Rheinmetall Ag Unsp/Adr

Thank you very much. Good afternoon, ladies and gentlemen. A very warm welcome to the conference call of Q1 of 2025. My colleague Klaus Neumann and myself will give you an overview about the first quarter. Please take care on page number two, the disclaimer that we added. Now let's go to slide number three. So here you have an overview about the quarter one, and you see the group highlights. Very positive is that on the defense side, the sales growth is plus 33%, where on the defense side, we made 1.795 billion sales. On the group side, plus 46%, up to 2.305 billion. Operating results on the defense side is growing faster than the sales with plus 96% to 206 million. But you see also that our civilian business is a very flat business and also by far not profitable than the defense business. Operating margin on the defense side for a first quarter, a record of 11.5%. And on the group side, on the operational margins, 8.7%. One of the critical things at the moment in Europe is that a lot of companies do not get enough people. We got in Q1 70,000 applications. As you know, last year we had totally in the group 240,000, so that we think that again this year Rheinmetall is in very good shape to get the best people and to get them very fast. The very positive figures on the operational free cash flow, we have a plus of 454 million Euro in comparison to Q1 of last year and an operational free cash flow of more than a quarter billion Euro. The CAPEX is still in good shape, so we have a CAPEX of 6.6% in Q1. If you see the growth rate that we have and if you see that the normal rate of CAPEX is between 4.5% and 5%, so it's not a very big CAPEX, but over the years we have to invest more because, as you know, we have to build more factories because later we will discuss that there is more need also from the NATO industry And as you know, NATO will give us in June the newest figures about what NATO wants from the nations. Primetime nominations, a plus of 181% to more than 11 billion, so that backlog growth was 56%, to more than 62 billion euros. Please have a look to slide number four. Here is Germany and Europe. These are for sure the two huge markets at the moment where we expect a lot of contracts over the next 12 to 24 months. First of all, on the financial side in Germany, A very positive information is that defense expenses, which are bigger than 1% of GDP, are excluded from the debt break. And the Chancellor said, we will invest in defense, whatever it takes. And he also defined, and the Ministry of Defense defined, what are the biggest needs? Air defense, digitalization, and ammunition, ammunition, ammunition. And all three parts, Rheinmetall has a very green tick in the box because we are one of the biggest producers in that area. But Europe also wants to finance, to be ready if something happens in Europe. If a war is coming up, so up to 2030, they want to have an 800 billion package for investments. And the main targets are, again, air and missile defense, auxiliary systems, ammunition and missiles, drones and counter UAEs, military mobility, artificial intelligence and protection. And also in that area, Rheinmetall is able to deliver in all that form. So you see we are very well prepared. We are very well prepared for the future, for the next 10, 15 years. And as you see later, we are investing more to enlarge our product portfolio. Page number five. Here you see the backlog of 62.56 billion. And in that backlog, and that is new, and that was a discussion that we had with the Ministry of Defense and with BINBV in Koblenz. Because of the budget gap we had over the last two, three years, they created this frame backlog and they want to change most of that frame backlog now into fixed contracts. What does it mean? It means that on the fixed contract side, we will have then contracts of nearly 55 billion euros. without the bookings that we will make on top, but later more about that. So we would have now up to four years planning security, but with the contracts we will book more. At the end of the day it will be more than four years on planning security, even if we grow very strong as we told you before. Germany, more of 90% of the total defense frame contracts are coming from Germany. As I said, Germany made that frame contract because there was not enough money year by year, so they have to make these slices of contracts. And so the backlog quality will be significantly improved. What are now the big German frame contracts? This is 8.5 billion for the ammunition. This is 4 billion for tank ammunition. So artillery ammunition was number one. Digitization, 12 billion. And UTF was 3.5 billion. So our expectation is that down payments and also milestone payments will come. At the moment, only as an example, we got on the digitization about 50% down payment. Normally, for example, also on the 155 ammunition, it's between 20% and 30%. But at the end of the day, it's a huge amount of billions that we expect as down payments, but this is still in negotiation and it's still not fixed. because as you know the government now we have for two days and now they start acting. Now have a look to page number six. Here you see the additional potential for Rheinmetall and if I see now for nominations our expectation is that in Germany most of the contracts are not longer frame contracts but fixed contracts because as I say no limits on the budget side. So in Q1 25, we booked 11 billion. In Q1 24, it was 3.9 billion, so a huge acceleration. And the expected Rheinmetall nomination is that we grow up to 30 billion, but there is additional potential from Germany but also international that we, over the last weeks, gut indications. They are restarting from Panta Italy, which will come soon now. Lynx Romania, where next week will be signing of the MOU before of the new election. A second lot to be for Puma in Germany, a boxer program in Middle East, and Lynx also in Ukraine. And up to the elephant system that you see here, so that there is a potential at the moment of more than 55 billion order intake in this year. What does it mean now? We have three parts of company growth, so the company will grow and will grow over the next years. There is, first of all, organic growth. There is an intensification, for example, on the truck side. If you have seen on the page before all these frame contracts, there is also of the German low a possibility that 50% of the frame contracts can be added. If you see the numbers and if you see that there are at the moment nearly 22 billion So another 10 billion could be added only in the frame contract. So for