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.

Our first question comes from Sven Bayer from UBS. Please go ahead.

Yeah, good afternoon. Thanks for taking my questions. The first one, Mr. Papberger, is on the new nomination guidance of over $55 billion. I was just wondering how consistent that number is with, you know, you remember the slide you gave us, the fiscal numbers, the 50 to 100 billion. Is the 55 billion still kind of under the old regime of 2% or is that now already consistent with the 2.5? So, in other words, could that 55 billion still end up being higher when we talk again in the second half? That's the first one. Thank you.

The point from my side is that I believe that the real push will come next year, and the reason is timing. As you know, we have, let me say, half of quarter three and quarter four to book all that stuff. What we need now is, from the timing side, first of all, in June, there will be the NATO plan. The second point is up to September, maybe October, there will be the planning of the Bundeswehr. And after the planning of the Bundeswehr, they give this plan, let me say, to the parliament and to BNBV. So at the end of the day, we only have Q4 to book all that things. I 100% wish you that at the end of the day, it will be more. And as I said, and I stay on that, It should be 300 to 400 billion up to the year 2030 that I expect. And this is the potential that we have. But if we reach from the European state more than 55 billion for this year in one quarter, I think that is really a good thing. Because at the moment we have 11 billion. So in the second, nearly nothing happens because there are no politicians there. They can make no decision. And so in three, four months, we are able to book that. Then it would be very good. The bunch of that, this is what really is expected. It could be more. If they are very fast, it could be more, 100%. There is more potential inside. But I think the bunch will come next year and the year after next year. And this is also a big task now. The organization in Koblenz, yes, they have to work. They worked very hard the last two years. But they really have to double and triple now the capacities of these 25 million contracts or more than 25 million contracts. So that's a huge beast. Is that clear?

It's very clear as ever. And I also have a follow-up because, you know, obviously you thankfully outlined your positioning on capabilities. I totally agree with that. I was just wondering, I mean, of course, the governments, they kind of know probably already quite a bit of those requirements. They probably won't learn it at the end of June. I was just wondering, you know, when you say the conversion of the frameworks, is that already anticipating some of these or is then the capability kind of coming on top of that?

No, it's not in the figures. and the the first thing is and this is these are the first discussions we had the first two meetings now with the with mine to say okay now the money is there now we want to fix it now we want that you buy in the materials etc etc if you buy in the materials with that big numbers we need for sure also down payments but what is not in and this is at the moment what is legally as you know legally it is it is possible if they need more for example if They have in the frame contract at the moment 3,000, 4,000, 5,000 trucks. If they have 5,000 trucks, they can order another 2,500 trucks in that frame agreement to change that, even if it was not in the frame agreement, into a fixed contract. And I believe that they will use that because the European need is much bigger than that what we had in our planning before. But this is not in the figures, yeah? So therefore, there is much, much more potential only if that will come. And if Bain says, okay, we use exactly our choker 50% more, then immediately we have 10, 15 billion more on order intake.

The final question I had, if I may, was just on this recent announcement from BAE on the artillery side. And my question is not so much around the capacity increase, but it's more around their claim. that they can do this without nitro, which sounds to me as a layman, that sounds quite revolutionary given the bottleneck we have on nitrocellulose. So obviously very keen to hear your opinion, whether this is really so easy to do, whether this is scalable, whether this is cheaper than the traditional process, because it sounds like a big claim to me, but yeah, really interested what you have to say.

First of all, I'm not deep in this R&D program that BAE has, but we made an R&D program 15 years ago. And we call that program NINA. And that NINA program was exactly based on RDX micro generators. And in that micro generators, we created, let me say, powder. I can say the problem that we had. First of all, problem number one was price because RDX is much higher price than nitrocellulose in this area. Second point is that the powder corns are very brittle. So if you have to fire from minus 40 to plus 63, you had a technical problem about that. And third problem was capacity because we speak about thousands of tons And if you breed that in a small, let me say, equipment which is going on, we were not able about that. But this was our technology. I cannot say something about the BAE technology if they, let me say, found a totally new technology. But we stay at the moment on that technology because we have to deliver today. And I cannot go into an R&D program to say, okay, I do it, and then at the end of the day, I can produce one ton of powder. What I have to produce, we are on 12,000 tons, and we have to grow up to 20,000 tons of powder. This is, at the moment, the task that we have. And to be fair enough, this is, at the moment, we can do it very economically in that scale, and price never were an issue.

