expansion. In terms of phasing, we've always communicated that 2026 will be very effective and very strong. More than 90% of our planned 2026 revenues is already covered by our fixed order backlog. Therefore, let me continue now with a quick view on our order index situation for 2026 and moving to the next page.

Regarding order intake, we are looking at a very attractive pipeline for the rest of June. After roughly 1.2 billion euros in June, we are on track towards our full-year target to secure approximately 2 billion euros in order intake in 2026. Group Ag Group Ag We find this election on the right hand side of this page and we can go through this discussion afterwards. Regarding Q3 and driven by the timing of the specific projects, we do expect order intake on a lower end of Q1 and Q2 and also lower than expected for Q4, thus moving us in a range between 300 to 400 million euros.

Please allow me a few words regarding our operations and follow me to the next page.

To sum it up, we are absolutely focused on executing our capacity for land transfer. And especially Q2 and Q3 are marking very important milestones on our way to almost triple our capacity towards 2030.

Group A Group B Group C

from our final assembly shop into the sub-assembly and spare part operations, followed by the MRO operations during Q4 26 and in the beginning of Q1 2027. also very important and related to David Brown Defense. We started machining of the first Type 26 main gear here in Augsburg in order to prepare for future operational synergies regarding Type 26 deliveries.

and overall capex spending. Leaving now Augsburg and going to Weiner, we are step-by-step converting a former industrial site into a defense operation by the installation of further CNC machining centers. Not new, but maybe important to mention that we are executing our capacity expansion for converting future profitable growth in a very disciplined in a very distant way with a limited capex 3% on average and below 5% for 2026

Let's move to slide 23 and some quick words on Damage Round Defense, or in short, DBD. As already said in the beginning of this talk, the acquisition of DBD is the consequent execution of our M&A strategy. With transmissions for large surface combatants, including the Type 26 program,

Group Ag Group Ag Group Ag Group Ag

in the naval domain.

Regarding the domain land, David Brown contributes with transmission systems and power pack integrations for tracked and wheeled armoured vehicles like the Challenger 2, 3 or the Boxer MIV.

While I will not run you through all the numbers on that slide, we did it by the way during our call on July 3rd.

Let me emphasize that the price reference for the pre-mite phase have already started even before the signing on July 3rd. Closing is targeted for June 4, 2026. After closing, After closing, David Brown will be integrated into the M&I Division.

Our integration is structured first with a clear focus on improving operations, realizing operations synergies, and safeguarding deliveries, followed by leveraging and gross opportunities from joint market access, supported by new technologies and product segments like unmanned or less surface missiles.

Ladies and gentlemen, I know it was long. We are finally close to the end of our today's presentation.

So let's move on to the four and very briefly look at the key takeaways of today's call. If I, Alexander Sager, had to summarize each one in one sentence, stellar order intake from strong demand for land and sea platforms,

See solid cash conversion, clear margin improvements and a confirmation of our full year 2026 guidance with a clear and unchanged target to land in the upper half of the adjusted EBIT range. Very last but not least, a quick view on our financial market activities. Our activities will always continue to be very busy, and we are very much looking forward to meeting many of you in the coming weeks. At road shows, conferences, and of course, tons of bilaterals. Some of the key data are shown on this slide. Again, from all of us, thank you very much for your attention. We are now looking forward to your questions.

Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. If you've dialed in by phone, please select star 9 and star 6 to unmute. Once your name has been announced, please accept the unmute pop-up on your screen and ask your question. If you want to withdraw your question, please lower your hand using the raise hand function or select star 9. Please limit yourself to a maximum of two questions. If you have any further questions, please raise your hand to join the queue again.

Our first question comes from... Please unmute your line and ask your question.

Yes, good morning. Thank you for taking my questions. I'll have two. The first one is on the BMS assumption for margin in H2, because obviously you had a pretty good momentum in H1 without the benefit of the sales to resume. Any thought on where the margin could get to in H2 would be great. The second one is on the draft budget for Germany. There's a pretty significant drop in the procurement to some vehicles. I just wanted to... and see what your thoughts were there in terms of the demand and how it can be impacted for instance by the ARG for instance and the timing of the signing there.

