RENK Group Aktie

Welcome to the RENK Group AG Q1 2026 Pre-close Call. Please note that the call will be recorded. [Operator Instructions]

I would now like to turn the call over to Christian Weiss, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to our Q1 2026 results conference call. My name is Christian from the IR team. With me today are our CEO, Dr. Alexander Sagel; and our CFO, Anja Manz-Siebje. Alexander and Anja will take you through the presentation. Afterwards, we will open the floor to your questions.

But now I will hand over to Alexander, please go ahead.

Yes, Christian. Thank you very much. Ladies and gentlemen, also from my side, like always, a very warm welcome and many thanks for joining today's Q1 call. Today's presentation has, like always, 3 parts. I will start first with a quick review of Q1 2026, followed by Anja, who will guide you through our key financials in more detail before I will come back with our outlook and guidance for 2026, a quick review of our current R&D pipeline and the upcoming key order intakes and programs for 2026.

Ladies and gentlemen, before we go into details, let me quickly summarize the key messages upfront. First, RENK has delivered a solid start into 2026. Q1 confirms the strength of our business model, the strong momentum in our Defense segment and operational execution of our entire team. Second, the strongest Q1 order intake in our history at EUR 582 million, resulting in a book-to-bill ratio of 2.1. Third, the total order backlog at a new all-time high of EUR 6.9 billion. And importantly, also our fixed order backlog grew further to EUR 2.6 billion versus year-end 2025. Our defense business continues to be the clear driving force with plus 27% in order intake. Fifth and finally, we fully reconfirm our 2026 guidance. Revenues above EUR 1.5 billion and adjusted EBIT between EUR 255 million and EUR 285 million. And again, let me be crystal clear again here. We are clearly targeting the upper half of our adjusted EBIT range. All to sum it up, RENK is on track. Let me now walk you through the details during the next slides.

Therefore, ladies and gentlemen, let's move to Slide 1, which summarize the 4 key takeaways I just walked you through. Record order intake in Q1, all-time high backlog, VMS as the clear growth engine and more than 90% of planned 2026 revenues already covered by our fixed order backlog. So let me focus directly on the key order intakes for Q1 2026.

Most of these programs, I'm sure it should be very familiar to you. First, an international MBT program with our transmissions at approx EUR 157 million. This program is quite relevant for RENK by providing access to a growing market in the NATO environment. Also, the second Puma batch with transmissions and suspensions at approx EUR 140 million, a quite important step for the modernization of the German Army. Also, the U.S. M88 recovery tank program with engines at approximately EUR 49 million. And finally, two orders from international howitzer programs at approximately EUR 25 million.

If we move to Slide 2. Slide 2 summarizes the group performance for Q1 2026. And as you can see in the 4 orange boxes at the top, all KPIs show a very positive development. The order intake we already covered, so let's move directly to the revenue. The revenue came in at EUR 284 million, plus 4% year-on-year. Important to note when comparing Q1 2026 revenue with previous year's first quarter, Q1 2025 did include Israel-related revenues in the range between EUR 20 million to EUR 25 million for Q1 2026 and as already communicated during our full year 2025 call, we did not have such Israel volumes in our production planning and consequently, no Israel-related revenue contribution. The adjusted EBIT stands at EUR 42 million, plus 10% year-on-year and once again clearly outpacing revenue growth and reflecting the operating leverage in our business model. The adjusted EBIT margin improved by over 9 percentage points to 15.0%.

Regarding the end markets, we are now at a defense share of 74% on a LTM basis, fully consistent with our sector strategy. The New Build versus Aftermarket split is at 64% to 36% and within our typical current range, depending, like always, on the specific product mix quarter by quarter.

Let's move to Slide 3. As you all know, defense is the core of our business and the main driving force behind our group performance. While the defense-related order intake increased strongly by plus 27% to EUR 495 million versus EUR 390 million in Q1 2021, the revenue side came in at EUR 209 million, plus 3% year-on-year. Important to emphasize if we would, and this is just for reference, included in this revenue figure, the missing Israel volumes from Q1 2025, as described before, the defense-related revenue would have been above EUR 230 million with a corresponding growth of approximate 14% year-on-year.

One final word to Israel at this point. Since November 2025, the German export embargo has been lifted, and we are now ramping up the production and shipments for Israel during Q2. We continue to expect EUR 80 million to EUR 100 million revenue contribution for the full year. Ladies and gentlemen, let's move on to a quick view on our divisional performance and starting with our largest and most important division, vehicle mobility solution.

VMS is, once again, our clear growth engine. Revenue grew strongly by plus 11% to EUR 191 million, fully in line with our customer contracts and delivery schedules. Our modular production concept in Augsburg ramped up during Q3 2025 is fully running and supporting ongoing margin improvement. The order intake was outstanding, a record Q1 of EUR 478 million, plus 21% year-on-year with a book-to-bill of 2.5x, driven by the main programs mentioned earlier. All to sum it up, VMS is performing, both commercially and operationally. Let me now turn to Slide 5 in our Marine & Industry division.

M&I had a softer Q1 2026 with revenues at EUR 65 million or minus 11% year-on-year, driven by two specific effects, as already mentioned, during our Pre-close core. First, customer-induced delays in outbound logistics on certain naval projects, approximately EUR 10 million impact on the revenue side; and second, supplier-related schedule issues. These effects are temporary and will be fully recovered during Q2 and Q3. The underlying performance and the order pipeline of our naval business remains fully intact. On top of this, our industrial business is still under pressure due to the GDP-related overall weak market environment. The order intake of EUR 70 million confirms a solid level of activity, and we expect several larger naval order intakes during this year, which I will touch later on in the third part of the presentation.

Last but not least, a few words on slide bearings. Slide bearings showed with EUR 30 million of revenues, a flattish performance in Q1 2026 reflecting the ongoing headwinds from the weak industrial market mentioned before, the quarterly driven lower aftermarket and a negative impact by U.S. tariffs, which we did not have in Q1 2025. The order intake at EUR 35 million is slightly above the revenue level. Ladies and gentlemen, now let's move on to the last slide, at least of my introduction, our total order backlog for [ Q1 ].

We have reached a new record level of EUR 6.9 billion, up from EUR 6.7 billion at year-end 2025, which corresponds to approximately 5x our LTM revenue. Very important to highlight, our fixed order backlog has continued to grow from EUR 2.3 billion at year-end 2025 to EUR 2.6 billion driven by the strong Q1 order intake and despite our high revenue conversion. The third order backlog stands at EUR 3.5 billion, slightly below year-end 2025, driven by the conversion of soft into fixed during the quarter. On top, we have over EUR 9 billion of frame backlog, plus our significant recurring aftermarket business outside our framework contracts.

Having said this, I would like now to hand over to Anna for a deeper look into our Q1 financials. Anja, over to you.

Thank you, Alexander, for handing over. A warm welcome also from my side, and thank you all for joining us today. In accordance with our usual agenda, I will guide you through our Q1 financial performance, the development of our divisions and then net working capital as well as cash generation. Overall, Q1 '26 marked a strong and profitable start into the year for RENK Group. We continue to benefit from the favorable demand environment in defense-related mobility solutions while at the same time, demonstrating solid execution, especially within VMS. Most importantly, our profitability developed ahead of revenue growth confirming once again the operating leverage and our ability to make use of it. This was supported by a favorable product mix and positive scale effects, particularly in VMS, which remains the key growth and earnings driver in the quarter.

At the same time, we also saw some headwinds in parts of the business, especially in M&I and slide bearings. These effects were mainly driven by customer-induced delivery delays, supplier bottlenecks and postponed order awards. Nevertheless, we do not regard this as structural.

From a balance sheet perspective, net debt remained stable and our leverage stayed at its normal level. Net working capital increased in line with production activity and short-term delivery obligations. So to sum up the first quarter, RENK delivered profitable growth, maintained a strong financial position and continued to benefit from high visibility in its core defense markets.

Moving to our group performance in the first quarter. Order intake increased by 6.1% year-over-year from EUR 549 million in Q1 '25 to EUR 582 million in Q1 '26. This is a record-breaking start into the year and was mainly driven by VMS, which contributed the vast majority of group order intake in the quarter. Revenue increased moderately by 4% from EUR 273 million to EUR 284 million. The main driver here was again VMS supported by higher output realized based on our modular production process in Augsburg and continued execution of the order book. At the same time, M&I had a counteracting effect mainly due to customer-induced delivery delays in the Marine business and the supplier bottleneck at RENK American Marine industry. As Alexander already highlighted, our book-to-bill ratio remained very strong at 2.1x. This means that order intake, again, clearly exceeded revenue conversion in the quarter. As a result, fixed order backlog increased by 14% compared to year-end '25 from about EUR 2.3 billion to about EUR 2.6 billion. The key takeaway is that Q1 confirms the strength of demand, the quality of our backlog and our ability to translate that backlog into execution.

Turning to profitability and leverage. Adjusted gross profit margin increased from EUR 78 million in Q1 '25 to EUR 84 million in Q1 '26. This corresponds to growth of 7.4%. This adjusted gross profit margin improved from 28.7% to 29.7%. The reflecting positive scale effects and a favorable product mix in the quarter. Adjusted EBIT increased even more strongly by 10.4% from EUR 38 million to EUR 42 million. The adjusted EBIT margin improved from 14.1% to 15%. This is an important point because earnings growth outpaced revenue growth, confirming the already mentioned operating leverage that allows us to benefit from positive scale effects. On the balance sheet, net debt remained essentially stable at EUR 391 million. In relation to last 12-month adjusted EBITDA, leverage remained at around 1.5x. This means that we continued to combine profitable growth with financial discipline.

The cash position, I will comment on that in detail later on, also remained stable compared to year-end. Operating cash flow in the quarter was sufficient to cover investing cash flow and financing cash flow. We, therefore, see the Q1 development as a constructive signal. The business is growing profitably while leverage and liquidity remain well under control.

Let me now move to our divisions, starting with VMS. VMS once again confirmed its role as the group's key growth and earnings engine. Order intake increased by 20.5% from EUR 397 million to EUR 478 million. This strong development was driven by continued demand for land-based drive systems. It is worth noting that the prior year quarter had already included significant order intake. Against that comparison base, the Q1 '26 order intake performance is particularly encouraging and driven by two major order intakes. Revenue increased by 11.2% from EUR 172 million to EUR 191 million. The main driver was higher output in Augsburg, supported by the [ modular ] production set up. This shows that the current growth profile is not only demand-driven but also execution and capacity driven. Adjusted EBIT increased by 22.3% from EUR 29 million to EUR 35 million. The adjusted EBIT margin improved from 16.6% to 18.3%. This margin improvement was mainly supported by growth in the margin-accretive Augsburg business. To sum up, VMS had a strong first quarter with order intake, revenue and adjusted EBIT, all growing double digit. The division continues to scale, and it remains the center pillar of RENK's growth and profitability profile.

Now let's have a look at M&I. M&I had a weaker first quarter compared to prior year period. Order intake decreased from EUR 122 million to EUR 70 million. The main reason is that Q1 '25 had included an exceptionally high order intake level in the Navy business. So the year-over-year decline should be seen against a demanding comparison base. Revenue declined from EUR 73 million to EUR 65 million. This was mainly caused by customer-induced delivery delays in the Navy business and the supplier bottleneck, which led to extended production processes and downstream delays. In addition, aftermarket revenue was below the prior year level, especially in [ turbo ] products. Adjusted EBIT decreased from EUR 7 million to EUR 4 million, and the adjusted EBIT margin declined from 10.2% to 6.7%. The main drivers were lower revenue, negative scale effects and missing margins from the delayed deliveries. At the same time, it is important to put this into perspective. The weaker Q1 performance does not indicate a structural change in the division's demand profile. It is primarily driven by timing effects, customer-induced ships and supply chain constraints. Based on the current view, we expect compensation of these effects in the following quarters. So the key message for M&I is Q1 was below the prior year, but the reasons are identifiable, managed fleet timing and supply related.

Turning to Slide bearings. Order intake decreased moderately from EUR 37 million to EUR 35 million. This development was mainly driven by postponed order awards for marine and e-bearings despite stronger aftermarket activity. Revenue was broadly stable at EUR 30 million compared to EUR 31 million in the prior year quarter. Performance continued to be affected by the subdued industrial market environment, as Alexander already pointed out. Adjusted EBIT declined from EUR 5 million to EUR 4 million. This adjusted EBIT margin came down from 73% to 30.3%. The decrease was mainly attributable to an unfavorable product mix and negative effects related to U.S. tariffs. The key takeaway is that slide bearings remained relatively stable on the revenue side, but profitability was burdened by market conditions and the regulatory setup in the U.S. We continue to see the division as a high quality contributor to the group, but Q1 reflects a more challenging environment.

Let me continue with the reconciliation from operating profit to adjusted EBIT and adjusted EBITDA. Operating profit increased from around EUR 24 million in Q1 '25 to around EUR 27 million in Q1 '26. Purchase price allocation effects were stable at around EUR 11 million. As a result, operating profit before PPA depreciation and amortization as well as income and losses from PPA asset disposals increased from around EUR 35 million to around EUR 38 million. Adjustments amounted to EUR 4.8 million in Q1 '26 compared to EUR 3 million in the prior year quarter. These adjustments were limited in size and mainly related to global system and process improvements severance payment, M&A-related costs and tax compliance standards. In total, adjusted EBIT increased from around EUR 38 million to around EUR 42 million. Adjusted EBITDA increased from around EUR 46 million to EUR 51 million. The main message is that the increase in adjusted EBIT and adjusted EBITDA was supported by the operating performance of the business, while adjustments remained modest.

Now let's have a look at net working capital. Net working capital increased from EUR 345 million at the end of '25 to EUR 380 million at the end of March '26. As a percentage of last 12-month revenue, this corresponds to 27.6% compared to 25.2% at year-end. The increase was mainly driven by inventories, which rose from EUR 436 million to EUR 496 million. This reflects short-term delivery obligations and higher production activity. Importantly, around 69% of inventories are customer related, which means the increase is closely related to existing customer demand. Customer receivables decreased from EUR 375 million to EUR 356 million, and this development was mainly shaped by reporting date effects. On the funding side, prepayments received increased moderately to EUR 343 million, while trade payables declined to EUR 129 million. Overall, the development of net working capital is in line with the production activity and subject to timing effects. Our higher working capital supports revenue conversion and delivery readiness. At the same time, we remain focused on managing the managers, particularly when it comes to inventory discipline.

Finally, let me turn to the key free cash flow items for Q1. The starting point is adjusted EBITDA of EUR 51 million. Adjustments amounted to minus EUR 5 million, and the change in net working capital had a negative effect of EUR 31 million. As just discussed, this working capital increase is closely linked to production activity, inventories and timing effects. CapEx amounted to EUR 5 million in the quarter and income taxes paid were around EUR 10 million. including the positive effects from other items, unlevered free cash flow come in of EUR 8 million after the interest result of minus EUR 6 million, free cash flow amounted to around EUR 1 million. This means that we generated positive free cash flow in Q1 despite the working capital buildup. The last 12-month cash conversion rate stood at 59%, which is consistent with our current growth path and scale up of production. Put differently, operating performance clearly outpaced the net working capital increase in the first quarter. We will continue to focus on disciplined working capital management, but the Q1 cash flow profile supports the overall message of profitable growth with a stable leverage.

With that, I would like to hand back to Alexander again, and thank you for your attention.

Thank you, Anja. Ladies and gentlemen, let me now come back with a few comments on our outlook and guidance for 2026. Let's move directly to Slide 18, where we fully reconfirm our 2026 guidance. Revenues above EUR 1.5 billion and adjusted EBIT range between EUR 255 million and EUR 285 million. And as mentioned before, we are fully targeting the upper half of the adjusted EBIT range. The main operational levers, which are key for our 2026 guidance are summarized on the right side of this slide.

First and clear strict delivery and revenue conversion based on our customer contracts. We have the order book, we have to fix backlog, and now we execute it, [ full store ]. Second, a stronger back-end loaded H2, fully in line with our customer delivery schedules and our investment plan for 2026. Third, full focus on operational excellence and our capacity expansion in Augsburg and Rheine, the modular production line is fully running and the next investment steps are coming online during Q2 and Q3. Fourth, the continued rollout of the RENK production system from Augsburg to [indiscernible] and now further towards [indiscernible]. And finally, further improvements of our operational efficiency. The overall market environment for 2026, even including a potential peace deal in Ukraine, we do see as strong and positive, and we expect major order intakes during 2026 which I will touch and describe on the next page.

Moving now to Slide 19 and having a quick view on our order intake situation for the rest of the year, meaning Q2 up to Q4. Regarding Q2, we do currently see a range between approx EUR 400 million to EUR 500 million for order intake, depending on the timing of the specific programs. For the full year 2026, we confirm our high visibility of approx EUR 2 billion in order intake, which we have already indicated during the full year 2025 call. Let me highlight a few key programs.

Regarding main battle tanks, we do expect further orders from Germany for the Leopard 2A8 and related MBT-based family platforms, but also further MBT orders from various international customers. Staying in Germany, we have the Boxer Arminius program, most likely a first contract for approximately 1,800 vehicles expected during half year to 2026. We also see further orders for the Panzerhaubitze 2000 tracked howitzer during Q2 and Q3. And then, of course, the U.S. Thor IV frame contract and related first contracts for 2026 currently in the final phase of negotiations. And new orders from various IFV programs such as Italy, Romania and Austria.

On the Navy side, the F-127, the MEKO A200 and the R&D project for the German Navy and also her various international frigate programs, including the two programs which shifted by the way, from Q4 2025 into 2026. Also, and as a first highlight, and if you want a kind of sneak preview for Q2, we were nominated in April with the very first serious contract volume for the Patria TRACKX APC, a great success. By the way, the press release will follow soon. Fair to say, the potential order intake pipeline is full and the underlying momentum is strong.

Now let's have a quick look on our production portfolio initiatives, and let's move to Slide 20. Slide 20 is, from my point of view, at least, a very important slide, which demonstrates very clearly that RENK is doing a lot in terms of R&D and new product development for the land and the sea domain. Our next-gen mobility road map is fully in execution with important milestones through the entire year 2026. Let me just walk you through 4 of our recent R&D projects where two are focused on new transmission for land platforms, while the other two are related to unmanned platforms.

First, the HSWL 354B transition for the future Leopard platform, a development contract from KNDS. Second, the ESM280, the development of a high-performing transmission for heavy wheeled platforms above 30 tonnes. Third, the Heavy Tracked UGV concept. Here, we are working together with Patria on a new UGV concept between 10 to 20 tonnes platform weight for multiple use cases. And fourth, the ASV project, a development contract for an autonomous surface vehicle in the Navy domain for an international customer. The UGV and the ASV are underlining our strategy in the field of unmanned platforms for land and sea domains, a new product segment, which we believe will be a structural growth area and volume market for the coming decade. Important to mention 3 of these 4 projects will be shown at the Eurosatory in Paris from June 15 to 17 at the RENK booth. And of course, we are very much looking forward to welcome many of you in person.

Ladies and gentlemen, you did it almost. We are close to the end of our today's presentation. So let's move on to Slide 21, the key takeaways of today's call. If I had to summarize Q1 in one sentence: Strong demand, good execution and very high visibility. We are seeing this very clearly in our order intake and total order backlog. This is not just a good quarter. It reflects the underlying strength of our markets. At the same time, VMS is stepping up exactly as planned. Growth is strong. And importantly, we see the operational improvements coming through in margins. For Marine & Industry and Slide bearings, the picture is more mixed. What we see here is largely timing and external effect, not a change in the fundamentals behind these segments. Finally, more than 90% of our 2026 revenues are already in the fixed order backlog. Fair to say that we are exactly where we want to be and fully confident in delivering on our guidance. Very last but not least, a few words on our financial calendar. Our capital market activities continue to be very busy, and we are very much looking forward to meeting many of you in the coming weeks and months at road shows, conferences, [indiscernible], et cetera.

Some of the key dates are shown on this slide. Let me highlight one date, in particular, our Annual General Meeting on June 10, 2026, but also, and as already mentioned, please mark that in your calendar, the Eurosatory investor meetings in Paris on June 16 and 17, a great opportunity to see our R&D pipeline live and in color.

Ladies and gentlemen, RENK has delivered a solid start into 2026. We are fully on track. The order book is full. The team is ready and the focus is crystal clear. Thank you very much for your attention. We are now looking forward to your questions.

[Operator Instructions] Our first question comes from Sebastian Growe with BNP Paribas.

So then I would start quickly on the recap on the quarter 1 of [indiscernible] so the first one would be around the VMS segment. Firstly, on the mix, and I would be interested in getting a bit more color on the drivers behind the strong margin development. I was generally surprised to see a contribution margin of more than 30% when at the same time, the segment was confronted with limited fixed cost absorption, relatively speaking, at least, and then also the missing Israel deliveries and conversely related ramp-up costs. So if there's anything that you would like to highlight here, then I would appreciate that.

And the other question around VMS is in regards to Israel. You mentioned the lifted [indiscernible] but on the other side, it apparently also requires an export approval. So where do we stand here? And then I have two more.

Sebastian, I will try to answer your profound questions as soon as possible. If there's not enough, Anja needs to chime in. Maybe first, on the margin development of VMS, I think it's fair to say, and Anja mentioned it before, the center of gravity of margin development and improvement is clearly Augsburg. So if you want to call it VTA, it's on the land side. What we simply see here is the fact that the -- I mean, the operational efficiency improvements from the modular production line is just kicking in. We see constant improvements in the reduction of assembly time, et cetera. So this is clearly the driver for the margin development.

Having said this, I'm not saying that the other VMS companies are not performing. But if you ask me personally about what -- who is the main driver, it's absolutely VTA. Absolutely. And I can jump on this later on, if you want.

Israel, you summarized this perfectly. The export embargo is lifted. And all what I can say is we are in full swing in order to ramp up our production starting the first deliveries, and this includes, of course, a certain legal framework, which is given.

Okay. So just on the latter, you have approved those licenses that are required?

We are preparing, and we will deliver according to our customer contracts and then the delivery schedules. Yes.

Okay. Good. Sorry, I don't want to interrupt you, Anja.

Yes. I only wanted to state that I fully agree with what Alexander said on the margin development. It's VTA, it's really -- what we can see is what we always told is that more of the same just supports us at VTA. It's really the scaling up topic because we really produced a 16% more compared quarter-to-quarter. So -- and that's really mostly driven by our scaling up.

Okay. Sounds fair and [indiscernible] and sorry, just as a quick reminder, when did these kind of tailwinds start to come in from VTA? So you rolled out this modular concept. And I recall it was sort of later summer. So maybe the first statements really were visible into the fourth quarter of '25. Is that the right way to look at things, so that you have still two quarters with those related step-ups and tailwinds?

I would like to answer this, Sebastian. I think we have a continuous improvement of our performance in the line. I think I mentioned last year or during the full year 2025 call that I mean, just comparing the output figures of October '25 to October '24, we had an improvement. I think it was in the range of 14% to 15%. So what we see is simply the line is running since the end of Q3, and we have a permanent improvement of the parts flow of all the warehousing. And for this reason, we see that simply the time our people need to assemble one transmission is reducing further and as I just said, I think I said it before, I mean, our modular production concept, and we just talk about the final assembly. Please keep in mind that because of this year, we will roll out the modular production concept from the final assembly, which is running where we are benefiting, as you can see in the margin development towards the subcomponents, but also towards the end of the year in our [ MRO ] line. So we will see a continuous further improvement.

Okay. Good message. Then quickly on the order pipeline. You mentioned a couple of programs. I would just like to take it to a higher level for a second because we saw a bit of news for last week that the German government is about [indiscernible] earlier planned budget in '27 by about a high single-digit euro billion amount. I was just wondering to what extent you might benefit here? And similarly, if you could also provide an update in regards to the potential configuration of the circular reserve for the German army that would be appreciated.

Yes. I think we always shared very openly what are the relevant platforms for RENK. And I think from this point of view, my main comment and you see it, for example, in the booking of the second batch of the Puma, we are fully on track in regards to the visibility, planned visibility and the entire process. So I do not see that we will have a significant upside swing by the German budget. I think we are exactly running as we have since -- by the way, since 10 months or even more, communicated this.

What was the second part of your question, Sebastian, sorry?

On the circular reserve, I think that was still unclear how many brigades, et cetera what configuration. So if you have any sort of update here, that would be great.

Well, I think the German customer is, how to say, on the move, and this includes but only the new platforms and the new projects, but this also includes on establishing during the next 4 years, please keep in mind the circular reserve was always targeted during the first phase of the German rearmament program. And I would -- all what we see is that the German customer is moving forward. Does it mean that he will have a circular reserve on the transmission side accomplished at the end of 2026? This is most likely not the case. It simply will take time, but we will execute it.

Okay. Good to know. And then the last one is just on the strategy part. Apparently, you have been [ kind of late ] been a potential exit of the Slide Bearings business. So maybe you can just provide an update where you stand here. And as you also mentioned, the ongoing developments in unmanned vehicles. Is there any sort of say, white spot in your offering that you would still need to close, so reinvest any potential funds from the potential Slide Bearing exit?

Yes. I would like to start maybe with the Slide Bearings discussion. In fact, to be honest, there is no update, as I just said, and as Anja has alluded on it, Slide bearings is [indiscernible] again in 2026 a value contributor to our overall crew business. And as I already indicated, there is, of course, a certain interest from the market because some companies are to recognize the performance and the market position of Slide Bearings. And we, as the Board, we have not only the responsibility, but it's also part of our strategy to constantly review and verify these potential interest indications from the market, and then we will make a decision if there's something attractive. If not, we have a nice round and sound running business, might have some headwinds in regards to industrial, but the overall market position, especially when we talk about alternative energies, energies in any kind of where the slide bearings is key. We are also happy to continue. But as I just said, this is an ongoing process, and we will see what is the outcome of this.

Regarding unmanned platforms and [ client spot ], well, I mean, I think from a given RENK portfolio and product offering, we are focused on the domain, land and sea. This is the reason why so far organically and for example, by partnerships with ARX for smaller UGV, but if it comes to really full-sized UGVs can drive more than 90 kilometers and the payload of 3 up to 5 tonnes, et cetera, we are working with [indiscernible], for example, now with [indiscernible]. And I'm very happy to show you this 15-tonne UGV on the upcoming Eurosatory. So the question is, and it's the same, by the way for the autonomous surface vehicle or vessels where we got a development contract to provide if you want the entire propulsion system, not only transmissions, but e-generators, e-engines, condition monitoring, smart condition monitoring, couplings, et cetera. And as I just said before, we do see this as a structural growth market beyond 2030. It's absolutely sure. So we do feel that we are on a good way to position our product offerings in our today's domains. The question is, if you talk about blind spot, the question of what is missing are under the water, under the surface, unmanned vessels, vehicle platform, ships, boats, whatever. And of course, if you talk about area, I mean, UAVs, counter UAVs, and I mean -- or what I can say is we are observing and following the market and -- but I cannot give a more deeper and more detailed comment on this.

Our next question comes from Sam Burgess with Goldman Sachs.

I'll limit myself to two so that other people will have a go. Q1 VMS margins were very strong. And from the commentary there, it sounds like operating leverage is responsible predominantly. But Q1 is typically the seasonal low point on VMS margins. So can we expect quarter-on-quarter growth for the rest of the year? Or will there be mix changes that might weigh on future quarters? Any guidance there would be really helpful.

And then just on M&I, I mean aside from the revenue deferral, I think the release also mentioned slightly softer aftermarket activity. Can you just give some more color here? And is that expected to persist?

I will try to, also here, to answer your questions. I mean the VMS margin development I think it's fair to say that Q1 showed a very positive trend. We will have a Q2, Q3, Q4. And as I just said, we will have, especially for Q3 and Q4 according to our customer delivery schedules and according to our investment planning and strategy, especially focused on Q2 and Q3, we have a stronger back-end loaded half year too from the revenue side. I think it's fair to assume that the overall margin development on VMS through the year should be a positive one. And I would say that if we look on the year-end 2026, we should see new all-time high in the margins on the VMS side. I hope this answered a little bit your question.

The M&I, your second question, Sam, on the M&A side. the aftermarket business. I mean, as Anja said, we have aftermarket in M&I for the Navy segment and for the Civil or Industrial segment, for example, [indiscernible]. I mean there is, as I just said, we both highlighted this days still ongoing industrial headwind from -- for the industrial market coming from the current overall GDP sector-related market challenges. But from what we see is that this -- especially on the aftermarket side is what we would consider more a quarterly specific effect, not a structure because if you usually have weak market conditions, the new business is more impacted than the aftermarket business.

Next question comes from Chloe Lemarie with Jefferies.

I have two as well, if I may. The first one is actually on the updated German defense strategy and the budget highlights to 2030. Could you maybe comment on how these align with your expectations? Because there's definite skepticism in the market around, obviously, the relevance of conventional defense platform going forward so I'd be keen to hear your thoughts on this.

The second one is on energy costs. If in case you foresee any kind of impact on your own business or maybe your supply chain due to rising cost on this front?

Sure. Always a pleasure. Also here, I will do my very best to answer your strategy. I mean, our reading of the updated German defense strategy and the discussions we are -- I mean, who are in the market about all conventional platform [ steps ] and we only have future unmanned [ UXV ], whatever domain air, domain land. Honestly, and I said it last time during our pre-close call, we do see our revenue and order intake planning according to the few platforms, which are relevant for us on the land side, still fully on track to make this absolutely clear. We had -- last week, we had a strategy meeting. We had a guest, a VIP guest, a 2-star General from the German Army, who was leading one of the tank divisions and we had extensive discussions about using conventional platforms. Do we need them? Do we not need them? And I simply would say, and this is in alignment with the Bundesliga strategy. If you talk about the main attack points of a potential Russian aggression, this will be not in the same geographic position like Ukraine. If you talk about the Baltics, you talk about the [ North Cup ]. If you talk about Finland, we talk about, for example, very dense forest, in these very dense forest, the entire effect of [indiscernible] is not given like in the open corn fields in Ukraine. So why I'm saying this, I think we need both, and this is part of our planning. And again, we see this fully on track. We need to have in the Bundesliga not only -- the Bundesliga need to have conventional platforms, more of them, especially beyond 2030 will become unmanned, especially when you need to supply certain use cases like ammunition, logistics, air defense, et cetera, et cetera. For this reason, we are focusing as a new product development area on these unmanned ground vehicles, for example, and it's the same for the unmanned surface vessels. So overall, we see no change in our prognosis in our forecast. And I think you know since two years, I'm talking about the same point. And I think it's a clear statement. We need both conventional and new innovations on the air, on the ground, whatever.

Regarding your second questions, I mean, so far, and we are monitoring this on a biweekly basis about supply chain, energy costs, et cetera. It's a kind of pre crisis committee in order to evaluate the impact of the Gulf war. So far, we do not see a significant impact, and this includes also estimates including increasing energy prices and also increasing energy price to our supplier. For example, as you know, aluminum casting is always full of energy in all respects. And our big housings for the gearboxes are aluminum and casted aluminum parts. But so far, we do not see an effect and all what we see towards the end of this year, we believe we can manage it.

But to be also crystal clear, Chloe, if there is -- for the next 6, 7 months, a total blockage of the Straight of Hormuz, if on the other side, Iran continues to blow away LPG terminals, whatever. Then I think sooner or later, the global economy as in the full glance, a different challenge.

And please also keep in mind our total energy costs really make up only 3% of our total production cost. So it's not a significant [ drop ].

Our next question comes from Benjamin [ Heelan ] with Bank of America.

I just had one. There was a follow-on from Chloe, I guess, at the full year, you talked about the Arminius program as an example being awarded in Q2 or Q3. And I think in your prepared remarks, you talked about it being in the second half of the year. I think what we see from some other companies as well, we are kind of seeing some of these big orders get pushed to the right. So I was just hoping you could talk about that a little bit. Is there -- is it just because of the scale of the orders, the amount of work investigations that needs to be done? Is there questions about do we need 1,800 vehicles or 2,000 vehicles. Just if you could give us a bit of color as to the discussions with the German customer because it does feel as though from the outside, some of these big programs are being moved to the right slightly.

Yes, again, I will try to do my very best to answer. I think first of all, before I talk specifically about the German customer programs, I think it's important to mention and you have seen this in our order intake of Q1 and you have seen this also in our outlook for the key order intakes of 2026 that we are not depending solely in our order intake in our revenues from the German customer. We have various international customers from West to East, and this gives a nice diversification of any kind of order intake risk. And for this reason, we are staying strong in our high visibility of this EUR 2 billion of order intake. I think this is -- if I could make some commercial for RENK. I think this is one of the strong points of RENK to have a fully diversified portfolio of customers and markets.

Coming to Germany, Well, I think if you talk about the Boxer and you ask for the reasons, first of all, I think these are complex program is, I mean, from the contract negotiations and from an allocation of, for example, the 1,800 or 1,900 Boxers on different platforms. As you know, I mean, these 1,800, 1,900 Boxers are not going on to the IFV version or to 1 or 2 specific, there are 5, 6, 7 different platforms they need to serve and this needs to be arranged under these contracts. And there is obviously still the questions should the Bundesliga and the [indiscernible] use existing contracts of some of these frame contracts of some of these platforms who should get more of the Boxers or should they negotiate a full new frame contract out of this. So this is one thing. And the second thing is, I think part of the truth is also that part of the complexity is not only complexity from the political side or from the procurement department, from the MOD, it's also part of the industry, to be honest. I mean, the reason that the Boxer has a delay is that our customers could not provide a quote when it was requested. So it's not a driven delay by political decisions or by budget, the budget is there, but it needs to be finalized now in contracts. As I just said, it's not only one platform below this 1,800 or 1,900 Boxers, there are multiple platforms. In the industry, we all -- we have to perform in order to meet time lines when these programs should be submitted to the end customer and to the politics in order to start the political approval process. I hope this helped you a little bit.

No. That's super clear. Just a quick follow-on. As you sit here today, do you think that the customer will want to negotiate new frame contracts or use the existing contracts for that program? Do you have a strong view?

I mean a personal statement, I see this 50-50. It's not clear yet. I think the fastest move forward would be to use, at least for the majority of these programs, existing contracts.

Our next question comes from Marie-Therese Grubner with Cantor Fitzgerald. We will come back to Marie in just a moment. Our next question comes from George Mcwhirter with Berenberg.

I've got two, please. Firstly, on the aftermarket business. I think you mentioned that the full year results that you plan to maximize the potential of this business. Can you just update us on how that's going? And the second one is just on the EBIT consolidation line. It came in a bit lower than expected, I think. So can you just remind us what you expect for the full year on that one?

George, I will start quickly with the first question. This I see more in my responsibility. Then I will hand over if it comes to the [ consol ] figures to Anja. You're absolutely right. You are referring to my statements on the rework or redefinition, new definition of our aftermarket strategy. And I can confirm, we are right in between. We have approximately done 50%. We have calculated 8 weeks for this program. The teams are running on full speed. We are through the first data analysis. We are in the modeling of the future perspective of the aftermarket development, MRO development because there will be, as we already discussed, there will be different drivers compared to the past and as of today, and the final step is then, of course, to define short, mid- and long-term measures in order to drive, as I said, my perspective in the next 10 years, is to develop towards a potentially towards a business model similar to [ aero ] engines and so far with a significantly higher aftermarket share. And -- but I'm confident that during -- for our next call, so this is for the Q2, we can give first insights about our aftermarket potential and our approach. Anja?

So for the consolidation line, if you look at Q1, you can see that they are slightly above prior year for '26. So -- and for our planning, I would say we're at the same -- at closely to be the same level as in prior year for the full year.

Our next question comes from Sven Sauer with Kepler Cheuvreux.

Just one left. On the 90% of revenues, in the fixed order backlog for -- sorry, 90% of the fixed order backlog, does this include aftermarket? Or is this just equipment orders?

Sven, this is Alexander. I mean this does include a certain share of aftermarket. But I mean, if you talk about equipment order, it's more or less fixed. And the data, what we see here is this is driven by the nature of the business, if you talk about our industry business like couplings, for example, or if you talk about slide bearings, we have usually very short lead times. So the majority or the -- I would say, almost 100% of this remaining 10% is not driven and triggered by the platform because they are fixed and sealed. It's driven by the nature of the business or industrial business will shortly [indiscernible].

Okay. That's clear. And then on the rollout of the RENK production system at Horstman, should we assume similar efficiency improvements than we are seeing in Augsburg?

You are asking a tricky question. I mean, I'm asking the same question to my CEO, to be honest. And I think what we have done, and this is not related to RENK production system. Fundamentally what we have done in Augsburg with the introduction of the assembly line is absolutely key. I think what we will see, and this is also a lessons learned from my time in automotive, by installing these kind of RENK production systems or these production systems, you are defining standards, processes and tools, how to run your operations. And there will be an impact on efficiency, on lean, on how to work, and there will be also a continuous improvement on process, and this will be also reflected on the margin. But most likely, you cannot expect such a kicker in the EBIT or in the EBIT margin development like in Augsburg by a fundamental new breakthrough step of introducing this modular production line. But yes, I mean, we -- as I just said, we had last week a strategy meeting. And one of the key things we did not only change our brand slogan. So from a trusted partner is not anymore existing. Our brand logo, we adapted from our [ RAM ] company in U.S. is now We Power Freedom, but one of the major things was also that we handed out to all of the 89 executives of RENK a booklet about a RENK production system. So we are now in the full swing to introduce it, and this will help us during the next year to have incremental improvements on top of major kickers like, for example, the modular production line on our margin.

Our next question comes from Joe Orchard with Rothschild & Co Redburn.

Just one, please. Please, could you expand a little on the press release yesterday and your decision to enter the transmission market for wheeled armored vehicles with the ESM280. Now wheel transmission seem to be more of a competitive environment. So it would be great to hear your reasoning here. What sort of demand you're seeing compared to tracked vehicles and how material this opportunity could be for RENK?

Joe, good question. we are working. I mean, to give a little bit of color on the ESM280, that's the name of our wheeled transmissions. We are working on this since 3, 4 years and the lead is here with RENK [ forms ]. And having the lead with RENK [ forms ] implies certain platforms, which are maybe more related in the first hand to the French customer. We also do this development for other international platforms, which are as of today, at least not in Europe. But for example, if we go towards the Middle East. So this is a kind of framing why we are doing this.

The second thing is -- this could be an attractive market, but we are not going at least not now in the mass market. We are looking here on above 30 tonnes and especially for heavy wheeled vehicles with -- which are having heavy payloads or who need to carry a lot of weight somehow. There are certain platforms. And what is clear is during this development period, we focus very much not only on meeting the performance, which is, and you know my statement, you cannot compare the performance of a tracked transmission to a wheeled transmission, I mean to come from the tracked technology to a wheeled is significantly easier than to go from wheeled into tracked, it's a totally different number. But we focus on this in order to developed a very cost competitive transmission, a very cost-competitive real transmission for platforms above the 30 tons, where we are not giving the market prices for these specifics where we are not giving up our margin expectations towards 2030 and beyond. But to make it also clear, we are not targeting to go into a significant super mass market. We are focusing here on specific platforms. This will most likely bring us volumes. With these volumes, we can further improve our cost situation and then we just see.

Next question comes from Christophe Menard with Deutsche Bank.

Yes. I have two left. The first one was on M&I. You're saying you're going to recoup the lost sales in Q2, Q3. Will you also recoup the lost EBIT given the -- when the drop to margin, you had or negative drop to margin, it was quite big. So that's the first question.

And the second question is on the next-gen mobility. The R&D investment and the CapEx can you -- is it all behind us? And what is the amount? If not, what is the amount that is coming? And also when do you think those products will be ready for deliveries, I would say, when will we see tangible revenues going through this?

I will try also here to answer, and I would like to start with the next-gen mobility. I mean as you have seen this, we have, in principle, I mean, the [indiscernible] projects. We have some which are financed from our customers. If you talk about the next generation of the HSW 354, the Leopard transmission. So this is a funded development contract from KNDS. By the way, we will deliver on -- in the beginning of June, our 4,000 Leopard transmission. I mean, just as an information, so -- and if you take the ASV, for example, it's also customer funded. But if you take on the other side, as I just alluded before, the question from Joe regarding our ESM280 or if you talk about the average tracked UGV concept and other programs which are running, we are doing, of course, by self-funding, and we are staying, as we always communicated in our approx 3% of self-funded R&D, and you need to add overall, globally, around about 3%, 3% to 4% of customer-funded R&D. So we have a clear road map, and we are executing this [ enrollment ]. And we are very, very taking care according to our 4 technology segments that we are efficient in the spending of our precious euros. So it's pretty much about to focus where to spend the money, what are the future and also from the business case, of course, attractive development project. So this was my answer on the next-gen.

Regarding M&I, I mean, I think I mentioned this in the pre-close call. The reason why we were about EUR 8 million below the revenues compared to Q1 2025, there are somehow ridiculous. When we talk about outbound logistics, there were two cases, and they triggered almost EUR 10 million of revenue shift out of Q1, where either we were shipping according to delivery, our transmission to the harbor and unfortunately, the customer missed to order right in time the boat. So we could not realize it as revenue, we will realize it in Q2. There was another reason it's difficult to explain this. A [ bloody ] captain was so dumb and he just loaded one transmission instead of two. So we could not realize the revenues. And the second one, also one driver, and this was an impact maybe on the lower single-digit euro figure. One of our suppliers in the U.S. had problems in scheduling their deliveries because they had quality issues, cracks in the weldings of housing. They fix it now, but of course, they could not deliver, and we could not integrate them in the building. So -- not in the building, in the transmissions. So these programs, they are coming during Q2 and Q3, and they are not lost this all what I can say. Did I answer your question? Or did I miss something? Christophe?

No. I was just wondering whether you will also recoup the lost EBIT. I mean the -- we had a [ short follow-up ].

Yes. Absolutely. The revenues are shifting and therefore, the EBIT will also shift.

Okay. No, that was just -- because the margin differential was quite big [indiscernible] margin.

Our next question comes from David Perry with JPMorgan.

I've got three questions. Hopefully, they're reasonably quick. First one, just on Israel. Can I just clarify something, I read an article that said the arms embargo had been lifted by Germany but not for heavy equipment like tanks. So I guess two parts of the question. One, is that true? And if it is true, does it exempt systems like transmissions or are your transmissions being delivered as spares? Is that how you get around it? That's the first one.

The other two are probably quicker. And I think you used the word structural when you were talking about the slide bearing margin issues. Maybe I misheard, but just wondered what you're thinking for the margin through the year given some of the issues there?

And then very quickly, Anja, could you just tell us what you're expecting for adjustments for -- excluding PPA, but the other adjustments for the full year?

I will take over the first two questions then regarding the adjustments, I would like to hand over to Anja. Regarding Israel, you're right. I read this article also, but I can confirm we are not impacted by this. So we are not considered as tanks or as heavy weapons. We are defense good, but we are not goods who are killing people. So from this point of view, I can clearly confirm we are not impacted by this.

On our slide bearing business, we do expect to recover during this year on a similar margin level like we had maybe even slightly better like what we had in 2025. So I think this was my part of this, David. Was this okay before I hand over to Anja?

Crystal clear.

Thank you very much. Anja?

Okay. So let's talk about the adjustments. We're pretty much on a similar level if we look at the prior year not considering any, let's say, M&A, you can't really plan. So we need to see how that would come in. But on the other topics like process development and so on. And we are still working on our back to standard topics and so on to really get our systems up and running fully professionally. So that will remain in the same topics. So it could be that we have some payments to leading persons that could be [ coming too ], but that's it.

So for the full year, it was [ 13 ] last year -- excluding transaction and PPA, you had other costs of [ 13 ]. Is that kind of the number you've got in mind for the full year?

No. It's a little bit higher. We were like, I think probably it was like around [ 15 ] so what you need to add in is we might be kicking off in Q4, our SAP S/4HANA project. So if that would work out if we could hire people and so on. So -- but we really need to get the people first and onboard them. So there, we need to see whether that would fit in. So we would say around prior year or slightly above.

Okay. And then just -- and then once you've hit that level and you're rolling out the SAP, what would those numbers look like each year? Those exceptional items or adjustments you call them.

That's really a tough one. I mean we have said that SAP S/4HANA implementation would be a project running about 5 years and altogether, it's EUR 50 million. So there, it really depends on our contracts. So do we do that on time or not. And because then if we would do it on-prem, that means we would capitalize a portion of it. If we go into a cloud or whatever, we cannot capitalize that. So then that would be an exceptional item. But in order to really assess that, we would need to have the signed contract and really need to make the assessment on what parts and what features do we want to use for the S/4 system. That's for 2026, but that's not [indiscernible] because we will only have effects of Q4.