trucks, for digitization, for ammunition. And there is an expansion of existing capacities. For example, on the nitroshimmy side and the new plants getting ready. So like Niedersachsen and also Lithuania and United Kingdom where we build up a gun shop. So organically, we will grow very strong. Then we have repurposing. On the repurposing side, there is a conversation from civil Rheinmetall plants into defense manufacturers. This is very important to be fast. First of all, we are nearly ready with the plans of the conversation of Berlin, and we are very nearby to be ready also in our plant in Neuss. and so we have very very nice production locations and we can start immediately in months to produce something in that factories and we are also able to redesign third-party plants but first of all we do it with our own factories and later we want to do that maybe with plants that we buy in M&A and corporations log performance is running very well So the profitability of log performance in QA was better than expected. So they are on a good way. They are on a good growth way. BlackNet is implemented. Hagedorn, a new company where we produce nitrocellulose. Resonant is in the company now, which is producing all these chemical processes for powder production and for production of RDX. And we are looking for more opportunistic acquisitions. So firepower is there, and the cash would be there also because the cash management over the next years will be also very positive. So with that information, I take over now to my colleague, Klaus, and he will give you an overview about the financials.

Thank you, Armin. This is an introduction. Let's have a more detailed look at the development of our group KPIs. As Armin mentioned, we had a very strong start into the year 2025. For the whole of the group, our sales grew by 46% to 2.3 billion Euro, of which 1.8 billion relate to our defense business. This business showed a growth of around 73%. The strength was also driven that we did perform all the different divisions performed very strong. In contrast, the civil business is still struggling under the very difficult market conditions. It declined year on year by 7% and only achieved a profit margin of 1.8%. The sales development that we see is to a very large extent organic ULOG Performance, a business that we acquired towards the end of 2024, contributed around 120 million to our growth. Operating result, also the growth very strongly driven by organic performance, rose on the group perspective by almost 50% to 200 million euros. This brought the group margin to 8.7. That includes, as mentioned, a defense margin of a record 11.5% for the first quarter. As mentioned, the performance of the civil business is under strong pressure. And we did see a decline in the margin compared to a comparatively decent Q1 2024 to 1.8%. Let's move to the next page, page number 10. The growth in our defense business was driven by all the three segments of the defense business. The strongest grounds came from the vehicle systems business. It almost doubled sales to 952 million euros. That was driven by all different parts of that business. It includes the technical vehicles, but also the delivery of trucks that continue orders that we received in the past. The growth includes this mentioned 120 million contribution from log performance. Together, that led to an increased profit margin of 8.5% or 81 million in Q1. Also very strong, the growth in the weapon and ammunition business with 66% to 599 million. With the strong leverage in this business, the business contributed 160 million euros to the group's profit at a margin of 19.3%. The electronics solution business grew significantly based on the different projects operated in this segment. Key drivers were especially the air defense systems SkyRange and SkyNext for European customers, but also air defense systems in more general terms for the German customer. The growth was at 50% and contributed to a rise in the profit margin to 6.3%. You have to consider that there is some pressure on the margin due to ramp-up costs for the F-35 program that we'll start producing later this year. Lastly, the power systems segment in our civil business saw a decline of around 7% to $505 million, increasing pressure on the profit margin. The business only contributed 9 billion to the group's result. Let's turn to page number 11. As mentioned, we did see a very strong nomination in Q1, main driver, where the digitization orders in our ES business for Tavan and the soldier system for the German customer. But business also basically saw the biggest growth in the nomination. Overall, this contributed to an order backlog of 63 billion. As Armin mentioned, we expect large parts of that nomination or the framework contracts included in this number to be converted into firm orders in the next months. let's go to page number 12. very strong numbers also for our operating free cash flow as you know the first quarter historically is one of the weaker quarters for in terms of the Our cash performance 2025 is quite different, with 266 million, a very strong operating free cash flow, mainly driven by the prepayments linked to the Taiwan contract and other digitization contracts that we booked in Q1. As you can see on the chart to the right, we continue to build up inventory to support our growth and ongoing ramp-up of projects, but it's quite balanced with the prepayments received from our customers. Overall, a very strong start for the year 2025. Let's move to page number 13 for an update on our financing situation. We were mentioning the situation on our convertible that we issued about two years ago. For the first 500 million in Series A, more than 80% of convertible holders have converted the holding already into equity. For the Series B, the conversion rate is at around 50%. That contributed to an increase in our equity ratio to 33.6%. That compares quite favorably to the number at the end of Q1 2024, which was 31.8%. The other element mentioning is that driven by the strong operating cash flow and the conversion of the convertible, our net financial position improved to about minus $600 million at the end of Q1. All these numbers show that we have a very strong balance sheet and we have a very strong good financing situation that has already been acknowledged by the rating agency Moody's that upgraded the Rheinmetall to BAA once at the end of March this year. Our net debt to EBITDA ratio is less with 0.34% at the extremely low level. That was the information about the key financials. With this, I hand over to Armin for the outlook for the months to come.

