Rheinmetall Ag Unsp/Adr

Ladies and gentlemen, welcome to the Rheinmetall AGQ1-2026 conference call. I'm Iruna, the course call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Armin Papager, CEO. Please go ahead, sir.

Thank you very much. Good afternoon, ladies and gentlemen, and welcome to our Q1 26 earnings call. Klaus and I are guiding you through our presentation today. But before I begin, please remind on our disclaimer on page number two. Now let's go to page number three. Here you see the overview of the Q126. On the sales side, we have a growth rate of about 8%. This growth is a little bit lower than expected because we have for about 200 million Euro trucks ready. And you know that we always have the contract with our customers, especially in Germany, that the delivery dates are fixed from them. And we expect now that we are delivering this 200 million euro in Q2. Another delivery in Q2 is going out because we started with the powder production in quarter one, but we were not able to deliver to the customer because of the lot acceptance test, et cetera, et cetera. This is another 100 million euro which is going to Q2. That is the reason. that quarter two will be in growth rate much better than quarter one, and we expect, in comparison to last year in quarter two, a growth rate of more than 50 percent. The operating result, which is a plus 17 percent, is very positive. Even if the growth rate is on 8 percent level, 70 percent plus shows us a good leverage on the operating results, and we have an operating result of 224 million euros, so that the operating margin is growing to 11.6 percent. Another very good information is that applications are still in good shape, and in the first quarter we had more than 80,000 applications so that, like last year, we can expect that we have more than 300,000 people who want to join the Rheinmetall Club. On the operational free cash flow, it's very clear that we prepare us for a huge growth in this year, and we have to invest. And we invest a lot of money in materials so that the operational free cash flow is minus 285 million. This is not a critical point for us because over the whole year, we believe that we still have a very positive cash conversion rate. On CapEx, we are on a good level. It's 10%. As you know, this year and also next year, the CapEx will be still high. And over the next year, then, we will go down to a CapEx of between 5% and 6%, maybe 7%. Rheinmetall nominations in Q1 is nearly 5 billion, so exactly 4866, and the backlog is growing especially also because of the naval systems from plus 32% to nearly 73 billion euro. If you go now to page 4, you see that Rheinmetall is really a key partner and a key industrial partner of German Bundeswehr. So as you know, the German Bundeswehr has three different phases to build up and to be the strongest force and to create the strongest army in Europe. On the short-term side, we are really at the moment in maximizing defense capabilities. That is the reason that our investments programs in Germany, but also in whole Europe and in the United States are really focused on that. And we have an increase to 140% of the equipment level that we had before. On the medium term, it's very clear that we have a major buildup of sustainable armed forces. And as you know, at the moment, Germany has forces of 180,000 people, and they have to grow up to 240,000 up to, let me say, minimum 2029. And as you also know, there are plus 200,000 reserves, but all that soldiers need equipment. And that is the growth program, which is coming up from today to 29, 2030. And then we have a long-term target picture. And on these long-term target pictures, it's a very, very clear point on the way to be the strongest force in Europe. to have technologically superior armed forces. And all that is in combination with the budget that you have seen in 2030. The budget for defense will grow up to 190 billion euro. And as you see also here on page number four, the draft budget for 2027 will have a 21% increase of defense spending up to 145 billion. Huge amount of money. and Rheinmetall is preparing them to help wherever we can help to bring the equipment to the Army. Next slide, slide number five, you see the highlights that we have on our new domain, our new division, Rheinmetall Naval Systems. So the acquisition of the NVL, the former Lurssen Company, was closed in February. So we have a very good start in the integration process. We started with a steel cutting process. We started with first chip launching ceremonies. And the baptism of the Corvette Lübeck was a really good start in the first month where we had the Domain C. So we gave also a non-binding offer to acquire the German Naval Yards. And with that non-binding offer we started now a due diligence and we expect over the next weeks that we have a result about that so that we can give a binding offer also to enlarge our capacities in shipyards. The financial results in Q1 and also the sales side are in line. So in the first month, about 80 million sales and 10% EBIT. This is exactly what we expected at the beginning. As you know, the range is between 10 and growing over the next years, growing up to 15% profitability. And in 2026, we expect huge orders. And there is an order of the F-125 upgrade. And we gave also an offer for the new frigate contract of F-126. And we also see internationalization and successful internationalization potential, for example, also in Romania. So all in all, very good start, very good post-merger integration. We had the first welcome day also in Bremen with the team, and I'm very happy with the team. I'm very happy with the motivation of the team and the spirit they have. Now let's go to page number six. On page number six, you see what Rheinmetall is doing to create autonomous vehicles, autonomous air vehicles, land vehicles, and also vehicles on the sea. And you see the triangle that we have, the Rheinmetall autonomy strategy. On the unmanned ground vehicle side, you know that we have since years a lot of vehicles where we made tests, where we are very successful in that area. And the biggest program at the moment is the U.S. tender. This is the FMAT program from the United States of America. And we took over the majority of DOC Inc. And in combination with our U.S. business, our Canadian business, and the European business, we think we have a huge potential over the next years also to build up this land park. This is not only a one-product strategy that we have. This is a multi-product strategy, and if you see Hamelin and other things that we offer at the moment, also the German Bundeswehr, I think it's a great strategy to go the next steps also with European partners and with NATO partners. On the unmanned air side, there is loitering and ammunition and drone technologies. And this category two and category three drones are in our portfolio, not category one drones. But CCA, this is a real strategic partnership. As you know, we have partnerships with Boeing, but also with Lockheed. And the MOU with Lockheed for European CCA is part of our PLCD program. So with both American partners, we try to open the market and to help Bundeswehr And because PLCD is not ready, maybe, and we really hope that we can implement the Boeing Ghostbat technology into Germany from Australia. On the unmanned surface vehicles, we made this joint venture with Kraken, where they have the majority, and Last week I have seen the production lines. We produce in Hamburg these unmanned vehicles, and at the moment we have a portfolio of a little bit more than eight-meter ships, but over the next year we will build up two other ship classes, so that we think this is a real, real good start into the unmanned surface vessels. And over the next years, we see that there is a potential of about 1 billion, 1 to 1.2 billion also on the air vehicles, and also about 1 billion on the land side. So in total, it could be around a potential of 3 billion per year that we do with autonomy, which would be a very positive signal. On page number seven, you see that we are expanding the role of drone producer. And if you see the drones portfolio of the German Bundeswehr, and if you see how much Rheinmetall is doing, we sometimes really astonish that people said, okay, what is the reason that you're not going into the drone business? Because we are since 25 years in the drone business. So Rheinmetall is the producer of Aladin, Luna, and Katz et al. These drones are qualified and implemented in German Bundeswehr. And we implemented also the Heron class. As you know, we sold that business later, but up to 2011, Rheinmetall implemented the Israeli Heron technology into the German Bundeswehr. So 20 years and more before we started with this drone technology and the future systems that yet we see, the MQ-28, so the Ghostbat and the FV14, This is what Rheinmetall is doing, and on the right side, you see the different categories, from Alladin to the GhostBed, where we see a sales potential of 1 to 1.5 billion, as I said before, per year. If you have a look to page number eight, you see the partnerships, so we believe in partnerships, because with partnerships, we are faster than if we go into development programs. And we are grateful also that these partners from the U.S., like Boeing or also Lockheed, are helping us with strategic partnerships to grow into these areas. And as you said, as we said, the GhostBat should be implemented in 2020. And it is impossible to develop in that short time unmanned vehicle like the Ghostbat. So I think this partnership can help us to grow faster. Another partnership that we signed is the partnership with Indra in Spain. And this is very similar than that what we did with Italy, with Leonardo. And there is a huge need on military vehicles and military trucks for the Spanish Army, and we built up this joint venture at the moment with INDRA. Page number nine, you see another partnership, and one point that was missing was the long strike side. We are very good in artillery and tank ammunition. We are good now on the drone site, but the deep strike and long precision strike, this is what we missed. So we found a partner in our analysis, and this is Destinus, a Netherlands-Swiss company. It's an European defense technology, and this is the differentiator to the U.S. defense technology. So we made an agreement that we create a joint venture with the majority of Rheinmetall of Rheinmetall Destinus strike systems. And this includes cruise missiles, but also ballistic rocket artillery. And the work here should be that Rheinmetall is doing a lot on the rocket motor side. We do the warhead on the warhead side, and we make the infrastructure to build up the infrastructure till end of year to build up the whole cruise missiles starting end of this year or beginning of next year in Unterlust in the north of Germany. So if you have a look now to page number 10, in page number 10 you see that there is an intensive discussion at the moment with a lot of Middle East customers. And we got a lot of calls from after the U.S.-Iran conflict and we counted the systems that we have now in the Gulf region. It's about 150 systems in the whole Gulf region, gun-based air defense systems, and we think that new systems will be implemented also in very short time. Italy is a very strong driver in this area. The Italian government is helping a lot in this area to help the Middle East countries. The negotiations with already at the moment, we try to implement more than 10 systems in 2026, but we believe that this continues, and especially the ammunition, the high consumption on ammunition is the thing that really helps us on gun-based side, but also on missile-based side. On the missile side, you see there is a heavy use of different missile types, And that is the reason that we made that investment on the rocket motors. And end of this year, the rocket motor production in Unterlös will be ready. The rocket missile integration factory will be ready. So that in 27, we will go into a qualification. And hopefully in 28, we can be really in full-scale production. Page number 11 shows that Rheinmetall is fully in line with the Ukrainian priority areas. And the areas that we discussed, and the discussion was now one and a half weeks ago with the Ministry of Defense in Ukraine and the German MOD, that artillery ammunition, air defense systems, deep strike and drone technology, and in combination with combat vehicles, this is exactly what we offer. and the European Union decided to release financial support package and as you know there is a 90 billion package where 60 billion should be earmarked for the procurement of defense goods. We are in negotiations at the moment with different nations and also with Ukraine how much we can help in that area. And page number 12 is a highlight about the disposal of the power systems. We are nearly finished, and as said and as expected, we want to make the signing in Q2 26. So in some weeks we are, let me say, 95 or more, 99% ready and are very near on the signing process. So far, I know a few about the technology, and now I take over to Klaus, and he will take care about the financials.