Thank you very much, Mr. Pappegger.

Pleasure.

The next question comes from Christoph Lasquani from Deutsche Bank. Please go ahead.

Good afternoon. Thank you for taking my question. The first one would be coming back to your comments on the frame to fix conversion. Just to get it right, so they could be upsizing those contracts by 50% without additional understanding, correct? And you said it could happen in the next couple of months. Should we then also expect an accelerated call-off from these contracts, so that with the conversion they move to higher volumes in the shorter term, driving a bit of 25 upside?

Yeah, so first of all, yes, you're absolutely right, Mr. Lascavi, that you can have per law 50% plus, And without competition, and this is in the European rules and regulations, so this is the point where it's possible. That's the reason that this frame contract, after winning that frame contract, this was so important for us to win all these frame contracts. You remember some meetings ago, you also asked here how valuable are these things. So this is very, very valuable, but the guys who have the frame contract are able now really to deliver, and now it's a situation that money is there. First of all, yes, that is possible. Second point, we prepare ourselves. And our preparation is at the moment, and I give you an example. On artillery, we made a decision because, as you know, because Germany wants to have a German production. So we invested for 200,000 rounds in Unterlust. During the production, we made a decision because we do everything, and I hope I can show some of you that, everything with robots. So it's fully automatically produced shells about that. That is, we invest more in automation, and now we are able to produce 350,000 full shots, and now we are able from 200,000 to 500,000 shells, because we also have a higher capacity about that. The German government knows that. So if tomorrow, and they wanted to have 200,000 per year, so if they said, okay, there is enough budget now here, we want to help more the Ukrainians or whatever, it can be. It's not at the moment fixed, but it can be that they say, don't send us 200,000, send us 300,000, and we are able to do it.

Very clear. Thank you. And the second question would be on the German budget. We had headlines during the week that Pistorius basically proposed 62 billion in the base budget. On top of that, we have the special fund and potentially Ukraine. Do you expect the overall budget, if you put all of that together, to be growing in 25 or, as you said, mostly 26 or see more significant growth coming through?

He usually needs some billion more. This is what I directly spoke with him and I think he can get it. But he has to hurry up because the point is that usually we not produce on stock. But in some areas maybe we are able to do it. The big bunch will be 26 and 27. And if I understood him right, he wants to have a base and he wants to have an add-on year by year of minimum 50 billion. And this 50 billion should be very special also for investments.

Thank you. And the last question, just with regards to the visibility on the incremental order intake potential that you highlight. On Germany, you already said it's essentially everything in Q4 that can come through. On the international business, it sounded like the visibility is actually quite good there with regards to Romania, etc. Could that be also in Q3 then coming through already?

Yeah, it is possible. So it's not a secret. I will be next week in Romania. In Romania, they will make decisions and I will sign with the Prime Minister before the election something about ammunition and vehicles, etc., etc. So that's A huge potential for us, and we try to bring that into contracts very soon. Speak about nearly 5 billion euro. Italy, yesterday there was a decision with the Italian parliament. Prime Minister Maloney said, okay, we have to grow from 1.5 to more than 2% of the GDP because this was a discussion that she had with President Trump. So this is another huge potential, but more for the next year and the year after. And some air defense stuff is coming. Some more ammunition is coming. And there will be huge opportunities, I said much bigger than we expected now, opportunities on the ammunition side. I can give you hopefully more information in the next quarter because that is too early. But this is bigger than we ever had before.

Very clear. Thanks a lot. Thank you.

The next question comes from Marie-Angie Rigaud from Morgan Stanley. Please go ahead.