Thank you, Klaus. On the outlook, a very important thing is that we signed the MOU with Lockheed Martin. Last year, we signed an MOU for Rocket Motors. Now, this MOU is that we want to create a joint venture. In that joint venture, Ramital has the majority. At the moment, it is discussed to have 60% of the shares, 40% of Lockheed. So the reason to do that is that the capacities in the United States of America are not big enough also to deliver everything in Europe. Sometimes you have to wait 10 years to get some missiles from America, which is much too long. And as you know, all the European partners at the moment say deliver, deliver, deliver. So that is the reason that we create a European center of competence of missiles. So what are the missiles that we can produce? This is, for example, ATACOM, GMLS, Hellfire, JAGOM, but also PAC-3. So this is, as you know, the ATACAMs are missiles, artillery missiles, which has a distance of about 300 kilometers. GMLAS will be on a maximum 150 kilometer. Hellfire, as you know, is fired usually from the helicopters. And the JAGAM is also air-to-ground and air defense with the PAK-3s. which is the second missile that you can fire on the Patriot side. So we will build up a capacity, a total capacity, because there are huge rocket motors and also smaller ones, that we have a production capacity of up to 10,000 missiles per year, but also 10,000 rocket motors for sure. So the vertical integration will be huge. We We want to produce the warhead. The warhead production would be in Rametal, Italy. We do warhead production at the moment for that missile. The rocket motor will be produced in Unterluz. So in 12-13 months' time, the production line will be ready. And the final assembly of the missiles will be also there. So we have also technologies on safety and armor, and together with Lockheed, we will make also some European engineering to have also European IPRs on that. So we need the permission for that for sure from the U.S. government. Lockheed and Rymetal are working on that, but our expectation is that over the next two, three months, we can start this mission and then we can go to build that joint venture. The total potential of sales volume, if everything is running well, for sure not at the beginning, and as you know, we will start production of rocket motors in 26, missile start is in 27, And after the ramp-up curve, 28, 29, there is a potential of annually 5 billion euro if we are fully booked in that plant. This is the capacity that we built. Let's have a look to the next page. In page number 16, there is another MOU where we will also have a joint venture with the Finnish company IceEye. and we create the German space joint venture with ICEYE and Rheinmetall. So Rheinmetall again will have 60% of the shares. We implement and re-engineer ICEYE technology here in Germany. We built up a center of competence nearby Düsseldorf for these new technologies. and for this satellite technology. It is primarily SRR satellites, and this is satellites on the LEO side. And the expectation is in that business that we, end of 26, we are able to produce the first satellite because, as you know, we need clean room technology, et cetera, et cetera, in that area. So we buy that in. And we expect the start in Q2 in 2026. So the potential that we have for that will be in the starting phase after, let me say, one year, about 500. The target that we have is to create with service and with R&D sales of about 1 billion euro in that joint venture. Let's have a look to page number 17. On page number 17 you see that on the quarter two we think that we are fully in line with our guidance. The expectation in Q2 for the order intake is that, as you know, because we had no government and they start now working, that it will be not as high as Q3 and Q4. There is a little bit accumulated in Q3 and Q4 on the order intake, but sales will be fine. We will have also a small delay on the ammunition side because of the fire in Murcia. The fire in Murcia where the sieving house, so where you have sieved the powder, is burnt down, so we reinvested that. We built it up, but we needed nearly four months to build everything up. We start running the sieving now, so the ammunition is ready, the powder is ready. But before you can bring the powder to the ammunition, you have to give it into this bottleneck of sieving houses and we are at the moment working to build up two of them so if another fire would come that we are able to act. So it could be that from Q2 to Q3 there will be a delay of about €200 million, but this will not really hurt us a lot. So on the full year, Ramital backlog expected to raise beyond €80 billion. So as you know, we always calculated it should be around 80 billion, but the market and the demand is so high that we said it should be beyond 80 billion. And on the full year guidance, it is at least confirmed, and at least because we are at the moment on a way that we really have to find out how much of the contracts that we are booking, what is in with... with sales, and at the end of the day, for sure, also with profitability. And if we have at least a growth rate between 35% and 40% on the defense side, civilian business will be flat. The operational margin is, if you are bigger than 35% to 40%, also bigger than 15.5%, and the cancer conversion rate should be bigger than 40%. So thank you. Thank you very much for your attention. And we are now ready for Q&A.