Rheinmetall ADR Aktie

So good evening, everyone, and welcome to our Q2 analyst and investor recap call ahead of the upcoming quiet period in a new format.

Okay. Now it looks like we have almost everybody in. So as usual, the purpose of this call is to review recent public developments and ensure the messaging is well aligned. This call does not provide any public, non-public information, especially not after we have just released the ad hoc statement a couple of minutes ago. We will make the document that I'm prepared for this call, will make available on our Investor Relations website in the sections Publications or it is already available in this section.

So first, an update on the defense spending. Starting with the macro environment end of April, the German Finance Ministry published its new budget draft. This suggested a defense budget spend of close to EUR 145 billion for 2027, representing an approximate 21% increase compared to 2026, which further underpins the midterm visibility in our domestic markets. A more detailed draft is expected to be published in the coming days before the parliamentary summer recess starts.

Trading update on Q2. Moving to Rheinmetall's financial performance. Rheinmetall remains fully on track to achieve the guided quarter-over-quarter growth rate of above 40%. This implies an H1 growth rate of approximately 35% to 40%. Key drivers were planned project ramp-ups for several contracts, which have been signed before the war had started as well as some support from the EUR 100 million coming from Murcia restart and from the Weapons and the EUR 200 million from trucks and Vehicle Systems.

The portfolio optimization continued as planned. The disposal of the Power Systems was signed on June 3 for consideration of EUR 350 million with the closing expected in Q4. In connection with this transaction, please be reminded of an additional EUR 200 million noncash impairment for your financial models.

Next up, I would like to address the cancellation of the F126 frigate program. The German Ministry of Defense issued a press release on June 24 and gave 3 key reasons for their decision. First, they want to mitigate further cost overruns that stem from the past. Possible recourse issues with Damen were second; and third, an assumed shorter delivery timeline for the alternative platforms.

Rheinmetall is currently assessing the potential implications of the program cancellation for the F126, while the company confirms the provided trading update for the second quarter. Meeting the expected growth rate, the program cancellation will result in a shortfall of the expected quarterly Rheinmetall Nomination of EUR 20 billion, including F126.

Despite strong order momentum in all other segments, including the first order for loitering ammunition in April and the Romanian order package under the SAFE regime at the end of May. In sum, the Rheinmetall Nomination volume is expected to reach low double-digit of Euro billion level in the second quarter.

The company is currently investigating whether the order cancellation has any additional impact on the full year guidance, and we'll provide a more detailed update with the Q2 earnings release on August '26. In case that no mitigating measures can be identified, the 2026 revenue impact could reach a level of up to EUR 300 million. The F126 made up less than 3% of the planned group sales in 2030.

Update on Boxer. Looking ahead, the approval for the Boxer order is still expected to be around the late Q3, early Q4. The presented bid structure consists of 2 components: a EUR 12.5 billion fixed contract for Phase 1 to be delivered until 2029 and a EUR 25 billion frame contract for Phase 2 until 2035.

This concludes here my information that I have to share. There will be no Q&A, and we are entering now into a quiet period. I would like to thank you for today and closing this call now. Thank you very much.

Ladies and gentlemen, welcome to the Rheinmetall AG Q1 2026 Conference Call. I'm [indiscernible], the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Armin Papperger, CEO. Please go ahead, sir.

Thank you very much. Good afternoon, ladies and gentlemen, and welcome to our Q1 '26 earnings call. Klaus and I are guiding you through our presentation today. But before I begin, please remind on our disclaimer on Page #2.

Now let's go to Page #3. Here, you see the overview of the Q1 '26. On the sales side, we have a growth rate of about 8%. This growth is a little bit lower than expected because we have for about EUR 200 million trucks ready. And you know that we always have the contract with our customers, especially in Germany, that the delivery dates are fixed from them. And we expect now that we are delivering this EUR 200 million in Q2. Another delivery in Q2 is going out because we started with the powder production in quarter 1, but we were not able to deliver to the customer because of the lot acceptance tests, et cetera, et cetera. This is another EUR 100 million, which is going to Q2. That is the reason that quarter 2 will be a growth rate much better than quarter 1, and we expect in comparison to last year in quarter 2, a growth rate of more than 50%.

The operating result, which is a plus 17% is very positive. Even if the growth rate is on 8%, 11%, 70% plus, still has a good leverage on the operating results, and we have an operating result of EUR 224 million. So that the operating margin is growing to 11.6%.

Another very good information is that applications are still in good shape. And in the first quarter, we had more than 80,000 applications, so that like last year, we can expect that we have more than 300,000 people who want to join the Rheinmetall club.

On the operational free cash flow, it's very clear that we prepare us for a huge growth in this year. And we have to invest and we invest a lot of money in materials so that the operational free cash flow is minus EUR 285 million. This is not a critical point for us because over the whole year, we believe that we still have a very positive cash conversion rate.

On CapEx, we are on a good level. It's 10%. As you know, this year and also next year the CapEx will be still high. And over the next years, then we will go down to a CapEx of between 5% and 6%, maybe 7%. Rheinmetall nominations in Q1 is nearly EUR 5 billion, so exactly [ EUR 486 million ] and the backlog is growing especially also because of the naval systems from plus 32% to nearly EUR 73 billion.

If you go now to Page 4, you see that Rheinmetall is really a key partner and a key industrial partner of German Bundeswehr. So as you know, the German Bundeswehr has 3 different phases to build up and to be the strongest force and starting to create the strongest army in Europe.

On the short-term side, we are really at the moment in maximizing defense capability. That is the reason that our investment programs in Germany, but also in whole Europe, and in the United States are really focused on that. And we have an increase to 140% of the equipment level that we had before. On the medium term, it's very clear that we have a major buildup of sustainable armed forces. And as you know, we, at the moment, Germany has forces of 180,000 people and they have to grow up to 240,000 up to, let me say, minimum 2029. And as you also know, there are plus 200,000 reserves, but all that soldiers need equipment. And that is the growth program, which is coming up from today to '29, 2030.

And then we have a long-term target picture. And on these long-term target pictures, it's a very, very clear point on the way to be the strongest force in Europe to have technologically superior armed forces. And all that is in combination with the budget that you have seen in the 2030, the budget for defense will grow up to EUR 190 billion. And as you see also here on Page #4, the block budget for 2027 will have a 21% increase of defense spending up to EUR 145 billion. Huge amount of money, and Rheinmetall is preparing them to help wherever we can help to bring the equipment to the army.

The next slide, Slide #5. You see the highlights that we have on our new domain, our new division, Rheinmetall Naval Systems. So the acquisition of the NVL, the former [indiscernible] company was closed in February. So we have a very good start in the integration process. We started with a steel cutting process. We started with first ship launching ceremonies. And the baptism of the [ Corbet Lubeck ] was a really good start in the first month where we had the domain C. So we gave also a nonbinding offer to acquire the German Naval Yards. And with that known binding offer, we started now with due diligence and we expect over the next weeks that we have a result about that so that we can give a binding offer also to enlarge our capacities in ship yards.

The financial results in Q1 and also the sales side are in line. So in the first month, about EUR 80 million sales and 10% EBIT. This is exactly what we expected at the beginning. As you know, the range is between 10% and growing over the next years growing up to 15% profitability. And in 2026, we expect huge orders. And there is an order of the F125 upgrade, and we gave also an offer for the new frigate contract of F126. And we also see internationalization and successful internationalization potential, for example, also in Romania. So all in all, very good start, a very good post-merger integration. We had the first Welcome Day also in [indiscernible] with the team. And I'm very happy with the team. I'm very happy with the motivation of the team and the spirit they have.

Now let's go to Page #6. On Page #6, you see what Rheinmetall is doing to create autonomous vehicles, autonomous air vehicles, manned vehicles and also vehicles on the sea. And you see the 3 angle that we have, the Rheinmetall Autonomy Strategy. On the unmanned ground vehicle side, you know that we have since years a lot of vehicles where we may test where we are very successful in that area. And the biggest program at the moment is the U.S. tender. This is the S-MET program from the United States of America. And we took over the majority of DOK-ING. And with -- in combination with our U.S. business, our Canadian business and the European business, we think we have a huge potential over the next years also to build up this land part.

This is not only a 1 product strategy that we have. This is a multiproduct strategy. And if you see [ Hamling ] and other things where we -- that we offer at the moment, also the German Bundeswehr think it's a great strategy to go the next steps also with European partners and with maker partners.

On the unmanned air side, there is loitering and ammunition and drone technologies. And this category 2 and category 3 drones are in our portfolio, not category 1 drones. But CCA, this is a real strategic partnership. As you know, we have partnerships with Bundestag, also with Lockheed. And the MOU with Lockheed for European CCA is part of our PLCD program. So with both American partners, we try to open the market and to help Bundeswehr and because PLCD is not ready -- maybe, and we really hope that we can implement the Boeing [indiscernible] technology into Germany from Australia.

On the unmanned surface vehicle, we made this joint venture with Kraken, where we have the majority. And last week, I have seen the production lines. We produce in Hamburg, these unmanned vehicles. And at the moment, we have a portfolio of a little bit more than 8-meter ships. But over the next year, we will build up 2 other ship classes. So that we think this is a real, real good start into the unmanned surface vessels. And over the next years, we see that there is a potential of about [ EUR 1 billion ], EUR 1 billion to EUR 1.2 billion also on the air vehicles and also about EUR 1 billion on the land side. So in total, it could be around a potential of EUR 3 billion per year that we do with autonomy, which would be a very positive signal.

On Page #7, you see that we are expanding the role of drone producer. And if you see the drones portfolio of the German Bundeswehr and if you see how much Rheinmetall is doing, we sometimes really astonished that people said, okay, what is the reason that you're not going into the drone business, because we are since 25 years in the drone business. So Rheinmetall is the producer of Aladin, Luna and [ KZO ]. This drones are qualified and implemented in German Bundeswehr. And we implemented also the Heron plus. As you know, we sold that business later, but upto 2011 -- we -- Rheinmetall implemented the Israeli Heron technology into the German Bundeswehr. So [indiscernible] years and more before we started with this drone technology and the future system that we yet we see the MQ28 was the [indiscernible], this is what Rheinmetall is doing. And on the right side, you see the different categories from Aladin to the [indiscernible] where we see a sales potential of EUR 1 billion to EUR 1.5 billion, as I said before, per year.

If you have a look to Page #8, you see the partnerships. So we believe in partnerships because with partnerships, we are faster than if we go into development programs. And we are grateful also that the risk partners from the U.S. like Boeing or also Lockheed are helping us with strategic partnerships to grow into these areas. And as you said -- as we said, the Ghost Bat should be implemented in 2029, and it's impossible to develop in that short time, unmanned vehicle like the Ghost Bat. So I think this partnership can help us to grow faster.

Another partnership that we signed is the partnership with Indra in Spain. And this is very similar than that what we did with Italy, with Leonardo. And there is a huge need on military vehicles and military trucks for the Spanish army, and we build up this joint venture at the moment with Indra.

Page #9, you see another partnership and what one point that was missing was the long strike side. We had -- we have very good enough delivery in tank arminitions. We are good now on the drone side, but the deep strike and long precision strike, this is what we missed. So we found a partner in our analysis, and this is Destinus, Netherlands Swiss company is an European defense technology, and this is a differentiator to the U.S. defense technology. So we made an agreement that we create a joint venture with the majority of Rheinmetall with Rheinmetall Destinus Strike Systems. And this includes cruise missiles, but also ballistic rocket artillery. And the work share should be that Rheinmetall is doing a lot on the rocket motor side. We do the warhead on the warhead side, and we make the infrastructure to build up the infrastructure until end of the year to build up the whole cruise missile starting end of this year or beginning of next year in [indiscernible] the North of Germany.

So if you have a look now to Page #10. In Page #10, you see that there is an intensive discussion at the moment with a lot of Middle East customers. And the -- we got a lot of calls from after the U.S. Iran conflict. And we counted the systems that we have now in the Gulf region. It's about 150 systems in the whole Gulf region, gun-based air defense systems. And we think that new systems will be implemented also in very short time. Italy is a very strong driver in this area. The Italian government is helping a lot in this area to help the Middle East countries. The negotiations with already at the moment, we try to implement modern [indiscernible] systems in 2026, but we believe that this continues and especially the ammunition, the high consumption of ammunition is the thing that really helps us on band-based side, but also on missile base side.

On the missile side, you see there is a heavy use of different missile types. And that is the reason that we made that investment on the rocket motors. And end of this year, the rocket motor production in Ontolos will be ready. The rocket missile integration factory will be ready, though that in '27, we will go into a qualification. And hopefully, in '28, we can be really in full scale production.

Page #11 shows that Rheinmetall is fully in line with the Ukrainian priority areas. And the areas that we discussed in the discussion was now 1.5 weeks ago with the Ministry of Defense in Ukraine and the German that artillery ammunition, defense systems, deep strike and drone technology and in combination with combat vehicles, this is exactly what we offer. And the European Union decided to release financial support package. And as you know, there is a EUR 90 billion package, where EUR 60 billion should be earmarked for the procurement of defense goods. We are in negotiations at the moment with different nations and also with Ukraine, how much we can help in that area.

And Page #12 is a highlight about the disposal of the Power Systems. We are nearly finished and as said and as expected, we want to make the signing in Q2 '26. So in some weeks, we are, let me say, 95% or more, 99% ready or sharing year on the signing process.

So far, [indiscernible] about the technology. And now I take over to Klaus, and he will take care about the financials.

Thank you, Armin. Q1, we showed a solid growth of 8% on sales. But this does not give the full picture of the increase of our -- the execution on operations. If we look at the buildup of inventory, about EUR 0.5 billion of material went into finish and prefinished goods that are ready to be shipped in Q2, that would help us to basically show a very strong Q2 and have basically first half of the year that is fully in line with our full year expectations.

Operational results went up by 17%. So even in this increase in buildup of structures, which are showing leverage across all the different segments of our business. Overall, there was only a relatively small impact from currency on sales and on profitability.

Let's move on to Page #15 to have a closer look at the different segments. Vehicle Systems grew by 3% to nearly EUR 1 billion, mainly driven by more real technical vehicles and the links in Hungary. Operational margin improved to 9.6% to a more favorable product mix. Sales growth was, as mentioned, a little bit dam through the preproduction of trucks for the German customers, where we expect the drawdowns in the coming weeks and the additional sites in Q2.

Weapon and ammunition were flat at EUR 600 million. Main reason for the -- [indiscernible] was the multi incidents in Q1 last year. In Q1, as you know, this year, the Murcia plant is fully operational again, but the products that are being produced will only drive the sales in Q2. And then there was further slipover or delays in acceptance. So that reduced the sales growth. Overall, operating margin increased, nevertheless, by 0.1 percentage points to 19.4%.

Digital Systems grew by 16%, mainly driven by the Taiwan project and the consolidation of now Black net that was acquired in Q1 of last year. Also here, the division showed an improvement in profitability. The operating margin now stands at 5.2%, again showing at the other divisions, good leverage.

The biggest growth of all the different segments was in Air Defense with more than 30%. As a result, also the increase in profitability was the strongest from 12.5% to 15.6% with a very strong performance and shows the additional demand for air defense products. Naval Systems are now included for the first time with 1 month of sales. The business contributed already EUR 77 million of sales at a solid profitability of 10%.

Overall, as mentioned, the growth grew to EUR 1.938 million in the sales, you can also see the ongoing trends that consolidation increases as basically interaction between the different segments of our business intensifies.

Let's move on to Page #16. With almost EUR 5 billion of Rheinmetall nomination, it was a solid performance on the sales side. You have to remember that in Q1 2025, the high order intake or nomination of almost EUR 11 billion was strongly driven by 2 digital projects in Germany, TaWAN and the [indiscernible]. The mix in 2026 was [indiscernible] across all the different segment of the business and also fixed orders were higher than in 2005. Overall, also including almost EUR 6 billion of additional order book from the Naval business, the Rheinmetall backlog increased to EUR 73 million.

Let's move to Page 17. Operating free cash flow, as mentioned was negative at EUR 285 million, driven by strong investment, especially in inventory and basically as preparation of future sales. As mentioned, out of the EUR 1 billion increase in inventory, almost half was going into finished and unfinished products ready to be shipped then in Q2. The main driver for the increase in inventory were, as mentioned, weapon and ammunition, and also air defense. And they also include, obviously, the increase in vehicle systems for the trucks to be delivered in Q2. CapEx was -- as we are already early in the year, relatively modest, but higher than in 2025.

Let's move to Page #19. To have a look at basically some of the supply chain issues that we are facing. Page 18, sorry. On Page 18, we see some of our financing numbers. Our net debt to EBITDA is very strong at 0.39 multiple, driven by a very low debt. And that needs to be considered in the context of having acquired the Naval business at the end of February. That is also the reason for a slight decrease in our equity ratio, but still with 30.7% of equity ratio, we are in our strategic bandwidth that we are aiming for. So even after the acquisition, we have a very strong balance sheet and are prepared to support the ongoing growth and further acquisition if there are opportunities.

Concerning the convertible bond, almost all the bonds have been converted at the end of April 2026, only 8% of the Series B, the second tranche were still not converted. We also received some positive feedback from our rating agency, Moody's, we provide an update and confirmed the Baa1 rating with a positive outlook.

Let's move to Page 19 and look at the supply chain. Our energy costs only account for about 1% of sales. We have coverage of 77% for electricity and 84% of gas procurement is covered by long-term contracts. So we are not that exposed to volatility in the purchase price. On raw materials, we -- as mentioned before, we are stockpiling, actively stockpiling strategic raw materials and also support -- intensify our supply diversification to make the whole supply chain more robust or more resilient against the possible disruptions and price fluctuations.

As with many of the raw material prices, we have contracts in place on the sales side that we allow for the pass-through of increased purchasing costs in some case, specifically to certain materials in both cases for general inflation and production cost increases.

Let's move on to the outlook. And for that, I hand over back to Armin.

Thank you, Klaus. On the backlog side, you see that the Rheinmetall backlog in Q1 is, as Klaus said before, growing up to EUR 73 billion. We are around EUR 5 billion on the Naval side. A very positive signal is that the fixed contract are growing up. And so this is, in total, more than EUR 44 billion fixed, the rest is the nomination. So as you know, we change more and more from nomination to fixed because especially Germany wants to do that. And this is what we will see over the next weeks also for contracts for trucks, et cetera, et cetera, to get more and more fixed contracts, but also ammunition, like artillery ammunition and also a new contract, which is coming up on 30-millimeter ammunition, which is -- could be multibillions.

So in April, the biggest contract, there are a lot of smaller contracts, but the biggest contract of about EUR 2 billion is loitering ammunition. And we expect that in Q2, we will have a total nomination of around EUR 20 billion. There are this final negotiation, where we should sign it in -- we should have a signing also in May because of the safe money, it's MBT in Italy. There is a lease program that we have the final negotiations with Romania. The biggest contract will be, for sure, F126, where we expect that in Q2, there could be signing for ammunition trucks, et cetera, et cetera, or the other things.

And in the -- in the second half of this year, the expectation is to have around EUR 60 billion opportunities where you see Ukraine packages. The biggest one is [indiscernible] is the Boxer program, which is coming up, but also British and other international programs. If you see that we have a backlog covering of nearly 100% because it's at the moment, 97% booked and service contracts and other things are coming in, and we can serve that over the next 2 months, so that the 100% are very clear. So our expectation is that it is really that we are in good shape to have this EUR 14 billion to EUR 14.5 billion sales in 2026 if everything is in line. So the potential that is that Rheinmetall backlog could be around EUR 135 million end of this year.

So how does it work that the sales is really coming up, and they -- you get an overview about what happened in '25, '26 to compare it. So we had the best first quarter in '25 ever. And in the first quarter last year, we made 18% of our annual sales. This year, we have a better quarter 1, but we are growing strong. We have a growth rate of 40% to 45%. And as you know, about EUR 300 million, what we shifted into quarter 2 is because of the truck and the ammunition what Klaus and myself said before. So we had 14% in Q1. So it will be a stronger Q2. And last year in '25, we shifted from Q4 '24, something in the first quarter '25. But in total, and this is very normal in our business, in the second half of this year, we will make 64% of the sales last year, nearly the same. We made 62% of the sales.

So it's a typical year, and sometimes it change from quarter-to-quarter, but nothing that we unexpected. And by the way, we expected also in '26 that the growth rate was around the 40%.

So the importance that we have is now also that we have in Q1 '25, a full quarter with log performance contribution in Q1 '26, only 1 month of the naval systems.

If you have a view now to Slide 23. So we say on the full year guidance that the sales is going from about EUR 1 billion to EUR 10 billion, EUR 10.5 billion. Operational margins from 18.5% to around 19% and the operational free cash flow, we expect more than 40% about the cash conversion rate in '26. And we stay also what is our plan in 2030, and as more we book and the backlog is really growing up as better it is so that we are on a good way also to reach our long-term target.

So thank you very much for your attention, and now we are happy for Q&A.

[Operator Instructions] The first question from the phone from Alessandro Pozzi with Mediobanca.

The first one is on the NBL, can you provide an outlook for the opportunities that you see in the naval business. You mentioned the 125, the upgrade, the 126, we should put in as a potential contract in Q2. And if we [indiscernible], we read about EUR 12 billion potentially that could be worse. But again, it also comes with some maybe execution risk because taking over [indiscernible] under it's been ongoing with a lot of delays and some execution risk attached to it. But also I think Romania becomes an opportunity as well for NBN. So I was wondering if you can give us a sense about potential opportunities for NBN.

Let's start with the 126. On the 126 side is we have strong negotiations with the Ministry of Defense. About that, as you know, that this was a critical program. And as a critical program for us, it was very important to have a very, very deep technical analysis. And what we did is a technical due diligence that we did together with the team of German. In this technical due diligence, we found out that we are able -- we see the way that we are able to sort it out. And I don't speak about the exact numbers, but maybe you are right in the level where we said we always said it should be a program which is more than EUR 10 billion and we have to ask for that.

I think on the technical side, our team in Bremen and Hamburg is able PAUSE to sort it out the program management tools, the IT capacities that we have to guide such a program is very positive. On the 125, this is an upgrade program. We see very low risk on this area. As I said, we are not speaking about the 127 because we believe that this will be nothing for this year. I believe that the capacity that we have at the moment in the Ministry of Defense to work out such big programs is not high enough.

We gave also internally our offer. As you know, we do this together with our friends of [indiscernible], but I do not believe that this will come this year. So there are different opportunities. We speak with countries like Bulgaria, like Romania, like Croatia, et cetera, et cetera, where when we took over, they came to us and said, okay, we want to cooperate with Rheinmetall, and we want to do something also in that countries to build ships.

So all in all, there is a huge opportunity and another huge opportunity we see on this cooperation with Kraken. And as I told you, I have seen the production line now that we have in Hamburg. And I'm very positive that very soon we are able to produce more than 200 of that ships. We want to produce to grow up to 500 per year in different ship classes. And as you know, the higher ship classes, they also will have higher prices in that area. So there is huge potential. And what we want to do is over the next years up to 2030 to grow this label business to a EUR 5 billion business.

And how does it work? It works with a vertical integration. And again, our strategic point is to grow from a workshare of 30% up to 50%, to bring more ammunitions inside, more weapon technology, more launcher technologies, simulations, et cetera, et cetera, so that then we could be nearly a one-stop shop on the [indiscernible].

Yes. Just a follow-up on the 126, -- is it [indiscernible] changes in the procurement rules? And on the 127, can you quantify what could be the potential opportunity for [indiscernible]?

Yes. So the -- on the 126, we are in negotiations with the supply chain at the moment. And the point is, for me, very clear and nothing is fixed because we bring up everything new, and this is the negotiation that we have with the MOD, the German MOD. But we want for sure we want to implement the supply chain that we had before if we get a fair price and if we get a good technology. So if we see no risk in that area, we want to continue.

On the F127 in total, there is also an opportunity for a high single or double-digit billion euro.

The next question from the phone comes from Sebastian Growe with BNP Paribas.

Also one on the naval side. And on Romania, there has apparently been [indiscernible] press coverage on this one and also you released a good statement on it. So on this potential takeover of a shipyard in Romania together with [indiscernible] can you talk about the opportunity that you see there? And how can we think about the risk profile and also going forward because apparently, you mentioned the EUR 5 billion that you have on line for MBL over time. How does Romania really fit in here? And when you can start there and then I have one on the German order side?

Yes. So on the Romanian side, it's the Romanian government is asking us if we can help because they see that we need more capacities also on our side. And our calculation is that we have at the moment with the shipyards that we have under control, maybe 50% to 60% of the capacity that we need. So we have to grow. So we are looking for other shipyards for other investments. So that is the reason that we are looking Europe-wide what's possible.

But the shipyard in Romania is a very big one. And we are not interested to take over everything there because it's too big, and we cannot use it in this way. That is the reason that the MSC people came to us, and they have more than 1,000 ships -- transporting ships, container ships, et cetera, et cetera. And they have -- they need maintenance shops. And if I see it right at the moment, and nothing there is no deal at the moment, yes. But if everything is going right, maybe we need from the shipyard [indiscernible] capacity and the rest is for the container ships. And we have to educate the people, but this is always the same. We have our internal education program. And that could be a win-win situation. But as you know, Mr. Growe, nothing is done at the moment, and we are still at the moment in the negotiation.

Okay. Understood. And then on the German order pipeline, how should we think about the U.S. decision to report [indiscernible] in German soil and how much benefit you and the mentioned joint venture with customers. So how does this impact your earlier EUR 5 billion revenue target that you had set out for the missile business over time? And if you could also quickly comment on how you think about the chances that come with the increased budget for '27 in Germany?

Yes. So the investments that we do on German, so we stay on that. This is exactly what we want to do. We try to find out more capacities, and we will invest also more. For example, this is what I can say that we try to build up relatively fast also in [indiscernible] or Hexagon [indiscernible] production line here also in Germany.

Yesterday, I was in [indiscernible], where we have -- where we started yesterday, a huge new investment program, as you know. We doubled the capacity in the powder production, and we still doubled it again in that area with a huge investment. In total, it's an investment of EUR 450 million in total debt we do there in the powder production in [indiscernible]. So [ Bulgaria ] will be the biggest producer, I think, worldwide biggest producer also then for powder. So German soil is very important for us.

And only with that investment and only with that vertical integration, it is possible to grab all of the money and to help because, as you know, a lot of companies have to invest, but only some companies really invest strong. And with that strong investment -- and we are sure at the moment that the German government really is going that way to spend this money that they have in their plan. And the German -- like Germans are if they have it in the plan, usually it works.

And so with all the discussions we have with the Ministry of Defense, with the Ministry of Finance and we believe that we are on the right way to go forward and to grab a huge court. How much is exactly? I really cannot say because we have to -- we have a strong definition for this year, but we have to define for next year, what are the programs and how much we really can take into our order books.

That makes sense [indiscernible] because you just have some programs, if I may quickly go ask on the Boxer program. There has been [indiscernible] is probably the right way to put it in the sense how easy it might be to define the contractual agreements, et cetera. If you could just have a quick word on how to think about the time line?

Yes. On the Boxer side, it's -- there are 2 different ways at the moment. The Ministry of Defense discussed -- it is a direct contract from [indiscernible]. The next point is how much -- how many models should be implemented into this Boxer program, as you know, we don't speak about the figures, but there are at least there are some thousand which are coming up.

Our negotiation is at the moment that we need our partner and us, we need this long-term contract because of the investments on one side. And what you see is we are investing at the moment, a huge amount of money. It's about EUR 600 million for long-term items on the Boxer program. And we believe -- and this is -- otherwise, you are not able to grow up their production lines, you are not able to grow up the numbers that we have to deliver. And if everything is running well and if we are producing in full scale, we have to produce 1,000 boxes per year, 500 from us and 500 for our partner, which is a huge amount of vehicles. I believe that in end of Q3 or Q4, we get a decision about that. And they have to make a decision. Otherwise, there will be a delay because if we get later decision then get later deliveries.

And as you know, the Minister always said, we must be ready in '29. And we are not ready if we make no decisions on the contract so that I believe that the government is also in a position that they have to decide.

The next question comes from Sam Burgess with Goldman Sachs.

Just a big picture one to start. I mean you're obviously expecting very strong growth through Q2 and H2. Can you just give us some commentary on how you are seeing things developing operationally across the business? Its physical production capacity building out in line with your expectations? Do you feel like supply chain is generally in good health? Or is there anything we should be aware of that's giving you a headache across the business? That would be really helpful to know.

And then the second one is actually on the JV with Kraken. I mean, if you could just give us some color on the customer requirements that you're targeting there? And I guess the initial opportunity is likely to be concentrated on smaller USDs. But you see that scaling towards larger platforms over time?

So the growth rate is we prepared a lot. This is the positive thing. And as Klaus said before, we have a lot of good ready goods in the Q2 that we can bring -- the customer has to press the button, we get the green light, and we deliver. So this is one positive thing. As I said, EUR 200 million was from the truck side. The powder is now already at the moment, the quality of the powder is good that we see no problems on the zero tests, so that everything is going forward. The capacity of the factories is in good shape. It's absolutely in the plan.

What does it mean? So our factory in [indiscernible], who is producing the F-35 [indiscernible] are in time. Production line in Untolus is in line. We had a small delay of 2, 3 weeks where we had some impact on the explosives, but is not a big issue. We still have -- we work at the moment, 24/7. We are still able to do something on Sunday to bring something, but we want to produce about 140,000 rounds in that. The powder production and the modular charges in Bavaria and in other countries like also in South Africa are in full scale. Only an example about that.

The modular charges that you need, and we are the biggest producer of that was over the years, always 150,000, 200,000. We are now on a level of 400,000 and we grow up to 2 million modular charges. So this is a point which is huge. And in '27, you will see the first -- it's running up now. We doubled it now, but it's really scaling up. So we will have 10x more up to 2030. And so everything is really good.

The trucks on the truck side, we are ready. Everything was financed. We have a new painting shop. We have -- it's only some examples. I can give you 100 of that example. We did our homework. We made our investments, and we are ready with a lot of that investment so that we are able to produce. And we bought in with the division Naval Systems, the 200 -- more than 2,000 people, which we are really highly educated and which bring us for over the whole year, more than EUR 1 billion sales on top, and this is also part of our growth rate. So I'm very happy about that.

Kraken. On the Kraken side, we start now with this 8 to 9-meter boats. But as I said, there is a 12-meter class and also higher plus. In long term, we believe it's the same trend that the airport has. On the airport side, we think at the moment, there is one F35 and there are [indiscernible], which fly with the F-35 to make the mission. On the naval side, we believe it's very similar about that. So that is the reason that we have to go in that area and that we believe also next year that we come to a higher ship cars and the first will be more than 12-meter boat that we expect. And so again, I think we are in good shape and Kraken and Rheinmetall relationship is a very positive one.

The next question comes from Christoph Laskawi with Deutsche Bank.

The first one is a follow-up on Sebastian's question on the Boxer contract. Should we expect this to be in 1 contract, 1 announcement? Or do we prepare for essentially sliced pieces or by vehicle type, more contracts in smaller sizes, but the total sum is still heading up to the amount that you flagged?

And then the second question, a very long-dated one. But if I understand it correctly, obviously, you had discussions with your customers for fixed cost sharing and potential payments to keep capacity ready in future years, especially for very fixed cost in terms parts of your businesses could be, I think, quite a good solution once growth will slowed down. Could you elaborate a bit on how that could work? What kind of cost sharing one might expect? And is it largely Germany or also other nations that could do something like that?

So on the Boxer side, the first offer that we gave was a frame contract for all different types. So this is the first thing that we gave to [indiscernible]. And this is exactly what we said. The total amount for both companies, which was nearly EUR 80 billion. So there is a discussion at the moment if we should carve out some of the types to have, let me say, a better risk management, et cetera, et cetera. This is at the moment in discussions. There is, for me, very clear that there is a huge need and nobody at the moment is discussing about that. There is no need. But if whatever will come out from the risk analysis from the customer for us, it will not have a big impact because the total frame contract is a contract up to [ 35% ]. And if we reduce that, and if we come now to get contracts up to [ 29], this is also very helpful from other side because we have it for the next 5 years in the order books, and we are safe also on the production.

As I said, we invested in between EUR 600 million, and we -- it's not all paid. It's not all cash out, but some of them for long-term items for the Boxer, because if we don't do this, we are not able to produce hundreds of boxes per year.

And the -- we, as the 2 companies are fighting at the moment to have this long-term frame agreements with a fixed contract that would be at the moment on the level for Rheinmetall between EUR 12 million and EUR 13 billion.

Fixed cost sharing. On the fixed cost sharing, we have one discussion with the government, especially on the ammunition side. Because the government wants that on the ammunition side, we still should grow on -- to build up the capacity to have a [indiscernible] on 1 side on the -- in the stocks with goods ready ammunition. And on the other side, to have materials that we take into our stocks. And where we have extra capacities in the production line that we can grow up the production very fast. So for example, that we are able to start in 5 months to produce 20%, 30% more.

So my question was, okay, if I have overcapacities and if I have this material to pay for that, and the government at the moment, and this is still a concept. It's nothing in contract. It's still a contract that we discussed with the Minister of Defense to say the government will pay the material, and the government will pay us if we have higher capacities and underutilized machines, we are on the -- in the calculation phase how it was. It's not ready. So that is the reason then I can give you more information about that.

Next question comes from Benjamin Heelan from Bank of America.

First question on the offers that you're making for shipyards, right? You obviously highlighted in the presentation the German Naval Yard, you've talked about this. Yard in Romania and [indiscernible] has historically been a very difficult business for most of the naval companies that have done naval. So how are you going to manage the risk around these shipyards? How are you going to manage these programs now we're just absorbing all of your time? Like how are you thinking about that?

Second question was on Boeing and the MQ28. What exactly do you envisage yourself and Rheinmetall doing on that platform? If you could outline what that could look like? And then also, we've not heard an update on the missile venture with Lockheed recently. Just wondering if you can provide a bit of an update on how things are progressing? Are you still waiting for the U.S. approvals and where we are on that?