Hi, Armin and Claire. Thank you for taking my question. I have actually three, so I will do it one by one if it's okay for you. So I just would like to come back on the German defense budget. You just said that basically the defense minister is looking for an additional budget per year of 15 billion. 50. 50. 5-0. 5-0. Okay, okay. So that's much clearer. Okay, perfect. And is there like any target as a percentage of GDP that you are finding the government is talking about or is only like this? Any clarification here would be useful.

Maybe I can share that. I had last week's dinner with Mark Rutte from the NATO, and I think you know that because you are very well informed. But Mark told me very clear that the 3.5% will be part of that every country has to go into that area. And the discussion is that, let's say, in medium time, Germany has to grow up to 150 billion now per year. This is the target, what they have. This will not happen in the first year, but this is a huge beast.

Is it fair to assume that by 2030?

I think it will be earlier than 2030 to go into this area. Because our job says very clear, we must be ready for fight in 2028, 2029. So everything that every discussion I have every day with also the German government about that is the only I only have one thing, hurry up, hurry up, deliver, make it happen, make it happen. So therefore, I believe that the contract will come as soon as possible.

Okay, very clear. Thank you so much. My second question basically is to come back on the slide six of your presentation, and so it's on your potential nomination. So you mentioned 55 billion. If you do 55 billion, is it right that basically your backlog guidance will move from 80 billion to even more than 100 billion if we had 20 billion on top of your initial guidance?

Yeah. You are 100% right. If you book everything about that, it will be in that range. So that is the reason that, you know, I'm always wrong if I discuss with you because I'm such a conservative guy. So with the share price, I'm always wrong. I'm always wrong with all the other things about that thing. So that is the reason that we said, okay, bigger than 80 billion. But you are right. If everything comes, we are on a level of 100. But If I say 100 billion and I have 95 at the end, I don't like that you are disappointed about me.

Then I will never be disappointed about you, no worries. But okay, so the matter is correct. Just to make sure on that, I have the sensation that this 55 billion potential domination is based on your current conversation with governments. So does it mean that post-NATO summit, where we should get as well a higher percentage of GDP for defense, basically there is much more to go from this $55 billion?

Yeah. Yeah, absolutely. So there is only if you see what can happen. It's a model. And I usually don't believe, let me say, in best-case scenarios. I try to make real scenarios. And as we discussed last time, Marion, the hit rate is not bad that we have. So we have a hit rate of 95% of that thing what's coming. But what could happen? This is a model that now the frame contracts are the 50% is coming up. So if that is on top, we will have around 10 or 12 billion on top. So it's a very simple calculation about that. If now the European countries also hurry up, and we get information at the moment, the Italian government for sure is ordering another 12 EDIFAN systems, which is billions at the end of the day. This can be added up, but I really don't know if we can make everything happen up to December. And so therefore, I would be happy if we can get it. And the easiest thing would be really the 50% of the frame conference plus, because then we would be not on 55, then we would be on 65 or 70 billion. And I agree, then we are more than 100 billion backlog. But as I get, I have a good slug ball, but not as good.

Okay, perfect. And last question on Lockheed Martin partnership. So it's very useful to know that the potential sales is about 5 billion annually. I just wanted to check a few things with you. So it's 5 billion for the GV or only for Remedal?

For GV.

Okay, for the GV.

It's for the GV. But what we do is we do like on the ammunition and like we always do. We do a vertical integration and we try to produce a lot of components that we deliver into the joint venture. And for sure Lockheed also, but at the end of the day it will be a very good win-win situation for Lockheed and us. Because usually the missile from America, I'll give you an example. The locket is changing at the moment. The attack is nearly closing, let me say, that factory because they need it for prism. And there is a good discussion and a good idea at the moment. The first one or two billion would be that we produce U.S. contracts also here in our factory. So that would be immediately fill the factory if we are ready. And it's only because of capacities, because the Americans are also missing capacity, and they send a lot of stuff into Ukraine. And as you know, Europe is empty. And at the end of the day, if you see the countries, and if they hired, for example, HIMARS system or whatever, they bought 20 or 30 missiles. Come on, this is fired in three days.

