Rheinmetall Ag Unsp/Adr

Ladies and gentlemen, welcome to Rheinmetall AG Q2 2026 Conference Call. I am Sandra, the Chorus Call Operator. I would like to remind you that all participants have been listened only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star N1 on your telephone. For operator assistance, please press star N0. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Armin Papperger, CEO. Please go ahead, sir.

Thank you very much. Good afternoon, ladies and gentlemen. Thank you for your interest in the quarterly call with Reimetall. My colleague Klaus Neumann and myself will put you through now the presentation. Please take care about the disclaimer that we have on page number two. Let's go to slide number three. On this slide, you see that in quarter two, the sales of Rheinmetall is going up to 3.289 billion. This is a plus of nearly 70%. So in the first half year, the growth is around 40%, which is exactly in line to that what we guided. The operational result with plus 115% to 562 million is also in line with us and for what we see very positive. Operating margin with 70.1% is on a very good level and we are very happy that the applications with more than 160,000 is still very high. So, as you know, we at the moment hire about 10,000 people per year, so we can pick up a lot of good people out of these 160,000 applications. What is the reason that the operational free cash flow with minus 1.331 billion is in that figure? So we have in between, in quarter two, supplies of about 6.2 billion euros. and we need this goods in our stocks otherwise it's impossible to grow and we wait and this is only to compensate if we get some down payments and we wait for some down payments especially from the big contracts there is a down payment that will come from Romania but especially also the down payment that we get from Germany If we book the Arminius contract, which is the big elephant in the room. So the second point is CAPEX. We reduce CAPEX at the moment and not because we reduce the factories, and you will see that later. We found a way to find synergies and to reduce costs, which is for us a very positive signal. So the capacities of our production lines are absolutely in line with what we planned but on the CAPEX side we can reduce the costs. Rheinmetall nominations with a plus of 476% is for us very good with 11.371 billion and so the Rheinmetall backlog is growing up to 80.4 billion euro. If you have now a look to page number four, you see what I said before, the execution is very, very well managed. Same what we told you in quarter one is that we had a growth rate on revenues between the first half year 25 to the second, to the first half year in 26. The first half-year growth rate is so in line with the full-year guidance. The margin increase is especially because we have a favorable product mix and we have an operating leverage for sure because of this growth rate. and the total operating performance is like last year with about 40% and this supports exactly and is in line with our guidance for the full year. So on the next page you see a little bit the story that we had on the F126 and we expected As you know that we can book this contract but at the end of the day the minister made another decision. And for us it was really astonishing and the reason is also very clear because the story is that the government came to us and said okay make a technical due diligence. We made this technical due diligence with about 70 people from our naval group. After this technical due diligence we told that everything is possible, we can make it happen. We made final negotiations with Bain BV about the contract and even Bain BV was astonished when the program was stopped because we also had the forecasted approval for the F-126 so the money was there on 8th of July and then we got the information on the 24th of June That the minister will stop it. What are the reasons? The reasons, and I think one of the main reasons is for sure the litigation issues that the Ministry of Defense had with Dahmen. But the calculations they had is that the MECO program is faster and to be faster, to have, as he said, steel in water, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rolf Giebeler MPAihood and I come later about our new Frigate program and the impact of the revenue and that is the reason that we reduced also the revenue. We cannot overcompensate in so short time 300 million euros. So that was the reason that we reduced the expectation of about 300 million on the sales side. On the long term side, we really hope that we can compensate these programs with national and international and here are different programs from the German side we look that we get some minesweepers but also some drone ships we call it MuSe which is possible over the next years but also international programs where we offer our new frigates and this is what you can see on the next slide on slide number six so the GMF 140 It's designed and we started a year ago on that because it's impossible to design in five months a frigate. And it is designed for operations in highly complex threat scenarios. And this frigate should combine air defense, ballistic missile defense, and anti-submarine. And this is also very important for us. It is possible to integrate the Aegis Combat Systems and the Combat Management System 330 where we are in cooperation with Lockheed Martin in that program. So this frigate, as the name says, has a length of about 140 meters, has a speed of 30 knots and a crew size of around 90 people from the marine side and we think it's a good standard for the international business and we will see The decision of different customers. We are in negotiations with different customers. At the moment there is nothing official, therefore I cannot speak about the nations by themselves, but I believe that this is one of the future drivers of the business of the naval system. By the way, the mid-term and also long-term strategy of naval did not change. So it was and is absolutely the right decision to go into the naval business over a period of up to 2030. We believe still that the naval business can grow up to 5 billion Euro. If you have a look now to the next slide, slide number 7, here you see The unmanned systems and air defense, that was the focus on Eurosatury and on ILA. And here you see the innovation and how we structure the company. So if you start with Komodo, which is an unmanned breaching system, fully automized, we see a huge potential for that area in different areas. If you only see in the Ukraine the big need, It will be a huge business over the next years. Skyranger on the HX truck is another opportunity, a relatively cost-effective opportunity for our Skyranger technology, but also containerized missile launchers where we implemented the FV014 Our new drones which we started now also on the international marketing and sales campaign because the production line and you see that also later will be ready end of this year or in end of Q3 this year here in Dusseldorf or Neuss. The same is on the SAR satellites. We are now starting the production processes for that. We built it up a capacity of one SAW satellite per week. And very similar is Ruta Block 2 and the Krüller in cooperation with Destinus. And we are on the way also to start the production end of this year. So it is planned that we really can make the first sales end of this year with that product. The 81 motor. Amos Integrated Motor & U Technology, the Unmanned Surface Vessel, the 8.8m Vessel and as you know we are in development also for larger vessels but autonomous vessels, and the Ghost Pad. So this is a part of our product portfolio, of our innovative portfolio, how to enlarge the product portfolio. and we do it relatively riskless because most of that things we do with technology which is available or with technologies with our partners that we implement into the Rheinmetall product portfolio. If you have now looked to page 8, you see that the market and the market mechanisms here are valid and are in line. Europe is on track for higher spending and you see the tendencies from Great Britain with 2.56, Germany 2.69 of the GDP, Poland with 4.6, etc., etc. You see there is a growth rate in 26. But on the right side you see the total spending and as you know over the next years There is an immense growth, and they want to grow up to this 3.5 percent. I believe that Germany is able to come near to the 3.5. It will be between 3 and 3.5 percent, which is a huge amount of money, but a lot of other countries will go also that way. Not every country will reach it because of the budget problems, but there is a strong growth rate inside. If you have an hour look to the contracts and these are the only the numbers of the 25 million proposals in Germany as you know this is if you have a contract of more than 25 million you have to go to the German Bundestag and that proposals are growing from 22 where we have 24 proposals to 25 with 103 and it will be even more Armin Theodor Papperger, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Armin Theodor Papperger, Klaus Jürgen Neumann, Armin Theodor Papperger, Klaus Jürgen Neumann, Next page is page number nine. On page number nine you see the Rheinmetall product portfolio tailored to the NATO capabilities. What is the reason that we show that? Because what we do is two times a year, every six months, to have a look what is really what NATO is looking for. And so these are the clusters where they have from deep precision to digital Transformation is a lot of different areas where Rheinmetall is in. And the only missing point that you see is that we are not in the raw materials. But the rest, if it is space technology, ammunition, strike capability, et cetera, et cetera, we build up a product portfolio or we have a strong product portfolio in this area. And this is that, and that's very important. And we here, To the customers, and it's better to hear to the customers and to make him happy than to anyone else, and Rheinmetall is continuously monitoring what the NATO requirements are. And it's not only what we need at the moment in Ukraine, or what the Ukrainians need, it's what the NATO really needs and what the NATO says for a conflict, what they need, which kind of products they need. These are multinational procurements and that is the reason that we make also international corporations and we must be fast in that area and our target is usually that we should be able in one or latest in one and a half years to bring new products to the NATO capabilities and the NATO gaps. So now have a look to the next page, it's page number 10. And in that we gave you an overview about the joint ventures, the M&A activities and partnerships and MOUs that we are doing. And here you see Rheinmetall in comparison to different peers. We picked out five peers and a lot of them are doing We believe in joint ventures because a lot of these joint ventures is very strategic for us is that we had a lot of that joint ventures also with governmental agencies or with Anika Giulia Marker, Anika Giulia Marker, Anika Giulia Marker Investments are absolutely not reduced, but only they found the synergy effects. So, so far the introduction and now I take over to Klaus and he takes care about the financials.