Thank you, Armin. Q1, we showed a solid growth of 8% on sales, but this does not give the full picture of the increase of our busy execution on operations. We look at the buildup of inventory about half A billion of material went into finished and pre-finished goods that are ready to be shipped in Q2. That would help us to basically show a very strong Q2 and have basically a first half of the year that is fully in line with our full year expectations. Operational result went up by 17%. So even in this increase in build-up of structures, we are showing leverage across all the different segments of our business. Overall, there was only a relatively small impact from currency on sales and on profitability. Let's move on to page number 15 to have a closer look at the different segments. Vehicle systems grew by 3% to nearly 1 billion euros, mainly driven by more wheeled technical vehicles and the links in Hungary. Operational margin improved to 9.6% to a more favorable product mix. Sales growth was, as mentioned, a little bit damp through the pre-production of trucks for the German customer where we expect the drawdowns in the coming weeks and additional sites in Q2. Weapon ammunitions were flat at 600 million euros. The main reason for the war was the Moskva incident in Q1 last year. In Q1, as you know, This year, the Murcia plant is fully operational again, but the products that are being produced will only drive the sales in Q2. And then there was further basically slipovers or delays in acceptance, so that reduced the sales growth. Overall, operating margin increased nevertheless by 0.1 percentage points to 19.4%. Digital systems grew by 16%, mainly driven by the Tawam project and the consolidation of now BlackNet that was acquired in Q1 of last year. Also here, the division showed an improvement in profitability. The operating margin now stands at 5.2%, again showing as the other divisions demonstrated. good leverage. The biggest growth of all the different segments was in air defense with more than 30%. As a result, also the increase in profitability was the strongest from 12.5% to 15.6%. That's a very strong performance and shows the additional demand for air defense products. Naval systems are now included for the first time with one month of sales. The business contributed already 77 million of sales at a solid profitability of 10%. Overall, as mentioned, the growth grew to 1.938 million euros. And in the sales you can also see the ongoing trend that consolidation increases as basically interaction between the different segments of our business intensifies. Let's move on to page number 16. With almost 5 billion of Rheinmetall nomination, it was a solid performance on the sales side. You have to remember that in Q1 2025, the high order intake and nomination of almost 11 billion was strongly driven by two digital projects in Germany, Tavane and the IDZ. The mix in 2026 was more varied. There was a strong growth across all the different segments of the business, and also fixed orders were higher than in 2005. Overall, also including almost $6 billion of additional order book from the naval business and the IMETA backlog increased to 73 million euros. Let's move to page number 17. Operating free cash flows, as mentioned, was negative at 285 million euros, driven by strong investment, especially in inventory and basically as preparation of future sales. As mentioned, out of the 1 billion increase in inventory, almost half was going into finished and unfinished products ready to be shipped then in Q2. The main driver for the increase in inventory were, as mentioned, weapon and ammunition and also air defense. And that also includes, obviously, the increase in vehicle systems for the pre-produced trucks to be delivered in Q2. CapEx was, as we are early in the year, relatively modest, but higher than in 2025. Let's move to page number 19 to have a look at basically some of the supply chain issues that we are facing. Oops, that's page 18, sorry. On page 18, we see some of our financing numbers. Our net debt to EBITDA is very strong at 0.3.9 multiple, driven by a very low debt, and that needs to be considered in the context of having acquired the naval business at the end of February. That is also the reason for... slight decrease in our equity ratio but still with 30.7% of equity ratio we are in our strategic bandwidth that we are aiming for so even after the acquisition we have a very strong balance sheet and are prepared to support the ongoing growth and further acquisition if there are opportunities. Concerning the convertible bond, almost all the bonds have been converted. At the end of April 2026, only 8% of the Series B, the second tranche, were still not converted. We also received some positive feedback from our rating agency Moody's. They provided an update and confirmed the BAA1 rating with a positive outlook. Let's move to page 19 and look at the supply chain. Our energy costs only account for about 1% of sales. We have a coverage of 70% for electricity and 84% of gas procurement is covered by long-term crontech, so we are not that exposed to volatility in the purchase price. On raw materials, as mentioned before, we are stockpiling, actively stockpiling strategic raw materials and also intensify our supply diversification to make the whole supply chain more robust and more resilient against possible disruptions and price fluctuations. As with many of the raw material prices, we have contracts in place on the sales side that allow for the pass-through of increased purchasing costs, in some cases specifically to certain materials, in most cases for general inflation and production cost increases. Let's move on to the outlook, and for that I hand over back to Amen. Thank you, Klaus.