Our last question comes from Marie-Therese Grubner with Cantor Fitzgerald. I wanted to ask about USD hedging. What exchange rate are you hedged out for 2026?

Anja?

Yes, we do -- when you look at our setup, you can see that the big part is we have here of the production we really have in Germany. And we also have mostly suppliers here in Germany. So there is no hedging necessary. Then if you look at our U.S. business, which is basically the next biggest business, so there -- also here the suppliers mostly within the U.S. So typically, from the supply side, we do not have that big coverage. So we do a lot of, let's call it, natural hedging because we say in our currency domains, basically. When we contract big projects, let's, for example, take some RTS topics, yes, where we produce in Germany, where we have different suppliers then we do a hedging depending on the contract and on the currency. However, that hedging is being determined at the inception of the contract, and this is how we hedge.

This concludes the Q&A session. I will now hand back to Christian Weiss for closing remarks.

Yes. Thank you all for joining us today. We look forward to see many of you in person at the upcoming investor conferences and roadshows as well as the Eurosatory in Paris. We will, of course, remain available for follow-up questions in the meantime. And have a great day, and goodbye.

This concludes today's call.

Welcome to the RENK Group AG Q1 2026 Pre-Close Call. Please note that this call will be recorded. [Operator Instructions]

I'd now like to turn the call over to Christian Weiss, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining our pre-close call today. My name is Christian from the Investor Relations team. Our CEO, Dr. Alexander Sagel, will guide you through today's pre-close call and will be available for questions afterwards.

As a quick reminder, this call serves to remind you of all relevant public information previously provided by RENK in various conferences and roadshows held throughout Q1 2026 or otherwise available in the public domain.

And with that, let me hand over to Alexander.

Yes. Thank you, Christian, and good morning, ladies and gentlemen, and thank you very much for joining today's call. Right in the beginning, I have to apologize. As you can hear it on my voice, I'm a little bit -- I have some -- I have a cold and for these reasons, please be patient with me. I will keep it crisp today in providing you the key messages for Q1 2026 before our official results publication on May 6, 2026.

The headline is simple. Our story is fully on track. Production and deliveries are performing according to our customer contracts. Our land domain, VMS is running and the clear driver of our overall business performance, and we are consequently executing our 2026 capacity expansion plan as presented during the full year 2025 call.

We are on the way to a solid 2026, and we were clearly targeting the upper half of our full year 2026 adjusted EBIT guidance and more than EUR 1.5 billion in revenue. As a reminder, more than 90% of our planned revenue for 2026 is covered by our fixed order backlog and showing a stronger H2 loading.

Having said this, let me walk you through the key metrics and starting with the order intake. I'm very pleased to report that Q1 2026 marked the highest order intake we have ever recorded for first quarter, and it came in well above the Q1 2026 range we indicated at our full year 2025 call in March, that clearly underlines a strong and continued order intake momentum, which we see across our core land defense markets.

The drivers for order intake in Q1 are clear. First, a larger international main battle tank program worth EUR 157 million. You might recall that this program was originally expected to be signed in Q4 last year and was part of the approx. EUR 200 million orders shifting into 2026. This order has now been contracted towards the end of Q1 2026 and is quite relevant for RENK by providing access to a growing market in the NATO environment. First series deliveries will start in 2027.

Second, we also saw a strong order momentum from the German Puma program, where we will supply transmissions and related suspension systems, demonstrating RENK's role as a holistic mobility solution provider. Related orders for our third product offering for the Puma platform, our final drives, will be booked in Q2 2026.

Finally, spare parts demand in general across Germany, Europe and the U.S. continues, a consistent and very encouraging trend across our continuously growing installed base. It should be mentioned that we were also nominated for some smaller but strategically important R&D programs. For example, RENK is the development partner for the drivetrain of the so-called autonomous surface vessel or in short ASV for an international customer. And RENK was also contracted by KNDS to develop a new transmission for the future Leopard main battle tanks.

Ladies and gentlemen, moving forward and having a quick view on the group revenue development. As said before, more than 90% of our 2026 revenues are already secured by our fixed order backlog and revenue conversion will be simply executed according to customer contracts and delivery schedules. As a consequence and looking on Q1 2026, the revenue overall developed as expected.

Important to note when comparing Q1 2026 revenue with previous year first quarter, Q1 2025 revenue did include Israel-related revenues in the range between EUR 20 million to EUR 25 million. For Q1 2026, and as already communicated during our full year 2025 call, we did not have such Israel volumes in our production planning and consequently, no Israel-related revenue contribution. If we would, just for reference, include these Israel volumes in our group revenue figure for Q1 2026, we would be slightly above or on the current market expectations for the group. Doing the same exercise specifically on the VMS segment, the revenues for Q1 2026 would be well above the market expectations.

Please allow me one final word to Israel. Since November 2025, the German export embargo has been lifted, and we are now ramping up the production and shipments for Israel during Q2. We continue to expect EUR 80 million to EUR 100 million revenue contribution for the full year 2026.

Regarding our M&I segment, 2 factors were slowing down our planned Q1 2026 revenues. First, postponed revenues driven by customer-related and very specific issues regarding outbound logistics. What does it mean? RENK produced, for example, the transmissions according to the delivery schedule, prepared them for shipping, but then, for example, the ships organized by the customer did not arrive at the agreed shipping date or in a different case, the captain simply forgot to load all scheduled transmission.

So for example, instead of loading 2 transmission, he only loaded 1 transmission. As a result, planned Navy revenues in the range of approximately EUR 10 million did not materialize in Q1. This is, ladies and gentlemen, a pure timing effect. The revenues are not lost. They simply fall into the next quarters.

And second, regarding M&I, supplier-related issues regarding housings for naval gearboxes. Our supplier had identified cracks in the welding of 2 naval gearboxes. Reworking was initiated and the schedule issue is now fixed, but finally resulted in a mid-single-digit euro revenue impact for Q1. The housings will be now delivered in Q2 to RENK, while revenue conversion will take place during Q2 and Q3. They need to be rescheduled into production.

Considering these 2 effects, our M&I revenue development would have been well above last year, but still slightly below market expectations. So when you model Q1 2026 revenue, I would encourage you to take these effects I just mentioned before into account. Also, do not forget the usual RENK Group seasonality where Q1 is always the weakest of all the quarters.

On adjusted EBIT and margin, let me give you a group level read today. Of course, full segment details will follow at the Q1 results call on May 6. At group level, the adjusted EBIT margin development is expected to be positive in Q1, and it's fair to say that our modular production line in Augsburg is clearly proving its performance.

The operational efficiency gains we expected from that specific investments are simply materializing, which is positively reflected in our Q1 adjusted EBIT growth which is clearly outperforming the related revenue growth and in our adjusted EBIT margin, all compared to previous year and despite a somewhat restrained top line, as mentioned before. Overall, the group's adjusted EBIT in absolute terms is well above last year's Q1 level and slightly below current market expectations.

On the VMS side, specifically, the margin performance, the adjusted EBIT and the related adjusted EBIT growth looks really strong. And the modular production line as well as the continued impact from several operational excellence measures from other production site are a key element of this.

On the M&I side, the adjusted EBIT was impacted by the mentioned 2 effects: first, by the specific outbound logistic-related missing revenues; and second, the supplier-related schedule topic. Adding these 2 effects, we would be more or less on previous year's level.

Last but not least, a few quick comments on our bearing business. Revenues are expected to come in flattish versus previous year's first quarter, while quarterly driven by lower aftermarket business and the impact of U.S. tariffs, adjusted EBIT and margins are below last year's Q1 levels.

Ladies and gentlemen, at least I'm coming to the end, in a nutshell, 2026 showed a solid start. Order intake at the highest ever Q1 level, a strong performance by VMS regarding all key figures, the clear and absolute growth engine of the group, strong operational performance and execution by RENK across all segments. And finally, confirming our guidance and the targeted adjusted EBIT range for 2026.

Having said this, I'm looking forward now to your questions in case you have some, and thank you very much.

[Operator Instructions] Okay, we have a question from a number ending 092. Please introduce your name and your company and ask your question.

Hello, Alexander, can you hear me? It's David Perry.

David, I can hear you.

So we had a bit of an IT issue at our site, so I didn't hear a lot of what you said, but I'm not going to ask you to repeat it. I'll speak to Christian and Max. I just wanted to ask you a really high-level question because when we talk to investors in the last month or 2, there's just been a big change in attitude in terms of people being a bit more skeptical about armored vehicles and huge coverage about the role of drones and obviously with the Iran war. And I just wanted to get a sort of high-level update from you. I think the only thing that would reassure people that there's still demand is that the orders start to come through, both from Germany and internationally. So if you could just repeat one thing, whatever comments you made on any orders you've booked and then just potential timing of some of the big German orders that we're all sort of waiting for. That would be really helpful, please.

David, of course, I try to do my very best. I mean the first comment, and I see if you look on our Q1 order intake, which was really strong, the all-time high if you look on the Q1 order intake and well above the range we indicated for Q1 in our full year 2025 call, just indicates that the order intake momentum is just ongoing and just providing opportunities.

And if we look before I come to a general comment on conventional platforms versus or against unconventional, modern autonomous platforms, I mean if you just look for Q2, if you look for Q3 and if you look through the order intake we expect for the entire year, the first statement I would like to give is that what we communicated in our full year 2025 meeting, the visibility of approximately EUR 2 billion of order intake, we can just confirm. I can just confirm we have still the same visibility.

And if we talk about some of these programs we expect in the next 3 quarters, I mean, of course, the German programs will continue, as I just said, if we have a quick view on Q2, as I said before, the Puma final drives, we do expect. We also do expect a further call-off of our Leopard main battle tank frame contract. We also see additional orders for the so-called Leopard family vehicles.

And I think for Q2, it's also relevant if you talk about the land domain, we see the first and this important serious order and serious contracts for [ Patria tracked vehicle ]. If we still stay in the Q2 and just look on the Navy side, the 2 larger Navy programs, which were scheduled for Q4, but shifted into 2026 for 2 customers, they will come now in Q2. I think that's a positive message.

And if you look on the rest of the year on Q3, Q4, as I always said, we do expect the Boxer coming at a final number somewhere towards the end of almost 2,000, so between 1,600 to 1,800 in this range. We are in the final contract negotiations for the contract in U.S. We are -- we do expect in the second half additional order for the K2 main battle tank family in Poland. We expect a decision on the IFV program in Rome.

If you go a little bit on the Navy side, German programs, again, the MEKO A200 during the summertime, the F127 late in 2026, as already indicated. And we might even see the second order of the so-called FFX vessel frigate from the U.S. Army. So overall, from the order intake momentum, we just see it strong. Again, I underline that we confirm the visibility on the EUR 2 billion order intake for the full year. And as you know, David, my position and my personal view on this discussion about conventional platform versus drones has absolutely not changed.

If you look in the future, not only until 2030, if you look beyond 2030, it's not a discussion if we, our customers have conventional or drones, I mean, conventional platform or drones, it's conventional platforms and drones. Conventional platforms beyond 2030 will be, maybe not all, 100% unmanned, but that's exactly the reason why we are striking into the unmanned ground vehicle segment. And I can, all of you, invite you to see our booth on the Eurosatory in June, where you will see the first Patria RENK or RENK Patria 15-tonne autonomous UGV based on a tracked vehicle. You will also see for the first time, our new Leopard main battle tank transmission 354B, and you will also see a new proposal of a quite performant, new transmission for wheel platforms. So I hope this gives you a little bit of indication. It's not about conventional platforms or drones, it's a combination of both.

[Operator Instructions] Our next question will come from George Mcwhirter with Berenberg.

I have 2, please. Firstly, on free cash flow. I'm not sure if you said anything on this in the quarter, but any comments you can make on that would be helpful.

I was waiting for this question, but I also need to be fair, I really cannot give you a profound comment on this right now. But I think, first of all, we all should keep the typical defense sector-specific seasonality in regards to free cash flow under consideration.

And the second question I can -- or the second point I can make, if you look back on Q1 2025, I think RENK was with minus EUR 25 million free cash flow negative. I think if I look on our improved earnings situation compared to the last -- I mean, the quarter in 2025, as mentioned before, and also if I consider known improvements on the net working capital side, I would expect, but please, this is not really now a profound answer. It's my solid feeling, if you want, my gut feeling. I would expect to achieve at least a slightly positive cash flow if you compare this to our 2025 Q1 minus EUR 25 million level.

Please keep in mind, despite the fact that we booked a lot of business during Q1, the advanced payments of larger programs, for example, the Puma transmission, they came in towards the end of Q1. So this means that most likely, all these programs who came in at the end of the quarter, the advanced payments behind will not flow into the first quarter. They will come in the second quarter. I hope this was a good enough answer, George.

Yes, that was really good. The second one I have was on the THOR IV contract that I think you mentioned earlier. I think previously, you said it could be worth up to about $1 billion framework contract. What sort of firm order do you expect to book for that one initially?

Yes. I'm also happy to answer this question. I mean, as I just said before in the call, we are just in the final negotiations, and I do expect to get it done during Q2 2026. We talk about a 3-year plus 2 optional years. And depending if it's 3 years or 5 years at the very end, it's up to $1 billion. This is the frame contract. And then as you know, we always get 1 or 2 or whatever, sometimes 3 contracts per year, which are then order intake for us.

And if you look back in the past, the contract size or the contract volume of one of these single contracts out of a frame in the past THOR III contract were in the range between EUR 80 million to EUR 150 million per year. So it depends. Last year, we had several orders of the -- from the THOR III contract. But I think the key is really to look on the entire potential of the frame contract.

Our next question will come from Marie-Therese Grubner with Cantor Fitzgerald, Europe.

Can you hear me?

Brilliant, Marie. Brilliant.

I just wanted to maybe, sorry, piggyback on David's question earlier. I mean this is more conceptual, I know. But as you say, most of the sort of vehicles will be rather unmanned after 2030. Just pragmatically, I mean, everything that's being ordered now that is not unmanned and that has a life cycle of whatever, 15, 20 years maybe, is this going to be like refitted, retrofitted to be unmanned? Or how does it work? What do people do with all the stuff that they are ordering now that is manned?

I think, first of all -- Marie, it's good talking to you. I think, first of all, the conventional platforms, if you look in the order book for the next 3, 4, 5 years, they are just needed. I mean if you look on the current scenarios in Ukraine, as I'm always saying, the reason that we have this situation where the enemies are trenched in several lines and you have hundreds of kilometers of mine fields and oversaturated with drones is simply driven by the fact that in the year during the summer offensive in 2022 or '23, driven by the Ukrainian Army, the Ukrainian Army had not enough still conventional platforms because the Western nations did not supply enough. So if we look really on all the orders coming in up to 2030, it's all conventional. And also when we look beyond 2030, there will be significant business, significant business across all our key markets and key regions still conventional platforms.

There will be, first, an increase 100% of unconventional platforms -- I mean, unconventional, unmanned platforms like UGVs, I'm not talking about drones. We all have a significant demand for drones. There is no discussion about this, UAVs, et cetera, et cetera. But as you know, and you just touched this point, our customers always have the possibility by a retrofit or by a new transmission to transform conventional platforms into intelligent platforms by providing the digitalization of our transmissions by providing drive-by-wire, steer-by-wire, brake-by-wire systems as a retrofit on existing transmissions or for our new transmissions and by repowering or retrofit to increase the capabilities of conventional platforms. If you take a Puma, for example, to make remote control steering or even semi or fully autonomous.

But again, if you look on current war theaters in a very rational point of view, look on the war in Iran, you can have thousands of drones, hundreds of missiles, but there will not be any decision to win this war. You can only reach a kind of really victory by moving in with ground troops. It's the same what you see, and I always make the comparison if you look on the Gaza conflict or if you look on the Lebanon conflict, just by drones, you cannot win a war. You need to send troops in. And these troops today have conventional platforms and will have in the future conventional and unmanned platforms, unmanned conventional platforms.

So as I said, and I think I answered this question on David's question, it's not about conventional platform against or versus drones, it's a combination of what you need. In Germany, we have the term [Foreign Language]. So in the future, you will have across domains, unmanned, manned platforms and they will be connected on a digital battle space. If you take, for example, Israel today. So again, we need drones. We need all kind of drones, it's desperately needed, but we also will need in the future today's conventional platforms more intelligent. And we have the product for this.

Okay. And then maybe one comment. I mean, we see that Marine -- as a Navy Marine is becoming more and more important and obviously, across the globe, not just in the U.S. I think in the future, it will be very interesting and probably very helpful for all of us sell-side analysts if we get some more granularity or if we get a -- because now, I mean, the focus is on VMS largely, right? I mean also the biggest part of your operating profits. All I'm saying is that I believe that the Navy part will be more and more important in the future, and it would be very helpful for us to get like a deep dive at some point, more granularity on what you're doing there.

Marie, I think this is a very good point, and we are happy to prepare for an appropriate occasion. And as you perfectly said, I mean, just look on the U.S. budget. Navy is getting more and more important. And I think the only difference to the land side is that the time volume impact is different. I mean if you have larger volumes with shorter lead times on the land business, so you see a stronger impact on the revenues, on the financials, while you have longer lead times on the Navy business.

So for example, typically, when we do have an order intake of a naval business, it takes 2, 3 years until we see it on the revenue side. So it's a very attractive business, and it's a very strategic business, and it's a growing business. Again, I just make the reference to the U.S. budget, the [ EUR 1.5 trillion ] and the impact on the Navy business here. But it's a long-term business, a long-term OE business and an even longer-term aftermarket business. But fair point, I'm very happy or we are very happy to take this and to prepare it for the next round.

Our next question will come from Sebastian Growe with BNPP.

I have a couple of quick questions. I would start on the guidance and kind of link it also to the comments that you made around the onetime impact in quarter 1 that are all related to M&I if I spare the Israel embargo situation at VMS. But the simple question is to this one, can you fully confirm that there is kind of no sort of more permanent impact from this? It's really all a timing situation. I would assume so because you also pointed to the upper half of the guidance. So maybe you can start there.

Sebastian, I'm very happy to do so. And I think right in the beginning of this call today, I confirmed the guidance. I confirmed the EUR 1.5 billion of sales, and I confirmed my statement I gave on the full year 2025 call regarding our targeted upper half of the EBIT range. And I would not do this, to be honest, if from today's point of view, I would not feel solid to say this. We have shifts driven by the customer, by the way, or by suppliers who could not ship housings as expected, but this is not related to our production performance or whatever. And these revenues, as I just mentioned before from the M&I side, they are just shifting into one of these quarters, Q2, Q3.

If you talk about Israel, I mean, I think I said it quite clearly, and there are in some discussions, what I hear on the capital market is a kind of wrong perception from my point of view. There is no Israel export embargo. The export embargo was lifted in November 2025. And all what I can say, and I say it very clear and with a solid voice is we are ramping up our production according to delivery schedules. And for this reason, I confirm the guidance, I confirm the targeted EBIT range, and this includes scenarios, as I said it on the full year call that we might have some impacts on tariffs. But what is also clear, if the world collapses, to be honest, if the world collapses, we have an energy crisis because the Strait of Hormuz is closed for the next 10 months or whatever, there could be an impact coming from energy price. But then I think the entire industry has a totally different problem. Again, I would not confirm and put this right in the beginning of my statement, if I would feel unstable or not sure.

Appreciate it, fully understood. Then quickly on a data point or a statement that we got yesterday from a French and also a defense exposed company, that they pointed to urgent requests from the Middle East region. And my question to this is simply, is there any sort of upside risk that you might see even a better outcome than the EUR 80 million, EUR 100 million in Israel? Or is this kind of too much of a far-fetched thought?

Well, this is an interesting question. And I think it's fair to say that the demand from Israel will not stop. The request from Israel and their strategic approach to build more tanks, more IFVs to go to unmanned ground vehicles did not only materialize in the past, it will materialize in the present and in the future. So I do not see an upside to the current range, as I'm always indicating EUR 80 million to EUR 100 million. But all what I'm saying is our business with Israel is a long-term business and is a very attractive business.

Fair. If I may just quickly circle back to the order intake comments that you made. I think you weren't too specific around the order intake for the first quarter. You said you were better than what you had guided to with the fiscal '25 results call, which was EUR 400 million, EUR 500 million. So is it probably a fair assumption to say the book-to-bill could be around 2x, if we can dance around it this way?

Yes, in this range. Maybe not exactly 2x, but I think I gave 2 clear indications. First, it's well above our range we indicated between EUR 400 million to EUR 500 million on our full year call. And second, I also said in the beginning, it's our best ever all-time high Q1 order intake. And I think this describes it quite well.

Fair, fair. And then the very last one for me, just on the pipeline, more in the kind of medium-term outlook. So I guess there's been also fears not only technology-wise, but also that '24, '25 and now also '26 might turn out to be kind of superb order years. And after that, it's getting meaningfully lower. I guess we have heard also other German defense names rather reassuring that the book-to-bills are very likely to remain at a very comfortable closer to 2x level for a longer period. So the question that I'm just having is, would you be also comfortable making such statement that in order to grow the revenues to the intended EUR 3 billion mark over time that you will then also see a prolonged period where you probably are running on very, very comfortable order intake rates?

Well, we have assumed for our midterm target of EUR 2.8 billion up to EUR 3.2 billion of revenues, a clear project pipeline for order intakes. And I do not see any change of this perspective from today's point of view. And please keep in mind that compared to other German companies, we are not only depending on Germany. I think what you see is that RENK is super diversified in regards to customers and in regards to regions or markets. And as I did and could confirm the visibility for 2026, I confirm all the order intakes we need to get in order to reach our midterm target.

Well, this concludes the Q&A session. I'll now hand back to Christian Weiss for closing remarks.

Ladies and gentlemen, thank you for joining today's call. With this, we are now entering our quite period, by the way. We will speak again at our Q1 conference call at May 6. Have a good day. Bye-bye.

Bye.

This concludes today's call. Thank you, everyone, for joining. You may now disconnect.

Welcome to the RENK Group AG FY 2025 Call. Please note that this call will be recorded. [Operator Instructions] I'd now like to turn the call over to Christian Weiss, Investor Relations. Please go ahead.

Thank you very much, operator. Good morning, everyone, and welcome to our financial year 2025 conference call. With me today are our CEO, Dr. Alexander Sagel and our CFO, Anja Manz-Siebje. Alexander and Anja will take you through the highlights of 2025, our financials and, of course, the outlook. Afterwards, we will open the floor to your questions. But now I will hand over to Alexander. Please go ahead.

Yes, Christian, thank you very much. Ladies and gentlemen, also from my side, a very warm welcome and many thanks for joining today's conference call. Before we go into many details, let me summarize the key messages upfront. RENK has once again proven that we can perform. We delivered what we promised we walked our talk first. We have fully delivered on our 2025 guidance on revenue and adjusted EBIT. Massive Kudos to all 4,400, RENKies worldwide with this tremendous effort. Second, we are proud to say that 2025 was once again a year of new all-time highs, record order backlog, record revenues and record adjusted EBIT. Clearly, a proof of our strategic focus and above all operational excellence and execution.

Third, and this is important to emphasize, we delivered this performance despite facing several external headwind, exchange rate movements with a weak U.S. dollar tariff effects, a weak industrial market and most significantly, the Israel export embargo. Our results in 2025 are therefore even more remarkable. And I think they speak very clearly for the resilience and the strength of our business model. To sum it up, a very strong year.

Having said, this let's move now into more details. Let me start with the highlights of the past 12 months by walking you through the four key takeaways on this slide. RENK has again demonstrated strong execution in the Q4 2025 year-end trade. We can perform on it constantly. As a result and as mentioned before, we have clearly achieved our 2025 guidance on revenue as well as on adjusted EBIT. We recorded a strong 2025 order intake of roughly EUR 1.6 billion plus 9% year-on-year versus 2024, which leads to a book-to-bill ratio of 1.2, let me be very clear here. This is a new all-time high in order intake despite the fact that we had a shift of approximately EUR 200 million of expected defense-related order intake from Q4 2020 into 2026. These are not loss contracts, they just shifted purely due to minor delays in the final contract negotiations. They have a budget, they are approved and they will come in 2026. So the underlying demand momentum is even stronger than the headline numbers implies.

Our total order backlog reached a new all time high of EUR 6.7 billion, up from EUR 5.0 billion at year-end 2024. This corresponds to approximately 5x our 2025 revenues and providing a very high level of visibility going forward and underpins our confidence for the years ahead. Our Defense business was once again the main growth driver in 2025. Defense revenues grew by 24% and defense-related order intake by 4%, which should be put in context with a before-mentioned project shift.

Let me also briefly walk you through some of the key order intakes from 2025, where the majority of the program should be very familiar to you, starting, of course, with the Store 3 contract where we realized approximately EUR 254 million as order intake. Then our large transmission and engine business with an international customer in the range of EUR 130 million. Various international naval programs of approximately EUR 110 million for the full year. VTA, or Augsburg spare parts for MBTs, IFVs and APCs in the range of EUR 90 million for 2025 including the first orders from a frame contract for spare parts between RENK Germany and the Ukrainian MoD during Q4.

Furthermore, and not shown here, we also realized a service contract with the Ukrainian MoD and RENK America during Q4. And finally, the K2 platform for Poland which continue to be a very successful platform and driving our order intake also during 2025. Ladies and gentlemen, Slide 2 summarize the group performance for 2025. And as you can see in the 5 orange boxes at the top, all presented financial KPIs are showing a very positive development.

We already talked about the order intake performance. So let's move directly to the revenue where we realized with EUR 1.366 billion or approximately EUR 1.4 billion plus 20% year-on-year, which is the result of our focused operational execution and conversion of our order backlog into revenues. The adjusted EBIT is with EUR 230 million plus 22% above 2024 level. The adjusted EBIT growth is once again outpacing revenue growth. And this despite low double-digit EBIT headwinds due to the factors mentioned before, which indicates the operating leverage in our business model. The quality of our growth and our disciplined cost management.

The adjusted EBIT margin improved to 16.9% or 30 basis points. And last but not least, we will propose a dividend of EUR 0.58 per share for 2025 at the upcoming AGM in June, an impressive increase of 38% year-on-year, reflecting our confidence in the business and our commitment to deliver value to our shareholders.

Regarding the end markets, we are currently at the Defense business share of 74%, which will further increase in the coming years to approximately 90% plus driven by our sector strategy. Finally, and looking at the revenue split between new build versus aftermarket, we see our typical current range of aftermarket business between 35% to 40%. Which is depending like always on the specific product mix quarter by quarter. You will see later in the outlook for 2026 that we will have a special focus this year on our group wide aftermarket strategy in order to further drive this important sustainable and highly profitable business segment on the short term, but also on the midterm towards 2035 to levels north of 40% to 50%.

Let's move now to Slide #3. As you know, our Defense sector is the core of our business and the main driving force behind our group performance. On order intake, let me repeat the approximately EUR 200 million of order intake, which shifted from Q4 2025 into 2026. Adjusting for this effect, order intake growth would have been at approximately 19%, close to EUR 1.37 billion instead of the reported 4% growth of EUR 1.17 billion. The mentioned shifts include a larger international MBT program in the lower 3-digit million euro range to naval programs from international customers and finally, a German Navy R&D project. On the revenue side, our Defense business once again grew with plus 24% strongly, fully reflecting the ongoing ramp-up of our production out and strong execution on our existing backlog.

Ladies and gentlemen, now let's move on and have a quick look at our segment performance, starting, of course, with our largest and most important segment, Vehicle Mobility Solutions. VMS continues to be our strongest growth driver in 2025. On the revenue side, VMS realized significant growth in 2025, both in Q4 and in the full year, exceeding current market expectations. As you know, we had a planned temporary slowdown in Augsburg during Q3 in order to implement our new modular production line. By Q4, the new line was simply up and running, and the global RENK team delivered an outstanding performance in the year-end rates. The order intake was for 2025 with EUR 1.129 billion and a book-to-bill ratio of 1.3 and plus 11% compared to 2024 which was driven by ongoing and wide spring demand for our high-performance Vehicle Mobility Systems across various land vehicle programs.

Let me now turn to Slide 5 in our Marine & Industry segment. M&I also delivered a very solid performance in 2025, mainly driven by the Naval side of the business. Revenue came in at EUR 380 million, plus 15% versus 2024. Our strong naval business realized a new all-time high for the full year and could overcompensate missing revenues from our industrial part of the business, which was impacted by the GDP-related overall weak market environment in 2025. Strong execution on ongoing projects and the successful integration of our new U.S. operations, RAMI, were key for this performance, and we are prepared to fully leverage our strategic positioning in the largest navy market in the world, the U.S. market for future strategic programs such as the FF(X) Frigate program. Regarding the order intake of EUR 327 million, plus 6% versus 2024. You should please keep in mind the mentioned shift of 3 naval projects from 2025 to 2026 in the range of a mid-double-digit euro figure and missing order intakes from the industry business due to the mentioned market challenges.

Last but not least, a few words on our Slide Bearing segment. 2025 was a very challenging year for our Slide Bearing segment due to a weak industrial market for the entire year and operational challenges during Q3. However, we managed to stabilize and improve our production and realized finally not only a very strong Q4, but also a solid full year 2025, with slight revenue growth and very solid results on the adjusted EBIT line. Anja will talk more about this.

One fact I would like to highlight, December 2025 was the strongest month in the Slide Bearing segment, entire history in terms of revenues which is a great indicator for the execution quality of our team in the final sprint of the year.

Now let's move to the last slide of my introduction in our total order backlog. For 2025, we have reached a new record level of EUR 6.7 billion in total order backlog plus 34% compared to year-end 2024, which corresponds to approximately 5x our current LTM revenue and providing us with an extraordinary quality of visibility for the years to come. Our fixed order backlog has continued to grow, driven by the strong order intake and including our strong conversion of existing orders into revenues. The soft order backlog has grown strongly mainly driven by German but also international programs.

Having said this, I would like now to hand over to Anja for a deeper look into our full year 2025 financials. Anja, over to you.

Thank you, Alexander, and a very warm welcome from my side as well. In line with our usual structure, I will begin with an overview of our full year group performance before guiding you through our segments. Followed by a review of net working capital, cash generation and the returns we have generated. Fiscal year '25 marked another year of strong execution and progress for RENK Group. Order intake remained at an elevated level, supported by strong demand in defense-related mobility solutions. Despite record high revenue conversion throughout the year, our total order backlog amounts to EUR 6.7 billion, underlining the current dynamics in the defense market and the long-term visibility of our business model.

Alexander has already referenced the growing share of defense in our portfolio. Revenue developed in line with our growth strategy and reflects our focus on operational excellence across our sites. Most importantly, profitability improved disproportionately to revenue, confirming once again the operating leverage embedded in our business model.

Moving to our group performance. Fiscal year '25 was characterized by persistently strong demand across our core end markets, most notably in defense-related mobility solutions. At the same time, we faced several headwinds including Israel export embargo, FX trends, volatile tariff schemes and a weak macroeconomic environment related to industrial applications. Nevertheless, we successfully mitigated these effects and maintained our positive growth for trajectory.

Order intake came in at around EUR 1.6 million, plus 9% compared to prior year. and therefore, remained at an elevated level. With a look at Q4 '25 intake was significantly lower than Q4 '24. But as you know, already based on Alexander's explanation, the timing of contract sign-off is subject to market-specific factors like budgets and the speed of decision-making processes at the customer's end. And once again, it is only a shift in timing. The order intake will occur. With a book-to-bill ratio above 1 Order intake continued to exceed revenue conversion during the full year '25.

As a result, fixed order backlog increased to around EUR 2.3 billion after EUR 2.1 billion at the end of '24. Revenue increased notably and landed at around EUR 1.2 billion, up around EUR 1.1 billion in the prior period. Q4 with EUR 438 million came in significantly better compared to prior year's Q4 revenue of EUR 362 million, an approximate 20% increase year-over-year in revenues reflects a successful scaling up of our production, efficient utilization of our installed asset base and significant employee engagement.

I would like to repeat and take and extend our sincere thanks to our entire workforce, their dedication, professionalism and team spirit were the decisive factors in delivering this performance.

Turning to adjusted gross profit. It increased from EUR 327 million in fiscal year '24 to EUR 391 million in '25 while the adjusted gross profit margin remained essentially stable at 28.6%. These outputs provide a clear indication of our earnings quality. We are scaling up the business in absolute profit terms without margin dilution. Nevertheless, our product mix continues to change from quarter-to-quarter as reflected in Q4. While the nominal amounts have risen from EUR 110 million in Q4 '24, to EUR 130 million in Q4 '25. The adjusted gross profit margin for Q4 '25 at 29.6% is moderately behind the prior year figure.

Adjusted EBIT for the full year rose from EUR 189 million to EUR 230 million. And the adjusted EBIT margin improved from 16.6% to 16.9%. The Q4 '25 contributed EUR 89 million and was very strong compared to Q4 '24 at EUR 77 million. Our earnings growth is outpacing revenue growth with higher output translating into higher profitability rather than being bought through higher cost. On the balance sheet, net debt increased moderately from EUR 375 million at the end of '24 to EUR 391 million at the end of '25. At the same time, leverage improved from 1.7x to 1.5x, meaning the earnings base extended faster than the net debt. We see this as a constructive signal with growth is being financed with discipline while credit metrics improve through higher profitability.

Let's have a quick look what all this means in terms of adjusted EPS and dividend and the payout ratio. Before I start with the figures, I would like to recap that the bottom line is affected by positive tax effects that came in Q2 based on our control and profit transfer agreement between RENK Group AG and RENK GMBH, we could effectively make use of tax losses carryforwards of RENK Group AG. In addition to that, we now can utilize until '27, our U.S. interest carryforwards due to a debt-to-equity conversion related to our U.S. entities. This actually translates into a strong decrease in the group's tax rate that will normalize over time.

That said, our adjusted earnings per share sharply increased by 38% to EUR 1.42 per share compared to EUR 1.03 per share in '24. With our proposed dividend of EUR 0.58 per share, we intend to pass on the same growth rate to our shareholders. This would be equal to a payout ratio of 40.9% and in '25 after 40.7% in the prior period. Now I will move on to a detailed look into our segments.

Turning to VMS. This segment again underlined its role as our key earnings machine. Order intake increased from around EUR 1 billion to around EUR 1.1 billion, confirming that demand remains strong and program-driven rather than short cycle. Our order intake is consistent with the broader defense spending environment. Q4 order intake was lower at EUR 225 million compared to EUR 467 million in Q4 '24. But as we have previously stated, these timing-driven effects do not reflect any reduction in our participation in the demands of the Defense sector. Revenue for the year rose from EUR 699 million to EUR 872 million, indicating continued conversion of the order book into delivery output and reinforcing that the current growth profile is primarily execution and capacity driven.

Going forward, Execution will further benefit from our modular production system introduced mid-year. I should stress that the '25 revenue increase was achieved despite the embargo on planned deliveries to Israel. Looking at Q4, VMS contributed EUR 293 million to the total revenue figure in '25 compared to EUR 235 million in the prior period. So from a group's perspective, we can state that VMS is our strongest pillar for growth and profitability.

The significant role of VMS for the group is also demonstrated by our adjusted EBIT improvement, reflected in an increase from EUR 140 million to EUR 178 million on a yearly basis and from EUR 63 million in Q4 '24 to EUR 74 million in Q4 '25. Margins were held at a high level with 20.4% at the end of the reporting period. Despite the Israel embargo impact. Again demonstrating that product mix changes quarter-to-quarter do not impact the annualized profitability trajectory. To sum up, Earnings expand in line with volume, while margins remained firmly above 20%, supporting our view that VMS continues to scale without sacrificing profitability.

Now let's have a look at M&I. M&I continued to deliver a steady and dependable performance profile, combining marine resilience with more cyclical industrial exposure. Order intake increased from EUR 307 million to EUR 327 million, which reflects a steady activity level and indicates that demand remained intact over the year. Main drivers are the Marine business and aftermarket activities. Q4 '25 was weaker than the prior year's period as it came in at EUR 72 million compared to EUR 92 million in the prior year's Q4.

As previously mentioned, the order intake shift included M&I Navy contracts that are scheduled for sign-off in '26. Full year revenue rose from EUR 330 million to EUR 380 million reflecting solid execution and continued throughput in the segment. And I would like to add, in addition to Alexander's earlier comment, that a portion of around EUR 20 million is attributable to RENK America, Marine & Industry. Our newly acquired Marine business in the U.S. On a quarterly basis, revenue increased by 14.9% and landed at EUR 113 million at the end of Q4 '25.

This revenue increase of about 50% came with a favorable product mix that led to a corresponding profitability increase. Adjusted EBIT for the full year improved by around 30% and from EUR 33 million to EUR 45 million and the adjusted EBIT margin expanded from 10.6% to 11.9%. Q4, '25 added EUR 14 million to the positive development after EUR 11 million in the prior year period. On a full year basis, adjusted EBIT also benefited from onetime effects of approximately a low to mid-single-digit million euro amount. These included insurance payments received in Q3 and the release of warranty provisions in Q4.

But the key takeaway should be that we were able to successfully mitigate strong headwinds related to the industrial market that had the potential to hold back M&I's overall development. The shift towards marine, especially naval applications helped to overcome that industry-related contraction.

Turning to Slide Bearings. This picture is slightly different. Order intake soften on a full year basis while revenue and profitability remained stable. Order intake decreased moderately from EUR 133 million to EUR 126 million, whereas the weakened industrial environment is responsible for the general trend of softened order intake. The year-end picture is actually driven by delayed order placement from defense-related customers. As you see, Q4 nevertheless, showed a good order momentum of EUR 30 million compared to EUR 26 million in Q4 '24.

Revenue for the full year increased slightly by around EUR 3 million to EUR 128 million despite the softer industrial demand environment. Q4 '25 with EUR 36 million made a remarkable contribution, representing an uplift of around 10% compared to the prior year quarter. The story behind this is straightforward. After the resolution of temporary staffing constraint midyear, we were able to sustain the prior year output level on a full year basis. Revenue was mainly generated from bearings for electric motors, generators and marine applications.

On profitability, adjusted EBIT for the fiscal year 2025 increased from EUR 21 million to EUR 23 million, and the adjusted EBIT margin improved from 17.2% to 17.9%. Q4 showed an uplift of around 56% to EUR 8 million. The key takeaway is that the segment maintained and slightly extended its high margin profile despite the challenging industrial environment, underlining the robustness of its operating model. Overall, Slide Bearing continues to provide a high margin and comparatively low volatility contribution within the group as seen in prior years.

Group operating profit came in at around EUR 169 million after EUR 116 million in the prior year. As Alexander has already said, the drivers continue to be our strong operational performance, higher output levels and the resulting operating leverage. After adjusting for the effects of purchase price allocation, operating profit before PPA, depreciation and amortization as well as income and losses from PPA asset disposals increased to around EUR 250 million compared to around EUR 160 million in fiscal year '24. Adjustment came in at a significantly lower level than the prior year and totaled around EUR 15 million down from around EUR 29 million and mainly related to global process and system improvements, whereas the corresponding period of the prior year was mainly impacted by our efficiency programs in Muskegon U.S.

In total, we recorded an adjusted EBIT of around EUR 230 million, '25 against around EUR 189 million in the comparative period. Adjusted EBITDA increased to around EUR 264 million from around EUR 222 million. Let me continue with a detailed look at our net working capital development. Net working capital increased to EUR 345 million at the end of '25, up from EUR 284 million in '24 and EUR 248 million in '23. The increase of EUR 61 million in '25 was primarily driven by customer receivables, which rose from EUR 268 million to EUR 370 million. The underlying explanation is our typical year-end acceleration in production and related timing effects when it comes to customer payments. Inventories also increased from EUR 391 million to EUR 436 million and therefore, contributed to the higher working capital leverage however, to a lesser extent than receivables and with a reduced growth rate compared to prior year's development.

On the funding side, the increase in working capital was partly offset by higher liabilities. Prepayments received increased from EUR 258 million to EUR 322 million. And trade payables increased from EUR 117 million to EUR 144 million, both supporting working capital financing. The rise in payments has its roots in the first 3 quarters of the year, whereas the shift of major orders, Alexander already referred to, came with a corresponding deferral of prepayments.

So on pure Q4 to Q4 basis, we were behind '24 million. Importantly, net working capital as a percentage of last 12 months revenue remained broadly stable at 25.2% compared to 24.9% at the end of '24 and below the 26.8% level seen at the end of '23. Overall, the chart shows a higher absolute working capital base in line with higher activity levels, while the ratio remains contained. On free cash flow, the starting point is our adjusted EBITDA of EUR 264 million, which reflects the strong operating leverage I already referred to. The latter also is true for the increase in net working capital that had an impact on cash per period end of around 20 -- sorry, around EUR 80 million. Please remember that a significant portion of that increase is attributable to customer receivables and so close to cash.

The slippage of major orders from Q4 '25 to '26 and the corresponding absence of related prepayments negatively amplified that effect on the financing side. CapEx excluding additional M&A transactions amounted to EUR 39 million, representing 2.8% of revenues and so slightly below our reference point of 3% on average during '24 until 2030. Prior year's ratio was 2.7%, creating some headwind for our proposed CapEx increase in '26 and '27. Besides organic growth, we will pursue M&A opportunities that fit well to our financial framework.

Not surprisingly, and given our earlier communications, our M&A focus is directed at potential growth opportunities in the defense sector. After considering income taxes of EUR 33 million, we generated an unlevered free cash flow of EUR 94 million. Free cash flow amounted to EUR 67 million for the year with an interest result of minus EUR 27 million as a reconciling item. Our net working capital increase resulted in a below-target CCR of 47.2% for fiscal year '25. The current year's figure negatively impacted the 3-year average of the years '23 to '25 that landed at 54.6%. If you add above factors together, you can see that our operating performance in '25 funded our investments and financing costs, resulting in a positive generation with sense on solid grounds.

Now let me move on to our approach to shareholder value creation. With an emphasis on returns in line with our capital market discussion directed on return on capital employed, I would like to state or start with the key drivers of the denominator of that performance indicator. The #1 message is that we adhere to our CapEx target of 3% in relation to revenue in a medium time frame. For fiscal year '25, we are below that figure, namely 2.8%, benefiting from our preceding investments in our productive basis. Nevertheless, given our growth ambitions that are enhanced by significant increases in proposed defense spendings our message is that we foresee a CapEx increase beyond our average CapEx target in the year '26 and '27. As communicated earlier, we foresee a CapEx ratio in '26 below but close to 5% and for '27 below but close to 4%.

Put differently, an average is an average and not meant to be a limiting factor for profitable growth that drives the numerator. And as already said, our capital allocation policy continues to embrace the potential for M&A activity as a driver of growth for the business.

Secondly, deleveraging. In terms of net debt in relation to adjusted EBITDA is on its way with a ratio of 1.5x at the end of fiscal year '25. We are confident to bring that number down further and below our benchmark. Finally, we are committed to provide for an appropriate payout ratio, which we locate somewhere between 40% to 50% of adjusted net income. Our '25 dividend proposal mentioned by Alexander and addressed by me earlier, would equate to a payout ratio of 41%. We will balance these 3 elements to ensure our envisaged ROCE development over time and fiscal year '25 adds credibility related to that ambition.

Now let's put things into perspective. When we reiterated our strategy at our Capital Markets Day in November '25, we laid out a clear set of building blocks that would drive financial returns and ultimately link the strategy to a valuation outcome. These building blocks remain, and I'm delighted to report the progress we are making in reaching our objectives. With a ROCE of 23.5%, we laid a sound starting point for our midterm goal. Key driver is the increase of our adjusted EBIT by 21.7% on a year-on-year basis.

At the same time, we saw a relatively small increase in capital employed that ultimately amounted to 2.3%. Besides our net working capital development mentioned earlier, CapEx and M&A activities are accountable for that lift up whereas amortization of intangibles and negative foreign currency effects had a mitigating effect.

Our current year's cash conversion rate is clearly below our midterm orientation mark. The same is true for net working capital in relation to revenues. As I said earlier, we need to acknowledge adverse timing effects that has driven these figures However, we are committed to manage the manageable, especially when it comes to inventory management.

Now I would like to hand back to Alexander and thank you for your attention.

Yes. Thanks, Anja. Ladies and gentlemen, let me come back with a few words on our outlook and guidance for 2026. Looking back on 2025 and as mentioned several times before, we are proud to confirm that we met our guidance 2025 for revenue and adjusted EBIT. Regarding 2026, we are guiding for revenues of more EUR 1.5 billion and an adjusted EBIT range between EUR 255 million up to EUR 285 million. Let me be crystal clear at this point. Like in the previous year, we will also do whatever is possible to position us in the upper half of the EBIT range. We see the overall market environment, including a potential peace deal in Ukraine for 2026 as strong and positive, and we do expect major order intakes, which I will touch later on in more detail.