Thank you, Armin. As already stated, we do report a very strong result for Q2 and also we did deliver on our promise that we made after our Q1 conference call. We saw an outstanding Q2 growth with 69% to 3.3 billion euros and all the segments, and I will go into more detail later, all segments contributed to this very strong growth. Organic growth was above 50% and also important for 2026 numbers, there were no major pull forward effects from Q3. The naval system accounts for the bulk of our M&A number and there were limited impacts from FX, both on sales and on operating result. Operating result grew even stronger than our sales by 115%. Our sales growth, our result growth benefited from the higher volumes and also could leverage on this additional scale. Moving on to the next page. Now let's have a quick look at all the different segments. Vehicle systems showed the strongest absolute growth as more programs are now in the execution phase. Sales increased by 53% to nearly 1.5 billion euros supported by strong truck deliveries to Germany as we had The operating margin improved to 12.5% year-over-year due to a more favorable product mix and higher sales volumes. Sales in our weapons and ammunition segment grew by nearly 60%. Main drivers were deliveries for artillery and medium caliber ammunition. The sales catch-up Our Moosia plant is ongoing and will continue to contribute to stronger growth in 2026. Operating margins increased significantly year-over-year to almost 26%, benefitting from the increased volumes. Sales in digital systems increased by 30% to 470 million euros, largely attributable to the TAWAM programme for the German army and the further production ramp-up and our F-35 production site near Düsseldorf. Operating result profited from a favorable leverage effect and increased by 80%, pushing margin to 9.6%, an increase of 2.7 percentage points. Air defense showed the highest percentual growth of all segments. The sales grew by almost 80% to 285 million euros, Klaus Jürgen Neumann, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann, At around €260 million, main drivers were the contracts with Germany on fleet service boat and the naval fuel supply vessel, as well as repair and service business. Operating result reached €25 million, which resulted in a margin of 9.7%. On the consolidation line, sales consolidation increased to €325 million, as a result of stronger intersegmental sales and the result impact was slightly lower than in 2025 at 32 million euros. Let's turn to page number 14. Our second quarter saw a very strong book-to-bill ratio above three with a very high share of firm orders. Primary nomination of 11.4 billion euros, so a plus compared to 2025 of almost 500%. The high majority of the nominations are firm orders at a level of almost 11 billion euros. Main orders were the Romanian package of around 6 billion euros, the low-term ammunition contract for the German army, and the training program for the UK, the TTP. As a result, backlog increased to 80 billion euros. This is an increase of around 44%, with 70% of fixed orders contributing to the total of Rheinmetall backlog. The 70% fixed order share is an increase from 58% at the end of Q2 in 2025. Now, let's move to page number 15 for a detailed look on our order backlog. Over the last years, our order backlog grew at an average rate of 45%. From 2022, we grew the backlog from 18.4 billion to now over 80 billion at the end of June 2026. Also, the quality of the order backlog increased and we have a very strong visibility on our sales growth in the coming years. As you can see on the top right corner of the slide, for the next two and a half years, We have already fixed the order backlog that covers the next two and a half years. Order is to 90% fixed. Only 10% of the orders that we anticipate to turn into sales are from frame backlogs. Beyond 2028, we already have strong visibility with an order backlog of 47 billion euros. Let's turn to page number 16. As indicated, we had a negative operational free cash flow of around €1.3 billion after a negative cash flow in the first quarter that gets us in total for the first half of the year to €1.6 billion. The main driver is an increase of inventory that we are doing to secure supply readiness for the second half of 2026 and the coming years 2027. The build-up is mainly driven by the vehicle systems. As I mentioned, the major programs are going into the execution phase and digital systems that will see stronger growth in the years to come. One impact that also basically burdens the operational free cash flow is the continuously high level of capex that is in absolute terms higher even than in 2025. Let's move now to page number 17 for a more detailed look at our capex spending and expectations for 2026. During our capital market day at the end of 2025 we indicated that we anticipate a capex number of around 16% for 2026 and the main driver for this high number were energetics plants that we anticipated to start constructing in 2026. Several of these contracts, as you may have read in the news, have now been rescheduled and will only start serious construction in 2027. And that significantly reduces our capex number for 2026. At the same time, this rescheduling does not have an impact on our 2030 sales guidance and also We do not expect any impact for 2027 and 2028 because these are long-term construction contracts. There were some other project-related adjustments also as a result of somewhat delayed order intakes as discussed earlier that also has pushed some investment into 2027 and also we are able to reduce The budget on existing and executed programs as of today we anticipate a capex percentage of around 8-9% for 2026. Now let's move to page number 18. We successfully returned to the bond market after more than 10 years of absence. with the planned bond issuance in the second quarter. The bond, maturing in 2031, offers us financial flexibility for further growth. It opens up a new way of financing our business activities and acquisitions. The equity ratio came down to 28% as a result of the exposition of the naval business but also the expansion of the balance sheet due to the increased build-up of inventory as discussed. Our net financial position is now at minus 2.7 billion euros, mainly driven by the 1 billion euro syndicated loan that we took out to finance the acquisition of the naval business. As an update on our convertible bond, All bonds from the series A and B are now fully converted. That increases the number of shares in our business. With this, I would like to hand over back to Armin.