Yeah, so basically you are saying that there is one or two billion almost secured by the U.S. needs and quite quickly. For Europe, or I would say for the total addressable market, you said that the ramp-up phase will be in 28, 29. So does it mean that your full ramp-up, or I would say the five billion annual thing that we are talking about, can be done from 2030, or the ramp-up phase will be even longer than this?

Yeah, I think you're right. 29, 20, 29, 20, uh, on 30. This is the way water is that, you know, we are not, we are not slow. We are fast. And if you see that we build up now the rocket motor plant and, uh, uh, there is, there is, uh, I think we can feel it very, very fast because, um, uh, the Ukrainians need, uh, all this, uh, this, uh, Patriot stuff. Yeah. And this is also a point that we, that we want to, to go into that production because as you know, There is a Racian missile and there is a Lockheed missile. And this is a point also that we want to produce so that we see we can fill it very fast because everything is preparing at the moment themselves and nobody has in the stocks missiles. This is the same situation and that is the reason that we do it like we had on artillery ammunition. Nobody believes that we need such a lot of artillery If they would have now 10,000 more missiles, the Ukrainians would fire that, but they don't have them.

Yeah, okay. And probably last follow-up question on that, which is definitely the level of margin, because that's probably where the question marks. You said that the vertical integration will be very good. So can we assume the same level of margin that was for 155? Or, I mean, how we should think about this?

I think it's very similar.

Okay, very clear. Thank you, Armin.

It's a pleasure, Marie-Ange. Hope I see you soon.

The next question comes from Benjamin Healan from Bank of America. Please go ahead.

Yes, hi, Armin. Thank you for the question. I guess one of the big questions we've had over the past couple of months since the Munich Security Conference has been around is capacity, and you talked a little bit about the repurposing of some facilities. Can you just give us a bit of an update in terms of where you are on that? And then as a follow-up, you kind of touched on this already, but the slide six that you highlighted with the $50 to $100 billion, a big aspect of that was your assumed market share in what is going to happen over the next five years plus. You've obviously been on the road seeing defense ministers and leaders the last three months. Can you just talk a little bit about how you're feeling about that market share and your level of confidence around, you know, the positioning that Ramital has? And then a final follow up from me. M&A has obviously been a big part of the strategy over the last couple of years. Obviously, this MOU with Lockheed is more organic. Is there anything on the M&A side that we should be expecting in the next kind of 12, 18 months? Thank you.