From the operations side, our modular production line in Augsburg is, as mentioned before, up and running and just performing well, while we are consequently executing our investment and capacity expansion program with a strong focus on our German production side. From our growing supply chain, we also do not expect major issues. And therefore, we are very focused on converting during 2026. Our strong order backlog according to our customer delivery schedules into revenues. Including our investment plan for 2026, which I will discuss on the next chart, we do expect a quarterly revenue profile with a stronger H2 loading. Fair to say that we also need to manage some challenges during 2026 similar to what we did, by the way, successfully in 2025.

Besides geopolitical impacts on exchange rate movements here, we talk about U.S. dollar and tariffs, the export approval process regarding Israel is key. We have considered approximately EUR 80 million to EUR 100 million of revenues for 2026, and we are, of course, in very close and so far positive discussions with relevant authorities in Germany and in Israel, and we are currently preparing our production for meeting the production and delivery schedule for 2026.

Regarding our midterm targets, we fully reconfirm what we communicated during our Capital Markets Day back in November 2025. Organic revenues between EUR 2.8 billion up to EUR 3.2 billion and adjusted EBIT margin above 20%. The underlying assumptions on CapEx, ROCE, cash conversion rate net working capital and leverage, as shown before by Anja, all of these remain unchanged. Ladies and gentlemen, to make it simple, we are on track in executing our strategy.

Now let's move on to the next page and having a quick look on our operational priorities for 2026, which are very clear and concerning 4 focus areas. First, production and delivery according to schedule, full store. We have the order book, we have the backlog. Now we execute it. Second, the capacity ramp-up with focus on Augsburg and Rheine. The investments are on track, and we are preparing to almost triple our capacities for land transmissions in the coming years. Furthermore, Augsburg will increase 2026, the output north of 800 land transmission including additional capacities for the machining areas and still running most likely in a single shift mode regarding the modular production line.

Third, and as mentioned before, growing our supply chain and increasing the resilient, robust, flexible and scalable. We work on this continuously, and we do not see for 2026, as mentioned before, major issues besides normal day-to-day operational topics. Further finally, rolling out our operational excellence program and the RENK production system from Augsburg, which started in 2024 and Muskegon started in 2025, now to Horstman for 2026.

Slide 23 shows the installation sequence of new capacities in Augsburg and Rheine for land transmissions for 2026. In Augsburg and starting during Q2, new machining and heat treatment capacities will be installed and immediately starting production. For Q4, finally, a new test cell for land transmissions will also go live. Same for our former pure civil plant, Rheine, where we are installing new machining equipment for land transmissions during the second and third quarter of 2026. Very important. The entire capacity ramp-up performs according to schedule and will continue during 2027 and 2028. The strong focus on execution, plus a high level of standardization remains the key for our performance.

Ladies and gentlemen, moving now to Slide 24. As I said before, we do see the overall market situation for 2026, very positive. The potential order intake pipeline is full, and we currently have a strong order visibility, I mean, order intake visibility of approximately EUR 2 billion for 2026. Just to give you some examples of key order intakes, we do expect for 2026. And we are only talking about OE business. For example, the various German programs for land and sea platforms. Just talking about land, we do expect the Puma IFV, Boxer Arminius, the Leopard 2 additional MBTs and plus some Leopard 2-based family vehicles and also some PzH2000.

From the Navy side, we see the F127, the MEKO A200 and finally, a larger R&D program, which shifted from 2025 into 2026. We also see new transmission orders from the Store 4 contract, which is currently in the final phase of negotiation with the U.S. customer and worth of approximately EUR 800 million up to EUR 1 billion over 3 plus 2 optional years. Also, a larger MBT order intake from an international customer, which also shifted from '25 to '26 and further K2 orders for Poland. Also first orders from the Italian MBT and IFV programs and some additional larger INFV programs, for example, Romania and Austria. And as a kind of base business, more spare part contracts from Germany, Europe, Ukraine and international customers, specifically for land platforms.

Regarding Navy, more international frigate programs from various customers, including the two frigate programs, which shifted from Q4 '25 to 2026. Fair to say that we might also see for 2026 some order intake shift into 2027, like, for example, the German F127 program. But we see, as said earlier, the approximately EUR 2 billion of order intake is highly visible. Looking on Q1 2026, we currently see an order intake range between EUR 400 million to EUR 500 million depending, of course, on the final time line of the specific programs. Ladies and gentlemen, the good news, we are almost done. So let's move to the next slide.

The main priorities for 2026 are crystal clear and straightforward. First, execution, execution and again, execution. Our modular production line in Augsburg is running, and we are investing according to our CapEx guidance shown before by Anja into capacity expansion per our 2030 strategy. The foundation is set. Now we deliver on our financial KPIs and reaching new all-time highs.

Second, we have for 2026, a very attractive hunting list with major programs from Germany, Europe and the rest of the world, but also for future key order intake programs beyond 2026, such as, for example, the M1 platform and the large FF(X) Navy program in the U.S. Third, the optimization of our portfolio Defense is the center of gravity, the core of our business and always in the focus of value-accretive M&A. Moreover, the execution of our next-gen mobility roadmap during 2026 wth important milestones through the entire year is key in order to develop needed future technologies and new product segments for the defense sector.

And fourth, aftermarket RENK is today the peer with the highest aftermarket share in our space, but we want to expand this segment further. For 2026, we will review and define our new aftermarket strategy, including a better understanding aftermarket mechanics and analytics. We want to be more proactive, more systematic and more ambitious in order to build a strong and profitable resilience into our business model.

Ladies and gentlemen, before we open the floor to your questions, let me take final, final 30 seconds to sum it up. 2025 was a strong year for RENK with new all-time highs across the board. The year-end raise that once again, has proven the true capability of our team. and a strong order backlog, which is providing us with a visibility like never ever before. The appetite for what we produce has never been stronger. Land, sea, newbuild aftermarket across all our core programs and geographies, the momentum is strong in driving our business.

Furthermore, we are not just collecting order intakes. We have built up and are building up further the structure to convert them into revenues, Augsburg, Rheine or Muskegon, investments are on track. Capacity is growing and the operational performance is further improving. Finally, we are going into 2026 with a clear guidance a full order book and a proven ability to execute. Ladies and gentlemen, now really finally a few concluding comments regarding our final -- I mean, our financial calendar. Our capital market activities continue, as you can see, to be very busy, and we are very much looking forward to meeting many of you in the coming weeks and months at roadshows, conferences and by networks.

Some of these key dates are shown on this slide. So ladies and gentlemen, RENK has delivered a successful year. We have delivered what we promised. The challenge is absolutely clear. The focus is clear and the team is ready. Thank you very, very much for your attention. We are now looking forward for your questions.

[Operator Instructions] Our first question will come from Sebastian Growe with BNB Paribas.

The first one is on VMS and sorry for being a bit picky here, but can you comment on what has driven the margin decline at VMS in the fourth quarter. It was down like 150 basis points. And how do you view the margin trajectory into '26? And I'm asking that question in the wake of having seen the shift in the production concept in Augsburg now behind and as you also labeled the importance of the aftermarket business. So how fast might we simply get to tangible results here. That's the first question I have. And then I have another One on the guidance, please.

Yes, Sebastian, I mean I will try, of course, to answer your question, if you talk about VMS margin. I think we always communicated this that we had as a result of the export embargo, we were missing profitable business from the Israelian customer in the last quarter. And this, of course, was one of the main factors. We could partially compensate the missing revenues from the Israelian business from the planned and scheduled deliveries in the final quarter but we could not compensate it with the same kind of margin quality like we were assuming for the Israelian orders. And talking about the overall margin projections of the VMS segment, I think you see -- and this is the first general answer, you see the potential, if the plant is running under full production, you see the 25%. And I think if you look in the year 2026, we also would expect further margin improvement, of course, driven by the operational leverage.

And then on the aftermarket parts. So how quickly might this really turn out to be even stronger from a contribution perspective?

I think here we need to be fair. And as you know, I'm always saying that so far, we have disputed for an aftermarket share in a kind of not really proactive business approach. We are waiting for the customer and that the customer is coming to us. And usually, we are the only source in order to support our customers. We need to better understand what will change in the market coming from more platforms, more training, more exercises and a different perspective from the customer side, from the end customer side -- from the end user side, sorry, how they will run their spare parts strategy in order to increase the mission readiness of the platform, the existing platforms, but also the new platform.

So Besides this modeling of the markets, we will define in 2026 different improvement measures, which are for short-term perspective, but the majority of this business, when I talk about north of 40% or 50%, I think it's fair to say that this really change on the value and change on the share of the aftermarket business on the overall group performance will kick in beyond 2030.

And then to the guidance quickly, you at the Capital Markets Day said that you were striving for double-digit growth every year. Now your '26 sales target of more than EUR 1.5 billion implying just that. So it's just above EUR 10 million. So the questions that I'm having around this One is then what might lead to growth meeting the consensus expectation, which is EUR 1.55 billion as, you will know, billion? And can you also provide more color with regard to the growth rates by segments that you have in mind at this stage?

Well, I think the guidance and what we communicated on the Capital Market Day, I think it's consistent. So when we talk about double-digit growth, and this is clearly our target and approach for 2026. I think when we look on the current consensus of the EUR 1.55 billion. I think this is something what we -- I'm not waking up in the night and be full of sweat just referring to the question feedback of David Perry during the pre-close call. And I think the main growth driver, like on the segment level -- if you look on the segment level, the main growth drivers will be again on the VMS side. On the Slide Bearing side, we do expect a normal in the -- I mean, like in the past, shown a growth rate in the higher single digit, but this is from the total value is not a real driver.

The real driver was is and will be our land and defense business for the next year.

And sort of a very quick follow-up, just on how the current discussions with Israel with the German government are going in the wake of the conflict in the Middle East. Can this unlock to get to that approval any earlier and eventually even then further boost revenues beyond the EUR 80 million to EUR 100 million? Or would that be going way too far?

I think it's a fair answer to say that and as I mentioned this during my little speech here that we are in good discussions with the German customer and the German government. We are in good discussions with the Israelian government in order to align delivery and production volumes. So far, I do not see that there is any negative impact from, for example, the current crisis in the Middle East, the Iran war. This might lead overall, and this is really a gut feeling to an overall increasing demand for defense capabilities in this region. This will be, I think, or I could imagine pretty much on ammunition on air defense capabilities. But it will also could impact land defense capabilities.

Just a quick side note, and it's brand new. We just received yesterday the first orders for prototypes for a new IFV from a Gulf state which should be developed in the next 2 to 3 years. So it's a kind of indication. I don't know if this was an incidence, but it's a kind of indication that I think this conflict could drive further defense spending, not only on air and not only on ammunition and not only on air defense systems, but also on ground based. And you notice it's public Israel has strong demand for land platforms. Israel has announced to invest billions of euros into additional Markava tanks. So there should be on the midterm -- short to midterm additional benefit, of course, for the suppliers who are supporting these platforms.

Our next question will come from David Perry with JPMorgan. [Operator Instructions]

Can I just ask a couple of quick detailed questions and then one big picture question, please. The detailed questions maybe for you, Anja. On central cost line, I don't know if it's an elimination line or central cost line on EBIT came in at minus 16%. So it was much higher than previous years. Can you just explain why and what that will be going forward? Second question is and apologies if I missed it. Did you give any guidance on free cash flow in 2026. And then the big picture question, maybe for you Alexander is just if Donald Trump is successful in getting a big increase in U.S. Defense -- the U.S. Defence budget. What do you think the key opportunities might be for you in land?

Yes. Okay. Let me start with the central cost line. So this is basically the reconciling item for the segments for the adjusted EBIT. What we have in there is consolidation effects. And if we compare it '24 to '25 but it's not only consolidation effect, it's also central cost as said. So in '24 we had our IPO in February, and we had a newly set up AG. So in '24 the AG were starting to be populated. So the very first year is 2025, where we have the full setup of the AG. So that is partially due for the rising costs and what we have in there is we have central function costs, which we are not charging to the segments because these central function costs, they are providing stewardship work. Yes, so and stewardship work, which is related to a listed company in Germany, that cannot be charged to the operations. So therefore, that remains in that line, and let's not get charged out to the segments.

And obviously, as we have the very first full year in 2025, where we have the full AG setup and also the full central function setup for a listed company in Germany, that increase and it increased significantly. And so going forward, so I would say, gut feeling at around -- we're staying at around that level.

So, it stays around the sort of mid-teens that grow in line with the business.

No, no, no. We have -- well, it would go up if we would have other regulative topics where we are required by regulation to do further work on stewardship. There are some new regulation coming out from listed companies in Germany on things like that. But it's not in relation to our operations or something.

The next question will come from...

Sorry, we have two more questions from David. Anja, I think a statement on cash flow.

Okay. So cash flow 2026, as you have seen, so we have parts what we can manage and that we will be managing. But we also have parts which are depending on our customer behaviors. So for 2026, we just stay in line as and I assume that we hopefully have a more favorable cutoff topics in 2026, and we will be at the same levels as in prior years.

David good morning. Sorry...

Sorry, can I just clarify sort of a same level as prior year, you're talking an absolute amount or a conversion, you're saying that you're suggesting...

We're talking cash conversion rate.

But what is your reference here? Because we only have a limited history, you had a very good '24 and a much weaker '23. So I don't know what normal is. When you say prior years?

No, David, I think the message is clear, and we always communicated that we are looking driven by the nature of the defense business on an average cash conversion rate over at least 2 or 3 years and what we communicated always in the past to be on or above the 80% is our targeted average cash conversion rate. So we had in 2024, I mean for 2025 if we would not have these kind of EUR 200 million of order shifts and if you take from this EUR 200 million, to be fair, there's one R&D project in the range of EUR 20 million to EUR 30 million, which was not with advanced payments.

But if you take an average of 20% to 30% for these international programs on EUR 180 million and at this resulting advanced payments before the fiscal year end on the 31st of December on our EUR 67 million, we would be in a very favorable range also in relation to our consensus. We could not -- I mean, you know this, on the defense business, unfortunately, we cannot finally control our customer. So we had this shift of the projects with this shift in the order intake. The advanced payments will also shift into 2026. And so our target, and this is underlined is to have clearly on the average, our target is above 80%.

And David then, now finally myself. Good morning, and talking about the bigger picture about U.S., I mean, we had this discussion and Mr. Trump, I think, has set a very ambitious but also, I think, fair target to increase significantly today's defense budget of around about EUR 1 billion to significantly higher values, EUR 1.5 billion in this range. I still do believe that the main -- the main benefit, if you talk about domains will clearly be on the Navy side. The U.S. Navy has since 70 years the lowest number of vessel or fighting vessels. And if you see the geopolitics especially in Asia or when you see the number of vessels 2 aircraft carriers striking groups now in the Middle East, they need to build up and to ramp up through frigates, destroyers and whatever. It's the same if you talk air defense, if you talk about cyber and space capabilities.

On the land side, I still see that the budget will be maybe not so much under constraint, but I do not expect major moves. So I think in our today's positioning by serving the majority of the legacy platforms, except the M1 fair comment. And seeing that if you talk about in M1 future, I think we talked about repowering. I think the RENK is in a good position. RENK is in a very good position from my personal point of view, if you're talking about the naval programs. I mean, with the acquisition of Cincinnati Gearing Systems today, RENK America Marine & Industry, we have the needed footprint. the needed footprint in U.S. on top. If you talk about the large FF(X) program, I think there are numbers between 50 to 65 over lifetime. It's a huge number I would consider RENK in a very good position, but we need to book it, of course, because the reference vessel of this FR(X) is the so-called national c-cutter from the Coast Guard and the supplier of this transmission is RENK today .

Our next question will come from Joe Orchard from Rothschild & Co Redburn [Operator Instructions].

Just a quick clarification to begin with. Please, could you just confirm that you have included that EUR 80 million to EUR 100 million of potential revenue from Israel in your FY '26 guidance? And then secondly, please, could you talk about how you expect your revenue by region to evolve in FY '26? And it looks from the annual report that you had very strong revenue growth in FY '25 in Asia and the U.S., whereas in Europe, it was a little bit more muted. How do you see your revenue growth by region evolving in FY '26?

I will do my very best to answer your questions, of course. If you talk about, first, our guidance, of course, we have in our guidance, we have Israeli included EUR 80 million to EUR 100 million, and there is nothing to talk more about it. As I just said before, we are in positive discussions with both authorities. I was last week also in Berlin. And as I said in my presentation, we are currently preparing our production and delivery schedule according to the needs of the Israelian government. So from my side, yes, full stop.

The second point, if you talk about regions, I think we will have pretty much a similar pattern that in Germany, in Europe and in U.S., we will have a growth mode. Asia, if you talk about an end customer in Korea will also contribute. But I would assume pretty much a similar effect like or a similar pattern like in 2025.

Our next question will come from Sven Sauer from Kepler Cheuvreux [Operator Instructions].

The first One is, could you maybe provide some more color on the comments you made regarding the tax rate in the coming years? You mentioned a strong decrease of the tax rate that will normalize over time. Yes, it would be great if you could maybe quantify this a bit more? And my second question is on the main ground combat system. There is some news out that it's looking like it's going to be even more unlikely to materialize. Just wanted to hear your thoughts on this, what this could mean for RENK in the long term?

Yes, and I would start with the easy question, at least for me because I'm not a tax expert. So I would like to start with your main ground comment question. I think we talked about this at least 2 years now. And I always said I do not believe on the main ground combat systems. And if we read carefully the current planning of the Bundeswehr, the German Army and talking about the so-called -- bridging solution based on Leopard basis, it's kind of Leopard A3 or whatever, I think if the German customer and is our understanding is procuring beyond 2030, quite significant numbers of these so-called bridge solutions. I think from my point of view, this makes it even more unlikely that then 10 years later, there will be a new main battle tank platform. But this is my own personal judgment on this. Now I would like to hand over to taxes.

Okay, taxes. So our effective tax rate for '25 is around 18%. And in prior year, it was around 40%. So what happened in 2025 is we were able to implement the loss the control and profit transfer agreement between the AG and the GMBH and we did a debt-to-equity swap in the U.S. These two measures actually enabled us to activate on losses carry forward. So we are only talking about the deferred taxes. So we're not talking actual taxes, so there is no cash impact related to that. That is important. And that was -- and why did we have this huge increase in 2025 because that was a catch-up effect, which accumulated over the whole year where we increase the interest on the debt-to-equity swap in the U.S. and where we weren't able to deduct that.

So we were, for the first time in 2025, able to really capitalize on that. And obviously, it's a catch-up effect, and it will not recur in any going forward years. So that will basically defer out. So when you talk -- when you talk about going forward, tax rates, it will further flow out, and we will be very soon based on a normalized German company tax rate of 30% to 32%.

Thanks, Sven. Just to really complete my answer, I forgot your question. You do talk about the implications on RENK. There are no implications. I mean, main ground combat system is from the original planning beyond 2030, 2040 somewhere. If you talk about the pitching solution, it's RENK. So for us, there's no implication.

Our next question will come from Charles Armitage from Citi [Operator Instructions].

A couple of quick ones. Unfortunately, I dropped off at the critical moment and you're answering David's question, so you might have answered this already. What do you typically get on as a customer prepayment on orders? Does 20% sound about right?

Alexander here. This depends really on the customer contracts. I mean it depends on how we negotiate with the customer, of course. But I think it's fair to say in the range of 20%. It's a good average indication.

Excellent. And again, I think you mentioned this previously, but I've mislaid my notes. Israel sales last year lost were about EUR 80 million, is that right?

No, no, no. Last year sales, I mean, when we talk about the impact of the export embargo, which was materializing in form of missing revenues in Q4 was in the range of EUR 20 million. This were EUR 20 million. But if you look on 2026 we have, of course, included and we communicated this, I think, several times in the range between EUR 80 million and EUR 100 million. And as I just said before, or what I can say is, we are in positive discussions with both authorities. And as I just said it, I think it was Sven or I don't know exactly we are just preparing our production and our delivery schedules according to the needs of Israel.

Our next question will come from George Mcwhirter from Berenberg [Operator Instructions].

I have 2, please. Firstly, on order pipeline, can you provide an update on the Saudi Arabia and Egypt. Abrams M1A2 repowering contracts? And the second one is on aftermarket. I think aftermarket growth revenue growth in FY '25 was 8% versus OE at 28%. Was there something specific in the aftermarket business to explain the lower growth? And do you expect aftermarket growth to be quite similar to OE growth this year.

I mean I would like to start with the second -- with your second question, if I got it correctly. I mean the aftermarket growth in general, I mean if you look on 2026, I think I mentioned this in my speech. We're looking forward to receive more aftermarket, and I really talk about aftermarket spare parts. We are looking forward to receive more of these orders from the German customer, from the European customers from international customers as well. We also do see that the -- so what we started successfully for the very first time, by the way, during Q4, 2025 to start to have direct contracts between the Ukrainian MoD and RENK entity to continue this also in 2026.

And if you talk on the long run, I mean, all the new business, which is kicking really in from the rearmament in Europe from the 3.5% plus 1.5% increase all this new business coming 2028 for following is, of course, adding up transmission by transmission, engine by engine, drive system by drive system, additional aftermarket layer and that's the reason why I'm saying if you look really on the mid- to long term beyond 2035, I see our business model and developing more with a higher aftermarket share north of 40%, where I cannot tell you is, to be honest, for this reason, we need to make and do our homeworks this year.

But what is clear is really, so far, RENK was more in a really reactive mode in driving the business. This means organization maybe needs to be aligned. This needs to be much more activities even in our Industrial segment, if you talk about branding strategies, et cetera, et cetera. more and new service ideas, also if you talk to our end customers. So it's a broad spectrum.

Coming to your first question on the order intake pipeline you asked about Egypt and Saudi Arabia. So we talk about the FMS repowering idea and potential program of the M1 Abrams, the M1A2 current model. Well, as I said earlier, we do expect from our potential customer GDA decision during the summertime, we are preparing a quote from the physical setting of this repowering. As you know, the turbine should be replaced with a diesel engine, and there should be a new transmission the only supplier who has a transmission besides Allison, who is capable to run this 70-tonne tank is RENK.

So we do see us in a good position, but Unfortunately, we need to wait a little bit more for the summertime. And then during the summertime, of course, there should be a guidance for this FMS business towards Saudi Arabia and Egypt. And as I just said before, if you look on the current crisis, my gut feeling tells me it will accelerate on defense spending in this region simply.

And we have a written question from Marie Therese Grubner from Cantor Fitzgerald. The question is what are your expectations on German orders in FY '26? Do you have any visibility on when major orders will come in, meaning of which quarters or seeing anything hinting at delays on that front?

Marie is not here, otherwise, I would welcome here. But nevertheless, I mean, first of all, the orders and the expected order intakes are pretty much exactly what we had on our radar in our expectations since months and quarters. So to be more precise, you have seen in the presentation, we talked about Puma, the additional batch or the additional to around about 200 Pumas for the second batch. We do expect, and this depends really on the timing, Q1 or Q2 in 2026. The Boxer Arminius program in the range of 1,800 Boxers, somewhere during the summertime, Q2, Q3. What else do we have? The Leo additional main battle tanks, 75 to 80. I would see this more in the second half. Leo family, if you talk about Buffel, LEGUAN Bridge layer, WiSENT, they will come scattered throughout the year.

The PzH2000, Q2, Q3 and I think I covered, if I'm correct, the current land programs. If you talk about the Navy programs, we do expect to have F127 in Q4. Why? Originally, we expected the order intake somewhere at the end of Q2. But as you know, the German Navy has currently quite some topics to manage the F126, the exhaustive negotiations regarding F127 and on top to include somewhere the MEKO A200.

So there's a lot of work for the German government and the buying and we do see that for this new missile destroyer air defense destroyer, we would expect simply ongoing discussions. And so it could happen that this might slip into 2027, but we have it in our visibility for Q4. And the MEKO A200 as a bridging solution on the sea side, because F126 will have a delay, a massive delay. This first feeling of the first vessel will be somewhere beyond 2030. So there's an urgent need for the German Navy to have mass and capabilities in 2029, 2030. So we do expect that the MEKO 200, 4 plus 4 ships somewhere Q2, Q3.

Thank you very much. Well, that concludes the Q&A session. I'll now hand back to Dr. Alexander Sagel for closing remarks.

Ladies and gentlemen, thank you very much for this open discussion and your patience. It's a little bit longer than usual. But please take it as granted we are fully aware about your expectations. We are well prepared not only to collect orders to execute these orders. We are just precisely following our capacity expansion plan, always staying in our targeted CapEx range, and we will execute. We are on track in executing our strategy we have for 2026, a fantastic total order book. I think we have proven in the year-end and through the entire year 2025, by the way, that, again, operational execution, including supply chain, we have under control.

And for this reason, again, I would like to reconfirm if you talk about our adjusted EBIT range we do feel well to position us well in the upper half of this range. Having said this, thank you very much for your patience, and see you soon. Bye-bye.

This concludes today's call. Thank you, everyone, for joining. You may now disconnect.

Welcome to the RENK Group AG Q4 2025 Pre-Close Call. Please note that this call will be recorded. [Operator Instructions] I would now like to turn the call over to Christian Weiss, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining our pre-close call today. Our CEO, Dr. Alexander Sagel, will guide you through today's call and will be available for questions afterwards.

And with that, let me hand over to Alexander. Please go ahead.

Yes. Thank you, Christian. Good morning, ladies and gentlemen, and thank you for joining today's pre-close call, the first one in 2026. First of all, I hope you all had a great and fantastic start into this new year.

Before we go into details, let me summarize the key messages upfront. First, RENK has once again proven that we can perform on a true year-end trace. Therefore, massive kudos to the entire RENK team for this tremendous effort. Our operational performance and delivery capability, combined with our strong team were the foundation not only for a very solid final quarter, but ultimately for a very successful full year 2025, where we confirm our 2025 guidance on group level for revenue and adjusted EBIT and where we are fully in line with current market expectations.

Fair to mention that we delivered this performance despite facing several external headwinds, including exchange rate movements, so a weak U.S. dollar development, tariff effects, a weak industrial market and most significantly, the Israel export embargo, making our 2025 results even more remarkable.

From what we can see today, we are on the way to another all-time high regarding order intake for 2025. In fact, over the past year, we secured new contracts close to market expectation and this despite the fact that some larger international orders shifted from Q4 2025 towards Q1 and first half year 2026.

I will come back on this point later during the segment discussion. We are also pleased with the order intakes in U.S. where RENK America alone recognized record-breaking order intakes in 2025 and crossed the USD 500 million watermark for the first time, truly a great proof point for our strong position in the U.S. market.

While Q4 did not include any larger orders exceeding the EUR 100 million level, like, for example, the exceptional strong Q4 of 2024 and was more in line with the previous Q3 2025, we, however, secured a number of important orders across our portfolio, underlining the continued strength of demand.

On the revenue side, full year 2025 showed a slightly better growth rate compared to 9 months 2025. Important, all 3 segments were able to grow in the past year with VMS once again as the clear growth engine on group level. Notably, in Q4, VMS improved significantly, while M&I and slide bearings improved strongly in terms of revenues compared to Q4 2024, just confirming again the successful year-end really I mentioned before.

Regarding the adjusted EBIT, we can simply recognize that once again, the adjusted EBIT growth in 2025 outpaced the revenue growth, resulting in an improved adjusted EBIT margin on group level despite low double-digit EBIT headwinds due to the factors mentioned before. This improvement of the adjusted EBIT underscores our clear focus on operational performance and cost discipline.

As a result, we see adjusted EBIT very close to current market expectation, both in Q4, but also in full year 2025. Overall, RENK remains fully on track. Our full year 2025 performance has positioned us very well to achieve our targets, deliver on our promises and simply execute our strategy.

Ladies and gentlemen, let me have a quick look on our segments, starting, of course, with the largest one, VMS. The VMS segment continued to be our absolutely strongest growth driver in 2025. During Q4, order momentum in VMS stayed elevated and comparable to Q3 2025, fueled by ongoing demand for our high-performance transmissions for tracked vehicles through the entire year.

Just to mention or better recall some few key contracts from the last quarter, for example, like the second batch of K2 main battle tank transmission for Poland. You might recall that we booked the first batch already at the end of Q3 from Germany, additional first orders for Puma's, the recovery tank Buffel and the Boxer and various orders from the SOR 3 program in U.S. as well, just underlining our leading position in NATO's land defense programs. Furthermore, we saw various international orders for AVDS engine and our drive system as part of retrofit and support programs. complementing our core transmission business.

We also recorded increased orders for the aftermarket business for BTA for Augsburg throughout the year, especially in Q4. This includes for the very first time, purchase spare parts and MRO support packages for Ukraine by direct contracts between the Ukrainian MOD and RENK.

Comparing Q4 2025 with Q4 2024, it is fair to recall the fact that we had an unexpected high order intake of 3 large MPT programs just before Christmas and which was scheduled originally for 2025 order intake, just significantly supporting order intake performance of Q4 2025. On top, the order intake of a larger international MBT program in the lower 3-digit million euro range shifted from Q4 2025 into half year 1, 2026 due to minor delays in the final contract negotiations.

On the revenue side, VMS just delivered significant growth in 2025, both for Q4 and for the full year. Our production output ramped up strongly in Q4, thanks to the year-end push after a slower third quarter. As you know, we had a planned temporary slowdown in Augsburg during Q3 to implement our new modular production line.

By Q4, the new line was simply up and running and VMS revenues grew significantly year-over-year in the quarter. As a result, we are ending up slightly above current market expectation for Q4 as well as for the full year 2025. In terms of adjusted EBIT, VMS showed another strong performance, which is pretty in line with current market expectation for Q4 and full year 2025 as well.

Adjusted EBIT increased significantly both in Q4 and on a full year basis. As a result, VMS once again remained the largest driver of the adjusted EBIT for the entire group in full year 2025. However, while we were able to partially offset the revenue losses of the Israel business with other business in Q4, the margin quality of the latter was different.

Ladies and gentlemen, our Marine and Industry segment or in short M&I also delivered a very solid performance in 2025, primarily driven by the naval side of the business. The global naval market remained robust and RENK benefited from rising defense budgets and a steady flow of modernization and new naval programs in Europe, in U.S. and Asia.

However, contracts from 3 international customers with a total order intake range approximately in the mid-double-digit million euro value and expected for Q4 2025 shifted into half year 1 2026, resulting in Q4 order intake levels compared to Q3 2025.

Looking now on the revenue side, our naval business achieved a new all-time high for full year 2025, which is the result of our strong execution on ongoing projects and the successful integration of our new U.S. operations, RENK America Marine & Industry, RAMI, and our strategic positioning in the largest Navy market of the world, the U.S. market.

However, the industrial part of M&I continued to face a more challenging environment. Broader industrial markets remained weak in 2025 with soft demand in sectors like energy, steel and general industry, which impacted our industrial transmission business. Overall, M&I's revenues for Q4 and full year 2025 were well above last year's level and slightly above current market expectations.

Turning to adjusted EBIT. Marine & Industries saw adjusted EBIT growing faster than revenues in Q4, reflecting solid execution and a strong contribution from the naval business. This also holds true for the full year 2025 with adjusted EBIT growth outpacing revenue growth and reaching an adjusted EBIT level well above current market expectation, underlying our ongoing focus again on performance and disciplined project execution.

Please keep in mind that the full year adjusted EBIT level is also impacted by positive onetime effects like, for example, insurance payments received in Q3 and released provisions for warranty claims in Q4. Taking these onetime effects into account, underlying 2025 profitability would have been slightly above last year's levels.

Finally, a few words on our Slide Bearings segment. Despite the challenging industrial environment throughout 2025, the business realized the slight revenue growth close to current market expectation and delivered a very solid performance regarding adjusted EBIT well above current market expectations. The execution of operational measures and the recruitment initiatives are starting to show first tangible results with improving throughput and utilization.

The order intake for 2025 is, however, slightly below the 2024 level. Looking on Q4 finally, Q4 2025, we can see that December was the strongest month in the segment's history in terms of revenues, which supported a very solid Q4 regarding revenues and adjusted EBIT, which were together with the order intake well above Q4, 2024.

Ladies and gentlemen, to sum it up, RENK has delivered a successful 2025 and RENK has delivered what we promised. Execution is clearly key, and we are almost brutally focused in driving the needed future capacity uplift and preparing ourselves operationally for the coming years by simply executing our strategy or in a more simplistic view maybe just doing our homework.

And as a final remark, we will disclose our full year 2026 guidance on March 5, 2026, as part of the publication of our 2025 annual results. Ladies and gentlemen, thank you for your attention, and I'm now looking forward to your questions.

[Operator Instructions] First question with Sam Burgess of Goldman Sachs.

If I've heard you properly, VMS revenue is likely to come in ahead of market expectations, but adjusted EBIT in line. Was that -- did you say due to the exclusion of the Israel business, which I presume is coming in at relatively high margin. I think you said previously you're expecting to receive permission for that in the first quarter of '26. So we should expect that to come through at high margin in the first part of the year would be my first question.

And then the second is just whether anything has changed in terms of what you're seeing, particularly in Germany on capacity ramp from some of your customers or whether everything is in line with your initial guidance that you provided at the CMD for a more kind of back-end loaded 2028 sales growth?

It's a pleasure talking to you. I mean, starting with the first question about the fourth quarter and the impact of the Israel business. I mean you are perfectly right. We are regarding on the revenue side, well above or over the market expectations. And on the EBIT side, I think we are pretty good on the market expectations. So this is a result because as you correctly said, during Q4, we could not deliver the quantities from Israel because we had this export embargo. And we could compensate partially with different business, but you also mentioned it that the margin quality was different, lower compared to what we had originally considered for our Israeli business. So this is one and first answer on this point.

The second answer on the same topic is that indeed, we are in very close discussions with the German government. We are in very close discussions with the Israeli government in regards to understanding the delivery and the shipment time line, which will be linked on the export approval time line of Israel. We do expect to have in the next 4 to 5 weeks a more clear visibility because it is also needed for our guidance on March 5, of course. But I mean, all what I can say in regards to Israel is that we have considered for 2026 around about EUR 80 million of revenues from Germany.

And according to the delivery schedule what we have currently and where we are working on and preparing our production and our production scheduling, this will start during the second quarter. So during the first quarter, we do not have Israel volumes to be produced because this was not possible. But we will have a stronger back-end loading of the Israeli volumes.

But so far, I'm optimistic we will need to see how the German government finally will proceed on this export approval ban. If you take the overall political sentiment between Germany and Israel, I think it has improved during the last couple of months. So let's wait and see.

If -- your second question is a tricky question, to be honest, because I'm not doing the capacity planning, of course, from our customers. What I can say is according to the delivery schedules for 2026 with our key customers in Germany, in Europe, I do not expect any significant deviations from the understanding what we have going into our plants. We see -- I mean, into the plans of our customer we do see, I mean, many, many of activities. And this, I think, is broadly through Europe. So it's our 2 German customers. We have international customers in Europe. But I have no reason to assume that we cannot fulfill our contracted delivery volumes for 2025 -- 2026, sorry.

Our next question comes from Sebastian Growe with BNP Paribas.

I have 3. The first one is more clarification. So from what I heard, you said, I think the VMS would be in line with market expectations, M&I and Slide Bearings, both above market expectations when it comes to EBIT. However, I think in the sort of group commentary you gave, you said that you would be close to current market expectations.

So to me, that sounded a bit like you are rather coming from the lower side, if I may put it this way, but the segment-related commentary would rather suggest you are kind of exceeding market expectations. So if you could just clarify that. And maybe we take the questions one by one, if you don't mind.

Yes. Okay. Yes. I mean I think your understanding about the -- my comments on the full year performance in regards to adjusted EBIT for the 3 segments, VMS, M&I and Slide Bearings is perfectly on the point. And maybe I should be more precise, if I look on '25 adjusted EBIT performance, I would say it's very, very close to market expectations. I don't know, if this answer helps you more, but this is all what I can say right now.

Okay. Okay. No, that's helpful. And I think we shouldn't go any further. Then the next one is around free cash flow to the extent possible that you can talk about that. So I think we heard you saying that the order intake should rather be at the quarter 3 level. At the same time, however, it seems that for some market participants, there has been indeed a very, very substantial tailwind from then also prepayments received. So if you can just elaborate on what we should maybe see then from the prepayment working capital tailwinds for the quarter 4.

Yes, sure. I mean, as I just tried to allude during my little speech, we have 2 main factors, who also have an impact on our free cash flow generation 2025. As you know, our target is always, and we discussed it to be above the 80% in an average over 2 or 3 years. We do not -- we are not completely through with our free cash flow figures. But what I can say is we are on a good way. We are currently somewhere on the 50% level, and this is what I can see from today's point of view. And this is -- I mean, 50% in regards to cash conversion rate.

And this is simply driven by 2 facts. First, we had order intake shifts. We had larger programs from the Navy side and one large program from the MBT side. They just shifted from the year-end towards the beginning of 2026. So we do expect them in Q1 and in half year 1. This has, of course, free cash flow or advanced payments, who did not materialize as expected before Christmas, but they are coming now during Q1 and during the first half year from this point of view. And we also had a payment -- a customer payment, which was due before December, which did not materialize, but it will materialize right now in February. So there should be a positive cash flow impact on Q1.

Overall, currently, what we see is somewhere in the range of a 50% cash conversion rate. But if you would consider the impacts of these 2 factors, shifting of programs and this not received payment, we would be -- if we would adjust this, but don't take it, I mean, as a normal adjustment in regards to our free cash flow, well above current market expectations.

Okay. That's helpful. And because you just made the point around the customer payment, we know that one customer of yours is apparently quite vocal about 30% prepayments from the German customer in particular. Can you just walk us through to what extent you might benefit also from this generous way the German customer treats their suppliers?

We are contracted by the primes. And of course, if the German customer is so generous and giving 30% advanced payment for certain programs, we also do hope, of course, when we are in contract negotiations to participate from this increased advanced payment method. And we will see, to be honest, if we are successful because we are starting now, as you can imagine with, for example, the 200 Pumas, which were approved by the German parliament just before Christmas, we are starting now to enter and to go into contract negotiations. And of course, we will try all what we can do. And I think in the past, we were not really unsuccessful to make our share and to participate on these advanced payments.

Okay. Makes sense. And the very last one, maybe it's a follow-on to what Sam asked before, but I think you have been helpful in qualifying the expectations around '25 and how things might then simply shape up in comparison with the consensus. Would it be as helpful then also for '26 to at least give a certain hint as how to think about the consensus because I think as you will and can tell by the market reaction for one of your customers today, the deviation from the expectation has been quite severe in their case. And I just wanted to sort of check in if and when you could disclose anything around how to think about '26.

I mean looking on the stock market this morning, I can understand this question, to be honest. Of course, as you know, and I think you would not have expected a different answer. We will have on our full year call in 2025, a much more detailed discussion on this point, including our guidance for 2026. But really, if I run through from my Alexander angle point of view, through the main topics and main triggers for 2026, I think I can provide this and I should do it, of course.

Starting with the market view, which from our -- I mean, our perception is very, very positive for 2026. We have a strong order book. As you know, according to the 9 months results, it was in the range of EUR 6.4 billion. To be honest, I would be surprised if in 4 weeks, the EUR 6.4 billion would be at the same level. I mean this in a positive way. We have -- overall, we have very positive market conditions.

I mean, if you watch the last 4 weeks on the geopolitics, independent, if you talk about China, Indo Pacific, if you talk about European Union and Russia. And even if there's a peace agreement or if there's no peace agreement for us, it doesn't matter, to be honest. We see it even more positive if there's a final peace agreement between Russia and Ukraine for our overall business development. But overall, the geopolitics will not change.

On the opposite, we do expect, as you know, major order intakes through the entire year, starting with the German programs where we see a pipeline what we can see today in the range between EUR 500 million to EUR 600 million order intake. This includes Puma, the second batch. It includes Boxer and Rheinmetall program, LEO main battle tank and family vehicles, et cetera, et cetera, F127, maybe even the Mako 200, let's see on the Italian programs on the [indiscernible] frame contract U.S., the Romanian and maybe Austrian IFV programs. So we do expect good order intake, so positive. So overall, from my point of view, if I talk about the market view, it's fair to say, it's an absolute positive perspective.

Just to give you another indication, we have for our largest segment, VMS, already today, 90% of our orders fixed in our books. So I think this is a really record level at least for RENK.

So overall, from the market side, from the business side, positive. From the operations side, if you talk about execution on the revenues, I mean, all what I can say is the operations are simply running. The modular production line is on speed and performing exceptionally well. And we are just executing our capacity expansion, investing, investing and converting plants. But it's also clear, and we just touched a point about Israel. I mean, we need to get the export approvals.

We are ready and set to deliver according to the agreed delivery schedule with the customer. We are working very hard and very open in good discussions with the German customer, of course, but this will be a trigger through the entire year to be fair.

And of course, we had in 2025, we had some impact from the geopolitics, if you talk about tariffs, for example, and I think in the beginning during Q1 2025, we indicated a potential tariff impact for 2025 in the higher single-digit euro range. By the way, this did materialize, and we compensated this in our 2025 figures. But you do not know, at least I or we do not know how the U.S. foreign politics and maybe even Mr. Trump will impact the tariffs and exchange rate. I mean, I cannot tell you this, maybe you know it.

So overall, looking on 2026, it's I think very fair to say we know what to do. The market is strong. We will see, of course, by nature, new all-time highs in our -- in all of our relevant key financial figures. And of course, we know what the market, so the consensus is expecting from us we are confident. And I do not feel massively concerned about the current market expectations. That's all what I can answer you right now. I hope it's okay.

Absolutely. [indiscernible] Again, just one thing for then the one customer. I think it was pretty harsh shortfall simply speaking, when they are guiding to around EUR 6 billion for vehicle systems and the market is at EUR 6.5 billion. That is not helpful. And I think it is a logical conclusion that one asks and also key suppliers to what extent they see eventually, I don't know, softer volume outlook in the short term because of whatever delays might happen, et cetera, and that was simply the backdrop of the question. But I guess it's more than I think we have covered them.

Sebastian, just to answer your last comment, I think it's important to mention that -- and you know this, we are not depending on one single customer. And I think the benefit for RENK is we have a very wide diversified customer base, and there is no single customer, who has more than 10%. And I think this is really the strength of RENK. We are focused in our products. We have a strong aftermarket, a strong downstream business. I think this is also unique. And we have from the regional and from the geographics, but also from the customer portfolio, we are not depending on one market, and we are not depending on one customer.

[Operator Instructions] We will take our next question from George Mcwhirter with Berenberg.

On the contract that you signed with Ukraine MOD for spare parts and MRO, can you just comment on what this contract covered and what you expect potentially for further contracts with Ukraine in the coming quarters and years?

I can hear you loud and clear, and I fully understood your question, and I'm happy to answer. Really, indeed, these were the first 2 contracts we signed in Q4. This was 1 contract signed between the Ukrainian MOD and our company, RENK America, and it's about servicing overhauls of engines and transmissions of -- from platforms, which are currently operating in Ukraine.

And the second one is a quite -- I mean, it's a very attractive on package of spare parts for several platforms. And these platforms include German platforms. It includes French platforms, and it does also include American, U.S.-based platforms, and it's in the higher double-digit and euro level. It's a kind of frame contract. And really, this is the first business direct business RENK did since the last 4 years with direct Ukrainian MOD.

That's really helpful. The other question I had was on the M&I business. I was just trying to work out actually the Q4. I think I might have struggled to understand exactly what the message was. Maybe if you could just repeat it, if possible, just the Q4 EBIT in terms of mentioned some of the one-offs, that would be great.

What I can tell you is, I mean, if you take the Q4 and what I mentioned, the one-offs, I mean, the total magnitude of the one-offs from the M&I is maybe in the lower to mid-single-digit euro value. So it's relevant, but it's not really overwhelming. And honestly, we had no other choice because we solved the dispute with the customers we had on the quality side. So we had no other choice than really to release it.

But overall, if you look on the Q4 and of course, if you look on the full year, including this range of onetime effects, we are very pleased to be honest, we are well above the last year's levels, I mean, for both. And if we compare this to the market expectation, we are slightly for Q4 and the full year '25, slightly above the current market expectations. So if you take this as a kind of horizon to make your assessment and then you deduct the indication what I just said about the onetime impact or onetime effects, I think you should come in the right point.

Overall, and I said it, we are very happy with the development of the M&I segment. And I think it's fair to say that thanks to the good order intake situation from the naval side, good revenue conversion, thanks to a very focused and disciplined project management and also operations. I think the naval business could very well compensate the revenues, which we did not generate by the industry business.

Industry business, and you know this, in George, 2025 was under a lot of pressure. We will see how this will develop in 2026. In our estimates, currently, it's flat. However, it will also depend, if there will be more turbulences on global business by exchange rates and impacting certain industries, industrial areas like steel or like oil and gas, whatever. But overall, we are very pleased about the performance of our M&I business.