Thank you, Klaus. So on the next page, on page 20, you see first of all the backlog that we have or the orders that we brought in. So in age 1, 26, we are on a level, as I said before, of more than 80 billion. At the moment, the backlog is on about 60% Germany and 40% on the international program. So it changed a little bit because before we had usually 60% or more international programs and the rest was Germany. So Germany is more now in the focus. Now I think a very important information is the information from yesterday also what we see or what we got also from the customer side on BOXA, the Arminius program. So now yesterday also from customer side said the final discussion should be end in the second week of September. for the Arminius program. The Deutsche Bundestag should make a decision in the beginning of December, so the meeting is on the 9th of December. Then, over the next five, maximum ten days, the contract should be signed. And like last year on the Schakal program, the discussion at the moment is that end of the year There should be also a down payment. So what is in now for Rheinmetall? There are two contracts which are fixed. There is a fixed contract about the vehicles, and this is what we spoke about, this €12.4 billion for vehicles. And another contract, which I believe could be signed in January, February, is a service contract, which is a total contract of €4 billion. Armin Theodor Papperger, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann We negotiated 30% down payment so that would be more than 3 billion down payment that we could get end of the year or let me say in January maybe also but this is something in weeks but this is at the moment what the government told us. There are two options and this is what we also offered and also negotiate. The option number one is another 14 billion contract and an option number two and this option number one is then for the next piece from 2030 to 2035 and then option number two of 12 billion which are additional vehicles. So this is the offer that we have. At the moment everything seems in line. We are very careful of the F-126 what really can happen but we are in line and there is no signal at the moment that they want to cancel the program because they need it and there is no other opportunity that the 12.4 billion fixed contract plus the service contract should be final negotiated and the end of the year. It's a strong race to do it end of the year, but at the end of the day, the most important thing is that the contract will come. So after having that information, there are more trucks, ammunition, but also missiles that we negotiate so that the peace from the German side is a big one, but there are also international As you know, the Italian programs where we expect the next lots. There is a Portugal boxer program, which is inside the SAFE program from Austria, Caracal, etc., etc. So these are the international programs. And if you see what we see, so we expected this 135, we reduced that. Anika Giulia Marker, Anika Giulia Marker, Anika Giulia Marker At the moment everything looks like we want to do it in December. If you have a look now to the next page, the page 21, you see, and this is only a small part of that what we are doing, the key capacity expansions that we have and where is the status so that we are on track with our expansion. So you see that the only yellow painted is the Ukrainian artillery plant and the reason for that is that the civils are not ready. There is a special equipment on the civils and it's a strong delay, it's a delay of two years in that area. Lithuania is online, we are in time there. and the start should be in Q2 2027. The capacity that we have on this artillery plant is up to 100,000 per year. Then we have the medium-caliber plant in Albacete. Here is Spurgos. Sorry, there is a failure. It's Albacete where we produce upper medium-caliber plant. and this medium-caliber plant is able to produce more than one million rounds so we are in line and we will in the middle of 2027 we will have the ground opening there in Spain. On the explosive side we have an RDX plant in Varpalota which should be ready also next year. Blending facilities in Switzerland, this is for powders, special also for the single Anika Giulia Marker, Anika Giulia Marker, Anika Giulia Marker Then we have a rocket plant in Burgos, that's right, and the rocket motor plant in Unterluß. The rocket motor plant in Unterluß will be also ready in Q1 next year. So everything is in line. The only thing that we miss at the moment is the Ukrainian side. But this doesn't hurt us a lot because what we see is that the plant capacities that we have in that factory, usually we can minimum Armin Theodor Papperger, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Armin Theodor Papperger, Klaus Jürgen Neumann, Armin Theodor Papperger, Klaus Jürgen Neumann, Armin Theodor Papperger, Klaus Jürgen Neumann, And on the vehicle side, also noise is that the truck cabin assembly will be ready in Q2 27 where we are able to produce more than 1,200 protected cabins for our protected trucks. By the way, the capacity of the air defense turret is about 100 turrets per year, also in noise, which is a huge piece then also on our sales. Now let's have a look to page 22. And this is only an overview about that with on the activities on the United States. I must say we invest at the moment to the United States. This investment cost us at the moment double digit millions also this year. But we have to invest it for qualification, for new R&D programs where we have to make an Americanization And we need the money also for market development. This is an impact that we have on vehicle systems, but you really don't feel it because the margins are good. But at the end of the day, if the U.S. margins are really growing up then to the level where we are, this is a trigger point for us that vehicle systems can grow up to our expected 15% EV cross. But the programs are of very interest. On the vehicle side, you know the XM30 program. I think we are, and last week we had the program meeting about that. We are on a very good way. The customer is happy with us. The technology is superb that they have. We know at the end of the day it's a political decision. CTT is becoming smaller because I think of budget issues also, but XM30 has still very high priority on the army. and a new high priority is also the RCH 155, so the new artillery program in the United States. So we go into competition there and also on the unmanned ground vehicles we go into competition. These are highly automized vehicles and the US is also very happy with the technology. that they see because the automation kit, the kit A, is from Rheinmetall, it's a Rheinmetall algorithm, it's Rheinmetall KI that is inside and the US is very happy about that. If you ever look to weapon and ammunition, there are ammunition programs like the 25mm FAP program, this is for the Air Force, this is frangible, 25mm frangible ammunition, so an ammunition which is If you have an impact that you have a lot of splinters and you destroy, for example, the whole wing of an airplane, but also the Ki-TF 30 millimeter for the Navy, this is the airburst ammunition that we also have in our air defense systems. This is for the Mark 340, where the Americans want to implement the 30 millimeter. The US programs are huge programs, and these are always billion The Precision Grenadier System is a new system that we developed, and the US is very interested to use that against the anti-drone fight, especially that the soldiers have the possibility to protect himself against drones. This is also an airburst ammunition, very similar to the KATF, but on a 40 millimeter caliber. and if that is implemented on the US side we believe there is a huge opportunity also in Europe to implement it because at the moment most of the soldiers are not protected against these category 1 drones and we gave an offer to the Redford Army Ammunition Plant this is especially for the powder production and this is what we do in cooperation with Honeywell because you need also a second US source to go forward. If you have now a look to page 23 and we see that as we said before the delivery is in line, we have a plus of 40% but in total we have again this second half here which is back and loaded This is year by year the same and Q4 is always what we have to produce for sure everything nearly everything in Q3 but in Q4 it comes into the sale and this is especially because of the contracts that we have on one side and that the customers also want to get the deliveries mostly then end of the year so We are in line with the expectations that we had with our plan and on the next page, on page 24, you see that we, but this is what we told you also in our ad hoc message, that we took out 300 million from the naval side because we are not able to overcompensate that. So that the sales is now between 13.7 and 14.2 billion. The operating margin of around 19%. It could be a little bit better because we reduced 300 million from the lowest profitable business and the operational free cash flow is a very digital decision. If we get the down payment, and as I said before, it's more than 3 billion down payment of Arminius, it could be higher. If we don't get the down payment, it could be also lower, but we stay on that area of about 40%, because at the end of the day, we really believe that we are very near to get this Arminius contract. Maybe then we would have a delay of one month or maximum. So, so far the presentation and now we are very happy to go into Q&A. Thank you very much for your time.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the session queue, you may press star and 2. Participants are requested to disable the loudspeaker while asking a question. In the interest of time, please limit yourselves to two questions. Anyone with a question may press star and 1 at this time. Our first question comes from Alessandro Pozzi from Mediobanca. Please go ahead.