So on the shipyards, we really analyzed what we are able to do with our team. So -- and what I see is that the 2,200 people that we have there, especially the management of the division is very [indiscernible]. And that is the reason that -- and you see it also, even if we had only 1 month there. We still have an EBIT rate of about 10%, so which is a lot of people say it's impossible to make 10% with a shipyard in this area. This is because of good digitization. They -- this is that we are able to make sales with, let me say, maybe less people than others are doing there. And this is because of the program management that the people have and the program management skills, we have some very good IT programs also for the program management. It was very, very positive when we -- when we had a look into this factory.

So it is possible, and we will see this year, it is possible that we start as the shipyards always need with good profitability and that we are good in handling the programs. So taking over other shipyards -- it's better to take over a warm shipyard. So with one shipyard needs that you have people who are really able to do it, who know what's going on. But to reduce the risk is that we have to educate them. We have to give them the same skills that we have in Hamburg. The same skills that we have in Bremen or that we have in our other shipyards in Germany and around the world. And this education and communication program is key for me to give them the same know-how level than we have at the moment in our shipyards.

On Boeing, the Rheinmetall has to be and must be the point of contact for the Germans. We are the program managers. We want to make the service. And we want to also to do some production because we have [indiscernible] we have a production line that can handle U.S. data. So we have terabytes of U.S. data, secret data from the U.S. government in Weeze, which are safe on our service. This server is highly protected. It's certified from the U.S. government. And so we see it very positive because our relationship to the U.S. companies brings us a good opportunity and a good advantage to handle the data.

And that we are able to produce something everybody knows because what we did in 16 months to build up this production line in the American we're very positive about that. And some weeks ago, the [indiscernible] had a look into the production line. I said it's outstanding what you guys did in 1.5 years. And so we are very happy and very positive about that.

So missile. On the missile side, we have at the moment because we don't want to be dependent from 1 side. We continue our activities with Lockheed, but we are looking for a good business case on the locked side. So the numbers of missiles must be big enough if we implement that into our production lines. So that is the reason that we have a look to different partners. We speak at the moment with [indiscernible], about ship missiles. We speak about [indiscernible], and we are very near to have this joint venture. We speak with other producers of missiles to do the rocket motors for them and maybe also the warhead. So at least 5 to 6 different partners we want to have to fill our production line.

End of the year, the production line of the rocket motors will be ready. And in 2027, we want to qualify these rocket motors that we are ready end of '27, beginning of '28 to produce this rocket motors. But not only the rocket motors, maybe to have also the full assembly. The assembly of missile is not the complicated stuff. The complicated stuff is the rocket motor and the warrant and some of the electronics for sure reaches there.

But you see then that we are not looking only for 1 source. We are looking for different sources to fill our production lines where we, at the moment, invest a lot of money. But I think very, very clear that there is a huge need at the moment for Rheinmetall and the huge need of rocket motor, and that is exactly what our strategy says and that's the reason that we invest. That's good enough for you.

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

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

The next question comes from David Perry with JPMorgan.

I have 2 questions. First one is quite a long question, I guess, it's on ammunition. So we're getting a lot more questions from investors about whether Germany and Europe are going to buy as much ammo as perhaps you'd hoped for because of the rising use of drones. So it'd just be helpful if you could give us an update on a few things. One of them is, will the book coverage you've got for the next 5 years? Are the prices locked in? And something that I can't find good data on, but you may have insights on our [indiscernible]. What is the current usage of [indiscernible] If you could help us on those things, that would be fantastic.

And then my question -- can I just [indiscernible] question? Or should I hold and wait till you do to the first one?

I'll give you an answer, and then you have as much time if you want to [indiscernible]. So on the ammunition side, so we are, at the moment, fine with the German contracts. So the German contracts that we expect now is -- for the -- there are different lots that they order. For the -- we call it lot #9 will be in negotiations between 100,000 and 120,000 and then another [indiscernible]. This is much, much more than they expect in the future, but this is the near time orders that will come.

On the price side, we are fine. There is -- and as I always said, the reason for that is because our price is better than the price of our competitors. And the main reason for that is automization and vertical integration, discussed it several times with you. So the other point is that a huge amount of medium caliber will come now. And as you know, there are huge programs for inventory fighting vehicles in Germany. The Boxer is an inventory fighting vehicle on Boxer chassis. And you need and we produce, as you know, the guns for that and especially the [indiscernible] ammunition, where we have -- where we are also a sole source. There is nobody at the moment who is able to produce it.

So on the medium caliber, we expect multibillion contracts also on the medium caliber because they need something for restocking. And on the restocking side there, as I said, we need years -- a lot of years of that.

At the moment, the backlog that we have on the weapon and ammunition is on a level of EUR 26 billion. So this is the backlog that we have. So this is good for some years, but we will fill it up. It is a part of our growing strategy. And there is only small numbers for missiles inside because we have some smaller contracts, 70-millimeter missiles, smaller contracts. As you know, EUR 200 million, EUR 300 million for rocket motors. But it's not -- it's small in comparison to the rest that we have. So I'm fine. I'm fine with the level of the order book and then fine also at the moment with the price.

So can I just clarify a couple of things there. One, if you do have any insights as to just how much artillery is being used at [indiscernible] just the other one is the EUR 26 billion order book you gained. I think that's the frame backlog rather than the firm backlog? [indiscernible] If Germany or other countries change their view? I'm not saying it will, but just if they were to change their view because of growing and evolving trends in the battle thing, can they walk away from that frame back book?

At the moment, I've seen -- I have no signals about that. And I can also tell you why. So the Ukrainian war at the moment is because of this, let me say, gray zone or black zone or however you call it is 35 kilometers above that. There is a huge use of drones and unmanned vehicles, et cetera, et cetera, because it's a stack war. I had a lot of discussions with Germany. So if Germany or NATO is involved, that never will happen. Never -- there is never -- it will be never with nature of [indiscernible] the first world war. This is at the moment a typical situation between Ukraine and between Russia. But I think it's too deep that I go into all the strategic points. Maybe we have some time [indiscernible] on the next conference about that. This is, I think, too detailed about, but there is a mixture. It must be a mixture of ammunition.

So drone is one ammunition. The ancillary need on the Ukrainian side. And I spoke still with the Ukrainians and the need that they see, and this is also something. They don't need -- and this is very simple. They don't need a ammunition, which has a length of 12 or 20 kilometers. Because if you have that, you cannot overcome the death zone. So you need now a long range of ancillary. This is 1 point that the Ukrainian asked for, and they asked for 1.2 million rounds per year. And the -- they do not have enough at the moment. And what we know is that the short range of ancillary, they do include the stocks at the moment because they don't need it. But we are -- it's beautiful for us because we have low range ammunition. We have a lot of long-range ammunition up to 60 kilometers in this area. And I believe for the next budget around, we will have and we offered now, again, some hundred thousand rounds for the Ukrainian via different countries.

So at the moment, I do not see that 155 is going down, but there is a need -- a lot of need and the Germans know it, say, okay, we need high-technology rounds. We need long range, right, and we need to keep ammunition. And cheap ammunition is grown, and we combine that. And the drone side is especially for the [indiscernible] side, but also in some areas, but these are then more cruise midsize or long-range drones about that for the precision dip strike.

All right, to be answered. If I could ask my question to Klaus. Klaus, you've got its guidance for EUR 2.8 billion of CapEx this year. I mean it's a massive number. I just wanted to check my understanding if I'm wrong, please correct my understanding is this is a gross number because you're including in that all the JVs, but it's 100% share. If I'm right in that, I think I'm not embarrassing myself and I'm wrong, but if I'm writing that, is there a mechanism you're going to get reimbursed? And so when and how, how would it flow through [indiscernible]?

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

And we see that -- how will we see in [indiscernible] you not know?

In 2 ways, of course, you would see it in the cash flow -- in the capital section of the cash flow statement. But because it is such a big number in case we do have these large investment programs, we will provide you with specific information how much of the capital contribution is related to such projects. We have only done so at the financial statements for 2025, where we provided this additional piece of information. And if this is significant in 2026, we will do so as well.

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

The next question from the phone comes from Adrien Rabier with Bernstein.

Could you please quantify the merchant and the truck delivery impact in Q2? I guess my question is we're all expecting to see backlog translate into very strong sales growth. So how confident are you that the inflection will actually happen in Q2 and what's going to drive it?

Yes. So one of the point is, as I said, we have a growth rate in Q2 in comparison to last year, as I have shown you in the presentation, which is the best Q2 ever in this area. And part of that is that our expectation is that the customer really gives the permission to deliver. There are different problems on the customer side. Sometimes the customer has not enough driver to take over the -- it's massive of trucks, hundreds of trucks that we deliver. Sometimes, there is a contractual part, I should say, I want to have it in that month. And number 3 sometimes is a contractual part that the frame contract is coming later.

So the beauty is that last year, we had the problem in December. And now we switched it from December and January. This year, we have a point in the first half of the year, but we believe that we have, over the next 2 months, a final decision about the deliveries of the trucks. But what we do is, and this thing is also very positive. We continue production because there is no risk because the customer -- the customers, it's not only Germany. It's a lot of customers, they need these trucks. And with continuous production. And with that continuous production, we have a good leverage effect so that the profitability is fine. If you would stop. If you would start again, maybe we could have a better cash management in that area, but that wouldn't help us on profitability because going down, coming up, it has quality problems, et cetera, et cetera.

So in total, the numbers of trucks, and you will see it over the next weeks, we will sign new contracts on trucks, thousands of trucks, which are coming up, and we are totally relaxed about that.

The next question from the phone comes from Sven Weier with UBS.

A few questions from my side. I'm afraid I have to bother you again on the Boxer [indiscernible] contract and the F126, because on the Boxer, I mean, I understand the procedural questions around [indiscernible] and the procurement office and maybe some slicing and dicing on the contract. But what is your sense of maybe fractions in the MoD having second thoughts in general about buying tanks in general, and that would obviously be the biggest order in the history of the German army and how much they are maybe afraid of the media feedback if they are seen buying tanks was EUR 80 billion. And then people ask them why they're not investing more into new technology.

So are you getting a sense that they're having second thoughts because of that. And that is actually delaying the process, and should you not be able to also get more political loving because, I mean, [indiscernible] has done exactly the same as you in terms of investing into Boxer production. So shouldn't you also get like the [indiscernible] on board to do the right amount of lobbying for the contract in Merlin. Is that your sense that is it happening?

I believe, we do a lot of lobbying in that area. And this is -- I do not see -- so there are always very funny discussions about that thing. If you think that the Boxer with a modern inventory fighting vehicle target or a Boxer with a modern air defense kind is not a new technology. So what is new technology, if the people say the new technology is to create some software, we do this, but this is in these vehicles. And you cannot fight with software.

So this is -- it's always funny if the people say, okay, what are new technologies. And look, what we are doing, we do -- we do know long straight. We do missiles. We do drones, and we sign more contracts about that thing, but you need vehicles if -- and the point is always speak with the Chief of the German Army, speak with the politicians to say, okay, what you need is logistics. What you need is safe transportation of troops, you cannot do everything like in a death zone with very small vehicles, which has nearly no price. And as I said, it's not my words. It's a word of general [indiscernible] also that we had on the Hanover exhibition that to say a really cheap stuff, and we need high-tech stuff. But the cheap stuff at the moment, mostly that this is high tech. And this is a differentiator in thinking about that.

So I believe we need a mixture. And the mixture is to have high-tech vehicles to have high-tech ships. And it would be the same if we would say we don't need submarines and we don't need [indiscernible], but very soon, we only have unmanned vehicles. That will not happen for the next 20, 30 years. And the same will be on the land side. So therefore, I'm relaxed. I don't know how much they really in the first scale order, it was planned, and that is what we offer to have a fixed contract from Rheinmetall side of about 12 -- a little bit more than EUR 12 billion.

And we are still -- this is the only offer that we gave. And if the customer is coming back and said, okay, we want to change something, we will see. But I can say not more at the moment about that because that is what we did.

F126, so what was the real question about the F126?

I mean the question for me was more -- I haven't asked it yet, but the question was that kind of -- because you sounded like you're still sorting out supply chain, you're still discussing with the customer because it didn't sound to me like the order would be really ready for the budget committee in Q2 then, right? If there's still quite a few things that you need to iron out with supply chain and with the MOD?

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

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

There are 2 things at the moment. Government is one thing. The other thing is really the expectation that one or the other company has about the monetary packages of transfer of technologies. I cannot pay everything. So what I want to do is I want to have, let me say, a fair also package about that thing. And this is what also takes some time.

I'm not negative about that. The only thing is what we usually do, and this is what I said. If I can build up in 12, 14 months ammunition factory, it should be also possible to implement the technology that we have in that time.

Final question for me, if I may, just on the [indiscernible] because that hasn't been discussed at all today and in the previous calls. But just was wondering, of course, it has a place order in the '27 budget. I mean how you're seeing the progress on the program. Do you also sense that maybe U.S. is kind of rethinking it in terms of how many tanks they actually need? Or how things are going?

Yes, we are a full [indiscernible] on that program. So the prototypes are running to the army. The first tests are positive. And as I said, I believe beginning of '27, maybe end of '26, we have an indication of who is the -- which is the preferred system. I personally believe that the U.S. wants that. They have not new technologies. They have the same decision in the German and other major countries. By the way, the [indiscernible] very, very clear that how many tanks, how many logistics [indiscernible], et cetera, et cetera, we need. This is nothing changed in that. So -- and the Americans need that also. So I'm still positive that this program will come.

If they really order at the beginning, 3,000 or 3,500 vehicles, I really don't know. And this is also not my expectation. But if they only order 1,000, it's a great thing.

The next question comes from George Mcwhirter with Berenberg.

I got 2 [indiscernible] brief ones. Firstly, on the European Union, EUR 60 billion defense support package for Ukraine. Can you just comment on how much of that you think Rheinmetall can capture? And the second one is on air defense. So you're seeing quite strong demand for your products currently. Are you considering further capacity expansion in our defense than you previously outlined? Or are you sticking to your current plan?

Yes, European Union, the EUR 60 billion, I really cannot say at the moment how much it will be. What we did is we offered -- we gave a catalog. We gave a catalog with our capacities to European Union, how much air defense system, how much ammunition, how much drones, how much interceptors or whatever we could deliver. This is coordinated by the Office of the Commissioner in the European Union. So now because you know that the money is still not really running. The first money would be for about EUR 5 billion for the factories that we and others, which you have in Ukraine to have them and also the Ukrainian drone program that they can go forward in this area.

So if I would say, yes, I really don't -- I really cannot say how much from the [indiscernible] at the moment either. What we offered is huge, but what we get, I can give you a little bit later.

Expansion or capacity expansion we need -- and this is what I told before. We need more capacity again, and this is -- that is the reason that we invest on powder. And on [indiscernible] so as I always said, is Hexagon and Octagon. This is the next investment that we have. And we will make also an investment on base bleeds, and we will make an investment also on the laser side. These are the 4 things that we go forward and maybe also on AP, [indiscernible], maybe we invest in Germany, and the rest will be invest than in Europe. But we only do it if we really have then 100% vertical integration of everything, what's going -- what's going on there.

That's really helpful. Just a quick follow-up. You potentially looking to increase capacity expansion of the products in [indiscernible] Sky range and Sky Gaurd systems? Or is it any really the ammunition that might be -- might be for increased?

No, no. We won't -- at the moment, we have -- we build up a capacity of 400 Air Defense systems per year. And with that 400, the total capacity or the total sales if we are fully booked about that could be more than between EUR 4 billion and EUR 5 billion, so that we have to grow up on the defense side. And on top, we have, at the moment, build up a capacity of nearly 1 million of air defense rounds. And because we need that for air defense, but also for the inventory fighting vehicles, I think we have to invest more especially into the fuse production and the medium caliber production in this area.

So -- but these are not huge investments that we have to go to there. It's the beauty is that we did all the investments on the ammunition. This is the most expensive side. On vehicles, on air defense, on electronics, the investment is much smaller than on the ammunition because on ammunition, you have to make a chemical plant. You have to build up an asset plant. You have to build up big mixers, you have, yes, a chemical factory and these are huge investments. If you want to produce vehicles, yes, you have to buy some tooling. They have an either production line in that area, and I have to have the supply [indiscernible] control.

The next question comes from Marie-Ange Riggio with Morgan Stanley.

I have a few follow-ups basically. The first one is on Germany because you mentioned the recent German package of the [indiscernible] 3 different phases. Can you explain us how do you believe Rheinmetall will be placed in terms of project exposure or potential growth for each player. So that's the first one. On air defense, again, it's a very strong quarter across all the metrics and especially on your phase because it's above [indiscernible] your sales growth expected for the year. So how should we think about the [indiscernible]? And is there like any indication to believe that guidance is a bit conservative, especially with a higher and unexpected demand from Middle East?

And the last follow-up is on the U.S. and beyond the X30. Is there like any recent development in terms of opportunity across any offshore activities, given the fact that we are seeing quite a significant increase of the U.S. project?

So in the 3 different areas on Rheinmetall, I think Rheinmetall has to be and will be one of the main players here in Germany about that. We are, at the moment, and we will continue, especially because we are now also in the satellite business, we are now also in the naval business, et cetera, et cetera. So we have all domains, and we will be a good service partner. And at the end of the day, and this is the point to make our customer happy. We have to serve the customer and then you play a good role in all 3 areas where the German government wants to be up to 35 or 40. So I'm very sure about that also in service and other things in the logistics. If you see what we are doing at the moment also to build up for transportation, for ammunition, for storage for vehicles.

As you know, we have to store vehicles because if we have -- if we get all the vehicles and if we have 200,000 people in reserve, you have to store it, you have to maintain them, maintenance them. And you only can do it if you have the IPRs and the know-how of these vehicles. Otherwise, we are not able to do it because they lose also guarantee. And so I think we play a really a very strong role.

On the air defense side, yes, I believe there is a huge need on the Middle East side, but not only on the Middle East. There will be a game changer on how to fight against drones. And it will be a mixture, and some of them -- a lot of them will be drone based. And it's not only at the air defense system that we have at the moment. We offer now also a new defense system, which is where we produce with other calibers, maybe 25 millimeter, but also with 0.50 with acoustic sensors where we fight automatically, and this is a small robot who is doing that fighting automatically on vehicles against that. This is new demos that we gave to the German government now or will give over the next 2 weeks. There are huge more opportunities on the air defense side.

So at the moment, the drones, the category 1 drones are very dangerous. As you know, in the Ukrainian -- in Ukraine, they take these net. There are 3 areas where the small fishnets are inside. And with that net, they catch them. And in the future, there will be very cheap systems as we said. We have, for example, a 40-millimeter hand gun, which is where we are able to catch drones if the soldier -- if the inventory guy is running around. So there are a lot of new technologies that are coming up because, you know if there is a guy who is acting who is giving you also a new threat, you have to fight against that.

United States of America, it's XM30. It's [indiscernible] we offered now also the ancillary program. This is the RCH. Rheinmetall offered that because we have to [indiscernible] mitigation in the United States. We offered autonomous vehicles. We offered a new gun technology, which they want to implement about that. There are minimum 10 programs. We have huge programs on the missile side because the U.S. want to produce much more missiles. Rheinmetall is a component producer for missiles in the United States. So lock performance is producing components for the United States.

So you say, Marie-Ange, it's huge. It's a lot of programs that we offer there.

The next question comes from Afonso Osorio with Barclays.

I have a couple as well. The first one is on this [indiscernible]. Correct me if I'm wrong, but looking at your previous slides from the CMD last year, you had the pencil contract to Italy falling in 2027, but now you have this falling in the second quarter of this year. I just wanted to confirm the exact case and also the potential size of that opportunity? That's the first question.

And then secondly, like bigger picture, given the significant increase in the German budget next year, just wondering how can you -- how are you thinking about your long-term targets? Is there upside for the long term because of that outfacing 2027? Or do you think it's still too early to say?

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

Yes, it does help. Just to confirm with the [indiscernible] contract that was expected before in 2027. That definitely this one in [indiscernible] , right?

We have it on the Page #21 as part of the EUR 18 billion [indiscernible]?

And what's the size of that one? If you can confirm.

It's a [indiscernible].

The next question comes from Chloe Lemarie with Jefferies.

I'd actually like to follow up on Ben's question on the missile [indiscernible], should we assume that the JV business would be able to replace what the Lockheed marketing would have contributed to the EUR 5 billion revenue project if it doesn't materialize? Or is it exactly the same scale from your perspective?

On my second question, if I could ask on the F126 order, how long should we assume from the order until it starts hiking to revenue? And what would be the revenue rent profile? Is it like a step -- step change? Or is it like going to be a progressive right?

So the missile is an add-on. On the missile side, it's an add-on to that, what we have. As I said, missile are -- as a businessman, you will not take all the eggs in 1 basket. So what we want to do is if we invest between EUR 100 million and EUR 200 million into rocket motors, if we invest EUR 50 million into an assembly hall to make missiles, I won't be sure that we can fill this factory. So that is the reason that we are looking for different partnerships. Lockheed was one [indiscernible] be another one. We are in negotiations with them if we can do something.

European partners want that we have the European sources. They want that we do something and that we build up capacities here in Europe. And it's a win-win situation also for the Americans because as you know, the American capacity is not so high that we have -- that they have a problem also to deliver. So what we want to do is we want to make risk reduction program that we do not have factories which are not fully filled even if the need is huge outside. And we want to call it a qualification programs in different areas. So take the risk data.

F126. On F126, if we sign the contract, we will have the POC mechanism in this area and with the POC mechanism, we will -- we can book sales not immediately, but over the first year and then year by year. So what we want to do is we want to have a ready ship in '29, and we want to have ready for sale in '31, latest '32. This is what we want to do, and this is what we speak at the moment. '31 would be possible, if we make parallel qualification programs with the German Navy and our internal qualifications, but we don't want that, let me say, all the sales will come when we deliver the ships because we have a lot of cash and also the cash must be in milestone payments above that. So we take care about that. Otherwise, it would be bad for us.

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

Just one question on my side. And it's one of our ammunition really and the competition there with the JV between deal and [indiscernible] getting the green light to proceed. I guess, how do you think about the long-term competitive landscape for 155-millimeter artery production and how well protected do you think your market shares are there?

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

No, not at this point.

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

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

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

Ladies and gentlemen, welcome to the Rheinmetall AG Full Year 2025 Conference Call. I'm Mortz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions]

The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Armin Papperger, CEO. Please go ahead, sir.

Thank you very much. Good afternoon. I start with Page #3, and I welcome you to the full year call of the Rheinmetall Group. The year 2025 was a good year for Rheinmetall. We had smaller impacts from the ammunition side because of the accident that we had in Murcia. But I think with nearly EUR 10 billion sales, it's a good year. The operating result is growing 33% to EUR 1.841 billion, and the operating margin is growing up to 18.5%. Important is to understand that we no longer have our civilian business into that figures. So we reduced about EUR 2 billion on sales. Also reduction on headcounts. On the headcount side, we are now without naval and without the civilian business on 29,000 people. Very positive, we see the operational free cash flow.

Even if we had this strong growth of nearly 30% on the defense side, we had an operational free cash flow of EUR 1.218 billion, which is a plus of 15% in comparison to last year. CapEx is on a level of 7.8%. That's important because we continue to grow. As you know, we invest into all these factories to build up the capacities. On the nomination side, we had -- we have a delay this year in '26 will be -- there is something swapped into '26. But still, the Rheinmetall nomination growth was 9% to EUR 26.4 billion. So the Rheinmetall backlog is -- and we also reduced the backlog from the civilian side. It's about EUR 8 billion that we reduced on a level of nearly EUR 64 billion, a plus of 36% and all that is now on the side. Let's go to the next slide.

On the next slide, we see only some words about the macro highlights, and this is very clear that we have a disruption of the geopolitical order with the new conflict from the Iranian side, also the whole Middle East oil price and all the things are under shock. And on the next page, you see what is the impact for Rheinmetall. So Slide #5 shows that the attacks from the Iranians is going to a lot of countries in Middle East and all or nearly all that country have Rheinmetall air defense systems. So they are very successful and they fight very successful against drones. So the Oerlikon Twin-Gun, the Millennium gun and the Oerlikon Revolver gun is in all that countries. And we expect strong orders over the next months because over the last 5, 6 days, these countries asked us if we are able to deliver fast more of our systems. The reason is that in the first 72 hours, the U.S. and the allies of the U.S., they expanded 2,000 munitions. And the cost of that was EUR 4 billion, about EUR 4 billion.

These are official numbers. And if you see how strong are the stocks of these air defense munitions is that over a period of next 2, 3 or 4 weeks, if the conflict continues like it would be over the first 2 or 3 days, the stocks should be empty. So we need -- and that's the reason that we developed our Skyguard, Skynex and our air defense systems that we are able, if we use 5 rounds to fight with $5,000 against a Shahed drone, which has a price between $20,000, $30,000 up to $50,000. The missile cost is between $500,000 and $3 million. So there are 2 drivers on business for us. One is our air defense systems, where we believe that we have huge opportunities on the other side is to fill up the gaps of missiles. And with our missile new missile production line, I think we have huge opportunities also for new contracts. If you have a look now to Page #6. Here, you see the macro view. On the geopolitics, you see the increase of tensions, very clear, I must not say about that and drive -- and we have to drive the European sovereignty. These are the 2 drivers on the geopolitical side.

On the financing side is the German budgets. These are the EUR 100 billion. There are also the EUR 500 billion, which are coming up, SAFE money of EUR 150 billion, SAFE II in discussion. And as you know, NATO target, not all the NATO countries will fulfill it of 3.5% on core defense and 1.5% on infrastructure. Rheinmetall will have in both areas on the core defense and on infrastructure, some projects. So that is the reason that we expect that there is a potential this year of EUR 80 billion on orders. We are not in time on the order side. There is a delay from the customer side. It's not from our side. It's mostly because the capacity on the customer side are limited. But at the moment, there are only smaller delays. There is nothing canceled, and there is nothing at the moment in danger, and that's positive. What is on the Rheinmetall side in preparation? On one side, for sure, we have to build up the capacities.

We do that, and we are in line with that what we always told on the capacity side. The same is on the personnel people recruitments, more than 300,000 CVs came in. And on the supply chain, and we have a stable supply chain, but we have to grow up the supply chain with the second and the third source to be more stable also in the future. But at the moment, no big problems, absolutely no big problems on the supply chain side. That's the reason that the CAGR is on around 35% over the years and also over the next years. What are the next highlights? We have now all domains under one roof. And this is what you see on Page #7. The reason that we acquired Naval Systems are on one side, naval will be a big business only in Germany.

Over the next years -- 10 years, the expectation is that the German Navy has to spend nearly about EUR 80 billion for naval systems. The second point is that we want to implement the naval systems into our digitization family, and therefore, you need platforms. And number three is that we, on the naval systems side, are able like on ammunitions and vehicles to do a vertical integration, create also internally in Rheinmetall more value and to be able, like on ammunition also to enlarge the profitability on the naval business. So we took over 9 sites, about 2,100 employees in that area, and I'm very happy to have these people on board because very well educated people. And the backlog between EUR 5 billion and EUR 6 billion and decisions that we expect this year for F126 and F127, which are a potential of, I think, more than EUR 12 billion order in '26. Let's have a look to Page #8. Here, you see what we did last year and what we want to build up the capacities. And as you know, most of the capacity buildup already in '27. So in 2026 is a very important year.

But we are in time, capacity ramp-up from the artillery lines. The capacity enlargement in Spain is ready. The capacity enlargement in Unterluess is on a good way. So we expect that we are able to produce about 140,000 rounds in Unterluess this year because of the ramp-up curve. Next year, we grow to 250,000 and then to the maximum capacity of 350,000 rounds. Murcia is back on track. So we are now in full production also on powder and green and white packs. And the rocket artillery starts in Q1 '27 with qualification so that over the year '27, our product should be qualified so that the sales will come in '28, the first bigger sales. On the vehicle side, we have the -- to optimize the production cycles. We were very successful in this area. We reduced the production cycles a lot. The level of automization is a very important thing to come forward in these areas. We recruit a good workforce and which are good. We have no problems about that. And we are ready on the truck side.

The capacity is still there on 4,500 inventory trucks and inventory fighting vehicles and APCs, we are on a level of 1,000. Air Defense, the EUR 3 billion backlog on the air defense, we have to bring into sales. We prepared an additional factory for that with 100 new air defense systems here in Germany in Neuss, 150 in Switzerland and 150 in Italy, then we will grow up to 400 systems. On the digital systems, it's people, people, people because of the algorithms, more than 400 software engineers now on board. And the integration of blackned, which is very important also for D-LBO worked. And the initial TaWAN demo was successful and was completed. Is it easy to handle all these projects? No, it is not. But on the other side, we are in a very good way also together with the customers to bring it into the right direction. Page -- the next page is Page #9. You see that we have -- we built up partnerships also for a huge contract on the space side. As you know, Minister Pistorius gave very clear order.

We need a total budget at least of EUR 35 billion for the satellites. The first SAR contract of EUR 1.7 billion plus nearly EUR 1 billion option is signed. And we created a joint venture, and we are on the way. It's still not signed, but on the way to create this joint venture with [ OHB ] a partnership with our German partner. And on the communication side, there is a potential of at least EUR 8 billion to EUR 10 billion. So up to 200 satellites -- communication satellites are expected that we have to bring into space up to 2029. If you have a look now to the next page, you see that the Rheinmetall drones -- and by the way, we produce drones since 25 years. This is always an interesting story if we see that Rheinmetall is a newcomer in drone production. I think we are one of the first producers of drones. We fired in front of the German customers, these drones.

As you know, the Germans want to have a pure German solution. We fired more than 1 year ago, our German Israeli solution, but now we have a full qualified German solution. The test -- the firing tests are fine and also the digital tests were fine. We had 100% accuracy hit rate in this area. And we see a total order potential, as you know, because the German Bundestag limited it to EUR 1 billion. But this is for us, I see only the starting point. We build up a capacity on the drone side here in Neuss, but also in Italy, a capacity up to 40,000 drones per year. How is it scalable? Very easy. The point is you need the warhead. The most critical thing is the warhead and the booster to push out the points because this is like a small missile.

And -- but we have that under control because we produce it by ourselves. Electronics is not -- and the structural part is not a bottleneck. And we have the [ gimbals ], which are also there, which is also a unique USP from our side. with the gimbals, you can, over a period of 70 minutes, make also create a reconnaissance drone even if you fight or if you don't want to fight a USP, which has Rheinmetall. Another USP is the warhead. We have a 6-kilogram payload, warhead on that. And this has a very, very good penetration rate, I can say, not comparable to other drone producers. So we see it very positive, and it could be medium and long term, a good business also for Rheinmetall, and we are prepared.

Now I take over to my colleague, Klaus Neumann. Klaus will show you now the financials.

Yes. Thank you, Armin. Let's turn to Page #12. Just to give you some more detail and background on the development on our sales and operating margin. It is quite important that the large part of our growth in 2025 of 29% was basically organic was coming from the development of our existing business, about EUR 0.5 billion was contributed from acquisition, mainly from the acquisition of Loc Performance that we acquired late in 2024.

Our operating results increased by 33% to EUR 1.8 billion, resulting in an operating margin of 18.5%. Again, the growth of the result and the performance came from primarily existing businesses. We had some smaller downward impact on the FX on sales and smaller on results, mainly from the U.S. dollar exchange rate as the dollar deteriorated over the year of 2025.

Let's turn to Page #13 to look deeper into the performance of the different Segments in our business, the strongest growth percentage-wise was from Electronic Solutions at 45%. The business grew from EUR 1.7 billion to EUR 2.5 billion, at the same time, increasing the profitability to 14.6%. That is an increase -- improvement of 2 percentage points from the 2024 level of 12.6%. Vehicle Systems grew by almost more than EUR 1 billion. This growth was basically pushed by the contribution from Loc Performance. And also that business improved its profitability from 11.2% to 11.7% The main drivers from -- that contributed to the sales in 2025 were the technical vehicle programs in our different locations and also we had a strong contribution from the logistical vehicles.

The increase on the growth of weapon and ammunition at 27% in 2025 was very strong, considering that the growth was limited by the issue that we had at our site in Murcia as we discussed throughout the year that basically reduced the sales number by more than EUR 200 million in 2025. If you look at that, then the growth would have been even stronger than the 27% that we are reporting for 2025. At the same time, profitability increased to 29.3% and the division for the first time, generated an operating result of more than EUR 1 billion. Overall, our group increased the sales by, as mentioned, by 29% One comment to the consolidation line. We had a positive contribution in 2024. So there is no otherwise strong change in the numbers compared to 2024.

Let's move to Page #14. As a result of our increase in profitability and our performance, also earnings per share, increased significantly to EUR 25.28 per share with also some impact from the strong performance of some of our minority -- the business with minorities, primarily in South Africa and the vehicle business in Vienna, our joint venture with MAN. As a result of our strong performance in 2025, together with the Supervisory Board, we are proposing a dividend of EUR 11.5 to the Annual General Meeting in May. Let's move on to Page #15. As mentioned, all the numbers that we are discussing do not include any contribution from our automotive business. As you know, we decided in mid-December to finally go to the next and final step of the disposal process. From that moment onwards, we are reporting that business as a discontinued operation.

I think it's quite helpful just to show what the numbers would have looked like if we had continued including the business in our numbers. At our Rheinmetall backlog number, we would have reached about EUR 70 billion at the end of 2025 on sales would have reached or have reached, including those numbers, EUR 12 billion. The operating result including the contribution from the Power Systems business went up to EUR 1.9 billion, equaling a profitability of 16% compared to the EUR 12 billion sales number. Let's move to Page #16 to give some context on the -- our development on our nomination and also our backlog. As in the previous year, our book-to-bill ratio was in excess of 200%. The nomination of EUR 26 million, excluding any numbers from the Power Systems business included EUR 20 billion of fixed orders.