Our next question comes from Sven Sauer with Kepler.

Just 2 follow-up ones. Can you quantify the full year adjustments that you were mentioning about a warranty claim release of provision of warranty claim in Q4 and the insurance payment in Q3? Just combined on a full year basis, what that would be? And the second question would be, can we expect some news in 2026 on the M1E3 suspension package?

Sven. I start with the last question because this is a very important question, but not the only important question. I mean -- if we talk about M1E3 suspension package, I think it's fair to say that there is no official publication from the customer side because also our customer, in this case, GD has some lessons learned from the latest publications, which were not really helping and supporting our customer in running and going in the EMD phase. But what I can indicate to you is that RENK is set for the suspensions of the M1E3 EMD phase. It's the same like SAFA is nominated for the transmission, both SAFA for the transmissions and RENK for the suspensions need to be qualified now during the next 3 years.

There will be a couple of platforms built up, I think 15, 16. And every one of us needs to run through this qualification and to perform. If we perform and if there's still money left there for the Army budget, the potential partners and suppliers for transmission and for the drive system will go into series production. I think just a little comment aside this, it's not only the M1E3 who is attractive. I think it's also attractive to see, if there could be a kind of repowering program of the existing Abrams fleet, M1A2, which is especially could be relevant for Abrams fleets in Sandy countries like if you take Egypt, if you take Saudi, where there are huge fleets of M1A2s, but maybe even repowering could be attractive for the existing U.S. fleet of the M1A2.

When we talk about repowering or in Germany retrofit, it means to get rid of the gas turbine to have a diesel engine and to have a new transmission. So -- and here, most likely, there could be from the customer side and from the end user side, a decision towards the middle of the year. And I would see that RENK is in a good position because the current Abrams M1A2 is quite heavy, much more tons compared to the target rate of the M1E3 next generation.

So there are not so many transmission suppliers, who have a transmission off the shelf just to make a TOT transfer of technology and to, yes, simply start delivering on the short notice. About the adjustments, to be really open Sven, I don't have the overview. I can tell you what I just told to the other gentlemen that if we talk specifically about the M&I, we had this low to mid-single-digit EBIT impact on the adjustments positive, in this case, positive because it's important if you will see our full disclosed numbers in 4 weeks from now, so we had this positive impact.

But again, if you -- so if you would take out this positive impact, our resulting performance, if you look on the M&I margin would be still above last year performance.

And you might recall, we always said that '25 and '26 is a year or other years of stabilization on the 11% value, on 10.5%, 11% value. And I think this is exactly where we are running despite the fact that we had, as I said before, a lot of headwind from the industrials, but Navy showed a good performance. And by the way, also our aftermarket in the M&I segment, which is also 50-50 roundabout from defense and by industry also showed a good performance.

Our next question comes from Chloe Lemarie with Jefferies.

Alexander, I have a follow-on on VMS. So I understand that in Q4, you had some margin headwinds versus market expectations. But I just wanted to check, if you started to see some effects from the new organization at Augsburg? Or should we expect that to take a bit more time to flow through in 2026? And also on the kind of delay to the Israeli sales in Q4, should we add that to the total that you were initially planning in 2026? Or should we kind of stick to the roughly EUR 70 million that you were expecting initially?

Always a pleasure and good questions. Starting with Israel, my recommendation would be to stay on this EUR 80 million range because we need to get approvals. We need to understand, and this is what we are doing currently. I'm very frequent, as you can imagine, in Berlin, and that was before Christmas in Tel Aviv.

And of course, if there's any opportunity to add this what we could not deliver in 2026 -- in 2025 on 2026, we are ready to do, but it depends on the timing on the frequency, not -- I mean, for the new contracts coming in. So -- and I'm always a little bit conservative. I see it in the EUR 80 million range. If we can manage this from the sequence of getting approvals versus delivery schedules to the Israeli customer.

If there's any chance to put this on top, we will, of course, do it. But for this, we need to have more clarity on the overall process now of approvals, and we have a clear delivery schedule from the customer, of course. So now we need to see this and to fit it. Your first question, Chloe, I think was related to the impact of the modular production line. Is that correct?

Absolutely, yes.

Yes. I mean we had a busy Q3. I think you all have seen this. Thank you again very much for participating on our Capital Market Day. And during Q4, this line was just up and running. And most likely, you could not see the full year impact in one quarter. But what you will see, of course, during 2026, you will see that we have generating or that we will generate more efficiency because the line is running just smoothly.

It's -- we could theoretically produce much more, but we have our contracts and the contracts we need to fulfill. But the line is beautiful. It's very efficient. It supports our entire procurement planning. And for this reason, yes, we do expect to see further efficiency gains also during 2026.

Our next question comes from Christophe Menard from Deutsche Bank.

I have 2. The first one is on the -- you mentioned, Alexander, on M&I, mid-double-digit order that were expected in Q4 shifted to H1 '26. Can you give a little bit more details on this?

And the second question, you were talking about the expectation of order intake from Germany in '26. At the CMD, you mentioned something like a range of EUR 1.4 billion to EUR 2.2 billion in terms of total order intake you were expecting from Germany at given point in time. Do you have any update on this? I think you said that the CMD dependent on the quantities and it was not set yet. So any update would be interesting.

Yes, Christophe, for sure, also here. Yes, of course. I mean I would propose I start with the first point about the M&I shift. We had actually 3 programs, which originally were scheduled. And I think on the [ Q 9 ] we even talked about this -- about various free gate programs of international customers.

And in fact, there are 2 programs. 1 is for a European nation and the second one is an international customer. It's not because the customer has problems of funding. The funding itself and the budget is there and there's a clear commitment. It's more about the internal process. It's about the timing on the customer side. So for this reason, these programs, they will come simply.

And there was a third program, and this was an R&D project with the German customer simply here, final technical specifications or requirements on this R&D program, which is for a German R&D program, at least for RENK quite substantial. It's in the lower double-digit million euro range. We do expect. We simply -- I mean, we were ready, but the customer still needs to do some final adjustments on technical requirements and whatever.

So also here, just to make it clear, these programs are not lost. They are shifted into next year. So I hope this was an appropriate answer on the first -- on your first question, Christophe. The second one...

Absolutely, yes.

Well, on the second one, and here, I'm very transparent. I think what we see currently for the next 3 years as order intake. And these order intakes we are -- we see are according to our understanding and logic of the first phase of the German procurement program.

So talking about 2025 up to 2029 and 2030. And what we see here is -- and I just have it in front of me, if I'm just adding up all the order intakes we see in 2026, in 2027 and in 2028, we are well above the EUR 1.3 billion, EUR 1.4 billion order intake, which does not include for the [ EUR 10 billion ], the upcoming additional incremental, I always say [indiscernible] Phase 2 Boxer, we have in this number currently around about 1,800 of the [indiscernible] Boxer included. So from my point of view, we are fully in line what we have communicated on the Capital Market Day in regards to the revenue expectation.

If you take during the next 3 years, 2026, 2027 and 2028, the total order intake potential above the EUR 1.3 billion, EUR 1.4 billion, I think we are in a very good shape. And if you talk about the second phase of procurement, so starting 2029, 2030 and looking towards 2035. I mean what is currently absolutely missing are the entire perspective on the upcoming main battle tanks, the so-called bridge solution in Germany, it's [indiscernible] and all the family vehicles, for example, which from our estimate are pretty confirming what we indicated from the volume side on our Capital Market Day.

So we see for the second phase of the procurement cycle that if you talk about the Leopard family, which includes main battle tanks, but also recovery vehicles, engineering tanks, whatever, I think the incremental of what we communicated between 900 and 1,100 is still what we clearly see. So it fits.

From the Boxer side, I just confirmed again, we always talked about what we see until 2035 is somewhere in the range between 4,000 to 5,000. I think this is pretty much what we see now during the [indiscernible]. The first phase of [indiscernible] in the range of 1,700, 1,800, then additional 3,000 our estimate for the [indiscernible] Phase 2, I call it Phase 2. And also when we talk about the Puma, for example, you might recall on the Capital Market Day, we had a higher range, sorry, for around about 700, 750. I think this is pretty much in line what we expect coming to RENK as orders for 2026, but also 2027.

We talk about Puma Phase 2 approved from the German Parliament just before Christmas, as you know. And we do expect the Phase III coming in, in 2027. So in a nutshell, we see we are fully on track to what we have communicated and what we are following since a couple of months.

Our last question comes from David Perry with JPMorgan.

It's been a long call. I've got one high-level question and then one very detailed question. So the high-level one is this. Your shares were a lot weaker than other stocks in the sector in the last few weeks, and I was talking to some investors trying to figure out what was going on. And the feedback I got was that at various conferences you've been at, you were trying to sort of give the message that 2026 was a transition year. But this call to me has sounded a lot more positive.

And I think you said that you were comfortable with the current market expectations. So can I just pin you down a little bit if you don't mind. When you say current market expectations, I assume you mean the -- I think it's Vema or Vara, whichever company you use, there is a consensus for EUR 277 million of EBIT in 2026. And I think investors that met you in Jan were a bit worried about that. But are you today just reiterating that? Sorry to put you on the spot, but given Rheinmetall and everything, I think it's good to be clear about these things this morning.

No, absolutely, David. And maybe I just jump in. I mean if you call it bridge year or not, I think it's a bridge year from an operational perspective, especially because as we just discussed with Chloe, the modular production line is ramped up, is running perfectly, and it's a bridging year, especially when we look on our capacity uplift, we are doing massive investments. And as I just said before, we are almost prudently focused on operational execution and meeting requirements in order to prepare for a different growth rate on the CAGR side on the revenue 2028 and beyond.

So if I look on 2026, and we always communicated this from the market perspective, from the market conditions, I think everything is clearly fully cream. We have a full order book, as I just said before, we have a very attractive hunting list, how I always describe it in regards to the main programs. And so I think from the top line, from how the market is currently, what I see on February 2026 for the full year, I have no reason to be pessimistic. Yes, I'm really bullish. We need to perform. And of course, at the very end, it also depends. See if you take the shifts of some programs we scheduled for Q4, it depends on the timing of the customer.

If you take, for example, when do we get the order intake of the PUMA, PUMA was approved to our customers before Christmas. We do expect to get the order intakes 4 or 5 a month somewhere during in the Q2 somewhere or in the end of half year 1, it always takes time. So there is always a kind of time factor, which, unfortunately, we cannot really influence. But overall, on the market side, it is positive.

On the operations, the tick in the box, as I just said before. On the challenges, yes, of course, we have the Israel embargo or not the embargo, but we need to figure out. And David, you noted it's a tricky way, it's a tricky thing how during the next 11 months, the export approval process will take place. We are always shooting and preparing ourselves to get the max out. So in our entire planning, we are planning for the EUR 80 million around about EUR 80 million.

And of course, we are planning if the export approvals and the customer expectations are meeting each other to -- as asked by Chloe, to ship even more in order to compensate what we missed during the last quarter of 2024. But this needs to be managed. And we cannot, at the very end, whatever we do and how good we are in discussions and very transparent and open discussions with our government from both sides, by the way, we can only marginally control this. And of course, we had in 2025, we had tariffs. We had exchange rate, and we had on top the industrial part.

Tariffs and exchange rate, unfortunately, also this, I cannot predict. I cannot -- yes, I cannot influence this. This is triggered by people, who have a higher ranking than I do and there are usually presidents or whatever. And if they are coming, of course, we need to fight against this. And as I just said before, also in 2025, we had this impact, but we compensated it in a way that on a group level, we are very, very, very, very close on the EBIT side to market expectation. This gives an idea, by the way, if we would not have this exchange rate and the tariffs impact and if we could have delivered Israel what is in the real business value already today in regards to EBIT and margin.

But this needs to be managed. And for this reason, do I have sleepless nights because I -- to be honest, I wake up and I have sweat everywhere because I know the market expectation like the EUR 277 million. No, I do not have. And I think if you -- and you know this, and I think I hope you all know this. And I think if you look on our Q4 performance, year-end rates, RENK can do this. And we -- it will be a challenge, but it's a challenge we clearly take. And for this reason, I have good nights because we are performing. I hope this gives you an answer, David.

Yes. Well, you probably shared more info than your wife wanted to share, but that's a very reassuring...

Yes, [indiscernible].

This concludes the question-and-answer session. I will now hand back to Dr. Alexander Sagel for closing remarks.

Yes. Ladies and gentlemen, I think it was like always a very good and open discussion. Of course, we cannot share everything. Otherwise, our call on March 5 would be useless. And we are still in some numbers. I mean, we are very early in our year-end closing, but I hope it gave you a good indication about what we achieved as RENK, all the 4,200 RENK-ies in 2025.

I hope also in discussion, the first few gut feeling on 2026, we have no reason to be negative, but it's also clear we have no reason to be lazy and sit in the chair. I mean, to run and to focus on operations, on operational excellence, on costs requires full attention. RENK is dedicated for this. And yes, we are really looking forward for good discussions. Thank you very much.

This concludes today's call. Thank you, everyone, for joining. You may now disconnect.

Good morning, everyone, and a very warm welcome to RENK 's Capital Markets Day 2025 here in Augsburg. It is great to see around 70 people here joining us in person today. Thank you all for traveling here to be with us for this special event.

And then also, of course, a very warm welcome to everyone who is joining us via our webcast today. It is great to have you all here. My name is Melina Weiss, and I am delighted to be guiding you through today's event. With me here are, of course, today, our CEO, Dr. Alexander Sagel; our CFO, Anja Siebje; and our COO, Dr. Emmerich Schiller.

Before we start, I kindly ask everyone here in the room to take a look and note the nearest emergency exits around you. We have two over here. Thank you, everyone. Well, whether you have known for RENK for a long time or you are with us here for the very first time today, we are confident that this event will provide you with a deeper insight into our business and the investment proposition it represents. So let me now outline our agenda for the day.

Our CEO, Dr. Alexander Sagel, will start by presenting our strategy for the group, our priorities and our objectives. He will then be followed by our COO, Dr. Emmerich Schiller, who will provide a greater insight into the dynamics of RENK's operational excellence and how we deliver on our strategy and our products as efficiently and effectively as possible. After a 15-minute coffee break, Anja Siebje will then conclude the management presentations with a detailed look at our financial performance.

Following this, we will open the floor for a Q&A session. This session is scheduled for 30 minutes, but I should stress that there will be plenty of time to ask additional questions throughout the day. To provide additional insight into our relationships with partners and as well into the future of land defense, we are very pleased to welcome two more guests today on our stage. Esa Rautalinko, CEO of Patria Group; and Michael Mazu, our CEO of the VMS segment. He will join later, of course, yes. Okay. Then after these two additional presentations, the webcast will end at 12:15 p.m. After a joint lunch at this location, we invite all of our in-person guests for a site visit at our nearby headquarters. And there, you have the opportunity to gain further insights into our operations, meet some of the teams and experience our products, technologies and latest innovations firsthand.

And now please join me in welcoming our CEO, Dr. Alexander Sagel, to open today's event.

It works human machine interface. Ladies and gentlemen, a very warm good morning. It's a great pleasure to see you here. I mean, I think the majority of you, we had the pleasure to have a nice dinner last night. And I think it was also interesting for you, hopefully, to listen carefully to the words of General Mais about the Bundeswehr and the current scenario here on the European theater.

Melina, thank you very much for the nice introduction. But again, I would highlight the agenda today. The agenda, as you have seen this in the order of appearance is designed around our business model, where I'm more talking about strategy and the growth drivers and organic and organic growth drivers. We then, of course, need to talk about how to return the capital. If we talk about efficiency, margin expansion, if you talk about efficiency on the capital spending and of course, on cash generation.

So I have the part. I talk a little bit about strategy. I talk about market, market drivers. I will cover also technology and then handing over to my dear colleagues, Emmerich and Anja in order to go for the return part of the story.

Ladies and gentlemen, please allow me before we go into our more detailed presentation to make a quick recap where we are currently, who is RENK today? I'm sure you are a very educated audience -- but I think it's important to recognize RENK is the leading company in the world for mission-critical drive systems if we talk about land application and applications. We have a very broad diversified customer base. You can also follow this on the chart.

We have, and I think this is a kind of very important unique point of RENK. We have a strong aftermarket business currently in the range of 40%, which is a quite sustainable business. And also, I think it's open and fair to say, a high-margin business. What we also are, and this you see in the revenue split with 3/4 of our revenues for defense, we are a defense company, full stop.

And our slogan, "We power freedom" are not only some written and mixed words, this is a dedication and a motivation and a moral implication for -- not only for the management team or the entire RENK people here in the room for the entire 4,200 rank, how we call our employees to serve our customer, to serve our Bundeswehr and to serve and to make sure that we can support deterrent and a peaceful living together in the future.

What is important, you will hear today about growth and using market opportunities. If you look on the financial figures, and I'm sure you know them quite well, we are doing this growth process from a position of a financial strength. It's important because we need to invest. We need to grow. We need to take care about supply chain. We need to take care about M&A. And for this, we need to have a solid financial basis, but I think this will be also covered later by Anja.

Starting from there, like always, I think 14 months since the last Capital Market Day, so please allow me a quick review about what happened during the last 14 months. I will do it fast, not to bore you, because, again, I think you are quite in the topic.

Starting first, expanding our footprint, internationalization. I think you heard about our acquisition in April, Cincinnati Gearing Systems in U.S., one of the two main gear suppliers to the U.S. Navy for us, a very strategic acquisition in order to open and to expand into the growing U.S. Navy market. Emmerich will touch it later on. I think the post-merger integration is on a good way and also the first customer projects coming in. So it's quite positive.

Also, we had the inauguration of our new plant in India. India for us is a long-term strategic defense market. I will touch it later on. There are various programs if we talk about RENK'S, new generation of tanks, IFVs, et cetera, et cetera. But there's also business for the civil part of our group, the industrial transmissions, and we will cover both in our Indian plant.

This -- I like this picture because you see all the RENK guys as of today, we are trressed in blue. It's our color, ladies and gentlemen. And what you see here, not only 40, 50 gentlemen, diversity is a little bit of problem here. But this is the team of our final assembly, you will see today, and you might have heard about our modular production line. This is the team who has accomplished this change.

You see in the background, our modular production for the final assembly, you will see it also today in life and in color. I think this was a very important milestone for RENK on our growth path in order to prepare for capacity for the future business to come, especially here in Europe.

Last word on REM. I think you are all familiar about what happened last year at RENK America. We had quite some problems on the supply chain. We fixed it. So the next step was, of course, to stabilize REM, RENK America. And also here, I don't want to spoiler Emmerich, I think we are on a good way. The production is running, and we clearly see improvement and it's stabilized to sum it up at this moment.

Top line. Today, we will talk a lot about top line. So I don't want to spend too much time here. But if you look back during the last 12 months, if you take the order intake accumulated between Q4 2024 up to Q3 2025, we talk about more than EUR 1.8 billion of order intake, which is quite a strong signal for a small company like RENK. You see some of the main really main bigger projects during the last 12 months. We have our Bradley, we have K2 in Poland. We got, as you know, also two additional orders this year, very recently, the [ Leard ] family, where was the launch yesterday at KNDS. So overall, a very positive solid track on the top line, and this will continue.

Technology, even we are not IT or software, whatever, we consider us as a technology company. Technology is key to maintain our market position for us, to be the technological North Star in our market segment is absolutely, absolutely relevant. And I will talk later about our next-gen mobility road map.

Just as a spoiler of my own presentation, we launched this year, and we are very proud two new transmission types, one for the upper end of the weight class, next generation of main battle tank transmission and also one on the lower end side, which from our point of view, is the entrance into further digitalization and even unmanned platforms.

We, as RENK, we are a strong company, but we are also still a small company. So if we talk about getting access to technical capabilities, having partners for localization in markets in order to grab opportunities or to develop together with partners, key platforms, we are looking on building up a network of strategic partnerships. And you can see this network here what we built up during the last 12, 14 months. I mean, if we talk about getting access to needed technological capabilities, we formed partnership with Kinetics and XP. The latest one was with [ Ax Robotics ].

If it's more about localization in order to support customers in their business, in their projects, if you talk about Italy, for example, I will touch it also later. We are teaming up with companies like Leonardo or IVECO. If you talk about new platforms, innovative concepts, driving the next generation. We are talking with partners like [ Patria Eza ], also from my side, a very warm welcome. Good to have you here. It's a pleasure. And so we are building up our network of strategic partnerships.

And as of today, if we talk, for example, about technological capabilities, we do not see the need to involve capital in order to strengthen this cooperation, but I will talk about M&A later on.

Last but not least, here, we are more formal. This was at the day when we had our promotion to the German [ MDAX ] mid-cap stock market. This team, what you see here is in charge since March this year, Emmerich, COO; Anja, CFO. And maybe from an outside-in perspective, the timing of the changes on the C level could have been perceived as a little bit challenging, but I can tell you, it was a long-term really successful succession planning.

And I can tell you also together with our 4,200 employees, this team is absolutely motivated and committed to drive this company in the next phase of growth. This was looking back where we are today. Where we are today, I mean, you see it. I don't want to talk about the 9 months report. This is the job of Anja.

But in a nutshell, very good, solid on track. Independent -- if you talk about order intake, backlog, if you talk about adjusted EBIT, if you talk about revenues, very solid double-digit growth rate. And that's all from my side so far. We walk the talk.

Looking quickly on the capital market, and I'm sure you have followed yesterday's discussions, let me have a quick comment on the share price, and let me have a quick comment on our shareholder structure. The share price, I mean, like all industry and peer groups in the market, of course, have seen an incredible positive market sentiment starting with the Munich Security Conference, no one, and I will touch a point later, no one could expect that 12 months ago, this development, these new dynamics on the European market.

Currently, the share price is somehow stabilizing. Really, actually, it's maybe somehow doing a little bit of deep dive. But I mean, this is a common sentiment. Immediately, if someone is talking about potential meetings between Mr. Trump and Mr. Putin, if you talk about any kind of peace talks, the share price is dropping.

Two comments on this. First, good entry point, a very good entry point. And the second comment is at least for RENK, but I would also perceive for all other defense peers, the business opportunities really are starting if there is, hopefully, for the people in Ukraine, a peace agreement because then the business really starts rearming, restocking. But I'm always saying the capital market, you are determining the share price. All what we can do is to perform, to walk the talk and trying to be as transparent as possible in the communication. On our shareholding structure, easy to see, you know this major changes. Triton is out. Now we have a free float in the range of 84%. KNDS, our strategic partner is in with 16%, but I think this was also a trigger for the positive market sentiment.

Also, what is the status quo is that we defined for the first time very clearly our segment strategies. As you know, we have two sectors. We have a defense sector, and we have the civil business. Civil means industrial business, where we are selling, developing and producing bearings, couplings and transmissions. And we have two different approaches to these segments.

If you talk about the Defense segment, it's absolutely clear, it's full focus on profitable growth or as I'm always saying, full throttle. Here are the market opportunities. Here is the so-called defense super cycle, long-term opportunities despite discussions I just touched before. So Defense is clearly in the focus of capital allocation. If it comes to R&D projects, if it comes to CapEx, there's a strong push towards defense. If you talk about M&A, clearly only for the defense part of the business.

On the other side, the civil business, we are very happy if the civil business is growing, and we're trying to support the growth, but it must be a profitable growth. So #1 focus on the civil business is manage for value, being very selective on the type of projects we are acquiring in regards to return, being much more focused on costs, on production costs, on product costs, being focused on reducing overcapacity. You might have recognized during our 9 months and 6 months report that our Industrial segment is facing quite some headwind from this all GDP-related market environment.

So we have overcapacities, which is a fortune on one side because we can use this overcapacity to load it with needed defense production. But it's clearly two different approaches. As a result and driven by the market environment, we do see that from today, rule of thumb, 3/4 of our revenues, the share of the defense business, most likely towards the end of 2030 will increase to a level 85% or 90%, while the share of the civil business will be somewhere 10%, 12% in this range. So we are developing even more towards being a defense company.

Please allow me before I go now step-by-step in the market to have a little review of what happened since the last Capital Market Day. And again, here, I don't need to make you more -- to bother you with statements because you all know the geopolitical tensions from China, from Middle East, here in Europe, Ukraine and Russia, they have not changed. They have absolutely not changed. But what has changed is, and this is what you can see on the right side in this time line is that since the Capital Market Day, there was a trigger event of the Munich security conferences, and this was the beginning of the rearm of Europe initiative, Chancellor Merz, whatever it takes, you heard it yesterday from General Mais, in principle, an unlimited check at least for Germany.

And Europe is following according to the NATO Summit and the conclusions on this, the 3.5%, plus 1.5%, you have seen that Europe, the European Union launched a safe initiative, a long-term credit facility in order to support countries who are maybe not that strong and maybe a little bit weaker on the debt side of the financing.

And last but not least, also what we see, and you could also recognize it now step-by-step, the programs are coming, getting approved in the so-called EUR 25 million pleaetaric approval process and the projects are coming now. It took a while, but they are coming now, and this is positive.

So the market, again, I don't want to focus too much on the numbers, but the key statement is if you look on the key markets for RENK, Europe and North America, both markets are growing. Of course, there's a different dynamic in growth between North America and Europe for the reasons I just explained before. You see that Europe had in the year 2024, around about EUR 430 billion of defense budget depending on the financial capabilities of each member state, this will increase from our perspective, it will increase in 2030 to a level in the range of EUR 800 billion.

A big driver for this is Germany. And of course, if the budgets are increasing, and this is what you see in the middle, also the procurement budget is increasing. We see going to 30% to 40% of the overall budget. And of course, this means the relevant domains for RENK, land and sea, they are also getting more money. But I think you had enough market feedback and statement during the last couple of weeks and months.

What is important is the right side of this chart because this shows the industrial logic, how in case of Germany, from order intake programs coming to the primes, how this translates after a certain period of time into revenues, first into order intake for RENK as a Tier 1 supplier and then later on into revenues, OE revenues and later, later on into sustainable aftermarket business.

And in our assumptions, you noticed we always shared this during our reports. We do assume and we see it now, our primes, our customers are starting to get contracts from the German customer with a certain delay of 3, 4, 5 months, we, as a Tier 1 are getting also the contracts from our primes. And then, of course, everyone needs to build up capacity.

For example, our primes, they need to ramp up capacity. We assumed in our scenario, it takes around 2 years. So this means before 2028, for following, there will be no additional impact on our revenue lines from this 3.5% Germany or 3.5% NATO. This is important.

In the time in between, and I will touch this point later on, if you talk about different growth dynamics, we will grow according to our total order backlog, fixed contracts, according to our operational execution and according to the delivery schedules of our customers. And after a lead time, if you take a land transmission, if this land transmission is sold to our customers after a certain lead time, this new transmission is generating an attractive downstream business in form of spare transmission, spare parts, MRO service, et cetera, et cetera.

Now we go a little bit again into more details. So what is driving our top line, our visibility towards 2030 and beyond. We have, as you can see it here, four buckets. I'm always saying four buckets. It's maybe not professional, but I like this expression. The first three buckets, A, B and C are organic buckets. D, I will touch later, is an inorganic bucket. So starting with the first and most obvious, our total order backlog.

As you know, as of today, 9 months report, it's in the range of EUR 6.4 billion. These are contracts we have or where we have an extremely high visibility that these contracts are coming, and it's all about analyst is just out. I'm always saying it's all about, please don't tell them this. It's all about operational execution, nothing else. But this is challenging enough, but I think we are on a very good track on the ring side.

Pocket B or basket B is our normal project pipeline. As you know, we have introduced this last year in the capital market, we had this kind of bubble chart. In the bubble chart, we try to indicate what the growth potential is depending on the maturity level of a specific program for the regions, Germany, Europe -- Germany, Europe and Middle East and North America, the Americas and Asia Pacific. This time, we made a little change. We separated Germany out of this project pipeline and our view on Germany is undersea. But let's stay first for the time under our normal project pipeline. These are known projects. It's a bottom-up approach. They have a different maturity level. These are new business for the time being, and this is only focused on land, of course, and on sea because what I'm talking now about in general is only defense related.

What we estimated over the regions, Europe, Middle East, North America and Asia Pacific, what we see until 2032 time frame, and this 32% is coming from the logic, how we evaluated it last year because we had a look until 2031 is somewhere in the range between EUR 11 billion to EUR 12 billion for new business.

Do we get everything all of this business? No. There's, of course, competition. We have regions where we have 100% probability. But if you take our overall market position, our market feedback, the performance of our organization, the delivery performance and the product performance, I think there's a high [ Pwin ] probability to get a major share of this EUR 11 billion to EUR 12 billion out of this basket.

C is Germany. I think this is -- I will highlight all of these ABCD later on. You see that we are still continue to work in ranges because -- and you heard it last night from [ Gener ], not all the volumes from Germany as part of the 3.5% are really final, final, finally defined. So we are working with ranges. We are working with a lower range and with the upper range.

Our estimates regarding 2030 targets is somewhere in between and what we see today for the land and for the sea domain is an average between EUR 1.4 billion up to EUR 2.2 billion of revenues up to 2035. What is important for B and C, our project pipeline in Germany, we usually always talk about new business. But as I just indicated before, driven by the type of product we have, aftermarket is a very important business. So we try to estimate how much out of this new potential business from B and C could be translated into revenues up to a certain time line. We see it here up to 2035.

Aftermarket business is quite complex. It depends on the number of training cycles, services coming today, coming in the future. It depends on spare part stocking or inventory strategies of our end users. For example, the German Bundeswehr also here, please remember the statement from General Mais. We try to estimate that between today and 2035, how many new transmissions we are selling and we could sell in the market as a potential and after a certain lead time, how this could come back aftermarket.

From my own perception, I would rather consider this as on the conservative side, the EUR 3 billion up to EUR 4 billion of revenues coming out of the aftermarket business. But to be honest, we prefer to be a little bit more conservative. We are working hard in order to evaluate further how this business, especially if we look beyond 2035, is coming back into our pocket. I will touch this point later on.

So A, B and C are the sources of organic growth. D, is inorganic growth, M&A. And as you know, RENK has quite a good track record for doing M&A. For example, our entire footprint in North America was done and created by M&A, and we have a good track record for post-merger integration. So of course, we will also, and I'll touch it later on in the M&A section, look further to continue the story. We have clear targets in regards to market, verticals or to technology. I will touch it later. But it's fair to assume that we could add between nothing if we are not successful or it doesn't work or theoretically, if we look on our targets and the time line in the next 5 years, up to EUR 1 billion as an estimate of inorganic growth.

Important to mention for our midterm target, which is coming soon, we only consider organic growth. Every M&A is coming on top. Again, A, B, C, D is the -- no A, B, C is the source for our top line growth and leading to our midterm target. 2024, as you know, it was EUR 1.1 billion as on the revenue side, 2025, we will be above the EUR 1.3 billion, fulfilling our guidance. By A, B, C and the combination into aftermarket business, we foresee a range as our new midterm target between EUR 2.8 billion and EUR 3.2 billion of revenues. If you ask me, do I feel well with this? Do I feel nervous? I feel very solid about this range. But it's important to give a little bit more color of this, also to explain why we see this range.

First of all, there are three major criterias which are impacting our ramp-up. Number one, it's 100% in RENK'S responsibility. Do we have enough cash in order to finance our growth? In the average, we are spending in the range of 2% to 3% of CapEx. Do we have a production strategy which is in place in order to execute this expected growth? And [ Mel ] will talk about this, yes, tick in the box. Second point, only in the responsibility of RENK, do we have our suppliers under control and are our suppliers growing with our demand.

We have various of activities running from lead time reduction, selective in-sourcing cost, whatever, new frame contracts. We had some -- quite some lessons learned from last year's experience at RENK America.

Overall saying, tick in the box. Does it mean that we will not have red flags on a weekly, on a monthly basis for certain components, we will have this. And we are having this today, but this is normal operational management. This is how to need to manage growth.

And also one last final comment, we do not have yet a strong dependencies on any semiconductors, PCBs or whatever. We are a mechanical-driven company, which also helps, including a deep vertical integration of 70%. So overall, tick in the box. What we need to do, we will do.

The second point is -- or the third point is, of course, like we need to ramp up capacity, our partners, our brands need to ramp up capacity. And there's an absorption rate. We cannot produce or what we can could produce. Our customers need to have a certain capacity and, of course, a delivery schedule. But if you have seen during the last weeks, I'm sure on our customers in Germany, for example, there are many, many activities. They are fully focused on ramping up the capacity, and we are very, very positive here.

But the range is also determined simply because if you take Germany, we are working with ranges. And then, of course, the range is also determined by the fact that for some of the projects out of our project pipeline, there is a lower level of maturity, meaning maybe the final volumes are not defined. Maybe the final SOP or T0 for contract is yet not defined. So this is the reason why we are working with ranges, the EUR 2.8 billion up to EUR 3.2 billion. And as I said, do I have sleepless nights? Absolutely not. We do feel solid about this.

But it's important, two comments. First, there are key enablers. You see it on the below. It's technology. We need to maintain our position and having the right and needed technologies in place. And the second one is operation. It's just about operations, just about operations. This is my good position, by the way. But it's also important to underline the dynamics of growth from a crew perspective. And I think this is important what we try to highlight here on this chart and again, take on top the process, the industrial process of getting contracts from our primes to convert it into revenues.

Before 2028, if the contracts to our primes are flowing in now and we get the contracts during 2026, maybe in '27, there's a lead time. And from our today's point of view, before 2028, there will be no significant impact on the revenue line, simply driven by the industrial logic.

Before we do our growth from our total order backlog of EUR 6.4 billion. And we do it by converting it by improving excellent operations and according to customer deliveries.

Then, of course, after 2028, when the contracts are coming in, the revenues are coming on the top line of us, of course, you have a different acceleration. And the key question is, what will happen beyond 2035. We are working on this in order to get more visibility, but I will show it at the end of this presentation. you should not be concerned that after 2030 and 2031, suddenly RENK is not growing anymore. There will be continuous growth. There will be continuous growth on the OE business, maybe not after 2035 or whatever time line in a double-digit mode, in a single-digit mode. But then after 2035, the impact of the aftermarket business should really kick in.

So now I will spend a little bit of time to run through the A, B, C and D buckets. Some of this I already discussed, so I will make it faster. I start with the total order backlog. And this is nothing else what we have presented on our 9 months report 2 weeks ago. You see EUR 6.4 billion independent if you compare us on the fixed order backlog or on the soft order backlog compared to fiscal year -- financial year 2024, we see everywhere improvements. You see some of the projects, some of the customers we can name, other customers we cannot name.

You are quite familiar with our store contracts in U.S. for the HMPT transmissions. We have international customer, a good international customer who is buying engines and transmissions. Two, three orders this year, very positive. We had various of naval programs.

Interesting, if you talk about the Eastern part of Europe, I mean, you heard about the book business of the AJAX for the Baltics. K2 is quite a success story. We got a contract last year before Christmas, a big one. We got in the meantime during Q3, another contract. We got in the first week of October, another contract. K2 is really performing. So -- but I don't want to spend too much time on this year because now it gets complicated because we talk about our pipeline. So we talk about the bucket B.

And I will really try to do my very best to make it as smooth as possible. I'm very happy to answer all questions in the break wherever because overall, and this is maybe starting with this, the logic for our bucket list is we take known projects, known projects who are in the market, maybe they are not finalized in regards to the timing. They are not finalized in regards to the volumes. And we have, as you see it here for our bucket B, we have three regions: Europe and Middle East. We have not the Americas, which is 100% North America and 98% U.S. and we have Asia Pacific.

Overall, what we have currently in this project pipeline as a visibility is between EUR 11 billion and EUR 12 billion. If you check our last year's presentation of the pipeline, there was first Germany included, but it had no impact because last year in September, we had booked everything for Germany and the potential, what we had here in this bubble chart for Germany, you could not see it, because we saw no potential. So no one could expect what happened with the Munich Security conference.

The second important point in our last year's chart, we had included the soft order backlog. This time, we took out Germany and we took out the soft order backlog. Soft order backlog was under the total order backlog. And what you see here are really the market potentials we are seeing in the next 6 to 7 years.

We could go through all this, but I think one observation is the biggest bubbles and therefore, the biggest market potential is, of course, in Europe. You have as a main driver, IFV programs, APC programs from various regions. We have Patria sitting here. They have a very innovative APC concept. But you also see Asia, and this is interesting because Asia in this kind of middle category is pretty much driven by India. India, new light battle tanks, main battle tanks, [ Aun ], where we are currently supplier, if you talk about new IFV programs. And if you talk about new frigate corvette and destroyer programs.

On the right side, you see some of the very prominent programs. Again, K2, we do expect more batches to come. We see various IFV programs, for example, in Italy, in the Ukrainian coming, hopefully, when there are soon a peace agreement. We see various frigates in Europe also about Asia Pacific, I just talked before, for example, the light battle tank and also interesting, and I guess that's would be a source for questions, the Abrams tank.

What we took out of this bubble chart and we had it last year in was the transmission business, the potential transmission business for the [ M1,E3 ], the next gen. You all know that [ Sapa ], a Spanish company, got the go for the development and qualification program. So we took it for the time being out.

On the other side, if you read carefully, we are still in the race on the [ M1, E3 ] with our [ TRV ] systems. And I would consider this as a very high probability for RENK to be in this [ Airbraance ] program, at least in the qualification phase. You need to pass the qualification phase successfully. Otherwise, you do not have a chance for the serious ramp-up. And I would consider us as being well positioned here.

So this is B. If you talk more about B, talk about Europe, overall, we see a potential of almost EUR 6 billion. In Europe, it's, of course, key to get as much as possible market share from the ISVs, from the MBTs, from the Navy programs. But for customers, for some customers, we also need to think about localization, localization of the production, at least partial localization of the production. We have two cases.

You see on the right side, Italy, you are all aware about it. We founded RENK Italia last year on the premises of Leonardo and we formed a partnership with Leonardo and IVECO to prepare for the future IMBT, the Italian main battle tank program and the IFV program. If RENK would be successful together with the partners, we would do a localization in Italia in order to build up local supply chain to have -- to enforce local workforces and to be close to our customers.

It's the same if you look about Eastern Europe. And as you all know, on the Eastern side in Ukraine, in Poland, on the Baltics, we see a significant demand for aftermarket overhaul business. So what is a natural step is that we will build up an MRO center in Eastern Europe. If you look carefully on the chart, you could get the idea where this will be. I promised to our communication chef that we will not talk about Poland. But please expect in the next weeks an announcement in this regard to building up an MRO hub in Eastern Europe to serve the local market, but also the adjacent Baltics and Ukraine.

Quickly still staying on the -- on our pipeline, U.S., we see a different dynamic of growth. The dynamics of growth in U.S. is different, lower than in U.S. for all the reasons we discussed before. But if you follow up the RENK strategy, you could pretty see pre-IPO by acquisition, we built up the footprint. 2024, we had to do quite some work in order to fix the operations, to fix the supply chain. We were successful. 2025, we start to expand. I mean, if you talk about the land domain, REM to produce according to customer requirements and delivery schedules, but also expanding by the acquisition of [ Syconetic ] Gearing Systems to have a local footprint, at least of 85% of value chain, a localized value chain, which is needed in order to be considered in upcoming larger Navy contracts like the DDG and the FDG program.

If you look in the future, I think now in the meantime, RENK has 7 sites in U.S. We are serving the domain land. We are serving the domain sea. We still have some smaller industrial business. So what we feel is we need to build up an organization, lean and clean to better orchestrate all of our U.S. organizations and activities towards our end customer, towards the government, towards our customers. So 2026 will be most likely seeing the foundation of a kind of RENK in organization.

And of course, looking always and seeking for attractive M&A opportunities. To make a little spoiler, U.S. was and is and will be always in the focus of M&A for us, maybe not on the land domain because we have a good footprint, but maybe going into Navy domain. [ Expend ] 2030, if we are successful doing this, we should have access to the larger Navy programs, which are kicking in on the revenue side starting 2030 and of course, to further continue on the land side, especially looking on repowering of platforms.

Coming to sea, again, I think you had some profound detailed ideas and thoughts from last -- from yesterday's speech of General Mais. You know this chart from our 6 months report. The principle saying is Germany has two phases from today up to 2035 in the first phase up to 2029, 2030 is to get at least ready for fight.

And the second phase is then to scale up in quantity and innovations. We discussed the logic, the contract starting now to come in towards our primes. They are moving through the EUR 25 million parliamentary process. So we are expecting to get the first contracts out of this 3.5% increase in orders in 2026, in the first half 2026, the first one, but this will come in gradually.

Overall, then starting 2028 to see it materializing on the top line in form of revenues and of course, going further. You see the numbers I talked before on the land side, we have a potential between EUR 1.3 billion and EUR 2.1 billion. I think what is important without going into too many details, you see our assumptions here in regards to volumes. We're still working with ranges because it depends really what the German customer will do until 2030 up to 2035 and beyond.

And I think one point which is yet not clear is how many main battle tanks or how many Leopard 2 families will really materialize. And as you see it here, if you talk about Leopard 2, which includes main battle tanks, but also the family platforms, bridge layer, recovery, engineering vehicles could be between 500 up to 1,100. So we are working hard to understand this better. We have more transparency and visibility, for example, on the [ PUMA ], where we see us on the higher end coming in of the numbers here.

But overall, it's a quite interesting, attractive revenue potential. I talked a lot about aftermarket. I talked about the source of aftermarket. We have, as I just said before, spare transmission, spare parts doing overhaul. If you talk about Navy, we have field service on board. And as I also said before, it's not that easy to make really a precise estimate how much of aftermarket is kicking in. You have a certain lead time until the first transmissions are coming back. This depends on the user frequency, on the training frequency, for example. It depends if you talk about spare parts on the stocking inventory strategy of our customers.

But as a rule of thumb, but this is really very rough. One new transmission you are selling on the land system side, you will get back 3 to 4x over lifetime in value over the life of a platform. And the platform life is in the range between 20 to 30 years.

So this is attractive because, for example, this does not consider an enhanced increased training frequency exercise. If you take the Bundeswehr, for example, the transmissions are coming back after 800 or 1,000 hours. If you take the transmissions coming back from customers who are in a hot conflict, they're coming back after 40 to 50 hours, just to give you an idea about how training and use and concept of operations are impacting this.

Overall, a very, very attractive business today on a 40% -- round about 40% share. And if you look on a timeline beyond 2030, 2035, when most likely somehow new business is normalizing, still growing, to get me absolutely clear, but maybe not on a double digit, then the aftermarket is steadily growing and might lead to the fact that we will overall increase our share of aftermarket from today 40%, maybe in the range of above 40%.

M&A, I touched this before. You see this range from EUR 0 to EUR 1 billion. We have a clear set of criteria, of course, return of investment of the capital. It must contribute to our profitable growth strategy in the relevant segment, Navy and land segment. We have, as I'm just saying, around about three handful of companies we are observing some of these companies, we are just following, tracking them with some of these companies, we are maybe in first discussions, a warm-up and maybe with one or two of these companies, we are short before, let's see, maybe going into a structured process.

But all this is as of today. We have three allocation criteria for potential targets. First, do we close the market gap. So we talk about market consolidation. As I just said before, U.S. will be was and will be always in the focus. But if you talk market consolidation, we might look also to Europe, not on the land side, neither in U.S. or in Europe, but maybe looking on the consolidation on the naval side in Europe.

From the verticals, from the product, of course, we are searching if there's an attractive way maybe to go half a step upward in the value chain. And from technology, as I said before, in principle, we are also looking for M&A targets. But so far, we are moving forward with our network partner strategy.

Technology, we introduced last year, we have four key technological segments. One is the core technology, our today's products to optimize in regards to performance, weight, power density and even costs, of course, cost down activities. Then we have the new tech electrification and hybridization. We talk about in the third one, digitalization, including technologies for unmanned vehicles where we do believe the so-called UGVs are getting more and more relevant because you heard it yesterday, soldiers are a very rare good.

And in the future, we see beyond 2030, a very well-balanced mix between conventional platforms, manned and also unmanned platforms, by the way, not only on the crown, but also in the air and the industry. Last but not least, system engineering. Some of our customers are requiring that we do more than just transmissions or more than just engines. They want that we integrate engine, transmission and maybe even the drive system. And I think here we have, you will see later, quite a unique competence just if you look on our test rigs.

Overall, to sum it up, in our next-gen mobility road map, we have two phases. The first phase is until the end of this decade to upgrade our main products on the Navy side and on the land side in regards to the traditional performance parameters, but also in regards to hybridization, electrification, digitalization.

And then beyond 2030, seeking for new product opportunities based on our core mobility systems, on our transmission, on our damping systems. Just very quick, if you talk about the two transmissions I mentioned before, we are very proud. We have launched our next-gen main battery tech transmission during a media campaign during last summer.