Thank you. No way. This is how many questions you are doing the trick because you put 10 questions in one question. But happy to answer. But happy to answer. I will try my very best not to miss something. First on the VMS margin, I will not comment on the H2 because H2 is H1 plus H2. I will just comment on the full year expectation. The full year expectation of VMS is clearly well above the 21%. This is the first answer, I hope, regarding Germany procurement of resales and budgets increase.

I think it's very important to overall

Armored Learned Platforms and this is independent if you look on Procurement Authorizations or if you look on the EP14 Development are key and are vital. The Procurement Authorizations for example are currently at 44 billion up to the end of next year. They were reduced, but again, you get it. This is really important. There is so much money considered in the next two or three years in the next two or three years in the next three years in the next three years in the next three years in the next three years in the next three years in the next three years in the next three years In capacity expansion scenario, we have not expected and seen any surprises to be honest. You just ask about the Boxer Program.

Well, the Boxer Program, I think we have it still.

We reduced a little bit the amount, but to be honest, I do not believe that this order will come this year to rank this year.

I think the parliamentary approval of the Boxer program will take place maybe in December. But happily, we even have this capability, this capability, this potential shift of the Boxer order, this potential shift of the Boxer order from 2016 to 2017 by other international customers, so underlining our Prox 2 million target.

on the order in Texas. Overall, and I think I said it in the beginning, what you have seen on the Ankara, NATO summit, the capabilities who were discussed and basically confirmed on what was decided in Denmark, there is no surprise. It was always said there needs to be a lot of air defense. There needs to be a lot of air defense. there will be a lot and tons of ISR and of course space is key and there will be a lot of drones because the key is besides all these air defense conventional mass is key in order to increase future combat readiness of NATO and this includes armoured land platforms wheeled and tracked manned and tracked on a perspective beyond 2030. So, Chloe, I don't know if I managed everything, but feel free to ask.

No, absolutely. Sorry for the tricky question, but that was great. Thank you.

Welcome. Thank you. Our next question comes from our next question comes from BNP Paribus. Please unmute your line and ask your question. Please unmute your line and ask your question.

Hi, good morning. Hi, Alex. Hi, Alex. My questions. I was wondering whether there's been any change with the customer. for the number of vehicles under the firm, for the number of vehicles under the firm, for the tranche, I think you had put out, I think you had 8,000 units prior, and on the VMS margin, the segment is running at 200 base points, above prior year, and that point is very early, and that point is very early, so the question is, is there anything to highlight from a mixed perspective, anything that might not be sustainable, and can you also please remind us where you stand, with regard to adding another. So these were the half questions. So these were the half questions. We start them on slide bearings.

There was again unfair, but anyway. There was again unfair, but anyway. We should stop this rule of two questions. We should stop this rule of two questions. One is putting everything inside. One is putting everything inside. On the other hand, I think there is a vital discussion About the timing of the fixed orders for the Aminus project, there is an ongoing discussion regarding the total quantities who will be covered in the Aminus contract while on the other side. Elements of volumes of the Aminus project might be under existing frame contracts like for example the Shakal or the Skyroger. I think at the very end, the total number from my perspective, if we would add the demand for the Boxer during the first phase now up to 2030, has not significantly changed, and I'm always talking about 1700-1800. The big question is, to be honest, how much of the 1700-1800 will go into a fixed amines contract, and how many of them will be awarded in contracts from other platforms? Looking on rank, or the intake still for 2023, 6, and as we have seen this before on our order intake chart, we are not relaxed but confident that we can compensate this to other international companies.

Regarding the BMS margin, as I just answered, we see a buff of 21%. I think the first half year was quite successful.

I think the first half was quite successful. This is coming from one part from the Augsburg. Really good performing the modular production line. I think the second part is order intakes. Good in regards to aftermarket business. I think overall the performance of the rest was as expected. So I think this was as these are the main contributors for our half year 1 contribution and of course H2 will be very much back and loaded will be additional impacts on the cost coverage let's see but I'm very very optimistic that we will be above the 21% and this is absolutely anyway our target and this is absolutely anyway our target

I'm not excluding this option.

to put it in this way.

Okay, so let's go down on the shift question. Okay, so let's go down on the shift question. What was the shift question?

Because I cannot read my... What was the shift question?