Yeah. First of all, let's start with the capacities. On the capacities, we are on a very, very good way. As I said, we have enough capacities on the ammunition side 120, and we build up the capacities nearly to 4 million rounds on medium calibre. So medium caliber, the new actions that we have is medium caliber production in Romania, and it will be a medium caliber production. This is what we discussed yesterday on high level, on prime minister's level, also in Latvia. So these are the new things that we are going on. We are in discussions with Denmark about powder. Our other programs are running absolutely in time. So that, in a nutshell, on 120 millimeter, we have still invested in that. 240,000 rounds per year are possible. 155 millimeter, we are at the moment looking to have a capacity from 1.1 to 1.5 million rounds. And there is another thing, and this is what I said. This is not officially, but it could be that Ukraine is looking for another 1.5 million rounds per year. This would be a game changer, a total game changer in this area. It's not done, so that is the reason. Yes, forget it again, but if we come in some weeks and can give you that information, it's, I think, a game changer also in that area. So medium caliber is minimum 4 million rounds. We need more. That is the reason that we invest in Romania and also in Latvia. And what we also get a very fast decision is in Lithuania to get the powder production. We have the contract for the production of the shells, but also the powder production. So what I want to say is on ammunition, we don't stand still. We continuously grow. And even if we build up 10 factories around the world now simultaneously, let's build up 12 or 14 or whatever because there is a demand. There is a huge demand. So we go up in that area. So we invested a lot on the digitization. So everything is invested. We invested on the truck side that we can grow up to 4,500 trucks per year. And we invest at the moment also, especially in the conversion, We plan that the noise factory is able to produce another 60, 70 tanks per year out of the noise level. This is at the moment planned in self-propelled howitzers and links vehicles. So air defense, we had a capacity which was really small, and now we build it up the capacities that in Italy we can produce 60 air defense systems and we can produce even more up to 80 or 100, let me say 90 conservative systems in Switzerland, so that 150 air defense systems, so if it is guns for Skynex or if it is for Skyranger. So this is a point where we really, really build up the capacities, and with all that capacities, and then Unterluste Missile Plant for sure. These investments are coming up, and as I said, a potential of $5 billion. I give you a very, very clear update on the next Capital Markets Day about that thing, but the figures will be better than the figures last year. Number one. Second point, market share. At the moment, especially on the ammunition side, nobody is able to deliver. And there are, you know the statements. I must not give you an overview about that, how much capacity different countries have. And I don't speak about our competitors in these areas, but we have by far the biggest capacity. So now there is, we have an RFQ at the moment also from Sweden, also from the Scandinavian things, to produce 80,000 to 100,000 rounds for them. And our capacity is there. So our market share is, and as I said, we had a share in Germany of 50%. So it is going down in Europe because there are for sure also some friends who work in the same areas. But my expectation is that on the ammunition side here, we will have a market share that is more than 50%, but for the whole defense side, maybe the market share is going down. And I have not a fixed calculation now because I want to do that on the capital markets day, but I believe that we can grab 30, maybe more than 30% of the whole European market. Number three, M&A. The gun is loaded.

Okay. Very clear, Armin. Thank you. Just one quick follow-up on the Lockheed Martin. When do you think you'll be able to get and start winning orders on the JV? And one of the big challenges that MBDA has had has been around the supply chain for defense electronics into missiles. Can you just talk a little bit about how you're thinking about the supply chain situation with regards to the JV? Thank you. Yeah.

We build up the supply chain at the moment because it is really brand new. The idea was created during the Munich Security Conference between the CEO of Lockheed and me. And the point was that we build up the supply chain. On the electronic side, I think we had a very clever idea to give a five-year contract to the producers of the electronic components. and to give them also a proper down payment about that. Because, as you say, it's nice to have a lot of cash on the banks, but it's better to have components into the stocks. So therefore, I think we will find again, like on the tanks, where we have at the moment no big problems with electronic parts, that we can grow up. It's a part of investment and it's a part of long-term strategy. Very clear. Thank you. It's a pleasure.

The next question comes from David Perry from J.P. Morgan. Please go ahead.

Please go ahead. Yes, hello. I mean, hello, Clare. I hope you're both well. I've got a couple of questions. I'd like to just start on the missiles and just dig a little bit deeper, sort of following on from what Ben said. So if I look at MBDA... they report their sales. So it was 3.6 billion in 2020 and it's 4.9 billion in 24. So they went up 37% over four years to just about 5 billion. It sounds like you want to go from zero to 5 billion in four years. So part A of my question is, is that realistic? And part B, is MBDA also reports a margin. It's 11%. So would that be the right margin for you? Can I start with that, please, and then come back?

Yeah. No, I'm targeting to higher margins. This is number one. But our plan is the needs that are there, and this is what we discussed. And the need at the moment is what we think is to have about, let me say, between 600 and 800 ATACMs per year. About 2,500 GMLRS, 5,000 Hellfires, 5,200 Jaggums, and 250 to 300 Pac-3. So if you count that up, and we are able to make, and this is at the moment the biggest bottleneck, and I think, I don't know, I don't speak about MBDA, so you know much better than me about that thing. But if you see that things, we are able, and this is the most important thing, to produce the rocket motors. This is the biggest bottleneck at the moment. It's not the electronics what I see, especially not with America. The second point is we have a joint venture partner who is very familiar in producing that in America in bigger amount. Because, as you know, Europe usually had very small numbers, but the Americans had bigger ones. On the attack camps, it's planned at the moment that we take over the assembly lines directly. So we take it from America, we buy it into the joint venture, and we really start about that. If you go that, this is only 1.2 to 1.5 billion euros. Very well qualified. Everything is in line. So I don't want to go too much into the details because the joint venture is not signed, but David, maybe you see that I'm I'm not dreaming.