Thank you for taking the questions. First of all, I think it's good to see that we're seeing, again, a strong growth in Q2. But the first question is only one to six. If we can go back to, if you can give us your view on exactly what happened, because there was clearly a disconnect between the ministry and the procurement agency. And I think this is a key point in the context of big programs that are coming up, being the Arminios or the 127. And I think only Armin has been talked about extensively even in the RENC call as well. But can you give us your view of what you think you can book in terms of value by year-end? Is it just the fixture or is it the frame contract as well? And maybe an idea of margins for the service contract as well. Thank you.

Okay. Yes, Alessandro, I will do that. So on the 126 for me the biggest issue was the liabilities and it's a big difference between the 126 and the Arminius program. The Arminius program was not a program that was fixed with another company. As you know the 126 was a diamond program. We wanted to rescue the program and we gave the opportunity to rescue the program But the final negotiation between the Ministry of Defense and Dahmen, yes, was not ready. And the point was that Dahmen is looking for sure that the German government is taking out the liabilities because, as you know, they nearly spent its three billion about that, and the government has to take care about that. And this was nearly impossible for the minister to do that. And the second point is, as you know, there was a proposal There is no proposal, there is no other vehicle at the moment than the Boxer, so you cannot compare both cases. But the most important thing for me for the 126 is very clear that the Minister has to protect the government and has to protect also the money the government spent it and they could not Armin Theodor Papperger, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Before the decision, I had all the traffic lights on green. From Ministry of Defense, from everyone was green, but at the end of the day, the Minister, together with the Chief of the Navy, had to make a decision and said, okay, I must be politically correct and go the politics correct way. It was not a money issue.

Okay, I missed it. And on the Arminius, you mentioned a couple of options. Can you take us through the numbers again and whether you think a frame can be awarded?

Sure. So we offer a frame contract for option one and option two of about 26 billion. This is what we offered and a fixed contract of 12.4 billion for vehicles. And these are only the numbers for Rheinmetall. This is what we offered. And the fixed contract of 12.4 billion for me is at the end of the day a must. And the frame contract is an option one and option two that we offered. I don't know if we get everything. It's not a big risk for them if they also take the options. Armin Theodor Papperger, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Yeah, but what I can say today is that I believe that the 12.4 billion plus the service contract, because without the service contract it will not work, and this is 2 billion for Rheinmetall, so at least I believe 14.5, 14.4, 14.5 billion, it's a must, and the rest are the options. It would be unfair if I say it's 100% safe, or it will not happen. This is a point which is not finally negotiated with the Ministry of Defense.

Okay, understood. And when you look at the backlog, and you mentioned the Boxer, you have the full value of the Boxer there, I guess, with the frame as well. Okay.

On the backlog, it's easy if you count the boxer and the rest, and that is the reason that you said it's more than 100 billion. It's between 100 and 120 billion. So if everything is going well, we are on this level of 120 or a little bit more. And if you only have a case of that, it's more than 100. So this is the point.