On the backlog side, you see that the Rheinmetall backlog in Q1 is, as Klaus said before, growing up to 73 billion, where around 5 billion is on the naval side. A very positive signal is that the fixed contracts are growing up, and so this is in total more than 44 billion fixed the rest is the nomination so as i know we change more and more from nomination to fix because especially germany wants to do that and this is what we will see over the next weeks also for contracts for trucks etc etc to be to get more and more fixed contracts but also ammunitions like artery artillery ammunition and also a new contract which is coming up up on 30 millimeter ammunition which is could be in multi-billions So in April, the biggest contract, there are a lot of smaller contracts, but the biggest contract of about 2 billion is the loitering ammunition. And we expect that in Q2, we will have total nomination of around 20 billion euro. There are this final negotiation where we should sign it in, we should have a signing also in May because of the safe money, MBT in Italy. There is a links program that we have final negotiations with Romania. The biggest contract will be for sure F126, where we expect that in Q2 there could be a signing, but ammunition trucks, etc., etc., or the other things. And in the second half of this year, The expectation is to have around 60 billion opportunities where you see Ukraine packages. The biggest one is Arminius for sure. This is the Boxer program which is coming up, but also British and other international programs. If you see that we have a backlog covering of nearly 100% because it's at the moment 97% booked, and service contracts and other things are coming in and we can serve that over the next two months so that 100% are very clear. So our expectation is that it is really that we are in good shape to have this 14 to 14.5 billion sales in 2026 if everything is in line. So the potential that is that Rheinmetall backlog could be around 135 billion. end of this year. So how does it work that the sales is really coming up and you get an overview about what happened in 25 and in 26 to compare it. So we had the best first quarter in 25 ever. And in the first quarter last year, we made 18% of our annual sales. This year we have a better quarter one, but we are growing strong. We have a growth rate of 40 to 45 percent. And as you know, about 300 million what we shifted into quarter two is because of the trucks and the ammunition, what Klaus and myself said before. So we had 40 percent in Q1, so it will be a stronger Q2. And last year in 25, we shifted from Q4, 24, something in the first quarter, 25. In total, and this is very normal in our business, in the second half of this year we will make 64% of the sales. Last year, nearly the same, we made 62% of the sales. So it's a typical year, and sometimes it changes from quarter to quarter, but it's nothing that is unexpected. And by the way, we expected also in 26 that the growth rate was around this 14%. So the importance that we have is now also that we have in Q125 a full quarter with log performance contribution, and in Q126 only one month of the naval systems. If you have a view now to slide 23, So we stay on the full year guidance that the sales is going from about 1 billion to 10, 10.5 billion. Operational margins from 18.5 to around 19%. And the operational free cash flow, we expect more than 40% about the cash conversion rate in 26. And we stay also what is our plan in 2030. And as more we book and the backlog is really growing up, as better it is so that we are on a good way also to reach our long-term target. So thank you very much for your attention, and now we are happy for Q&A.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. In the interest of time, please limit yourself to two questions. Anyone who has a question may press star and one at this time. The first question from the phone comes from Alessandro Pozzi with Mediobanca. Please go ahead.

Good afternoon and thank you for taking the questions. The first one is on Twitter. NBL, can you provide an outlook for the opportunities that you see in the naval business? You mentioned the 125, the upgrade, the 126, which you put in as a potential contract in Q2. And if we read the price, we read about 12 billion potentially that could be worse. But I guess also comes with some maybe execution risk because taking over a program that has been ongoing with a lot of delays has some execution risk attached to it. But also I think Romania becomes an opportunity as well for MBL. So I was wondering if you can give us your sense about potential opportunities for MBL.

Yeah. Let's start with the 126. On the 126 side, we have strong negotiations with the Ministry of Defense about that. As you know, this was a critical program, and as a critical program for us, it was very important to have a very, very deep technical analysis. And what we did is a technical due diligence that we did together with the team of Daman. In this technical due diligence, we found out that we are able, we see the way that we are able to sort it out. And I don't speak about the exact numbers, but maybe you are right in the level where we say, we always said it should be a program which is more than 10 billion, and we have to ask for that. I think that on the technical side, our team in Bremen and Hamburg is able to sort it out. The program management tool, the IT capacities that we have to guide such a program is very positive. On the 125, this is an upgrade program. We see very low risk on this area. We are not speaking about the 127 because we believe that this will be nothing for this year. I believe that the capacity that we have at the moment in the Ministry of Defense to work out such big programs is not high enough. We gave also internally our offer. As you know, we do this together with our friends of TKMS, but I do not believe that this will come this year. So there are different opportunities. We speak with countries like Bulgaria, like Romania, like Croatia, etc., etc., where when we took over, they came to us and said, OK, we want to cooperate with Rheinmetall and we want to do something also in that country to build ships. So all in all, there is a huge opportunity. and another huge opportunity we see on this cooperation with Kraken. And as I told you, I have seen the production line now that we have in Hamburg, and I'm very positive that very soon we are able to produce more than 200 of that ships we want to produce to grow up to 500 per year. in different ship classes. And as you know, the higher ship classes, they also will have higher prices in that area. So there is huge potential. And what we want to do is over the next years, up to 2030, to grow this naval business to a $5 billion business. And how does it work? It works with a vertical integration. And again, our strategic point is to grow from a work share of 30% up to 50%. to bring more ammunition inside, more weapon technology, more launcher technology, simulations, et cetera, et cetera, so that then we could be nearly a one-stop shop on the naval side.

Just a follow-up on the 126. Is it engine two changes in the procurement rules? And on the 127, can you quantify what could be the potential opportunity for MVL?

Yeah. So on the 126, we are in negotiations with the supply chain at the moment and the point is for me very clear, nothing is fixed because we bring up everything new and this is the negotiation that we have with the MOD, the German MOD, but we want for sure, we want to implement the supply chain that we had before. if we get a fair price and if we get a good technology. So if we see no risks in that area, we want to continue. On the F-127 in total, there is also an opportunity for a high single or double-digit billion euros.

Okay. Thank you very much.

Pleasure.

The next question from the phone comes from Sebastian Grof with PNP Paribas.

Good afternoon. Thanks for taking my question, Sebastian. Also one on the Naval side and on Romania, there have apparently been various press coverages on this one and also you released a quick statement on it. So on this potential takeover of the shipyard in Romania together with MSC, can you talk about the opportunity that you see there and how should we think about the risk profile and also going forward because apparently you mentioned the 5 billion that you have in mind for NVL over time, but how does Romania really fit in here and maybe you can start there and then F1 on the German order side.