Okay. The second one, if I may, I'm surprised you didn't talk about the Ukraine ammo opportunity. Your IR team spoke about that on the pre-closed call about this huge opportunity. Let's talk about that. It's hard to keep up with you, Armin. It's hard to keep up with you. But one thing I was wondering about Ukraine is, For such a massive, massive ammunition order, why would they want to buy it from a third-party country, give you that much profit? Why not set up, if it's really 50 billion, why not set up an indigenous capability or buy a license? Because they can do it in drones, or they can probably do it in a lot of other areas. So if you could talk to that, please.

Yeah. First of all, we will build up the factories. It will be not only one. It will be more that we have planned in Ukraine. So it will be produced in Ukraine, and we will do that together with Ukraine defense industry, with UD. And the second point is for the NATO calibers, it's not as easy as people always say to have a full shot, to have modular charges, to have the powder, and we speak about full shots, and to have the projectiles. So to produce a drone is, I think, I can say, much easier than to produce this powder and CCC technology, et cetera, et cetera. So that is the reason that they, and they tried to do it several times. A lot of other countries tried to do it and said, okay, oh, it's easy. I think they also said there is no high entrance of a border. This is a very high hurdle. It's a very high hurdle, believe me. Otherwise, it would be easy for others, especially if you have triple-based powders and NATO standard modular charges. Not a lot of companies in the world are able to do that.

Okay, thank you. And then the last one, if I may. I mean, I'm sure the analysts on the call get the same questions from investors every day. Is Rheinmetall going to do $30, $40, or $50 billion of sales in 2030? I don't know the answer to that. If you had to probability weight those outcomes, what would you assign to each, please?

To be conservative in this area, as I said, it would be more than 30 billion.

Could it be more than 40? I mean, because there's top-down and there's bottom-up execution. So what is your current realistic view of 2030?

If all the contracts are coming, if all the factories are running, and it could be also more than 40, but first of all, I want to reach more than 30. Thank you. It's very, very helpful. Thank you, David.

The next question comes from George Megweiter from Burenburg. Please go ahead.

Good afternoon. Thanks for the questions. I've got two, please. Firstly, on the US performance, on lock performance, you mentioned that profitability was a bit better than expected. What sort of profitability did you actually achieve in the business? And the second question is on the large US contracts that you have outstanding. Can you just update us on the timing of the X and the 30 contract decision and potential size, and if that's changed at all in recent weeks? Thank you.

Yeah. So first of all, Locke is doing very well. The profitability is good. As you know, if you see when we bought it, our calculations were lower than we reached at the moment. What is the reason for that? First of all, we started immediately with some efficiency programs in the post-merger program and the team is doing a great job in the United States. Second, they book, and this is also very interesting, the Rametal flag also in the US is a very good one. Pentagon came and said, okay, you are now part of a huge company. Please, can you do some more for us? So this is the second point. It was very interesting some weeks ago when I had a look to all four factories. is how big these factories are, how much space we have, and how much technology they have. And I have seen nearly every vehicle of the U.S. Army. They do chassis technologies on the Abrams. They work on the Bradley part. They work now also on the new XM30 part because, as you know, we want to produce the XM30 in one of these factories. The factory space is prepared about that thing, so it's a very good mixture. And I think we made absolutely the right decision. Second point on the U.S. big programs. So we are on time on XM30. The prototype production is running, so I have seen the first prototypes. We have a parallel program, and as you know, there are Chinese walls between the Army, and one team from the Army is working with us, another team is working with our competitors. And the feedback that we get at the moment is they are very happy. It's a very good technological solution. It's a new technology. We do a lot with artificial intelligence. We do a lot with simultaneous engineering. We have good cyber protection. We have digital twin technologies. Everything is really running very well. They're very happy about that. So we are at the moment on time. And next year, end of next year, the decision will be in 27. This is at the moment the timing. But I believe that end of next year we get a smell who will win it. And, yeah, in 27 we will see. My expectation is that we have a good chance and my point is that we have to fight hard till the end because you only win if you are able to run a marathon in such a big program and not only the short way. You have to go the extra mile but our team is doing that and we have in between only on the vehicle side about 1,400 people working. which is a good team for XM30 and for CTT, and Lok is really focused on that stuff. Maybe one thing which is also very interesting. One of our factories in St. Mary's, for example, is doing all the tracks for the US vehicles. They're doing all the rollers. They are doing all the bumper stuff. They're doing some gearbox parts about that, It's unbelievable, and I didn't expect it because I hadn't a view before I bought it. It was the first time that I was in that factory. It's unbelievable how deep the vertical integration in the US vehicles is. But also know that if you spoke about missiles, in one of the factories we produce the missile components, and we produce parts of the shelters. We produce components for the missiles. We are able to produce nozzles for that. A lot of different things. So I'm happy with the investment. That's super helpful. Thank you, Armin. Thank you.