Okay, that's very clear. And just on the final one on the CAPEX, there is a reduction in CAPEX in 2026 partly because of some delays in the energetics facilities in the build-up. Can you reassure about the medium-term target in weapons and munitions despite the lower CAPEX in 2026?

Absolutely. The point is very clear. The investment on the energetic side that we do is at the moment on the nitrocellulose, it's in line. We expected that we have a strong cash out also this year for Romania, for example, for the energetic factory there. This will not happen, number one. Number two, we get also from the Romanian side a down payment on that area, so this is also helping us to reduce Anika Giulia Marker Anika Giulia Marker Anika Giulia Marker Anika Giulia Marker, Anika Giulia Marker, Anika Giulia Marker Thank you very much.

Very useful.

It's a pleasure.

The next question comes from Sebastian Grohe from BMP Paribas. Please, go ahead.

Good afternoon. Thanks for taking my questions. It's two, one on Evel and the other one on partnerships and broadly. And then on the system side, you've reiterated the 2030 sales goal of up to 5 billion. I was wondering whether you could talk about the margin ambition, really. And the second question on the partnership side. You labeled the teaming and partnering approach to then also satisfy customer requests and also fulfill capabilities. There have been some media reports that the drone partnership with a U.S. partner has scaled back. So my question there is, can you comment on the root cause? And more broadly speaking, are you seeing the risk that there might be more such cases, especially with probably more or less mature companies, I may say so?

Yeah. So let's go to the naval side. Our margin target is very clear. It's still around 5 billion and around 15% profitability. And for sure you need the shipbuilding programs. This is one thing. And we lost now one, but we will win other programs. I'm sure about that because I think we have a very good product portfolio. We have minesweepers, we have these drone carriers, etc., etc., and the national and the international need is there. And I also trust that our team will be successful on the new frigate program because the feedback that we got, and we spoke for sure with different customers before we started the development, was a very positive thing. This frigate will be In a price level which is much better or lower price than most of the people expect, but you still can have margins and we brought in also in this area and will bring in production technologies that Rheinmetall is doing in other areas. So, automation of welding, etc., etc. So, yes, we stay on that. This must be our target and this is the target that the management team Armin Theodor Papperger, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels With Unreal we stay on that point, but at the moment we have no products that we can sell which are ready. And if we have ready products, and we said we started with Barracuda in this area, but the Barracuda, I need Barracudas for qualifications here in Germany, and if they would be ready, we could help there, but they were not. Then we stepped into other partnerships also and this is the reason that we stepped into also Destinus because Destinus is ready. Thousands of that cruise missiles are fired in Ukraine and we want to get the first contract end of this year also with these cruise missiles. So can I say that 100% every partnership is able to be successful? No, it's impossible. But at the end of the day, Anika Giulia Marker Anika Giulia Marker Anika Giulia Marker Thank you so much.

Absolutely. Thank you.

Next question comes from Rory Smith from Oxcap Analytics. Please, go ahead.

Good afternoon. Thank you for taking my questions. First is just on CapEx. You've already talked a lot about this, so thank you for bearing with me, but I just wasn't clear On what you said the outlook was for CAPEX as a percentage of sales going into 27 and 2028, and then how we should think about that beyond the next two years, just on this kind of phasing there of the energetics. That's my first question.

Yeah, thank you for the question. We will provide a more detailed update on the CAPEX expectations during a couple of market dates. From what we see today, we see potential that the level will be lower than we indicated at the end of last year, also for 2027 and 2028.

Okay, thank you. And then my second question is more of a big picture question. I guess we heard the Chief Executive of RENC this morning saying that he was very sure that 99% of German defense supply's land business would still involve crude vehicles by 2030 and that drones and loitering munitions would not make heavy armor obsolete. Now, I was just wondering what your sort of thoughts on that were and how that flows into some of these partnership and capital allocation decisions that you're making in land. Thank you.

I try to bring that information also with my presentation what we look what NATO wants. And I have not to look what some guys and professors or whatever are telling us. So every six months we check what the NATO is doing. And NATO is telling us or is telling the different countries what they have to buy or that they should buy. I believe that drones are important and you see that in Ukraine also that drones are important. But if you have a look to the chief of the German army and the former deputy chief of the German army and if you see what they say is drone is one effector. We need a mixture of effectors. and drones are able to fight against vehicles or against personnel as you have seen yesterday also in the videos from where the Russians are hunting people in cities but at the end of the day the protection against drones will also go forward and you need vehicles You need also a lot of vehicles, not as much as expected 10 years ago, but you need still vehicles to have a safe transport also for people. And the next 20, 30 years, there will be no robotic war by themselves. There will always be people in the battlefield. If you see what happens in Russia or wherever, A lot of these drones are still at the moment one-on-one guided with drone pilots. This is a point where you need people, you need infantry people going to the frontline, especially if you don't have a stacked war, a stalwart which you have at the moment between Russia and Ukraine, which is, as I always said, it's a war like in the First World War. You have a dead zone there, And then you go in the dead sword 100 meters in front or 100 meters back. This is not a war that NATO is doing. NATO has air forces. NATO has perfect air defense support, has a lot of firepower to bring in to have a mobile war and not a static war. And this is the big difference that you see. So I see and The point is from me very clear that we need a mixture and in that mixture there are also protected vehicles. That's very clear. Thank you for the question.

Thank you.

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

Good afternoon. Thank you for taking my questions. First, just coming back to Armin's and your statements on option one and two, what do you think are the main decision levels that the MOD is taking there and what would be the risk to sign both options basically this year or early next? Could you elaborate on that, what the discussions look like and what you think the MoD is focused on in evaluating taking both options? And then the second one, sorry, just a clarification question. I think you stated that despite the capex shifts or cuts, 27 and 28 revenues will not be impacted. Could you just elaborate again on why there is no impact on revenues despite the shifts? And then the last question, sorry, very short term. You indicated that there is an XM30 impact on Q3 earnings. With that, we probably cannot expect the usual step up Q3 over Q2 margins, but could margins still be flat to up in Q3 versus Q2 or no comment at this stage? Thank you.