Yeah, so on the Romanian side, the Romanian government is asking us if we can help because they see that we need more capacities also on our side. And our calculation is that we have at the moment with the shipyards that we have under control, maybe 50 to 60 percent of the capacity that we need. So we have to grow. So we are looking for other shipyards, for other investments. So that is the reason that we are looking Europe-wide what's possible. But the shipyard in Romania is a very big one. And we are not interested to take over everything there because it's too big and we cannot use it in this way. That is the reason that the MSC people came to us and they have more than 1,000 ships, transporting ships, container ships, etc., etc., And they need maintenance shops. And if I see it right at the moment, and nothing, there is no deal at the moment, but if everything is going right, maybe we need from this shipyard 10, 15% of the capacity, and the rest is for the container ships. And we have to educate the people, but this is always the same. We have our internal education program, And that could be a win-win situation. But as you know, Mr. Grobe, nothing is done at the moment, and we are still at the moment in the negotiations.

Okay, understood. Thank you for that. And then on the German order pipeline, how should we think about the U.S. decision to withdraw troops in German soil and how might that benefit you and the mentioned joint venture with Destinus? So how does this impact your earlier 5 billion revenue target that you had set out for the missile business over time? And if you could also quickly comment on how you think about the chances that come with the increased budget for 27 in Germany?

Yeah. So the investments that we do on Sherman, so we stay on that. This is exactly what we want to do. We try to find out more capacities, and we will invest also more. For example, this is what I can say, that we try to build up relatively fast also an SPX or hexagon or octagon production line here also in Germany. Yesterday I was in Oshau, where we started yesterday a huge new investment program. As you know, we doubled the capacity in the powder production, and we still doubled it again in that area with a huge investment. In total, it's an investment of $450 million in total that we do there in the powder production in Oshau. So Bavaria will be the biggest producer, I think worldwide biggest producer also then for powder. So German salt is very important for us. And only with that investment and only with that vertical integration, it is possible to grab all the money and to help because, as you know, a lot of companies have to invest, but only some companies really invest strongly. And with that strong investment, you and we are sure at the moment that the German government really is going that way. to spend this money that they have in their plan. And you know, the Germans, like Germans are, if they have it in the plan, usually it works. And so with all the discussions we have with the Ministry of Defense, with the Ministry of Finance, and we believe that we are on the right way to go forward and to grab a huge part. How much it is exactly, I really cannot say because we have to, We have a strong definition for this year, but we have to define for next year what are the programs and how much we really can take into our order books.

That makes sense. And if I, because it just sits on programs, if I may quickly, quickly ask on the Boxer program, there have been I think confusing message is probably the right way to put it in the sense how easy it might be to define the contractual agreements, etc. If you could just have a quick word on how to think about the timeline.

Yeah, on the BOXER side, there are two different ways at the moment. The Ministry of Defense discussed, is it a direct contract from Bain or is it via OCA? The next point is how many models should be implemented into this box of programs. As you know, we don't speak about the figures, but at least there are some thousand which are coming up. Our negotiation is at the moment that we need, our partner and us, we need this long-term contract because of the investments on one side. And what you see is we are investing at the moment a huge amount of money. It's about 600 million euros for long-term items on the Boxer program. And we believe, and this is otherwise you are not able to grow up the production lines. You are not able to grow up the numbers that we have to deliver. And if everything is running well and if we are producing in full scale, We have to produce 1,000 boxes per year, 500 from us and 500 from our partner, which is a huge amount of vehicles. I believe that in end of Q3 or Q4, we get a decision about that, and they have to make a decision. Otherwise, there will be a delay, because if we get a later decision, they get later deliveries. And as you know, the minister always said we must be ready in 29, and we are not ready if we make no decisions on the contract, so that I believe that the government is also in a position that they have to decide.

Perfect. Thank you so much.

The next question comes from Sam Bruges with Goldman Sachs. Please go ahead, sir.

Good afternoon both and thank you very much for taking the question. Just a big picture one to start. I mean, you're obviously expecting very strong growth through Q2 and H2. Can you just give us some commentary on how you are seeing things developing operationally across the business? Is physical production capacity building out in line with your expectations? Do you feel like supply chain is generally in good health? Or is there anything we should be aware of that's giving you a headache across the business? That would be really helpful to know. And then the second one is actually on the JV with Kraken. I mean, if you could just give us some color on the customer requirements that you're targeting there. And I guess the initial opportunity is likely to be concentrated on smaller USVs. But do you see that scaling towards larger platforms over time?

Yeah. So the growth rate is we prepared a lot. This is the positive thing. And as Klaus said before, We have a lot of ready goods in the Q2 that we can bring. If the customer has to press the button, we get the green light and we deliver. So this is one positive thing. As I said, 200 million. It was from the truck side. The powder is now ready at the moment. The quality of the powder is good that we see no problems on the serial tests so that everything is going forward. The capacity of the factories is in good shape. It's absolutely in the plan. What does it mean? So our factory in Wetzel, who is producing the F-35 fuselages, are in time. Production line in Unterluss is in line. We had a small delay of two, three weeks where we had some impact on the explosives, but this is not a big issue. We work at the moment 24-7. We are still able to do something on Sunday to bring something up, but we want to produce about 140,000 rounds in that. The powder production and the modular charges in Bavaria and in other countries like also in South Africa are in full scale. Only an example about that. The modular charges that you need, and we are the biggest producer of that, was all over the years, always 150,000, 200,000. We are now on a level of 400,000, and we grow up to 2 million modular charges. So this is a point which is huge. And in 2027, you will see the first, it's running up now. We doubled it now, but it's really scaling up. So we will have 10 times more up to 2030. And so everything is really good. The trucks on the truck side, we are ready. Everything was financed. We have a new painting shop. It's only some examples. I can give you a hundred of that examples. We did our homework. We made our investments. And we are ready with a lot of that investment so that we are able to produce. bought in with the division naval systems, more than 2,000 people, which are really highly educated and which bring us, for over the whole year, more than 1 billion sales on top. And this is also part of our growth rate. So I'm very happy about that. Kraken. On the Kraken side, we start now with this eight to nine meter boats. But as I said, there is a 12-meter class and also a higher class. Long term, we believe it's the same trend that the Air Force has. On the Air Force side, we think at the moment there is one F-35 and there are five to seven co-planes which fly with the F-35 to make the missions. On the naval side, we believe it's very similar about that. So that is the reason that we have to go in that area, and that we believe also next year that we come to a higher ship class, and the first will be more than 12-meter boat that we expect. And so, again, I think we are in good shape, and fracking and dry metal relationship is a very positive one.

That's really helpful. Thank you.

Thank you.

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

Good afternoon. Thank you for taking my questions. The first one is a follow-up on Sebastian's question on the Boxer contract. Should we expect this to be in one contract, one announcement, or do you prepare for essentially sliced pieces or by vehicle type, more contracts in smaller size, but the total sum is still adding up to the amount that you flagged? And then the second question, very long-dated one, but if I understand it correctly, obviously you are in discussions with your customers for fixed cost sharing and potential payments to keep capacity ready in future years, especially for very fixed cost intense parts of your business. This could be, I think, Quite a good solution once growth will slow down. Could you elaborate a bit on how that could work? What kind of cost sharing one might expect? And if it's largely Germany or also other nations that could do something like that? Thank you.