Our 4 -- 6 transmissions for weights up to 60, 75 tonnes. It will definitely set a new benchmark in power rating, in weight and weight reduction. It will set also a benchmark in modularity because as of today, each new tank, if you develop a new tank platform as of today requires a new tank transmission. This transmission has a modular approach saying for new platforms, but even for repowering of platforms, you can use one transmission type, which could be an interesting aspect if you talk about logistics in the future, if you have in a NATO environment, 2, 3, 4, you know this, different platforms and you talk about spare part management in the theater. So if you have one subsystem who is modular and one size fits all, we believe it's very attractive.

On the other end of the weight class, our 76, it's our -- I'm always saying our small beauty. It has a different power rating, of course, like the NBT transmission, but it also has only this size. You will see today, 760 kilogram for us, very important and also proud to have this developed in this case, together with Patria. For tracked vehicles between 10 to 20 tons. You will hear later more about these kind of tracked vehicles.

But this is interesting because with this small transmission fully digitalized and drive by wire, we are opening the access to remote control driving and even semiautonomous or autonomous driving of tracked platforms. This is the idea what we have to understand if we should go and if we can go from our core product offering, mobility with our today's systems by digitalization into mobility systems for UGVs in the future in this weight class, tracked UGVs and maybe even to make a little step further to go from only mobility supplier to go with key partners and provide maybe full UGVs who could then be used in a various of use cases from transporting ammunition or including effectors.

The key for all of this is the digitalization of the transmission and it is especially the drive by wire system. And RENK will have the first worldwide certified according to the [ AS ] norms, Germany, fully qualified [ drive-y-wire ] system. What does it mean if you talk about UGV components and maybe even going into UGV role together with partners, we have a presentation today.

Michael Masur, the CEO of VMS will talk more about this. But of course, I need to show it also here also kind of spoiler. So we have prepared a little video just as a teaser, and please expect more in Paris in June next year on this. Just look on our teaser as forgetting a kind of flavor.

[Presentation]

I don't know if you have seen this, there were some droplets from the rain on the chassis. This was just a teaser. It's a kind of outlook where RENK is maybe trying to go.

In a nutshell, our technology strategy, it's very simple. We are coming from the core for the land and for the sea with our transmissions, our engines, our drive systems, our e-generators, PTOs, et cetera, et cetera, advanced silence drive compact propulsion technologies for naval application. And as a step I just highlighted, digitalization will not only take part on our today's product portfolio, transmissions and [ damping ] systems. For example, what we are offering as a proposal to the M1, E3 on the drive system is a fully digital drive system. I'm always saying a smart drive systems. Our CTO is always angry. But anyway, and as a further step with this to go into future mobility to deliver systems and components who are intelligent into so-called unmanned ground vehicles, we are on the ground and we are on the sea. We are not in the air, not in the space. We are very, very focused in our business. And maybe later on, looking on what I just indicated with this little movie, maybe stepping together with partners, prime partners into the role of [ UGV ] providers.

Having said this, I'm almost done, and I'm perfect in time. I just see this here. Let me give you two comments more. First of all, what is beyond 2030. I mean the first statement, and again, we are trying to quantify this more in real figures is the [ OE ] business of the conventional platforms will not stop beyond 2030. I mean I talked before about our pipeline. You see name of the programs. For example, the big bunch of the German programs are expected to come in the second phase. If you talk about all the Navy programs in U.S., if you talk about India, India always takes time. But again, we, as RENK are prepared from our footprint as of today. So this business is continuing. It might be not always on a double digit. It might normalize to a normal growth rate.

But the second point is the aftermarket business. Each new transmission, if you talk about land transmission, we are selling during the next years is generating a sustainable aftermarket business, adding on our huge installed base, always another layer, another layer of long-term sustainable, profitable business.

And third, we will, of course, try to add additional layers from new products and new market segments where we are not in today with our existing core technologies. What is also important is we have today technologies, if you talk about energy change, regenerative energies, et cetera, which are unique in the market.

If you talk about the entire value chain of hydrogen, we believe with our industrial part of couplings and transmissions, this could kick in, could be relevant beyond -- far beyond 2030, somewhere in the middle of next decade. Sooner or later, human mankind has to react on the climate change. Today, there's a strong focus on defense. This strong focus, super cycle defense will maintain the next 10, 15 years, 20 years. But of course, we try to seek opportunities with our technology, our competencies, if there are markets, we also would grow these markets. This is a perspective, a qualitative perspective on 2030.

Organization is, of course, key. And as I just said before, we are a defense company with an increasing share of defense business going in the range in the next years, almost close to 90%. This also implies changes in the organization. If you see today on the left side, we have three segments. VMS is the largest segment, M&I and we have slide bearings. VMS is more or less 100% defense. M&I really as a rule of thumb, 50-50, 50% it's defense business, 50% is industrial business. And slide bearings, of course, almost 90% slide bearing business, triggered by the organic growth which is predominantly taking place on the domain land in the VMS segment. And triggered by potential acquisitions, we will refocus the organization, refocus on really pure defense land, pure defense naval. If we are successful, what I just said before, looking towards 2030, maybe to have our own separate business unit for new tech, for example, [ UGV ] mobility.

And last but not least, we will consolidate the existing civil part of our group into one organization in order really to maximize the synergies from the customer point of view, which is, as of today, not given simply.

Having said this and referring to my statement in the beginning, this is my last slide now. But I think it's important because this is not only the bridge from strategy growth and growth levers. It's the bridge towards my dear colleagues. And it shows the business model, which is also not no rocket science, but crystal clear. Growth and growth levers, I try to explain, organic, full focus on organic growth. But of course, if the opportunities are there, also inorganic growth.

But then it's all about the return on capital. It's about how to improve the margin, volume effects, efficiency, working on the COGS side, on supply side, working on the product mix. By nature, the product mix is changing. The capital productivity, I mean, how to use our capital, I just said we are in a pleased starting situation to capture this growth because we are starting from a well-invested industrial base due to the history. We will grow in the future on the CapEx in the range till the 3%. We will have 2 years, '26 and '27, where we will be slightly above this. But on the average, we are staying and we consider us to be very efficient on the CapEx spending. We are using existing plants. We do not need to build up new plants.

So all this is about capital. And at the very end, it's about the cash conversion, about the cash conversion rate, we will talk later. But this is our business model. And again, this is really my last word. I have 1 minute. We have a very focused business and product portfolio. This is the reason why all what we do here and what we tell here is not fancy. We do not need to follow specific trends. We need to execute. We need to execute on the operations. We need to execute on the financial efficiency, on the capital efficiency. And I think this is the mission what we as a team have. And for this reason, thank you very much. I would like to hand over now to Emmerich.

Alexander, thank you. Also a warm welcome from my side. Good morning to everybody. I think -- or I'm sure you have seen what Alexander presented, and we are going to at least double the revenue within the next 5 years. And we had a discussion yesterday, Esa, and I like his picture. Doubling the revenue is counting beans. But it needs somebody and it needs a team to produce these beans before you can count them. And as Alexander just said, and this is how he welcomes me in the morning, it's just about operations. And this is what I'm going to tell you within the next couple of minutes.

So I was called from [ Susanne ] 2 years before, if I would be interested to join RENK. And I think she has an idea in mind because she foresee that we need to prepare for that tremendous growth in the future. And one of the ideas, and we shared this thought yesterday on the table is to bring in experience from automotive. And therefore, let me briefly introduce myself. I was working for almost 30 years in automotive in mass production, but also in very small series production. So I was COO in [ AMG ] and CEO with the [ G-Class ], which is a low volume. And many of the things we are discussing today are similar to that what I did in this position. And therefore, I started the discussion with [ Susanne ]. And honestly, she convinced me and saying from today, if at least your heart beats a little bit for operations, this is one of the most exciting jobs you can have in the industry at the moment. So it's just about operations.

We had the same discussion yesterday on the table. And maybe this is a little bit bold, but I'm absolutely convinced that this is the truth. So failure or success in or for any company in the defense business for the next years is answered in operations. If operations is able to scale up, if operations is able to fulfill the demand and if operations is able to transform to at least an industrial level, this is not there at the moment. And our idea is that we bring in automotive standards to our company and to adapt them to the company because it's not the same. You cannot put them to the company one by one. You have to find the right level and you have to find the right way to do it.

If you compare automotive, for example, with the defense industry, there is a gap of at least 15 to 20 years in between. And the more we close the gap, the more we get the benefits from that. So the contribution for operations is pretty clear. We are supporting the growth or we are securing the growth. And it's -- you can summarize it in three words. It's -- the first is secure output. The second is enhance resilience and the third is increase efficiency. So it's all about these three words: output, resilience and efficiency.

And you have seen the numbers on our 9 months report, but it was on your slides as well. Two figures, plus 19% in revenue and plus 25% in EBIT. And this, from my perspective, and this is very Sweden, I think we made somehow our homework, and we delivered on our promises. And you have to take into account, and you know that, we almost made the same numbers last year. So talking about 2 years, we increased the output by around 50% in 2 years.

The challenge is to keep that momentum. And what is even more challenging, and I will go deeper in this in the following is how we prepare for a growth that is even steeper.

Therefore, today, I would very much like to concentrate on [ VTA ]. [ VTA ] is our transmission production here in Augsburg, and we will visit this on our plant today. Why VTA? I think it's pretty obvious that VTA is our main driver for revenue and for EBIT. So it's worth to spend the time there. We will extremely grow, and therefore, we have the idle conditions to apply standards from automotive to this approach, and therefore, we see VTA as a role model for us or a blueprint that could be rolled out to all the company.

So we are doing a stepwise approach. We are transferring ideas and methods from the automotive industry to our setup, then we prove the feasibility and prove the benefits. And if we can make a tick mark there, we define it as a standard and then roll it out into the company next line.

So you have to keep that in mind when you see the numbers and the figures I'm going to present. So they are related to VTA, most of them. But I think what is important is you see the potential of these numbers if we roll out these approaches and this way of doing it to all the company within the next years.

What we have achieved in the last 12 to 18 months, I think it has a measurable impact on our company and our situation, and I just gave you the two financial figures, 19% and 25%. I also have some production numbers there. So by applying the new assembly concept here in Augsburg, we started with this concept in August. So it's almost 3 months operative. So within these 3 months, we again increased the output in the existing system by 13%. And as Alexander already said, RENK is back on track more or less. So the colleagues the are producing three transmissions a day. On the procurement side, we tremendously reduced the lead time for our supplier parts by more than 50%. And we -- in addition to that, we stabilized our supply chain by more localizing our supply chain in Germany for VTA. So we have almost 100% of all the supplier parts around the [ church ], as I used to say.

As I already mentioned, we are focusing on two dimensions. The first dimension, it's obvious we need to scale up for serious production. But the second is even more important. We need to scale up for serious supply. So the main levers are we are trying or not trying. We are expanding our capacity by adding additional machinery and equipment, yes, but what is even more important and what gains us more capacity at the moment is we are increasing efficiency tremendously. So the more the efficiency increases, the more capacity is there. And what we do in addition is we fully utilize the potential of our production network. So we are using capacity in our network. Then we are going to more localize our footprint. We need to do this because we want to have the opportunity to fulfill local content requirements. And I would like to dig a little bit deeper in what we call planned strategies or operation strategies.

On the supply chain side, we really managed to enhance the resilience with different measures we took there. We are deeper, deeper in supplier management. And finally, we are talking about system suppliers. What this means, I will explain a little bit later.

We talked a lot about the new assembly concept here in VTA and the participants who joined us in person, they will see it in the afternoon. I'm a little bit proud about it, but this is not the reason why we are showing it. The reason why we are presenting it is we see it. You can really see with this what we are doing and how we are thinking with this perspective. So you see the before and after picture. And I think it's totally different. It's a very traditional workshop on the right side, very manual. And if you are looking for processes there, honestly, you will not find many of them.

On the right side, it's different. This is what you see. And what is important is it's -- you need to understand what it is behind it because it's not just what you see on the slide, it's even more what you don't see because changing to such a way of working is a fundamental rethinking production is a fundamental rethinking of supply chain. And I had the opportunity to install a very similar system in one of my former positions at [ AMG ]. And this was selected or was selected for the first prize in the Factory of the Year award from [ AT Kearney ]. So even in an automotive environment, it was somehow, I would say, outstanding.

This slide, again, should demonstrate that we deliver on what we promised. So those of you who have been there last year, they might remember that I have shown some sketches of where we want to go. This was the second picture here, the 3D visualization on the left, on the very left, you can see my hand scribbled. I discussed the idea with the team. Then we had the reconstruction phase. This was similar to change the tire driving on the German auto by 180, and I avoided to go to the shop floor for 2 weeks because it was really a mess. I do not know how the people manage it because we had to do this in full utilization. And as I said, from August and July on, we are operative, and I think we can make a tick mark of what we have achieved so far. On the next slide or on the next slide, I will go -- I will show you a short, I would say, Am of what we are going to see this afternoon for those who join us on the factory tour. And for those who are online with us, hopefully, it convinces you to join us in person next year. So this is the film.

[Presentation]

In [ AMG ], it was one man, engine. This is one man, one transmission. And I see some of you smiling. And I think you can imagine what it makes with a person. So before he was working in a line and he just assembled a part of this transmission. Now it's his transmission, and it makes a difference. And I think you can really feel it. And it was his idea in the movie to stand like this because it was his transmission.

So it's not just a change in how we work. It's not just a change how we apply the things. It's a change of we work together as an operations team.

So results are quite positive. As I said before, it's not just what you see, it's even more what you don't see. I would like to give you an example on this slide. So on the picture, you see a logistic worker picking the parts. This is what we call a lineback principle. Lineback principle, again, is a method which is well known from automotive, where we concentrate on the value adding at the workplace, the value adding from the assembly worker. So we are trying to avoid everything which is not value adding at this station because assembly worker is highly educated. It's highly -- it's difficult to find. And therefore, we want to let him do his work to assemble the transmission and not running around and looking for parts.

So this colleague there is picking the parts, is pre-picking the parts and then the assembly work, as you will see this afternoon, gets this in the right order, in the right quantity at his workplace. We optimize the material flow, and we even integrate the supply chain. So we are going upstream and optimizing everything according to that principle. So the efficiency is much higher. We increased the quality with this. So just to give you an example or to underscore that, we have had the highest -- all-time highest first run rate in October in the system. And I think this is how -- it shows how it works. The first run rate is almost double as high as it was in '23 on average of the whole year. We reduced costs for sure, and we reduced the lead time tremendously.

So the shift from a very manual system to a small serious system, I see it as a game changer. You see some of the advantages on this slide. So we have 100% flexibility in the old system where we have had dedicated lines. It was difficult to react when the mix of the transmissions has changed. Now we are 100% tight flexible. So we can produce or assemble any transmission on any workplace or we can react on changes in the volume because with the line, you have to go in the second shift with the whole -- with the entire line with a single workplace, you can go to the next shift with just one station, and this is much more efficient than with the old system.

We -- for sure, we reduced the space in the factory because we have less logistic effort there. We are estimating it by 50% and therefore, avoiding additional investment in buildings, for example. Qualification time for the people is by far less. So I was surprised. I was calculating 20% to 30%. But my foreman who is working with the people there, he said it's 60%. So 60% less training and qualification time. And what is also already stated is it's a 30% of additional increase in efficiency.

So what I said in the beginning, it's a tick mark. It proves to be the right situation. And therefore, we go the next step. We define this as a standard because it's not just made for Augsburg, it's made for the entire RENK Group. And therefore, again, we are looking on what is the automotive industry doing. And many of you know the Toyota production system, which is the most famous one. I had the opportunity to work on the first production system from Mercedes in the '90s. So it makes me a little bit old, but maybe it's a little bit experience behind it. And our RENK production system will be designed in a very similar way.

So the production system is a kind of a cooking book or story book of how we plan, how we design and how we operate accordingly in all our factories. It defines our production philosophy and it defines our methods. So one of the key methods or core messages there is continuous improvement. And there, again, standardization is key. So if you have a standard process, you can work on the standard process and you can improve it and then define it as a new process or as a new standard.

And finally, we need this production -- or we need and use this production system for qualification of our employees, but also for our management people for our team leads to work accordingly to standard, which is a game changer.

So the idea is that in the future, we will work accordingly to a standard in every single plant. For sure, there are some differences in land transmissions and gearboxes. But I don't see any reason. And I think you will fully agree, there is no reason why we should work differently on a plant transmission in Plant A and Plant B. If there is one best way to do it, we should apply this best way in every plant. To give you another example of this idea of modularization is -- and Alexander, I think you have referred on this on several times talking to the analysts and talking to the people.

We defined a module for the final assembly of the -- not just final assembly of the assembly of the transmissions. And this module is defined for 100 to 150 transmissions a year. And it is predesigned. And therefore, it's a kind of a bill of material. We know exactly the needed machinery. We know the defined test rigs. We know what infrastructure we need. We know the assembly equipment, the tools for machining, et cetera. We know the supplier parts, et cetera, et cetera. It's like a bill of material, as I said, and therefore, we have a fully cost transparency of what we need there.

Another advantage is we do not need to plant every time from scratch because we have this standard. We know the needed personnel and their qualification, et cetera, et cetera. And the idea is it's similar to a LEGO brick so that you can apply this LEGO brick whenever you need to increase capacity in an existing plant or you can bring this LEGO brick to a new plant or a facility where you want to ramp up it. And again, the advantage of this standardization is it makes us flexible in our production network.

So when you're working accordingly to the same standard in Plant A and Plant B, it's pretty easy to shift the transmission from Plant A to Plant B whenever you need more capacity or if you want to speed up or whatever.

We have had a discussion with the teams from slide bearings yesterday, and they come up with a similar idea. So we are applying this approach of standardization of modularization across the company. This helps us to get the full advantage from our footprint from our global production network. And you see here just one example of how we work together on the German production network. We are currently assembling and producing a transmission, the 295. We are final assembling part of the volume in France as well as subassemblies. We are producing components in our plant in [ Reine ]. So [ Reine ] is more and more transforming into a VTA or VMS or land transmission plant. We are producing components. So wherever we have any spare capacity, we are using it before we are going to invest into new machinery. This is just, again, the starting point and step-by-step and using standards, we are able to increase the benefits from this production system.

We have not just done our homework at Augsburg at VTA, as Alexander already said, the colleagues in the U.S. also made their homework. They transferred parts of the standards we designed in VTA to their production system. They added additional capacity, again, according to the standards. And what was the most driver is they managed to stabilize their supply chain. And therefore, it's a small number, but it's a good number. They are back on track, and they are producing three and going to four transmission every single working day. All these approaches will help us to go to the next step. The next step is we are going to go global, and we are going to go local.

Why do we need to do this? Well, we had the discussion yesterday on the table. Many of the governments see the defense industry as a kind of a possibility to get work into the country. And therefore, the local content requirements, I'm sure, will increase. I experienced the same in the automotive industry, and we need to be prepared for that. And therefore, we have this standardization, the modular approach.

We are preparing at the moment with three sites. The first one is India. We officially launched that at the beginning of the year. We are already producing industrial stuff there, but this is not the main reason. The main reason for this site is that we are prepared to produce local whenever a tank program is coming up in India.

Same in Poland. It will start as an [ MRO ] hub for Eastern Europe. But again, it's an entry ticket if there is a request for local production for a potential new [ K2 ] program.

And finally, Italy, as Alexander just said, we are sitting on the premises of Leonardo. And therefore, I think it's a strong commitment in the upcoming European main battle tank program. And again, if you would reinvent the wheel on every single site again and again, it would be impossible to do all this within the next 5 years. And therefore, I think standardization, transferring the right approaches from automotive is exactly what we need to do.

What is fitting ideally in this picture is the acquisition of our newest sister plant, the plant in Cincinnati, former Cincinnati Gearing Systems. You see the Milford plant there. It's really a good -- it's a great plant, and it's a great team there. And Alexander and myself had the opportunity to welcome the team on day 1, which was in April. And from that on, really, we are integrating the colleagues there. We're adapting them to our processes. We are integrating them in our production system. We are trying to harmonize all the processes. And so step by step, I think we make really a good progress there, and we help the people to integrate there.

CGS is, again, an entry ticket because CGS has a long time. It has decades of experience in gear manufacturing and has a strong relationship to the U.S. Navy. You see one of the products there is not the Hovercraft, but the transmission for that Hovercraft what the colleagues are producing. And therefore, again, I think it's our crystal ball or starting point for really increasing our business, our naval business in the U.S. with a strong footprint in the U.S.

Let me briefly address on our supplier side, what did we achieve there. On the supplier side, it's -- I would make it easy. It's -- I just want to have the port. So it's all about resilience. We need to build up a supply chain that needs to be resilient against any disruption. So we need to really think about where do we need a double source or not just a single source, how we work together with the suppliers, then we need to run something which is supplier management because as Alexander already said, I'm in this business now for 30 years, and I have never had 1 week without any disruption. This is -- I should have learned something different. But this is why everybody wants to become a CEO, not a COO.

But you have to work differently with the suppliers. When I'm looking back what we did so far, and I was surprised when I came into RENK is every time we placed an order, we made a request in the market and we placed an order. It was pretty clear who got the order, but we made a request and placed the order.

Looking again on automotive, this is not common sense in automotive. In automotive, you're making frame contracts. So what gives the opportunity to the suppliers to prepare because they know the volume upfront, at least in benches or in ranges and so they can rely on it. And it gives us the opportunity not just to order something, it gives us the opportunity to just make a call of it's much more easy. It runs through the process and nobody has to take care about it.

And finally, and we discussed this with Benjamin, with [ Kevin ] yesterday on the table as well, system suppliers. What is the system supplier? System supplier is somebody who is supplying a component or subcomponent. And for example, we have a very deep vertical integration at the moment, even in final. And therefore, we have a high complexity because imagine a component which is subassembled out of 50 parts. If you make it in-house, you have to order these 50 parts, you have to take them into the plant, you have to transport them, you have to store them and then you have to assemble it. When you order subassembly, it's just one part number. And again, this is common practice in automotive to reduce complexity, and we are thinking about this way step by step in the future as well, really to handle the growth, which is in front of us.

Therefore, we had a what we called Supplier Day with the core suppliers from BTA in August, now it is in June this year. And we invited around 70 suppliers, mostly the long lead items suppliers to have a discussion with us. And the discussion for sure was economical discussion. It was about contracts. But the main question in the setup was how can we manage to reduce the lead time down to maximum 120 days, 1 quarter. And you have to make -- you have to have in mind that we have had lead times in the past, which were even longer than 2 years. So 2 years means whenever you want to react, your braking distance is 2 years, which is quite long. if you want to avoid anything in this time, you need to increase your network -- your stock material, your stored material. And therefore, it's extremely important that we reduce this. The idea honestly came up during the discussion, and I said 120 days. Today, I would have said 80 days because I think then it would be even lower. But this will be the next time, but you see the outcome. The outcome is we reduced the average lead time by 100% within the set of suppliers. And again, I think it's a good way of achieving it.

My general idea of working together with suppliers is more partnering. There is a big openness at the moment. And there are many suppliers who are losing automotive business at the moment. So they are really interested to working together with us working together with a successful defense company. So this is so far our operational homework that we made. And again, looking on the figures, I think it was quite okay.

This is something I would like to go a little bit deeper in because I think it's even more important for the future. So when you look on the numbers, when you look on the numbers, Alexander just presented and Anja is going more in detail, we will double the output of the company within the next 5 years, doubling the output within the next 5 years. And everybody who has some experience with operations should be pretty, pretty clear that this is not just something that happens somehow, and it's a step into the next level. It's not a linear scaling anymore.

We have to completely rethink the way how we work, how we operate because if we add the same process, the same way we do it today, we will not survive the complexity and everything will kill us. And before that background, parallel to all these operational things we are doing at the moment, we are heavily working on an operations strategy. And with this operation strategy, we want to foresee what is needed for the next 5 to 10 years that we need to decide now that we need to install to be prepared when we -- when the volume is coming because it's not just about counting the beans, it's about producing the beans.

And therefore, we started a very structured process, what we call an operation strategy or business plans. The starting point for sure is the forecasted demands. then we make a Capacity planning. Capacity planning includes already an ambition increasing efficiency. So there is something in between. Then we make very, very detailed SWOT analysis in every single plant. We run something what we call a health check. health check is for machinery, for example, how old is the machining, what would be the impact if it is the breakdown, et cetera, et cetera. And then we come to ambitions and we come to measures and we come to projects, which are described and defined in a so-called business plan, which is then the foundation for the plant manager, for the responsible operations manager and operations team to make it for the next 5 years. We track the milestones. We have defined targets and goals there. Some of you might know the methods, which is [ OKRs ]. And this is how we now are preparing for the next future.

And with the business plans, we know exactly the need for capacity. We know exactly the need for additional investment. We know the need for additional personnel when we need to start hiring them and qualifying them. This is, I think, the most important thing what we need today. So really being prepared for the volume that will be there in the next years.

And just to give you one example, and Alexander just mentioned it, in VTA, this year, we will produce north than 700 transmissions. The forecasted number is almost 2x higher. So we are close to 2,000 transmissions. At the moment, it's close to 1,800. We will see what it will be at the beginning. When I came in into the company, I started a program in VTA, which was VTA 800. And honestly, the team was a little bit smiling because they thought I'm crazy. Next year, we will produce this number almost. So within 2 years.

In final assembly, we are still working in shift due to our efficiency measures. This was possible. When I came in, we had the idea to go into a second shift already 2024, so last year. We can avoid the second shift even next year. So earliest in '27, we will have to do that due to our efficiency increase and due to our new final assembly concept there. In machining and in test bench, this is pretty clear. We are trying to fully utilize this cost-intensive equipment. We are already in three shifts. But with a detailed business plan, we know upfront when we need to implement the next step from the module I just presented to you.

And with this in mind, for example, we know where we need to invest in which plant we need to invest and the advantage of having all these business plans for all the facilities, we can coordinate the spending, we can coordinate the capacity and therefore, we can keep the CapEx level quite low, and there is still the commitment from the Board that we will stay within the 3% line -- till the 3% line within average for -- until 2030. We will have a slightly increase in '25 and '26 and '27 to prepare for the extreme volume growth, which we are expecting from Germany, but then it's almost done. And on average, we will stick to the 3%/

so this is my last slide. It should give a small summary and an outlook of what we are going to do. I think the numbers prove that we have done our homework in the last 2 years, '24 and '26. It was more fixing the basics. We scaled up to serious productions in Augsburg. We scaled up to serious supply.

This will now be approached stepwise into the company whenever it's fitting there with the volume, which we are expecting, as I already said, we now need to go to the next level. We need to optimize and further professionalize our processes. We have to qualify our people. We need to go more local, blah, blah, blah. I think this is -- we know what we need to do there. And our ambition and the very personal ambition because I'm very competitive is that we want to be the benchmark in the defense industry latest at the end of this decade, meaning that we are highly flexible that we always deliver on demand that we are growing in margin by far over proportional to the revenue, et cetera, et cetera.

So hopefully, I gave you a feeling of what we have achieved so far. This is history, it's water under the bridge. What is even more important is, hopefully, you got a first flavor, and you will see it in the afternoon on the factory tour that we have a picture of where we want to go, where we want to be. And what is even more important, we have a plan how to go there.

Is it finished yet? No, it's not finished. Will it be easy? No. It will be hard work, but I'm absolutely convinced it will also be hard fun, yes. And I'm really excited to do it with my team. So thanks a lot, and I'm excited for your questions.

Thank you, Emmerich and Alexander, for two comprehensive presentations. And now dear ladies and gentlemen, it is time for our 15-minute coffee break. Please enjoy some refreshments and a will signal when the break has ended.

[Break]

Thank you, everyone, for returning to your seats. And for our next presentation, please join me in welcoming our CFO, Anja Manz-Siebje to the stage.

So hello also a very warm welcome from my side. I can only add to my 2 colleagues who already stated that already. We are very happy to have you all here, and we really appreciate you spending your time with us today. So thank you for that. And just picking up the picture, Emily introduced in the last session, I would like you now to invite you to do some bean-counting with me.

So let's talk about financials. This is a very important picture for us at RENK. This is the RENK machine. This is how we actually power our profitability and our growth. These are our 5 gear cogs, and what you can see is we have 2 growth levels. These have been explained very, very well by Alexander this morning in his strategy section, it's organic and M&A.

Then we have 3 year cogs. They are powering return on capital. Emmerich started already explaining us how operation is driving the margin expansion. And I will add to that, and we'll definitely talk about capital productivity and cash conversion. So let's start with a small recap of our financial figures. We have RENK. As you can see, we have been in the last years through 2 ownership structures. So the very first phase was PE-owned.

And then since February 2024, we actually started our life as a listed company. If we look on the left-hand side, we can see that revenue in 2021 was at EUR 689 million. We ended last year with a revenue of EUR 1.1 billion. And I confirm our year-end guidance for 2025 revenue being above EUR 1.3 billion. If we then turn to our adjusted EBIT, it's a very similar picture.

We started out in '21 with EUR 91 million adjusted EBIT. We ended last year with EUR 189 million, which represented our upper end of the guidance we have given for that year. And I confirm today our range of EUR 210 million to EUR 235 million for the year-end 2025. If you look at the CAGR, we can see that the CAGRs of revenue is about 17%. The CAGR of our adjusted EBIT is 16.6%.

What you can actually see is that our adjusted EBIT CAGR outperformed our revenue CAGR. And this is really growth what we do and what we like. On the right-hand side, what we see is our LTM September 2025, some highlights. So we have a book-to-bill ratio of 1.4x, we have a ROCE of 22%. Our free cash flow grew by EUR 94 million, and our cash conversion stood at about 81%.

So this whole thing shows that our past really is a true growth story. So bear with me a little more moment and spend slight look on our 9 months numbers 2025, which we have presented to you already in our last week's earnings call. If you look on the left page, side, we see that our revenue grew by 19%. And our adjusted EBIT grew by 25% compared with the prior year period. And this also shows that our adjusted EBIT growth outgrew again our revenue growth.

Looking at order intake, that grew by 45%. And then our total order backlog stood at EUR 6.4 billion by the end of September 2025 and grew by 34%. So this shows when we consider what Emmerich told us in his presentation that we doubled our output that we are doubling the output, increasing our revenue and still adding to our total order backlog.

So we really have a great total order backlog. On the right side -- right-hand side of this page, what you actually see is how did the most part of this growth. And you can see that vehicle mobility solution, our biggest segment and which is mostly defense driven, really contributed the most. It grew by revenue by 25% at a margin of 18.1%, and we are at 105 adjusted EBIT by the end of 9 months.

Also our M&I segment, which is also with a very big portion defense driven, also contributed a lot. We have a revenue growth here of 16%, and we have a margin of 11.6% with compared to prior year 10%. Here, you need to keep in mind, please, that EUR 1.5 million of this margin really was a onetime effort because we were able to convince an insurance to pay us for warranty.

That was also a success, but this also explains why we have such a great margin in our M&I business, which is truly impacted by the industry developments. Site bearings, as always, is very stable on a very high level and solidly contributes to our overall group success. If you look at that, our growth momentum is here and it will continue.

This is what we would like to share with you on the next slide. This is the EBIT walk. Alexander explained the revenue work really well. And when you look at this, you can see immediately that the EBIT walk really follows the revenue walk.

Let's start on the left-hand side. We confirm our adjusted EBIT range for this year 2025 between 210 and 235. Then we have 4 building blocks. 2 of them covering growth and 2 of them covering operational improvement. And then we end up in 2030 by above 20% of adjusted EBIT margin. So let's talk about the building blocks.

We have 4 of them. The very first one is capturing sales potential. This is explained very well by Alexander this morning. It's really converting our big order backlog into revenues. It's as easy as it is and Emmerich is going to produce the beans. It's just about operations exactly. So this is the very first building block.

The next building block, obviously, is aftermarket. By growing our installed base, we will definitely by itself, get more maintenance, more spare parts and so on and so on. Then we have another bits and piece here. We have read in the newspapers, everyone did that, that all these tanks and so on is going to be practiced many more times. It's going to be used many more times.

So also their additional aftermarket will kick in. These building blocks cover the growth story. Then let's have a look at the other building blocks, scale and capacity and efficiency and optimize supply chain, they make up for operational improvements.

Building Block 3, it's scale capacity and efficiency. This is all what Emmerich was talking about this morning. It's about getting the scales done, also being more efficient and rolling out our new production system worldwide and actually using our plans where we have less industry and put more defense in there.

This is building Block 3. Building Block 4, it's all about optimizing supply chain. That was also explained by Emmerich this morning. It's about leveraging our increasing base and having more negotiation power and also optimizing our supply chain colleagues so this is how we come there. Let's have a look at the timing on how this will happen.

When you look at this page, it's the same concept as for the before page. It's really the EBIT walk follows the revenue walk, which was explained by Alexander this morning. We start on the left-hand side, we reconfirm the guidance of adjusted EBIT, the range of 210 to 235. And then we have Building Block 2, 3 and 4 kicking in.

That brings us to 2027. And here, we confirm the guidance for 2027 of above EUR 300 million adjusted EBIT, which we have confirmed to you in last year's Capital Market Day. After 2027, so starting 2028, an acceleration really kicks in, which is back-end loaded. And here, the building block 1, 2 and 3 really kick in, and they bring us ultimately to 2030 with an adjusted EBIT margin bigger than 20%.

So to recap that page, it's really revenue shows the same pattern as the adjusted EBIT. It will kick in and accelerate starting 2028. And it will be back-end loaded. And by year-end 2030, we stand with an adjusted EBIT margin above 20%.

Let's talk about the 2 numbers we have introduced to you in the last Capital Market Day, it's cash conversion rate and [indiscernible] see. On the left-hand side, you see our cash conversion rate with LTM September 2025, we stand at 81%. Compared to year-end '24, we were at 48.4. Now you can say, okay, where is the dip coming from? The dip is coming from our net working capital because we are a growing company.

And therefore, this is what we've always been telling, we are in the process to optimize it. But however, we will definitely make sure that our inventory stands at a level which allows us to fully capture the growth and deliver on time as based on customer needs. This is cash conversion.

However, we still stand for our ambition over time that our cash conversion is around 80%. So we confirm that what we have mentioned to you last year on the Capital Market Day. In last year's Capital Market Day, we also implemented ROCE. We defined it, we discussed it. And since this year, it's also included in the long-term incentive scheme of top management.

LTM numbers, September 2025, it's 22.1 and compared to year-end 2024, it was at 19.7, so it increased. Why did it increase? You have heard that. Emmerich really explained that very well in his section. It's really all about utilizing our invested capital base, optimize it and really will integrate our well-invested platform. Our midterm ambition, we confirm, we also confirmed that last year on our Capital Market Day will be above 20% over the years.

Let's talk about net working capital. We have been touching that chapter with all of you many, many times. We are a growing defense business. And so we all see that we do have cash sitting locked in our inventory. And we would want to unlock that. We are working on that. However, we still want to capture all the growth, and we still need to have the inventory in order to deliver on time and capture all the growth.

So this is kind of a little bit a contract conflicting topics, but we will still manage that. And what we can manage is here actually in the middle of the page. Everybody knows the building blocks of net working capital. And what we really are working on is what we heard, what Emmerich told us -- we're working on optimizing our supply chain on reducing the lead time of the crucial parts on all our parts.

We are also working on excellent project management and therefore, reducing the cash coming in cash time, so reduce the cash cycle. However, there are also topics which we cannot control. And that's pre-payments the part of the pre-payments, what we can control, that is what we're doing. We go into the negotiations with our customer, and we really ask for prepayments, and we are negotiating hard.

However, it depends on when the contract is actually signed and when the prepayment actually hits our bank account. And then -- it depends on when is my cut-off date for the quarterly reporting what we're doing to you. And sometimes, it's just too bad, yes. We are having a deadline, so it's end of June. And the money is in fourth of July. So that's when we actually that's a cutoff issue.

We cannot change that. So therefore, we tend to look at net working capital rather on an overtime basis. So maybe 1 or 2 years to kind of leverage out these once in a while cutoff topics what we have. However, considering everything what we have said here, we still think that over time, our net working capital is at around 20%. This is our ambition. We also talked last year about capital contribution.

And we're really confirming our capital contribution priorities from last year. So firstly, we definitely invest in growth. because in essence, what you have seen and what you've seen this morning, we are a growth company. So we will invest definitely in CapEx. Emmerich alluded that and an average from 2024 to 2030, we will spend around 3% of revenue into our CapEx. We will have 2 peaks in '26 and '27, but we will stay in '26 below 5% and in '27 below 4%. And on an average, we stay with our 3%.

Then Alexander this morning, explain to us the M&A defense part. Yes, if there is a possibility, if it makes sense, if it's value accretive, if it fits into our portfolio, and we have learned, it's either a technical topic, it's a regional topic, but it's definitely defense. Yes, then we will do that. But M&A is never really predictable but it will be 1 part of our investment in growth.

Secondly, our capital allocation framework is balance sheet strength. That is important for us because we want to come to an investment-grade rating, meaning that our leverage ratio stays a bit below 1.5x and we stick to that. We also said that in our last week's Capital Market Day. And lastly, but not leastly, we want to pay an attractive dividend to our shareholders.

Therefore, we confirm our dividend policy, which we have been living for the last 2 years already. And that means we are staying between 40% to 50% of our adjusted net income of a dividend. We believe that all these 3 parts come to a shareholder value creation of a ROCE target above 20%. And this is our financial foundation of growth, and we actually have 2 big levers.

And then we have one chapter, which is underpinning that whole thing. So cash focus, what we've learned here, it's important for us to unlock the cash as much as possible while we are optimizing net working capital. Also, our capital allocation. Here, we want to align our capital allocation with our investor expectation as well as with accelerating market growth.

This all is underpinned by our environmental targets. We have governmental, social and governance targets. You can see them since last year, we are fully compliant with our ESG reporting. It's regulated and we are CSRD compliant. I would like to highlight you one topic. This year, we are implementing relative total shareholder return as one key metric, which will also be ultimately, next year, part of the top management long-term incentive plan.

With that, that was the last component, which was missing in that long-term incentive scheme of top management, we are aligning top management decision even further to shareholder value creation. And if you remember, in last year's Capital Markets Day, we did the same thing with ROCE. We implemented the key metric. And then we ultimately put that into the long-term incentive scheme top management.

And we're doing it today with the relative total shareholder return in the same manner. This is the summary of our updated financial framework. We reconfirm our short-term guidance for 2025 with revenue being above EUR 1.3 billion with adjusted EBIT in the range of EUR 210 million to EUR 235 million. We are also reconfirming the metrics we told you during last year's Capital Market Day.

So in 2028, revenue being above EUR 2 billion and adjusted EBIT margin being in 2027 above 300. Our new midterm guidance for 2030, revenue stands at a bandwidth EUR 2.8 billion to EUR 3.2 billion. And please make sure there is no M&I included at the moment, and our adjusted EBIT margin is above 20%. These are our guidance figures.

And obviously, they are supported by additional financial metrics. You know them very well because we also mentioned them last year. The CapEx in percentage of revenue stays between the years 2024 to 30% as an average of 3%. And the ROCE mid-term is above 20%. The cash conversion rate over time is around 80%. And net working capital as a percentage of revenue stays over time or comes over time to 20%. And the leverage ratio is over time, below 1.5%, meaning investment-grade rating.

So with this, we are best equipped for our next growth period, which will start next year, and we are in a position to drive rank to the next years. And with that, I would like to hand over to Melina, and I thank you for your time and attention.

For that update and for linking our strategic ambitions to the financials and the [indiscernible] that is now time for our Q&A session. Therefore, I kindly ask Alexander and Emmerich on stage with us.

Gains. Before we start, let me just quickly introduce the Q&A. We look very much forward to answering your questions during the next 30 minutes. [Operator Instructions] And yes, we have participants joining via the webcast. It would be great if you could state your name and organization before starting your question. And once you have a question, we have colleagues over here that will hand over a microphone to you.

And with that, let's just jump into the first question. I see one right over here in the front.

Samuel Burgess Goldman Sachs. If I could just ask a couple, if that's okay. On the operations side, it was quite notable there was one supplier still at over 180 days. And I guess you're only as quick as your slowest supplier. Is there any visibility you could give around that?

Well, it's -- so in the past, we did not really have all the transparencies. As I said in my speech, we made a request and then placed an order, and then this was the average of the return. So with this special supplier, the target was to be below the 120, and I want to be very open, very transparent, and I should have I could have left it out with what is not what I'm doing. So I was aware that there might come up a question. The question is how do you deal with this?

So if we know that there is a longer lead time with this specific supplier, we have to react on it. Maybe the stock is a little bit higher or we have to go into another round in the negotiation with the supplier. But I'm not nervous about that. The average accounts now we know where we have a problem.

And I am satisfied with this 80 days in average. No. I even want to reduce it, but this is the first level we have reached, and then we are renting. And I think the more we work together with the suppliers -- they know that we are reliable and then we even can reduce the lead times.

May I just add a little comment just to what Emmerich is explaining, Today, we have lead times. Some of these there are over 700 days. So if you look on the projects coming up front on the industrial logic, if we would wait until we have the contract despite the fact that this procurement team is working hard to reduce the lead time. We could not start production before 2029. So what we are doing for selective components where we see we still have this long lead time we are buying more than what we maybe need for the next 2 years to come.

So by purpose, we are increasing our stock. And I'm always saying, we are all incentivized as a management also in our STI on the inventory level. But sometimes you have to take entrepreneurial decisions because what we will not do is give up profitable growth profitable millions because we had not put a little bit on stock side of these critical components.

Perfect. Great. Great. That's really helpful. And if I can just add one more. The targets you gave, I presume there's no Ukraine aftermarket baked into those. So in the current context, just be quite hopeful to get visibility on how you're thinking about that.

Well, I think it's important to mention to everyone, and this I think it's an important question, if you see the sentiment on the Ukrainian war, there, as I said before, one discussion about Mr. Trump and Mr. Putin are talking are the share prices going down. So far, we did not really participate from an economic point of view, from the Ukrainian war.

Sometimes we got some call-offs from our U.S. customer in order to send some spare transmissions to Ukraine but the first time we really realized and got contracted happened in the -- so where we got for the first time a contract with the Ukrainian MOD for servicing and for shipping spare parts and spare transmission to Ukraine.

So if you look on Ukraine, hopefully, there will be peace agreement, to be honest, because if you look on the people there, it's just devastating. From a business point of view, Ukraine will have a significant demand in rearming restocking which includes not only new business, but it also does include, of course, follow-on aftermarket business.

And what we are intending to launch in Poland, obviously, even if it's not published yet. If we talk about MRO, this would be the next step. Subsequently, if there is [indiscernible] to go even for MRO into Ukraine. Today, we have some projects where we are sending people from the workers here in order to make service in Ukraine. But this is just really on very small project specific. Does this help you answer the question?

We have another question over the there.

Sven Sauer of Kepler Shaver. I have 2 questions. The first one is on the pipeline on Slide 21. I'm not sure if you want to show it. But I'm just wondering where the X30 is in that picture in the pipeline?

Thanks Sauer and a very good question. If you recall last year's pipeline, we had big bubbles in the U.S. because we consider the full M13 potential transmission and drive system, and we had the X30 in transmissions and drive system. So we have it included. I cannot show you what you have it in front of you in the U.S. bubbles, but we only included the drive systems for the because we are set for both potential primes to deliver this.

Then we have included the M1 E3 tribe systems, but we excluded the transmission business so far. I mean we also need to be fair. And this is also valid for us for the trial systems. If you look on the E the nomination currently is for the EMD phase for the development phase. And everyone subsystem and of course, the prime to go through this phase.

We also need to go through the space on the tribe system side and making sure we are passing this qualification positively. Only if you pass it positively, then you have a chance for service supply. So let's wait and see.

Okay. And the second question is on the margin expansion over the coming years. I'm not sure how to frame this question. But if we look at the 2028 guidance, I mean, this implies a margin roughly 18.5%, somewhere in that range, plus/minus yes.

And this is the time when you will be getting lots of OE orders and aftermarket share in '28 and '29, I mean, I think, at least will go down because the aftermarket will only come after a few years after. So against this backdrop, I'm wondering how from '28 roughly 18.5% margin, you're going to increase it to above 20% in only 2 years with such high influx of OE orders that have a materially lower margin than the aftermarket.

Sauer that's is a very good question, and I must take care because one of my potential customers sitting here, but this is full trust, by the way. I mean just very roughly talking about the margin expectation. So if you look on 2028, we see us clearly above the 19%, clearly above the 19%, somewhere in the range between 19% and 20%.

Secondly, the new business is indeed starting to kick in on the revenue line on 2028 and fourth following. Naturally, the share of the aftermarket business might drop, I don't know, a certain percentage. But even if you see today, if you take the Q3 and if you take the 9, our aftermarket share is somewhere on the 35%.