So it's a kind of key important basis for our growth in the coming years that contributed to an order backlog of EUR 64 billion by the end of 2025 out of the EUR 64 billion of backlog, EUR 41 billion are fixed orders. Let's move to Page #17. Just to go a little bit deeper in our cash flow numbers. As you can -- as in many other years, we have very different quarters in terms of the cash generation. 2025 was no different in -- in Q4, we saw the biggest positive cash flow of the year, exceeding EUR 2 billion in these 3 months alone, contributing significantly to the EUR 1.2 billion generated through the continuing business in the year 2025.

One key driver for the positive cash flow in Q4 were good negotiation or successful negotiations with our customers that agreed to substantial advance and early payments from new orders. When you look at the right side, the development of the working capital, you can see that basically the EUR 1 billion buildup of inventory that we need to produce the orders in 2026 in the following years was mainly funded through prepayments from the customers. So the customer contributed EUR 1.2 billion to our cash -- working capital improvement. At the end of 2025, operating working capital for the business was just under EUR 500 million. Let's turn to Page 18. Just to give you an update on our financial position.

The financial position was positively impacted by the cash flow, as I explained before, but we also had a good contribution from our convertible that was converted throughout 2025 and there were further conversions in 2026. So by the end of February 2026, 83% of the Series B convertibles were converted. Series A had already been fully converted in 2025. That also improved our equity ratio that now stands at 33.5% at the end of 2025. The strong balance sheet and our good liquidity position that for the first time, basically was positive at the end of the year is a good basis for the acquisitions that we did at the end of February when we acquired the Naval business. But even after that acquisition, our balance sheet is strong to continue basically a growth path where we are able to also acquire businesses when it fits into our strategy and portfolio.

With these comments, I hand over back to Armin for the outlook of our business.

Thank you, Klaus. So Page #20 shows us now the nearly EUR 64 billion backlog without automotive. Then there is an NPL impact. So the Rheinmetall naval business, EUR 5 billion to EUR 6 billion backlog, and we expect nominations of minimum EUR 12 billion. Then there is the Rheinmetall nomination from the German side, where the biggest piece for sure is Boxer. I will come on the next page on the details, but also ammunition armored vehicles like the [ Puma ] trucks, et cetera. So EUR 55 billion. as I said, some of this business stepped from '25 to '26, but it doesn't matter. It's only a delay. For us, it doesn't matter. On the Romanian side, Italy and Ukraine, you see the international business where we have an opportunity of around EUR 16 billion.

So that in total, we expect for -- and the exact timing, if it is coming in Q2 or if it is coming in Q3, for example, the big contract on the Boxer and also the ammunition contracts, we hope that we can do as much as possible in the second quarter. But if it is coming into the third quarter, it's, I think, also okay because there is no influence about the sales. On the sales side, the EUR 14 billion to EUR 14.5 billion we have a coverage rate from 91% so that nearly everything is inside the books that we need and especially service business for chemical stuff, et cetera, et cetera, is still not in, so that the coverage is nearly 100%. So it should be relatively safe to get this sales, which is then 100% defense sales.

So then the backlog in the end of '26, there is a potential to get EUR 135 million. If you have now on the next slide, Slide 21, a few on the biggest program at the moment that we are in negotiations. This is the Boxer program or the Arminius program, how the customer calls it. And there is for Rheinmetall, a total potential of EUR 38 billion where that EUR 12.5 billion in Q2 or Q3 would be -- is expected as a fixed order, and this fixed order is also expected with down payments. So this is the driver for operational free cash flow, and this is also the driver -- the big driver for the order intakes. But ammunition trucks is always multibillion contracts on top, but the real big piece is the project Arminius.

And you see the different variants and you have variants from Schakal on the left side to the air defense Boxer. Then, FlaRak Boxer, which has a lot of different variants, which is a long, long-term program at least to 2035. But in our discussions, we are up to 2040.

If you have a look to the next page, it's Page 22. There is a new business, and this new business could grow very strong also. This is the service business on defense to handle ammunition. As you know, it's not easy to do it because you need the rules and regulations to handle also weapon systems and to bring different systems from the western part of Europe to the Eastern part of Europe. This is with infrastructure, with logistics, a big opportunity with an order potential over the next years, maybe the first contract, it's a smaller one, EUR 200 million to EUR 300 million, it could be -- could come in April. But if it is a frame contract, it could go up to EUR 7 billion.

Now from the service side, let's go to the D-LBO side. Really, we try to step deeper inside because that's a very important program for Rheinmetall, but not only for us, also for Bundeswehr. So what are the interface points. And the first point is that the army has to give us the vehicles. So this is the first interface point. Why? Because we have all these vehicles at the moment in service. So they have to take it out of service, they have to give it to us. And then, first of all, there is a hardware retrofitting for radios, monitors, servers and et cetera, et cetera. So we are, at the moment, on the Rheinmetall side on a level of, I would say, 95% to be ready. So we are not on a 100% level, but 95% is fine.

The second point is then to integrate the software. And on the software side, Rheinmetall has a very important role because Rheinmetall has the so-called tactical core. And in the tactical core, we connect hardware and software components into our tactical core. And that is a huge team at the moment, working on that. And the software optimization is the point that we have to fulfill. And after that, if the function testings are really going forward, then the vehicle can be again handed over to the Ministry of Defense.

We try to do it on this simple picture, but if one of the steps has a delay, the big problem is that we have a delay on the vehicle handover and the army is missing vehicles. So that's the reason that also the Minister says it's such an important project. And as I told, for Rheinmetall, it is absolutely priority is number one. It's the most complex digital program at the moment worldwide that we are doing. But I think we are not in a bad way. It's good at the moment.

So if you have a look to the next page, Page 24. What is -- what are the clear targets for '26. This is the integration of this Rheinmetall NVL Systems. That's very important to have the vertical integration, as I told before, on the Rheinmetall and NVL Systems. The second point is the capacity ramp-up. We are in a good way, especially on the vehicle side, ammunition is full in scale and for sure, the order execution. So these are the main points to fulfill the sales.

And if you have a look now to the figures, there again is the -- on the sales side on '26, we will have a growth rate of 40% to 45% on sales up to EUR 14 billion to EUR 14.5 billion. And the -- on '25, you see the nearly EUR 10 billion to EUR 14 billion to EUR 14.5 billion. And pro forma, if you see, we had EUR 11.8 billion in '25, so if we would add the civilian business. Operating margin is growing from 18.5% to 19% and the expectation is that the operational free cash flow will be also good in '26 even when we were good in '25 with EUR 66.2%.

The last page shows you now the growth rate where we are growing. We will have a growth rate of about 20% on the vehicle side from EUR 5.9 billion to EUR 6 billion. Weapon and Ammunition 40%, this is the driver for this year. This is a driver of success, 40% plus. This is because of the delays last year because of the accident that we had in Spain, but because of the market. And as you have seen, we have the business 100% booked. So that only operation problems can stop us.

Digital Systems, again, a strong growth of 27% and Air Defense a growth rate of 25%. This is maybe -- there is more in maybe if now the conflict with Iran are going forward and the Middle East is also coming up. What we do at the moment is really to grow in that area and to invest also in these areas like here because we believe over the next 10 years, there is a huge need.

And then Naval Systems with EUR 1.3 billion to EUR 1.5 billion. It depends a little bit also about the decision of F126. And when we can start it, and I hope that over the next 2 to 3 months, we have a final decision on F126 where Rheinmetall can book this order. If you see the operating results, we are not everywhere in the target corridor. Vehicle system, 12% to 13%, Ammunition is around 30%. So we are there where we want to be. The Digital Systems is still on a growth base because of all the investments. By the way, there is also our air system, not air defense, but our air systems like F-35 and the drone business, where we have to invest. Air Defense is with 19% in good shape. There is also more in, and the Naval System between 11% and 13% is still not in the corridor where we want to be because as you know, this is our target to go to 15%. So that -- we'll have margins of about 19% EBIT growth.

Thank you very much for your attention. And now we are ready for Q&A.

[Operator Instructions] And the first question comes from Sebastian Growe from BNP Paribas.

The first one would be around the order pipeline. You pointed to the delays in the German or the German customer in fiscal '25. And given that you're hinting towards EUR 80 billion orders in the pipeline for '26, what is the approximate volume that you deem highly visible in this year in '26? And probably what goes beyond this EUR 12.5 billion related to the Arminius program? And related to that, what is the amount of firm orders that you would expect in '26, i.e., those that would then qualify for receiving also this 20%, 30% down payment range that you had mentioned on the last call. And then I would have one more around the Weapon and Ammunition business, but maybe we take this one first, please.

Yes. So by far, the biggest one is Arminius. On the Arminius side, we speak, as I said, about between EUR 12 billion and EUR 13 billion. We expect that the down payment rate is between 20% and 30% of that. This is what we have at the moment in negotiation. The second big piece is a contract for the ammunition. On the ammunition side, we expect a fixed contract between 600,000 and 700,000 rounds full shot artillery. And this is also a multibillion contract. Usually, on the ammunition, the down payment rate is also 20%, between 20% and 30%.

The next big piece is the Puma contract. They asked for a new contract on the Puma side. This is, in total, in Puma, we see another potential of minimum EUR 3 billion, but up to EUR 5 billion, not everything may be in this year, but it can be EUR 3 billion in this year. By the way, it continues also later. It is not the final stage that we have now we book everything and then everything is done. This is a continuous process.

Then we are now in negotiations with a new truck process. They need more protected trucks. This is also more than EUR 2 billion, et cetera, et cetera. So these are the points where we are. Medium caliber ammunitions, SMArt ammunition, 155 SMArt ammunition. So there are, I believe there are hundreds of contracts at the moment, but this is only the very big ones. Is that okay?

And so -- it is. And just to clarify that, if I take then the EUR 12 billion, EUR 13 billion Arminius, maybe what you said around ammunition would point me towards EUR 3 billion, maybe rather EUR 4 billion, the Puma EUR 3 billion. So we're easily approaching like EUR 20 billion on the firm order side that you would deem very realistic this year and then the rest might be more on the frame side and things like that.

No, there is more fixed -- there are more fixed contracts. They want to change more and more to more fixed contracts. I think also the smaller contracts for sure are fixed contracts. There are hundreds of smaller contracts, which are EUR 5 million, EUR 10 million, EUR 50 million in this area. So I think it is more -- it is very stable. So as you know, we are fully booked and that's important. We are fully booked for '26. So in '27, over the next months, there is -- we still have also in '27 a rate it's I think is more than 50% -- in between 66% in '27. So with the growth rate that we have.

And we expect on the growth rate that we are able to grow more than 30% year-over-year. As I said, this year between 40% and 45%. And for the next years, the backlog is also huge. Also the fixed backlog. And the other program, nobody will stop it. Yes, if you go on the program like the 8x8 vehicles or the infantry fighting vehicles, you see that all the vehicles, the trucks, the ammunitions, all that was expected came or more. And the reason is also very simple because we still have nothing. On the ammunition, we have nothing on stock. Everything is going still to our partners in Ukraine, and we have to start for our stockpiling.

That's fair. And then if I may quickly move on then on to the ammunition side and considering the latest developments in the Middle East and the related importance apparently of missiles and also air defense as such. What is the incremental opportunity that you see here, given that the rocket artillery is starting in quarter 1, '27? And you will also need time to prepare for the full ramp on the Skyranger. So how quickly can you really respond to these incremental, a, requests? And b, what could it do to the previously communicated targets in that particular business area?

A strong driver will be really the gun based system, and we are able and we are at the moment in negotiations, and this is very, very fast to -- for the gun based systems to deliver in August, the first systems also to the Middle East because we are in production, even if we have no contracts, we produce that system.

We told you that we are ramping up to 400 systems. And for that systems, we need -- we must be variable to go into the direction to give the customer directly systems and directly impact. And if we can deliver in August and they are trained because most of the states have our systems, they can use it immediately. Nobody knows at the moment how long the conflict lasts. President Trump says tomorrow it stopped, but maybe it's not stopped. And we will see, but these countries prepare themselves.

Over weekend, I have a bunch of phone calls with very high ranking guys on the Minister level to say how can we help. So that would be helpful for us on the system side, but on the other side, on the ammunition side. So we need much, much more ammunition. And the driver #3 is then on the missile side that we really can start. I see that we have a smaller impact in '27 but in '28, we should be ready. Missiles are not as easy as our ammunition because on the ammunition, we have to produce more from the same. But on the missiles, we have to produce new technologies. So it's not as easy.

And the next question comes from Christoph Laskawi from Deutsche Bank.

The first one on '27, you highlighted in the slides as well that you're ramping up a lot of capacity in '26. You're preparing strong growth for '27. You had guided in the past to EUR 20 billion to potentially EUR 25 billion of revenues in '27. Obviously, that was including Power Systems. Now that is out, Naval comes in. Could you, as a first question, just comment a bit on where you see the '27 now? And roughly the order coverage, if I understood it correctly, you're above 60%, around 66% in the comments you just had. And also, if the EUR 20 billion plus again still stands for '27.

And then as a second question, just coming back to the Air Defense and reaching the 400 units essentially per year. Are you fully booked already now with the orders that you have on hand? Or can you fit in the Middle Eastern orders? And with that, get to a rate which is closer to 100% capacity utilization in the coming years?

I think we can fit. We also can grow up. It's not a huge investment also to grow up in the air defense system. So if we need more than 8 systems per week and this is what we plan at the moment, we can do that. The investments are not so big. The only thing what you need, you need a supply chain under control, but a lot of them from the supply chain we do by ourselves. We produce the weapons, we produce the weapon feeding systems. This is an internal production so we can grow up in capacities.

I have not a full picture at the moment how much this really will come because, as you know, in Middle East, you need the contract and not the negotiations. It's not like Germany. And if you have the contract, then we can give you an overview about that. I have not the full picture at the moment. But the opportunities are huge. This is for clear.

Second point for '27. We stay on the way, and we want to have the growth rates like we discussed and in our planning is a growth rate between 30% and 40% CAGR over the period up to 2030. And this is the reason that we are able to reach this EUR 50 billion if we are able also to make M&A processes over the last years, we were very lucky about that and we made it happen and we made good acquisitions. So we stay, Mr. Laskawi, to that figure.

Just a quick follow-up, if I may. As you mentioned M&A. Is there any updates on the Iveco truck side? Is that progressing as planned or?

Yes. There is a delay in the -- why? Because Leonardo is now able to make the closing. And if the closing is done, then we are able to step in. As you know, we had a handshake agreement that Rheinmetall takes over the trucks and the technical vehicles should be took over and if they took over from Leonardo site. We are weekly in discussion with the Leonardo team in these areas. We are working on our due diligence side in this area, and we would be faster, it should be faster, but the first deal between Iveco and Leonardo had a delay, and then our deal has also a delay.

Then the next question comes from Marie-Ange Riggio from Morgan Stanley.

I have 2 actually. The first one is on the backlog because this year, it comes EUR 6 billion short orders compared to your initial target of EUR 70 billion. So my first question is like should we expect this EUR 6 billion orders to shift into '26?

And my second question is probably a bit broader, but I understand that it's not a question of demand, but more a question of delay. So is there like any change in the German procurement process to prevent for further detail and to provide your confidence about the EUR 80 billion nomination for this year? So that's the first one. The second one is on Germany because you mentioned during the call that there is a EUR 500 billion package of order in Germany. So do you think like you can keep the same capture rate around 40%, 45% as the previous package? And how much has been already allocated?

Yes. I can say that the German institutions are working very, very hard, and there are delays, but it's only because of this huge growth inside. You know the organization, also the BAAINBw organization is not able to grow as fast as they handle a contract. So I have a full understanding even if OCCAR is doing something, but the main task has -- is clear on the BAAINBw and the [ buyout] in Germany. They are good. Yes, there is -- they have slipped something from '25 to '26. For example, what we expected is to book this 600,000 to 700,000 artillery rounds in '25. Only that is a multibillion contract in this area. And that is what we missed but it's not gone. The only thing was that it came back to the State Secretary, the State Secretary says, is it up to '29? Or is it -- or do we have to book it more to 2030 or '31 et cetera, et cetera? We will have over the next weeks a decision, but there is a delay.

But I'm not afraid that we have a basic problem. This is not a basic problem. It's really a problem because the size of the contract and the number of the contracts are so high that the parliament, the BAAIN, the Ministry of Defense, all of them are really busy. They are really busy. We as companies we are also busy because at the end of the day we have to write the offers. We have to go into the negotiation, but it works relatively well. Not everything is in time. But as I always said, Marie-Ange, if I get it 3 or 4 months earlier or later for me, it doesn't matter because as long as I'm booked for this year and nearly then also for the next year, and this will be very soon. We are not in hurry. So we have enough time to do it.

The EUR 500 billion package I can exactly say how much we booked for the EUR 100 billion package, but I cannot say exactly about the EUR 500 billion package and what is the reason. The reason is, first of all, there are new -- a lot of new packages like the naval package where we have not such a lot of experience than on ammunition. On ammunition, on vehicles, it was relatively simple for us to say, okay, okay, this is the packages that I get.

My expectation is that Rheinmetall still has a very, very high value in this area. If it is 42% or whatever, please, I cannot give you the figure. The only thing what I can tell you is that we are in negotiation with the German government with a very, very high number also for this year and also for the next years of that EUR 500 billion package. And this EUR 500 billion package should then go up to 2030, as you know. This is not only for 1 year.

The next question from Adrien Rabier from Bernstein.

First question is on cash and the cash guidance, please. Could you elaborate on what the assumptions are in the guidance? It sounds from what you said before in that call that it could be a lot higher than 40%. And then hopefully, a quick question on Weapon and Ammunition, please. Can you comment on where you think the inventories are at the moment? Are they improving?

Yes. Klaus Neumann speaking, I'll pick up the question on cash flow guidance for 2026. The 40% that we have guided, although higher than 40% is in line with our basically midterm strategic ambition or guide for our current growth phase. And we see potential to generate significantly more cash, but it's highly volatile, and it really depends on the level of prepayments that we can negotiate and the timing of the orders when they exactly will come in. If you look at 2025 and as I explained, we needed an increase in customer payment through prepayments of more than EUR 1 billion to reach the level that we achieved in 2025.

In 2025 -- 2026, the level that in prepayment, the total amount will need to be bigger just to reach the 40% because we will invest significantly in the expansion of our facilities and the automation of our vehicle plants that will take -- require lots of cash, and we also will continue to build up stock to basically -- to support the production of our existing orders. So while there is potential above the 40%, considers some level of prepayments that we receive, but we think that will be...

Adrien, it's I think a very -- if I can say from my side, a very, very simple thing, not only for Arminius and ammo contract with EUR 12.5 billion and EUR 3 billion to EUR 4 billion runs we would have -- we could have a down payment, if all the negotiations are running well, up to EUR 5 billion. And then we don't -- we must no longer speak about cash conversion rates, yes. At the moment, it seems to be that we are in a good way, but it's not a done deal. And so then everything is fine. And I asked the question on one of the investor conferences. What happens if we book EUR 5 billion, EUR 6 billion, EUR 7 billion cash and have a cash conversion rate of whatever, 300% or 400%, what happens the next year.

Then the next question comes from Chloe Lemarie from Jefferies.

Yes. First one actually would be quite high level on space. I think Armin, you mentioned on the press call that you aim to build a big satellite consortium in Germany. Could you maybe flag which areas you're targeting? And in particular, when compared to the other planned consortium between Airbus, Leonardo and Thales, so how aligned would you be on the German defense needs, the European institution goes into space? So yes, if you could shed some light on what exactly you're aiming to do there.

The second question would actually taking another stab at the free cash flow guide. But just within the 40% conversion that you're targeting, could you maybe share how many advances consumption you factored in, please?

So the first -- from the space side, the first question is, as you know, we booked the SAR business, and we do this, as you know, with ICEYE. And the reason that we stepped in was very clear that the German government told us we want to have a German production, and we want to have a German service line because we need a national -- this is for national security. These are national security data, and that is the reason that a German company, at the end of the day, has to take care about that. And as Rheinmetall is the digitization head also of the German Army, the Minister said, okay, it's a good idea if we do it that way. So that was ticking a box, and this is done, and we will fulfill it. And Q3, the first satellite will be in space.

Second point is now on the communication side. On communications side. We said, okay, how can we do a thing to make the German customer happy because this is also for -- on the defense side. The space side is on the commercial side, one side. But on the defense side, it's always national security. And therefore, again, they need a consortium from the German side and German production lines. So if we build up now in Neuss, the satellite production and OHB has in Bremen a production line, and they have to build up other production lines because there is not enough capacity.

We discussed with the government what can we do. And there is a partner #3. We have our joint venture then between OHB and Rheinmetall. But there would be a working community also which is possible, and that is in negotiations at the moment with Airbus. Then there would be only one bidder. This is the consortium. No other bidder about that is going up and then the contract would be very safe for the consortium. Is that clear, Chloe?

Yes, it is.

Klaus?

Yes. You also had a question on basically the use of the prepayments. I would put it the other way around. We need an increase of the prepayments that we currently have of EUR 5.6 million by about EUR 2 billion to get to the 40% as a starting point. As Armin mentioned, if we get the EUR 5 billion for the big contracts alone, yes, we would have a significantly higher cash conversion rate.

We use it for stocking, yes. We need it because what we have -- the restocking that we have in our stocks to have the basic materials. These are very important things. This is number one. And the second point, for sure, continuously to grow what we discussed also before on the vehicle side for automization because welding robots and other things that we buy in at the moment, it's also an investment. But then it's -- we are really well prepared because then the investment rate will go drastically down over the next years.

And the next question comes from David Perry from JPMorgan.

Just a few questions on vehicles, please. One, can you just talk a little bit about Q4 where the EBIT came in quite like against the guidance from the CMD. So just what happened there, whether it was sales or it was execution or something?

And then the second one on vehicles. Armin, you talked about having capacity, I think you mean in the midterm to do 1,000 vehicles, infantry fighting vehicles and APCs. I just wonder, do you have that number for 2025, the actual? And do you, at this point, have a good visibility on the annual ramp-up? And if you do, can you share that with us, please?

Yes. So we are, by far, not on the 1,000. We are nearly ready on the logistical side. Here is everything done over 2 or 3 years ago, we started, as you know, with the investments on the logistics vehicles. Here we are ready. And here we are really ready to boost up to this 4,500 or even more vehicles if we press everything out.

On the infantry fighting vehicles and on the Boxer side, we have -- we need 3 to 4x higher capacities. If you compare it, what we did to grow up in this area. So we produce a number. I told you that the customers don't like to speak about all these numbers because this is -- are official data also for, let me say, for aggressors which are not good if they said how many inventories, citing vehicles we deliver, et cetera, et cetera. But I can tell you, at the end of the day, we have 3 to 4x higher -- we have to grow up 3, 4x to fulfill this 1,000.

Okay. And on Q4, just what happened there, please?

Yes. The Q4 thing is a very simple thing. So what you have is, first of all, you produce vehicles. If you produce the vehicle, everything is fine. Then, for example, for heavy weapon carriers and other things, we have, I think 12 or about 12 heavy weapon carriers ready and still no capacities from the Ministry of Defense to make the final checks in these areas. This is, as you know, if you think quarterly, quarter-to-quarter, you always can have problems. But sometimes, you -- do you remember when we have this truck problem. It was not a problem from our side. We produced it. But we were not able because the customer was not able to take over these trucks. So this happens sometimes, and this happened also. This was number one.

The second point was that on one of the vehicles, they had some software problems. So we have to sort that out. It is sorted out now in this area. So there are sometimes delays if you are not in 100% serial production. Now become more and more, and this is a positive signal, become more and more into serial production. If we produce thousands of Boxers, we are able -- like to produce it like ammunition. So the ammunition is very, very, very -- it's much easier because we produce thousands from the same thing. And the beauty is that the vehicles that we produce over the next years, there is only the Panther, which is new, and the rest is more from the same. So we believe that we have a better track record over the next years on vehicles than we had over the last 2 years.

Next question comes from Benjamin Heelan from Bank of America.

Yes. Well, I wanted to touch a little bit on air defense and following, obviously, was [Audio Gap] but have you had calls from...

Ben, we lost you in between.

Can you hear me?

Yes, we lost you in between. I only -- it stopped when you said you have a question about air defense and then we didn't hear.

Sorry. Okay, yes. So the question is, you talked a little bit about the Middle Eastern customers that you've kind of discussed in the call. Have you had calls from your typical customers, Germany, the U.K., et cetera, about their air defenses and what you can do for them? Because we just feel like what's happened in the Gulf, it's fairly unprecedented from an air defense perspective. So that will be the first question.

And then the second question on the joint ventures with Lockheed and Anduril, and the approvals. I think you were waiting for some approvals there. Could you give us an update on the time line around that and where you are?

Yes. Yes, Ben, we had contact with a lot of governments also here in Europe. I cannot name the contract because, as you know, if this war [ sites ], they want to do a lot government to government. This is, I think, I can say. There are some countries who want to help government to government, they contacted us and said, okay, what can you do, how much you can deliver? Can you change something? Yes, for European countries that you have to deliver because, as you know, you are in full production also now to help them. And we are on the way at the moment to work it out. We are not ready with the concept because this is what's over weekend where all the calls came in.

But Germany takes care about that and Germany wants also to help in that area. And I think that the countries really appreciate that. But there are not only Germany. There are a lot of other European countries who are looking for that to help and to help very fast. The Lockheed and the U.S. agreement that we have is, I must say it's -- I think it's too slow. We usually -- we are usually much faster about that. And we want and we have to accelerate.

And can I ask a quick follow-up? I mean, when you're getting inquiries from governments, et cetera, given the kind of the magnitude of what's happened in the last couple of weeks. If you think about the next 18, 24 months, do you see potential for governments to shift their priorities in spending towards air defense kind of weigh in from other areas? Or do you think this will just be incremental demand that will come on top of everything else? How should we think about that?

I don't see that they shifted. So from my side the priority #1 is still ammunition. And on the ammunition, it's all different kinds of ammunition. But still, artillery ammunition is a very, very big driver in these areas, but also medium caliber ammunition has a renaissance. Only Germany is looking for billions at the moment on the medium caliber where we expect also huge contracts. And then the whole missile business where the whole Western world at the moment sees that they run out on ammunition because it's the -- as I said before, EUR 4 billion in -- to spend EUR 4 billion on missiles, that's a huge number. But if you see the capacities that the Western world, even the U.S., yes, it's a very small capacity. In some areas, U.S. companies have a capacity of 70 missiles per year. This is usually shut down in half a day.

The next question comes from Michael Raab from Kepler Cheuvreux.

Mike Raab, Kepler Cheuvreux. Mr. Papperger, I'd like to get back to the issue of D-LBO. Obviously, my understanding is this is sort of a lengthy process to retrofit those vehicles and equip them with the corresponding technology. So probably, I don't know, a couple of months, quarters per vehicle, including testing, whatever it may be.

My question is, this is happening in a phase in which you're ramping up capacities for production. Does this need to retrofit those vehicles to be in accordance with D-LBO requirements by the German MOD? Does that sort of compromise your ability to increase the output of new Boxers, for instance?

No, absolutely not because the new Boxers get the D-LBO module immediately from the beginning. So if we produce the new Boxers that it's much better than the old ones because then you have the D-LBO technology immediately inside that. But if you have all the old stuff, so all the new productions because now we have a clear settlement in infantry fighting vehicles, in Boxers, in 4x4 vehicles, what the equipment, how it has to look like.

For the new ones, it's easy because then you implement it directly. For the old ones it's a problem. But the point is if you -- because we have all the trucks and blah, blah, blah, there are thousands and thousands of vehicles. That is the reason that this contract are so huge. It's a multibillion contract. If D-LBO is really if you are ready and everything is ready about that thing, I think at the end of the day, it will grow up to EUR 10 billion.

Would you be willing to outsource some of the activity for retrofitting to other players in the industry to speed up the process?

We cannot. And the reason for that is that the -- you are -- at the end of the day, we are responsible for that. What we do is at the moment to implement technologies from others, and this is outsourced for sure. As you know, Rhode is doing the radios. And there are a lot of other suppliers who take care about that. The point is to make the software at the end of the day, really, really working. And we cannot -- this is our hot chamber. I don't want that other guys are looking into our algorithm.

[Operator Instructions] The next question comes from Joe Orchard from Rothschild & Co Redburn.

The first one is on the XM30 program. Please, could you provide an update from your side given that milestone B approval has not yet been signed off by the U.S. Army? Are you still confident that this is a realistic opportunity for you?

And the second question is on the dividend. Why did you increase the payout ratio this year above the range that you previously communicated of 35% to 40% given that the business still requires a lot of investment to scale up manufacturing capabilities to translate to your order backlog into revenue?

Are you unhappy if we raise the dividend?

No, not necessarily. I think it's an interesting decision.

Yes, yes. Yes, yes, we will start with the XM30 program. On the XM30 side, we are, let me say, on a very, very good way with the U.S. Army. The feedback, as I always said, is a very positive one. On the XM30 side, they want to see, and this is now a program which is guided also from White House. This is also very interesting, a very interesting program. White House is and President Trump himself takes care about the huge programs at the moment because he said we are late in different areas. And especially on the Army side, but also on the Navy side. And there could be also an interesting opportunity for us in the U.S. on the Navy side because they want to build up more capacities and they want to get also the technology that we have on the land side. And they have seen that we are able on the links to have a full digital system. And the XM30 is nothing else like an American links, with American IPRs.

So I'm positive. I believe that end of this year, beginning next year, we can -- we get an indication about the program. And I hope that next year, they really give an order. It's not in our business case. The whole program is not in our business case. But we have more in the U.S. In the U.S., it's not only XM30, it's the artillery program. It's the program of the new howitzer where we offer -- this is the same howitzer that Germany gets at the moment, the self-propelled howitzer with the light gun 47 cal.

Then we have this autonomous vehicle programs running in the United States. And the newest thing now is -- and this is also because we have now Loc Performance, that a huge program of the Navy are coming up, and they look for competencies and they look for companies who are able to build up capacities in the United States to build some of the frigates that they have and that could be an interesting program. It's in a very early stage. But at the end of the day, I think end of the year, we get a decision from the Americans if there is something where Rheinmetall can participate.

Yes. And some comments on the dividend. We had a very extensive discussion in the Board and also with the Supervisory Board of about the level of dividends for 2025. I mentioned the payout ratio. Yes, we are above the 1 payout ratio that we communicated and was guided for the past. But we had moved to the higher end in recent years already. We looked now also on the equity position. And if you look at the balance sheet, we have now an equity of EUR 5.6 billion up from EUR 4.5 billion in 2034. And on the balance of all the different factors, we think we have -- it is the right decision to increase payout ratio for the dividend in 2025. We will look at all the different elements of financial strength, our basic performance and also our equity position to decide where we are going forward.

Then the next question comes from Afonso Osorio from Barclays.

Just one final one for me, if I can. On your CapEx spend, I think I'm looking on your CMD presentation, you planned to invest last year '25 roughly 11% of sales in CapEx. I think you just did 8%. So looking forward to '26 and '27, are the plans still the same, roughly 16% revs in '26 and about 12%, 13% revs in '27, is that still the plan?

Yes. The CapEx will be roughly the same. It might be somewhat lower than originally planned because we have constant movement in the way we invest and we also want to invest, yes, as only what is really required. But the level will be very similar to what we communicated at the Capital Markets Day. We always need to consider that some of the investments, especially loans that we do in -- together with partners, will be co-funded through capital contributions with -- by our other partner in the joint venture.

And we gave a clear target, Afonso, to find the synergies also on the investment side. And what is also interesting is at the end of the day, what is possible at the moment to reduce also the costs in this area. So this is a combination of that, that the CapEx is not as high as it was planned at the beginning. If you are deep inside the program at the end of the day, we found that it is always possible to reduce costs.

And the next question comes from Christian Cohrs from Warburg Research.

I have two actually. First of all, is it correct that your Electronic Solutions operating profit actually included a EUR 48 million exceptional item related to divestments? And if so, is this also the reason for the margin backdrop for Digital Systems in the segment guidance you have outlined at the end of the presentation?

And secondly, coming to Power Systems. If I'm not mistaken, you originally envisaged a deal to be done before Easter. Now you're right about Q2 or Q3. Does this change in statement imply more caution whether say it can actually materialize, I mean, given the structural weakness in automotive, the challenging macro environment, et cetera?

Yes. Let's start with the question about Electronic Solutions. Yes, there is this gain on the disposal of a technology-based investment in a company that we had for several years. And as explained in our annual report, we divested this technology-based company because this technology is more part of our strategic portfolio. From our point of view, it's a divestment of any other asset that we have held in use over many years, it just comes in the form of divestment. But that is not the main reason for the movement of the profitability of Digital Systems in 2026. As Armin explained, a lot of new programs that are ramping up in 2026 that require investments, that need the ramp up costs and will only be covered by revenues that will materialize at a later point. So there is cost pressure in 2026 through the ramp-up. This disposal gain in 2025 is one element, if you look at both years next to each other, but it's not the driving reason.

Big drivers are F-35 and the satellite business where we invest in this area. But long term, we are sure that the digitization, yes, will come into an area like we have on the air defense side.

And then, yes, the original aim was basically to come to a final agreement before Easter, that now seems to be delayed by a few weeks. We hope to conclude an agreement in Q2. But these processes are difficult to predict. And the Q3 is a very latest date to finalize this process.

By the way, the buy process of NVL had also a delay of 2 to 3 months. That's very normal in these areas, but you need a target, first of all. And this is our target. We want to reach this target. At the moment, we still hope that we can sign it in April and have then the signing. And then it depends a little bit, as you know, from Monopoly Commission, how long we need to have the closing. But the process is running, and nobody will stop it.

Next question comes from Sven Weier from UBS.