So on the Boxer side, the first offer that we gave was a frame contract for all different types. So this is the first thing that we gave to Ocker. And this is exactly what we said, the total amount for both companies, which was nearly €80 billion. So there is a discussion at the moment if we should carve out some of the types to have, let me say, better risk management, et cetera, et cetera. This is at the moment in discussion. There is for me very clear that there is a huge need and nobody at the moment is discussing about that. There is no need, but if whatever will come out from the risk analysis from the customer for us, it will not have a big impact because the total frame contract is a contract up to 35. And if we reduce that and if we come now to get contracts up to 29, this is also very helpful from other side because we have it for the next five years in the order books and we are safe also on the production. As I said, we invested in between 600 million and it's not all paid. It's not all cash out, but some of them for long-term items for the boxer. Because if we don't do this, we are not able to produce hundreds of boxes per year. And we, as the two companies, are fighting at the moment to have this long-term frame agreement with a fixed contract that would be at the moment on the level for Rheinmetall between 12 and 13 billion euro. Fixed cost sharing. On the fixed cost sharing, we have one discussion with the government, especially on the ammunition side, because the government wants that on the ammunition side we still should grow to build up the capacity to have a war reserve. War reserve on one side in stocks with ready goods, ready ammunition, And on the other side, to have materials that we take into our stocks and where we have extra capacities in the production line that we can grow up the production very fast. So, for example, that we are able to start in five months to produce 20%, 30% more. So my question was, okay, if I have overcapacities and if I have these materials, who pays for that? And the government at the moment, and this is still a concept. It's nothing in contract. It's still a contract that we discussed with the Minister of Defense to say the government will pay the material, and the government will pay us if we have higher capacities and underutilized machines. We are in the calculation phase how it works. It's not ready, so that is the reason that I can give you not more information about that.

Understood. Thanks a lot.

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

Yeah, thank you for the question. Hi, Armin. Hope you're well. First question on the offers that you're making for shipyards, right? You've obviously highlighted in the presentation the German Naval Yard. You've talked about this. in Romania. I mean, naval has historically been a very difficult business for most of the naval companies that have done naval. So how are you going to manage the risk around these shipyards? How are you going to manage these programs without just absorbing all of your time? How are you thinking about that? Second question was on Boeing and the MQ-28. What exactly do you envisage yourself and Rheinmetall doing on that platform? If you could outline what that could look like. And then also, we've not heard an update on the missile venture with Lockheed recently. Just wondering if you can provide some a bit of an update on how things are progressing. Are you still waiting for the US approvals and where we are on that? Thank you.

So on the shipyards, we really analyzed what we are able to do with our team. And what I see is that the 2,200 people that we have there, especially the management of the division, is very risk-averse. And that is the reason that, and you see it also, even if we had only one month there, we still have an EBIT rate of about 10 percent, which is a lot of people said it's impossible to make 10 percent with a shipyard in this area. This is because of good digitization. This is that we are able to make sales with, let me say, maybe less people than others are doing there. And this is because of the program management that the people have and the program management skills we have. some very good IT programs also for the program management. I was very, very positive when we had a look into this factory. So it is possible, and we will see this year, it is possible that we start as the shipyards always did with good profitability and that we are good in handling the programs. So taking over other shipyards is It's better to take over a warm shipyard, so a warm shipyard means that you have people who are really able to do it, who know what's going on. But to reduce the risk is that we have to educate them. We have to give them the same skills that we have in Hamburg, the same skills that we have in Bremen or that we have in our other shipyards in Germany and around the world. And this education and communication program is key for me to give them the same know-how level than we have at the moment in our shipyards. On Boeing, the Rheinmetall has to be and must be the point of contact for the Germans. We are the program managers. We want to make the service, and we want to also to do some production because we have And in Weze we have a production line that can handle U.S. data. So we have terabytes of U.S. data, secret data from the U.S. government in Weze, which are safe on our servers. This server is highly protected. It's certified from the U.S. government. And so we see it very positive because our relationship to the U.S. companies brings us a good opportunity and a good advantage to handle the data and that we are able to produce something everybody knows because what we did in 16 months to build up this production line the Americans were very positive about that and some weeks ago Jim Tacklett was there, had a look into the production line and said it's outstanding what you guys did in one and a half years. And so we are very happy and very positive about that. So missile, on the missile side we have at the moment, because we don't want to be dependent from one side, we continue our activities with Lockheed, but we are looking for a good business case on the Lockheed side. So the numbers of missiles must be big enough if we implement that into our production lines. So that is the reason that we have a look to different partners. We speak at the moment with Raytheon about ship missiles. We speak about with Destinus, and we are very near to have this joint venture. We speak with other producers of missiles to do the rocket motors for them and maybe also the warheads. so at at least five to six different partners we want to have to fill our production line end of the year the production line of the rocket motors will be ready and in 27 we want to to qualify these rocket motors that we are ready end of 27 beginning of 28 to to produce these rocket motors but not only the rocket motors maybe to have also the full assembly. The assembly of a missile is not the complicated stuff. The complicated stuff is the rocket motor and the warhead and some of the electronics for sure, which is there. But you see then that we are not looking only for one source. We are looking for different sources to fill our production lines where we at the moment invest a lot of money. But I think there is very clear that there is a huge need at the moment for missiles and the huge need of rocket motors. And that is exactly what our strategy says, and that's the reason that we invest. Is that good enough for you?

No, that's helpful. Thank you. Just one quick follow-up. Is there a reason then that the Lockheed venture wouldn't be able to fill up the motor facility in Unseloos? Because when you look at the Lockheed missile portfolio, it's very broad. So is it they only want to work on certain programs, not the whole suite of platforms? Is that what's going on?

What I want to do is I want to cooperate with not only one, I want to cooperate with more. And I want to have it on a broader base. And that is the reason that we speak not only with Lockheed, we speak also with others. But as much we can do with them, we will do. If you ask me if I'm happy with the progress at the moment with the U.S., no, I'm not. I'm usually faster. And so you see that we, again, build up in 12 months the production line about that. I thought that we could be faster also on the qualification, but that is the reason that we look for different partnerships.

Okay, very clear. Thank you, Omen.

Pleasure, Ben.

The next question comes from David Perry with JP Morgan. Please go ahead.

Yeah, hi, Armin and Klaus. Hope you are both well. I've got two questions. The first one is quite a long question, I guess, but it's on ammunition. So we're getting a lot more questions from investors about whether Germany and Europe are going to buy as much ammo as perhaps you've hoped for because of the rising use of drones. So it'd just be helpful if you could give us an update on a few things. One of them is the order book coverage you've got for the next five years. Are the prices locked in? And something that I can't find good data on, but you may have insights on Armin, is what is the current usage of 155 million in Ukraine? If you could help us on those things, that would be fantastic. And then my question, can I just give Klaus my question or should I wait for you to do the first one?