The next question comes from Dario Dickmann from HSBC. Please go ahead.

Hi. Thanks for taking my questions. I would have one on the missile joint venture. At the CMD, you mentioned a 3.5 billion potential just from rocket motors. And this now becomes a 5 billion potential in the JV structure for producing the whole missiles. Is this correct?

Yeah, that is absolutely correct. And as I said, it's not 50-50, but we deliver the rocket motors. So it stays on the rocket motor side. but we calculated the first stuff for auxiliary rockets. But now we have a mixture, and we have not only auxiliary rockets, and the price of an attack is, let me say, up to 1.3 million, but the price of a Hellfire is on a level of 200K. So this is a different point, but it's better to have that mixture, to fill the factory and that is the reason that our calculation is now around 5 billion.

Okay, so basically increased by 1.5 billion but with a better margin since we have more vertical or more steps in the production.

It's a little bit like the ammunition profit on profit because the Americans buy in the rocket motor. We produce a rocket motor now by ourselves so we want to make profit with rocket motors for sure.

and uh but the joint venture get the rocket motor for the same price than from the competitors but we will make uh we have coverage in in that for sure so that's the reason that we want to make also profit okay great and another one would be on the it container details um project for germany it seems that this should be a multi-billion project Could you share some additional details in that? And do you see some additional digitization efforts from countries like Netherlands, similar to the German one, or opportunities for other countries?

Yeah. So first of all, you are absolutely right. The container program is a multibillion program. There are thousands of containers that they need, protected and unprotected containers. We have our own department, or it's a business unit now in between, to produce that stuff. So we are producing the containers, and we equip the containers. This is a point which is very important. The production of the container is something. This is, again, vertical integration, but the equipment with all the electronics and all the other things is a little bit like a DLBO program, what we do on the vehicle side. The second point is that I believe that At the end of the day, Europe will have a digital standard. This is not now, but there is a huge potential over the years. But only the German program. It's a really, really, really huge program. And if everything is running in, it's a double-digit billion program.

And all these orders you already got from digitization companies, that are possibly up to 15 billion already. These are all for the current structure of the German army, right? So basically for three divisions only.

Yes, if we need another two or three, if we need another two divisions or let me say minimum two, three or four fighting brigades, nothing at the moment is planned inside. This is in the new planning. But for the new planning, I think we have to wait up to October because then I have the first chat with the minister about that, what he needs, because in some times, yes, and this is crazy, really, to say, because all the figures are so huge, but in some areas, maybe he has to double the figures.

Great. And wouldn't Netherlands need a similar judicialization effort, due to the deep integration on the British side with the German army?

Yeah, so not only the Netherlands, I think there are a lot of other armies, but We are at the moment not in negotiations with them.

Okay, thanks. Maybe as a last question, on the put forward call-offs you mentioned in Q1, did these mainly come from Germany?