And apologies if that has already been asked because I could only join a bit later. The first question is just on your existing joint ventures with Lockheed. And given the current discussion we have around air defense, I mean, could you imagine that also the cooperation will be expanded to other missiles and also including Patriot? That's the first one.

Yes, we are in discussion with Lockheed. I'm not happy with the speed that we have in that area because I spoke with Jim, the CEO of Lockheed about that, that we have to hurry up to reduce bureaucracy in different areas because the world needs at the moment the capacities.

On the rocket motor side, there is a huge need from Lockheed and there is a huge need from us. But what we do at the moment is not only to speak with Lockheed but also with other companies, also European companies to build up the -- because the capacities are there. End of the year, we are ready beginning of next year, we go into qualification. And then we want to fill the factory and the demand is so huge that we prepare ourselves at the moment to fill it whatever missile it is. So we are very flexible in that.

Sounds good. The other question I had was just on NVL because the other day, I saw a article that you're expecting or that you could produce up to 1,000 unmanned vessels. Could you elaborate a little bit on that?

Yes. This is a program where we have -- this is, I think, the first decision and the first success, we will make a joint venture where Rheinmetall Naval has a majority with Kraken. As you know, Kraken has contracts with the U.S. Navy and with U.S. Marine Corps. And with that -- in that joint venture, we have the ability to start with about 8 to 9-meter boats, then to 12 meter, we go to 24, but also to bigger boats, which are unmanned. So these 1,000 boats is for the smaller ones, for sure, not for the big ones. But there is a huge opportunity to grow strong in that area. The German government is very, very interested, and this boats have an opportunity to speed up to 17 knots. And to be really fast boat and in areas where it is very difficult to run around, we think there is a really big market.

For the small boats, only for your idea, without weapon systems, the price will be about between GBP 300,000 and GBP 400,000, so it's a smaller class for the bigger ones. We are in the multimillions. So that this could be only yes, for -- if everything is running well, much more than EUR 1 billion, there is an opportunity of much more than EUR 1 billion sales. The technology is in-house. We combine now also the Rheinmetall technology, the automization, as you know, on the Land Systems side. We won a lot on automization programs. It should be easier to navigate on sea because there is much more space than on earth in that area. And this is what we do at the moment. The working groups are together. But if you know, we are now nearly 2 weeks owner of the company, so give us a little bit of time.

The final question I had is just on the consolidation line. I mean it came in much lower for '26 at 8% against the original guidance of 12%. I mean would you think that also for next year, where I think you guide 11% that there's a likelihood that also 11% is maybe more on the high side?

Yes. There are significant changes in the structure as I explained with a different makeup. I think I would more look at what we guided for 2026 and what we mentioned at the Capital Markets Day.

Yes. And it's a product mix. And as you know, we enlarge the product mix where we have less consolidation. If you see on the satellite, there is not a lot of consolidation. On the ship side, it's not a lot of consolidation. So there is -- we go into the right direction.

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

Thank you very much for your time. Very interesting discussion. And I hope we could give you an overview. We are responsible for the performance. You're responsible for the share price. Thank you. Bye.

Ladies and gentlemen, the conference is now over. Thank you for joining, and have a pleasant day. Goodbye.

Good morning, everybody. Welcome to the Capital Markets Day of Rheinmetall. I hope you enjoyed yesterday, not only the evening, but also the presentations. Today, we will walk through our technologies. Later, my colleague, Rene Gansauge, will give you an overview about the operations. And on the financial side, Klaus takes care. Then at the end of the presentation, I will give you an outlook about that, what we want to do. And during the lunch, I think we can go through and give you an overview about the vehicles and technology, if you're interested, what we have here inside this facility.

So one thing which is very -- that is very important for Rheinmetall is that we have dramatic spendings, and you know this exactly, especially on the German side. And the beauty at the moment is that Germany really wants to invest. We see it. We see all the negotiation, but it's not only Germany, it's whole Europe. Germany is the main driver. Germany has to be the main driver because Germany has the money. And the NATO target that we have, 3.5% or in total, 5% spendings up to 2035. This is really a reality on the German side. What you see is on the budget side, what happens and the German budget will grow up to EUR 180 billion. A lot of that will be investments in materials because for sure, the personnel has to grow up. But at the end of the day, the personnel costs are not as high as the spendings are going north.

There is a clear message from the German Chancellor and the Chancellor says, Germany wants or has to become the largest European fighting force. And it will be reality. I really trust in that because of all the investment programs that you see later, especially which is coming from Germany. And another point is that Germany is a lead nation now in Europe. A lead nation means that they really try to make a pooling. On the ammunition side, on the vehicle side, a pooling means that, for example, if we signed the Schakal, which is here also that you -- the vehicle that you can see. And the Chairman said, okay, Netherlands should come and should join the club to have bigger contracts to have a pooling, which is also very important.

And we -- Rheinmetall is expanding now into space, into air, into naval and into the army. So these are -- we always were very strong on the army side, but this is a new message now because of the decision to step into NVL. If I speak about NVL, I speak about our company. But as you know, at the beginning, still closing is not done. So -- but we believe that in Christmas time or latest in January, it will be done.

So that we have an expansion across the whole portfolio. And you see some of the products that were here, really some of the products. Rheinmetall in between has 2,000 different products that we can give to defence forces. We will not speak about civilian business today, and the reason is very clear. We will take it from the top line. Klaus will give you an information about that. And from January on, it is not longer on the top line, our civilian business, and we -- I think we are able to sell it in Q1 or Q2 next year.

So in the circle is we had 30 years of underspending. Rheinmetall is building up the capabilities, not only on the land domain, but also on other areas. What's the scenario now? The scenario and that's very clear, the aggressor at the moment is coming from Russia, no doubt about it. And if I speak with the Prime Ministers of the eastern flank that we have, if you go to the Baltics, if you go to Poland, if you go to other areas, they said, on the eastern part, we are really afraid about that. And they must be afraid because they see nearly daily attacks. Attacks from the Russian Navy, attacks from drones, which are coming up, and we have to prepare ourselves. And there is no doubt at the moment, absolutely no doubt that especially the eastern flank countries are very, very convinced that they have to invest more and Germany is part of them.

It's not the same in Spain, and this is also very easy. If you see Europe, it's far away from the area where we have problems. And it's at the end of the day, for sure, also a political decision, but also Spain wants to grow up to 2% of the GDP to do something because they are part of the NATO. And part of the NATO, and this is a differentiator that we had 5 years ago, the NATO at the moment is driving. Mark Rutte is the driver at the moment to give the different countries really clear tasks what they have to do. How many brigades they have to send into the NATO, what kind of equipment they need. That is very helpful for us because we know exactly how many vehicles they need. We know exactly how much ammunition they need, but in all other areas also, so we are very near to NATO. That's a differentiator to 5 years ago where NATO nearly played no role. And NATO states in Europe, playing a big role. 5 years ago, it was the United States of America. They were the driver. They drove everything. Now Europe wants to be a real partner of the United States of America.

And we have a strong conflict in the Baltic Sea. You keen -- you seen not a lot into the newspapers about that. But if you speak with the German Navy and the German Navy is the main protector of the Baltic Sea, they see every day attacks from Russians, from submarines, not really attacks to fight against frigates or whatever, but to have, yes, let me say, a little bit of a cold war in that area. And that is the reason that Germany will invest a lot into the Navy. The Navy investments, which are coming up over the next 10 years is a level of more than EUR 80 billion only for the Navy. It's everything in. It's submarines, it's frigates, it's corvettes, et cetera, et cetera. So we have a neighbor, and this neighbor is dangerous, and we have to prepare ourselves.

A small overview about the budget. From the budget side, you see the German spending underpins the aspiration that we have. And it's going up to EUR 180 billion, as I said before. And I really believe in that figures. If you speak at the moment with the politicians, if you speak with our Finance Minister, there is no discussion at the moment that we have to spend it in Germany. Absolutely no discussion. I personally thought that these numbers are too high because in our simulation, we have not numbers which are as high. But if you combine that also with other European states, what they are spending, it's for sure growing up and it's bigger.

Coming back to a slide that we have shown you 2 years ago. That's also very important because a lot of people ask us, is it possible to hurry up to grow up all that things? And this is again what we have shown you 2 years ago. We need for ammunition from order intake to production 6 to 12 months. We need for logistic vehicles, 12 months, for medium-weight vehicles up to 18 months, for main battle tanks, 24 months and for soldier systems with all the electronics inside, we need also 12 months. So we are able to react in 1 year, mostly in 1 year. Very rare cases, we need 2 years. So at the end of the day, we are very fast.

And you sit here at the moment, in a factory where 2 years ago, where Bush, we had Bush here 2 years ago. And it's possible to build in 12 months such factories that you have seen. The only thing is what we need is from the governmental side, we need, let me say, a safe base. And the safe base is to have long-term contracts. And we discuss a lot with our governments about that thing to get these long-term contracts now, and I think we will get it.

What are now the budgets that Germany wants to spend over the next years. And this is what is in the planning. Sometimes a little bit -- it changed. If ammunition is going from EUR 80 billion to EUR 60 billion and next year, it again is going up, it doesn't matter. So this is -- the figures are so big. I'm absolutely not afraid that something happens in this area. But Germany wants to invest EUR 80 billion in ammunition. As I said before, a little bit more than EUR 80 billion in navy, EUR 10 billion on air defence, EUR 10 billion on drones, more than EUR 50 billion on vehicles, EUR 35 billion in satellites and also EUR 35 billion in digitization.

The reason that we have shown you digitization yesterday is that we change at the moment really our company. Rheinmetall has changed, and we are getting more and more a digital company. And the reason is not that we are not convinced that vehicles or platforms are not important. We are convinced they are important. But we are convinced that the future is the connectivity. And without connectivity, you are not longer able to be a platform producer. And the platform is the base. The platform is the base for that. So that's the basic know-how that you need. And the digitization, what you have seen yesterday from satellites pictures to the drone pictures to the battle management system where the algorithms are coming from Rheinmetall.

And for your understanding, and I really take time today about that. The starting point from Rheinmetall was not to say, okay, we are the kings of battle management systems. The starting point was 20 years ago that we are the digitization guys from the soldiers. The soldier system, which is a big digital system, was the starting point of Rheinmetall, and we started 20 years ago together with the German government. Now we have implemented in different countries, our soldier system, but this is the starting point.

From the soldier system, we go to the vehicles. It was impossible to communicate from the soldiers with the vehicle side digital because the vehicles were not digital. So for your understanding is that is the reason that we have the D-LBO program. The digitization -- the land-based operations on the -- from the army side, the digitization from the Army is the second point. The soldier system is worthless if you don't have also the digitization on the vehicle side. So -- and with the digitization in the vehicle side, you can communicate because 24,000 vehicles over the next 2 years will be digitized. This is the second big contract that we have. There is multibillions for the soldier systems, multibillions for the vehicles. And now the next step is coming.

If the vehicle are digitized, we have to go to navy and to air force. On the air force side, we are on the way with F-35 because F-35 will be the backbone for digitization for information flow from the air force to the army. And the frigates and corvettes will be the backbone for the digitization from the navy to the army. And that is the reason that we stepped in into the F-35 business because together with Lockheed and together with our digitization technology, we are able to be a good partner for the German Air Force or for the German forces in total. And now with the platform that we stepped in, in NVL, we are able to be a good partner for the whole German forces. That is the real thing behind NVL.

It's not that we say super, we are able now to build a ship. The ship by themselves is 25% to 30% of the value. But the equipment on the ship, this is really that what is important, missile system, missile lounger, the combat management system on ships, et cetera, et cetera. And we do the same what we did on the army side. We make a vertical integration on the naval side. Nobody at the moment is doing that. That's a big differentiator.

So what happens now in Ukraine and how important is Ukraine? And is Ukraine a game changer if the war stops? A lot of people always asking me, yes, but what happens if tomorrow, the war stops? The Ukrainian business, yes, it's EUR 1.3 billion. We want to grow up to be a company of EUR 50 billion in this area. It's a small piece, the whole arena that we have and the backlog is EUR 1.7 billion. We deliver a lot, and we could deliver much more, but it's a money issue. At the moment, the Ukrainians have no money about that. The Americans stopped spending. The Europeans not stopped spending.

Today, there is another meeting, as you know, between the Chancellor and the Prime Ministers from U.K. and France in Berlin. This evening, they have a dinner there. And they discuss how much spendings are coming. But we see at the moment, the spendings are going down. We give them something. We give them always ammunitions, but it's absolutely not enough really to fight the Russians back. But what we want to show you, we have from vehicle services to the Lynx localization, everything in place. But at the moment, it's a small business if you compare it to the rest of the Rheinmetall business.

What's the situation that we have at the moment? We have a significant progress on our growth path. And you see it, first of all, on the backlog, as you know, expectation is around EUR 80 billion end of '25. And I told you also during the -- all the conferences that we had, that we have a potential to grow up to EUR 120 billion mid of next year because of all the big contracts, which you will see later. So the sales on the defence side, we have a growth rate of 35% to 40% on the sales side. I think there are not a lot of companies also in defence who have a growth rate between 35% and 40% but we stay on that level.

And the reason that we are able to do this is that we really reorganized our operation systems. Rene will give you an overview about that, what we did. And you have seen some of that, for example, yesterday, if you go here behind that wall, it's a fully automized production line. As I said, here, 40 people per shift are able to produce up to 500,000 shells and 350,000 full shots of ammunition. That's also a differentiator. You cannot see a production line like that on a second place in the world at the moment, not one. And I think a lot of your people had also a look into our partners or competitors, however you want to call them, to go in.

And the operational margin will grow. And if you see, and we gave a lot of information, and I think there is one information missing here. The operating margin that we have on the defence side is going nearly to the 20%, which is our target because here is also the civilian business, which is a flat business and which makes no profit inside. So next year, the figures will, for sure, change if we take the civilian business from our top line.

And what we're also doing is we believe in partnerships. We believe in partnerships and joint ventures. And we discussed it yesterday. 3 years ago, Rheinmetall has no clue about satellites. But in a strategic meeting, we, the Board of Rheinmetall, yes, we asked our people what the hell is the reason that we are not going into space. The people told us, yes, because we have no clue about that. They said, can we find a way? Then he said, okay, I want to have in the next 2 weeks a statistics about all the satellite producers.

And we found that ICEYE is a 100% good partner for us because it's a small company. They want to grow. They have good technologies. They have the best SAR technology at the moment in Europe, maybe worldwide in this area. So we contacted them. We made this joint venture and the production start will be now in Q2 '26 in Neuss. Maybe the next Capital Markets Day will be in Neuss because then you see a production line, which is similar to that, what you have here, but also on the electronics side, on the turret side.

So with that joint ventures, with Auterion, where we bought shares now. Last week or 2 weeks ago, we had -- it's still not in the -- I think we have to give a press release now about that. We bought shares of them. Anduril, a good partner. You have seen it yesterday. On the Anduril side, we are -- we try to implement American technologies here to Europe. And we use everything also on Lockheed on joint venture base. We are the door opener.

We open the door for U.S. companies, for technology companies. We cooperate and we create a win-win situation. And the win-win situation is that we said I want to have 60% of the profit. I have everything, let me say, on the top line, but you have 40% from the profitability from a market where you usually are not able to come in. And that is what the Americans love. The American -- President Trump loves that. I said, "Hey, you make America great if you do it in that way because you open market for us in different areas."

We are a German cross-domain system house. And you see it in these areas. And we speak about ecosystem. What we build up is to build up an ecosystem for our governments. And this ecosystem is going from sea to air and space. And the center of all that, for sure, has to be digitization. This is what we tried to show you yesterday also. I'm coming always back to that point because a lot of people always telling us, Rheinmetall, yes, it's a gun producer and whatever. It's wrong. We are a gun producer, but we make 1.5% of our sales with guns. It's nearly nothing, and it's an important thing because with guns, you can sell ammunition because you have the combination between that. But at the end of the day, it's much, much more behind.

And maybe that's boring for you, but it's important. Again, we have a worldwide ecosystem, and we created especially a European ecosystem. And if you see from Germany to Italy, from Italy to Great Britain, now Poland is one of our new partners because they want to make the support vehicles together with us. And you know that Poland is a very hard market to conquer. But I think we are on a good way now also. And with nearly every European country, we have -- in every European country, we have nearly production lines. But with every European country, we cooperate. And we have contracts. And we get year-by-year contracts from more than 120 different nations in the world. So a very, very international business.

From January on, we will have a new organization. I think this is also a very important point for us. As you know, last year, we implemented a centralized operations. The divisions are still for sure, responsible for the P&L. But Rene is taking care about that they have the same operation processes. He takes care about automization. And he takes care about that we do not have 5 different strategies of our automization processes and our internal digitization processes. That's also very important. So to have a transparent IT system, et cetera, et cetera. Otherwise, it's impossible to have this growth rate.

But now we said, okay, we have Vehicle Systems. And the biggest shop of automization over the next 1.5 years is in Vehicle Systems. Weapon and Ammunition is done. You see it more from the same. That's easy. You don't need experts about that to copy things what we have. But on the Vehicle Systems side, that's much more complicated, welding chassis, welding turrets automatically to have some robots to implement stuff, cabling technologies, all that things. And Rene is on the way together with his team and for sure, the divisions to make it happen.

We have a new division, Air Defence. So we make it transparent to you also how successful air defence is. We speak a lot about that things, but air defence was part of the Electronic Solutions side. Air defence and digital will be 2 different divisions. And that division will be transparent for you how successful they are. In digital side, we invest at the moment more, but the profitability of Air defence, you will see is from the beginning on very, very high. And we will have, for sure, after closing, and we hope that we have this in January, naval. Rheinmetall naval systems is another new division that we have. So that's a new organization that we start in 2026.

The NATO is telling us what we have to do. The NATO says very clear where are the gaps. And if you see the gaps that we have at the moment in NATO and including United States of America, you see air and missile defence, artillery systems, ammunition missiles, drones and drone defence systems, military mobility, strategic trailblazers or protection and infrastructure, cyber and electronic warfare. What is missing? The beauty is, if we got that from NATO, that we are in all areas, and we have business in all areas that was there. In some areas, we are the #1 in the world. And in some areas, we want to grow in. Military mobility, super. Ammunitions, really good.

On the missile side, we have to grow in. You are here in the place in 1 year's time, that we will produce components here for missiles here in that factory. This is not the whole to make Capital Market Days for sure. So we want to produce here something, yes. Artillery systems, who is better? And air and missile defence, we are very strong on the canon-based, but you see a lot of new products also all in these areas where we step in. And this is the growth path in NATO. Here is where NATO creates growth. And in all domains, in all 7 domains, Rheinmetall is working and will expand the product portfolio. And this is nothing for 2 or 3 years. This is a strategy for the next 10, 15 years, which is perfect because of the contracts which will come up.

And what are our internal targets? What is where we -- what we want to reach? What is our management target? The whole management team wants to reach this target. In 2030, we want to be on a sales around EUR 50 billion. This is what we want.

The operating margin is, as I said, here is still on '25 with 15.5% the civilian business inside. We will be maybe on a level of 18%, 19% this year on the defence side. We want to be bigger. We want to have better figures than 20% on the operational margin. And the cash conversion rate and the investments are this year, next year and also, I think, a little bit the year after next year. But then everything is done. The investments that we have to do on the vehicle side is much smaller than the investment on the ammunition side. It's by far the biggest investments, powder plants to produce these chemical industry factories. This is a huge investment that we have to do, but then it's done. And after having done that investment, the investment rate is going down so that the cash conversion rate has to grow up to more than 50%.

A very important part is for sure the down payments. And on the down payment side, we are working hard with our customers at the moment to get the money, and we are on a very good way. A lot of customers are very happy to give us 20% or 30% down payment. And if the -- really, really big contracts are coming, which I go now inside the discussions, you will see that we will be also in good shape.

Like last year in Roma, I want to go into now into the segments and want to give you a detailed information about that. And we speak about 2030. We don't speak about the next year. We speak about that, what's really going on, what we expect and what is coming. Vehicle Systems has a potential of EUR 13 billion to EUR 15 billion in 2030. What's the way to that EUR 15 billion. You've seen other years, '25, '26, '27, et cetera. And you see, and that's very important on the bottom line. So the light blue to the dark blue. The dark blue, for example, here, if you see the Boxer, it's a contract between EUR 10 billion and EUR 20 billion, a single contract between EUR 10 billion and EUR 20 billion. And the light blue is up to EUR 2 billion. So these are the smaller ones.

Sometimes -- I know this company very long. And sometimes it's -- for me, if I see all these figures, it's like a wonder world, yes, because we spoke 6, 7 years ago about contracts, EUR 200 million, EUR 500 million, maximum about that. Now nobody of you, nobody of you takes care if we said there is a EUR 200 million contract that Rheinmetall is booking. I get a call and then you say, hey, where are the billions? Here are the billions. Here are the billions. This is what will come.

So -- and if you see the whole product portfolio that we have on the vehicle side, the whole product portfolio is in a good range. The biggest driver will be the Boxer and the German business and also the international business. Because there are also a lot of international contracts, which are coming in like Italian Panther, also like the Romanian deal that will come. It's on the Lynx side, there is a huge contract coming up. We signed it last week, the agreement, and we will sign -- when the SAFE money is coming, we will sign the real contract, hopefully, in end of Q1 or Q2, it depends a little bit when the SAFE money will come from Brussels.

Now Europe, if you see all that things, it would be impossible to do all this international business without SAFE money. The SAFE money is the driver for that. And the EUR 150 billion that SAFE is giving the nations, the nations finance their programs. And we are with all European nations at the moment on the way to take the SAFE money and to give them partnership because in SAFE money, you need 2 countries. And the Lynx, for example, it's Hungary, it's Italy, it's Romania. So if you have one country, the second country, yes, is looking how can we combine it with SAFE money because SAFE money is a huge advantage, as you know. Up to 2029, you have to pay no interest. And after that, yes, you have to pay nearly nothing in this area. So it's free lunch. It's free lunch to bring the investments in the European Union to the right level.

And this is exactly what happens now here. I don't go into the details, but you have a handout about that things. But what you can see is that -- and this is important, the Rheinmetall nomination potential, the potential of order intake is more than EUR 65 billion. And that's very near. It's not wishful thinking. It's real programs. It's programs where we are in negotiation and that will come.

So that is the reason that Germany is a driver, but internationally is a bigger driver in that area. It's not only Germany, especially up to 2030. After 2030, Germany, by the way, is a bigger driver because a lot of more contracts are coming after 2030. And the plan that Germany has at the moment is up to '29, then from '29 to '35 and then from '35 to '40. These are the 3 areas inside the plan, rearmament program from Germany. So you see that we think very, very long term. It's a 15 years period that we are thinking.

And here, you see, I think that's -- I love that picture because in that picture, you can see really what happens. So driver #1 is not the main battle tank. The main battle tank is here. Driver #1 is the Boxer. It's the 8x8 vehicle. And it's -- as you know, it's not longer allowed to speak about numbers because the Ministry of Defence don't like that, but it's easy to calculate. It's thousands of vehicles. Thousands of vehicles that we have to produce.

And our operations team has now a clear job to say, okay, we have to start next year with the automization program, and we have to grow up. And we said at the end of the day, the Boxer fleet, together with our partners, we have to produce 1,000 Boxers. This is a clear target per year. If you see what happens at the moment, yes, we produce 50, maybe 100. So we really have to accelerate this area, and we have to do this with automization.

So Boxer is #1. Medium wheel is a small thing. This is all the 4x 4 vehicles, which is -- but tracked vehicles, inventory fighting vehicles. The vehicles that you have seen here. So Boxer -- this Schakal is the #1 or heavy weapon carrier. Then next one is the Lynx and the Puma. Also the Puma is a multibillion business because Germany will have a second lot and a third lot of that.

And this business, and that's also not bad for us, I would say, is without competition. And why is it without competition? Nobody else has such a vehicle. And if you have a qualified vehicle like the Schakal here, if you see here this Schakal, that -- we will produce thousand of them. Nobody is qualified because if you have it qualified in a country, you cannot qualify another vehicle. Usually, they don't do it because they said it's too expensive. It's not good for the logistics, et cetera, et cetera. So this is for the next -- and I said 15 years. This is a program for the next 15 years.

And if you see 2030, I don't speak about 2035 because it's, let me say, unrealistic to do it. But this is not the end. because we are still in the ramp-up curve, you see. And if you see -- if you started mathematics and if you see that, you see this curve is not going that, like that. This curve is usually going into the right direction. It's going north.

Is there an end? Yes. Some -- it will be an end. But I see at the moment that the story will continue up to between '35 and '40 because otherwise, we are not able to deliver as much as they want. And the other beauty on the vehicle side is that usually -- and I see that on the truck side -- [Foreign Language]. Is this boring for you? Okay. It's not boring. So we have time, hopefully.

The other thing is that the numbers which are here is they are huge, the Lynx, this vehicle that you see here is -- it will be a new star. If everything is running well, we have to produce 3,800 in the U.S., 209 in Hungary, 300, the Ukrainians are looking for, 298 in Romania. This is what we signed last week. Poland is looking for that. Greece is looking for that, et cetera, et cetera, 1,050 in Italy. So this is a new star, and we don't speak about small numbers. We speak about very, very high numbers. That's the reason that it's really going up. And we want to make a successful transformation of the United States on this business side to be also a powerhouse in the States.

Is that in our plan? No. We have EUR 2 billion per year in our plan in the United States. If we win these contracts, for sure, we have to grow. We are much bigger than in the United States, but we don't have it in our plan for 2030.

Weapon and Ammunition, EUR 14 billion to EUR 16 billion. I tried to hurry up a little bit, otherwise, Dirk is so nervous. So this is -- the -- in 2030, we have a sustainable demand from different countries in Europe, from everywhere. And what is the driver? And it's the same you can see later about in your documents. So we have good operational margins. We have a good growth rate. And the margin on the ammunition side will be really around 30%. We discussed several times the reason for that. And it's the vertical integration and it's a leverage effect that we have.

And here again, I like -- as I said, these pictures are really impressive. Artillery will be the driver #1. But after artillery, this -- on the rocket side, will be #2, then medium caliber. And if you see, it's not so important, tank ammunition is very small in comparison to the rest.

10 years ago, Rheinmetall was a tank ammunition producer. We changed everything also on the ammunition side. It's not that this is given. We were not a big artillery house years ago. Now we are. And these are the numbers. And this -- nothing changed here. We want to grow up to 1.5 million rounds on the artillery side, which is the biggest driver and 4 million rounds on the medium caliber side.

The expansion in that is also very clear. So rocket is what you see here nearby 200 meters away, we build up that factory, and that factory will be the rocket motor production and the rocket assembly. It's a part of Roman Köhne's business that you have to build up here, which has a huge potential, as you have seen.

Air defence. On the air defence side, we have EUR 3 billion to EUR 4 billion. On the EUR 3 billion to EUR 4 billion side, again, and let's go to the real pictures. I think this is also a point which is not bad. Growth rate is 30% to 35%. You have seen the growth on the ammunition, it's the same. And we have still now in '25, 16% to 17% EBIT. Next year you see it first. I think that we are able to reach next year nearly 20% EBIT growth. And the -- especially the drone attacks that we see is the driver for the business that we have. And the capability gap that all the nations have in Europe are huge, so that we have a massive business.

And for sure, we have lessons learned from the war in Ukraine. And exactly that is it. And we have videos where you see several shutdowns of Shahed drones. And what you see here is -- and that's also, I think, a very interesting business up to 4-kilometer protection radius. We have it gun-based because it's much cheaper, much, much cheaper than the missiles are. And the turret is platform agnostic. So we can use trucks, we can use every vehicle to implement that turret. We have different ammunitions and these ammunitions are cheap in comparison to missiles. The price of 1 round is about $1,000. And we shoot usually 3 to 5 rounds. If you want to be safe, shoot 7 rounds, then you have EUR 7,000 mission kill in comparison to 100,000 on the missile side.

And if you see what is coming in on the Ukrainian side, 90% of the attacks are coming from Class 1 and Class II drones. Class 1 are the quadcopters, the small things and Class II are the Shahed drones. And 90% of the attacks are coming from them. The heat probability that we have at the moment on these drones is more than 90%. So we shoot down more than 90% of that drones. So at the end of the day, if we shoot down them much cheaper than the drones are coming in economically, it's nonsense what they are doing. The only thing what you see in the newspapers is and in the television shows is, the 2 drones who are coming through and hit it, let me say, a building and sometimes unfortunately, they hit the wrong target and then people die. But the ballistic missiles and all the other things which is there are in the cruise missiles. It's very rare. It's very small numbers. And the reason is price.

[Presentation]

The system you see here, exactly that system will be next week on the way to Ukraine. This is the first Leopard 1 chassis, which is going to Ukraine. So now a very interesting calculation, and we did that calculation also with the Ministry of Economics about the critical infrastructure and how many facilities we have as a critical infrastructure, especially in Germany. The definition is we have nearly 2,000 critical infrastructure facilities. And you see what is critical from finance system to Bundeswehr areas to information and telecommunications, et cetera, et cetera, but also transportation hubs and also medical on the health side.

If you see that, there is a concept at the moment, what is -- how can we protect it. Critical infrastructure because we have a range of 4x4 kilometer to protect. Usually, you protect with 2 Skyrangers, an area with critical infrastructures, which has what is easy, yes, 8 kilometers or 16 kilometers because it's 4 and 4 (sic) [ 4x4 ] in both directions and then you need to see a second one. So you can cover a small city with that stuff. Maybe you need a little bit more.

So what we have a concept with the Skyspotter, and this is an acoustic system and a radar system, you detect all the drones who are coming in. By the way, the Skyspotter, the acoustic system is the biggest system at the moment in Ukraine also. On the border line on every house, yes, they have noise detectors and these noise detectors show if drones are coming and detect them. And then you have Skyrangers and Skynex systems, so a mobile system and a station -- system on the Skynex side. These systems, 4 of that systems, which have 4 guns are in the Ukraine at the moment to protect the power plants on the -- in the western border in Ukraine.

And we calculate it. So the cost of drone protection of all the critical infrastructures would be a cost of EUR 81 billion. It's only a calculation. It's not that we said, okay, what is possible with the calculation. You can implement drones, you can implement other things, but this calculation has to be done and will be done also with the ministry.

The second point is a lot of people speak about the drone wall to protect the border. And if you have an area of 100 kilometer that you want to protect here, this is 100 kilometer. This is -- a cost of securing 100 kilometer is EUR 1.9 billion.

In comparison, if the missiles are coming in and destroying infrastructure, it's nothing. So this is a concept at the moment where we speak with the government. This is not only defence. This is Ministry of Economics. This is a lot of other ministries, and this is also for other countries. So it's the first time that we said to secure the German eastern border, the eastern flank of Germany of 1,286 kilometers will have a price of nearly EUR 24 billion. Then you are very safe. I think it's an interesting calculation, what infrastructure at the end of the day brings.

Digitization, EUR 8 billion to EUR 10 billion. I tried to hurry up a little bit. Again, you see the different points that -- where we are in. Simulation sensors like Leopard upgrade, simulation sensors like the F-35, IdZ, D-LBO, satellites. So a wide bunch of digital components that we are producing. And that is part of the ecosystem that we have. Together with that, we are able to grow up to EUR 8 billion to EUR 10 billion. At the moment, we are still on a level of -- because of the investments of 15%, we invest a lot, as you know, in F-35. We invest a lot in the algorithms now for the new systems, but that's important. But we are still very profitable. We are not like a start-up who says in the next 5 years, we make a loss. And then [Foreign Language], we will come. And so we have this 15% profitability. And we have 40% growth rate.

And with that growth rate in digitization because software is easier to copy than hardware. So it's easy at the end of the day for your understanding how the profitability will go on digitization. It goes north, 100%. So we want to make nearly 20%. And I think maybe that's conservative about that thing, if software is more software is inside, we can be a little bit also a software house. As I said, on contracts like TaWAN, we are the defense telecom, Deutsche Telekom of defense because we give the net. And here in these areas on the digital side, we are a little bit the defense Microsoft for Germany because we give them the software.

And here, you see what are the big drivers. And the big drivers are really the digital solutions. Here, the dark blue one, digital solution is one, but we do also a lot on the sensor side and aerospace services is coming very slowly. Space is also very -- is coming slowly, but every billion counts, and we want to grow in these areas. But the growth rate in that area is coming later. It's coming after 2030. It's not possible to do it in 2030.

And there is a clear credo from different NATO leaders in these areas, and I only want to take one. Double the firepower within 3 years and triple it by end of the decade. And to do this, it's not only to have warheads, you need warheads. Without warheads, you have no firepower, but it's only possible with digitization, what you have seen yesterday. Otherwise, you don't bring it into the target. Otherwise, you miss the target. Otherwise, you cannot find the target, and this is exactly what we have to do.

So this is now, in a nutshell, what really happens? As I said, Vehicle Systems, 13 to 15; Weapon and Ammunition, 14 to 16; 3 to 4, air defence; 8 to 10, digitization; 5 is naval -- on the naval side. Later, I come more also to the naval side. And then for sure, we have a target to say, okay, we want to make M&A. We are able to invest about EUR 1 billion to EUR 2 billion per year in M&A in that area. That's the way forward. That's the way of Rheinmetall.

Any questions? If not -- yes.

Let's leave the mill to speed up things. Just a quick question. The only thing that really puzzled me was your statement about the 120-millimeter ammunition because when I look at plans to grow the MPT fleet, you would think that as a knock-on effect, demand for that would also increase.

Yes. But it's -- look, the main battle tank is a direct firing. On the direct firing, yes, you usually need -- and that is the bad thing. The precision of our ammunition is very high. You usually don't -- you need only 1 round to destroy the tanks. And if you see that we are able to produce 240,000 rounds, it will not grow. It will not grow much more.

So it's fine to make EUR 1 billion or a little bit more than EUR 1 billion, but this is -- at the end of the day, we are able to produce tank ammunition for the whole world. We need no second factory.