I give you an answer and then you have as much time as you want for the next point. So on the ammunition side, so we are at the moment fine with the German contract. So the German contract that we expect now is for the lot, there are different lots that they order. for the, we call it lot number nine, will be in negotiations between 100,000 and 120,000 and then another 600,000 rounds of 155. This is much, much more than they expect in the future, but this is the near-time order that will come. On the price side, we are fine. And as I always said, the reason for that is because our price is better than the price of our competitors. And the main reason for that is automation and vertical integration. Discussed it several times with you. So the other point is that a huge amount of medium caliber will come now. And as you know, there are huge programs for infantry fighting vehicles in Germany. The Boxer is an infantry fighting vehicle on Boxer chassis. And you need, and we produce, as you know, the guns for that, and especially the airburst ammunition, where we are also a sole source. There is nobody at the moment who is able to produce it. So on the medium caliber, we expect multi-billion contracts also on the medium caliber because they need something for restocking. And on the restocking side, as I said, we need years, a lot of years of that. At the moment, the backlog that we have on the weapon and ammunition is on a level of 26 billion. So this is the backlog that we have. So this is good for some years, but we will fill it up. It is a part of our growing strategy. And there is only small numbers for missiles inside because we have some smaller contracts, 70-millimeter missiles, some smaller contracts, as you know, 200, 300 million for rocket motors. But it's small in comparison to the rest that we have. So I'm fine. I'm fine with the level of the order book, and I'm fine also at the moment with the price.

So can I just clarify two things there? One, if you do have any insights into just how much artillery is being used at the moment in Ukraine. And just the other one is, The 26 billion for the book you gave, I think that's the frame backlog rather than the firm backlog. If Germany or other countries change their view, I'm not saying they will, but just if they were to change their view because of drones and evolving trends in the battlefield, can they walk away from that frame backlog?

At the moment, I have no signals about that, and I can also tell you why. So the Ukrainian war at the moment is because of this, let me say, gray zone or death zone or however you call it, this 35 kilometers above that. There is a huge use of drones and unmanned vehicles, et cetera, et cetera, because it's a stacked war. I had a lot of discussions with Germany. So if Germany or NATO is involved, that never will happen. Never. It will be never with NATO a war like in the First World War. This is at the moment a typical situation between Ukraine and between Russia. But I think it's too deep that I go into all the strategic points. Maybe we have some time if you're on the next conference about that. This is, I think, too detailed. But there is a mixture. It must be a mixture of ammunitions. So drone is one ammunition. The auxiliary need on the Ukrainian side, and I spoke still with the Ukrainians, and the need that they see, and this is also something they don't need, and this is very simple. They don't need an ammunition which has a length of 12 or 20 kilometers, because if you have that, you cannot overcome the death zone. So you need now long-range artillery. This is one point that the Ukrainians ask for, and they ask for 1.2 million rounds per year. And they do not have enough at the moment. And what we know is that the short-range artillery, they do into their stocks at the moment because they don't need it. But it's beautiful for us because we have long-range ammunition. We have a lot of long-range ammunition, up to 60 kilometers in this area, And I believe for the next budget round we will have, and we offered now, again, some 100,000 rounds for the Ukrainians via different countries. So at the moment I do not see that 155 is going down, but there is a need, a lot of need, and the Germans know it, say, okay, we need high-technology rounds, we need long-range strike, and we need cheap ammunition, and cheap ammunition is drones. And we combine that. And the drone side is especially for this dead zone side, but also in some areas, but these are then more cruise missiles or long-range drones about that for the precision deep strike. All right.

Thank you for the answer. If I could just ask my question to Klaus. Klaus, you've got this guidance for 2.8 billion of capex this year. I mean, it's a massive number. I just wanted to check my understanding, and if I'm wrong, please correct me. My understanding is this is a gross number because you're including in that all the JVs, but it's 100% share. If I'm right in that, I hope I'm not embarrassing myself and I'm wrong, but if I'm right in that, is there a mechanism you're going to get reimbursed? And if so, when and how? How would it flow through the accounts?

Yeah, yeah. You're absolutely right. The main driver for the significant capex number that we anticipate for 2026, the projects within joint ventures and the mechanism where we would get contribution from the JV partner would be through capital injections. So we get basically a capital contribution as equity and that would be part of the financing for the additional capex.

And how will we see that? How will we see it in the accounts or do you not know yet?

In two ways. First, you would see it in the cash flow, in the capital section of the cash flow statement. But because it is such a big number, in case we do have these large investment programs, we will provide you with specific information on how much of the capital contribution is related to such projects. We have only done so at the financial statements for 2025, where we provided this additional piece of information. And if this is significant in 2026, we will do so as well.

I believe, and we have, David, we have also at the moment a very, very strong program to cut the costs. And we found some areas where we really can reduce costs prices also into our investments so that I believe there is massive potential to have a better cash flow in that area.

Thanks a lot.

The next question from the phone comes from Adrian Rabier with Bernstein. Please go ahead.

Hi, good afternoon. Thank you for taking my question. Could you please quantify the Mercer plant and the trucks delivery impact in Q2? I guess my question is we're all expecting to see backlog translate into very strong sales growth. So how confident are you that the inflection will actually happen in Q2, and what's going to drive it?

Yeah. So one of the point is, as I said, we have a growth rate in Q2 in comparison to last year, as I have shown you in the presentation. which is the best Q2 ever in this area. And part of that is that our expectation is that the customer really gives the permission to deliver. There are different problems on the customer side. Sometimes the customer has not enough driver to take over. It's massive of trucks. It's hundreds of trucks that we deliver. Sometimes there is a contractual part that you say, I want to have it in that month. And number three sometimes is a contractual part that the frame contract is coming later. So the beauty is that last year we had the problem in December, and you know we switched it from December in January. This year we have a point in the first half of the year, but we believe that we have over the next two months a final decision about the deliveries of the trucks, but what we do is, and this thing is also very positive, we continue production because there is no risk, because the customers, it's not only Germany, it's a lot of customers, they need these trucks, and we continue production, and with that continuous production we have a good leverage effect so that the profitability is fine. If we would stop, if we would start again, Maybe we could have better cash management in that area, but that wouldn't help us on profitability because going down, coming up, it has quality problems, et cetera, et cetera. So in total, the numbers of trucks, and you will see it over the next weeks, we will sign new contracts on trucks, thousands of trucks, which are coming up, and we are totally relaxed about that. Thanks, Armin. Pleasure.

The next question from the phone comes from Sven Weiher with UBS. Please go ahead.

Yeah, good afternoon, gentlemen.

A few questions from my side. I'm afraid I have to bother you again on the Boxer-Arminius contract and the F-126 because on the Boxer, I mean, I understand the procedural questions around OCA and the procurement office maybe some, you know, slicing and dicing on the contract. But I mean, what is your sense of maybe fractions in the MOD having second thoughts in general about, you know, buying tanks in general? And, you know, that would obviously be the biggest order in the history of the German army and how much they are maybe afraid of the media feedback if, you know, they are seen buying tanks worth 80 billion. And then people ask them why they're not investing more into new technology. So are you getting a sense that they're having second thoughts because of that. And that is actually delaying the process. And should you not be able to also get more political lobbying? Because, I mean, KNDS has done exactly the same as you in terms of investing into boxer production. So shouldn't you also get like the Bavarian, Hesse and Lower Saxony MPs on board to do the right amount of lobbying for the contract in Berlin? Is that your sense that this is happening? Yes, yes.