So even today, we have a fluctuation between 35 up to 42%, and it depends simply also on the call of frequency of our customers. The third comment and either -- the third comment is, of course, if you talk about margin profitability on the aftermarket business, I think it's fair to compare to jet engine providers, for example, but this does not mean that our new business is not supporting our margin work towards 19% to 20%, somewhere in this range for 2020, 28 and beyond. And finally, if you listen carefully, to the presentation of Emmerich for us, more of the same.

More of the same transmission is the enabler not only to leverage more efficiency more volume effect and even rank started since last year, maybe a little bit too late to work on supplier base, on COGS optimization, should cost analysis, but more of the same is supporting not only price reductions based on the volumes, but also further allowing us optimization of the bottom line.

So this is the reason why we see this increase when we're giving this range for 20%, 30% above 20%. And by the way, last question or last answer. I need to say it. Our product mix will change. Today, we have 3/4 of our business is defense in the future. I mean, as a thumb indication, it might be at 85% or 90%.

The Civil business is maybe not really that strong on the margin side for good reasons. So also from this macroscopic impact, you will see a driver of our business model, if you talk about margin optimization.

There was another question in the same row.

Chloe Lemarie from Jefferies. I have 2, please. The first one is on the margin guide. If you go split it out by divisions. That would be very helpful. And the second one is on the M&A. Is it fair to assume that given you have a focus on U.S. Navy, maybe. Could it be dilutive to the margin if we include up to EUR 1 billion target into the guide?

It will be split up I pass to [indiscernible] to like always to the CFO, I talk about M&A. I think it's important we are not doing -- we will not do acquisitions where after a short time, we will have an improvement of our overall business margin and quality. And as you see, if you talk about Navy and if you talk about land system side, you know the margins on the Land Systems side.

BMS had at the end of 2024 round about 20.5%, 20.6%. This margin will increase. So whatever acquisition we would do on the land side this must be value accretive. But as I said it, we are not focusing so much on the land side because we are pretty consolidated and feeling very well here. On the Navy side, it must support our margin improvement of our Navy business.

As you could imagine, a potential acquisition might have an impact on the net leverage. And for us, it's clear if there's an increase of the net leverage to bring it down by synergies in a quite short time frame. This was an answer, I hope, on the M&A side.

And I take over the margin side. We steer our company in accordance to the segments, you're right there. And we are fully aware that we want to give you the most transparency what we have therefore, we do our guidance on a group level. However, if you think about what we have all been telling you this morning and in the in bean accounting session, bean counting.

So we think, yes, we are transforming more and more to a defense side. And if you look at our segments, there is 1 which is largely defense driven and we also report in our quarterly sessions on a sector side. And you can see which is the main driver of that margin and that is clearly defense. It's revenue growth and its profitability. That's clearly defense-driven.

And again, as an indication, BMS last year at 20.5%, the center of gravity for all volume leverage, efficiency gains, cost optimization. So I think you can expect that the BMS margin will not stand on 20.5%. Absolutely. It's the main driver. -- has another question.

[indiscernible] Cantor Fitzgerald. I have 3 questions. The first 1 pertains to orders. and Israel. So the expert band has been lifted? And how long would it take for you to be able to deliver again? And would it come this year? The second question on the order side is the Italian main battle tank topic and the infantry fighting vehicles that go with it, can you give us at least a range of what it could represent in terms of million euros. So these are -- this is the first set of order related questions.

The first, about Israel. I mean, we were extremely positively surprised when we learned the news that the German government, I mean the German transferred lifted the export embargo. However, driven by the processes -- now it takes a while until this -- from this principle goal, it will be transfer and processed in the entire administration.

So we do not expect to have any impact we cannot deliver in the year 2025. So we do expect that during Q1. Finally, we have it on the paper, the export permission. We continue to produce by the way, also in the net working capital what Anja discussed, we have it currently fully included the transmission, and we are waiting for the final approval and this is also important, how this delivery and the approval will take place.

Will it be one approval for the planned figures in 2026 for all the planned volumes in 2026? Or do we get it slide by slide. This is something what we do not know yet and it could impact 2026. If, for example, we're getting sizes in the range of 20, then we need to wait for the next approval. This is not clear yet, but overall, it's a positive in for the IBT and the ICS, the MBT programs in Italy and the IFE programs in Italy, I mean you can make the math you are all extremely educated.

If you talk about a lifetime volume of [indiscernible] for example, lifetime volume for 1,000 IVs. If you multiply it with the average transmission price you all have in your books, you see it's a quite important business, and it's the same for the main better tank. But clearly, in Italy, the volume driver coming from the IFRS.

Thanks to the math. And the second question pertains to short-term guidance. The bottom end is -- would imply a contraction versus last year at adjusted EBIT margin level -- so what is the scenario behind this? What is the story behind the scenario? Why would you guide something like this in light of everything we had.

You guide what the 2030 target.

And I'm talking about 25 the bottom end of our adjusted EBIT guidance would imply on EUR 1.3 billion of revs a contraction year-on-year? Right?

Yes. I mean we are not doing a contraction. I mean, just -- and I'm sure you know this, this year, rank and many other companies faced first tariff -- we always communicated a single-digit million. We faced exchange rate. We have a high exposure in U.S. We faced a significant headwind from our industrial in the high double-digit revenue side, maybe not impacting so much on the profitability side.

And last but not least, we did -- we cannot deliver what we had planned in the Q4 for the Israelis. So this is the reason why we did not we all accommodate all this. We are still confirming the guidance, and you can be sure we will have a good position in this guidance.

Okay. The last question has to do with 2030. What about the slide Bearings business? It's part of this sale. And I mean we didn't discuss it today so much, obviously, because the focus was on defense, but is there any portfolio kind of your thinking around this?

I think the message -- I'm sure you have received this that as a part of a future reorganization to have focus on crystal clear defense domains and the second step to bundle the existing industrial part of the business is in order to make it more attractive and to gain more of our sector strategies executed as. Of today, I mean, as you know, Slide [ Barings ] is a beautiful business. steadily growing cash generation.

Now there are some current problems may be temporary from the end for the time being, it's always on the -- I mean there is no news, but what is important? We are doing, of course, like what we're doing with all the 3 segments annually strategy reviews. And we look exactly on the product portfolio on the market situation on our impact on the business and the next round is somewhere at the end of January, where we have our internal target setting.

So far, no news, but let's see.

Yes. There was one question over there. And then the second.

Cantor Rochas, BNP Paribas. The first on revenue. So considering you very -- you feel very strongly about the increased 2030 revenue target range, EUR 2.8 billion to EUR 3.2 billion, but you haven't changed the revenue target of EUR 228 million above EUR 2 billion. So first of all, could you maybe quantify what that above EUR 2 billion would mean? And then how should we think about the cadence of that growth from -- in 2026, 2027 to 2028. Are you still aiming for double-digit top line growth every year?

I mean, should I should you? So I'll start maybe and you with [indiscernible] more precise than I am maybe -- we have these 2 kind of dynamics. After 2028, all the potential order intakes and contracts are converting into revenue. So we will have a different double-digit growth than what we always have communicated by the way, also since last capital market, and we are growing between 24 and 28 double digit, but maybe not on that double-digit growth, what we will see 2028 and fourth following.

So to comment on your question about our EUR 2 billion, we are very confident it will be above EUR 2 billion. Will it be at EUR 2.1 billion, EUR 2.3 billion, EUR 2.4 billion. Let's see, but it will be above EUR 2 billion. Please keep in mind nothing has changed compared to our last Capital Market Day in regards to the execution of this first phase.

What came on top is really starting after -- I mean, on the revenue line, starting after '28 all this increase in the defense spending. And also, if you look on our margin side, I mean, you can be always very critical, but honestly, from a 16.5% or 16.6% what we have shown before, last year, financial year-end 2024, we are working in the year 2027 where we had our milestone now above 300, as I just said, through a margin most likely in the range of 18%. And if you go to 2028, we will be in the range between 19% and 20%. Are we at 19.2% or at 19.8%, or even maybe a 20%? We will see. But the overall market development -- yes, the market development, our business development, I think we should be optimistic and solid and proud about this.

I can only add to it, because you need to think about the acceleration. That's what we've been telling in the EBIT and the revenue walk. It's really until '28, then the acceleration kicks in. And what we mean with that is there is the real impact of the scale effects are coming. And this is what really boosts us up.

David Perry from JPMorgan. I guess the thing I took from your presentation, Alexander, was so much of the business is still international in the next few years. It's a bit different to maybe the other 2 German CMDs of the last week. So just on the target of over 1,800 transmissions in 2030, just how many of those are international versus Germany? And you said last year, 27% of the sales were Germany. Will that be higher, lower, the same in 2030?

And I guess one follow-up. Given how much is international, can you give any more color on some of the sizes of the international programs, like which are more important, less important in ranking?

I think if we talk maybe first about the composition of our sales, I mean, going from north of 700, north, to 1,800, so almost tripling, I think it's fair to say that the majority of this business is related to Germany and Europe, if we talk about this. The international programs, and David, if I talk about international programs, I talk about exporting out of Europe, you can limit actually as of today on maybe 2 main customers. One is going towards Middle East. We just discussed the challenge what we had about the export. And the second one is going to go Korea, and from Korea going back in the K2 to Poland.

The majority of our growth in the future and going to 2030 will take place on the European business, European platforms, which includes everything, including Ukraine and going along the north flank or the east link of the eastern border, if you want to call it.

And this was the first question. What was the second question, David? You had so many.

Like when we get to 2030, is it still 27% sales from Germany at constant -- because it doesn't look like Germany is actually going to outgrow the other bit for you.

Yes, I think it's a very good question because what you see today, we have a nicely diversified customer base. And as of 2024, if you look on RENK Group level, and this is what we have shown here, we have quarter, quarter, quarter, very roughly speaking, Europe, Asia Pacific, North America and the Middle East. This will -- most likely German share will increase. But it's very important to understand, we have today, if we talk about the entire RENK Group, maybe 20%, 25% of business in Germany. Of course, this will increase, but we always will have international business. Always will have international business.

And again, the main growth dynamics are clearly in Europe. And if you talk about 2030 and beyond, also in Asia Pacific, for example, India. In U.S., the growth dynamics are more or less well below the strong growth in Europe here. It will grow, but on a different speed.

There is one more question over there, or 2 actually.

George Mcwhirter from Berenberg. Maybe on the secular reserve. Can you just run us through what you're assuming in terms of circular reserve share in Germany and the rest of Europe?

Things like what?

The circular reserve? In Germany or in Europe in 2030. And the margin trend to 2030, I was expecting a slightly higher contribution from the aftermarket. Is that because it's coming through off 2030?

Well, let's wait and see what the real contribution by the aftermarket will be. I mean it's clear that the aftermarket will kick in with a certain [ D&A]. But if you talk about the circular reserve, specifically about Germany, I think it's important to make 2 differences. First, we have a circular reserve on platform level. We talk in Germany about a so-called [indiscernible] reserve. So if the German customer, for example, is ordering 100 tanks, because he needs 100 tanks to fill gaps in his current frigate structure, he will order 140 tanks because he needs to have a reserve in case there is really a conflict. And it might happen in a conflict that the tank gets defect, so you need to have a new one.

So this circular reserve on platforms is, of course, supportive for our business development. And we have it also in our scenarios, what we just discussed in the platform numbers, included, in the [indiscernible]. On top of this, there is like today a circular reserve of critical subsystems, engines, but for example, also transmissions. If you talk about transmission and you see today's level of circular reserve, it depends on which platform you are looking, but it's somewhere between 10% to 20%.

If you compare this to countries and customers who are or who were in an active conflict, like Israel, for example, they have a circular reserve up to 50%. So I think the German government and the Bundeswehr understood this. And also on the circular reserve side for transmissions, they are going towards the 40%.

Do we have -- George, we had this discussion very often. Do we have fully included this 40% on the circular reserve on transmissions in our adjustments? Maybe not to the last volume because, you need to understand, we are not starting from 0 to 40. We are starting from a level of 10 to 20 to 40. Did this answer your question?

Okay. Due to our limited time, I would suggest that only the 2 -- in the third row, can ask one question each before we have to conclude the Q&A session.

Yan Derocles, ODDO BHF. So just one on the beyond 2028 trend, because we heard yesterday that Germany should not treat the 3.5% [indiscernible] by 2029, but more at 3%. So [indiscernible] something for the beyond '28?

I mean for Germany, to be honest, if we are on 3% or 3.5%, what it means is a massive increase in the budget from 80 billion in 2024 towards 140 billion, 150 billion in the next 5 years to come. So the budget increase is significant.

Also what we should understand, if you look on these 2 phases, Phase 1 in Germany and Phase 2, if you talk about -- especially about the large platforms, lead family, including main battle tanks, but especially the family vehicles, the majority of this we considered always to be in the second half in Phase 2, so not related to Phase 1.

So we are looking Phase 2 starts with 2031 going to 2035. So for us, we do not see any impact. What Germany is doing is a significant effort to increase the deterrence capabilities and is massively investing.

Yes. Christophe Menard, Deutsche Bank. A quick one on MRO aftermarket. Thanks for highlighting the 40%-plus. If we go beyond 2030, could we see 50%? Could we see 50-plus?

As I just said, to model really the year-by-year impact on the aftermarket business depends on many factors. And I think what I would say that today, we are maybe a little bit on the conservative side because, in our assumptions in these rough estimates, we are considering the status as it is for the typical long period for [ overall ] not having a real spare part strategy on our end customer side. What we do expect that this will change, because to have a decent stock of inventory is necessary even for the existing platforms to provide mission readiness, not even talking about the new platforms.

Coming back to your question, as I said, personally speaking, beyond 2030, some when the normalization of the growth on the OE business will take place simply. It will grow, but it might be not growing double digit on 20% what we have seen before maybe, or even more. It may be single digit, and this is the time over the lead time over the years when the importance of the aftermarket business on the overall revenue generation for RENK is increasing. If it's to 45, 50 or I don't know, we will see. But it will increase. But don't ask me at which year it will increase. It will increase beyond 2030.

And can I ask another one? On UGVs. Recently, you were talking about partnership, if I'm not wrong. I mean -- and that was not mentioned in the presentation. Are you going alone? Or it's no, I missed it.

I had mentioned in our network of strategic partners, and of course, RENK does not have all the needed, especially software, know-how as of today in order to make this happen. So we are looking on partnerships. We are looking on [ Arcs ] robotics to support this way, of course. And we are looking on key customers in order to support here with the platforms. So it's a combined approach.

Okay. Now we have one more final question before we end our session.

Joe Orchard from Rothschild & Co Redburn. With the 1,800 transmissions per year from VTA, do you see any risk of oversupply or overcapacity in the market?

Well, I would like to answer the question from the overcapacity. So as I said, I'm coming from automotive, and normally you put your operational point at 80% of your expected volume. So you're not planning for the 1,800; you are planning on a regular basis on 80% or 85% or something like that. And you cover the rest by overtime, by working together with some suppliers, blah, blah, blah. And therefore, even if we would have a drop there, there would not be the problem that we have invested too much in the overcapacity. And as Alexander already said, we are not thinking about a drop in the future. Maybe the increase will be lower. It will be not double-digit anymore than we don't know yet. But before the background -- or the question about overcapacity, I'm not afraid about it because we have this in mind.

And this is why I pointed so strong on these strategies. If you don't have a strategy, it might happen, what you say. If you have a strategy, you have to define where is the operating point. And our operating point is on 80% to 85% on normal business, which means normal shift model. And we can brief or go on in a higher volume when we use over time or things like that.

Okay. Thank you very much, everyone, for your questions and active participation in our Q&A session. And yes, if we weren't able to address your question, I can point it out again that you can always reach out to our investors at renk.com e-mail address, and our colleagues will be happy to, yes, deliver the answers there.

Thank you.

Thank you very much.

Yes. Thank you. And of course, there will also be more opportunities during the day. We have the site visit, we have the lunch and the Executive Board will be happy to talk to you during that time.

So what is next?

You go back to your seat. I will take over for a second. Yes, with the presentations from the management board now concluded, we will now move on to the next part of our program. And we are delighted to have 2 more speakers on today's agenda.

Firstly, Esa Rautalinko, CEO of Patria. We already introduced him in the morning. He will provide background into this company and the close collaboration partnership it has had with RENK on recent projects. And Michael Masur, who also arrived -- I'm not sure -- yes, he's over there. He will then conclude our morning program with an outlook on RENK's vision of future land defense.

And now ladies and gentlemen, please join me in welcoming Esa Rautalinko to our stage. Thank you very much for traveling here all the way from Finland.

Okay. So greetings from Finland. And first of all, thank you, Alexander, and the RENK team for giving me this opportunity. By the way, we are all RENKes, as we heard. Renke is a Finnish world; it means employee. So there we go. Yes. [Foreign Language] So that's what renke means.

The aim of my presentation is that we are not a listed company, so giving you some insight about who we are, where we are coming from, what we are aiming for, what's our belief, basically even though we did not coordinate it. So what General Mais was telling yesterday about the future land warfare during dinner. So it seems that we are like-minded about that one. So what's our take on that one?

And then a couple of examples what we have done and also what we are doing currently in Germany, and then highlighting our new concept vehicle and soon to be ready to be produced, Patria Trucks, where RENK is our essential partner.

And by the way, Alexander, you said that, as I'm over here, so I should shut my ears about your margins. Don't worry. Only 3 things we are interested in, right pricing, the best possible performance and timely deliveries. Other than that we want to have healthy and successful partners. So that's where we are.

Some background I won't go into detail. You read faster than I talk. That's roughly over 100 years, old company, and actually started with German cooperation with the production of Hansa aircraft in Finland. So we do have this German ties from 1921. So that was last year. Now we are looking at our rolling 12 months, so we are on the speed of going above EUR 1 billion this year. So that's our traction at the moment. If we are looking at our Q3 this year, 24% growth in net sales, EBIT growth 60%. So basically, that's where we are. And quite a lot of customer countries.

Maybe to note, so our ownership structure is not a typical one. It's 50.1% in the State of Finland. 49.9% Is owned by [ Kongsberg ] Defense and Aerospace. The reason for why there is this state majority is pretty simple. The Finnish concept goes in the lines that we are the maintenance, we are the overhaul, we are the monetization of the Finnish defense forces. So we are providing the military the usability of any platform, whether it would be fiber jets, main barrel tanks, more ships, what have you. And they are the end users.

So it also means that during the time of peace, crisis even full bar, we are there. So basically, half-jokingly, half-true, the only thing I would change if there would be a war would be my clothing [indiscernible]. So we are an integral part of the Finnish Defense Forces.

Maybe just a notion, another not listed company is [ Namu ], which is a leading ammunition manufacturer in Europe and in the U.S. That's 50-50 owned by the State of Norway and Patria. So there is that connection as well.

That's where we are located geographically, where we have operations, legal entities and so forth. So farthest away, Japan, where we had a major deal a couple of years ago, the first ever that Japan is ordering major equipment from outside the domestic market. And then you're looking at Finland, before anybody starts to have an idea, that doesn't make any sense to have so many occasions in Finland. So the vast majority of those are military bases. So wherever the military goes, there we go.

We are still currently, we are in Lebanon, we have been in Iraq, we have been in Afghanistan. So wherever the Finnish Defense Forces are deployed, so we are following. So that's how we work.

Just background on numbers. It's not our Capital Markets Day, so I'm not going to go into this one. Maybe a couple of points. So strong growth in all of the numbers, and the point also made previously, the thing today is working capital. And what the whole industry is working today, I'm pretty sure about that one, prepayments because the time still are in the -- or it used to be in the olden days, it was the companies who were financing governments. So that needs to change, and it has started to -- it has started to change.

Today we are over 4,000 people, and as mentioned on the track ago, above EUR 1 billion in net sales this year with a nice profitability.

Then if we just split Patria, so roughly half of our business is maintenance repair, overhaul, that strategic partnership with Finnish Defense Forces. And that's a pretty stable volume. Slightly growing, but pretty well -- which is pretty predictable.

So if we take the OEM part over there, if we take that out, the other half of the business, that's the one that's now speedily growing, a better growth rate today, is almost 50% on an annual level. So that also, in my mind, gives some confidence that, yes, in these new capabilities, the growth is there.

That's basically what we do. So -- sorry, 3 tanks in the [indiscernible] what we are doing so what we call sustainment solutions. Basically it's all about maintenance, repair, overhaul, midlife upgrades, extensions and so forth. There's protected mobility, which is all about our vehicles, for instance, autonomous mobility, which we have worked with a long, long time. In one of the videos, you'll see a short glimpse of that, how they are already operating those remotely.

And then Defense [indiscernible] systems and various technologies over there. Motor systems, for instance, our [indiscernible] motor system is something that Germany is now going to procure, at least that's our belief, on the [ top of our] 6x6 vehicles. So that's going to be one [indiscernible].

And then many, many very closely guarded secret from the times when Finland was militarily nonaligned. Yes, we were natural partners, but we were not part of the alliance. Signal detection, passive radars and so forth, which were never sold outside of Finland. Now we have started deliveries with a number of NATO countries. So that's where we are. So that's what we are doing.

Everybody knows what strategic partnership has meant to me. But in Finland, it goes very, very deep. It means that certain rules and regulations do exist. Agreements about war economy, who's going to do what. We are practicing -- we are constantly practicing with the military and other authorities. So it's very, very deep. So just a description over here. If anybody was this material, so more than happy to disclose all the material through Melina, if you so wish.

But that's the way how Finland works in a society, which is all about trust. By the way, just a piece of information, population, 5.6 million. 1.45 million people in Finland today have a trained wartime position, 1.45 million.

We do a lot of systems integration. So we do have very, very deep capabilities in Finland. We are rebuilding, fixing fire jet engines. We have modernized our F '18 twice, many times before the OEM even has those capabilities anywhere, warships and so forth. So those are the skills, and that means that actually, as somebody said, in military terms, amateurs talk about strategy, professionals talk about logistics. And then it's about geographical positions and what capabilities one needs to have in Europe or on one [indiscernible].

What we also do is technology transfer, our local manufacturing. That's one of the keys of our success, I would say. We've done it a lot. Some examples of the countries what we have done -- the reason for this one, and I think it brings certain bells with the RENK presentations as well. We want to avoid CapEx wherever possible. We want to bring local jobs we. Want to utilize those capabilities to give also the political acceptance. We want to provide with security of supply. And then in the end also, if anything happens to any of the production facilities producing our products, the potential ramp-up and step in with any of the other partners is by far more speedy. So that's all about resilience. So how to have the biggest possible capacity to produce without paying for that one. So that's the trigger over here.

We are also working what Emmerich was telling about automotive. So we are doing that one as well. We just recently publicized the letter of intent [ with Valmet Automotive ] which actually is a contract manufacturer of automobiles in Finland, and exactly for the same reasons as described previously.

And so -- and these are the reasons why we are doing. So basically I explained it, but the only downside of technology transfer is that, yes, you will have lower net sales. But surprisingly enough, you will have higher profit margins and you will have the same absolute profitability.

Modern warfare and armored vehicles, so what's happening over here? So the main belief over here is that, yes, there's this well spoken of no man's land today. Ukraine guarded by drones, and so with 5, 10 kilometers of breadth, whatever it might be. So does it mean that the so-called conventional army equipment are no longer needed? Far from that.

So if we want to conquer or if you want to take back something that belongs to you territorially, you need to have that superiority. And also bearing in mind that for each main battle tank, there will be a certain number of IFVs. For each IFV, there will be a certain number of -- an increasing number of [indiscernible] personal carriers. Behind them, there's an even bigger amount of logistical equipment. So basically, it's a triangle. So whenever somebody is talking about adding main battle tanks, it will -- essentially, it will mean that there will be the supporting equipment, and by far larger quantities.

So yes, the so-called conventional warfare equipment, it's not there. It needs to be protected. The most valuable assets are our soldiers. And then secondly, our mechanical assets, and those will be protected.

Then by the way, just as a notion which is not discussed so much about today, is what's the condition, the operational condition of equipment, legacy equipment, that any of the countries possess today? What's the usability. They are allocated. How -- what's the deployment time? Are we talking about months, weeks or hours? In Finland, we are talking about a couple of hours. There you go.

The point of the day is also about modernization and utilizing the assets. And I think that's a huge aftermarket possibility for any in this industry, for sure.

So what do we -- basically, what do we offer? So the key point in this presentation is about armored vehicles, and we have done that for over 40 years. And also, we know that, for instance, our 8x8 vehicles today, which are not used by the Bundeswehr, Germany is using boxes. But for instance, our 8x8 is by far the most sold in the whole world and most of the user countries. But we've been there for a long, long time.

A couple of interesting points over here. So everything in Finland needs to be standard. There's a standard that it has to be inside of the vehicle, it can be used in extreme temperatures. So all vehicles need to work from minus 45, minus 50 million, to plus 45, plus 50. So a range of 100 degrees. And that's what we do. So therefore, also [indiscernible] extreme conditions embedded. So that's not an option, right? It's built in.

The other one is that what actually is our value proposition. We want to give by far the best price performance ratio in the market. And that's -- and when we are going to the technologies next, so that's what we are doing.

So first of all, with the vehicles. So you might have heard about the so-called Common Armored Vehicle System program, a 6x6 program that's up and running. Over there, the point is that it started with an [indiscernible] a couple of countries, basically Finland and Latvia, also Estonia. At that time, we wanted to create new capabilities for true transporting, and that was a couple of years before the invasion of Ukraine because the need was clearly there.

And participating countries today are 7. So the U.K. and Norway joined in September this year. Germany actually joined already over a couple of years ago. So Germany is pretty long down the road now, and now we are waiting for the first [ serial ] orders from Germany.

So since the program started only a few years back, so today, basically 1,000 vehicles, 250 delivered. What it means today is that when we are talking about armored personal carriers, Patria is by far the biggest manufacturer in the whole of Europe. There's no question about that one. Our production numbers, what we have now ramped up are today 20x as high as they were only 2, 3 years ago. Next year and the following years, we will be 40x as we in production capabilities. And that's not -- that's without any significant investments. It's about partners, processes and putting inspiration on what we [indiscernible] because that's exactly what we are thinking about as well.

Germany, that's what's the hot topic at the moment. And we have partnered with KNDS and FFG in that program. And so there will be local manufacturing in Germany. So what we normally do is that we do a certain pre-series, no prototypes, but ready vehicles for a certain number. Then the partner comes in, so we are training the people, the personnel and so forth, and then there will be a technology transfer into Germany in this case, as we have done in many, many countries before.

So the next one is a video clip, about 2 minutes.

[Presentation]

Common Armored Vehicle System program, enhancing defense resilience and cooperation through joint development of Patria's 6x6 vehicles. The CAVS program began in 2019 as a multinational cooperation initiative. The selection was made of the Patria 6x6 vehicle as the platform for the program.

The CAVS program has since expanded to include several other countries. As of now, the participating countries are Finland, Latvia, Sweden, Germany and Denmark. The program remains open for new countries to join provided they have similar equipment requirements and receive approval from the existing participants.

The primary purpose of the CAVS program is to develop a 6X6 armored vehicle system that meets the common requirements of the member countries. This collaborative effort aims to enhance mutual defense resilience, bring cost benefits through joint procurement and strength in European defense and NATO cooperation. The program also focuses on utilizing local industry capabilities of the member nations, thereby reinforcing the security of supply for the entire collaboration system.

Shared systems across nations allow for logistical cooperation during joint missions, including spare part exchanges in the field. and are built for the reality of the battlefield.

So that's the 6x6, and hopefully, you'll see that in Germany pretty soon.

Just one slide about this one, the 8x8 vehicle. So that's our success story that started over 20 years ago, so [indiscernible] globally to various countries, and today, we are delivering to Slovakia and Japan.

There's a video clip of this one, that's from our so-called Arctic event. There are also colleagues from RENK that are joining last March in Finland Unfortunately, it was only about minus 5 or 6 degrees. Today, it's over minus 20. But you will see also other equipment over there. So have a view on this one.

[Presentation]

That, by the way, you saw the so-called directly the motor system on the top of the vehicle. So there is the one that now hopefully is going to be installed in the vehicles delivered to Germany. That's one variant.

Then the point where we do have a deep cooperation with RENK. And first of all, I want to thank publicly now the RENK management and all the RENKes about the extreme speed of execution. We only started cooperation about 2 years ago, so feeling around and so forth. And now we are very, very far down the road in the process. This vehicle, you will see shortly, would not be possible, the performance would not be possible without the innovative transmission system of RENK. There's no question about that.

So what this is? This is a modular vehicle as is the 6x6 as the 8x8. So it can be used for various purposes. So don't pay too much attention to the weapon system on the top. That's just one example that can be fitted. So this can be used for medical evacuation, for command and control, for motor systems, whatever it can have heavier or lighter armor and so forth.

The point over here is that it needs to be cost effective. it means to have extraordinary performance, something that actually has never been available anywhere in the world. If a 6x6 is a very, very advanced evolution of technologies this will be -- and this is a revolution. And the point -- what makes the point over here is that, for the hardest imaginable conditions, first of all, over there, it's driving at least a meter of snow under the vehicle, and it's not even thinking. It is extremely fast.

I can't give you the exact details. But the point over there is that for missions that they have to deploy troops, let's say, from somewhere to somewhere, hundreds of kilometers. So this vehicle will keep up with the fastest field vehicles. something the world has never seen before.

So that's one of the points. It's sold -- it needs to be interoperable. But also what we need to discuss about and understand is a term called interchangeable. It means that the more and more countries are jointly procuring, so all the advantages of logistical change, warehousing, stockpiles and so forth, they become true.

So we are going to deliver the first examples to the Finnish Defense Forces next year. We will have serial production capabilities in 2027. And already today, there's 11 countries who are in this European defense fund program. It's about future land war capabilities. One of the operations of that one is this new truck vehicle. France is involved around the 4x4 lighter patrol vehicle. And then also Greece concerning [indiscernible] battle tank capabilities. So it has been heavily funded. Finland is the lead nation and Patria is the coordinator of the industrial partners.

And there's a lot of legacy fleets in Europe today like the M113 from the U.S. We have to remember it's originally designed late 50s, early 60s. That's where the legacy comes from, or the MTLB, which is the old Soviet equipment, also decades old. And now the point is that the development curves of those vehicles, they don't exist. Something new is required, something that actually has been designed in the 2020s. So it will be a huge leap in the capabilities for sure.

So that's what we are doing. There's a lot of articulated truck vehicles as well, those that basically have 2 cabins and so forth. Not naming any of those manufacturers here, those will have their place in the future. But this is -- anyway, this is superior in performance. And price-wise, very competitive.

So this is what we are working together with RENK, as said. And our cooperation here is as deep as it can be. So that's what we are doing.

But seeing is believing. I'll show you a video clip. My wife, who's a very typical Finnish, she tends to be cool, calm and collected. The reactions I normally have from her is, "Nice. Okay." She saw this video, she said, "No way in hell that's possible." That's the strongest reaction I've heard from you in 30 years. So let's see what's your reaction.

[Presentation]

So that was the last. Just saying that was the potential of that vehicle. So we also work with scale. 10,000, 20,000 vehicles, that's the potential of this. So thank you very much.

Thank you, Esa, for providing an engaging overview of Patria Group and also for introducing us to Finnish defense technology.

And our next speaker is already here. So the stage is yours. Thank you very much.

Thank you very much. My name is Michael Masur. I'm heading the segment for all the land applications. And it's my pleasure today to give you a very short, comprehensive introduction especially in our business based on what Esa just presented.

And to start with that, here it is. Esa, thank you very much. You and your team, we found a trusted partner. And that's what I would like to start with in the first slide, to tell you a little bit about what we did within 2 years with a development concept where a spoken word is a contract with this company and where we executed in a very agile, collaborative mode a very complex part of this impressive vehicle.

So with this trusted partnership, it was very quickly and flexible also to get fundings because somebody has to pay the party. And so we had an experience, which we've never seen before since many, many decades, of having the chance and the pleasure to work together with Patria. We had a jointly staffed team and only 24 months, as I said, after we agreed with a handshake to do it. We place these transmissions from a blank sheet of paper in hardware on a test bench. And only 2 months later, we have been able to show it in front of only 300 international customers, potential customers, military experts, companies in the beautiful area of Rover anime in Finland.

And can you imagine how that is something which was ready 2 months ago is now in a vehicle in the northern hemisphere, yes, and it has to work? And that's exactly what we are doing. Our equipment, our staff is essential for our people in the war theater. So what we do matters. So we need to be very careful to provide highest performance and, of course, biggest, strongest reliability. And we are the same company doing this whole day.

What is now going on? So what did we provide? Esa impressively shown the vehicle, it shoots and it drives. And people are in sight. And we do the propulsion, we do the steering, we do the breaking. So if the vehicle is not driving anymore, it's lost. It's just lost. It can't escape anymore. It's not maneuverable anymore. People will die.

So we are now here having a transmission in this vehicle, which is light, [ wide ] which is amphibious and which provides an easy operation for the people inside. So the more easier the vehicle is to drive, the more you are relaxed, the more you can put your focus on other things. And that is exactly what will be the motivation for the next step, the [ semi-automotive ] driving of such a heavy-truck vehicle.

If you imagine sitting in a RENK transmission, you can accelerate the vehicle, you can break it down and you can steer it. So when we are able to do that in an autonomous way, we can control the whole vehicle while driving -- and that gives -- it needs a digital environment. It needs a digital drivetrain, where there is no steering wheel anymore and where then the system itself can be operated without the interaction of a driver. That can be manned autonomous vehicles or functions like in your car, depending on which generation of autonomous driving you are, you can at least relax a couple of seconds because the car is doing the steering. In these operations, the distances we have to gain several thousand kilometers. And the lack of personnel, of course, we are all very well aware of.

And that is the next stage, the final stage, that the vehicle should be unmanned and autonomous. To provide capacity, to provide functionality without soldiers on board of that. And I will show you later on a little bit more what type of functions I'm talking about.

There's a huge potential of unmanned ground vehicles. It's just -- and I would be happy if somebody could give more detailed information on that. It's not a fixed market yet. It's constituting. Something is going on because we have such challenge. We need more weapon systems in the theater. So there's some relevance on the ground. There's a need for long-term operations. And you can see it, unfortunately, also in the Ukraine, they have really a challenge of having personnel.

So we believe that there is a high future potential of several billions of euros in these markets, and we will get a major share of that. Because we are doing this development and we are taking care that it will be done fast and high and functional quality value for our customers. What is the platform looking like?

So we are typically in a more heavier weight scenario. So we are not doing the small things; we are doing the big stuff. Big stuff means that we are looking into a vehicle weight of a total of roughly 20 tons, whereas the ratio for the payload is about 50%, which means we can put about 10 tons of payload on this vehicle. That can be mission modules for transport, for sensors. It can even be effectors or enablers, which means ammunition, fuel or maybe even vehicles to carry back wounded soldiers.

That is only possible with this fully digitalized platform, which I explained. So you need a system which can be operated autonomous, and it needs to be also intelligent. So there needs to be some intelligent digital driver in that, and we are doing that.

We are not doing that, by the way, only for this application for the heavy UGV. We are doing that also for the next generation of all our transmissions. So this is a general technology approach to have these additional functions in the systems, making driving track military vehicle more comfortable, more secure, more autonomous.

I invite you, Alexander probably have invited you, to join us in the upcoming Eurosatory in Paris, where we will present the first hardware of this vehicle. So we have done quite some work. And we, of course, are looking very much forward to be as successful as with the last product release in the Eurosatory Paris mid of this year, June 26.

So thank you very much for your attention and enjoy the day. It's a great company.

Thank you, Michael, for the fresh perspectives and an outline of RENK's role in future land defense.

And now I would like Alexander and Esa to join us again here on stage because Alexander has a small presentation to make.

I have a small presentation to make?

Esa, thank you very much. As I'm always saying, it's a friendship. Thank you very much for this. And like always, we are exchanging coins as last night for General Mais. We have coins, as is typical in the military, you are exchanging coins. So thank you very much for this very great partnership, for the support and for the future ideas we have together.

Thank you. I appreciate it. Thank you very much.

Okay. I guess now we come to the end of the morning session. We are, I think, 5 minutes behind schedule, but I hope you forgive us about that. And before the live stream draws to a close, I would like to hand over to Alexander again to bid farewell to our webcast participants.

Yes. I hope you could enjoy it. I hope you got all the needed information. Like always, we are trying to be as transparent, as clear as possible. Michael just mentioned, it's a great company. We are strongly standing behind the statement. We do fully believe in the future in the growth of RENK. And we are happy to do this together. And thank you very much for your participation.

Also in the live stream, I invite everyone now to reallocate [Foreign Language] in German into our plant and then to see it live, the products and the production. Thank you very much for your patience.

Just one more note. As usual, a record of our CMD, including the presentations of the management, as well as the Q&A session will be available shortly after the event on our Investor Relations website. And yes, with that, we conclude the webcast now. Thank you all for joining us today. And goodbye. Until next time.

Good morning, ladies and gentlemen, and welcome to the RENK Group AG 9M 2025 Results Analyst Call. [Operator Instructions]

Let me now turn the floor over to your host, Christian Weiss, Investor Relations.

Thank you very much, operator, and good morning, good afternoon, good evening, everyone, everywhere, wherever you are joining us today, and welcome to our 9 months 2025 results conference call. Joining me today are our CEO, Dr. Alexander Sagel; and our CFO, Anja Manz-Siebje. Alexander and Anja will take you through the highlights of the quarter, our financials and the outlook. Afterwards, we will open the floor to your questions.

But now I will hand over to Alexander. Please go ahead.

Thanks, Christian. Thank you very much for the this international -- works in order to consider that we are a global community.

Ladies and gentlemen, also from my side, a very warm welcome and many thanks for joining today's conference call. Today's presentation consists like always, of 3 parts. Firstly, we will provide a quick review of the highlights and financial performance of the first 9 months of 2025. I will take over this part by myself. Secondly, we will guide you then through our key financials in more detail, including Q3 figures. Anja will take over this part. And thirdly, taking into account that we are only 1 week away from our 2025 Capital Markets Day here in Augsburg, we would like to comment only very briefly on our guidance for 2025 on upcoming key order intakes for the rest of the year, so meaning Q4 2025 as well to have a little look on the first half of 2026 as well as our main focus points for the last quarter of this year.

Now ladies and gentlemen, let's move into the presentation. Let me start with the highlights of the past 9 months. First and very important takeaway. The top line remains strong, and we are seeing ongoing growth in the order intake. For Q3 year-to-date, order intake expanded strongly to more than EUR 1.2 billion, corresponding to a solid book-to-bill ratio of 1.3x. On the right-hand side of the slide, you can see the main driver for this positive order intake development and some of them, I'm sure, are quite familiar to you, but I will nevertheless make a little run through this program. Starting with the THOR III framework agreement with our HMPT transmissions in total year-to-date at EUR 235 million, where EUR 56 million came in during Q3.

Various international navy orders, EUR 105 million in total with new contracts in Q3, including a larger contract for RAMI, our former synthetic bearing system. VTA spare parts, mainly for Leopard users, but also IFV with approximately EUR 75 million, therefore, EUR 15 million during Q3 booked. Then to Poland, where we do continue our success story and booked a further contract with EUR 50 million during Q3.

Following one of our latest press releases, we already booked another batch of the K2 during the first week of October. We also should not forget a few larger contracts for an international customer during the first half year 2025 with a total order intake of EUR 130 million for transmission and engines. Regarding specifically Q3, we also booked a second batch of transmission for the AJAX programs for the Baltics or to be more precise for Latvia as well as engines for the Turkish Firtina Howitzer. Not unexpected and as a logical consequence, the total order backlog continued to grow in the third quarter, reaching a new record level of EUR 6.4 billion and providing increased visibility for the coming years. Looking next to the main driver of our group performance, our defense business.

During the first 9 months of 2025, the defense business grew by 48% in terms of order intake and 25% in terms of revenue compared to the same period last year. A major highlight of the third quarter and a very important milestone to prepare for increasing capacity requirements, but also efficiency gains was the launch of our modular production concept here in Augsburg. Our COO, Dr. Emmerich Schiller, will provide more details on this during next week's Capital Market Day.

Finally, the launch of our 2 new transmission concepts during Q3, the 076 transmission as well as the 406 transmission was just as important as the new modular production concept and demonstrating the focused execution of our next-gen mobility road map.

Going on the next slide, Slide #2, which summarizes the group's performance for the first 9 months of the current financial year. Overall, all presented financial KPIs continue to show a very positive development to new all-time highs. Starting from the left to right and as already mentioned before, order intake increased significantly to EUR 1.246 billion for the first 9 months. Worthwhile to mention that looking at the last 4 quarters, so talking about Q4 2024 up to Q3 2025, we recorded order intake of over EUR 1.8 billion, a very strong performance indeed. Revenue grew year-to-date September 2025 by 19% to EUR 928 million.

As mentioned during the pre-close call, revenue in Q3 was somehow softer due to the planned and needed production changeover in Augsburg. In line with previous quarters, adjusted EBIT increased overproportionately by 25% to EUR 141 million and was driven by operational improvements, resulting in a further improved adjusted EBIT margin by 0.8 percentage points to 15.2%. Furthermore, no major changes in our revenue allocation year-to-date regarding our 2 sectors, so talking about defense and civil, with approximately 3/4 of our business related to defense and also our new business versus aftermarket ratio.

On the next page, you can see a quick before and after comparison of the main changes in our final assembly line for land transmissions in Augsburg. On the left side, you can see the old somehow chaotic-looking assembly area, while the changes are clearly visible in the picture on the right side, clear back-end loading of the entire part logistics lean and clean.

The modular production concept will not only provide us more flexibility regarding the different transmission types, but also will increase capacity, realizing higher efficiency gains and defines a new standard within the RENK production system. Started approximately 12 months ago, we finally managed the change over in our production and again, an as planned and with a plan to reduce output during Q3. And therefore, we are more than happy to present it to you if you want live and in color during our upcoming Capital Market Day in our Augsburg.

The execution of our so-called next-gen mobility road map is key in order to secure our leading market position regarding market share and technology. The newly developed 076 transmission was launched in September during the Defense Show in London and is specifically designed for light track platforms between 10 to 20 tonnes, including future track UGVs and showing a superior mobility of up to 90 kilometers per hour plus a compact and lightweight design below 800 kilograms.

The modular 406 transmission is setting new performance and modularity standards for future MBT platforms and was introduced to the market during a media roundtable in August. Very important to note that both transmissions are fully prepared for drive-by-wire and autonomous applications by digitalization.

Let's move quick on to Slide #5. As you all know, our defense sector is the core of our business and the main driving force behind our crew performance. The top line is strong and order intake increased during the first 9 months by 48% to EUR 932 million, while in the same period, revenue grew by plus 25% to EUR 690 million, converting order backlog into revenues.

Now let's move on to Slide #6, if I'm correct, this year at 6 and having a quick look on the segment performance and starting with the VMS segment. VMS remains the largest and most important segments in terms of order intake, revenue and of course, adjusted EBIT. For the first 9 months of 2025, we achieved an order intake of EUR 904 million and a strong book-to-bill ratio of 1.6x. Revenue climbed to EUR 579 million, representing a year-over-year revenue growth of 25%. The going live of our new module production concept was mentioned before, and we can furthermore summarize that all relevant customer projects are performing according to schedules and deliverables.

Let me continue now with our M&I segment. The performance was very solid, particularly in Q3. The financial performance was mainly driven by the Naval business, while the industrial business continues to suffer from a GDP-dependent weak overall market environment. Order intake for the first 9 months amounted to EUR 255 million, and revenues rose by plus 18% to EUR 268 million. Positive to mention that also our newly integrated RAMI, RENK America Marine Industry, formerly Cincinnati Gearing Systems, contributed to this positive development, not only with a new contract for the so-called ship-to-shore connector for the U.S. Navy, but also with a solid aftermarket revenue contribution.

Last but not least, a few comments to our Slide Bearings segment. The trend from the second quarter has emerged to a certain extent and similar to our Industrial Transmission segment, slide bearings is also suffering from a difficult and GDP-dependent weak overall market environment. As already mentioned in the pre-close call, we were facing certain operational issues, which were mainly related to problems with staffing during Q3 and affecting the output level. We are working to resolve this, having launched a recruitment campaign, and we are positive to regain momentum and return to its usual strength as we move into next year.

Now coming to the last slide of my today's introduction, our total order backlog. For the first 9 months of 2025, we could grow our total order backlog to a new record level of EUR 6.4 billion, which is approximately EUR 1.4 billion above financial year 2024 level and corresponding to approximately 5x LTM revenue. Compared to the end of 2024, we could also increase the fixed order backlog by almost EUR 300 million, driven by the mentioned strong order intake, which more than compensates for increased output levels from our operations. Our soft order backlog increased to EUR 3.2 billion compared to EUR 2.2 billion at the end of 2024 and is also including first German programs, but also international programs.