Alessandro Pozzi, Mediobanca. During your remarks, you talked about the SAFE money, the SAFE facility. How much of that is a driver of revenues into 2030? And do you think it's sufficient to get to the 3.5% target? Probably not. Do you expect the safe facility to be expanded? Or do you expect new tools to be approved at the European level, such as defence Eurobonds?

Second question is on 2026 guidance, probably in terms of profile to 2030, your revenues, are they more back-end loaded? And any indication of what could be the growth in 2026, if it's possible?

Yes, we want to stay in a good double-digit growth rate. And usually, I said to be conservative between 25% and 40%. This is exactly now what we said, it can be this year, let me say, it's a very good growth rate. But I be conservative and said more than 25% per year growth is absolutely in. If you calculate that, if you grow 25%, 30% per year, you come to this figure. And this is what we have to grow. And the backlog is there. So I'm very optimistic because now the production lines are running. We have more production lines, so we can hurry up also on the sales side.

On the vehicle side, we are at the beginning. We need -- I think we have -- the ramp-up curve is really starting in '27. So '28, we are fully loaded with the automization that Rene will tell you later. And so the real trigger point is coming then in '28 on the vehicle side.

Digitization sometimes is going much faster. I see the satellite -- on the satellite side, I see the first sales this year. Because if we sign the contract now, and we -- I think we will sign it over the next weeks, we can immediately sell pictures. And what we do is we -- on the satellite side, this is maybe also important. The satellites are our satellites. We only sell the pictures. We are the owner of the satellites, yes. It's a small Musk effect that we are doing. We get the contracts.

With that contract, we are able to build the satellites, to bring the satellites into the orbit. We have a contract for 3 or 4 years. The satellites usually work for 5, 6, 7 years. And every picture that we sell later, is pure profit because there is no maintenance in the space. So this is, I think, a very also clever concept. Elon Musk did it, and we do it in a small scale. 40 satellites are the first contract that we have to bring 40 satellites, but Germany is planning to go up to 400. It's not the 6,000 that Musk has, but it's a good starting point for us if we come into this area. So satellites can grow earlier.

Digitization, at the moment, we have a lot of programs like TaWAN, D-LBO, other systems to complete the soldier systems that this is a linear growth that is going up. So back-end loaded is very strong the vehicle side. Ammunitions is going linear and digitization is going linear. The -- as you have seen, the air defence is ramping up now and the air defence is really starting in '27, '28 also to go to higher value.

SAFE money. On the SAFE money, I believe that there are 2 initiatives from the European Union, which are really helpful. This is the ASAP program. This was the first program where they have a small amount of money, EUR 500 million. They want to have an ASAP 2 program, which is a direct investment to the industry. This is very positive. This is a very positive thing. And the reason for that is because the industry is investing. You get a co-investment of 20%, sometimes more than 20% from the European as a donation. The European Union is giving you a donation. It's a free lunch.

The ASAP program -- the SAFE program, without the SAFE program, countries like Bulgaria, like Romania, they would not be able to invest such a lot of money. Romania gets EUR 17 billion from SAFE. They would not have the money. So they need it and the terms and condition that you have, and you know exactly as a banker in this area, yes, are great for the [ count ]. Is it -- at the end of the day, it's debt, yes, but it's -- they do not feel it.

And are the EUR 150 billion enough? I think, no, it's not enough because every country at the moment is looking for that. Even Italy is looking for that money now. And to say, okay, we want to combine it. The Lynx that we have, they want to finance via SAFE money and also the Panther. And I understand that. And -- but at the end of the day, if the European Union wants to give another package, a second package, there must be an agreement with governments who pay the bills. We say, okay, okay, I protect the European Union because as you know, the European Union has no money by themselves. The countries have to give the money. At the end of the day, it's a point if Germany says, okay, you can give more and I protect it in the back. I don't know if that works.

Just a quick follow-up, if I may. And you also said that 2030 is not the end of the road. Potentially, we could see further growth into beyond that, basically.

Yes. Absolutely. And the point is that maybe European Union has to do something in this area. But in 2030, NATO will be not 100% ready with all the things that NATO wants. And especially on the European side, they are not ready. And if I see the planning, especially from the German side, they are looking not for SAFE money. Germany is a little bit independent in this area. But German's plan -- the plan of Germany is going up to 2040. And the other European countries have this plan also, but they only can communicate if they have money backing. And the money backing at the moment is missing, and therefore, maybe SAFE 2 has to come.

I think I'm next. So it's Sebastian from BNP. Just quickly on M&A because you have in your EUR 50 billion sales target by 2030, also about EUR 5 billion from M&A. So if you could help us understand how well filled the pipeline is. And as you have also now said that you will put the Power Systems business as discontinued. Can you just share the latest developments in terms of interest and what gives you the confidence to really put it as discontinued and to deconsolidate at the end of the day?

Of interest rate?

Not the interest rate, but the interest by parties that are looking into the business, if you could just share the latest around Power Systems on the exit?

Yes. So we have 7 investors who are interested to buy the business. We have 3 at the moment where we continue. The rest is out. So we gave last week information to the guys who are out who didn't pay enough. That's very normal. What you do with the 3, we want to go -- to have a solution up to Christmas, end of the year. And if we have a solution, so it's binding offers. If we have a real solution, then we will have the final negotiation in Q1. And hopefully, in Q1 or Q2, we have a final solution and we can sell the business.

Pipeline?

The pipeline for M&A?

Because you put to targeted [indiscernible].

Yes. As you know, we always speak about M&A if we are very near to this area. This is always the same sentence that I'm telling you. And I think that's a fair thing. We -- what I can say is that we scan year-by-year 200 companies. And I think we did over the last 5, 6 years, a really great job on the M&A side. We always found a target which really fits to Rheinmetall and which fits into the ecosystem. I cannot say more about that thing, and we will inform you if we are nearby.

And you see on the label side, how it works. So we started 3 months before signing that we are interested in some areas. We didn't tell the target. But at the end of the day, out of the breath, you can usually read it. But we are not so near at the moment with other M&A activities.

So thank you very much because I have a second point and a second slot. And now I think Rene takes over and gives you an overview about all the operations. Thank you.

So good morning from my side, ladies and gentlemen. Thank you very much, Armin, for giving the outlook of what is ahead of us from a revenue point of view. And I would like to start my presentation with the last sentence on your slide, unfold the next chapter of growth. So to unfold the next chapter of growth, I think my goal for the next 30, 35 minutes is to tell you where are we in executing that goal. And I will not just focus on 2030. I would basically like to start to look shortly into the rear mirror.

And if we look into the rear mirror, then we can see that Rheinmetall over the last 3 years has already more than doubled its revenue. And if we focus for the future on the defence revenue, then we have been able just in 2 years to double already the revenue just on the defence side. And I will go deeper into the different divisions to give you not just an outlook of what has been executed, but as I mean Papperger already mentioned, what we have been already in execution in terms of additional capacity increase so that we are able to deliver the products, which are ultimately are going to help us to generate the revenue. So I will focus mainly on 2026 forward, and I will try to give you in 2 steps, the outlook, how do we reach the 2027 goals, which is again a 2-year time span and what are we already executing so that we reach the target of roughly EUR 50 billion in 2030.

So we are here in a brand-new facility, and I had the opportunity over yesterday to talk with some of you about what is actually possible in Germany and how were we able to pull it off. And there were 2 attributes in Armin Papperger's presentation, which I will as well refer to various times in my presentation. And that is an ecosystem and that is vertical integration. And if you look at the pictures in February -- end of February last year, the groundbreaking took place here with the German Chancellor. And I remember many discussions because the goal for us was to build up this facility where you walked through yesterday, the lab facility and the shell facility in 15 months. And I think, I mean it's fair to say many people said that's going to be impossible. That's something we are not able to achieve, particularly not in a country like Germany.

Now 15 months later, we had the groundbreaking of -- not the groundbreaking, we had the opening ceremony of our location here. And to give you some figures which are beyond revenue, so we have established here 2 facilities with a size of 35,000 square meter production place. If we add the rocket artillery plant, which has roughly another 15,000 square meter, then we have been able to establish production space of 50,000 square meters here in Unterlüß. I think we can be proud that this is the most modern and largest artillery plant in the world. And we went a complete different route than what we have in other locations because you know that we produce already artillery in Spain. We produce artillery already in our location in South Africa. We decided here that we want to use the sheer size of the facility to follow different processes and different concepts.

So automization right from the beginning, particularly driven by the higher labor costs we have in Germany compared to South Africa was the overall goal. And I'm glad that you had yesterday the possibility to walk through the facility and see that we have been in the process of executing this all. We are ramping up the production. And for next year, we are already expecting a substantial impact on our bottom line and top line by the revenue we produce here out of this facility.

The good thing is the ecosystem we are having from a manufacturing point of view helps us to exchange with our existing production capabilities, as I mentioned, in South Africa as well as in Spain, so that we implement a network, a global network, which is constantly in the exchange of what we can do better. And I think this is as well unique. If you look at the competitor landscape, there aren't too many other Western manufacturers for artillery ammunition, which have a capacity globally, which goes up to over 1 million rounds by 2027.

With this facility, we have been able to establish a blueprint and not just with this facility, but if we look in Spain, if we look in South Africa, where we produce slightly different rounds than what we will produce here, we have now a blueprint, which helps us to expand in Ukraine, in Lithuania and in other countries where we have signed the contracts to establish capacity. And since we were able to do this here with the strong support, as Armin Papperger mentioned earlier, of the government, and I think this is one of the key drivers you need in order to be able to execute in that short period of time, such a big industrialization project. You need the support of the governments. You need strong partners on the supplier side, and I will later elaborate what competence, what vertical integration we have as Rheinmetall, which helps us to really be able to pull something like that off in such a short period of time.

One of the big growth drivers, as Armin Papperger said, is going to be the rocket motor plant. So this is not completed yet. But yesterday during the tour, I think you saw already that we are in the process of building that facility up. As I mentioned, roughly 15,000 square meter of production space. We will have 27 curing chambers. We will have 2 big mixers with a size of 2,500 liters. So if you imagine, they are double the size of what I am. We have here as well the benefit that we are in Spain in our location are currently establishing as well a mixer, which has the capacity of 1,000 liter. We have in South Africa already a production of rocket motors. So it's nothing which is completely new for us. It's nothing where we wouldn't understand from a production and manufacturing point of view how to pull that off.

Pretty much all machines are ordered. The real estate and the production hall build is on its way. And we are on track that by next year, we will have the equipment established and we'll then be able to start to mix the first rocket motors. The rocket motor itself is a very important part. And in this lovely facility here, we will then be able, as you saw in the video, to introduce the additional manufacturing requirements to build up the complete rocket and be then able to sell up to 10,000 missiles per year.

We had yesterday as well the opportunity to walk through our large caliber gun hall. And we have invested in the last 24 months substantially in new machines. So you saw there many machines which are brand new. In total, almost a dozen new machine centers, roughly EUR 15 million in investment was put into our capacity there. And we have been able to reach already more than double the amount of weapons we are able to build.

Weapons is one important thing, but particularly in the Ukraine, we need to make sure that we are able to support with barrels. So if a barrel will need to be exchanged, we are already at 280 barrels, roughly 300 barrels capacity as of today. And the groundbreaking of a new large caliber gun hall took place at DSEI this year, where Armin Papperger, together with the Secretary of Defence, did the groundbreaking for our facility, which is in Telford.

Why in Telford? Because we have there already a manufacturing facility for infantry fighting vehicles. So here, again, we try to use the infrastructure, the production network of Rheinmetall to make sure that experts are available and we don't have to start completely of scratch in a greenfield project.

An additional topic I very often get asked is, so how do you cope with the growth in terms of supplier? So if I take just the steel we need in order to manufacture the large caliber guns here, then in the past, maybe 5, 6 years ago, our supplier base was rather limited. And it didn't need to be that we have multi-suppliers because if you produce 20, 30 guns per year, then you are fine with the capacity a single supplier is offering you. We have now already multi-suppliers just for our location here in Unterlüß. As soon as we start in the U.K., we will expand here as well the supply base so that we have then there a direct link, a direct supply of steel and whatever we need in order to be able to manufacture on-site large caliber guns.

The big driver of future growth are the infantry fighting vehicles. So Armin mentioned that the 30, the 35-millimeter guns, but as well -- when we go into the Eurofighter, 27-millimeter guns and even for the Marder, the 20-millimeter guns. This is something where we see a huge demand to make sure that we are not just producing the vehicles, but that we are able to equip these vehicles with the respective guns and the ammunition.

Same as the large caliber, we have started already, and I think that's as well an important message to pass on. We started to invest even before we had contracts. In many areas, we went ahead. We said we are going to invest in capacity because we believe that the customer is going to take the capacity from us. And we started in 2022. And by today, we have already capacity on the barrel side, which is more than double what we had 2 years ago. And we have just kicked off expansion -- further expansion program into our center in Oberndorf to come up to close to 1,000 barrels, which we are able to produce that per year.

Essentially, if you take a 30-millimeter gun, if you take a 35-millimeter gun, which you saw yesterday on the Skyranger, we have here, again, a network where we make sure that the different production locations are exchanging processes that we continuously try to improve, reduce cycle times, put automization in. Some of the machines you saw in the large caliber gun hall, they are rather ancient if you want so. But everything we are going to put in new helps us to digitalize to connect the machines with each other and to apply continuous improvement to drive as well efficiency down.

So all the guns, all the ammunition I've shown you at the end are not really worth too much if you do not have the propellant to make sure that you are able to shoot, for example, the artillery around 30, 40 or even more kilometers. And we kicked off as well in 2022, 2023, our first capacity increase project. It was called KBA 25 plus. And we have been able in our locations in Bavaria, Switzerland, in South Africa as well as in Spain. So here, again, the ecosystem of propellant and combustible cartridge cases, and we have established an additional capacity of 2,000 tonnes. So we have now a capacity of 7,500 tonnes. We have just released an investment project to boost at these locations the capacity even further to debottleneck so that by year-end of '27, we have already 12,000 tonnes of capacity.

Vertical integration, if I take again that topic, we not just went ahead and increased the capacity in our locations, we did as well do execute strategic acquisitions. And the company Hagedorn, which on the defence side might have not been a very prominent one. The company Hagedorn helps us to increase our nitrocellulose production significantly. Up till now, they have produced civil-grade nitrocellulose. So we know what to do in order to bring it up to a military grade. And that military-grade nitrocellulose is going to be available for us by next year and helps us to eliminate a significant debottleneck.

I would like here to just briefly address again supply. And I had yesterday at my table, significant discussions in terms of what are material threats to Rheinmetall. And the example I used yesterday are linters. So linters are a little cotton balls, if you want, so which predominantly are currently produced in China. So here, we took as well a strategic decision. We pumped up our inventory so that we have now for more than 3 years' linter in our stock. On top of it, we went ahead from the development side and try to find an alternative so that we are not just depending on cotton linters, but that we are going now as well to qualify wood linters. We are going with different countries who are producing cotton so that we are actively managing that potential risk to boost up inventory and on top of it, then find technical alternatives.

I think you know Armin was quite busy over the last few weeks to sign additional contracts with Bulgaria, with Romania for additional capacity. And if we now look towards 2030 and the continuation of growth, then these additional facilities, which, again, are blueprints of what we are executing already from a manufacturing point of view in Germany, in Switzerland, in Spain as well as in South Africa. So these locations are then closing the gap till 2030 for 20,000 tonnes of propellant and the respective modular charges for the future.

So how are we actually able to pull these things off? And ecosystem is, once again, from my point of view, the exact aspects where Rheinmetall has invested in the past, not just in an ecosystem from an engineering and a product point of view, but we have as well an ecosystem, which helps us to pull off projects much faster than other companies might be able to do that. How are we executing this? We have a plant engineering team. And here, you know as well that we have just recently acquired a company in South Africa, Resonant, which are the experts in chemical plants. So we have boosted up their resources and capabilities from the plant engineering side.

From the industrial engineering side, I think here, we can fairly say that the benefit of having an auto business in the Rheinmetall Group has helped us to scale up production to something which is normal in the automotive side. So here, we were able to make sure that we get the colleagues with the expertise to support us on the industrial engineering and the automization time. And I don't know if that's something which is really present to you. We have a big department which is coping with real estate and not just real estate at its general terms. We have architects there. We have people who are calculating the statics and they are the ones who are having the blueprints of the plants we want to expand as well in the future.

So vertical integration for us means not just on the product side, but as well on the expansion side, we are deeply integrated. We have blueprints for the different aspects, let it be a chemical plant, that it be a gun hall, let it be an artillery production plant, and I will show you later as well something about the vehicle side. So the vertical integration on the engineering side in combination with the know-how we have as well on the product side because as well on the product side, I think it's fair to say we are the most vertically integrated. If I use the example of artillery, then I think the only thing we really purchase on the shell is the steel. The rest, we are forming it, we are machining it, we are painting it, we are heat treating it. We are producing fuses. We are producing the explosives, and we are producing as well the whole value chain of the propellants.

So the understanding of the product in combination with the vertical integration, plus governments giving us permissions helps us to be able to pull such projects off like you just know it, let's say, out of China. And we have proven that we are able to execute that and feel, therefore, confident that we will be able to execute that as well with the projects just acquired. And that helps us as well on the vehicle side to execute our growth.

Coming to the vehicle side. So Armin mentioned as well earlier, Boxer. So what is the road we see to up to 1,000 Boxers per year. And here, again, coming or going back maybe 2 years, 2 years ago, we did not produce a single Boxer in the U.K. We did not produce a Boxer in Australia. We did not produce a Lynx in Hungary. So here as well, we established capacity. And this year is the first year where we are getting serial quantities or serious quantities out of these locations.

We are in the process of building up new locations. Armin just said the contract in Italy with over 1,000 Lynx. So here, we know already how a blueprint, how a footprint for a manufacturing site would look like because we have just established the site in Hungary. And important is every time we do build up a new production capacity, the network makes sure that we apply afterwards a lessons learned. Because there are certain things at the end of a project where you, in retrospective, would say, I would do it differently, and we want to use this know-how then for all future projects so that we don't make the one or the other mistake twice.

So our footprint today, I think I've mentioned that already. We have today in total, roughly 170,000 square meters of production locations or production space for infantry fighting vehicles. If we want to grow up to the 1,000-plus vehicles, and I think that's a very important message. All we need is roughly 20% to 25% more in production space than what we have today. And why is that? Because what we do today, and I use the example of our biggest infantry fighting vehicle production in Kassel, what we do there today is we have a combination of different products we are building there. We have service business. We have Büffel. We have Panzerhaubitze and we have as well the Boxer.

So we are not at volumes which would allow us to switch to a manufacturing concept as we know it, for example, out of our plant in Vienna. And you see at the little video there in Vienna, which is our -- from the pure volume, biggest manufacturing site with 2,400 vehicles we are producing there per year. We have established in-line manufacturing process with lean aspects, which we are now implementing as well in Kassel. So we are a little bit compared to the ammunition side, we are a little bit more at the start of executing this. But the general concept for Kassel will be focus on the Boxer, put there a manufacturing concept in place together with the colleagues out of the network where the blueprint in Vienna is there, apply automization concepts.

Here for me, important to mention as well, we will not end up in something similar like you would see at Volkswagen because we are producing not millions of vehicles, we produce hundreds and thousands of vehicles. But I will show you later as well some concrete processes, which we are already executing to automize. So we're going from producing a whole bunch of different vehicles in one location to focus much, much more to get processes in line to have production footprint, which goes step by step, [ tucked ]. And therefore, in Kassel, we will grow up to over 500 Boxer per year production capacity.

Automizing. So I think it's easy to understand when you just walk over into the other hall and you see what we do here on the artillery side. So how do we address the whole topic of increased volume and the opportunity to decrease our manufacturing cost on the vehicle side? So you saw yesterday already the first robots at the cabin build, which we have already in production. We are automizing the measurements. We will have a paint shop, which is partial automized. We have logistic concepts where today, people are moving much of the material from A to B, which afterwards, we are going to have little robots driving from A to B. We are taking subcomponents out of the manufacturing, have them assembled in different stations where optimization can take place so that we just take modules and assemble them into the vehicle to become much more efficient.

And one of the big topics we are addressing, and this is as well something on the naval side, where we see already a crossover to what we need to do is welding. You saw at the beginning, if you have low-volume production, then you have an individual who is taking the bowls, who is fixing them, who is welding them, and that was all good in the past. So what we do now is we not just go into 2-dimensional weldings, we go into 3-dimensional weldings, and we do this with all different materials. We do this with aluminum. We do this with armored steel, and we are executing this now in all the locations where we do welding.

Shifting from the vehicle side now to the whole topic of air defence. So how are we managing to ensure that the growth of the air defence system is going to be executed? We have invested as well substantially in our air defence production centers in Switzerland as well as in Italy. And the air defence systems, you need for sure, a gun. So we have now put a substantial increase of machine centers similar to what I've showed you already in Oberndorf into Zurich as well as Rome, where our production locations are. And we have established there a lean manufacturing concept where we assemble turrets. And we have the capacity in Switzerland for 140 turrets to assemble by the beginning of next year.

We have already as well the same assembly line. So it's the same concept. It's again a blueprint. It's a network which we have put in, in Italy. And as Armin mentioned earlier, we are in the process in our today civil plant in Neuss to put there as well, again, a blueprint, the exact same processes for air defence turret production into Germany. So that we come up by 2027 already to have a capacity of over 400 units per year.

How long would it take if we want to increase the capacity here? We would need additional machining capacity, which we could. And today, it's not that many machining companies are fully utilized, which we could get partially as well externally. And the assembly and the manufacturing process is something where we will be able to establish additional capacity in a time horizon of 6 to 9 months. So I think the air defence, the turret production itself is a perfect example of how quick we can be able to establish capacity here.

Going into Italy, going into Germany, here again, from a supplier point of view, we are talking all the sudden about volumes, which are much, much higher than what we ever had. So we are diversifying our supply base. We are categorizing our suppliers into A, B and C suppliers based on technical criticality. Some of the very critical stuff we are doing basically as well in-house. So here, again, vertical integration rather high. And that is the strategy we are executing to ensure that we will not struggle with the ramp-up on the supplier side.

So we saw yesterday the demonstration of the radar as well of the HERO. So both of these products you see here on the slide. We have already a production line in Italy ready. But if I look again at the vertical integration of a radar, Rheinmetall knows how to produce explosive. We know how to produce a warhead. So we have that already in-house. We know how to produce electric motors because we have already a plant which is producing over 10 million electrical motors per year. We have the capability to design and to manufacture a flight vehicle like you have seen here already in our location in Italy.

Capacity today, as you can see there, over -- or almost 40 per day. Again, if we want to increase that, we will be able to do that again in a time span of 6 to 9 months by copying what we do in Italy, using the blueprint, using the vertical integration to execute that in different locations.

So I've mentioned already quite a lot about the resilience of our supply chain. The growth clearly allows us now to diversify much, much more than we were able to do that 5, 6 years ago. And the interest of the supply base to work together with Rheinmetall to participate in the growth is huge. We get a lot, a lot of interest. We get as well a lot of interest from companies who were in the past working in the automotive industry. So we are -- if you also benefiting from the downturn there. These companies are, in general, used to produce mass production. They understand quality systems much, much different than it was maybe common in the defence industries. And that helps us to have a resilient and a strong supply base. And it helps us as well to be competitive in terms of pricing because it's always much more fun to have alternatives when you go out and negotiate prices than to just depend on a single source.

So the question I got asked the most, particularly after Armin Papperger is presenting the numbers, the revenue numbers, and that was yesterday as well, the discussion. It was -- the question I got asked was, do you feel that you will be able with your team to manage that growth? Do you feel confident? And I have to say, yes, I feel totally confident because I do not see any real struggle we would have that we are not able to manage that growth. Does that mean that everything goes without any setback, everything goes perfect? No. But in no industry, that is the case. But with the blueprint we have in place, with the network we have in place, with the experience we have in place, I am absolutely confident that we are able to manage the growth and that we are able -- and I hope I was able to give you already in all the different divisions, the measures we are executing and we have executed. And therefore, I feel confident that we will be able to manage that.

That brings me to the end of my presentation. So what are the key takeaways I want to leave you with? I hope I was able to demonstrate to you that the major capacity increases in all different areas are either executed or they are in execution so that the 2027 as well as the 2030 growth is not just fantasy, but backed up already with the required capacities. We have the opportunity, and that's something we are executing now. More of the same was what Armin Papperger said earlier, more of the same allows then to go into completely different manufacturing concepts compared to having hundreds of different varieties.

So that allows us to drive automization and supplier diversification, the deep vertical integration and the know-how of the product, of the processes allows us together with the network. Together with having on the industrialization time, this experience to execute projects in record time, which we need to ensure that the growth is becoming reality. And we are as well executing on our risk product diversification, which ultimately then with the right supply base ensures that the growth becomes reality.

So that brings me to the end of my presentation. Thank you very much.

So the coffee is now a little bit colder that we can speed up the process here. We have coffee and some snacks in the back. I'm really sorry. Yes. Any questions?

[indiscernible] from [ Alpha Value ]. So you seem very confident and I would say, prepared. But as you nearly aims to quintuple revenue by 2030, scaling ammunition, air defence, naval simultaneously, what do you see as the most critical execution challenges? And quickly on automatization, to what extent automatization will come from retrofitting legacy facility versus new production facilities? And how should we think about the impact on CapEx timing and margins of this automatization process?

Okay. So maybe I start with the CapEx. And I think -- I mean Papperger mentioned it already, a huge amount of CapEx comes with the chemical plants, and it's much, much less when we go towards the vehicle side. Legacy, you saw yesterday that we are able to mix legacy equipment with brand-new equipment because when you walk through the large caliber gun hall, then we still have a lot of equipment, which might be 10, 15 or even 20 years old, but it still does a job. So we're not just going ahead then and we are trying to scrap it. We are continuing to use it because it does a great job. And that ultimately means as well that we are very cautious with the investments we are basically doing.

So what are the biggest challenges we are having? I tried to point that out. I think we are working actively in making sure that we have the workforce in place that we have as well the material which we see today, critical that we have them in place. We did acquisitions. So the capabilities are going to be something which are available to us. So Resonant is one of the example. Hagedorn with the nitrocellulose is another one. So therefore, I think we have many things addressed, and we will see if there are any other challenges are going to thrown at us in the upcoming years, but that's how we are addressing all these things.

Christoph Laskawi from Deutsche Bank. One question just on -- you elaborated on finding alternatives to linters. You highlighted rare earth as well, working to find alternatives or even exclude them from the product. At what point can you be 100% European product? Or is that impossible with all the input factors? Is that a 3- to 5-year time horizon or...

I think that at the end, depends as well on what product we are talking about. If I take the linters, so the goal is really in a time span of 3 to 5 years because we have the inventory for 3 years to, a, have alternatives ramped up. So we are in discussions, for example, with Turkey because they are producing cotton with the United States. So we have already alternatives, which we are starting to mix in. On top of it, I mentioned yesterday evening already that we take now the wood linters to mix that as well in. But that is the process we are executing it.

Mike Raab, Kepler Cheuvreux. Considering your ammunition production capacities, what stocking level by NATO does it take into account? 30 days or 60 days at a current level?

Our capacity?

We are prepared for 30 or 60 days stock keeping by NATO forces.

It's 30 days as of now. So we know if NATO with the non-U.S. gun systems wants to stock up to 30 days, then roughly 10 million to 12 million rounds are required to basically put into stock.

Does that mean on the reverse, if the new requirement was 60 days, you would have to invest additional CapEx?

I think if we would get the orders, then we would invest into additional capacity. But I think the capacity we have right now, let's get it ramped up and then we see what NATO is going to decide in order to increase the stock levels.

It's Sven from UBS. It's just on how you prepare yourself for redundancy and making maybe the factories more autonomous against asymmetric threats like power failure, sabotage. I mean we all have to take these things into account that they could happen. Do you plan to make the plants more autonomous? Because I think here, you're connected to the power grid, the usual power grid. I mean do you plan this also for the coming years?

Yes, for sure. We have -- we are very thoroughly assessing what threats would have an impact on our production locations. And then we prepare accordingly to backup solutions or for backup solutions. But that's nothing we would share in public because then we would have to immediately think about the next backup solution. So -- but that's something we do location by location.

Chloe Lemarie from Jefferies. I have first a clarification on Slide 47. When you put your 2x revenue from '25 to '27, is that on the base of '25, including the civil business? Or is that excluding the civil business?

And my second question is actually on the defence electronics supply chain. We've seen obviously quite a lot of the peers having to move in-house some circuit printing capacity. Are you also doing this? Do you see any kind of potential risks to your sourcing in that area? And how do you reply to that?

Okay. So it's excluding the civil business. And we have already capacity for PCBAs for the circuit printing. But I would like to take the question as well because not too long ago, there was a lot of discussion in terms of what happens if there is a shortage. And if you look at the biggest vehicle manufacturing plant we have, it's 2,400 vehicles.

So if I take now, for example, Volkswagen, they produce roughly 8 million, 9 million vehicles per year. So the 2,400 is roughly 2 hours of the production capacity of Volkswagen. So if we then need maybe a few hundred PCBs from one of our suppliers, then due to the fact that what we produce maybe has a much higher national interest than getting 200 or 300 more Volkswagen out is something where we get as well from the supply base preferred treatment to get maybe critical components.

Sam Burgess, Goldman Sachs. I think maybe the skeptics would say it's -- you're dealing with governments and things are never quick and there's always impediments. Maybe you could just talk to how you have managed to build a plant in such a small amount of time and the kind of special accommodation maybe you're getting at the moment and the support from government and some specifics around that. So we can help to understand why in this instance, government will be moving so quickly.

So if I take the example of the plant here in Unterlüß, as a matter of fact, when the groundbreaking took place or when you saw the picture with the German Chancellor, we had already an arrangement with the local body, with the regional body, with the state body as well as with the Chancellor. And that allowed us, as a matter of fact, at the next day to start already with our project. So we had the full support from all of that different players on the legal side, on the governmental side.

And we got, therefore, in a record time, the required licenses, the required permits to move on. Then we had suppliers which were highly interested and highly motivated to make that project of their highest interest. I gave you yesterday already an example. If we would call Deckel Maho Gildemeister, so the manufacturer of machine centers. So I have the number of Mr. Mori himself. And if we say we need a machine, then he is ensuring that we get the machine before anybody else would get it. And that combination of everything allows to move at that speed.

Adrien from Bernstein. Can I follow up on your presentation about Weapon and Ammunition? Clearly, there's a lot going on with utilization rates and everything. You have a target to increase margins -- EBIT margins by 2 points by 2030 in the division. Does that include an assumption that prices are coming down? And I guess my question is on a net cost basis, where do you think margins could go with higher utilization rates, vertical integration? Yes.

Yes. So there is a pressure to reduce as well prices. We are the biggest, if you want to -- artillery manufacturer in the world that allows us as well to apply economy of scale. Economy of scales, we have here in the manufacturing process, but as well in terms of the material costs. And that's what we apply at the end of the day and is the road map for the profitability we have shown earlier on the chart.

So if there are no further questions, I then would suggest that we move to the back of the plant and have a little snack and a coffee to refresh before we then go into the final presentation of the CFO and the closing remarks of Mr. Papperger.

[Break]

So I would kindly ask everybody to take a seat. We are now getting ready for the second round of presentations. And we will start with some outlook on the financials by the CFO, Klaus Neumann. Klaus?

So also a very warm welcome from my side to our Capital Markets Day 2025. In my presentation, I will not so much talk about operations and basically the capital development but focus on some of the issues that are missing to get a full picture of our financial situation.

So let me start with a brief look at our Q3 numbers for the 9 months up to September 2025. Those numbers as of today still includes the civil business. As Armin mentioned, towards the end of this year, when we decide on the future of the civil business, we will take the civil business out of the top line and also out of the operating result numbers. But as of today, those are the numbers for the whole group. We increased sales by 20% to EUR 7.5 billion in 2025. We reached an operating margin of 11.1%, so almost the level of 2024, and we increased our earnings per share to EUR 8.34 per share.

We talked about the development in the different divisions, and we explained how this will develop and some words on the non-divisional side and how this impacts the overall picture. We know that we will have a more integrated working together as part of the downward integration and the supply chains that we have in-house. So the consolidation line will also grow over time to roughly 6% of total sales, but that will be of roughly EUR 50 billion in 2030. And we will also have an opposite effect on the operating results, consolidation impact. At the moment, the operating result and the consolidation of other businesses is impacted strongly by our IT transformation, as we mentioned in several occasions, and we have some impact from group-wide R&D, both impacts will diminish over time.

So we expect that the impact from consolidation on operating results will be roughly 1% of operating results in 2030. So as at the moment, in significant impact on our profitability, we expect it to be a really small effect going forward in those numbers. And as you know, in our operating result, it's EBIT adjusted for PPA impacts and other special impacts, just to give you an idea where we are at the moment with our PPA, and all those numbers is mainly driven by our acquisition of Expal in 2023 and of the acquisition of Loc Performance last year. Those numbers are driving these numbers. They will diminish going forward and will we have an impact in 2026 again through the acquisition of our -- the naval business. As of today, we don't really know how much it will be. We have a rough estimate but will increase again in the coming years, and we will update you about these numbers once we have completed the acquisition. As Armin mentioned, we expect to do so early in 2026.

Some words on the minority impact. As you know, we have an impact on EBIT, on the profitability for our investors on the minorities. We expect that in the short term, the profitability of our wholly owned subsidiaries will outperform profitability of our joint ventures. But as we are setting up new joint ventures, Armin mentioned several in terms of satellites, in terms of services and digitization but also in terms of the joint ventures for the production of powder and propellants. We will expect that minorities again will have an impact and growth impact going forward towards 2030. At the moment, it's very difficult to predict exactly how this will turn out. But roughly, it will be in line with our profitability growth.