Believe me, we do a lot of lobbying in that area, and this I do not see. So there are always very funny discussions about that thing. If you think that the boxer with a modern infantry fighting vehicle turret or a boxer with a modern air defense gun is not a new technology, so what is new technology? If the people say new technology is to create some software, we do this, but this is in these vehicles. And you cannot fight with software. So it's always funny if the people said, okay, what are new technologies? And look what we are doing. We do now long strike. We do missiles. We do drones. And we sign more contracts about that thing. But you need vehicles. And the point is always speak with the chief of the German army. Speak with the politicians to say, okay, what you need is logistics. What you need is safe transportation of troops. You cannot do everything like in a death zone with very small vehicles which have nearly no price. And as I said, it's not my words. It's the word of General Freuding also that we had on the Hannover exhibition to say, okay, we need cheap stuff and we need high-tech stuff. But the cheap stuff at the moment mostly said this is high-tech. And this is a differentiator in thinking about that. So I believe that we need a mixture. And the mixture is to have high-tech vehicles, to have high-tech ships. And it would be the same if we would say we don't need submarines and we don't need frigates, but very soon we only have unmanned vehicles. That will not happen for the next 20, 30 years. And the same will be on the land side. So therefore, I'm relaxed. I don't know how much they really in the first scale ordered. It was planned, and that is what we offer, to have a fixed contract from Ramital's side of a little bit more than $12 billion. And this is the only offer that we gave. And if the customer is coming back and said, OK, we want to change something, we will see. But I can't say not more at the moment about that, because that is what we did.

f um f126 so what was the the real question about the f126 no i mean the question for me was more i haven't asked it yet but the question was that um kind of because you found it like you're still sorting out you know supply chain you're still discussing with a customer because it didn't sound to me like the order would be really ready for the budget committee in q2 then right if there's still quite a few things that you need to to iron out with supply chain and with the MOD?

The order is ready. We gave the order to the Ministry of Defense. So we gave it, they have it. And if they make tomorrow a decision, then we can sign the contract. The order is ready. What we did is we created for sure a risk package around that thing. And the point is that we have also from our supply chain also the offers. But with some of the offers, we know that we have to make a renegotiation.

Another question I had was just coming back on the Lockheed Corporation. I mean, given the consequences also of the Middle East conflict, I mean, is your impression maybe also that Lockheed wants to pocket the profit for themselves and don't want to share it, and that's kind of slowing down the process? And, you know, I think they also need some technology transfer approval from the US government. Is that maybe also behind why it's going slowly?

There are two things at the moment. Government is one thing. The other thing is really... the expectation that one or the other company has about the monetary packages of transfer of technologies. I cannot pay everything, so what I want to do is I want to have, let me say, a fair also package about that thing, and this is what also takes some time. I'm not negative about that. The only thing is what we usually do, and this is what I said, if I can build up in 12, 14 months an ammunition factory, it should be also possible to implement the technology that we have in that time.

One question for me, if I may, just on the XM30, because that hasn't been discussed at all today and in the previous calls, but just was wondering, of course, it has a placeholder in the 27 budget. I mean, how are you seeing the progress on the program? Do you also sense that maybe the US is kind of rethinking it in terms of how many tanks they actually need? How is XM30 going?

We are full throttle on that program. So the prototypes are running to the army. The first tests are positive. And as I said, I believe beginning of 27, maybe end of 26, We have an indication which is the preferred system. I personally believe that the U.S. wants that. They have not new technologies. They have the same decision than the German and other NATO countries. By the way, the NATO Decree is very clear. It says how many tanks, how many logistics vehicles, et cetera, et cetera, we need. Nothing changed in that. And the Americans need that also. So I'm still positive that this program will come. If they really order, at the beginning, 3,000 or 3,500 vehicles, I really don't know. And this is also not my expectation. But if they only order 1,000, it's a great thing.

Yep. Sounds good. Thank you, Mr. Pappager. A pleasure.

The next question comes from George McWhorter with Burenberg. Please go ahead.

Good afternoon. Thank you very much for the questions. I've got two, hopefully brief ones. Firstly, on the European Union's 60 billion defence support package for Ukraine, can you just comment on how much of that you think Rheinmetall can capture? And the second one is on air defence. So you're seeing quite strong demand for your products currently. Are you considering further capacity expansion in air defense than you previously outlined, or are you sticking to your current plan? Thank you.

Yeah, European Union, the 60 billion, I really cannot say at the moment how much it will be. What we did is we gave a catalog. We gave a catalog with our capacities to the European Union, how much air defense systems, how much ammunition, how much drones, how much interceptors or whatever we could deliver. This is coordinated by the Office of the Commissioner in the European Union. So now, because you know that the money is still not really running, the first money would be for this about $5 billion. for the factories that we and others for sure have in Ukraine to help them, and also the Ukrainian drone program that they can go forward in this area. So if I would say, I really cannot say how much from the 16 at the moment I will. What we offered is huge, but what we get I can give you a little bit later. Expansion or capacity expansion, we need, and this is what I told before, we need more capacity again, and that is the reason that we invest on powder and on RDX, SPX, so as I always said, hexagon and octagon. This is the next investment that we have, and we will make also an investment on base plates, and we will make an investment also on on the laser side. These are the four things that we go forward and maybe also on AP, ammonium perchlorate. The first four maybe we invest in Germany and the rest will be invested then in Europe. But we only do it if we really have then 100% vertical integration of everything what's going on there.

That's really helpful. Just a quick follow-up. Are you potentially looking to increase capacity expansion of the products, so the air defense products like the SkyRange and SkyGuard systems, or is it only really the ammunition that might be further increased?

No, no. At the moment, we build up a capacity of 400 air defense systems per year. With that 400, the total capacity or the total sales, if we are fully booked about that, could be more than between 4 and 5 billion, so that we have to grow up on the air defense side. And on top, we have at the moment built up a capacity of nearly 1 million rounds of air defense rounds. And because we need that for air defense, but also for the infantry fighting vehicles, I think we have to invest more, especially into the fuse production and the medium caliber production in this area. But these are not huge investments that we have to do there. The beauty is that we did all the investments on the ammunition. This is the most expensive side. On vehicles, on air defense, on electronics, the investment is much smaller than on the ammunition because On ammunition, you have to make a chemical plant. You have to build up an asset plant. You have to build up big mixers. You have, yeah, a chemical factory, and these are huge investments. If you want to produce vehicles, yeah, I have to buy some tooling. I need a production line in that area, and I have to have the supply chain under control.

Thank you very much.

The next question, with Morgan Stanley. Please go ahead.

Hi. Thank you for taking my question. I have a few follow-ups, basically. The first one is on Germany, because you mentioned the recent German package of the new military strategy with three different faces. Can you explain how do you believe remittal will be placed in terms of project exposure or potential growth for each period? So that's the first one. On air defense, again, it's a very strong quarter across all the metrics and especially on your sales because it's above your sales growth expected for the year. So how should we think about the seasonality in this division? And is there like any indication to believe that the guidance is a bit conservative, especially with the higher and unexpected demand from Middle East? And the last follow-up is on the US and beyond the XM30. Is there any recent development in terms of opportunity across any offshore activities, given the fact that we're seeing quite a significant increase of the US budget?