So if you go to the investment side, I try to precise that again. So if you go to the factories that are ready now and that are becoming ready also next year, like for example the powder side, on the powder side the raw materials are fine. The nitrocellulose is coming also from our factory that we have in North Germany. And we have no gap there on that area. And the Ashau plant is overcompensating a lot of other plants. If you see, the Ashau plant is growing up to 4,500 tons. Most of the other things, for example, even if Romania will be delayed of half a year, for example, We can compensate it because the Romanian capacity is much, much lower. We speak then about 1,000 tons in that area. So that is the reason that our plan and also a huge amount of money that we invested in ASHAO where we grow to the modular charges that you need on the auxiliary business where we have then enough capacity From South Africa, from Spain, and also from Aschau, where we are ready. So the second point is, and this is the second biggest source, is the investment that we made in Spain. Spain is also ready next year on the powder side, and the third biggest investment was in South Africa. So these are the three big pillars. And the rest that we have is, if you see Romania, if you see Bulgaria, if you see Lithuania, the Lithuanian plant of about 1,000, we could overcompensate also with untalus if we really drive untalus full throttle. That is the reason that we think that we are able to, and as I said, 10% or 15% plus In Unterlös or in Aschau will nearly compensate a full factory. Is that clear?

One additional comment, the construction programs that are being pushed, the big energetic plants would have had a construction time of around two years Armin Theodor Papperger, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann,

I believe that the government wants to sign also this frame contract, but it is not fixed. So therefore, whatever I say now in the point could be right or could be wrong. What I believe, which is very, very safe, is that we get, as I said before, the 12.4 billion plus the 4 billion, which is 2 billion for Rheinmetall, so the 14.4, 14.5 billion safe. and there is a need and this is for me what is positive for me and there is not a gap of money at the moment which is also helpful so therefore up to 2030 everything is financed but up to 2035 for me I cannot say yes or I cannot say no and I have to wait what is coming out now in the negotiations and then you get the information but I'm very careful about this area and I try to be conservative in this area because on the other side I try to be always positive in this area but I'm very conservative and we will see what's going on.

Thank you. And on the Q3 margin question?

Sorry to follow up on that. Q3 is in line. The margins are good, and as you know, end of the year, usually the margins are higher than at the beginning of the year because the fixed costs are done. So we are on a very good way to reach, let me say, at least the targets that is in your expectations.

Thank you.

The next question is also from Marie from Jefferies. Please, go ahead.

Good afternoon. Thank you for taking my question. I have one just to confirm on the 100 billion backlog that you target by the end of the year. Would it be achievable without the frame contracts from Arminius? And then one on the U.S., when do you expect a decision on the RCH 156, please? Thank you.

First question, yes, it's possible without the frame. And the second point is that we don't speak at the moment about time schedule on the frigate because this frigate program is very new. And we even don't speak about the... So, RCH, I didn't have understood wrong. On the RCH 155, The Americans want to make a decision also next year, but first of all, we have to go into a qualification program.

Very clear. Thank you.

Thank you.

The next question comes from Marie-Ange Rigaud from Morgan Stanley.

Please, go ahead. Hi, Armin, and hi, Klaus. Thanks for taking my question. I have three. The first one is on the German Decent Bizet because We all know that we have seen recent headlines around the potential draft suggesting lower cash outlays for ammunition and land systems. I know it's quite difficult to comment because it's a draft, but I have two questions here. Are you seeing any change in the German procurement priorities or allocation of spending? Can you probably just help us to understand what can be the drivers of lower cash spending? Could it reflect program timing or industry capacity rather than weaker order opportunities? And lastly on this topic, and probably more importantly, should we read anything into these figures regarding remittance sales by 2030? So that's the first question. The second one is on air defense because your performance is very strong in H1 and well ahead of your full-year guidance, so it will almost imply a significant slowdown in H2. So I just would like to understand if there is any specific reason why growth should moderate in the second half or if it is simply a conservative assumption. And lastly, on your operating free cash flow, could you just quantify how much of the advance payment shifted from H1 into H2, and how much of the inventory is built related to products already manufactured in Q2 that are expected to be delivered in H2? Thanks.

Yeah, let's start, Marie-Ange, with the ammunition side. So we made a very strong analysis about that. By the way, It's not 100% clear what the government really wants because it's not a fixed check. What we can do, we spoke with the government and said, okay, what is, I think at the moment it's between 11.5 and they want to reduce the ammunition budget to 9.5 billion. So we analyzed, first of all, tank ammunition. We see no influence on the tank ammunition because most of the contracts are signed on the tank ammunition side. There is no reduction on this area. On the artillery ammunition, we are, as you know, in the discussions at the moment for another 114,000 plus 600,000 rounds. Nobody gave us a stop and said, okay, no, we don't want to do it. And as you know, and as you have seen, The backlog on the ammunition is a very high one, so that we see no impact also over the next years. Medium caliber is the big area where we have a growth rate. On the medium caliber side, there are at the moment negotiations about 5 million plus 5 million rounds. It's two contracts, and this is nearly 10 billion Anika Giulia Marker Anika Giulia Marker Anika Giulia Marker Anika Giulia Marker Anika Giulia Marker Armin Theodor Papperger, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Armin Theodor Papperger, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Armin Theodor Papperger, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Armin Theodor Papperger, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann And on the operational free cash flow, Klaus, do you want to say something about that?

We were asking about basically how the inventory balance will develop towards the end of the year. We expect that the growth will significantly slow down as we basically increase sales in the second half. So we anticipate a more or less similar level as at the end of June. What we have in stocks. What we have in stocks, yeah.

Maria, do you have a question?

Yeah, all good. And just on the advance payments that shifted into H2, can you quantify?