Having said this, I would like now to hand over to Anja in order to have a deeper look into 9M and the quarterly figures. Anja, over to you.

Thank you, Alexander. A very warm welcome from my side. In line with our usual format, I will start with our group performance. Then I will guide you through our segments and the 9 months and Q3 metrics. Order intake maintained its strong momentum, increasing by around 45% compared to the same 9 months period of the previous year. In absolute terms, this corresponds to EUR 1.2 billion in new orders, up from EUR 858 million in 2024. This extremely strong performance is primarily driven by our Vehicle Mobility Solutions segment, as previously mentioned by Alexander, and remains consistent with the high levels seen in prior quarters.

Group revenue reached EUR 928 million at the end of the 9-month period, reflecting a strong increase of around 19% or EUR 150 million compared to the same period last year. VMS accounted for EUR 150 million of this growth, underscoring its continued and growing strategic importance. The first quarter delivered around 15% revenue increase, reaffirming the solid growth trajectory established in prior quarters.

As highlighted by Alexander, we further expanded our fixed order backlog by EUR 303 million over the past 9 months, an impressive achievement in conjunction with our enhanced operational performance and higher output levels. Over the 9-month period, we achieved an adjusted gross profit of EUR 261 million, up EUR 44 million or around 20% compared to last year. This increase once again exceeded revenue growth, reflecting the continued success of our operational improvements, higher production volumes, economy of scale and in particular, the strong performance of our Defense business were drivers for that momentum.

Our plans in Muskegon and Augsburg confirms their tangible productivity gains, while M&I and slide bearings provided a solid contribution to our 9-month margin expansion. Adjusted EBIT rose to EUR 141 million, marking a notable 25.5% improvement versus the prior year period's EUR 112 million. This strong performance illustrates the resilience of our cost discipline and the operating leverage embedded in our business model. The adjusted EBIT margin expanded to around 15% compared with around 14% a year earlier, evidence of the group's ability to consistently convert scale gains into higher profitability.

In terms of our financial position, net debt increased to EUR 435 million, up 16% from EUR 375 million to year-end 2024, while the leverage ratio remained stable at 1.7x LTM adjusted EBITDA. This development reflects our growth-driven working capital requirements and the elevated activity levels across our operations. Overall, our capital structure remains solid, providing the flexibility needed to sustain momentum into the final quarter.

Now let's have a more detailed look into our segments. VMS maintained its outstanding growth pattern and performed well across all key metrics. Order intake for the 9-month period reached EUR 904 million, marking a 65% year-on-year increase from EUR 548 million in the prior year period. This impressive growth reflects ongoing demand related to defense with Q3 contributing EUR 223 million in additional orders. The book-to-bill ratio stood at 1.6x in the first 9 months, underscoring the promising future revenue outlook.

Revenue advanced to EUR 579 million, a substantial increase of around 25% compared to EUR 464 million a year earlier, reaffirming VMS' position as the primary driver of the group's top line growth. The positive revenue development was supported by robust volume output and continued high economies of scale at our Muskegon and Augsburg, where operational execution remains a clear strength.

Earnings performance also remained very encouraging. Adjusted EBIT rose to EUR 105 million, representing a 36% improvement from EUR 77 million in the prior year period. And as I have already mentioned, the adjusted EBIT margin climbed to around 18% compared to 60.6%, highlighting significant operating leverage and sustained cost discipline. On a quarterly level, Q3 achieved an EBIT margin of 20%, following 17.5% in Q2, underscoring VMS' ability to translate revenue growth into profitability.

Let's have a look at M&I. Our M&I segment continued its solid performance during the first 9 months of 2025. Order intake increased to EUR 255 million, up around 18% year-on-year from EUR 250 million in the same period last year. The segment's navy solutions remain a reliable and steady contributor to the group's revenue prospects. The book-to-bill ratio stood close to 1.0x in the first 9 months, confirming a balanced demand pattern and continued stability.

Revenue advanced to EUR 268 million, reflecting a 15% increase compared to EUR 332 million a year earlier. Growth was primarily driven by the Navy business, which maintained strong momentum and more than offset the subdued development in industry-related solutions. The third quarter contributed notably with EUR 92 million in revenue, representing a significant 31% quarterly increase. Also, profitability improved significantly. Adjusted EBIT rose by around 35% to EUR 31 million compared to EUR 23 million in the previous year's 9 months period. The adjusted EBIT margin increased to 11.6%, up from 10%, reflecting the positive impact of the business mix shift towards Navy solutions.

On a quarterly basis, Q3 achieved an EBIT margin of 13.4%, up from 11.1% in Q2. The key takeaway is that M&I maintained its average margin at the level seen before the second quarter. However, it should also be noted that M&I benefited from a one-off effect of EUR 1.5 million due to an insurance payment received.

Let's move to Slide Bearings. Slide bearings produced a solid performance, although we experienced some negative factors. Order intake totaled EUR 96 million, representing a decline of around 9% compared to EUR 106 million in the previous year's period. Demand for E and Marine bearings remained robust overall, though the timing of individual projects led to a dip in Q3 compared to the prior year's quarter. The book-to-bill ratio remains around 1.0x in the 9-month period, confirming a balanced and steady order position. Revenue for the 9-month period remained virtually unchanged at EUR 92 million. This outcome was realized although the sector faces the same GDP-related challenges in the industrial sector as M&I.

In addition, some open positions in the operational department put some pressure on our production output, which was addressed by subsequent hiring programs. You can see a corresponding revenue dip in Q3, which contributed EUR 29 million, moderate below last year's level. Adjusted EBIT amounted to EUR 15 million, down around 9% year-on-year from EUR 16 million, corresponding to an adjusted EBIT margin of around 16% versus 17.6% in the prior year's period. On a 9-month basis, this is still above group level average. On a quarterly basis, Q3 reported a margin of 14.9% following 16% in Q2, reflecting a reduced aftermarket share and the lower utilization of our asset base due to the Q3 revenue dip.

Now let's update you on our adjustments. Group operating profit came in at EUR 95.5 million after EUR 58.3 million in the prior year. The drivers continue to be revenue growth, economies of scale and cost discipline. After adjusting for the effects of PPA, operating profit was EUR 129.1 million compared to EUR 91.4 million at the end of Q3 fiscal year '24. Adjustment came in at a significantly lower level than the prior year and mainly related to global process and system improvements, whereas the corresponding period of the prior year was mainly impacted by our efficiency program.

In total, we recorded an adjusted EBIT of EUR 141 million in the 9-month period against EUR 112.4 million in the comparative period. Let me continue with a detailed look at our net working capital development. Our net working capital at the end of the third quarter stood at EUR 343 million compared to EUR 284 million at the end of December 2024. The main driver of this change was the buildup of inventory, which rose by EUR 86.8 million. Beyond cutoff effects, this increase primarily reflects work in progress from the growing order backlog as well as the stocking of critical input materials.

The net impact from other working capital items amounted to around EUR 28 million, also influenced by cutoff effects. Consequently, net working capital as a percentage of LTM sales stands at 26.6% compared to 24.9% at the end of December 2024. We remain comfortable with this level given our revenue growth and foreseeable customer demand. Nevertheless, we are committed to bring this ratio down over time and continue to identify net working capital reduction measures.

Let's move to free cash flow. An adjusted EBITDA significantly is in excess of the prior year's level, more than offset the increase in the net working capital, whilst the combined impact of the other factors shown in the chart resulted in a free cash flow over the period of EUR 26 million. Capital expenditure relating to property, plant and equipment amounted to EUR 60 million, representing 1.7% of revenue, well below our benchmark level of approximately 3% and the prior year's level of 3.3%. Once again, I also would like to highlight the positive effects of our reduced tax liability due to the control and profit transfer agreement between RENK Group AG and RENK GmbH.

These measures enabled us to make use of the tax loss carryforwards that accumulated in RENK Group AG. The same is true for U.S. interest carryforwards, now usable thanks to a debt-to-equity conversion related to our U.S. entity. Interest payments are significantly down and represent a normalized level. Taking all components into account, free cash flow for the 9-month period was positive at around EUR 26 million. In the prior period, we had seen a cash outflow of around EUR 4 million.

Thank you for your attention. Once again, it was a pleasure for me. And now I would like to hand over to Alexander.

Yes. Thank you, Anja, for the good report. Now a few words to our outlook for the rest of the year 2025. Regarding our 2025 guidance and based on our 9 months 2025 performance and what we expect for the remainder of the year, we do confirm both revenues of more than EUR 1.3 billion and an adjusted EBIT between EUR 210 million and EUR 235 million for 2025. Please keep in mind that the export ban to Israel has not yet impacted significantly the third quarter. However, it will affect Q4, resulting in a loss of revenues in the lower double digit.

Regarding our new midterm targets for 2030, I would like to refer to our upcoming Capital Market Day next week.

Moving to Slide 21, which is quite busy, but I would like to try at least to provide you a very brief overview of some of our key order intake programs for the coming months and quarters. For the last quarter of 2025, we do expect some further important contracts such as for the Puma and the Kodiak recovery tanks for Germany, a major naval R&D project also from Germany, but also aftermarket volumes for Ukraine for the first time and Europe and last but not least, an MBT test rig for the Dutch MOD. Let me comment please on 2 points. First, on this intended Puma contract, we do not talk about new vehicles here. We do talk about additional orders for the existing circular reserve in regards to transmission.

The second comment on the Ukrainian aftermarket contracts, which is in this form, we have seen for the first time now, we booked during the fourth quarter already a frame contract between RENK Germany and the Ukrainian MOD for spare parts and spare transmissions in the range. I mean, if you talk about the total range of the frame contract, high double-digit figure, euro figures of revenue. And on top, we expect a further business contract to serve local U.S. components, for example, the HMPT transmission locally in Ukraine with a local Ukrainian partner.

So to be really clear, this is the first time that we see and have these kind of contracts regarding aftermarket from the Ukraine. The larger MBT transmission contract for an international customer most likely will shift into Q1 2026. The THOR IV framework agreement certainly has the largest order volume between USD 800 million to approximately USD 1 billion over approximately 3 years and maybe 2 additional years as an option. However, driven by the U.S. shutdown, we do expect to see a delay into Q1 2026. Please keep in mind the order intake of this frame contract will come on a year-by-year basis.

Moving into the first half of 2026, we do expect to see some major orders from key customers like Germany. And we discussed this in the past, Poland and Italy, for example. In Germany, we do expect to see the first major orders for new vehicles for main programs like the Puma, the Boxer, the Leopard family, but also the tank haubitze Panzerhaubitze 2000, while we do also expect a further larger contract again for the Polish K2 MBT. The large Italian IFV and MBT programs are scheduled for the middle of 2026, and we also see additional orders from an international customer regarding our AVDS engines.

For the Navy segment, we also expect some larger orders for international customers. We cannot disclose these international customers, apologies, during Q1 and Q2 2026.

Ladies and gentlemen, we are almost done. So let's move to the next slide. And the statements here, I think, are very clear. The main drivers for the last quarter of 2025 are crystal clear and absolutely straightforward. Full focus on Q4 performance regarding operational performance, output and financial KPIs, capture pending order intakes and proceed on important business development and R&D programs. Ongoing monitoring of potential M&A opportunities and last but not least, preparing for the expected upcoming Bundeswehr and European programs regarding further market intelligence, such as platforms, timings, volumes, budgets, et cetera, but also the consequent execution of our production strategy and capacity expansion. Sorry for my voice, I have a cold, by the way.

Before we move to the Q&A session, let me briefly recap the key points of today's call. First, RENK has shown a strong 9 months performance, driven by a strong top line, record order intake and focused operational execution. We, therefore, do confirm our guidance for 2025. Second, we are a defense company, and our growing defense business is the main driver of our group performance. Third, we are getting prepared for the expected increase in volumes in Europe. The execution of our production strategy is key and the launch of our modular production concept in Augsburg during Q3 defines a very important milestone. Fourth and final, technology is driving our business and success. The execution of our next-gen mobility road map is highly important and Q3 also marked an important milestone here.

Before we go finally on the Q&A session, a few concluding comments on our financial calendar. Our capital market activities continue to be very busy, and we are looking forward to meeting a lot of you in the next couple of weeks and months. Certainly, a highlight will be our second Capital Market Day next week here in August with hopefully much more color on strategy, financial ambitions, capacity ramp up, production strategy, technology, M&A and much more. And I think some very interesting guest speakers in the evening before, a former -- a former German General and also on the day itself, a CEO from a leading prime from Europe. But I don't want to make more an advertisement for this event. Please join.

Thank you very much for your attention, and we are now looking forward to your questions.

[Operator Instructions] So the first question is from Sam Burgess.

I just got 2, if that's okay. Firstly, on CapEx, I think your previous expectations were for CapEx to be between 2% to 3% of sales. I guess unless you have an abnormally high seasonal CapEx in Q4, then you're going to come in right at the bottom end of that range, most likely, if not below. Can you just give us maybe a little bit of color on why this is going to be so low and whether that's sustainable into '26.

And the second question, clearly, you are very close with the German customer. At this stage, how much visibility have you been given on their order intentions by platform type, maybe over the next 5, 10 years?

Sam, Did I got you correct on the CapEx -- on the CapEx question?

Yes.

Anja, would you answer?

Yes, I would like to take that question. Yes, compared to prior year, we are a little bit low until the third quarter. And actually, we are back-end loaded this year with CapEx activity, yes. So we fully intention to really have the 3% of revenue as our usual thing is. It could be though that depending on the inflow of the machines and so on that we might have some cutoff topics. But if everything goes well, we should kind of be in our usual range.

Yes. And just to underline it, I mean, as I always said, we are staying on our 2% to 3% average CapEx demand between 2024 and 2030. So in this year, including the back-end loading, we will be on this level. And I think this is exactly the execution of our production strategy. I hope this answers your question, at least the first part.

The second part on the German program, well, of course, we are getting more color on this, and we are more than happy to share much more detailed information on our Capital Market Day. But what you have seen during the last weeks, especially here on the German parliament, the approvals of relevant platforms where rent is on -- I mean, if you talk about the Boxer, so the Shakal family, if you talk about a [ Medavac ] Boxer variant, if we see in the next 4 to 6 weeks, we do expect that the German Parliament is approving also the project to increase and to procure the second batch of the Puma.

You might have heard that today in this week, the German Bundestag is taking care and finalizing the budget for 2026, and there will be significant increases for the spending for armored military platforms. So we do expect that, as we already said, we always indicated a potential between EUR 1 billion to EUR 2 billion for new vehicles. We might share a different positive view on our Capital Market Day because we see some slight increases on the German potential up to 2035 plus. And of course, this is also triggering a sustainable aftermarket business. But overall, it's absolutely clear the intentions and the focus of the German customers are straightforward, absolutely straightforward.

And the next question comes from Carlos Iranzo Peris from Bank of America. The floor is yours.

I just want to ask on margins on VMS because like the margin expansion in Q3 and in the first 9 months of the year has been remarkable. So should we assume the same kind of margin expansion in Q4?

Carlos, your question, you're always going behind the margins. No, I'm just kidding. It's very important. Well, first of all, we do appreciate that you recognized our improvements on the margin. And VMS is, I think, on a very good move. I mean, if you have seen today, it's a 20% for the segment for the 9 months, it's thriving. And this is, by the way, setting the pace also for the next 3 to 4 years because VMS is the largest growing segment, which will, of course, trigger also our margin expectation if we look on our midterm expectations, but more to talk about this next week.

To talk about Q4, I mean, Q4 is like for many defense companies is the -- maybe it's a wrong word, but it's the main battle zone because for all the financial KPIs for all the revenues, I mean, we are also back-end loaded. And I think RENK managed quite well this year during the first quarters to decouple a little bit and derisk by increasing the quarterly performance. But Q4 will be in the full focus of managing margins and delivering the volumes we are committed to our customers and end users. And this will have an impact, I would assume a positive impact on the margin of VMS. I hope this answered your question.

And we have one more question. The next question comes from Joe Orchard. The floor is yours.

Firstly, please, could you talk a little about the commercial response you've had from customers regarding the 2 new transmissions you unveiled in Q3, the 406 and the 076. And what are the sort of time lines you expect regarding potential orders and revenue generation for these transmissions. And then my second question is really, please, could you provide an update on possible M&A and the types of businesses you're looking at, potential size and geographies that these targets might operate in.

I will try to answer your both questions. First, about our -- I mean, you asked about the customer response and the feedback on over 076 and 406 transmissions. And to get a better feeling about how does this and when does this convert into revenues or order intakes maybe. I mean, first of all, I will start with our low weight champion, our 076 transmission, which is superb from a lightweight balance and performance. We have developed this transmission very, very closely with one of our key customers, Patria from Finland. And Patria had a launch of the tracked vehicle, so the first tracked platform, which is a 15-tonne APC platform during the DSEI in London.

And the feedback is superb, like the feedback for the tracked is superb, more than currently 14 potential user nations are in negotiations with Patria. And we do expect to get the first orders in -- I mean, already next year, in the beginning or in the middle, it depends on the progress of the negotiations between Patria and the first 2 LEAP nations. So we do expect to have the first order intakes for this 076 transmission next year.

And by the way, the 076 transmission is playing from our point of view, also here in a kind of closer cooperation with Patria, a crucial role when it comes to digitalization to drive-by-wire capabilities and as we're always saying, a kind of midterm ambition to prepare and develop a RENK and maybe RENK Patria including maybe ARX, UGV, Tracked UGV platform, which is fully autonomous, able for remote control driving. It's in the 10-tonne weight class and maybe has a capability for additional 8 to 10 tonnes of payload. But this is just an outlook. More on this on the Capital Market Day.

Regarding the 406, the time line is very simple. We have one lead customer currently, and the lead customer is requiring that in the middle of 2027, we are providing a couple of these new transmission for the qualification and validation phase of this customer. The feedback is overall very positive because the 406 is combining, I mean, new benchmarks in regards to classical performance parameters like power density, et cetera, et cetera. But I think the trick is here, especially the modular design approach. So independent of the overall chassis configuration, platform configuration and the entire drivetrain design, you can use in the future only one different type of transmission. So if you would have different platforms from customer A, B and C, usually, it was a very specific development for each of these customers.

Now in the future with the 406, you have a one fits all transmission for different main battle tanks, which is significantly improving logistics, especially if you are in the kind of conflict theater.

So if we assume the delivery of the first prototypes for qualification and validation in the summer 2027, most likely a ramp-up in order intake is at the end of this decade. So this was maybe, I think, a quick or maybe even too long answer now on the product. Talking about M&A, we have, Joe, a very clear set of criteria for M&A, and we have maybe 3 hands full of companies we are observing, we are maybe in discussion or maybe we are just in the process to enter into a process into a structured process, which we have allocated according to 3 different criterias. Do we close or consolidate a market or an existing market cap? Do we expand vertically on our product offerings? Or do we need to get a better access on technology?

For technology, we do not see currently a need to go into financial involvements or to make any kind of joint venture or M&A. We do feel quite well with our network and still expanding network of strategic technology partners where we have strategic cooperations. If you talk about the market, we have a clear focus. I mean, always in the focus is the U.S. market. It's the largest defense market. General M&A will be only for Defense in regards to capital allocation, so not for the Civil business. In this regard, U.S. is a key market. We have a good and strong position on the land domain in U.S. So most likely, we could imagine to progress what we started with the acquisition in this year to acquire Cincinnati Gearing System to explore more and deeper the Navy segment in combination.

On the European market, if we stay on this market allocation, I think there might be still some final consolidation opportunities, not on the land side, maybe on the Navy side. So I do not know if this answered all your questions. Again, more than happy to discuss it on our Capital Market Day.

So there are no further questions. Okay. So then thank you for your time, and have a nice day.

Thank you very much.

Good day, and a warm welcome to today's pre-close 9 months call of RENK Group AG. Kindly note that this call is being recorded [Operator Instructions]

Having said this, I hand over to Christian Weiss, Investor Relations.

Thank you, operator. Good morning, everyone, and thank you for joining our pre-close call today. My name is Christian from the IR team. Our CEO, Dr. Alexander Sagel, will guide you through today's pre-close call and will be available for questions afterwards.

And with that, let me hand over to Alexander.

Thank you, Christian. Good morning, ladies and gentlemen, and thank you very much for joining today's pre-close call. Before we go into more details, let me quickly summarize the key messages upfront.

RENK remains fully on track, and our third quarter was characterized by a very solid momentum on the order intake side, solid and as planned operational execution and important strategic progress in our production footprint. Having said this, the going live of our new modular production concept during Q3 in Augsburg was clearly the highlight of the respective quarter, and a true milestone for RENK in terms of operational implementation of our European capacity uplift program for the upcoming years.

As a further highlight in the third quarter, we had the market launch of our 2 next new transmission concepts for tracked vehicles as a part of our next-gen mobility road map. At the DSEI show in London, RENK launched the new 076. It's a typical RENK acronym transmission developed for modern light tracked vehicles in the 10 to 20-ton class. The 076 transformation supports hybrid driving and is fully prepared for drive-by-wire and autonomous applications. In parallel, we also launched our next generation for main battle tanks, our so-called 406 transmission, designed to enable platform consolidation across future main battle tanks, thanks by its modular design approach, realizing new performance benchmarks and including fully digital and drive-by-wire capabilities.

But now let me start first with the group performance. As mentioned briefly at the beginning, order intake developed largely in line with our expectations in Q3. While perhaps not reaching the same levels as in the first or second quarter of this year, it was significantly better than in Q3 of last year. The demand remained quite solid, driven by continued momentum in our core defense markets and supported by various additional smaller, but also some larger programs that were awarded earlier than anticipated. This includes, for example, a follow-on order for the K2 MBT in Poland originally expected for Q4 which already materialized during Q3, and where we also got a further order already in the first week of October, as you could read it in our yesterday's press release talking about EUR 70 million approximately for revenues.

On the revenue side, we continue to grow year-on-year, but accepted a lower production output on our lead plant for land transmissions in Augsburg compared to the second quarter. This was entirely planned and related to the implementation of our new modular production line, where we had to slow down simply the production output during the summer months in order to execute the needed changes and installations, a truly important step to position ourselves for greater flexibility, higher efficiency and more capacity. As a result, the revenue development after 9 months is nearly on a similar level compared to H1 2025.

In this regard, I would like to make one final comment on the topic of Israel. Nothing fundamental has changed here in the recent weeks and the export embargo remains in force. We are, of course, in close contact with the relevant authorities of Germany and Israel in order to understand the further process. While the export bearing to Israel has not yet impacted significantly the third quarter, it could and most likely will affect the fourth quarter, resulting in a loss of revenues in the low double digits.

Ladies and gentlemen, let me now turn quick to our segments and starting here with the VMS segment. Order momentum in VMS remained strong throughout the quarter, supported, as mentioned in the beginning, by ongoing demand for tracked vehicle transmissions and follow-on orders for major international programs.

As mentioned in the beginning, the earlier than expected award for the next K2 batch for Poland as well as the second batch of the AJAX for Latvia underlines our strong strategic position along NATO's eastern flank, and demonstrates clearly the trust our customers place in our technology and in our production capabilities. We also recorded additional order intakes from, for example, THOR III contract, U.S.; the Firtina tracked howitzer program in Turkey; and also various VTA spare parts during the third quarter.

On the revenue side, growth continued compared to last year for Q3 and 9 months 2025, but was affected, as mentioned before, by the planned change in the production concept on the land systems side in Oxford. Apart from the planned production switch in Augsburg, we are making continuous progress in operational performance across all of our sites, confirming that we are well on track with our operational performance initiatives.

Coming quick to the M&I segment. Our Marine & Industry segment also delivered a very solid performance, mainly driven by the naval side of the business. In Q3 and 9M, order intake and revenues were well above last year's levels. While the industrial part of the segment still operates in a more challenging and GDP-depending weak macro environment, the naval pipeline is robust. We benefit here from rising global defense budgets and a steady flow of modernization and new build programs for Navies in Europe, the U.S. and of course, in Asia.

Positive to mention that also our newly integrated RAMI, formerly Cincinnati Gearing Systems, today called RENK America Marine & Industry, contributed to this positive development, not only with a new contract for the so-called Ship-to-Shore Connector for the U.S. Navy, but also with a solid aftermarket revenue contribution. It may be also worth mentioning that the provision for quality issues for a European label customer in the range of a lower single-digit euro value was released during Q3, which contributes with a positive impact on the segment's adjusted EBIT.

Finally, a few words on our Slide Bearings. The business is still facing similar challenging market conditions than the Industrial Transmission segment due to the mentioned weak macroeconomic industrial environment. The softer trend that emerged in the second quarter continued through Q3, both in order intake and revenues as well. We also, to be honest, we're facing some operational challenges, which were mainly driven by open positions in the production area and therefore, a resulting lower production output than planned.

Overall, Slide Bearings did not reach last year's level in Q3. However, we have already taken the necessary steps to fix the operational issues by launching several measures and initiatives, including a massive hiring initiative, which -- this is a kind of preliminary status, is performing and doing well so far. With these measures in place, we are confident that the segment will gradually regain momentum and return to its usual strength as we move into next year.

Ladies and gentlemen, to sum it up. We are preparing ourselves operationally for the upcoming years by simply doing our homework. Consequently, the implementation of our new modular production concept was needed and a strategic move in order to strengthen our operational base and support future capacity and efficiency improvements. In general, our sites continue to advance operationally, confirming that we are consistently, step by step, improving the entire production network.

Compared to the revenue growth in H1 2025, our group revenue growth was slightly softer, mainly due to the mentioned planned production change in the VMS segment. Order intake in Q3 remained stable, well above 2024 levels and broadly in line with expectations. Overall, we remain fully on track to achieve our full year targets and are well positioned to capture future growth in the years ahead.

Ladies and gentlemen, I'm now looking forward to your questions. Thank you very much in advance.

[Operator Instructions]. So by now it seems everything is crystal clear, Dr. Sagel, and now we have no questions and no virtual hands.

But now, we have a virtual hand from [ Joe Hart ]. [ Joe ], unfortunately, we cannot hear you. I give you the permission to unmute yourself.

Can you hear me?

Yes.

There we go. Sorry. Sorry, that's my lack of IT skills causing that today. I just wonder whether you might be able to give us a little bit of detail around the group's free cash flow performance for the -- for 9 months or for Q3. And turn to the kind of the direction of travel for cash.

[ Joe ], I always have the same problems, by the way. I'm always talking and talking and talking and I forgot to unmute. So fully understandable.

To be honest, we do not have yet a clear picture on the cash flow. The numbers are currently generated. As you know, we have, overall, if you look on the year-end level, always the target to hit a cash conversion rate of above 80%. But for the time being, I need to [ patient ] your questions up to the official upcoming 9 months call. Sorry for that.

Sure, of course, of course. And just one, I guess, more strategic question around the performance of the Slide Bearings business. Has this changed your view about potential -- you potentially disposing of this business in the future? Or is there any change there in terms of your thinking?

Well, first of all, the operational performance, as I just highlighted in regards to Q3, is something that we will solve. So all the measures are defined, and these are not rocket science measures. So we are really confident that we get this very soon under control.

If we talk about disinvestment of the Slide Bearing business, I mean -- I'm sure you are pretty aware that Slide Bearings is a wonderful business. It's a growing business. It has a huge market potential if you look forward up to 2030. However, this is also clear, there are absolutely no synergies between the Slide Bearing business and the rest of the transmission. So for the time being, we keep it as you see it for 2025, I mean, in our portfolio, but I would consider in 2026 to have a more closer look on what the best and appropriate future of this very attractive segment could look like -- how the future could look like.

Okay. And just one final question, if I may. With the introduction of the new transmission assembly process in Augsburg, does that change the point at which you might need to introduce a second shift into assembly?

That's a very good question -- and my COO is not here, so I can talk freely. But in general, we do expect that the introduction of the modular production line concept will enable us, most likely, by growing output demand, if you look on 2026, so next year, to continue for the time being, at least partially, maybe even the full year in 2026 in a single shift mode.

[Operator Instructions] And in the meantime, we will move on with Daniel. So Daniel, unfortunately, you're not unmuted. I have given you the permission. But maybe we move on with Marie-Therese in the meantime.

Everyone has a problem with unmuting.

Obviously. All right.

Yes, it is indeed a bit complicated. I'm sorry, just -- this is an off the shelf feedback. Two questions from my side. Can you -- Alexander, can you give us an update on how the recovery in your output levels in Augsburg is now looking? You mentioned that you're fully on track.

And my second question is relating to the Slide Bearings. Can you give us a sense of the nonrecurring kind of -- or restructuring, organizational expenses that will flow in Q3, maybe even just a magnitude, that would be helpful. And yes, that's about it for now.

Marie-Therese, it's always good talking to you. I will try my very best to answer your questions. I mean, yes, starting with the first question about the recovery of the missed volumes. We do not change despite the fact that we have this Israeli topic and despite the fact that we had a planned less or reduced output in Q3. We do not change our guidance for the year-end in regards to revenue. So please expect that this will be recovered during the fourth quarter as planned.

The second point, I mean, I think I got your questions in a way that are there additional nonrecurring onetime costs for what I considered or what you could consider for the measures in order to bring the operations back on our Slide Bearing business. To be honest, we are not talking about a restructuring. I mean we had -- very simply speaking, we had a couple of handfuls, 3 handful of open positions, which were not filled during the summer season. I mean, exactly in the third quarter for various reasons. I mean, maybe someone [ was not ] taking care or whatever. It's not a lack of people because this is what we see currently.

As I mentioned before, we started a massive -- I mean, a very controlled and focused initiative in order to hire people. We are getting people and we are closing these open positions. As a consequence, when we had these 3 handful of open positions in the production side, we could not perform in the production as expected. And the measures to bring it back is very simple. And I would not talk about nonrecurring costs is just to hire enough people. We are on track, and the rest is to balance internal production, external production. And that's it. So from my point of view, we do not consider any NRC. It's not a restructuring, it's a fixing of temporary problems.

So we will now come back to Daniel. So please go ahead and we try again to unmute you. So maybe we have the wrong microphone device chosen. So Daniel, I've given you the permission. I apologize, but at this point, it seems -- not that he is able to speak. [Operator Instructions] Otherwise, we would come to the end of today's earnings call.

So thank you for joining and your shown interest in the RENK Group AG. And the conversation, so should further questions arise later, please feel invited to get in touch with Christian and his team. And a big thank you also to you, Alexander, for your presentation and the time you took today. And with this, we say thank you, and goodbye.

Thank you very much. Goodbye.

Good morning, ladies and gentlemen, and welcome to the RENK Group AG H1 2025 Conference Call. [Operator Instructions]. Let me now turn the floor over to your host, Christian Weiss from RENK Group AG Investor Relations.

Thank you, operator. Good morning, everyone, and thank you for joining our H1 225 conference call. I'm Christian Weiss from the Investor Relations team. our CFO, Anja Manz-Siebje; and our CEO, Dr. Alexander Sagel, will talk you through today's call and will be available to answer your questions afterwards.

With that, I will hand over to Alexander.

Yes, Christian, thank you very much. Ladies and gentlemen, also from my side, a very warm welcome and many thanks for joining today's call.

Today's presentation consists of 3 parts. Firstly, we will provide a quick review of the highlights and financial performance of the first half of 2025. Secondly, we will guide you then through our key financials in more details including Q2 figures. Anja will take over this 1 later on. And thirdly, we would like to share with you a more forward-looking perspective regarding our 2025 guidance, upcoming key order intakes, our view on the German procurement process as well as the key priorities for the rest of the year 2025. But to sum it up and before going into details, we are fully on track.

Now let's move into the presentation. Let me start with a short overview of the key highlights from the first half of 2025. First and foremost, we achieved a strong order intake of EUR 921 million, representing a significant increase of plus 47% compared to half year 1 2024. You can see some of the main drivers and projects for the strong order intake on the right part of the slide. And I think many of these projects are very familiar to you. I will not go through all of these. But of course, on top of this, our transmission contract in U.S. for international customer, we sold transmissions and engines as well, we had various new contracts in the Navy segment.

It's an ongoing developing story regarding spare parts, especially here in Europe for the MVT for the main battle tank of the And finally, and this was also a very important order, we got the contract for 52 transmissions for the were 44, round about 42 to be correct, were for Latvia for the first procurement program, which is, from our point of view, clear indicator by our growing presence in the Baltics, the so-called Eastern of the NATO.

As a result, our book-to-bill ratio increased to 1.5 compared to 1.2 for H1 2024. Our total order backlog reached a new record level of EUR 5.9 billion for the end of June, coming from EUR 5.0 billion at the end of 2024, providing a strong visibility and confidence for the upcoming quarters and years.

Like for the previous quarters, our defense business was clearly the growth driver with high double-digit growth rate for order intake and revenues and reflecting both the structural upturn in demand as well as our execution capabilities. In addition, we made good progress with the PMI process of and Gearing systems or how we call this company today, RENK America, marine and industry.

And lastly, we also initiated new strategic activities regarding our future product portfolio. For example, talking about our new strategic partnership with or the service development and qualification of our next-gen transmission. More on these 2 specific relevant technology projects later in the presentation.

Ladies and gentlemen, let me now move to the overall group performance for the first half of 2025. Besides the already mentioned record order intake level, the revenues came in at EUR 620 million in H1 2025, corresponding to a plus 22% growth versus the first half of 2024, which is well above our 15% CAGR midterm guidance.

Moreover, the adjusted EBIT increased by plus 29% to EUR 89 million, once again outpacing the revenue growth. The strong defense business, scale effects and operational performance that our core production sites are here the main contributor. As a result, our adjusted EBIT margin improved to 14.4% or 0.9 percentage points year-over-year.

Having a quick look on the right side of the chart, you can see that our overall business development shows a further increasing share of our defense business and a stable aftermarket business. As you can see, the revenue split by sectors is now on a 12-month basis at a 74% level for the Defense business and 26 for the Civil business. The share between new build and aftermarket remains stable with a 62% 38% ratio.

To sum it up, a very solid first half year performance in terms of top line, momentum and adjusted EBIT and related profitability.

Moving on to Slide 3 and having a quick view on how I call it pure defense play prospective. As already mentioned, our defense activities, which includes both land and sea domain, remain the cornerstone or backbone of RENK growth story.

H1 2025 order intake grows by plus 46% year-over-year to EUR 694 million, while revenue has climbed by plus 32% to EUR 462 million, reflecting not only a strong demand environment, but also our ability to convert backlog into deliveries at increasing scale.

Now very quickly before we go into more financial details by Anja, a few words about the individual segments. As I said before, more financial details later by Anja.

Starting with our VMS segment, which continues to be the main growth driver of the entire group. In the first half of 2025, we achieved a very solid order intake of EUR 681 million reflecting a sustained customer demand across both new build and aftermarket.

Operationally, the performance of our 2 main plants, BTA in Augsburg and America in Muskegon remains strong. In particular, reached in June a new monthly output record of 91 transmissions. If we convert this into daily production rate, it's above north of 4 transmissions per day, underlining our improved manufacturing performance and execution capabilities, especially compared to our challenges we were facing in half year 1, 2024.

As a consequence, on the revenue side, the segment delivered a strong year-over-year growth of plus 32% in H1 with revenues increasing from EUR 295 million to EUR 389 million in H1 2025.

Let's now turn to our Marine & Industry segment, which also delivered a solid performance in the first half of 2025 despite GDP-related headwinds for our industry segment and thanks to the good run of our Navy business. Driven by several larger orders of our Navy business, as mentioned before, the order intake came in at EUR 183 million for the first half year reflecting an increase of plus 16% year-over-year.

On the revenue side, the strong Q2 2025 helped to overcompensate our Q1 performance and shifting growth rates back into the positive territory. As a result, we realized a growth of approximately 9% year-over-year in H1 with revenues increasing from EUR 162 million to EUR 176 million in H1 2025.

Last, but definitely not least, our Slide Bearing segment. Like our industry transmissions, also the slide bearings were and are facing a challenging market environment. Nevertheless, showed a robust market performance where the order intake reached EUR 66 million and the revenues were even slightly above last year's level.

The backbone of the Slide Bearing business remains the e-bearing segment thanks to the unique material and surface technology competence of slide bearings.

Finally, and before I hand over to Anja, a few comments on the total order backlog. At the end of June 2025, our total order backlog reached EUR 5.9 billion, a new all-time high for RENK, and we are very proud about this, by the way.

This corresponds to a 4.7x coverage of our last 12 months revenue and provides us with an excellent visibility for further growth going forward. Compared to year-end 2024, we could uplift the fixed order backlog by nearly EUR 300 million, driven by the strong order intake level mentioned before and overcompensating our increased output levels from our operations.

Our highly visible soft order backlog ended up at EUR 2.8 billion compared to EUR 2.2 billion at the end of 2024. Important to note that we have included, on a conservative basis, first volumes and projects from German procurement programs until 2029. We are currently entering into first discussions with our primes and do expect first orders during half year 1 2026. I will come to this point later in the third part of our today's presentation.

Ladies and gentlemen, having said this, I would like now to hand over to Anja in order to have a much deeper look into our H1 and Q2 figures. Anja, over to you.

Thank you, Alexander, and hello, everyone. I'm glad to have the opportunity to guide you through our H1 financials. I will start with our group's growth metrics, followed by a closer look at the performance across our segments. In the first half of 2025, RENK generated an outstanding order intake of EUR 921 million compared to EUR 627 million in the prior year period.

This significant increase of 46.8% was due to our military product portfolio, especially driven by our VMS segment, as mentioned by Alexander. To put this into the sector, we managed to acquire EUR 373 million in Q2, even after EUR 549 million in Q1 '25 and EUR 584 million in Q4 2024.

Group revenue stands at EUR 620 million at the end of the first half year, also representing a substantial uplift of 21.5% or EUR 109 million compared to last year's period. VMS alone contributed EUR 94 million to this accomplishment.

I would also like to point out our Q2 performance with an even higher 27.5% increase to a quarter-to-quarter basis. As already highlighted by Alexander, we added EUR 294 million to our fixed order backlog over the past 6 months, representing a 14% increase, continuously demonstrating our growth curve.

Let me continue with a look at our profitability and net debt ratio. On a year-on-year basis, RENK increased its adjusted gross profit by EUR 33 million to EUR 171 million. This represents a material growth rate of 24% with a notable outpace our revenue increase. So despite higher volumes and the associated economies of scale, our operational efficiency gains laid the foundation for this development, especially due to VMS and our plants in Muskegon and Augsburg.

Profitability was supported by M&I and Slide Bearings, both of which delivered robust contribution to the high-margin business activity. H1 confirmed our anticipated full year performance as demonstrated by our 29.4% increase in adjusted EBIT totaling at EUR 89 million compared to EUR 67 million in the same period last year.

Despite the ongoing expansion of our business, we maintained disciplined cost management. With outstanding adjusted EBIT development a strong adjusted EBIT margin of 14.4% compared to 13.5% in the same 6-month period last year.

As already stated in relation to our Q1 2025, we see a net debt increase of 1.8x of LTM adjusted EBITDA, also at the end of H1 compared to 1.7x at the end of fiscal year 2024. Our cash position at the reporting date continues to be the main contributor which is impacted by cut-off effect. We consider this development aligned with our current operational activity.

Now let's have a more detailed look at our segments. As already indicated, VMS continues to provide excellent results. Order intake in H1 amounts to EUR 680 million after EUR 410 million in the comparison period. This reconciles to an outstanding 65.9% increase year-over-year. Q4 2024 and Q1 2025 were already outstanding, so not surprisingly, Q2 could not keep the same pace.

Nevertheless, it still added higher volumes to our fixed order backlog related to our military product portfolio. Our segment's book-to-bill ratio has risen and amounts to 1.7x compared to 1.4x in the prior half year.

VMS revenue numbers prove our assertion that VMS was the key driver of the group's revenue growth, both on a year-to-date and quarterly basis. Volume output in Muskegon and Augsburg developed out in line with expectations and was facilitated by strong and efficient operational execution.

VMS also strongly delivered on profitability. Adjusted EBIT and adjusted EBIT margin show a steep uplift even outpacing revenue growth and enhanced by our strict cost management. Adjusted EBIT landed at EUR 66 million compared to EUR 45 million in H1 2024. Adjusted EBIT margin for the H1 period came in at 17% after 15.6% in the prior year. On a quarterly basis, Q2's margin was even higher at 17.5% also compared to Q2 '24 with a 16.4%.

Let's move on to M&I. M&I order intake during the first half of the year amounted to EUR 182 million after EUR 156 million in the comparison period. From a group perspective, M&I Marine Solutions represents a stable and reliable contributor to fixed order backlog. The segment's book-to-bill ratio at the end of H1 remains stable at around 1x, with a slightly improved growth momentum in the current year's period.

M&I revenue in the first half year has grown notably by 8.7%, resulting in EUR 175 million after EUR 161 million in the prior period. The incline in industry-related applications was outpaced by Marine business, which continues to show a solid growth momentum. Q2 performance heavily added to this performance compared to the Q1 dip seen earlier this year.

The shift towards Marine business also accounts for profitability increases reflected by higher adjusted EBIT and adjusted EBIT margin on a year-on-year basis and even beyond our H1 revenue growth costs. Our quarterly adjusted EBIT margin shows a notable [indiscernible] This was primarily driven by our single customer relationship, resulting in a onetime expansion of the product offering due to third-time components, which carry lower trading margin.

Last, but not least, let's have a look at our third segment Slide Bearings. Consistent with past performance, our smallest segment, continued to deliver the highest profitability. Despite minor fluctuation, also growth indicators are holding steady. Demand for e and marine bearings continues to be on a high level. On a relative basis, however, we see a moderate decrease in order intake of minus 5.5%, which stands at EUR 66 million at the end of H1 '25 compared to EUR 70 million in the prior year.

The segment's book-to-bill ratio remains stable at around 1.4x, so still above 1. Revenue in the first 6 months developed in a stable manner and came in at EUR 62 million after EUR 61 million in the prior year. As already mentioned, during Q1, Slide Bearings revenue trajectory is intact with a gradual but steady improvement for the 6-month period.

As indicated at the beginning, profitability remains high and above this level both on a year-to-date and quarterly basis. However, in H1 '25, we have seen a moderate dip in adjusted EBIT to EUR 10.4 million after EUR 11 million in the comparison period, in line with a decline in adjusted EBIT margin. We view this as a short-term slowdown due to a slightly weaker product mix than the first half of the year due to economy environment.

After this close look at our segments, I want to continue with our adjustments. Operating profit came in at EUR 59 million, after EUR 35 million, thanks to our volume revenue growth I've already mentioned earlier. When adjusted for PPA effect, we land at EUR 81 million compared to EUR 56 million in half year 2024.

Adjustments mainly relate to global process and system improvements, M&A-related activities and other minor components, mostly due to The overall level of adjusted non-PPA items is significantly lower compared to prior year.

Let me continue with a detailed look at our net working capital development. Our net working capital at the end of the second quarter stood at EUR 340 million compared to EUR 284 million at the end of December '24. After adjusting for cutoff date related effects in trade receivables, payables and prepayments, the remaining increase in net working capital is primarily attributable to higher inventory levels.

The latter primarily relates to the VMS segment, reflecting work in progress as well as plant production requirements. As a result, net working capital as a percentage of LTM sales stands at 25.1% compared to 24.9% at the end of December '24.

Given our current growth opportunities, we currently also need to focus on customer expectations and delivery requirements. The increase in net working capital has a direct impact on free cash flow, which we will now examine in more detail. When taking a look at this bridge, only a few major effects are left over that are noteworthy.

As you are already familiar with the convincing development of our adjusted EBITDA and the drivers behind the increase in net working capital, it is important to highlight that the latter significantly impacted cash flow due to capital being temporarily tighter.

Capital expenditures into property, plant and equipment amounted to EUR 11 million, representing 1.7% of revenue, remaining below our benchmark level of approximately 3%. I would like to highlight our measures to reduce our effective tax burden. Thanks to our control and profit transfer agreement between RENK Group AG and RENK GmbH, we could effectively make use of tax loss carryforward of RENK Group AG amounting to EUR 11.9 million for corporate income tax and EUR 11.6 million for RENK tax purposes. In addition to that, we now can capitalize until 2027 our U.S. interest carryforwards in total EUR 39 million due to a debt-to-equity conversion related to our U.S. entity. We expect that our effective tax burden will benefit going forward from the aforementioned measures.

Interest payments. In H1 2025 reflects a normalized level in line with our current financing structure. Taking all components into account, free cash flow was positive at EUR 11.5 million after a negative cash flow of minus EUR 7.3 million in the first half of 2024. Beyond free cash flow, I would like to highlight significantly cash outflow items in Q2 2025.