Because I cannot read my... The question was... The question was... Oh, yeah. I put it up on shift. Yes, absolutely.

We will drive the entire year 2026 in a single shift mode, which gives you an idea about the performance increases we have realized. Thank you.

Our next question comes from Christophe Minal with Deutsche Bank. Please unmute your line by selecting star six and ask your question. Christophe, your line is now open. Please select star six. We will move on to the next question for now. We will move on to the next question for now. Yes, hello. Thank you for taking my questions. The first one is on

The first one is on the PATRIA track QGV.

You mentioned in the beginning that there was already an order received. I was wondering if you could give some more information on who ordered this, how many units, and when will it be delivered, and when will it be delivered. And the second question is on the order intake for 2026. You mentioned that the Armenian will likely slip into 2027.

My understanding is that the S-127 will also slip into 2027.

So just two of the orders that you just saw on the slide.

If you get to the 2 billion, how confident are you to really reach the 2 billion order intake? Good question.

I will start directly to answer your second question.

And as I just said, in our scenarios, as I just said, if we get a DF-127, I think this is a very complicated, complex contract, which needs to be negotiated, despite maybe a personal view of the question, if these kinds of massive 12,000 ton destroyers are really needed in the future, but this is a separate thing.

We are quite confident, but this is a separate thing.

We are quite optimistic and positive that we could even compensate these two shifts of the Boxer and the F-127, for example.

The F-127 could be and will be partially compensated from the F-128, the Tizen Group Makeaway 200, and I think also on the N-side. And I think also on the land side. So, considering a shift of the amine news programs and even a most realistic and likely shift of the F-127, we do confirm our approximately 2 billion euro order intake target. And the first question, sorry.

The first question on the track side.

A very positive first customer is not unexpected Finland and we are in the range of a Heidelberg digits and we are in the range of a Heidelberg pre-series order. Deliveries will start at the end of June 2027. By the way, the number of potential customers All right, that's great to hear. Thank you.

You're welcome. All right. That's great to hear.

Thank you. Thank you. You're welcome. We're going back to Christoph Minna with Deutsche Bank. We're going back to Christoph Minna with Deutsche Bank. Please unmute your line by pressing star six. Please unmute your line by pressing star six.

Good morning. Can you hear me? Yes. Good morning. Can you hear me? Okay. Perfect. Perfect. Okay, perfect. Two questions on my side. Two questions on my side. I may have missed it, but is there any update on the agrarian opportunity? I was thinking we could have news weeks. And on the service strategy or the aftermarket strategy, I understand that in your assessment, but I mean, you've not come to a conclusion yet in your assessment, but when could we expect you and on what occasion could you do the MD or will you need to fix the MD or is it through an earnings...

I will answer where I can't answer and I will not answer where I cannot answer because it's simply driven by the customer so I will start directly with the repowering of the M1A2 I would put it in the following words I would put it in the following R&D we have prepared budget in order to start development of a very competitive power pack which could be applied in the M1 A2 which could be applied in the M1 A2 until the time frame to going into service production I cannot tell you more because I cannot tell you more because I cannot tell you but as you could hear maybe we are but as you could hear maybe we are Very positive, super positive. Regarding the aftermarket 2035 strategy, to be honest, we are almost 85-90% done, and the numbers I indicated in my introduction, so to have the at 2030 so stabilizing our today's aftermarket share despite increasing the potential to grow on an annual revenue level of up to 2 billion if you look from 10 years from now. These numbers, if you look from 10 years from now, these numbers, to be honest, are the extract of our aftermarket strategy. But there are of course many, many more strategic actions and measures how to realize it. And to be honest, we do not have yet defined how to roll out this really in order to inform you all. to give a 30-minute introduction into the results of the aftermarket strategy. To be honest, I don't have an answer on this, but we will find an answer on this. You're welcome, Christoph.

Thank you very much.