Armin mentioned that we have a cash conversion rate target of 50% or above 50% for 2030. And one of the key drivers is basically what are we doing with the cash and how we are managing by -- our liquidity. One big focus, and I will walk a bit more later on is CapEx. We need to invest in the increase of our capacities, and we need to invest also in new facilities also to increase our potential and make the growth on the sales side possible. One other factor, and that's also something we talked about several times is our working capital at the moment is binding lots of additional cash basically to ensure that going forward, we can increase sales, we increase production.

And one factor that Rene mentioned is that we are in a transition, especially in the vehicle business from a more -- from kind of local manufacturing concept to a more production line concept. And once we have converted to this new concept, we expect that working capital levels for the vehicle business will go down in the ratio of sales. And in order to finance this whole transition, we need advanced payments. And that is the key driver to make sure that we have enough funds available to make all of this possible. And then the other thing that will kind of -- we need to manage going forward is the demand of some of our suppliers to also increase their capacity. We have the suppliers that have enough capacity. They don't need initial investment, but for some specialized or some production, we need also to support our suppliers to make growth happen.

In addition, another area where we want to invest is M&A. We have invested strongly in the last 2 years. We are in the process of acquiring the naval business. And all these businesses contribute in the short term roughly EUR 1 billion of sales per year, and this is also what we anticipate going forward. This is what we're aiming for so -- on a more or less annual basis to add about EUR 1 billion of sales through acquisition. And if you look at the target of EUR 50 billion in 2030, that is some contribution, but it's not the driver for our growth. This dividend is now another source where we want to basically spend our money, we want to stay with the level of payout ratio that we have had over the last years, a stable 35% to 40% of our net income before PPA. So it's basically looking at the operating result as a kind of the benchmark for the determination of our payout. And based on EUR 8.10 per share for 2024, we expect to continue to increase dividends going forward in line with our profitability growth.

As mentioned on other occasion, share buybacks would be the last option, if basically, based on our liquidity profile, we have additional funds available that we cannot use for focused investment or M&A and would be available in excess of dividends that we have to pay. CapEx, as I mentioned, will be a major area of investment in the coming years in addition to what we've already done in 2024 and what we're currently doing in 2025.

As mentioned, the investment, especially in energetics plants requires significant amount of cash. We mentioned in our press statement that the facility in Bulgaria will cost about EUR 1 billion. The facility in Romania, about EUR 0.5 billion. We need to invest in higher degree of automization. So going forward, for '26 and '27, we anticipate a significant level or increase of CapEx in absolute terms. But we are making sure that we are not the only people investing it. We ask our joint venture partners, especially on the investment for the propulsion and energetics plants to support the investment in our facilities. And we anticipate, based on the improvements that we have made that will make up about 5% to -- or 4% of the total sales will go into CapEx from funds coming from our partners. So overall, if you deduct this from the sales -- from the CapEx numbers, we anticipate roughly 10% of sales of CapEx in the years '26 and '27.

After that, we anticipate a decrease in investment and target a CapEx level of around 5% as an ongoing basis of sales. Especially the last -- next 2, 3 years are strongly driven by growth and additional CapEx in addition to our capacities. Working capital, another area where we really buy a lot of funds. As you have seen in our numbers, we increased working capital or inventory around to almost EUR 1 billion in the first 9 months this year. That is always driven by the need to make sure that we have enough inventory available to support the growth and also to hedge against the risk of disruption in the supply chain. Rene already mentored that we have stock for cotton linters for 3 years on stock. We have some additional stock in the area of electronics, especially where there are rare earth involved, and we are looking at other areas to just make sure that we have enough stock available to grow. Going forward, at the moment, the production will also turn into a more industrialized concept.

In ammunition, we already have it. But in terms of the vehicles, we are in kind of a transition here. Inventory levels in relation to sales will decrease and then support basically the cash flow target that we have for 2030 of above 50%. One important part where the money will come from is the area of down payments. We're aiming at 20% to 30% for large contracts of prepayments, and we are working hard and negotiating hard with our customers to make this possible. It is very difficult to predict going forward because it really depends on the timing on the signature of the contract and the award of the contracts as we explained at the conference for the Q3 results. There is some delay at the moment, but we expect that the award of contracts will strongly increase and accelerate in the coming months towards the end of the year and the first half 2026.

One other factor in the working capital management area is suppliers. As mentioned, we need to manage this carefully with our suppliers. We need to make sure that they are stable and adequately financed to support us in our growth story. For M&A, I mentioned that we want to invest in additional companies that are anticipated to contribute about EUR 1 billion of sales on an annual basis. And we are looking at entities that complement the portfolio that we already have and diversify also our regional presentation and access us to new technologies and enable us to grow in some certain faster or access new markets. One area, just in part of the financial housekeeping.

So our hedging strategy as we are strongly based in Europe, a lot of the growth at the moment is in Europe and also the production is strongly based in Europe. Currency hedging is not such a big issue for us at the moment. Now we have some -- we hedged the resulting transactional risk that you have, and we are moving to looking a little bit more closely at translational risks. We use FX contracts that are relatively straightforward. So we are relatively stable. It is, at the moment, not a big area of concern for Rheinmetall because of the way our currency flows are arranged. Commodity hedging is also under control. We have pricing escalations for those areas where hedging is possible. So we are matching by the purchase price of some raw materials with our selling price. With the disposal of our anticipated -- disposal of our Power Systems business, we anticipate that hedging for commodities will decrease.

So that is at the moment, not a big area of concern. We talked about -- a lot about growth, and I want to give you a little bit of context of where Rheinmetall is standing at the moment in comparison to our peers in the industry. When you look at our CAGR for operating profit, in relation to our sales CAGR from 2025 to 2030, we strongly outperform all our peers, with the exception of one technology company in the U.S. But that just demonstrates that we are really well positioned and are really working hard to increase our sales line, while also increasing strongly our operating profit with a strong growth also on margins.

Now we looked at all the different segments. And just to summarize again the situation for the group. Our target for 2030 is about EUR 50 billion in sales at an operating margin of above 20%. We are at the moment in the defense business around 18% already. But given all the different drivers in the different industries on the market, on the cost side, we anticipate that we will be able to increase sales beyond 20% in 2030. And our cash conversion rate target is 50% over a running 3-year average. Below, you see the contributions of the different divisions. And with a very strong margin in weapons and ammunition, all the other divisions as well will contribute more than 13% gross margin to our overall profitability, which is a very strong performance given what -- where we currently are for some of the businesses, but also in comparison to our peers or other competitors in the industry. And that is also a result of our strategy to downward integrate and basically to create an ecosystem in the way we produce our products and access the market.

So from my point, just to summarize, our new guidance targets confirm our commitment to long-term value creation. We have an industry-leading sales and profitability growth. And importantly as well, our strong balance sheet at the moment allows us to basically finance this growth and also leaves room for additional complementary M&A going forward to reach the target of EUR 50 billion by 2030.

So these are my final comments. And thank you very much. If there are any questions, I'm happy to answer them.

Sam Burgess, Goldman Sachs. Just focusing in on the EUR 50 billion and the contribution from M&A. When I take the upper end of the individual segment guides, I get to EUR 50 billion irrespective. You talked about EUR 1 billion annual contribution from M&A. So is this outside of the NVL acquisition? And is there upside to the EUR 50 billion, if I take the top end? Or are you baking those in?

No, if you add all the divisions, you are right, but there is a consolidation. So basically, there is some reduction when you put all the divisions together through the integration and the collaboration between the divisions. So the additional revenue is not fully complementary to the EUR 50 billion. It's part of this estimate or target for 2030. And we don't know whether it will be EUR 1 billion exactly every year or will be EUR 3 billion in total for the next 4 to 5 years.

It's Afonso Osorio from Barclays. Just going back to the Slide 78 on your margin summary and delving deep into that weapon and ammunition margin for 2030. Is that -- 29% to 31%, is that the new normal? How do you see the margin profile of this division going beyond 2030?

Yes. So we are already almost at 30% at the moment in that business. And yes, as Rene explained earlier, all the different aspects together, the pressure to some extent on pricing, but also the cost benefit through automization and basically increased scale will contribute to achieving overall profitability of 29% to 31%. So in a way, you could say that based on the current pricing levels, we share some of the benefit from automization and cost optimization with our customers.

So you feel comfortable protecting that margin beyond 2030?

Yes.

Thanks very much for your transparent presentation and for all of the numbers that you gave us. In terms of integrating or swallowing and integrating larger acquisitions, we all know that they don't come in slices of EUR 1 billion to EUR 2 billion year-over-year. Would you then be -- or would you consider to give us milestones to integrate a bigger acquisition in terms of, let's say, return on invested capital going forward? That's question number one.

Question number 2, if I may. What's your stance on potentially financing suppliers?

Yes. On M&A, yes, you're absolutely right. There are a limited number of 1 billion companies that we could acquire. It's meant to be a guide of the size and the scope that we are aiming for. It's roughly in line what basically the contribution was or is from Expal, Loc and as you know, naval would be somewhat higher. So it's an average number.

In terms of the return on investment, I think our past performance on acquisition shows that we are -- we achieved very good return on investment. And that is not just by expanding the business that we acquire, but the benefit comes from the integration and the interaction with the business we already have. So that's question number one. And the second question, sorry?

What's your stance on potentially financing your suppliers?

Yes, we don't like giving suppliers money, yes. It's -- first of all, we want to keep it for ourselves and invest it in -- where we need it and not use it for prepayment. But in terms of making sure to have a stable supply chain and to ensure that they also can grow as quickly as possible and to the extent that we need, we are prepared to do so. We are also looking at options where basically the supplier might be financed externally, but the agreement that the supplier may have with us is basically the additional guarantee for the financing party to support the supplier. So we are looking at all the different options. But we are looking carefully at prepayments. We're not just giving it away because we have managed to negotiate a prepayment with our customer.

George Mcwhirter from Berenberg. Two questions, please. Firstly, on revenue. Can you just give us an idea of what share of revenue you expect Germany and Ukraine to account for in 2030?

And the second question is on digitization. Can you just give us an idea of some of the big ticket orders you expect between now and 2030 to get to the EUR 8 billion to EUR 10 billion?

In terms of sales in 2030, so Germany will be a big contributor to our sales line, given the numbers that Germany is able to expand. I'm not entirely sure, but I would -- because we -- for 2030, we have not planned it exactly. We have big tickets. So it's substantiated by planning. But not all of the things from Germany might come. Some others might come from other countries or vice versa. So it's roughly, I would say 50% in 2030. And in terms of the big tickets for digitization, we already have big contracts in place with TaWAN, which has already fixed order of roughly EUR 1 billion, but a commitment for up to EUR 10 billion. And there were other areas to substitute it. But for what exactly it is, I think Armin is much better placed to elaborate it for 2030 than I am. And I think we explained quite in detail what the strategy is in the Digital division.

Joe Orchard from Rothschild & Co Redburn. What needs to happen for you to change your stance regarding share buybacks? What sort of time line might those be a more appealing way of returning capital to shareholders?

There are 2 elements. The first thing would be -- I would need much more stable situation than at the moment because at the moment, it's extremely dynamic. And it's driven by large order intake and the need to finance growth. So in the near term, I don't see it as an option that we will look into closely. It might, going forward, change. So that would be beyond 2030 from my current assessment.

It's Sven again from UBS. I just had a follow-up question on 2026 because Mr. Papperger said that the 25% growth also applies to '26. But now next year, you have almost 20% contribution from NVL. So I was just wondering if you also feel confident to grow 25% organically.

Definitely. Yes. So we -- I joined Rheinmetall in -- yes, 13 years ago, 2012. At that time, Rheinmetall was doing EUR 2 billion in defense business. So we have a track record of growth in the defense business that gives us the confidence that we can grow somewhat faster going forward. And as Rene showed, we have accelerated our growth path in recent years, and we are prepared to further grow even faster in the coming years.

But specifically also in '26?

Yes.

Sebastian again from BNP. Sitting here to your left. I waved my head. Just quickly on the EBIT margin trajectory and especially when squaring that with the CapEx step-up, the EUR 8 billion or more than EUR 8 billion that you mentioned over the next 5 years. How should we think about the D&A phasing? So how should we think then with that also about the EBIT margin? Should we expect really every year an increase? Or might there even be a year like '26, where this is a bit more front-loaded? If you could just help us on that front.

And the other question I have is around free cash flow, and I appreciate that the uncertainty to time the down payment received is difficult at this juncture, but you are currently forecasting more than a 50% cash conversion by 2030. And my question is simply, do you have also a guide for us what the sort of average cash conversion might be through 2030?

Yes. In terms of CapEx and the impact on amortization and depreciation, yes, the large part of this investment will go into energetic plants and chemical plants. They will take 2 to 3 years to set up. So amortization and depreciation will only start in -- towards the end of '27 or in 2028. And also, these are long-term assets that we are setting up. So the impact will not be like a PPA for -- that you have a very strong increase and jump once you started, it will be more gradual increase towards the [Technical Difficulty] from 2027 onwards. The other -- in terms of margin, can you just repeat the question? Sorry.

The question on the margin was just if we really have sort of a step-by-step every year improvement, but from your earlier answer, I would take the answer is yes because of this back-end-loaded pattern of the D&A. And the other question was on the free cash flow conversion from operating profit as a sort of average eventually over the 5 years period.

Yes. We have given the 50% -- the cash conversion rate for -- on average for the target in 2030. Last year, we had a very -- in 2024, we had a very strong cash conversion rate. As you know, the first 9 months this year were not yet as -- not that strong. We're working on getting -- achieving 40% for 2025, primarily through prepayments. And the next 2 years will really depend on the pattern of what kind of prepayments we can negotiate. I don't want to give a specific guidance for 2026 because that we will do in March next year. But we are working hard so that it's not -- yes, that we still will be positive in the next years, but not necessarily at the same level as plus 50% given the investment, but it might be better. It really depends on the timing and on the lots of factors that we are at the moment, not fully in control of.

Yes, Marie-Thérèse Grübner from Cantor Fitzgerald. It has to do with M&A. So when you are entering bidding processes for your targets, are you oftentimes the only game in town, do you compete against any other European players or is Germany [Foreign Language] for you in a way, that would be the most likely winner?

It's different acquisitions. Some of the acquisitions were done in very close contest with -- or negotiation with our targets. It's also the case with some other negotiations. But as you know, the -- for [Technical Difficulty] and overall, we presented the best prospect for the business and also for -- yes, from overall German industry strategy perspective. It's not a given that we will get everything that we would like to acquire.

Conor Dwyer from Citibank. A very quick question on the CapEx ramp up. It's quite helpful over the next few years, but I think it excludes IFRS 16. But I'm just wondering, basically, on that, how substantial basically right-of-use asset financing will be in that.

It's not -- yes, we looked at the cash impact from it, there is an IFRS 16 impact, but that won't be substantial.

It's Stefan from [ Baden-Wurttemberg ]. You have quantified your 2030 operating margin target at a group level and then individual ones. What makes you confident that your one customer will allow you to make such solid margins? And can you quantify a little bit what's in it for them? So how is it advantageous for them as you scale? How will their prices go down?

Yes. For some of the products and especially the vehicle business and I mean, Rene mentioned that Boxer will be one of the big products going forward. We do get the same price as our competitor. It goes through a joint venture with KNDS. So it's not that we are getting different prices than our competitors. And that's also the case for some of the other products, especially on ammunition, we are getting similar prices to other producers of similar products. Sometimes we are even cheaper. But because of our scale and all the vertical integration, we are able to basically attract higher margins. And that is also what is important for the customer. He is looking not at margins. In pricing law, I know that there are some rules on margins. But the key focus is that they get good value for money. And based on our product portfolio and our pricing, we are convinced that we are doing exactly that. We give our customer good value for money. And that's not going to change to 2030.

Saima Hussain from AlphaValue. So I have 2 questions. So on CapEx. So NATO-driven demand is expected to run through 2035. So is 2027, genuinely, the last CapEx peak or simply the last year where you have this visibility? And since most of your growth relies on German programs and on prepayments, will -- so how confident are you that this prepayment will materialize on time in terms of cash and in terms of revenue as well?

Yes. In terms of 2027, the CapEx target and the profile, yes, it's true that the programs will run longer, yes. But we are now building the capacity to be able to produce the quantities that are required to 2035 or as Armin mentioned to 2040. This is basically an initial push to get basically the whole system to a totally new level. So as of today, we don't anticipate that beyond 2027 there will be another peak or anything. We really see it as now kind of a push to bring the whole industry and in our case, Rheinmetall to a new level. But then the revenues and the production will come and increase to 2030. And you have a question -- second question?

Yes. I was wondering, since most of the growth relies in government programs like Germany programs, and we've already seen some timing slippage, how much timing risk is implicitly embedded in your guidance in terms of revenues, but also in terms of cash conversion on prepayments?

The prepay -- our sales targets are independent on the profile of our prepayments. We -- as we have shown, we need funds to basically invest in the growth and to make sure that the growth is going to happen. We're working hard with the customer to negotiate appropriate and adequate payments terms so that the customer is helping us to fund this growth. From our discussions, we know that the customer is fully aware of our -- of the situation and has also shown in the past that he is willing to support us. The examples for the facilities in Bulgaria and Romania show that, that is also done on a large scale, not necessarily through prepayments, but also through capital injections. We are very confident that we will manage. But to get the timing of large payments coming from inflows from prepayments fully synchronized with large out payments for investments that will be the challenge. But that's what we also say we get an average over time to -- because we think it will balance out over time.

One final question on cash conversion, if I may. At some point in the mid-2030s or towards late 2030s when growth is slowing potentially below the 20% level. What do you think the cash conversion this business can generate would look like? Closer to 70%? Or any estimation you could give?

Yes, 70% is what you can achieve in a stable mode if there are no big additional investments. We anticipate that it will -- once growth and basically investment into growth will reduce that we will get to that number. But we anticipate -- we plan to grow quite fast until 2030 at least. So it will be a challenge to achieve it earlier on a consistent basis. We achieved it more than 70% in 2024. But it will be a challenge to get there consistently in a strong growth phase.

Thank you very much. And I hand over to Armin for some closing comments.

Thank you, Klaus. And first of all, I want to say thank you very much, and we are very grateful that all of you are here, that you take your time and this big audience of 75 investors and analysts, yes, it's a great honor for us to have you here, and thank you very much to all of you. The second point is I want to say thank you very much also to the marketing team. All of that, what we are doing here is an internal thing, and the people prepare it and they want to show you that Rheinmetall is innovative, that we have a huge product portfolio and that we are able to reach the targets. Another thing, and I want to comment this also, I'm very happy to have colleagues who are really focused on that, what they are doing. And maybe you have seen this today.

Klaus is very deep inside the figures he's taking care about that and Rene is unbelievable at the moment, what he's doing on the operations side. Without these colleagues and Vera is missing here because she is for -- responsible for HR. She's making the housekeeping in Dusseldorf at the moment, but she takes care about that, and we have a great team about that. I'm very grateful also about that. And last and not least, I think it's very rare that also the Chief of the Supervisory Board is here, Ulrich Grillo. And Ulrich speaks most days about that because he said, it's very important to also to have contact to investors and to analysts. And therefore, thank you very much to my colleagues and to the Chief of the Supervisory Board.

So as discussed before and to bring everything into a nutshell, and we were traditionally a player of land systems. And maybe you have seen yesterday and you see also today that we changed the company. We changed the company absolutely in a space, air, sea and land systems house. It's driven at the moment still from the land side. So it's the biggest part. But over the next 5, 6 years, we will bring Rheinmetall to be a digital system house. And the digital system house, what you see here, the digitalization at the end of the day, this is the key where we want to go in. And if you see what happens on [indiscernible], and this is a discussion also that we had yesterday. There are rumors also about what happens about the F126, yes. Is there a stop now? What's going on, et cetera, et cetera? I'm absolutely not afraid. It's a need. This frigate is a need for the German Navy. The point what the government is doing at the moment is to have an interim solution, maybe to buy more frigates, and they speak about the MEKO class, if there is a delay, if there is a longer delay. So I see no risk in this area.

As we said before, there is an investment on the naval side of more than EUR 80 billion in Germany over the next 10 years. If we are able to pick up only 30%. It's up -- it's nearly EUR 25 billion of that. But at the end of the day, I think it's possible to pick up more. On the air side. What we have here on -- there are huge opportunities because if you see the unmanned planes that are coming up, we have the factory. Weeze is the factory where we handle at the moment, U.S. data. We have terabyte of secret data from the U.S. government on the F-35. We are the only one who handle these data about that because we are the only producer of fuselage outside the United States of America. And -- so therefore, we see a huge opportunity. And in space, you will see the growth immediately. You will see the growth which is -- which will come and the order intake, which will come this year. So again, huge opportunities from our side.

Segment naval and this segment of naval which will come, still not the closing is there, as you know, this EUR 5 billion, what is behind that? These are the programs that Germany is investing in these areas. And so we are, I think, conservative because the mine sweepers, the fast patrol boats, which are coming up. These are -- we are or if I say we, I think Rheinmetall NVL, if everything works, yes, we are the producer of that things. And nearly single source also in this area. We will produce corvettes, and we will produce frigates for sure. Nobody knows at the end of the day, is it 6? Is it 8? Is it 10 or whatever? It doesn't matter. It's a huge program. And the company this year makes EUR 1.3 billion. It is -- it will grow up. These are the official programs of the German Navy. So huge opportunity. Rheinmetall offers drones. You have seen it yesterday. And the summary that I want to see are the new businesses where we are going in.

And if you see yesterday, you have seen what we are able to do in automization. So you have seen on the land system side, and you will see it maybe next year. We are on the way at the moment to automize main battle tanks, to automize Schakal, unmanned driving. Next year, you see it. The same what you have seen on the small toys, yesterday, which are driving around, we want to do with the big boys. This is a point which is very important because that is the next generation of digitization. We spoke about -- we speak about unmanned boats. This is the next point. The technology that we have on the vehicle side, we want to implement also in the digitization of the naval side. And if we do that, we have a big advantage to other shipbuilders because other shipbuilders usually have not a huge department, which is doing digitization in that area.

The same on the air. This is what I said before, yes, unmanned planes. So the wing commanders to the F-35, and you have to communicate with the F-35. Not everyone is able to communicate with the F-35. So you need the linkage to them, and you must be in the inner circle of F-35 to make that happen. And the only thing what we want to show you is the opportunities that we have and the advantages that we have. And there is, in some areas, not so big competition. There is always competition in life, yes. but it's not so huge in different areas because of the technology gap others have in this area.

So -- and you see what we -- what -- this is the family that we offer at the moment of UAVs that we offer to our customers. And we never spoke in details about bad things. And as I said before, we will make this year EUR 120 million, EUR 130 million in UAVs. I think there is nobody in Germany at the moment who makes EUR 130 million sales on the drone side, but nobody takes care about that because it's too small. The other thing is what I told is on the UAV business, a good business, yes, but it will grow. I think it can grow up to maybe EUR 1 billion. If everything is positive EUR 1.5 billion. But it is not a business like the auxiliary ammunition, which can grow up to EUR 6 billion, EUR 7 billion, EUR 8 billion in this area. And the reason for that is that the numbers they want at the moment is much, much smaller than on the auxiliary side because this is a precision -- usually a precision strike.

Yesterday, you have seen the Raider. The Raider is that plane. So #4 from the top. This is what you have seen live yesterday. But we are on the way, and we are producing at the moment these drones. This is with a 10-kilogram, 4.5-kilogram warhead. This is loitering munition HERO. This is what we are producing in Italy. At the moment, only numbers of the 0.5 warhead. So these are different warheads. What is the differentiator that we have? And Rene told it before, we are a warhead producer. We are an ammunition producer. An electronic company is not able to produce a warhead. They are not allowed to produce a warhead because they need an ammunition plant like you see here, without an ammunition plant, without a warhead, you have no fighting drone. You have a plane which can fly, but you have no fighting drone.

The second point is that we are producing the engines. This is the second point which is very important for us because we want to independent. Most of the drone producers use Chinese engines, Germany will not allow that. I said, okay, we want to be independent in this area. But if you see the engines, the electric engines that we have, we produce that in our factory in Saxony, where we said between 10 million and 11 million electric engines that we are producing. This is another USP that we are doing, yes. And the USP #3 is the connectivities, electronics that we are doing. We do that with -- together with Auterion, but also with Rheinmetall, and we implement these electronics into our battle management system, into the whole algorithm for what you have seen yesterday for war.

Where are the competitors in this area? It's hard to compete if you can deliver all that things. And we are not interested, let me say, to be a single product producer. And this is the reason that we have all this family here in this point. Look, at this ammunition, for example, here, there is a small warhead, a very small warhead. This is where we fight -- this is implemented in vehicles like that vehicle or like that vehicle that we have. There is a launcher on the top where we kick out 10 or 12 of these small fighting drones. These are very small ones. The only thing that we produce is the electronics and the warhead. The rest we buy in.

We are not interested to be a producer of quadrocopters. That's not our job. There are other companies who can work for us and do it, but to implement that into the battle management system, into the digitization concept, that is great. The interceptor, the same thing what we are doing. Yes, we do that together also with others. Only the warhead is ours. The interceptor is the drone that is fighting against drones. And what we want to do is we want to make a combination. The interceptor is part of our drone wall, and it's part -- it's another part like the Skyranger you see here to say, okay, we combine that and we bring them together.

If the Skyranger can fight, but the Skyranger gives information to the interceptor and on the battle management field, if we need him also to fight against that. So there are different ways to fight against drones. The only thing what I want to reach now is to tell you and if -- the cruise missile, and this is the point that we want to qualify in this Barracuda. And the Barracuda is the underrated technology that we have. If we are able to qualify that in Germany, the European market is open.

If this Barracuda is qualified, then you have a cruise missile with a price that is 20% of the price of the cruise missiles that we have at the moment in the market. But the profitability is still fine because it's another technology. We want to do the warhead. We want to do also on these areas something here on the check drive and other things, which are coming up. So I hope I can -- we could give you a small overview about that. What is our philosophy also in that business, this business is able to grow. And as I said, this is another piece of EUR 1 billion, EUR 1.5 billion that we can implement. Ah drones and a lot of people said, drone is a game changer. We don't need tanks. We need nothing. I say this is totally wrong. And this is exactly what I see in the discussions with all the governments about that. Without protection of people, yes, it is impossible to make war, and protection of people is coming with such vehicles.

Germany will spend EUR 35 billion on satellites. That's a clear -- a very clear message. And it's not only satellites. It's also the intelligence that you get with satellites. It's the service. And the German government said, what we want is that we have a German satellite production, you want to be independent, also in Europe. Germany is spending most of the money, so we want to have -- we want to be also independent. And so they came also to us, and we spoke with them and said, okay, hey, guys, it's a good idea what you guys are doing, especially on the SAR satellites but also on others. We are on the way to cooperate also with satellite -- other satellite producers, not only on the electrooptical side but also on the communication side. Companies like Deutsche Telekom are interested to work with us now. And I said, okay, you're able to handle the customer, you are able to handle the Ministry of Defense, and this is an investment only from the Ministry of Defense. There is much more in because there are other investments here from the Ministry of Economy, et cetera, et cetera.

We have cooperations with satellite launchings because at the end of the day, we think that satellite launching is also an important thing. This is Andøya what we are doing. And we have data processing, and this is, at the end of the day, the real business, and then we give the data as a service to the customer. So what we do is we sell pictures. We sell pictures to the customer. We sell information to the customer. As you have seen yesterday, when Timo made his presentation at the beginning, there are terabytes of data coming down and no human being is able to bring these terabytes into the right direction.

So therefore, you need this data as a service. You need artificial intelligence to do it. And we have different partnerships in these areas, and we have our own technology that we bring in. We always try to have USPs that Rheinmetall at the end of the day is able to be in the driver seat. And there are 2 things which are important. One thing is the really, really good relationship that we have to governments in Europe and around the world. And the other thing are USPs on the technology side. These are the 2 drivers of the business to come let's -- to come inside that business.

So intelligence, surveillance, reconnaissance and also communication and communication is the next step, where we are going in. We need communication satellites also on defense because without communication, it will not work. We build up with our programs like TaWAN, a terrestrial communication system, and we built up a communication system with satellites. What about people? People are the driver of success. And we are very grateful that this year, again, we will have 300,000 people who send the CV to Rheinmetall and want to join the Rheinmetall company. We are very attractive at the moment. I think this is the biggest advantage that we have. We can pick out of 300,000; 10,000, even also 12,000 per year to find the best people. That's a driver of success. If we build up at the program management in the divisions, if we build up operations guys, a lot of people, like Rene said, from the automotive business, which are really, really good in automization, yes, want to come to us now because automotive is suffering around all Germany.

So we have, yes, a huge opportunity also to implement these well-educated people into the Rheinmetall family. So the risk level is very small. And this is what we always discuss, what are the risks of all the businesses. It's a very small one because we get the people. And if you see the risks, we make it -- we try to make it very simple. Over the next 5 years, the risk level of market is very small. It's a very small one because the demand is so big that nothing happens.

On the labor side, also we get all the people that we have. It's always a risk in R&D, but the beauty that we have is we produce at the moment, more from the same. We have no new developments. I must not develop, let me say, self-propelled Howitzer. I must not develop Schakal. It's developed. It's now qualified. So we produce thousands from the same thing. Are there different solutions on the software? Yes. But at the end of the day, we do it together with the customer and the risk is relatively low. So R&D side, is also a point which we have relatively good under control, supply chain and execution. These are the 2 things.

We acted, not we reacted. We acted. And the reason that we implemented Rene's area is exactly that because we have seen that operations is the biggest point. We need a big team, a huge team, yes. And I didn't count it. But at the end of the day, he has thousands of people who work in the operations side who take care about that. And this is -- and he's focusing really on that point. And the second point is that we implement also into Rene's area, the supply chain, because supply chain and operations have to work together. And we separated that, and we have a centralized supply chain management, with Marcus Gerlach, who is also the General Director of the Rheinmetall Group, and he's reporting to Rene. So Rene has the supply chain and the operations under control.

And for me, it's easier because I have the easy job. I bring only the contracts, that was -- Ulrich always says, you bring the contracts, Rene has to make the work, thank you. So not joking longer about that things, but I think we have it under control. And I hope you got an impression about that, how precise he is going into the details, how precise he is doing the automization at the moment. And from the financial side, with all the contingencies and all the other things, that Klaus is doing. He prepares every project. I think we are on a really, really good way. And Vera takes care about the labors. And she has -- we have a centralized system where we have the recruiting. There are more than 100 young ladies and also young men who take care about that by day and by night, and we have a good digitization systems also about that to handle up to 300,000 people who want to come into Rheinmetall.

The information we want to give you is we are prepared. We are really prepared ourselves. We are usually riding -- we are in front of the wave. We are not behind the wave in these areas. We invest before the customer is really pressing us. So we take the money. Is it always good for cash management? No, it is not. Absolutely not. But is it important? You cannot grow if you don't do it. If you don't invest, you cannot grow. But we are also entrepreneurs, yes. It's not bureaucracy what we are doing to say, okay, give me a contract.

Then after 1 year, I start to invest something. And after 5 years, I start to deliver something. This is not the motto that we have today. Europe is in danger. And the governments are very happy what we are doing. The governments are very happy, and most of the ministers said, Armin, Rheinmetall is one of the companies, one of the few companies who is really doing what you are doing to go into investments, to be fast in these different areas and make it happen. And we think it's the right thing to protect our democracy, to protect freedom and to protect the people and also let me kids and if you have grandchild in different areas.

So on the order intake, and this is also a very important thing in Q4 '25 and Q2 '26 -- up to Q2 '26, you see what happens. So the green checks are done. So Jackals, Skyrangers and different things are inside. And we have -- these are smaller than EUR 2.5 billion, EUR 2.5 billion to EUR 5 billion and EUR 5 billion in this area, and what you discussed about before the down payments. If you see, and this is an opportunity, if we sign EUR 10 billion, EUR 15 billion only for the Boxer or the Schakal side and because the first contract, the EUR 3.2 billion was the small contract. Now the big contract is coming. And what Klaus said, and that's a real digital thing, but the government wants to do it. If we sign EUR 10 billion to EUR 15 billion and if you get EUR 20 billion to EUR 30 billion down payment, we have no cash problem.

If we get for all of them and at the moment, cash is not an issue for Germany. The Minister of Finance said, okay, you have cash, whatever you want, you get in this point. It's not an issue. Signing means you get down payments. A little bit, let me say, we have to guide it also because I discussed that, I think it was in one of the conferences in London, where I said, what do you think if we get EUR 5 billion or EUR 6 billion in one shot. And then the next year, we have to reduce it in these areas, yes. So that is the reason that we have this 3 years period to say that, I think, more than fair in these areas.

But for all of them, we get down payments. And if you look to the big boys here of more than EUR 5 billion, EUR 6 billion package of Puma, yes. The same is here Romania. The digitization is on the same level. Medium caliber contract, a huge contract of 6 million rounds is also in EUR 6 billion, EUR 7 billion level. And the huge -- the biggest one will be the Boxer program, and you know the armed vehicle from Italy, where next year will be a big piece come. This year, we had a small piece, but next year, the big piece will come because they have to order. Otherwise, I cannot deliver Lynx and Panther.

What we want to bring over, and this is -- this was, for us, the message we want to give you about that. Rheinmetall is well prepared. Rheinmetall is in the pole position to go with the NATO. NATO is giving us very clear or is not giving us, is giving the nations a very clear target, what they need, how many brigades, how many battalions they have to deliver to NATO to be prepared. The first target is 2029. In 2029, all the ministers and there is a commitment from NATO, all the ministers have a clear target from NATO, where they should go, how many vehicles they have to send to NATO, if tomorrow, we have a crisis. And if tomorrow, an aggressor is coming and wants to attack NATO areas.