We mentioned that we do get the 15% for the remaining contract that we anticipate. Then we have some other programs where we anticipate significant prepayments, but the big The timing could be quite close for 2026. It really depends that the relevant parties are doing what they're supposed to do to make sure that it comes at the end of the year. And we also highlighted that we often have the situation that we get material prepayments really just days before the year end and this year might be another example of this pattern.

But if you only see mariage, Romania is more than 1 billion in two tranches and 3.5 billion, up to 3.5 billion is Arminius. So that is a total game changer in everything and the money will come because if we sign it the money will come And it depends if we book it in December or if we book it in January. At the end of the day, for me, it doesn't matter as an entrepreneur if I get it four weeks earlier or later, as I always say in that area, but we try to get it in in December.

Okay, perfect. Very clear. Thank you.

Thank you.

The next question comes from Sven Weyer from UBS. Please, go ahead.

Good afternoon. Thanks for taking my questions. First of all, I think it was the right decision to have a different type of guidance on the boxer. So even if we don't like the answer maybe, but I think that's good. First follow-up question I have is just coming back again on 2027 and 2028, because you said it doesn't have really an impact on the expected growth rate. I mean, if I remember correctly, I think you said in the past, Anika Giulia Marker, Anika Giulia Marker, Anika Giulia Marker, Anika Giulia Marker, Anika Giulia Marker,

Do you remember that we have Chacal booked? This was also a Boxer program. This should be also part of a Nominius program, but we got that contract. So we booked it. Heavy Weapon Carrier, we booked it. So this is all the programs that we are there. So this is part of our growth rate. So as Klaus said before, most of the business in 27 is also booked. So therefore, there is no impact about that. What is coming in from the order intake? So if we have order intake where we can make very fast, where we can create very fast sales, then there is potential of more growth. And as we discussed also before, the 40% of this year is around 40% tick in a box, and over the next years, I think 30 or a little bit more than 30% is possible and this is possible with the backlog that we have and the continuous order intake then over the next years we will year by year to have a positive book to bill ratio much more than one and that will help us and that can grow up also the backlog something happens always and you have seen that on the F-126 what could happen in the last minute yeah this is always clear but that's business and then we as businessmen have to compensate that we have to find new ways and we have to go into new opportunities and this is exactly what we do we are not sitting down and said okay wow now something happened and crazy world or whatever this does not help no we go forward and we look for new opportunities and the new Frigate program is a huge opportunity this is much bigger we didn't tell that even if we had it two years in our point we didn't tell that point because it was very early but now we are ready now we are ready to launch that and now we are ready to go into marketing processes yeah so at the end of the day I think there is also a lot of opportunities Compensate and overcompensate different areas. So I stay on my prognosis.

That's good. Thank you. Second question I had was just on the Navy business and your current opinion on German naval yachts, whether you think that's still makes sense or whether you should also pull out like TKMS.

At the moment, we cannot make a decision and this is very clear. We miss now the work of the F-126. If we would have signed the F-126, we need it. That was the reason that we stepped into the process. We have with Gnuq a non-binding offer. We did not stop it because we wait at the moment what are the next steps on the market side and in some areas we think Armin Theodor Papperger, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann, If Knick wants to step out of the process, it's fine, because at the moment we got no signal.

And then the very last one, if I may, is just on Lockheed and Atakens. Obviously, that seems to be now going ahead. I mean, what kind of order potential should we see on this one, short term?

Yeah, the Lot 8 should be produced in Germany, because as the statement of Lockheed was also very clear, that they need the space. and my colleague, the CEO of Lockheed also told very clear that he want to install now the PRISM production line. So we build up the production line next year and we want to produce next year starting end of the year with the Lot 8. But we see a lot potential also in Europe to produce the ATT&CK cams Armin Theodor Papperger, Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Vera Saal, Anika Giulia Marker

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

Hi, Armin. Hi, Klaus. Hope you're both well. Am I allowed three questions? Seems a few people asked three. If not, I will tailor my two.

No, no. Take your time.

Thank you. The first one is a very short one. Could we have a little bit more color on the trade receivables that you've referred to for Q2? Just which products are you awaiting payment on? Do you want to take them one at a time or should I ask them all?

Yeah, yeah, please, please. One at a time. Okay.

Second question, just on the boxer, could I ask the question in a slightly different way, bottom up rather than top down? Because I think on the Q1 call, Armin, you talked about a plan to go to 500 vehicles a year. But some of the suppliers like Renk and Vinkorin have both talked about 1800 in the first phase. And I'm not sure if the 1800 is just for Rheinmetall or for Rheinmetall and KNDS, because if I was a supplier, I guess I'd be agnostic. But if it was, maybe I'm misunderstanding, but if it's 1800 vehicles across the whole program, I just don't see how you get to 500 a year, if you could clarify that. And then my, The third one, please, which is a bit more conceptual, because you talked about the JVs and it sounds like a lot of them you've not put in your plan, in your sales guidance. And indeed, I think 11 of them that I've tracked have been announced this year. So they wouldn't have been, you may have known about them, but they may not have been in last year's guidance. I'm just wondering, when we get to the CMD this year, Is it the plan that you're going to reiterate the target for 2030 sales? But we may find the mix changes quite a bit. So you may say, look, the world's changing. We might not have as many vehicles or as much ammo, but we've got more on the drones, more on the missiles, more on the autonomy. Or am I getting ahead of myself there?

Thank you. Yeah, let's start with the last thing. I believe that the drone business will grow and I know. Anika Giulia Marker, Anika Giulia Marker, Anika Giulia Marker And yes, it could be that there is a change, but it's not a dramatic change. It's not that we say, okay, oh, wow, there is no longer tank ammunition or no longer artillery ammunition. I think that we can add something, and in some areas it's a plus, in some areas it will be a minus. But the total thing, I believe, is very clear, is the growing story that we have. The second point is, What we build up, we build up a capacity on Boxer of 500 vehicles per year. And the reason for that is because we have a German business and we have also international business in this area. And it makes not a lot of sense if you have a peak about this area because the costs are, if you build it up to 400 or 500 vehicles, the costs are nearly the same. Klaus Jürgen Neumann, Rene Gansauge, Dirk Winkels, Michael Salzmann, Rene Gansauge, Dirk Winkels, Michael Salzmann, We have now, and this is now August, and if you see, and I said in the second week of September we are ready with that, it's another four weeks or five weeks, and then we have a full picture about that. But yes, our investments at the moment are on a level of 500 vehicles per year that we want to produce for national and international businesses. There is a business in the Netherlands, there is a business coming out from There are other countries who are looking for that, and it makes not a lot of sense to go there and say, okay, after this investment, if there is a peak, let me say, from 350 to 500 vehicles, then to make another investment. So this makes not a lot of sense. Is that fair for you, David?