Our investing cash flow was impacted by 2 major items. First, the purchase price payment for the acquisition of assets and liabilities of Cincinnati gearing systems amounting to EUR 23.9 million. Second, we acquired certain assets from a former supplier, Midwest Gear and Tooling, for a total considering of EUR 6.2 million.

With regards to our financing cash flow, I would like to point out our dividend payment of EUR 42.7 million in June this year. This item came in earlier compared to prior year due to our annual general meeting at June 4, that is 3 weeks earlier than last year.

At this point, let me thank you for your attention. It was a pleasure for me. And now I will hand back to Alexander.

Yes. Thank you, Anja. Ladies and gentlemen. Now a few words to our outlook. Starting with the guidance. Regarding our 2025 guidance, we do confirm both revenues of more than EUR 1.3 billion and an adjusted EBIT between EUR 210 million to EUR 235 million for 2025.

Regarding our midterm targets, we are following in detailed discussions the future defense budget allocations and national procurement programs, especially for Germany, and will present our new 2030 midterm targets during our Capital Market Day in November this year.

Moving now to slide, I think #19, if I'm correct, where I want to provide a brief overview of some key order intake programs for the upcoming 12 months. I will not go through all of this, but I want to explain maybe some of them. I mean, very important for us, and we see this during the fourth quarter, the finalization of the THOR IV framework agreement, which certainly have over the entire lifetime, the largest order volume potential up to between $800 million up to almost $1 billion over approximately 3 years plus 1 or 2 optional years, but we need to be careful, the order intake contracts will come on a year-by-year basis.

We talked about also in the fourth quarter about partly as service in the first order intake from We talk about an additional batch for K2 Poland. We talk about IFV programs where we need to be honest, if you talk about Latvia. We already received, in the first week of July, the second batch, additional 42 IFVs from time

Of course, we are targeting various additional Navy programs. Also interesting, of course, is spare part development for is obviously what we can see since February this year, an ongoing story. But we're also looking forward for a main battle tank test rig for the Netherlands Army and so on.

Moving into the first half of 2026, we do expect first orders from Italy for the IFV and NBT programs and further orders based on K2-based support vehicles for Poland. And finally, in Germany, where we do also expect to see the first major orders from main programs like the Level 2, Puma, Boxer and 2000 during the first half year 2026.

On the next slide, and I think this is a good occasion, I would like to explain the German procurement process as we understand it, from today's point of view, in a little bit more detail. It's a complex chart. I know this, but nevertheless, please give me a try.

Starting from the top of the chart. Germany's defense procurement process for the mentioned tracked and platforms, but also for the overall procurement process for all other types of systems and domains across all capabilities will take place in 2 phases: first, during Phase 1, which is going up to 2029, 2030, Germany is focused on closing critical capability gaps or in different words, getting ready to fight.

During Phase 2, which is running up to 2035 and beyond, the execution of the NATO requirements is the key driver, increasing in volume. We expect first customer contracts between the German government and primes to be signed by the end of this year so that the first contracting between price and RENK on the other side should then take place during the first half of 2026, leading to first order intake for RENK.

Revenue conversion will, of course, depend on the specific contract terms. For example, contract start time, overall time period, et cetera, et cetera, and will most likely not start before 2027. From our today's estimate, we do see order intake and subsequent revenue potential between EUR 800 million up to EUR 1.8 billion for new platforms, plus EUR 400 million up to EUR 900 million for aftermarket maintenance and the circular reserves. Please keep in mind that these ranges must be further validated during the upcoming months and contracting period.

Ladies and gentlemen, let's move forward to the next slide. The overview of key priorities for 2025 has not really changed compared to the first quarter. Strong focus on operational performance form conscious capital allocation, preparing the future and preparing for the upcoming programs from Germany and Europe.

Nevertheless, please allow me to comment on 2 specific points. First, it's important to mention that we are, right now, during Q3, going live with our new production line concept here in Ogsbord. The new line concept will provide us with greater flexibility, better capacity allocation and increased production efficiencies.

Second comment. The second half of 2025 will also play a major role in executing our technology and product strategy. With the new strategic cooperation with Robotics and the start of the service qualification of our so-called battle tank transmission, we are on the way to realize major milestones for our future business development and future market position.

Regarding ARX Robotics, we signed in July an MOU for a strategic cooperation with focus on 3 main pillars: first, joint market exploration of ARX, today's UTV portfolio. For example, if you take the U.S. market by using RENK's production footprint and RENK's a market access, as just 1 example.

Second, further digitalization of our RENK's today's product portfolio; and third, the development of new own concepts for multipurpose UGV platforms between 5 to 20 tonne. The joint teams between RENK and ARX have started working on these pillars, and we do expect first results during H2 2025. For your information, ARX will also take part at our Capital Market Day in November 2025.

On the heavy platform side, we are moving forward with our next-generation main battle tank transmission which features a fully digital drivetrain with drive-by-wire technology, which is based on a modular configuration concept and which defines with more than 1,400 kilowatt, the new RENK benchmark in performance.

We will showcase this new MBT transmission next week on a dedicated media roundtable on August 20. Before, ladies and gentlemen, we move on to the Q&A session, let me briefly recap the key points of today's call.

In the first half of 2025, we delivered a strong performance, improved on a record order backlog level of around EUR 6 billion, and we confirmed our guidance, a massive thanks to all RENK employees for this performance.

Furthermore, we are in a great position to handle the expected increase in German and European defense budget over the coming years. Our well-invested asset base, our improving operational performance and a clear production strategy provides us capacity and flexibility to respond quickly to these opportunities.

Finally, we have initiated major products and technology programs to secure our leading market position for the future.

Finally, a small, but important comment on our financial calendar, as shown here, on the last slide. Please make a big, big and fat note for November 20, 2025, for our second Capital Market Day, which will take place here in Augsburg on this date. Further information, more details will follow in due course over the summer months. However, we will provide updated information on topics such as sector strategy, update on the 2030 midterm targets and the relevant and required capacity ramp-up in production, strategy, technology, I think I teased a little bit the topic just before, m&A and more.

Also, we are already looking forward to further engaging with you in many road shows and conferences in the second half of this year, as you can see on this slide.

Thank you very much for your attention, and we are now looking forward to your questions.

[Operator Instructions]. We already have a question. We start with Sebastian Growe from BNP Paribas Exane.

The first one is on the Defense business and the German potential. So you have raised the German potential by about EUR 300 million, EUR 400 million from the earlier provided range for the related upside potential in Germany earlier to the importance of the number of heavy aggregates with the patient of the quarter 1 call.

My question is, how is the number of brigades changed and that very, very assumption in the end and especially in the wake of Germany having published its 3.5% defense spending target in '29. And more specifically, especially also as there are 5-digit numbers making the rounds in the media for technical vehicles going forward. Can you help us with the rough product mix that you expect here? I think you also depicted some of the products where you would see your transmissions going in. So we could start there?

Thanks for this question. Starting with the product mix. I think what we considered here are the for RENK relevant key platforms, if you talk about Level 2 base main battle tank, if you talk about Level 2 based fleet support vehicles, if you talk about Puma, the 2000 and the

I think on the volume side, and this is always depending and for this reason, I depicted here these 2 phases. It depends if you consider just a demand, what you need in order to comply to Phase 1, closing a gap; or if we look on the total span of 10 years, including Phase 1 and Phase 2.

And to be honest, I think this is the trigger in order to understand the numbers, which are currently in the market and also to understand from our discussions with the customers, the planning, the procurement, et cetera, et cetera, to interpret. I mean, I think on the other end of our potential, as you see it here, I mean, for the new vehicles and aftermarket, MRO and circular we serve on the upper end, we have -- just to give you a little bit of flavor, we have included in the range of 3,500.

We have in similar understanding on platforms like the Level 2 based where we are depending and here, we need further clarification during the next month on volumes between a higher 3-digit number up to a 4-digit number. If you talk about 1,000, for example.

So this is the reason why we are also still having this range if we look on the orange bubble for new vehicles. And it depends if we consider only 1 phase, if you consider 2 phases, et cetera. For the overall estimate, if you talk about order intake potential to make the conversion on revenues, it really needs more intelligence in order to understand how the contracts will be designed.

For example, will we get or will the price get contracts for the entire Phase 1 or Phase 2 or will the contracting start only with Phase 1 and then after I don't know, 2 or 3 years, start contracting for Phase 2? This, of course, implies how the revenue conversion will take place. And for this reason, we are also working with a range. What is clear, we have a better visibility. And this is, I think, what you also can see if you compare it to our Q2 numbers, where we had a range indicated between EUR 1 billion and EUR 2 billion, starting with the lowest potential of EUR 400 million up to even higher.

So we have a higher visibility, but we still need to understand how the contracting will take place and how especially the contracting will consider Phase 1 and 2 or only Phase 1. Regarding the very famous, and I used it, a number of heavy brigades, I think this has changed a little bit depending on the Phase 1 and Phase 2.

From our understanding, during Phase 1, there will be no additional brigade. What will we use is or what would be most likely will be done by the customer, again, according to our understanding assisting brigades will be filled up with a certain number of main battle tanks, Puma, et cetera, et cetera.

So the overall number of heavy brigades from our understanding will not change during the Phase 1, but the gap will be closed in the heavy brigades will be expanded. This is different to what will take place during Phase II, where, indeed, additional brigades will be built up -- and they are numbers 3, 5, 6, whatever, all this still needs to be validated in more detail. But I think it's important to understand that the old parameter multi-play and the number of heavy brigades is not materializing and not working, again, according to our understanding for Phase 1.

This was a long answer, Sebastian. I don't know if I fully complied to your question.

Also, a long question, so I think -- I appreciate that color. And the other question I have, it's also referring then to the same slide and that is more in conjunction then with what you also put out is the aftermarket and the potential then around the circular reserve.

So the question here is apparently pointing to a number EUR 400 million to EUR 900 million. If I'm not mistaken, then I think 40% is a pretty good proxy for the circular reserve as opposed to what you would find then with the original vehicle shipments. So I've applied that to the EUR 800 million to EUR 1,800 million range for new vehicles on that slide, then it seems there is no aftermarket potential And so question one, could you comment on my math? And what do you see really with regard to the additional aftermarket potential?

I think -- the aftermarket and potential is more or less what we do assume on this 40% share. But I think 1 observation is correct. If you talk about the circular reserves. There are different discussions in Germany and on the circular reserve. In fact, to be honest, there are 2 aspects. We could talk or the German customer is talking to help circular reserve on a vehicle basis, just in case you have a conflict, you have a fight and a certain number of platforms are destroyed, so you have a kind of circular reserve of vehicles to put them immediately in action.

And of course, we are talking about the circular reserve for transmissions. In the assumption in this current level between EUR 400 million to EUR 900 million, I would consider that our assumptions so far regarding the circular reserves are more on the conservative side. But again, for this, we need to understand better in detail the upcoming months, how the customer really wants to or the end user really wants to apply a strategy for the circular reserve.

So for this reason, yes, I think on the aftermarket and MRO, we are on this 40%. But the circular reserve is most likely on the conservative side.

Okay. Got you. Maybe really last question quickly on Europe. I think on the last quarter, you call you put the total European potential at between EUR 1.5 billion up to EUR 2 billion. So currently, with the update and upgrade you applied there for Germany, it's rather moving towards EUR 2 billion, EUR 2.5 billion on the simple math. So my question then is, how is your assessment really of the opportunity in Europe change in the meantime? You mentioned Poland, for instance. So what might be really a refreshed target for total Europe, if you already have that available?

No, we do not already have this available because we need to take care, to be also honest, to make a clear separation and baseline between what we already see as projects which we already have in our acquisition road map even before February of 2025. And what is really coming on top of this new.

If you take, for example, the Italian program, which is dominant or if you talk -- or prominent, if you talk about the Polish and programs, but let's stay for a second on the Italian ones, there's a huge project -- I mean, as you know, about 1,000, 1,050 IFVs, the AICS.

This is in our terminology, it's not a new project, which is triggered since February 2025 because on this project, we are working almost 1 year. So it's already in our normal project pipeline. So for this reason, for Germany, it's very simple to make a clear cut what we have in our order backlog in our soft order backlog and what everything is coming on top.

On the European programs, we need, again, as I'm always saying, more color from the customer -- from the end user side about their procurement and capability strategy and then we need really to separate in order to prevent double counting. Yes, that makes sense.

Yes. That makes sense. So looking forward then to the CMD and we'll probably follow up with more questions later.

All right.

The next question comes from David Perry from JPMorgan.

So I've got 3 questions, please. The first one, and I hope -- I really hope this isn't a silly question. Just on the Slide 21, just so I understand it a little better, what is being shown in the orange bubbles. Is this a cumulative sales number, is it an annual sales number, is it an increment to a base plan? So can you just clarify exactly what the bubbles represent, please?

We are really talking about additional volumes and cumulated volumes. So in our consideration, we do assume we take Phase 1, and we do take Phase 2. So for this reason, the numbers you see here is the range for the total cumulated figures, and we try to make it really clear because it's important to separate between new vehicles and aftermarket MRO and circular reserve.

Why? The revenues coming from new vehicles, they have a certain time frame. If the first orders are coming in half year 1, 2026, we most likely start delivering in 2027. And after a certain time until 2035 or even before the total new number of vehicles wherever this new number of vehicles will be in the very end will be delivered.

So this is something kind of revenues, which if we know the exact numbers, if we have them under contract, we can really shop on a year-on-year basis and to plan the revenue conversion. The aftermarket MRO, especially the aftermarket MRO potential is for sure not stopping at 2035, but it's running on a much longer time line.

And this is, I think, it's important to understand to make this difference also by doing analysis and scenarios, how total order intake potential for new vehicles and aftermarkets, MRO, et cetera, et cetera, are converted on a year-by-year basis, especially when we talk about, for example, 2030 time frame.

This is exactly the intelligence, what we still need to do to get a higher -- really a higher visibility of the real number. There are many numbers. We are doing our research, if you want to call it, you have many numbers in the media. And then to draw it as exact possible on an annual slide in order to understand where we will be in 2030. Long answer. I hope it worked.

Yes. Okay. That's helpful. So it's added on to a base plan that you already have.

Yes. Absolutely.

Okay. So I'll ask second and third questions together, if that's the case. So the second one was you've said you'll give new guidance in on 2030 November. Just to be clear, is there any risk it's lower than the old guidance, the EUR 2.8 billion? Are we assuming it's upside that you're thinking about? That's the second one.

And the third one, which I know is going to be a bit sensitive, maybe difficult for you to answer, but can you give us any more information on the story in the press last week about the German export ban to Israel and what it might mean for your work there?

Very good questions. We do not see -- I mean, again, we are doing our math and we have to do our homework. So I give you my gut feeling if you talk about the midterm targets. I think what we will see is a much clearer picture about what we will do and can do and realize on an organic level and that any kind of M&A will come on top of this organic level.

And if I just refer back on our Q2 presentation, we had indicated a range or ambitions between EUR 2.5 billion up to EUR 3 billion, and we had a massive chunk of M&A as a red bar included. I think today, from my gut feeling, we are in this range even at the higher range, just from an organic perspective. And then we need to see what could be on top of this. So I do not see that we are going a step backward, to answer this clearly.

If you talk about Israel, this is indeed a political question. First of all, I will answer very formal. I mean, RENK is a German -- is an international company, but based in Germany, and we have a headquarter in Germany. So we will fully comply with the German law and regulation, full stop. If there's an export stop, we cannot export, even if we would like it, but we cannot, full stop.

As a kind of side note, it's also fair to say that the official embargo is so far not approved or released by the German security council. It's a decision from the Chancellor But again, so far, it's a kind of export stop. You can also imagine that RENK is in contact with the key authorities from both sides, from the German with the German government and political parties, of course, but also with the Israelian parties and government and because for them, to be also honest, it really is a pain.

They need propulsion, they need systems. So we try to understand what the next process is and to see what is the next world map. For RENK, we have, I think this is also no secret, I communicated this to German stakeholders, we started to develop a plan B because you need to understand, we have long-term delivery contracts.

We have hundreds of transmissions under contract. We have a responsibility to make this clear towards Israel. So if we cannot produce them in Germany, we will relocate these volumes to a different plant, for example, to U.S. This might take maybe 8 to 10 months. But if there's no move forward, we will do it because we have this business. So -- and I think this is pretty much what I can say at this point, please expect my -- respect my apologies that I cannot disclose more on the contract.

Next is Christophe Menard from Deutsche Bank.

Yes. On the last question from David, can you actually state or give us what percentage of group sales are made with Israel? I can't really figure it out from your geographical breakdown of sales.

The other question I had were, one is on the -- you mentioned when you talked about your soft order backlog that you already included some of the German orders. A rough calculation comparing Q1 to Q2 presentation suggests EUR 300 million. Is it what you included in terms of German orders?

And the last question is on the Slide 19 on the order intake in H2. You added a few new features to that slide. Does it suggest that your order outlook for H2 is actually improved versus your Q1 expectation? Yes, those were my questions.

So I will do my very best also to answer these questions. Starting with Israel, I think it's fair to say that somewhere between 2% or 3% is our share in our current product and business portfolio. So I would say, between 2% and 3%, yes.

The second question, I mean, regarding the value or the share, what we included as first, as I said, conservative approach, what we included in our soft order backlog, I stated conservative. This is really at the low end and is not related to the numbers I have on this slide, Slide 21, I guess, because we started first discussions and even that we have even today a higher visibility compared to our Q1 presentation.

We are -- I mean, as you can imagine, still conservative in what we consider as a soft order backlog. It's clear that if you look on these programs, RENK is positioned. But from today's point of view, because they are still months to go, I mean, there needs to be the first clear contracts to our clients. And then we -- for this reason, we were very conservative in what we included in our soft order backlog.

And I think I understood the third question, Christophe, about our H2 order intake programs. I mean we have to be fair. We all know that order intake can vary in the magnitude from quarter-to-quarter because if you take the example, during the end of Q4, just before Christmas, we got a little bit by surprise, 3 main programs in Germany for K2 Poland, et cetera, et cetera, which from our planning and assumptions we had allocated in 2025.

So around about EUR 300 million just moved into the Q4 2024. And if we take the last 3 quarters, adding Q4 2024, Q1 2025 and Q2 2025, we had, to be fair, exceptional run of almost EUR 1.5 billion of order intake. We see that we will have relevant order intake programs, especially in the fourth quarter.

This does not mean that we have no order intake in the third quarter, of course. But we had, during the last 2, 3 quarters, an exceptional order intake. Overall, it's also clear with the discussion what we had before, if you just talk about the German programs, the order intake level will, of course, over the time, grow.

But this is -- when we look currently on our map, we see an acclimation of what we consider some of the relevant order intake programs during Q4 2025. So my question, Christophe, did I answer your questions or did I totally fail?

No, no, you did, absolutely. If I may, I just had one additional -- I mean, on your Slide 21. The range you're providing are pretty wide on new vehicles. And you mentioned on the call that you're talking potentially 3 to 6 additional brigades. This is what that range reflects in terms of new vehicles?

At the very end, yes. But again, it's a little bit more complicated because of the capability upgrade it may be a wrong word capability upgrade, but I do not find a different one, capability upto process according to NATO requirement for the So we have a phase where current gaps are closed, where we, from our understanding, do not see adding of additional brigades, heavy brigades.

And we do see a Phase 2 where there will be additional brigades. Overall, in the sum, we are talking about the numbers what I indicated before. But again, these numbers, there is a variance in. And we need to understand more in order to really to make deep dives into the today's and future Bundeswehr organization, if you want to call it, in order to understand what the real volumes at very end will be.

The next question comes from Joe Orchard from Rothchild Co, Redburn.

Just one question from me today, and it's about transmission production, where you reached 4 a day in Muskegon back in June. Is that rate sustainable for RENK America in H2? And is VTA also producing at that rate, and will continue to do so in the second half of the year?

Thanks for the question. I mean you are just referring and I would start answering the discussion to the 91 or almost even north of 4 transmissions per day and the build rate in run. I would say it would be sustainable if you would need it, but we would -- we do not need this high build rate, to be also clear.

We are running a for 2025, as we always communicated, and this is our production plan on a total number of transmissions to be built in our RENK American facility north of 600. We are fully on our production schedule, and we had to produce this high amount because we have delivery obligations, but we do not need to run on this more than 4.0.

For us, it's enough if you run on 3, 3.5 transmission build rate, we have -- so if you want to say for run fully on plan. If you talk about VTA outport, I'm always saying, and this is -- it's unchanged. We are running fully on our production plan, on our monthly production plan. We are running fully on our targeted annual production volume of north of 700.

Of course, we have variances on a month-by-month basis. For example, in Germany, we have so many crazy national holidays in May. We have, for example, right now, as I depicted this, we are changing from the old production line concept at VTA into the new production line concept. So we see for 1 month, but everything is planned and according to plan, a little bit lower volumes. So all I can say is, so we are running according to our production and delivery schedule what we need for this year.

Next up is George Mcwhirter from Berenberg.

I have 2 quick ones. Firstly, on your aftermarket business. Please, can you just provide an approximate split of the revenue that you generate in this business between aftermarket MRO and circular reserve today?

And the second one is on the U.S. Avans tank upgrade opportunity. Please, can you provide an update there? And also, does the NextGen MBT transmission would that be suitable for the tank?

Thanks for the questions. To your first question, if I understood it correctly, it was referring to the split between aftermarket MRO on one side and the circular reserve on the other side. To be honest, I think in our today's calculation, especially if you look -- I'm just referring now on the new potential we were just discussing during the last half an hour, the way majority of this business potential is with aftermarket and MRO because from our today's perspective, we have included a very conservative assumptions about circular results.

From the so far, there is no official statement. And as you know, we from RENK, we are in the race with transmissions and damping systems. So we do expect that, hopefully, during the next weeks, at least hopefully, before the capital market, to be honest. We have a final official statement and decision.

And for the NextGen MBT, this is really something that started to be also honest last year with the what we showcased on our on the in Paris was the type of concept study. So in the meantime, we have done our homework. We have done a lot of cost initiatives in order to make sure our transmissions are in the future, not only from the price competitor, but even showing at least to be on the same margin level, we have further refine specific features like, for example, driver-by-wire. We have started now we started in the second half -- we started in July. So in fact, it's not really for the first half year.

But anyway, it's important to mention, we started now the serious qualification. And 1 of these projects, the first project where we -- since this next generation or NextGen MBT transmission in the race is for the Italian main battle tank program, highly competitive from a technology point of view and also attractive from the pricing level without, to make this also clear, compromising on the margin side.

Next question comes from Carlos Iranzo Peris from Bank of America.

Appreciate on the call that you gave on German procurement and VMS. Just wonder if you already have an early indication or estimate on how much you could benefit from Germany on the defense side of your M&A division?

Carlos, to be honest, I did not fully get the question. Did you -- I heard M&A in Germany or I heard something totally wrong?

No, let me repeat the question. I was asking if you already have any early indication in terms of how much you could benefit from the German procurement on the defense side of your division...

Sorry. This is also, of course, a good question, and we see, and I think I indicated this in the last call, we see going through different programs like the 127 additional volumes, et cetera, et cetera. We do see a potential of low EUR 3-digit million order intake over the time horizon with a clear time frame and vision, and you can read this if you -- I mean, if you Google for it, Marine 2035 strategy.

And if we take this, we see that somewhere at the lower end of a EUR 3-digit million potential is accessible for RENK.

And the last question comes from Sebastian Growe, one more time.

The first one is just on the German pipeline. Just to understand how you think about competition, if there are any changes probably going forward, if it's not for the shorter period, but then for the outer years, i.e., what have you assumed when you're talking around the 3,500 for instance? So is there a bigger number underlying, but potentially some transmissions would go elsewhere. The first question.

The second question is -- or maybe we'll take it 1 by 1 and probably.

Yes. I think for the first phase and for the next 5, 6 years to be straightforward, there is no alternative. There's simply no alternative for RENK. But of course, and this is in general, and this is not only specific for the German programs, but we need to prepare for the NextGen generation of our products. We need to prepare that we understand that from other sectors, potentially the competitors are newly raising.

So I like competition and I cannot change it. But we can, from our own perspective, be active and develop the next generation of products, which are from a technical performance, absolutely benchmark, but also on the pricing side, attractive.

There are many reasons why they are like this and again, without compromising on the margin side. So in general, competition is -- if competition is not here today, if there is an attractive market, there will be competition tomorrow. And we are the #1, it's always the most difficult position.

We need to defend our position. We need to do our homework, full stock. Just to comment baton the Boxer side. I think it's very important. I mean, also for evaluating potential business impact to understand that the Boxer is a wheeled vehicle. So the transmission -- the main transmission in the Boxer is indeed not from RENK.

So this is in transmission. I think from if I'm correct, at least not from RENK. So but what we have from the RENK side is in Germany, we call it it's an angular transmission in order to convert the forces in an optimum way. This is the most expensive part of the entire drivetrain, but you cannot compare the pricing level of a main battle tank transmission with the pricing level of Boxer transmission. So there's a huge difference, at least factor 10.

That's helpful. And then you have made the comment now around those specific transmission types. How would you see then the competitive environment and dynamics eventually changing within the massive unit output increase that we should expect then for future business from the German army, in particular?

As I said before, you need to be -- I mean, we need to be, in general, especially if you look on the long term run beyond 2035 plus and beyond, we need to be competitive on the technical side, we need to be competitive, we need to be the benchmark on the pricing side and we need to have the capacity to produce.

And honestly speaking, and I mentioned this before, RENK is in a perfect position. We have capacity today. We can easily scale up. We have our supply chain under control. We do not need to build new plants. We can use our existing footprint. So we have good conditions, but this does not mean that we lay back and wait until competitors are coming.

Makes sense. And then 2 quick ones. One, with regard to the output target that you mentioned for the north of 700 units. To me that doesn't sound too different to what you might have produced in '24. And the real question that I do have is a follow-up then to the last Capital Market Day, where you then also talked about the productivity improvements that you had on mind, et cetera. So where do you stand on the journey? Have you been able to see indeed to take down the overall tech times, et cetera? And how much of a capacity leeway would you still have for '26

I mean, we are, I would say, and for this reason, I mentioned on also the important step what we are currently doing during Q3 right now in our plant here in Augsburg to change the line concept. I think what we have realized in the last 12 to 14 months, if you just look at Augsburg, were so-called low-hanging fruits.

And I think Dr. will provide much more color on this during the Capital Market Day, but is these low-hanging fruits already, I mean, led to efficiency increases what we see. Anja alluded before to an outpacing of the revenue growth by the EBIT growth.

You can see this really specifically, if you look on the VMS quarterly or half year basis. But what is important for us, if you just stay for the moment in Augsburg is really to change into this new line concept. With this new line concept, we will go really on the next level of having a higher flexibility of line allocation.

Today, we have one line with one transmission type. In the future, we have the capability to put many -- I mean, 2, 3 or 4 transmission types on this line. With this flexibility, we also get a higher capacity, and we will have increasing efficiencies. So in a nutshell, and I'm always saying this, we are somewhere on the journey between having realized looking on Augsburg, maybe a 30%, 40% level.

So the next level starts now with this line concept. And I'm really looking forward to welcome you, hopefully, all of you on the Capital Market Day, you know I'm doing marketing now for the Capital Market Day because then you will have, of course, we will go through this new line concept, and you can see and smell and touch the efficiencies live on the floor.

That sounds good. And then the very last one is just on the nondefense part of the portfolio. And unfortunately, that's the one that's apparently now fighting a bit more with difficult macro environment and probably can also it's fair to say competitive dynamics. So the simple question is, what is your response to address those challenges? And what has been referred to by yourself as noncore operations?

Yes. I mean as a matter of fact that in our industry business you talk about industry transmissions or bearings, we are facing the typical GDP depending or related economy sector-wise headwinds. Of course, we cannot change the environment, but we are fighting, of course, on an operational basis. to save costs. I mean, the standard program, I mean, if the volumes are not there and your capacity is not really fully utilized, you need to start to work on cost side.

So we are doing the normal programs. But I think what is important is that you see, for example, on the bearing side, even if the relative numbers appear to be high, the absolute figures are not really significant. So -- and here really despite the economic headwind, we still have a good position with our leading technologies.

Overall, and this is also clear and not talking about the temporary, I assume the headwind will disappear somewhere and We are driving 2 different sector strategies, as I always commenting on this.

On the defense sector, we are going fully for profitable growth. It's the center of gravity for capital allocation. If you talk about M&A, if we talk about CapEx, if you talk about R&D. On the industry segment, which includes, again, bearings and industry transmission, we are focusing on profitability and not on growth.

So if you want to call it, on the industry segment, we are in a kind of consolidation mode and the team has clear targets to realize a certain profitability range. All measures are on the table, and this is exactly where we are working on, and we hope we can give a little bit more color. We will give a little bit more color on the sector strategy during our Capital Market Day.

Thank you very much. Ladies and gentlemen, thanks for participating in our conference call. The conference is now closed.

Good morning, ladies and gentlemen, and a warm welcome to the RENK Group Pre-Close Call H1 2025.

[Operator Instructions] Let me now turn the floor over to your host, Christian Weiss, Investor Relations.

Thank you, Operator. Good morning, everyone, and thank you for joining our Pre-Close Call today. My name is Christian Weiss from the Investor Relations team. Our CEO, Dr. Alexander Sagel, will guide you through today's pre-close call and will be available for questions afterwards.

And with that, let me hand over to Alexander.

Yes. Thank you, Christian, and good morning, everyone, also from my side, and thanks for joining this today's call. Especially, I would like to start by welcoming everyone from the sell side as well as from the buy side. As you know, the purpose of this pre-close call is to provide you with a summary of public already-communicated information on the second quarter of 2025 as well as a brief operational update on it. Today's update will be provided before the upcoming publication of our Q2 and H1 results on August 13. Consequently, today's call will not address our midterm financial targets.

Ladies and gentlemen, let's start with a brief overview at group level. From today's perspective, we can simply conclude that we are fully on track and as planned regarding our 2025 guidance. Q2 2025 was a quarter with another good performance and once again driven by our defense business for land and sea platforms. Notably, our VMS segment was again the main driver of growth and profitability within the group.

Order intake continues to show a solid momentum while being below last year's strong second quarter, but with several important contracts signed during Q2. For example, and I think you have read this already in some press releases, we are very proud about an engine contract for an international customer, signed during Q2. We are also very proud to have 2 new end customers for our 256 infantry fighting vehicle transmission, one of them is Latvia, where we could secure during Q1, the first batch and already right now in the first week of July, we could secure the second batch for the Latvia AJAX IFV, but also 10 AJAX supplying to the second new end customer, and this is a customer in Asia.

But also, and this is a kind of continuing story. We see a continued above-average demand for spare parts from European network users. And also, if you look on the Navy side quickly, we secured a new contract for 2 frigates again for an Asian customer. And also this is from a strategic point of view important, we made our first market entry step into the Japanese Navy market. As you know, this market wants to have -- manage the market entry. This should be the basis for a long-term and sustainable business. So for this reason, we are very proud that we could achieve this during the second quarter this year.

Revenue, if we continue now, it is expected to come in stronger in the Q2 and half year 1 of this year compared to the second quarter and of course, the first half year of 2024 and clearly above our 15% CAGR midterm target.

In terms of adjusted EBIT, we also see a positive development, which outperforms last year's Q2 as well as the first half year 2024.

Regarding our operational performance, we are also on track and produce and deliver according to our production planning and customer delivery schedule. In fact, we just had a record-breaking June at RENK America, where we produced 91 of the so-called HMPT transmission in a single month, which is comparable to a daily build rate north of 4 and indicating the good progress we are doing in our RENK America plant.

Ladies and gentlemen, so much for the group level, let's talk about the different segments and start with VMS, which remains our largest and most dynamic segment. As already mentioned, VMS was again the strongest contributor to all 3 KPIs: order intake, revenue and adjusted EBIT in Q2 2025 as well as for the first half year 2025.

Order intake of Q2 continued to be on an elevated level, but below previous year's strong second quarter. The book-to-bill ratio, however, remains well above 1 for Q2 2025.

The revenue growth was clearly above the group average, showing accelerated growth momentum on a quarterly and half year basis. Even more important, the adjusted EBIT growth outpaced revenue growth, supported by improved operational leverage and efficiency gains. The 2 largest VMS plants, VTA and RAM are running according to their planned production rates. As a result, the margins have further improved compared to Q2 2024 and half year 1 2024.

Moving on to our M&I segment. The picture here is overall positive. Or in short, Navy is on the run. Our industrial business is, however, feeling the overall global soft GDP-related economy situation. Order intake was broadly in line with Q2 of last year, indicating a stable demand. We are satisfied with the overall order momentum in half year 1, which is mainly driven by the Navy segment. Revenue growth in Q2 was clearly double digit compared to Q2 2024. Both for Q2 as well as for the first half year 2025, revenues are in line with current market expectations. The adjusted EBIT for the segment M&I was roughly on par with Q2 2024, and we achieved a sustainable low double-digit margin as expected and always communicated.

Finally, let me now turn quickly to Slide Bearings. Also, the current economic GDP-depending environment is not really favorable, Slide Bearings has continued to perform very robust. For Q2, we see a stable order intake situation, while revenue and adjusted EBIT are all roughly at the same level as in Q2 2024. The adjusted EBIT margin is like in previous year, slightly above the group level.

Ladies and gentlemen, to sum it up for half year 2025. We are well on track to meet our financial targets for this year and the years to come, and we are pleased with our performance in the first half of 2025. Revenues for H1 are clearly above our 15% CAGR midterm target, and we are seeing a positive margin momentum at group level. The VMS segment continues to stand out, delivering strong top and bottom line performance and solid margin improvement. M&I is also delivering solid growth and profitability. And last but not least, Slide Bearings was also able to contribute with robust results.

Having said this, ladies and gentlemen, I would like to thank you for your attention. And of course, like always, I look forward now to your questions. Thank you very much.

[Operator Instructions] We have questions incoming already. The first question is from George Mcwhirter of Berenberg.

Just on the German potential order for Boxer vehicles. Can you just comment on what content you expect to have on that order? And more generally, what content do you have on the Boxer infantry fighting vehicle across Europe?

George, regarding the Boxer, to make a short answer, we are supplying the so-called angle transmission, which is the most valuable part if you talk about the entire transmission system of the Boxer. And of course, having said this, we are looking forward to seeing what kind of volumes are finally really materializing from the German customer.

That's helpful. And just a follow-up. In terms of your Boxer content in general, is that a similar content to the rest of the European Boxer fleet? Or does it vary by country?

George, it's -- usually, it's the similar content independent where the Boxer is produced. So independent, if you talk about Boxer in Germany, if you talk about the MIV, for example, in U.K., the content for us is always the same.

[Operator Instructions] At the moment, there are no questions in the queue. So let's wait a couple more moments. Everything seems to be quite clear. There are no more questions in line.

Then I would say thank you very much to the audience.

A question there from Lucy Fitzgerald of JPMorgan.

Sorry, I was having some problems in my phone. 2 questions, if I may. One, I know things are moving very quickly in Germany. I just wondered if you had any more thoughts since you last spoke to us in May. I think that was like a day or 2 after the new government was sworn in. Just if you feel you have any more visibility or anything you can share?

And secondly, there was a press report about a potential review of your civil activities. If you could maybe talk about that, if you're able to?

Yes, of course, thanks for asking this question. I mean maybe start with a more complicated and most complex about the perspective on the German market. I think if you scroll through all the press release from various media spots, you were checking all the references from various CEOs from the OEMs or even my statements.

I think what is clear is that Germany really committed strongly in order to develop towards a leading defense player, I mean, from the defense capabilities, if you talk about the Bundeswehr across the whole Europe. I mean you see this strong commitment if you check the increase of the budget, almost doubling from EUR 80 billion last year up to EUR 150 billion, EUR 160 billion. There's a clear commitment from the government. There's also a clear commitment from the government to speed up the processes. And for this reason, from my point of view, before I start talking about potential volumes and platforms, I do expect that the first frame contracts to the primes like Rheinmetall or like KNDS will be awarded during the Q4 2025.

So looking on the programs, I think we always -- and I always communicated for us, for RENK with our focused product portfolio, the key is to what extent how many new platforms will be ordered, which are tracked or armored. So starting Puma and talking about the Boxer, George just asked about it, talking about Panzerhaubitze, talking about the main battle tank, et cetera, et cetera.

And one key parameter is, of course, the number of heavy brigades to be installed in order to reach up to 2035, the full requirements and capabilities according to NATO and the German commitment. I think what is important to understand -- and there are, in this context, many numbers in the room. But I think if you talk about this 2,000, 3,000-plus Boxers, if you talk about 500 up to 1,000 main battle tanks, if you talk about a similar range of Pumas and so on, I think this is also from our knowledge, and I would consider our knowledge to have a majority level of 80% is what we see from the industry right now. But it's fair to say that final numbers are, as of today, still not yet communicated. So we always talk at least from rank side about the majority of visibility of 70%, 80%, 85%.

But I think what is important is to relate these numbers, if you take, for example, the 3,000 and more Boxers to the time line because the German Bundeswehr has 2 phases. The first phase is actually from today up to 2029, 2030, which is, in fact, getting ready for combat. What does it mean is they have today certain gaps and holes in capabilities and platforms and up to 2029, they are seeking for closing these holes and to have a kind of better readiness capability. Then the second phase is between 2029 and '30 up to 2035, where there will be additional growth in order to enhance and to meet the required capabilities according to the NATO.

So this is important to understand because besides this frame of platforms we are currently under discussion, it's important to have this understanding because this is somehow guiding the potential order intake expectations and as a consequence, also the revenue generation over the years because the question is, will there be, for example, one frame contract for 3,000 Boxers for the next 10 years, or will there be 2 frame contracts, first for the first phase up to 2029 and the second for the phase '29 up to 2035.

So long story short, it's clear there are significant volumes coming. It's clear that RENK will participate. It's also clear that the numbers who are currently in the market space are most likely going in the right direction, but yet we do not -- no one in the industry has official final figures. And so what we can do is we need to wait, and we need to see during the next 2 to 3 months. And I'm sure there will be significant progress in the data quality and more visibility. And I think it's a perfect timing if you talk about our Capital Market Day on November 20, really to have a strong focus on this and on the operational execution.

I hope this helped a little bit to answer your first question. If I talk about the second comment about our approach towards the civil business. I mean, I'm always explained that we at RENK, we have a twofold approach between the 2 sectors. The management approach and the focus is clearly, I mean, manage on profitable growth for the defense sector. If you talk about capital allocation, if you talk about CapEx, if you talk about innovation, R&D is self-funded, if you talk about M&A capital allocation, there's a clear focus on defense, manage for profitable growth or as I'm always saying, full throttle.

On the civil side, which includes our bearing business and our industrial transmission business, it's a different approach. Here, the focus is clearly not on growth, but the focus is here on profitability because, I mean, as you know it, some parts of the civil business is diluting compared to our defense business. So we have here for the civil approach, a kind of manage for opportunities and manage for profitability. It's a different approach for the defense. Our business focus clearly is on the defense side in all our business decisions.

And if you would ask me what this means, if you look on the share of the civil business in the future, I mean, currently, the share is somewhere in the 28%, 27 percentage range of civil business compared to the whole revenues of RENK. If you would ask me or if we meet in 5 years, I hope we meet before, most likely, this share will be well, well below the 20%. And of course, I'm asking like -- I'm asking all the 3 segments every year, we are doing performance and strategy reviews. We just had a couple of weeks ago our internal group strategy meeting. And every segment, including VMS, but also Slide Bearings had to present measures and approaches and tactics and strategies in order to fulfill certain criteria, which we have set, which I have set from the executive level side. And of course, in order to reach it, everything is on the table. And having said this, I think this is the fairest comment I can give on the 2 sectors.

[Operator Instructions] There are a couple more questions coming. So next question is from Daniel Gleim of Gabelli. We cannot hear you yet.

Can you hear me now?

Yes.

I actually got 2 quick ones, if I may. The first one would be on regional potential. I mean the main focus, of course, is on Germany, and I appreciate the context, but maybe you can rank the top 3 markets in terms of market potential that you see for the next 10 years. That is question number one.

And the second question I have is, if you can talk a little bit about phasing. Of course, we are discussing units, we are discussing new equipment potential. But could you comment on the phasing of the aftermarket business? Is that something that we should model in line with the top line momentum on the new equipment side? Or do you see also a shift in between new equipment and aftermarket and not only in between defense and civil business? That is question number two.

All right, Daniel. Thank you very much for asking these 2 questions. I would like to start with the second one because it's a quick one. And what we see, if you look on our current share between new business and all the service aftermarket maintenance, spare parts, MRO business, we are currently at a level fluctuating somewhere around 40%. Of course, we are -- we will bring more new business in the market, but this new business will generate a similar quantity in percentage of downstream business.

So what we see is that we do not see a major change of the aftermarket share, neither going significantly up nor going significantly down. It might vary maybe from quarter-to-quarter, but this depends on the product planning if you have more MRO business or sometimes more spare parts or if you have more new business. But overall, I do not see a significant change of the current 60-40 split.

Regarding the regional potentials, I mean, you just mentioned Germany is, of course, the biggest one, which is interesting because around about 10 months ago on the Capital Market Day, we declared Germany as almost free of potential. This has, of course, dramatically changed, and we are very positive about this. But if we look around Germany, I mean, of course, starting with India, as you know, we are just doing next week the inauguration of our new Indian plant, our new Indian facility in south of Bangalore. And we see, especially on the defense market, if you talk about the new IFV programs, if you talk about the light battle tank where RENK is the only qualified -- we talk about the second phase or the second batch of the Arjun tank. India is an attractive market, but it's also fair to say it's quite a complicated market if it comes to government and contract structure. But I mean, if you talk about the next 5 years, it's an important market for us.

Also, if you look in Europe, I mean, if you talk about all the entire Polish programs, Europe as a region, excluding Germany for the time now, Poland is very attractive for us. Finland is very attractive for us, where we expect the famous APC, this new 15-ton armored personal carrier to kick off somewhere in '27, '28 time frame in large volumes.

We are looking forward, of course, for the Italian programs for the IFV and the MBT program. So Europe for us is -- and here, it's important to make a difference even before the entire discussion about increasing the defense budget in Europe since February this year, even before we had this strong potential and project pipeline for these programs I just mentioned. These are not new programs. We are working on them sometimes more than 1.5 years. So Europe is also an important growth driver.

If you go to U.S. on the land systems side, on the land side -- Army side, sorry, we are in a very good position for the legacy business for the next 5 to 7 years. What is here for us a growth option and for this reason, we made the strategic acquisition of acquiring Cincinnati Gearing System today called RENK America Marine Industry because the naval market is very attractive. But in order to serve the naval market, especially if we talk about the future new missile destroyers and frigates, FFG, DDG, you need to have a high localization rate as a requirement. And for this reason, we did the step for acquisition. If you see in the budget in U.S., Army is more or less in a steady state with 20%, 21%, which is still a lot if you have EUR 1,000 billion. And -- but you clearly see and driven by the geopolitical tensions in Asia Pacific, a rise of the budget and the spending on the naval side. Yes, I hope this answered a little bit your questions, Daniel.

And the last question is from Carlos Iranzo Peris, Bank of America.

I actually have 2. Maybe if we can touch on a little bit on free cash flow and how should we think especially about net working capital dynamics in Q2?

And then I also would like to ask on the EUR 500 million that you plan to invest in capacity and R&D over the next 4 to 5 years. How should we think about the phasing of those investments?

I would like to start with answering your first question -- your second question because it's a quick one. In my statement, when I said RENK is planning in the next 4 to 5 years to invest around about almost EUR 0.5 billion, this is pretty much exactly in line with our statement that in the next years to come, 2028, 2030, we will stay on the CapEx for operations in our 3 -- till the 3% plus adding, of course, R&D. We are constantly doing self-funded R&D in the range between 2.5% and 3%. So this -- adding these 2 guidelines up, it's coming exactly to almost EUR 500 million. So this is not a new crazy number from RENK. This is just doing a cumulative approach to the 3% CapEx target.

Regarding the free cash flow, I have to admit that we do not have yet the final numbers for Q2. But like always, we had a start where we had in Q1, a higher net working capital. I think this is normal in the defense industry because we need to prepare and to have enough inventory in stock in order to fulfill the commitments and deliveries from the customer. But we are targeting like what we have achieved, if I make a little swift to the year-end performance also this year, a cash conversion rate in the range of 80% and above. I hope this helps a little bit, Carlos.

There are no more questions in the queue. So with that, we are closing the question-and-answer session for this call. Thank you very much, and I'm handing the floor back over to the hosts.

Thank you for joining the call, and we wish you a pleasant day.

Thank you very much. Bye-bye.