Good morning, thank you very much for the questions. Firstly, on the German budget again, has there been any change in your reputation on the letter to your reputation on the budget outlook in the next 10 or so years? And the next question in the next is on 10 or so years? and the next question is on the M&I business. You mentioned the M&I business. You mentioned I have questions regarding the German budget and specifically German looking on the LEPR and specifically looking on the LEPR forecast additional

I'm from Germany I'm not talking about the international one but just staying in Germany but that's it I mean at least until the beginning of the 2030s as we always communicated in these two phases as we always communicated in the procurement strategy for the second phase there is this opportunity for the next German metal tank where we are by the way developing the powertrain where we are by the way developing the powertrain we just started by the way today at 8 o'clock we just started by the way today at 8 o'clock the first upgraded plus the new transmission for this bridge solution so we are moving forward in the development for this bridge solution I could expect another beyond 2030 I could expect another 100 up to 200 for Germany. How many could be ordered from international customers? What should not be underestimated are the number of family vehicles based on the level of recovery from a group. From the perspective, we don't care if we supply to an MBT or if we supply to a family vehicle, we always supply to an MBT or if we supply to a family vehicle. And here we do expect quite some numbers in the range between 300 to 500.

And here we do expect quite some numbers in the range between 300 to 500.

And we do expect in the beginning of next year quite some decent orders coming from these family vehicles. Regarding M&I catch-up, as you know, we had about, I think it was approximately in the 10 million range. We had customer-induced delays. You know the story about these guys and what was the reason. We could partially recover them. We could partially, but... Partially, it will go in Q2, Q3, and Q4, because this simply depends on the priorization of what the customer is doing. So if he's taking out the priorization of what the customer is doing, or if he's not executing the transmission because he had shifted, or if he's not executing the transmission because he had shifted, so from this approximately 10% we did recover during Q2, and the rest of it will come in the second half. Recover during June 2 and the rest will come in the second half.

That's really helpful. Thank you. Sorry, just to get back on the first question. That's really helpful. Thank you. To get back on the first question. To get back on the first question. On the Puma, has there been any change in the Puma quantities? Yeah. On the Puma, has there been any change in the Puma quantities? No, I mean, I think for the next...

No, I mean, I think for the next... I mean, we have in the industry, it has now the charge to produce Pumas, including Fasul Pumas, for driverless and whatever Pumas, as soon as possible. We, as I'm always saying, from our production capacity, we got the order intake for these 200 plus. From Q1 2020, we got the order intake for these 200 plus. I could imagine a third batch on this Puma but this third batch I do not see 24 months to be honest

It's really helpful. Thank you.

Thank you. Thank you very much.

Your next question comes from Benjamin Healan with Bank of America. Your next question comes from Benjamin Healan with Bank of America. Please press star six to unmute your line and ask your question. Benjamin, your line is open. Please select star six to ask your question. Benjamin, your line is open. Please select star six to ask your question. We will come back to you

Hi, Alexander, and I hope you're both well. I have to confess, George, specifically after the question I was going to ask, I have to confess, George, specifically after the question I was going to ask, a slightly different way, maybe then, a slightly different way, maybe then, you're still comfortable with your medium term, you're still comfortable with your medium term, it's been a quite an eventful year, a lot of things have happened, a lot of things have happened, and government plans are always adjusted because that's the world. And government plans are always adjusted. In terms of the 3 billion of sales, do you think the composition, in terms of the 3 billion of sales, do you think the composition may be slightly different from how you saw it 12 months ago or broadly the same? Do you think it's going to be more Armandian? Or do you think it's going to be more Armandian? Or do you think it's going to be more Armandian? Or do you think it's going to be more Armandian? Or do you think it's going to be more Armandian?

Hi David, I hope you are doing well. Regarding our medium term target, I would like to start first.

Regarding our medium term target, I would like to start first if we look on what we have shown today. Our composition, our limited relevance of Germany, Germany is relevant 24%. So, what we see, we see a strong international business. And this international business is, to be honest, driving us in the next four to five years. If you look back on our discussions that we had during the last year, especially for the H1 call, I think we showed a chart about our estimates on potential order intakes coming from the German program. And I think we had a lot of discussions because we were considered 35.

