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.