Yeah, that's helpful. The international piece is probably what I'm missing. And just from Klaus on the trade receivables.

Yeah. The one area where we have a lot of trace receivables more than in other quarters is logistic vehicles where we had a really strong push of deliveries as we had indicated earlier. These deliveries have a payment of normally 30 days so they will now be paid in July and the other is ammunition. We had a very strong June. and also there are lots of payments that come in the following month.

Okay, thank you very much.

It's a pleasure, David.

The next question comes from Sash Souza from Agency Partners.

Please, go ahead. Thank you very much indeed. Good afternoon. I just wanted to probably ask, well, hopefully, from your point of view, ask the last question on some partnerships and missile. But specifically, With Anduril, you said that they haven't been able to deliver Barracuda to you for qualification. Is the issue there that Barracuda is basically not past the vaporware level yet? Or is this an ITAR issue? And therefore, does that have any knock-on effects? And then on your relationship with Destinus, Destinus is being fairly active in signing Armin Theodor Papperger, Armin Theodor Papperger, Armin Theodor Papperger, Armin Theodor

We are responsible for where we make the sales, where the joint venture, which Rheinmetall has the majority, is responsible for. And where we build up, let me say, the production lines also in the joint venture. And where Rheinmetall is also responsible for warhead production and some other production in this area. So this is a very clear picture. And there is, we do not, we make not everything worldwide. And if there are countries where other players like Thales are more effective in this area, Destiny is able to do this and should do this with them. But the big business, I think, is big enough also for us to go forward. And by the way, we do also business with others, not only with Destiny, as you know. The attack is with Lockheed. We try to bring other partners inside to produce it. So on the air defense side with LIGNX is where we can produce a lot of things also here. So there is a mixture. And what we do, we have to do what the customer wants at the end of the day and to before. The second point is on the Barracuda side. I think at the end of the day it's a mixture of all that things. But what I can say is I can at the moment not make a testing program with the German government. And that is for me the most important thing because Germany is looking for that. And the other thing is that we also need then this, we have to participate on this very long range strike. and there is also one of the missing points. I don't want to say more in details about these areas because this is between the companies. Thank you very much.

Next question comes from George McWhiter from Bloomberg. Please go ahead.

Good afternoon. Thank you very much for my question. It's just on the German budget vehicle assumptions. And what are your latest thoughts on the quantity of Puma and Leopard 2 tanks that Germany will order in the next 10 years? Thank you.

Yeah. So on Puma, it's very clear. As you know, we signed the second lot, Puma. So this is signed. This was this 1.1 billion. And then Germany is looking for a lot number three. And this lot number three is another two and a half billion, where the opportunity is to get it. Let me say, I think we cannot get it this year, but because there are too many 25 million programs, but this is the need that they have. And I believe that's it. So there is no more need at the moment. The need of the main battle tank, it's better if you ask KNDS because they guide this program. At the moment the only program that we see is what we signed. So at the moment we are in discussions with KNDS also in these areas. I see no further programs for the new leopard tree. This is another story, but this is not ready, and this is now too early to speak about that.

Thank you very much.

Next question comes from Dario Dickmann from MP Capital Markets. Please go ahead.

Good afternoon. Thanks for taking my question. I've got one on the GMF 140 that you've just presented for the North American and international market. Do you see this platform as a potential fit for the German Navy as well, specifically as a smaller footprint alternative to the recently criticized F-127?

Look, this is a decision. You know that we are in cooperation with DKMS also on the F-127. At the end of the day, the customer has to make decisions about that. What we know is Philipp von Brandenstein, Vera Saal, Anika Giulia Marker Philipp von Brandenstein, Vera Saal, Anika Giulia Marker Philipp von Brandenstein, Vera Saal, Anika Giulia Marker

The last question for today's call comes from Joe Orsart from Roti Linko. Please go ahead.

Yes, good afternoon. Thank you for taking my questions. Hopefully just a couple of quick ones. The first one relates to naval systems and the F-126. Have you had any discussions with TKMS about taking on some work as a subcontractor for the MECO frigates in order to utilize some of your spare capacity? And the second one, please could you provide an update on the deal to acquire the Iveco Defense business from Leonardo, if possible? Thank you.

So Iveco Defense, it's still an open issue because Lorenzo and myself have to discuss in detail that area. So you know the statement from Leonardo's side. We still have our agreement, but there are also others interested in this area. We still think it's a good idea to implement the trucks from Iveco into the RMMV fleet, but it's not a must to do it, so we are in good shape. The F-126, we are looking at the moment to fill The production lines, there are always discussions. As you know, TKMS and Rheinmetall is a cooperation partner and a good cooperation partner for a very long time in a lot of things because of the Lurssen relationship before, which is now Rheinmetall, but also in other areas because of simulators, etc., etc. We do what the customer wants, but I think For the first four ships, TKMS gave the contract to shipyards, and this is at the moment, I think, absolutely fixed. So I believe that we cannot help for the first four ships, and the second four ships are still not in contract. So therefore, it makes not a lot of sense to discuss if there is nothing to discuss.

Okay, thank you very much.

A pleasure.

Ladies and gentlemen, this concludes today's question and answer session. I would now like to turn the conference back over to Armin Papperger for any closing remarks.

Yeah, thank you very much. I hope we could give you a real good overview about that, where we are at the moment. Yeah, we are on track, and thanks for your time. and thanks to go with us and with Reimertal. Thanks a lot. Bye bye.