and I think we had a lot of discussions because we were concerned we had OE potential between one or two billion and we had nothing more if you are asking me how do I feel about realizing our 2030 targets giving the discussions in Germany and giving the discussions in Germany where I have a clear absolute clear opinion I think you guys know all this I do not think you guys know all this This target is from any perspective under danger. This target is from any perspective really under danger. We have a strong international business for all the domains, including the Asia-Pacific. Germany will be an important contributor to our will be our mid-term target, but it will not contribute to our mid-term target if it can realize it or if it cannot realize it. And 2030, if we look about the composition, I'm very sure that 99% of our land business will be still mapped. I mean, the activities we have presented very successfully. I mean, the activities we have presented very successfully. Also surprisingly, from my point of view, on the Eurosetory, we will, as communicated 12 months from the Eurosetory, we will have, as communicated 12 months from the Eurosetory, remote control and autonomy. We are here moving forward with Patria in very closed and combined approach. But nevertheless, I do not expect that we will see a major share of our 2030 business turn from unmanned. Beyond 2030, if you look for example towards 2035, the life is different.

I'm 100% sure we will see significant portions of our conventional platforms be unmanned.

And by the way, independent, if we're doing this with Patria, or if we're doing this with any other independent, if we're doing this with Patria, or if we're doing this with any other independent, if we're doing this with any other independent, for autonomy and unmanned capabilities, our digitalized transmissions. If we talk about 2035, then to be honest, to the 2025 call, we are working not only on defining our aftermarket strategy, we are also communicating, we are working very hard to develop our picture of our business towards 2035. We are doing this and we are hopefully very We are doing this and we are hopefully very soon ready to share it with you guys because in 2035, as I said, we will have more unmanned and we also will have a significant amount of more aftermarket in our business.

So for 2030, I do not see

So for 2030, I do not see more than confirming our 2030 midterm targets. We are more than confirming our 2030 midterm targets, taking everything into account what I said before, on the development of the budgets, on the permanent discussions, on the permanent discussions, etc. Does this help you, David? You're welcome.

Yeah, it's very clear as always. Thank you.

Group Ag and now you're highlighting in the call that some of those vehicles can be procured under the existing arrangements. So can you just help us understand the existing arrangements? Why do you think these things continue to move? Why do you think these things continue to move? Why do the goalposts and continue to move. Thank you. Thank you.

and I think we discussed this first of all we should not underestimate the complexity of this contract because independently if you talk about 1700 or 1800 boxes because independently if you talk about 1700 or 1800 platforms so you always have the same drive module but you have a different mission module and then you have some easy concepts or Faces where you have a turret on the Boxer, or you have more complicated and challenging platforms like the Sky Ranger, for example, where you need to develop a totally new capability on this fast-moving incoming and mobile air defense systems. And I think this complexity is putting quite some load on the Bayern BV, on the German procurement, is putting quite some load on the German procurement. But it also put a lot of load on the supply base who needs to orchestrate their own calculations and to discuss it with the BNBW. And to be honest, I think from my knowledge as of today, there is still no platform submitted to the BNBW.

There is still no buffer. So for this reason, I think to consider that the Boxer-Arminius contract will be discussed very late during 2026 in the German Parliament is an absolute assumption. From my point of view, there is no question. And I think from my point of view there is no question about the demand for the boxers, but there is a question about how fast industry can deliver boxers.

I think this is one part from an outside perspective, the German procurement agency are taking long because I think there's also a kind of acceleration component included in this negotiation. But overall, the demand and the commitment, I think, is absolutely clear. The budget is there, however it takes time. And the only reason why, for example, the German procurement organization is discussing and evaluating options to use simply is discussing and evaluating options to use simply. or maybe for the existing Skyrim contracts to expand it is maybe there is a time pressure. So to expand it is maybe there is a time pressure.

So a better contract instead of waiting maybe until the 1700s or 1800s as soon as possible is fully negotiated.

This sounds complex. I think fully everything is here negotiated. This sounds complex. I think everything is here complex.

That's great. Thank you. Can I just follow up, I guess, putting, I mean, I think what a lot of people do is they look at what happened with, and I think what a lot of people do is they look at what happened with. Do you have any views around that?

to explain this in the introduction. And I tried to explain this in the introduction. Maybe it's a perceived difference, especially in the media. But again, the capability requirement makes from NATO has not changed since the last summit in Denmark. So nothing is new that Summit in the park. So, nothing is new that we need more coming cards and loitering munitions. Nothing is new that we need more coming cards and loitering munitions. Nothing is much more, much more capabilities and quantities and that we need much more, much more capabilities and quantities from the perspective of having a strong conventional mass from the perspective of having a strong conventional mass to defeat NATO territory. So, in fact,

There is no change, and there is also, to be honest, not a change.