Yeah, there is Germany. There is also some on the Ukrainian side. It's not only Germany, but it's a lot from them.

Okay, thank you. That's it from my side. Thank you.

The next question comes from Sasha Tusa from Agency Partners. Please go ahead.

Thank you. Good afternoon. Most of my questions have been answered. I mean, just to follow up on missiles and rocket motors, can you just confirm, will you or will the joint venture be selling the missiles into Europe or not? Is the joint venture effectively a production subcontractor to Lockheed Martin and they retain the sales links and the IP? And then really tied to that, do you envisage developing European variants of missiles or is it very much a build-to-print facility? Thank you.

First of all, the joint venture will sell it. It's not from the US. The joint venture will give it to the customer. And, for example, if you see what happens at the moment also on, if it is Pulse or if it is Hibas or whatever, a German government, but also on other governments, give it to a European OEM. So that, and we create, let me say, a Rheinmetall guided, that's the reason that we have the majority, and we will sell it to the point. The second point, and that is the reason that we made the joint venture. Lockheed has a lot of technologies. We start with these technologies, and a lot of countries like Germany also want to have a Germanization in this area. So then we have to create, let me say, and we get for sure also the money if everything is going forward, that everything is made happen to use it in the German army, blah, blah, blah, blah. So then a Germanization, and then we build up also technology. the R&D. But if we want to start with an R&D program, we would not be able to deliver. And that would be too late. So therefore, we have to start exactly with that what we said. As I said, the idea at the moment is to produce the ATT&CKMS very soon, built to print from the U.S. standard.

Thank you. And just a follow-up. So you think ATT&CKMS is a higher priority for European customers or particularly Germany than rebuilding stocks of GMLRS.

The Atacom has a 300 kilometer version and the GMLRS at the moment is used on 150, so they want to have a long distance. They speak in Germany also about 500, 600 kilometer. Only Prism at the moment is on the way to have this 500, 500 kilometer solution. They speak also about 2,000 kilometer. but there are still dreams. This is nothing what you really can have in two-year stocks now. So that is the reason that we said, okay, we focus on both, GMLS also, and as I said, we plan to have a capacity of minimum 2,500 GMLS missiles also. Thank you very much. My pleasure.

The last question is a follow-up from Sven Bayer from UBS. Please, go ahead.

Yeah, thank you for taking my follow-ups. Two follow-ups, please. The first one, I mean, we now talked a lot about Lockheed, obviously, but you also have partnerships with Northrop and Andoril. I was just wondering, could we have similar corporations with these? That's the first one. Thank you.

Yeah. So this is possible. But first of all, and this is the point where we have a very clear structure and a very clear win-win situation. That is the reason that we spoke about or I speak about this Lockheed deal. We are in negotiations with other companies, and we will see what's coming out. But at the end of the day is the two things that I told you. Lockheed and Rymetal is prepared to create this joint venture. Lockheed and ISAI, Rymetal and ISAI is prepared to create this joint venture under the lead. With other companies, we are not as far, so I can't say nothing about that.

On this 2030, I mean, I get the focus on the year. I do the same. But, I mean, would you agree with me that also when you think about NATO capabilities, right, I mean, they're not only all going to be achieved in one year. That's probably going to stretch out over many, many years. That 2030 is just like an interim step. Whatever the revenue number is going to be, it's likely to be higher in the mid-30s.

Yeah, it must be because we are not able to deliver everything up to 2030. It must be. I'm sure you're 100% right.

Okay, great. Thank you, Mr. Papberger.

Thank you, Mr. Ryan.

Okay. Ladies and gentlemen, that was the last question. I hand back to Mr. Armin Papberger for any closing remarks. Thank you.

Thank you, ladies and gentlemen. Happy to see you very soon in the next conference. A lot of things, busy days about that, but very, very happy, and we have to deliver. And as I always said, we have to serve NATO. We have to serve Europe. and we have to protect our democracy. Thank you for your time for Rheinmetall, and I hope I see you soon. Thank you very much.

Thank you.