And we will be ready in '29, maybe earlier because the ramp-up curve that is coming now up on the vehicle side. We did it on the ammunition side. We come now on the vehicle side. We come now also on the digitization side. We are ready. And we have the speed that NATO wants. What's the reason that the margins from our side are much higher than the margins of our partners? Leverage, much stronger growth. You have seen it in one of the things. If we are growing between 25% and 35% and others are growing 15%, it's very clear that there is a leverage effect. There must be a leverage effect. The second point is the risk is relatively low because we are producing the same, always the same. There are R&D programs. We are investing in R&D, but this is not in the scope up to 2030. There are new technologies maybe in '35 and others, like new drone technologies that you see here in that areas, which you cannot see it because we did not present it.

Best-in-class in capacity ramp-up. We are able to make it in 12 or 14 months. We have a very dynamic portfolio, as I said, 2,000 products from the Rheinmetall side. And we have the right people. And that is my point. And I really -- I'm really, really grateful that people are so motivated. It is unbelievable what you see. Maybe you have seen it yesterday if you go through the factories. The people have sparks in their eyes. They love to work for us. They love to do it even if they have to work by day and by night, even if the pressure is high to make it ready. We are able to do it. And people is everything what you need. It's people, people, people business, from program management to operation, to finance, to HR and finally also to sales. And if you have the right people, you create trust, and for me, in the governmental business, trust is the only thing what you need. If the ministers, if the prime ministers trust you, you make business. If you lose trust, you lose everything. And I hope now that we are not losing trust from your side. Trust us, we make it happen. Thank you very much again. Stay safe and god bless you. Bye.

So are there any questions left? Okay. Thank you. Who wants to go first?

Alessandro Pozzi, Mediobanca. You seem quite comfortable about execution and supply chain. I think that probably you've done quite a lot of work to see whether there is enough capacity in the supply chain, given your strong growth. You talked about a 25% to 30% growth every year for the next few years. And I was wondering what is your feeling about the supply chain and whether it can follow you into this growth trajectory, but also critical raw materials, you highlighted that in your slide and how critical materials are for you? And I guess there are areas where there are more of a concern compared to others. And last question, lot of orders coming through. If we fast forward a year by the end of next year, what do you think the backlog of Rheinmetall is going to be?

I say what I said before, middle of next year and with all the programs you see, we see the potential that our backlog can grow up to EUR 120 billion. The critical materials, and this was something that Rene also told you, we have usually very small numbers. It's easy for us to buy in whatever we need. For example, we made a deal with the chip producers with 10 chip producers, electronic producers for the next 5 years to say, okay, we pay, and we pay them also in front and said, okay, give us a safe harbor for the next 5 years for microchips. We gave them a better price because we don't need such a lot in this area. We are not automotive industry, yes, who needs millions of that pieces. And they store it for us. So they have it in their stocks, and we can pick it out and take it. It works fantastic.

In ammunition, there is only one thing where we are -- that we need at the moment. But we also think at the moment to start our own linters production. But we have linters for 3 to 4 years in our stocks. So we are independent also from that. In South Africa, we had a linters production 20 years ago before we stepped in. They closed it, we reopened it now. And to be fair enough, cotton, you can buy cotton everywhere. That's easy. So this is the next point. It is a huge investment? No, it's not a huge investment, but we want to be independent. Steel, we have frame contracts with steel. On the steel side, we have Europeanization, bring it back to Europe. We bought steel from India. We bought steel from China. We will buy in the future the steel mostly in Germany or in Europe. There are steel producers who are very interested because they take our contracts as a ticket, as an investment ticket.

You spoke about investments and Klaus spoke also about that point. On the investment side, if we said we give this contract for 5 years to this supply chain, Bank of America, KKR, all that guys are here coming to us and say, okay, I want to finance them. I give them money. This is a business for bankers, a huge business to invest in these areas, and it's a safe investment. It's a very safe investment because they have our contracts, fixed contracts over 5 years, over 7 years.

These are totally different modules that we have at the moment, and I believe that money is not an issue. Absolutely not. I'm not happy to give the down payments to -- for free also to them. It's much better if Bank of America, whoever you invest the supply chain in this area. It's a business for banks. And I think we had the last 2 months, 6, 7 banks who were there and said, can you give me the 100 biggest supplier of Rheinmetall to give them money to be -- to invest them, to make an investment about that. There are huge opportunities at the moment. You must be flexible. You must be fast. This is, for sure, very, very clear. But I think we are prepared about that. Is that fair enough?

Michael Raab, Kepler Cheuvreux. First of all, I tend to agree with your view on UAVs. They're important, but the importance has been over pronounced. And I'm not going to bore you with military tactics and physics behind that. But out of the EUR 1 billion to EUR 1.5 billion sales potential you mentioned, rephrasing things, is that already included in your guidance? Or would that be on top?

Something is in because you see we do this year, EUR 120 million, EUR 130 million, but it's not an essential part of all that things. So if it's growing faster, I'm fine, but you know better than me about that things. If you have a forecast for 5 years, always something happens. So you have to compensate something. But at the end of the day, you have to hit the target. This is the most important thing for me. If I make EUR 300 million more there or less on the other side, for me, it doesn't matter.

And then secondly, on the 6 million rounds medium caliber for Germany, is this just for the IFVs? Or does that also include ABM for Skyrangers that are forthcoming?

It's a combination. And the big pack at the moment is for the inventory fighting vehicles. And -- but you can use, as you said, this is a 30- and 35-millimeter solution. You can use it for both. If -- you can fire the ABM ammunition on the Schakal and you can use it also on the air defense.

It's just a follow-up on 2027 because last year, obviously, you gave the guidance for 2027. Now today, you took us to the high end of the EUR 40 billion to EUR 50 billion. You indicated previously for 2030. I was just wondering because the previous months, you said '27 could be EUR 20 billion to EUR 25 billion. Based on all what you said today, what you think the opportunity is more on the upper end of that range or...

We, at the moment, in the planning phase. What we do is what we have to implement. We have to implement the naval business. We are, at the moment, at the beginning of the analysis phase because, as you know, we have still have not the closing. And this is a big driver also in that business. And as you know, at the end of the day, we have to deliver. This is the most important thing. And if I'm standing here and say, yes, I want to make EUR 25 billion. And at the end of the day, it's EUR 22 billion, you said, okay, he's the guy said, okay, here's this guy who said he made EUR 25 billion. So give me a range at the moment because we are in the planning phase. We do our utmost to be as good as possible because what we know.

Timing is the most important thing. Customers have one thing at the moment, which is the most important thing. It's not pricing. It's time, deliver, deliver, deliver. If I go to the -- in 1.5 hours, I will fly to Berlin again. And the only thing that I get always from the minister is that deliver, when are you able to deliver. These are the hardest, let me say, speeches I have with my colleague here to say, okay, I need more Pumas. I need more Schakals and whatever in this area, they -- we have to deliver.

And the people in Rheinmetall are really working hard on that area. But our business is not a business like a bretzel baker to say, okay, now I make EUR 1 million and next year, I make 2 million bretzels. This is easy only for a machine. It's complex machines. Look at that machines. This is -- if you compare that machines with a normal Mercedes or BMW 7, so this is technology-wise, let me say, another totally in the space, where the others are -- this is a totally -- this is a real technology-driven business, so you always have risk, but we want to compensate the risks. And therefore, I said I stay that we are between EUR 20 billion and EUR 25 billion.

Saima Hussain from AlphaValue. Just a last quick one on my side. I know visibility beyond 2030 is limited, and you're not guiding, but I will try my luck. Do you have a strategic view on where Rheinmetall could be heading by 2035?

Yes, but I don't tell it.

Sam Burgess, Goldman Sachs. Two quick ones, please. So on -- we've talked a bit about digitization, battlefield connectivity and autonomy clearly go hand-in-hand with this area. And you touched a little bit about how this could impact platform development going forward and some of the big boys, as you said. Given the pace of change in this area, could we see quite significant changes in the near term to how these platforms operate? And what's the aftermarket opportunity here perhaps in terms of software as a service for Rheinmetall? So that's question one. And then question two, just with the new additions of naval, space, digital, air defense, should we expect a significant reconstitution of your current divisional structure at some stage?

Number one, this is the last generation of vehicles which are manned. The next generation will be manned and unmanned. So I believe that -- and this is a system that we develop at the moment, that you have 1 manned vehicle and maybe 5 or 10 unmanned vehicles. And the unmanned vehicles are fighting in the front line. And the manned vehicle is, let me say, a railway station, a digital railway station where you take care about if something is going wrong. The impact you will see next -- middle of next year, we want to have the first wheeled and tracked vehicles, which is going totally autonomous. Is it in a stage of 0 production? No, but we want to show the prototypes. We want to go to our customers. We have that at the moment on the truck side. We have fully automated trucks. The trucks are driving, we load and unload the trucks with automatic load handling systems full in the digital scenario. So that is the reason that areas like TaWAN are so important because TaWAN is producing the network for us.

You cannot hope if you -- in the middle of nowhere that telecom is giving you a 5G or a 6G net. So you have to do it by yourself as a point, and that's the reason that TaWAN is coming inside. You see it's a combination of all that things, and yes, the impact will be there. But what always is coming forward. First of all, that vehicles up to 2035 will be produced long term for the next 10 years. And then slowly, slowly, the next generation is coming in because governments are not changing the vehicles, yes, every day because it's too expensive. It's billion programs that they do. So it's a very smooth process to bring it inside.

Second point -- second question, yes, you see that we change our organization. And we focus and we want to be transparent, to give you on the naval side, on the air defense side and on the digital side, a clear picture what's going on. And maybe we have to change also something if we are growing faster and faster, but this is a story of tomorrow or the day after tomorrow. For example, if you have a division who makes EUR 20 billions or more billions, if this is a DAX company, as a division in this area. We have maybe to split then to say, okay, because people -- if the weapon and ammunition, and Roman is sitting here, business is growing with missiles or whatever fast and fast. Maybe in 3 years or 4 years' time, we have a division missiles and we have a division ammunition. I don't know. But for tomorrow, this is what you have seen, we will have this new organization.

Marie-Ange from Morgan Stanley. I have actually one question on the German budget because apparently, last week, we had a document from the Bundestag with some like new allocation, I would say. So first, can you come back to that and just tell us if you have any surprise for the '26 budget, and then we'll do like one by one.

Yes. No surprise for '26 because in '26, we are fully booked between. In '27 and on the ammunition side, we are very well booked also. What you have seen is -- and this is always something and believe me, you get every 6 months a new paper from them because if the budget in one project at the moment is if they need more budget, they change something, but they change nothing from the total number, as I said. The total number of EUR 180 billion is up to 2030, the right figure, and they don't change that. They change internally between procurement line 1 or 2. If they change EUR 2 billion, EUR 3 billion from ammunition to vehicles, it doesn't matter, not for us because we deliver both and they change something because of the new idea to have an interim program of frigates. And now we are also in that business. So for us, I think it's -- it doesn't hurt because for me, it doesn't matter if it goes from a left pocket to my right pocket.

Okay. And probably like it's a good follow-up because my next question is on 2030 sales and what you have included actually. Like for naval, have you included any 126 frigate that can come? Or is like anything that we will hear will be on top of that of the EUR 5 billion that you mentioned?

Yes. We have in our plan, F126. And -- but the beauty in that plan is that we have a POC because usually on frigates, you make that via POC. The 126 is the following situation. The Lürssen troop has -- we have, at the moment, 70, 7-0, people in the Netherlands who make a due diligence, and I say we because as I said, again, closing is still not done, yes. And we are not operationally going inside only after closing, we can do it. But for sure, we get information from the market, 70 people make a due diligence at the moment in the Netherlands.

And these people get from the government at the moment 4 months. After 4 months, the due diligence must be ready. Then we must see if there are technical risks, if there are economical risks and if there are time risks. And we are relatively risk-averse, as you know, because we take -- we try to -- and that is the reason that we have not super huge impacts. We also have impacts. So -- and if we would do everything better, as I said and only, as I said, on procurement and operations, and this is a discussion that Rene and myself are doing we have a potential of minimum 300 basis points to be better. So we lose for sure, something. But we will have an overview in 4 months. I think that in 4 months, the closing is done, and then we can make a decision what we do on the F126.

And just on M&A. So basically, you have included some M&A in your guidance. Like what's your level of confidence? Is it because you're already discussing with some companies and so you know that probably it will come? Or have you also included some JVs like higher scope for your current JVs? So can you just like go through that.

Yes. Now what we do, we always discuss over the whole year with companies if they fit for us. And there are smaller acquisitions, and there are bigger acquisitions. And if you see our new nitrocellulose plant come nearly out of the blue, we had an opportunity. The owner came to us and said, okay, yesterday, we discussed that also. He was a strong producer for nitrocellulose for this finger colors. And as I said, we are not interested in that, but we want to change that business into a defense business. This is exactly what we did. There are always opportunity. What I can say because now I always said to Roman because he is on the way to buy now the new ammunition storages in this area from a company, I told him inshallah because he told me 2 times that it works.

But I think we will have it in the next 2 weeks. So I can tell it because we are really convinced to go forward. I don't speak about figures or names. So yes, we are sure that we are able to implement year-by-year 1, 2, 3 companies. And there was one question before about the big shot. Is it so that we want to go and invest into the big shot? Usually, this is not the philosophy of Rheinmetall to say, okay, now we want to invest EUR 10 billion in a company and let's see if it works. No, this is not what we want. We -- at the end of the day, we want to be -- we want to have a safe business, and I think it's also very important for all because we're also investors that also tomorrow our kids have still food.

So thank you very much. It was a real pleasure for us to have you here. Now we -- food is the keyword. So the buffet is open.

Ladies and gentlemen, welcome to the Q3 2025 Report Conference Call. I'm [indiscernible], call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions] The conference must not be recorded for application or broadcast.

At this time, it's my pleasure to hand over to Armin Papperger, CEO of Rheinmetall. Please go ahead.

Thank you. Thank you very much. Good afternoon, everybody, and thank you for joining us for the Q3 results call today. With me on the call is our CFO, Klaus Neumann. Klaus will walk you through the financials. Before we start, please be reminded of our legal disclaimer on Page 2.

Now let's move on to Page #3. On Page #3, you see that on the sales side, and I focus very strong on the Defence side. We have a growth rate of 17% on the Defence, up to EUR 2.3 billion. The total sales is EUR 2.78 billion. The operating results on the Defence side is EUR 361 million, a plus of 7% and it's EUR 360 million in total of plus 19%. Operating margin is, on the Defence side, 15.7%. And it's lower on the total sales on operating margin is 12.9%. The people still want to come to Rheinmetall. So we had more than 200,000 applications.

Operational free cash flow is going down on the Defence side, minus EUR 286 million, total minus EUR 168 million. And CapEx is growing because of all the new factories that we build up at the moment to 8.9%. And Rheinmetall nomination and the issue that we have a minus of 36% is, as you know, the election period that we had in Germany so that we had delayed order intakes. And -- but that's very normal because the government was not able to give these order intakes to us. But Rheinmetall backlog is -- we're still very healthy. With EUR 63.8 million as nearly EUR 64 billion, we have a plus of 23%.

Let's have a look to Slide #4. And here, we have shown some innovations. We presented the innovations on the DSEI in London. And we have shown with together with Lockheed Martin, the [indiscernible] tank counter on a new Fox mobile, but it can be implemented also on other vehicles, then we have a growing family of our Skyrangers, the Mission Master, which is skyranger-- and the next-generation ship protection with the Luchs 2, there are a lot of more innovations that we have shown on the DSA. It's a small overview about that, what we did in London.

On the right side, you see the Telfort Gancho groundbreaking ceremony. And we will invest in total about EUR 100 million and we will create 100 highly skilled jobs and it's important for us to produce the caliber range of 120 to 155 from the [indiscernible] side. but we are also able to produce medium caliber. The need for that branch over the next year is huge, and we create upper capacity of more than 150 large caliber guns per year in the United Kingdom.

Let's have a look to Page #5. And here, you can see that the Parliament made good decisions. So at the end of the day, 2025, finally, we will have a budget of EUR 95 billion. There is a growth rate of 23% and in '26, the draft, and we expect nearly EUR 120 billion, where EUR 83 billion is coming out out of Ansell than the special fund and the Ukraine relief fund. So the decision on the budget in '26 budget has to be passed in November, so that we are able to plan -- really fix then for the next years.

Let's have a look to Slide #6. On Slide #6, you see 2 new activities that we have inside the Rheinmetall Group. One activity is that we reached an agreement with Lürssen family. And to take over the naval vessels from Lürssen, so we had the signing. And we expect that the closing is latest end of January in 2026. The potential sales that we see in 2030 is up to EUR 5 billion. Next year, the expectation is that we can grow up to around EUR 2.5 billion, but then double the sales. And the order intake potential that we see over the next 5 years is between EUR 20 million and EUR 30 billion because there are huge programs also from the German Navy but also international navies.

On the right side, you see the ICEYE cooperation. We formed a 40-60 joint venture with doing ICEYE and Rheinmetall. So Rheinmetall has the majority. And we signed it on the 23rd of September in '25 -- the first market is Germany, but we look for more markets and the immediate need we see is at the moment, 40 satellites. And Rheinmetall, the expectation on nomination is about EUR 2 billion. And if everything is working well, we can have an order intake also this year of that EUR 2 billion, so the first big contract on satellite for Rheinmetall.

Now let's have a look to Page 7. And here you see how Rheinmetall weapon and ammunition is creating this European ecosystem. And the expansion of existing capacities in Spain, doubling or in some areas, tripling capacities in Spain, the same in South Africa and in Australia are in progress. In Germany, we started the trial production for the 155 projectiles. And we are also on a good way, and the first stage is ready on the powder production in Bulgaria. And we will double, and in some areas, triple also the productions in Bulgaria on the powder side. So we are on a very good way in that area.

The groundbreaking in Lithuania for ancillary ammunition. And we signed an MOU also for propellant to create a center of competence of propellents in Lithuania signed also where the President of Lithuania was with us. A new ammunition plant in Latvia, signed Bulgaria, joint venture for powder and 155-millimeter is established. And in Romania, a joint venture for powder production is also established. And on the Romanian side, we plan at the moment, and it can be also very fast in the first quarter next year, a package deal with the Romanian government, not only about ammunition, but also about tanks and other equipment for the Romanian Army.

Now let's have a look to Page 8. Here, you see what happens now with the Power Systems, the process of selling our automotive business is going forward. And the submission of final offers will be in quarter 4, we expect over the next 4 weeks that we get binding offers. And if everything is running well, we can finalize the process in the first latest in the second quarter of next year.

Now I take over to my colleague to Klaus, and he give he will give you an overview about the financials.

Thank you, Armin. Yes, we had a strong quarter in which our sales grew by 13%. Defence sales grew even stronger -- sorry, with which now make up EUR 2.3 billion or 83% of the total sales of EUR 2.8 billion. Our operating results grew even stronger than sales to EUR 360 million, with a margin of 12.9% for the group and 15.7% for Defence. M&A activities, as you can see on the slide, contributed contributed to the sales, but only -- there was only a limited impact to profitability because we still have some integration costs for some of the acquisitions we did this year.

Please move on to Page #11. Let's have a look at the development in the different segments of our business. In Vehicle Systems, sales increased by 8% quarter-to-quarter to EUR 1.3 billion, driven by more tactical vehicles, including services. As you know, there are some truck sales was slightly lower than in previous quarter because of the delayed deliveries to the German customers. There's a small negative mix effect and a regional split compared to the previous year, so we have a margin of 12.5% in this quarter compared to 13.1% in the previous year.

Let's move on to Weapon and Ammunition. Again, we saw the highest growth rate in this segment. Sales grew by 38% to EUR 691 million, important sales related to tank ammunition and median Calama. As you know, artillery ammunition was held back to some extent by the delay of the new government permission for our production site in [indiscernible] -- the operating margin decreased by 3.3 percentage points to 23.2% in the third quarter.

In Electronic Solutions, yes, sales growth was very strong with 32%, reaching EUR 516 million. Main driver was the increasing contributions from multiple digitization programs as well as increased air Defence sales. Operating margin went up to 11.0% after 10.9% in the previous year.

Lastly, our Power Systems division showed slightly decreasing sales compared to the previous quarter as the auto market is a very difficult environment at the moment. And -- the division is fighting hard to basically keep its ground in that difficult market. Despite the sales decrease, operating results stayed stable compared to the previous year at EUR 18 million, slightly increasing the margin from 3.6% to 3.9%.

Let's turn to Page #12. As mentioned, yes, I mean, our nomination was lower in Q3 2025 compared to previous year due to the delay in order placement, especially by the German customer. Also keep in mind, that last year, we imposed a large framework -- frame contract of trucks of EUR 2.9 million, just to give us a bit of perspective of the development from year-to-year. Overall, everything is going as expected. And you might have seen in our press releases, we are gaining additional order momentum on several big tickets now in the current quarter, Q4. More on this in the outlook section. Our Rheinmetall backlog rose by 23% to EUR 63.8 billion year-over-year.

Let's move to Page #13. to look at our cash flow and our working capital development. As order intake in Rheinmetall Nominations was lower than in previous year, -- we also did not see the large prepayments that we enjoyed in 2024 so far. -- as a result and also as a result of the buildup of inventory for upcoming sales in the fourth quarter and in 2026. Our cash flow was negative at minus EUR 813 million million for the 9 months in 2025. Higher inventories again relate mostly to vehicle systems and are also impacted by the later truck deliveries compared to 2024.

Let's move to Page #14. While we have a negative operating free cash flow, this year so far, we have a strong support from -- on the financing side. I just want to give you an update on the situation with our convertible. We had no conversion of the Series B convertible bond and our total number of shares is now standing 46 billion shares. Our equity ratio improved and is now at 32.9%. This conversion support our net liquidity position and strengthens our balance sheet. Due to the lower level of customer prepayments, our net financial position, nevertheless, is now at minus EUR 1.9 billion.

And just to give you another example of our balance sheet situation, net debt-to-EBITDA ratio of 0.97 is still very strong and puts us in a very comfortable position to finance the upcoming M&A transaction.

With this, I would like to hand over back to Armin.

Thank you, Klaus. I want to give you on Page 16, an outlook about the nominations and the expectations that we have in Q4 after having the German government machine running again. So we are in negotiations, and we had the first successful -- the first success on the Jackal. The -- let's start on the vehicle systems side after 9 months. So we had, as Klaus said, also nearly EUR 64 billion. Our expectation is on Jackal, 3.4 is booked. The other point is Puma. And these are always net values that we have only for Rheinmetall, not in cooperation with others. The Puma, the expectation is that on the Puma side, we have a potential of EUR 1.4 billion .

On the Lynx side, there is another potential that we have from -- won from the Italian side. but also maybe from Romania, where if everything is going good. Only the Italian side will be a level of about EUR 400 million. On the Leopard side, we see EUR 0.5 billion, EUR 500 million also. And the support vehicles on the Leopard is another EUR 300 million. And there are negotiation on the trucks, but it seems -- it can be that the trucks are also going into '26 into the first quarter into the negotiations.

On the truck side, we are in negotiations at the moment to enlarge the frame contracts and which are then fixed contracts of more than EUR 4 billion. A very positive point is also and maybe not in Q4 because it's a huge contract. This is a boxer contract, the government calls it Arminus, -- this minus contract is a total contract number. There will be nominations of EUR 40 billion. from this EUR 40 billion, we expect more than EUR 22 billion also for Rheinmetall. But this will happen very safe in '26 and not longer in '25. But if it happens in Q1 or Q2, I will be very happy.

Next one, let's go to weapon and ammunition. On the weapon and ammunition side, there are the final negotiation on the 155 fixed contracts. And there are different numbers at the moment in discussions. First of all, we discussed about 1.7 million rounds than 1 million round -- maybe it's in this year a little bit reduced because they want to bring something to this year and to next year to create fixed contracts. But the expectation in total on the ammunition side is an expectation of around EUR 6 billion. So if you count it up everything, it's EUR 5.5 billion to EUR 6 billion for the vehicles minimum, EUR 6 billion on the ammunition.

Then we go to Electronic Solutions. On the Electronic Solutions side, we see the satellite program. And the contract that we expect this can be around EUR 2 billion. The SkyRanger is implemented in the program [indiscernible] -- and then we have Luchs 2 weapons and weapon stations, about EUR 300 million laser light modules, EUR 300 million loitering ammunition. This is what you have seen in the newspapers over the last 2 weeks, the first bigger contracts for drones and also some other smaller contracts so that we see potential of EUR 3 billion that we can reach this year.

The rest will be in first quarter and second quarter, and this is the big bunch then, which is coming in the first and the second quarter next year. If you count up everything; so we are still in the range of around EUR 80 billion, how we expected at the beginning of the year. Don't beat me if it is, let me say, 78% or 82% or is the big contract is coming earlier on ammunition, it's a little bit more. But let me say, around EUR 80 billion is a fair value.

Now let's go to Page 17 on Page 17 on the outlook. A positive signal is also that 95% or more than 95% of the backlog coverage we have, let me say, in our books. So we are confident about the full year guidance. On the sales side, we think that on the Defence, we can grow between 35% and 40%. There is no growth rate on the civilian business, maybe a little bit shrinking business in that area. And the operating margin will be around 15.5%. And it depends a little bit for sure about the down payments because, as you say, at the moment, the operational free cash flow on Q3 is very negative.

But with the new German contract, usually, we expect between 20% and 30% down payment so that then the cash conversion rate would be positive. If the down payments are delayed, we will get the cash in the first quarter.

So far, and now we can start the Q&A. Thank you very much.

[Operator Instructions] The first question comes from Sebastian Growe from BNB Paribas.

The first 1 would be on the nominations. -- the chart that you presented on Page -- or Slide 16. So the question here for me is, as you also made reference to the frame contracts in the wake of the trucks business, in particular, on earlier occasions, you said that you were expecting probably upgrading from EUR 20 billion of frame contracts by the 50% option, i.e., EUR 30 billion you have been putting the trucks potentially at 4. So how should we think of the latest developments in this frame contract conversion and then also with regard to the down payments that you mentioned at 20% to 30%, you also said on prior occasions that you are in discussions with the customer to even also think about special timing this way. So what's the latest in this regard?

And if you may then finally ask one very quick higher question around the guidance. It seems apparently that on the sales side, things are in flux and it's not these coming down probably to Spain, the restart and then also to the truck deliveries the German customer. So my highlight question is, are you confident to reach the operating profit target of around EUR 2 billion, almost irrespective of what's happening to the top line?

Yes. So let's start with the nominations. On the nomination side, as I said, we are in discussion to get fixed contracts also on the trucks for up to 29%. This is what we are in discussions. And we hope we can reach that. And you are absolutely right. If everything is going well, there is a potential, which is 50% to the nominations that we had. At the moment, I want to reach the first step to change nomination into fixed contracts and also the down payments. This is on the truck side, and this is also on the ammunition side. So this is -- if we -- let me say, have smaller -- this was a discussion that we have.

Is it good if we get the huge contracts to have it on, let me say, on -- in one shot, or is it better to get it in 2 or 3 shots also the down payment. At the moment, we take whatever we can get. And we are in negotiations there for everything at the moment, which is going from frame contract to fixed contracts or in new contracts to get between 20% and 30%.

And Second point is on the guidance. Yes, there is an impact -- still an impact on the Spanish side because -- we are -- still have not the permission. We are on the -- in the last stage to get it, but the government is -- yes, it's a governmental decision when they give us this step, but we expect we get it. We stay on the sales side because as you know, the impact is an area of EUR 150 million. But I think we are able to compensate in different areas because there are such the businesses in between so big that it is possible to compensate it.

But at least, we are able to compensate on the operating margin. This is exactly what we expect, and we expect to go up to this EUR 2 billion target. So that should be possible, if not extraordinary things happen. But at the moment, we are in line. Is that fair enough, Mr. [indiscernible].

Next question comes from Chloe Lemarie from Jefferies.

Yes. So I had one on [indiscernible], but I guess that was already answered. The other one is actually on free cash flow. So assuming you get those 20% to 30%. And obviously, with the reversal of the inventory buildup on over the past 9 months. How high could free cash flow conversion get if you do reach the all the contracts that you expect by year-end?

Yes. Yes. As you mentioned, we did have a negative cash flow until the end of September. It highly depends on what kind of contracts will be placed in 2025. And also what kind of prepayment arrangements we will be able to negotiate. As Armin mentioned, in some cases, the actual cash in might be -- might fall into Q1 2026. So it might -- there's a huge volatility at the moment, and it's quite difficult to exactly predict. But if everything is ordered already in 2025, and we look at all the payments already in 2025. It will be substantially above the 40% that we mentioned.

It's easy to calculate Chloe, EUR 15 billion that we will have in order intake. And therefore, from EUR 3 billion is, let me say, the potential of of down payments.

The next question comes from Sam Borges from Goldman Sachs.

Two, if I may. Firstly, there's obviously been a big pickup in interest across Europe on air Defence over the last quarter. you just talk us through the opportunities you see here? At the moment, your portfolio is quite focused on short-range Defence. Do you see any opportunities to expand the portfolio maybe into something more medium range?

And then the second question would just be about, I guess, interoperability between the operational domains. You've got pretty good coverage across 5 operational domains now. Do you see an opportunity here for Rheinmetall to be a prime integrator of Battlefield software?

Yes. So on the short-range air Defence, we are focused at the moment on the gun side. But as you know, we also offer the missile solutions, and we implement the missile solutions into our gun solution. So this [indiscernible], for example, will have also a gun solution, but also our [indiscernible] system has gone and missile solutions. So yes, we focus on both -- the -- on the drone side, and this is the big numbers that you have. As you know, Germany is looking for 600, 650 systems. It's not 100% fixed. But we have now also Denmark. We have Austria. We have a lot of other European partners who buy that systems. And our expectation is that we are able to sell much more than 1,000 Skyranges.

Skynet system is very successful. I can give you that information that on the Skynet side in Ukraine, we are also able not to fight against drones. We fight it against midsize -- and we had the first successes also to shut down missiles in the Ukraine. So everybody is very happy about that things. So in a nutshell, yes, we focus on the big pieces, which are the total systems.

Second, yes, we focus also on the missile implementation. And we want later, but this will happen in maybe 2, 3, 4 years produce also some missiles and by ourselves if our rocket motor and Missile Center is ready in [indiscernible].

Battlefield, the battlefield management system is, I think, the best thing is what we are doing at the moment in Germany, and we want to implement that also on other European partners. On Germany, we create the infrastructure, we create the battlefield management in total. We have the huge digitization contracts of more than EUR 15 billion to do this digitization from the German side. There are needs in other countries. The Netherlands is looking for such a system, how is looking for such a system. So there are opportunities for us, but we are not at the moment in the situation that we said we will sign over the next 6 months contracts in this area. So -- but yes, we are prepared. And yes, we want to do it.

The next question comes from Sven Weier from UBS.

The first one is just coming back to the the list of projects we had a debate in Germany recently about maybe last minute changes on the Fuchs successor, where, I guess, quite a few local state presidents have no bet in favor of you guys in terms of getting into the project despite the fact that it has been kind of awarded to Patria already. So that would obviously be a big change and a big project. I mean, what is your latest take on this one?

Yes. The Fuchs point is it's an initiative of the Premier, and it's not an initiative for Rheinmetall, and it's at the end of the day, political decision. The minister was very clear to say, okay, we want to have the first lot to do that together with our friends from Finland. And we will see if there is a split or no split, I'm open for everything. We are ready. We are ready to perform and we are ready to perform also on Fuchs. -- but it's a political decision. There are no further news. We are not, at the moment, in negotiations with the government. This -- the Premier initiative is a political initiative. And we are here and we are ready to perform.

So it's not too late for this one.

At the end of the day, I always said it's it's never too late, yes. You always have to try to try your chance. And at the end of the day, you never ever should give up.

Yes. That sounds fair. The second question I had was just -- I mean, there's a bit of discussion lately with the upcoming CSG IPO and competition from Eastern European companies. I mean as a matter of fact, you are striking all the deals in Eastern Europe on the ammunition and powder plants. I mean for the sake of the audience, I mean, what do you think still differentiates you from those kind of competitors, which also seem to be quite a bit aggressive, but you take the contracts, that would be interesting.

I think that -- and it must be because the government, if you see Bulgaria, Romania, Lithuania, Latvia, the government show that the -- I think we are able to show this government that we are very trustful partner. This is number one.

The second point is that they see and this is -- this was a good example of what we have shown in [indiscernible] that we are performing that we are able to make it happen in 12 months and maybe not in 3 or 4 years. So this is the second point where we say, okay, we have to hurry up. There is a budget.

And the other thing is that the financing, and this is the positive signal also for us from the governmental side will be mostly done via safe money from the European Union. So I think the combination between a huge player, a trustful partner and a company who has shown the performance in different areas are positive. Another positive thing is that we have the newest technologies that we want to produce there. So we produce the -- we have all these technologies on powder. There are not a lot of companies around the world who have these technologies of powder, the newest technologies for triple-based powder or even harder, the surface coated powder technology, nobody has that.

But we want to do this also in that countries because we see that all these factories will be guided from Rheinmetall, IPRs are also under Rheinmetall control. So there is a combination of newest projectiles and newest power technologies that we implement in that country and the countries are happy with that. And on the other side, I think that we are able to create all these things because we have our own planning, we have our own real estate company who is going forward in these areas. We can do it very fast, and we can do it for a fair price.

I think that's a combination, the 4, 5 aspects that I told you that here that we win the contract. I'm not unhappy about that.

And is it also the input that you have from South Africa from the engineering capabilities that you have down there?

Yes. It's a small part also, but it's part of the ecosystem that we build up that in South Africa with the -- with our companies that we have there because we have 2 companies, 1 company in South Africa is doing the shell production and implement all that things, the same what they also did in [indiscernible].

And the second one is doing that we bought this chemical components. And so we are not dependent from other companies. And there are not a lot of companies also in the world who are able to do this chemical stuff, so how to build all the explants, how to build power plants, how to build these chemical converters, et cetera, et cetera. And this makes us reliable. This makes us fast and I think this is the decision-making process of the government. But at the end of the day, the government, I'm happy if they share if they say, okay, Rheinmetall is a reliable partner, let's do it with them. But at the end of the day, as I said, they are in the driver seat.