Do we need more modern warfare, or what about the old stuff? Do we need both? And again, there is no new insight. And again, there is no new insight. And by the way, if you look on Iran, I think Iran is the best example that you cannot end a war, and you cannot win a war. You cannot make a decisive move just by drones and you cannot make a decisive move just by long-range drone missile attacks. This is not working.

And for this reason, I'm saying the only way to stop this war is to sit at the table and find an agreement on the street of Hormuz and better go home. But there will be no decisive move forward. No one will send troops in. So for this reason,

or what I'm saying is we need to have modern warfare or what I'm saying is we need to have modern warfare rank is position we are making our market in the conventional market with our unmanned platforms we are making our market and driving the market with our unmanned platforms I'm very calm so I'm very calm very clear thank you for the comment thank you very clear

Your next question comes from Joe Orchard with Rothschild and Co. Redburn. Your next question comes from Joe Orchard with Rothschild and Co. Redburn. Hi there, good morning. Thank you very much for taking my questions.

Hi there, good morning.

Thanks very much for taking my questions. How concerned are you about the recent performance?

and the outlook for the non-defense parts of the business, so slide bearings, but also the non-defense parts of the business, so M&I as well.

And then second question would be on M&A and following that, David Brown, defense acquisition. Are you still actively looking for more opportunities or should we expect a bit of a pause on that front while you integrate that business into your existing operations? Thank you. Very good question.

I will start maybe with the M&A part. If you look back in the history of REIT, I think we are quite active in our entire international footprint, which is good because then we have immediately a strong local merger and supply chain.

which is good because then we have immediately a strong local view and supply chain. David Brown warns from our point of view is an absolute strategic asset and I think the defense investment plan is fully supporting this. Especially if you look on what is the background of this five eyes. For us, we have US, we have UK, we have Canada, we have Australia. For us, we have US, we have UK.

But I can confirm that we are not tired in looking for a clear approach regarding our M&A strategy.

We are looking for a clear approach regarding our M&A strategy. We are looking for further market consolidation, which is on the land side. We are looking for further market consolidation, which is on the land side.

On the transmission side, we have this possible, to be honest, on the Navy side.

We have a strong view on our aftermarket business and maybe even develop our business model or change our aftermarket business and maybe even develop our business model in the aftermarket side by M&A and of course looking on new technologies which are part of our today's core mobility, which are part of our today's core additional value and benefits, where we can gain additional value and benefits by expanding the number of platforms and customer base.

So, to answer this question, yes, we are active, we are looking. To answer this in short, yes, we are active, we are looking, we are talking with targets.

It's a really important time to try these consolidations.

Regarding our industry business, I start with our transmission.

Regarding our industry business, as I'm always saying, we are absolutely not targeting to sell our industry business. Why? I mean, we have to sell some areas, key competences, which might be relevant in some areas and even are today relevant. If you talk about physical AI, where we are providing a transmission high-speed transmission. It's not our core business, but anyway, we need the capacity It's not our core business, but anyway, we need the capacity we have today in order to ramp up our N business. The reason why we are staying on this average is pretty much also impacted by the fact that we are using industrial sites.

We are also impacted by the fact that we

are using industrial sites like our wonderful plant in Rheine for example and for this reason we don't need to build new plants so we need new capacities and for this reason we don't need to build new plants so we need new capacities and we are not giving up this business in order to ramp up the land business and we are not giving up this business we need to be more focused on cost performance on product costs

For the slide-bearing, please allow me one very unsatisfying sentence. Please allow me one very, I mean, unsatisfying sentence.

Okay, that's super helpful. Thank you very much.

Okay, that's super helpful. Thank you very much. This was the final question of today. This concludes the Q&A session and I will now hand back to Maximilian for closing remarks. Thank you very much for your questions and for taking the time to join us today.

Thank you very much for your questions and for taking the time to join us today. Should you have any follow-up questions, the entire Rank IR team will be happy to assist. We look forward to speaking to you again soon. Have a great day. Enjoy your summer.