Thanks. So in the three different areas on Rheinmetall, I think Rheinmetall has to be and will be one of the main players here in Germany about that. We are at the moment and we will continue, especially Because we are now also in the satellite business, we are now also in the naval business, et cetera, et cetera. So we have all domains and we will be a good service partner. And at the end of the day, and this is the point, make our customer happy. We have to serve the customer and then you play a good role in all three areas where the German government wants to be up to 35 or 40. So I'm very sure about that also in service and other things in the logistics. If you see what we are doing at the moment also to build up for transportation, for ammunition, for storage for vehicles. As you know, we have to store vehicles because if we get all the vehicles and if we have 200,000 people in reserve, You have to store that. You have to maintain them, maintenance them. And you only can do it if you have the IPRs and the know-how of these vehicles. Otherwise, you are not able to do it because they lose also guarantee. And so I think we play a really very strong role. On the air defense side, yeah, I believe there is a huge need on the Middle East side, but not only on the Middle East. there will be a game changer on how to fight against drones. And it will be a mixture, and some of them, a lot of them, will be gun-based. And it's not only at the air defense system that we have at the moment. We offer now also a new air defense system, which is where we produce with other calibers, maybe 25 millimeter, but also with .50, with acoustic sensors where we fight automatically. And this is a small robot who is doing that, fighting automatically on vehicles against that. This is a new demo that we gave to the German government now or will give over the next two weeks. There are huge more opportunities on the air defense side. So at the moment, the drones, the Category 1 drones are very dangerous. As you know, in Ukraine, they take these nets. There are street areas where the small fissure nets are inside, and with that net, they catch them. And in the future, there will be very cheap systems that we set. We have, for example, a 40-millimeter handgun, which is where we are able to catch drones if the soldier, the infantry guy, is running around. So there are a lot of new technologies that are are coming up because if there is a guy who is acting, who is giving you also a new threat, you have to fight against that. United States of America, it's XM30. We offer now also the auxiliary program. This is the RCH. Rymetal offers that because we have foci mitigation in the United States. We offer autonomous vehicles. a new gun technology which they want to implement about that. There are minimum 10 programs. We have huge programs on the missile side because the U.S. wants to produce much more missiles. Rheinmetall is a component producer for missiles in the United States. So log performance is producing components for the United States. So you say, Marios, it's huge. It's a lot of programs that we offer there.

Okay, thank you very much.

Thank you.

The next question comes from Afonso Osorio with Barclays. Please go ahead.

Hello, yes. I appreciate it has been a long call, so thank you for taking the extra time with us. I have a couple as well. The first one is on this backlog bridge. Correct me if I'm wrong, but looking at your previous slides from the CMD last year, You had the Panzer contract to Italy falling in 2027, but now you have this falling in the second quarter of this year. Just wanted to confirm that that's the case and also the potential size of that opportunity. That's the first question. And then secondly, like bigger picture, given the significant increase in the German budget next year, just wondering how can you, how are you thinking about your long-term targets? Is there upside for long-term because of that uplift in 2027? Or do you think it's still too early to say? Thank you.

Let's start with the second part. I think it's still too early to really say how this is going to develop. Regarding the reconciliation for our order backlog, as we mentioned several times, there are always some movements, some shifts. Overall, we can confirm positively the guidance that we provided already in the last year of 80 billion order intake for 2026 that would take us to an order backlog by the end of the year of 135 billion. So, there are lots of additional opportunities that are moving around, but that is our best estimate as of today.

Does it help?

No, it does. It does help. Just to confirm, the contract that was expected before in 2027, that's definitely this one to enter into 2026, right?

We have it on the page number 21 as part of the $18 billion.

What's the size of that one, if you can confirm?

Thank you.

The next question comes from Chloe Lamarie with Jefferies. Please go ahead.

Yes, good afternoon, Armin and Klaus. Thanks for squeezing me in. I'd actually like to follow up on Ben's question on the missile . Should we assume that the JV with this unit would be able to replace what the Lockheed Martin would have contributed to the €5 billion revenue target if it doesn't materialize? Or is it not exactly the same scale from your perspective? On my second question, if I could ask on the F-126 order, how long should we assume from the order until it starts cycling through revenue? And what would be the revenue rent profile? Is it like a step change or is it going to be a progressive rent? Thank you.

So the missiles is an add-on. On the missile side, it's an add-on to that what we have. As I said, missiles, we are, as a businessman, you will not take all the eggs in one basket. So what we want to do is if we invest between 100 and 200 million euros into rocket motors, if we invest 50 million into an assembly hall to make missiles, I won't be sure that we can fill this factory. So that is the reason that we are looking for different partnerships. Lockheed was one. As I said, Raytheon will be another one. We are in negotiations with them if we can do something. European partners want that we have a European source. They want that we do something and that we build up capacities here in Europe. And it's a win-win situation also for the Americans because, as you know, the American capacity is not so high that they have a problem also to deliver. So what we want to do is we want to make risk reduction program that we do not have factories which are not fully filled, even if the need is huge outside. And we want to make qualification programs in different areas. So take the risk down. F-126. On F-126, if we sign the contract, we will have the POC mechanism in this area, and with the POC mechanism, we can book sales not immediately, but over the first year and then year by year. So what we want to do is we want to have a ready ship in 29 and we want to have ready for sale in 31, latest 32. This is what we want to do and this is what we speak at the moment. 31 would be possible if we make parallel qualification programs with the German Navy and our internal qualifications. But we don't want that, let me say, all the sales will come when we deliver the ships because we have a lot of cash and also the cash must be in milestone payments about that. So we take care about that. Otherwise, it would be bad for us.

Very sure. Thank you.

The next question comes from Joe Orchar with Rothschild & Co. Redburn. Please go ahead.

Good afternoon, and thank you for squeezing me in. Just one question on my side, and it's one about ammunition, really, and the competition there with the JV between DEAL and NAMO getting the green light to proceed. I guess, how do you think about the long-term competitive landscape for 155mm artillery production, and how well-protected Do you think your market shares are there?

Yeah. So on the 155, I think always it's very important how much capacity the different companies work off. Are you aware how much capacity they build up?

No, not at this point.

So I can tell you it's a different scale that we do. And I'm not responsible for that company, but I think if you really ask for that, you will see that this is another company category of ammunition production on 155. We still think that with our investments, with our automation, we have a very good situation because of the pricing of the costs that we have and the vertical integration, which most of them they do not have. And I love competition. Okay, that's great to hear.

Thank you very much.

It's a pleasure.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Armin Paperger for any closing remarks.

Ladies and gentlemen, it's again a pleasure, like always, to discuss with you. I'm happy to see you again in the next conferences or in the next Firesat chat calls. Thanks for your time. Thanks for your interest in Rheinmetall. Stay with us. My whole team will do really the best to make our customers happy. Thanks for your time.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coruscall and thank you for participating in the conference. You may now disconnect your lines. Goodbye.