Makes sense. see you in 2 weeks.

The next question comes from Christoph Laskawi from Deutsche Bank.

The first 1 on M&A. You just said the idea is to double revenues NVL in 2016, if I understood that correctly. It's obviously quite a big step up -- is that already in the books? Or do you need to see some business wins in Q4 for that 1 to happen as well? And then on [indiscernible], it seems that [indiscernible] is still pointing to some uncertainty if it makes sense to carve out the Defence trucks business and sell it to you. Where do you see the likelihood of that deal coming through next year? And if it makes sense.

And then the second question would be on the order intake. With the last quarter in Q2, you said the potential that you highlighted to some degree is conservative. If we think basically today, how does the potential look versus the communication around Q2, was there still more business opportunities that emerged to even better? Or is it essentially unchanged?

The last thing I didn't get, do you think for next year, the up to Q2 next year or...

Yes, correct. Yes. Okay.

Order intake and on business.

Yes.

Yes, let's start with that. On Q2 or up to Q2 in the next year, there is -- I would say every week, there are new businesses coming up. What we told you is still valid, what we want to do also in the next year. And I think the next year will be a very strong year also for order intake. It's not bad what we do this year. And if we can grow up to nearly let me say, EUR 80 billion, I think it's not a bad value. But if my expectation is that up to Q2, and this is always what I thought there is really a potential to grow up -- potential to grow up to EUR 120 billion backlog. So it's a very strong Q1 and Q2 next year.

Trucks, on the Italian side is, look, -- for me, it's a point that we have a handshake agreement and that we will, first of all, that Leonardo takes over, and then we have the opportunity to go in. I have no glass ball. I cannot tell you what happens. First of all, there is a process at the moment what going on. I read the comment also if -- how to go forward. Anyway, it's a potential, but we have it not in our business plan. And I still think that the handshake agreements are agreements between gentlemen that work.

Next point is N.V.L. On the N.V.L side, yes, it is in the order books and the order book is a good one. and we can grow with the order book, and there are smaller contracts for sure coming in. We are able, in 2026 to grow up to more than EUR 2.5 billion.

And the next question comes from Marie-Ange Riggio from Morgan Stanley.

I just would like to come back on Germany because obviously, we have seen the '25 different it passed, and now we will have a new budget for '26. So I just would like to know if there is any update on the addressable market for you. So what do you see in terms of budget allocation, how much is likely to go through equipment? And if German companies are clearly the priority for the government? And if you still see a potential for 50% market share? So that's my first question.

The second question is on capacity expansion because you have announced several capacity inflation in weapon and emission since September with [indiscernible], Romania, I just would like to confirm and to know if it's incremental to your previous target that you gave? And if it's incremental, if you can just update us on the capacity outlook now.

Yes. Let's start with the ammunition side. On the ammunition side, we always said and we calculated and you know when we discussed, Marie-Ange, that we calculated that in 2027, we want to grow up to 1.1 million million around. And we speak always about this affillary technologies. Yes, there is also medium-caliber technologies, but 1.1, in 2030, we will have a total capacity if everything is running 10% to 1.5 million.

At the moment, we do not plan more because we think that then we have an overcapacity and we want to fill the factories up, let me say, also up to 2035. So I don't want to have overcapacities in these areas. So no, it is not add on. It is exactly what we expected. This is exactly what we planned. and Lithuania is in the plan, Bulgaria, based on -- these are not so huge factories that we have. So -- and we speak then if you have EUR 1.1 million or EUR 1.5 million, we speak about to 100,000 drones above that. So it's less than 10% of that is going on. Is it possible to do a little bit more? I think yes, but it's not in my expectation. So I stay with the figures that we had before. Is that okay?

Yes. Perfect. And that's on Germany.

Yes. On the German side, at the moment, all the expectations are that we have are running. So we -- we have huge negotiations. My teams are every day at the moment in -- with the government to make these huge numbers also of negotiations. There is, for sure, one thing that will be the news on the Capital Markets Day to give you a detailed overview about the Naval business, what we are doing because the naval business for was not part of the discussion. -- that we had over the last months. And there is a huge opportunity, and we want to give you in detail then the opportunities that we have on the naval business side. So I'm still -- I still think that we have the opportunity to grab a big piece of that, what the government's contract is giving out.

Then the next question comes from Marco Vitale from Mediobanca.

The first one is on the space JV that you have announced, you were targeting -- you said that you're targeting the general market, but also looking at other international opportunities. I was wondering if you could provide us -- how do you expect to position the JV compared to the other, say, big European deal has been announced by [indiscernible]. What could be the, say, competitive landscape going forward for this business?

The second question is -- and second question is about Ukraine. We read from local press articles that you are planning to strengthen the operation for the vehicle systems if you could provide us some additional details on this.

Yes. So on the space side, we are newcomers in this area. We know that very well. And -- but we -- I think we started on a smart way, because we are not starting to develop huge satellite programs. We are starting to make more from the same what is still in the market. And this is what we do with our joint venture with ISI. The German government asked us that they want to have also a German production line. And we build that up at the moment. And if we are able, over the next 4 weeks, to sign the first contract on the satellite side, then we see a huge opportunity, also only for the German market because Germany wants to invest EUR 35 billion into satellites.

This is not a small number. And we are starting with the SAR satellites, but we will go also into the electrooptic and also into the communication satellites with other partners. I still cannot give more details about that because this is not signed at the moment. But even if we can pick up a big part of the German contracts, it's an attractive business for us. But if you have the satellite then in the orbit, you can use that satellites also for other partners.

And Ukraine -- on the Ukrainian side is, yes, we are -- we build up more capacities also on the vehicle side, absolutely right. And what we want is we are now because the Ukrainian government gave green light also now for the inventory fighting vehicle, for the Lynx. We stay with [indiscernible], we stay with the lead maintenance, et cetera, et cetera. But now the green light for the Lynx is there, and it's the first it's small numbers. It's only 5 lines where they want to start. And -- but I think the government is now very convinced about that. This is a very useful vehicle in this contract with Russia. And then we want to build up also capacities to build the Lynx in Ukraine. Is that okay?

Yes, very clear. Then the next question comes from Adrien Rabier from Bernstein.

First, I'd like to ask a follow-up on your margins, please. You had positive mix. But on a division-by-division level, your margin has been contracting slightly in -- so are you still comfortable with our target that? Do we expect a bottom-up inflection? And then a question on CapEx, please. It's great to see all these new projects. I mean, you were talking about doing more partnerships in the U.S. this morning. Are you still expecting CapEx to normalize in the coming years? Or are we expecting more investments?

Yes. On the merchant side, you know that the big lever will come in Q4. and on the margins, we stay where we were. And this is -- we have our target margins and the people have to reach this target margins. As you know, we have the ability because of the vertical integration between 25% and 30% on the ammunition side. We want to reach on the vehicle side between 12% and 15% where we are and Electronic Solutions will have a strong growth rate over the next years with digitization. We will also have a look -- very sharp look on the Defence side, which -- where we see also opportunities because we also have very strong vertical integration in this area, where we can make between 15% and 20%. So that's our target that we are, over the next years, can reach the 20% EBIT profitability in the defense side is still valid. So therefore, from my side, absolutely tick in a box.

Now I lost your second point, Adrian.

On CapEx, please?

Yes, CapEx. So on the CapEx side, we will have, as you know, this year and also next year on the side up to an area of 10%. This is what we need because of all the investments on ammunition and also the automization that we do on the vehicle side. But this CapEx will be over the next 2, 3 years going down. Is it going down back to 5%? It depends a little bit about the contracts that we say maybe it is between 5% and 6%. But we -- I think we can overcompensate that things if the down payments are really coming in. And this is what we want to do with our customers.

The next question comes from Benjamin Heelan from Bank of America.

First was, Armin, you have a statement in here about in your presentation about strength of the balance sheet and that's supporting your M&A, I think you say ambitions or something. Could you talk a little bit about where you want to deploy capital over the next couple of years post the naval deal? And then could we get a bit of an update in terms of where we are on both Anderil and the Lockheed ventures? That would be great.

Okay. Let's start with Lockheed and Ronel, but a lot of others that we have. So we are working very hard at the moment with our American friends to create a European business also or a transatlantic business between United States of America and Europe. And I think the best way for that is really to have this joint venture where -- and we are looking at the moment also with other companies to do this. And it's not someone is very open that we speak with Honeywell, we speak with [indiscernible] and we speak with others in that area because the product portfolio is -- yes, very different also with the U.S. companies.

But now especially also with the naval stuff that where we are investing, is there is a huge opportunity also for naval missile and others, and rockets usually not the producer of that, but rations it. So in a nutshell, it's going very very well, and we are very, very happy.

Strengthening our naval business, and if I understood right also, is there other investments or other things that we have to do in this area. I think that the shipyards that we take over that these ships are, at the moment, really, really in good shape that we are able to use it immediately and that we are able also to grow strong in that point. But what --, I missed something.

I think the other bit was basically how we are looking at capital allocation over the next couple of years. And as we always said, we are continuing to look into M&A targets. And it's always a preference to basically to a first finance our organic growth then look at good business opportunities for acquisitions as we have proven in the last years. And only at the very last thing, it would be to basically use cash for share buybacks or something else. At the moment, we don't see that happening.

There are opportunities to buy companies, and that's at the -- that's good for the growth.

I guess, Armin, sorry, just a follow up. I guess my question was you just said that the opportunities to buy companies, which are the areas within defense? Are you looking at buying companies now?

Yes. The first thing is we want to stabilize very clear now the naval business. Is there something what you can use around electronics and other things. What we did on the the land system side, we are looking for that. We have no fixed target at the moment. The second point is digitization. On the digitization side, we have to grow. We are looking for start-ups. We are looking for investments also in digital companies. even if we start with a minority and later to take over, there are a lot of companies where we see at the moment where we can fill smaller gaps that we still have inside the Rheinmetall Group, and we are looking for it.

But we said we -- as you know, when we are very careful in these areas. And first of all, we -- we check it a lot. And I think all the acquisitions we made over the last 5 years were not so bad.

The next question comes from David Perry from JPMorgan.

[indiscernible], I can't make the CMD. So my questions are a bit in that context. First one, back in about 6 months ago, Armin, you started talking about EUR 40 billion to EUR 50 billion of sales potential in 2030. Has anything materially changed in the last 5 to 6 months that would change your view up or down there?

And then the second question is, if it is still EUR 40 million to EUR 50 million? Can you just help us think about the cadence, the journey from '25 to 2030. In terms of percentage growth, is it even? Is it front-loaded? Is it back-loaded?

This is -- David, this is exactly the story I want to tell you on the Capital Markets Day. So it's really bad that you are not able to come there because I need a long time about that because this is division per division. And we want to see exactly -- I want to tell you exactly on the Capital Markets Day, how we make it happen. So -- but in the calculation at the end of the simple -- where you want to go. So -- and this is -- this stays. And on the ammunition side, we have the ability to grow up to more than EUR 10 billion, maybe up to EUR 15 billion.

On the vehicle side, yes, at the end of the day, it's the same. So it will be more than EUR 10 billon but also up to EUR 15 billion. So we are on a level of EUR 30 billion. So electronics solution -- this will be -- there will be a possibility also to grow up, if I make it conservative between EUR 5 billion and EUR 10 billion, but maybe more on the billion. On the air defense side, we go to a level of EUR 3 billion to EUR 5 billion. And on the naval side, we want to be more than EUR 5 billion. So if you count up and if you see EUR 30 million, EUR 40 million, it's EUR 50 billion maximum. And this is EUR 40 million EUR 50 million. So now the point is -- you can ask me now if you have now more M&A in this area. Is there more in? Yes. This is, in a nutshell, the story that we will tell in the Capital Markets Day. I'm very unhappy that you will not come. So this is -- you will see live firings, you will drones flying. You will see everything about that everything live. so nobody will show you that.

Well, no, I'm very upset. My colleague, Lucie will be there. I just have the clash. Can I just ask, though, about -- because now we've all seen the kind of some of the releases from the German government, I know they're not all formally into law yet. But I was just wondering if you had a little better feel for the phasing as some of the vehicle programs look like they'll take time to ramp up. So will we see more of the growth in '28 to '29? Or could we see more in '26, '27.

So you are right that it is more backloaded and '28 to '29. And the reason is we need next year for automization. The same what we need for the ammunition side. We need 1 year, maybe 14 months, 15 months to make all this automization streets. Welding Street, we will give you also a lower view on Capital Markets Day, what we do on automization in detail. And so then if we are ready, then we start with the productions in '27 and '28, '29, we will run the business. So '29, I think, full throttle the vehicle business. '27, as we said, we start with the ammunition side. So this is good. Vehicle is 1.5, 2 years later.

Electronics Solutions is the same like Vehicle Systems. Air Defence will also, let me say, is in the ramp-up curve in 28 by '28, '29 and 2030 or 3 years now, where we book our business, where we are very well equipped, and that makes me -- yes, makes me happy to reach this EUR 40 million to EUR 50 billion.

The next question comes from George Mcwhirter from Berenberg.

I've got 2, please. Firstly, on the N.V.L business. Can you just update us on the potential to gain more work show on the F126 frigate program -- and the second one is on supply chain. Please, can you just talk a little bit about raw materials and earth minerals? And any potential bottlenecks you're seeing there?

Yes. N.V.L, F126, you know there are some bigger contracts, but F126 is a real big one. I think that the government will make a decision how to go forward. And I personally think it's not a decision done at the moment. And to be fair enough, I cannot go operationally at the moment because it's not -- we have no closing. So I can only say if the closing is positive, we for sure will help -- the German government that the F126 will be a successful program. I cannot say more about that legally. Is that fair?

That's fair.

Yes? Second point, supply chain. On the supply chain side, we make weekly, weekly, a stress test on this area. We have a bigger problem on the supply chain on automotive than on Defence. And the reason is because on the defense side, we have -- we stocked everything up. So this was a point that is a rare earth. Everything what we spoke about, [indiscernible], blah, blah, it's 4 years, let me say, in the stock. We have billions in our stock at the moment.

The second point is that our -- because of the smaller numbers, yes, if you go into the auto business, you have to produce millions and millions -- if you go into the defense business and if you don't need it on the ammunition side, this is the only thing ammunitions are millions that we are producing. But for vehicles and for other electronic components, we usually have no problem.

What we can do is if there is something that we don't have in our stock, you can go to these technology traders -- and these technologies traders take care about that if our purchasing department is not able to bring it, you pay maybe a little bit more money. But with these small numbers, it really doesn't matter. At the moment, we see no obstacles that 1 -- that there is -- that, for example, China can stop us. On the microprocessors, we have different sources. We have 10 different sources. And I think that we have a very professional sourcing system on our purchasing now purchasing director is doing a great job in this area so that we are on the safe side.

Then the next question comes from Afonso Osorio from Barclays.

Just coming back to the long-term margin ambition you just mentioned. So you quoted 20% again on the defense side. to double check this. So does that mean that you expect to keep the margin on the ammunition side of 25% in the winter? Or do you expect that to see that normalizing down line?

And then maybe on the business mix as well. You continue to Electronic Solutions division into 2 new ones from next year. Can you perhaps tell us the growth profile and margin differential between the defense division and the digital division going forward, please, as well?

Yes. So on the ammunition side, I believe that we can stay on this 25% to 30% of our vertical integration. We discussed that several times. And the point is that I have different companies. One company is producing, let me say, the raw material, the other company is producing the powder. -- this is the same what our competitors are doing, but they do not have everything in their own hands. And we have everything in our own hands. And so therefore, this is the reason that the margin are high. diminution by themselves has a margin like you have, let me say, after the rules and regulation of the government. But profit on profit is an opportunity -- is the opportunity that we can make it.

Will it stay in this area? Yes, we will stay on that area because now with automization, we still reduced the personnel costs on that so that we are -- that we are able to stay in that area even if over the next years, and that is what we are doing at the moment. For a huge contract for Germany, we will keep a discount. And also with that discount, we are able to stay on a very profitable way.

Air Defence -- on the Air Defence side, if you see air Defence and digitization, air Defence will be faster higher has faster a higher profitability than the digitization because the investment on the digitization at the beginning is high. But later than the digitization will be on the same level or higher than air Defence. But on air Defence, I expect also up to 20% EBIT. So -- and on the digitization, not tomorrow, but for the day after tomorrow, I expect the same. Is that okay?

Yes.

So it seems there are no further questions at this time. So I would like to turn the conference back over to Armin Papperger for any closing remarks.

Yes. Thank you. Thank you, ladies and gentlemen. Like always, it's a pleasure to discuss with you about the things. I'm very happy to see nearly everybody from your side on our Capital Markets Day, [indiscernible]. Very happy to show you live and -- but also in presentations, what we are able to do. Take care, stay healthy, all the best -- bye-bye.

You may disconnect. Thank you for joining, and have a pleasant day. Goodbye.

Good afternoon, everyone. And thank you very much for joining us today. With me on the call is my colleague, our CFO, Klaus Neumann, who will guide you through the financials. Before we start, please be reminded of our disclaimer on Page #2. So ladies and gentlemen, please have a view to Slide #3. On Slide #3, you see that on the sales side for the quarter, and we always told that the Q2, because also of the election delays, but also, and I will give you in detail more that we are reducing a little bit the speed if you compare it with Q1. So we have, in Q2, on the defense side, a growth of 13%, and I focus a lot on the defense side because, as you know, we have made a strategic decision that at the end of the day, the civilian business we will take out of that.

And I think in Q4, we will also find out if it is possible to take it -- to take it from the head. In the first quarter, we had on the defense and growth. In the first half year, we have a growth of 36%. And we had EUR 600 million which were ready. EUR 300 million on the truck side, we signed last week this contract, so there was a delay of some rigs. So that it was impossible to do it on the top line and we had also EUR 300 million on the ammunition side. So if we would be able, the growth rate would be a level of nearly 60%. So we are ready with that products, and that is the reason that we are still convinced that everything in this year is growing into the right direction.

So the second point is the operating results. On the operating results. We have -- because we missed EUR 600 million sales, which are very profitable. And if you compare on this EUR 600, it would be between EUR 120 million and EUR 150 million extra profit. so that we would have an extraordinary good results. If we do what we have ready good in our stocks. And the operating result is now EUR 276 million, which is a plus of 2% in the group. Operating margin is on a level of 11.3%. Which is, as I said before, operationally much better than we can show you in -- for the first half year. Very positive also in applications. We have more -- we have nearly 150,000 applications, a lot of people who want to join Rheinmetall. And the operational free cash flow is with minus EUR 911 million. It's not as a good number that we had last year and the real reason is also very clear.

The reason for that is the German government could not give us some payments because there was a delay of 6 months at the moment in the negotiations about that. Q3, Q4 and especially then also because you cannot really guide every quarter, the first quarter in the next year will be the huge. We will get huge order intake and also then down payments about that. CapEx with 8.2% is on a high level, but this is also very important because with all the contracts we have and we expect and we know Minister of Defense in Germany, especially says, but also other European ministries then tell us we must accelerate, we must be faster. And on the Rheinmetall nomination, we are in the first half year, nearly on the same level than we were last year. But in the quarter, we had EUR 2.6 billion. The reason again is no decision from Germany because of election. Rheinmetall backlog is with EUR 63 billion, a loss of 30%. So we are in good shape in that way.

So what is the -- how do we see the future? And what are the next month or the next quarter? And you know there are new NATO targets, and this is you see on Slide #4. And from 2% in 2024, up to 2025 there is a target now of 3.5% of core defense spendings and related infrastructure spending is 1.5%. If you only focus on the 3.5% it's a huge booster for the business, and this is exactly what we will see over the next quarters. And our idea is to show you because you really -- there is at the moment, not enough capacity in Barleben especially in Germany to bring all these contracts into the line. So we need a little bit more time, and we have to look also the first and the second quarter last year.

So if you look now on Slide #5. Here, we gave you an overview about the Rheinmetall nominations and the potential. And as we discussed last quarter, we -- the indication is coming also from Ministry of Defense that a lot of the nomination will change into really fixed contracts. So in the first half of '25, we booked in between EUR 13.7 billion, so nearly EUR 14 billion. So on the Vehicle side, for the next period in '25 and the middle to 2026. We see that Leopard 2, there is a huge need Puma, Boxer Heavy Weapon Carrier, Caracal, support vehicles, but also how it self propels how it's self-propelled, how it's RCH, et cetera, et cetera. So there is a potential for Rheinmetall between EUR 30 billion and EUR 35 billion. And I think that we can grab most of the things.

Last time, you asked me the question, what are the competitions about that thing? And in Leopard 2, Puma,Boxer, et cetera, there are no competitions because there are no other producers, and we do that together with our friends from Munich. Second point, Weapon and Ammunition. On the Weapon and Ammunition side we see potential between EUR 10 billion to EUR 15 billion. There is Loitering ammunition, medium caliber, a huge contract about medium caliber, a huge contract about medium caliber 155 SMArt ammunition. This is the ammunition, which haver the thicker head to fight against the Main Battle Tank and also another contract on the 120 millimeter.

On the Electronic Solutions side, there are Skyranger. This is one opportunity between EUR 6 billion and EUR 8 billion. And another opportunity came up now Friday last week. This is also on TaWAN side, there is a need to double the contract on TaWAN. As you know, there was around EUR 8 billion. It seems to be that it can go up to EUR 16 billion, so to double that. This is not in that list. Lynx on medium caliber, powder plant, Boxer and a lot of different other things is at the moment on the International side of EUR 13 billion to EUR 15 billion. is what we see and we see the flag from Italy to Romania, Lithuania, Latvia, et cetera, et cetera.

So Bulgaria is the newest thing that we go forward. We think that we can make everything happen over the next 12 months. So in total, we see and that from 2025, so this year, the second half of this year and the first half of 2026, and we give you that information because of the 6 months delay of the German election and Germany is the driver at the moment for the national, but also for the international business here in Europe that we have an opportunity of more EUR 80 billion in order intake.

So the next slide is showing you the strategic partnership or the M&A activities that we made in between. I will start with CAD Malaysia. This is a production line in Malaysia for electronics. And we had a minority shareholder ship, and we have now the majority of CAD in Malaysia, a production area where we can produce electronic components for a fair value. blackned is for the digitization, a very important company, where we took over the majority. Hagedorn, this is where we are able to produce up to 3,500 tonnes of nitrocellulose tick in the box, it's ready. Now the Lockheed Martin joint venture is -- we are nearby for signing. The same is for ICEYE and also the cooperation with Indra. Leichtwerk is an investment that we made in North Germany, Braunschweig where we have a drone factory where a lot of specialists of drones are there where we want to produce and develop new drone technologies.

Reliance Defense is our cooperation that we have in India with the Reliance company. Resonant Holdings is South Africa. It's also a tick in the box. It's all done. This is our partner now and our company now who is able to build up chemical plants. So the same thing what we do on artillery plants, for example, we can do now on chemical plants, on chemical plants, we need now for sure is nitrocellulose, it's nitroglycerine, nitroguanidine, but also ammonium perchlorate, and other things that we will build by ourselves, and as we always discuss, we want to do it internally and we want to have a vertical integration in this area. Iveco Defense Vehicles, we made a very clear decision also with Leonardo because of the process, because the growth process must be very fast that we can -- that we need some time to take out the truck business from the normal Iveco Defense business. So Leonardo took over the whole business. And we are, at the moment, in negotiation to take over at the end of the day, the truck business in Italy.

And on the naval equipment side, you have seen now the first information about that. So we want to go more into the components side. And you see that the underwater technology is one of the things where we are investing and where we create at the moment, also partnerships. So far, from the market side, a small overview about that, and I'm happy to take over to Klaus. He will give you an overview about the financials.

Thank you, Armin. Let me start with an overview on our group's KPIs. As Armin mentioned, we delivered a good set of results within overall expectations. Some momentum as [indiscernible] was lost due to a pull-forward effect into Q1 and also delays in the call off of our trucks in Germany. So sales will only start in Q3 rather than in June as it happened in 2024. As a result, group sales grew 9% to EUR 2.4 billion, of which around EUR 1.9 billion are defense related. The M&A impact includes EUR 115 million from Loc performance, our acquisition at the end of 2024 in the U.S. All three defense segments delivered good results, but group -- overall result was held back by further decline in the civil business, which also included the transformational costs.

Overall, group operating result increased to EUR 276 million. As a result, group margin moved to 11.3%, supported by a 13.2% margin in defense. Moving on to the next page. Vehicle Systems sales increased to EUR 945 million, mainly driven by ramp-up in the production of tactical vehicles for the performance. As mentioned in the logistical vehicles held back as a big call out from the existing frame contract was only placed earlier this month. But it is important to note that all the vehicles were already -- that we are going to deliver in Q3 and Q4 have already been produced. As result, a slightly favorable mix effect increased the operating margin to 10.3%.

Weapons and Ammunition sales grew by 5% EUR 724 million, driven by a 150-millimeter order from a NATO country and an increased amount of tank ammunition. This development came despite the already communicated pull forward effect into the first quarter. Sales in the first half of 2025 increased overall by 26%. The operating margin increased by 0.7 percentage points to 22.7% in the second quarter due to a favorable leverage effect. Moving on to Electronic Solutions. That division showed a stronger sales growth within all defense segments. It grew by 44% to EUR 570 million, mainly driven by the delivery of intercom set, the TaWAN ramp up and the delivery of air defense systems to European customers. Operating margin was affected by ramp-up costs for the F-35 resection near Dusseldorf and as a result, the margin declined to 8.6%. The Power Systems sales development is with minus 6%, again, below previous year's level, mainly due to the weak market environment. The low production volume environment and transformational cost were the reasons for the decline of the operating margin to 3.0%.

Let's turn to Page #10. As expected, the rate government formation in Germany in May and the June NATO summit resulted in cautious order placement by our customers. Several orders, like the call off by Germany for our trucks has been postposed into the second half. And as communicated have now been placed. Weapon and Ammunition accounts for almost half of the EUR 2.6 billion Rheinmetall Nomination. Most orders across all segments were relatively smaller size and compared to a strong previous year quarter that was driven by the signing of the large frame contract for artillery ammunition the heavy weapon carrier contract and BLS trucks for Germany. Due to a strong first quarter for Electronic Solutions, this segment shows the biggest increase in the Rheinmetall backlog compared to the previous year, followed by Weapons and Ammunitions and Vehicle Systems. In total, Rheinmetall backlog increased by 30% to EUR 63.2 billion year-over-year.

Let's flip to Page #11 for a detailed look into our operating free cash flow. The low order intake go hand-in-hand with low levels of customer prepayments, as mentioned, which was one of the reasons for the negative operating free cash flow development in the second quarter. The further buildup of operating working capital added to this development. One of the buildup is also, as mentioned, the increased stock of trucks that are ready to be delivered to our German customers. Lastly, CapEx spend for our new capacity was an additional reason for the negative trend in operating free cash flow, which is expected to reverse towards the end of this year.

Please turn to Page 12. I would like to give you a brief overview of the latest developments in our balance sheet. The first convertible bond series was issued in 2023 is now fully converted. Series B is approximately 50% converted. As a result, total numbers of shares are almost 56 million pieces. This helped to increase our equity ratio to 33.7%. The conversion of the convertible bond will have a favorable effect on our interest payments. already this year and of course, also in the following years, when the full year effect for Series A will be realized. in the absence of material customer prepayments and the accelerated investment in inventories and equipment, our net financial position decreased slightly year-over-year.

This close my presentation, and I hand over to Armin for the outlook.

Thanks, Klaus. So Slide #14 is taking you what happened at the moment on the Power System transformation. We are well on track. The plant conversation of defense -- is Berlin is finished in July 1. So Weapon and Ammunition takes over the Berlin plant and where we produce automotive components, we will produce now components for defense, especially for ammunition, inert ammunition components in Berlin. Noise is still ongoing, but we are on a very good way, and we will have, let me say, a final organization this year.

What we want to build up is air defense capacities, we will build a Rheinmetall Air Defense Germany because of these huge contracts that will come from the German side, Turret technology, vehicle technology, protection technology, but also satellite. As you know, we have this cooperation with satellite producers. We are looking also for other sites, and we are very fast if we do it that way because then we have the factories. The investment is much smaller than if you build up a new factory. So that's the reason that Hungary and Italy, we are looking at -- also at the factories in Hungary and Italy, especially in Szeged in the south of Hungary and in Italy in the central part of Italy to create a hybrid factory where we have civilian products and where we have also defense products.

M&A process. We are in competitive negotiations in different areas. We have currently talked with several interested parties to sell our civilian business. And we are aiming for a decision by end of this year, and we hope that at least middle of next year, we can have a closing of that deal.

Let's have a look to Slide 15. The two biggest construction, there are a lot of construction that we have are completed in record time. And we will have now the ground opening in Q3 of the plant Niedersachsen in Unterlüß where we have the capacity, the maximum capacity of 350,000 rounds. As discussed last time, the fortune capacity is 500,000 and the lapping capacity maximum 350,000. We will produce, this is our target 20,000 this year. And then we have a ramp-up curve for next year. So that in the year '27, we will be able to produce a full capacity of nearly 350,000 rounds.

The second point is Fuselage plant in Weeze in Northern Westphalia and here is manufacturing readiness, we started some weeks ago with the production of the first fuselage, we had -- we will have the grand opening in September this year. So we are also in time. And here of the 16 months, we are able to start the production.

If you have a look to Page 16. We have pronounced seasonal persists with focus on Q4. We will be back loaded. We want it to be better. But again, and this is very, very important. We had some weaks delay on this truck contract so that we are not able to make this EUR 300 million sales in Q2. This will be now -- we will do this now in Q3, and some of them also in Q4. why? Because there is a limited capacity in [ Costwood ] where they can take over the trucks. And per week, there is a limited number they can take over, but we deliver everything is ready and we deliver week-by-week now the trucks till end of the year. So we've signed this around EUR 0.75 billion on trucks, and we are able to deliver everything this year.

So that we have a very high confidence for a strong order intake of Q4 and also, therefore, a strong sales. Rheinmetall backlog expected to raise this year be beyond EUR 80 billion, but if you count everything up, the middle of next year, if everything is running well, and we think we are on a very good way, we could have a backlog of EUR 120 billion. The sales of defense will be plus 35% to 40%, as I told you before, we would be in this range also for the first half. if we could deliver the ready goods that we have in stocks. We will have a flat business on the civilian business, which is not longer core business about that. So that we said we will have an operating margin of minimum 15.5% as a group, coming around 19% to -- on the defense side and a cash conversion rate of more than 40%.

So thank you very much for your attention, and we are ready now for Q&A.

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

Good afternoon, Mr. Papperger and Mr. Neumann. I have two questions, which are around the demand and order pipeline. From the chart on Slide 5, you mentioned an order pipeline of more than EUR 80 billion until the end of H1 '26. First, part of the question is related to how would this number compare to the previously disclosed target, which was more than EUR 55 billion in '25. And how much the mentioned German spending boost impact your pipeline going forward? So both for '26 and beyond '26? Or simply put, do you still consider the capture rate of the German procurement budget of 50% that you once mentioned on prior calls. It still is a realistic target.

Yes. So first of all, the expectation and the numbers that we expected 6 months ago are now, let me say, higher than that what we expected 6 months ago. We will not longer speak about, and this is a point -- this is an agreement that we have with the government, and this is something to do also with the security levels about numbers of rituals, but I think the figures are very, very high and higher than we expected on everything, on main battle tanks infantry fighting vehicles and also on the 8x8 and other vehicle side. So expectation is high. And there are two things that we have an overview at the moment from now to and from '29 to '35.

So these are the two periods that the government is planning. So in -- we will get in details over the next month, a perfect overview about all the delivery rate up to 35%. So a very, very safe thing. This is number one. The second point is that -- and this is a discussion we had also beginning of that week with Ministry of Defense that we will have no cash issues because there is cash in us at the moment, especially in Germany and the down payments will be good. We are, at the moment, in negotiation, how the rules and regulation of the down payments are coming up. And this down payments will be very positive for us for the next years. And so the trend is also the next point, how long, let me say, will it work.

So as I said, especially on the German side, we will have a very clear picture up to '35, so for 10 years. On the international business, in some areas, it is longer than 10 years. If you see to Italy, we speak about 15 years where they are going forward. So I think we can -- we will have over the next 6 months, a very, very clear picture about that, what happens over the next 10, 15 years.

That's very, very helpful. Absolutely. If I may take you up on the comments you made around the down payments on prior occasions. We also discussed that the frame backlog might well be converted and that the largest part of that is Germany currently. So how should we square that and the conversion on the one side and then the potential booster, I think, around downpayments, so to say, on the other side?

What we do at the moment is really to find because as you see all these nomination letters from the defense side we go at the moment, all of them, yes, are more than fulfilled. So mostly if we have a frame contract, mostly, it will happen that -- and this is by law possible that they overrun this stuff by 50%. So if we had EUR 5 billion frame contract that we expect over the next years because there is such a big need, and this is what you see what the Minister and the Chancellor says, especially on the German side, that if there is a EUR 5 billion nomination letter at the moment or frame contract that we expect that EUR 7.5 billion will come up. So we count at the moment really that the frame contracts will be enlarged and then changed into a fixed contract. The point is what we have to do, and this is what the financial guys from our side and the Ministry of Defense are doing at the moment is not to overpay also the downpayments because if you get all the down payments in one slice, you have too much money at the end of the day.

What we want to do is we want to make our -- to finance our investments to have a good operational free cash flow, but not, let me say, to eat all the potatoes in the first week. We need also a lot of food over the next years and also us good cash management in that way. I think at the moment, the flexibility of the government are very, very high. And what I hear at the moment, especially from the German government, is that, okay, please tell us what you need, tell us what you want. Money is there. We can guide, let me say why -- the way where we want to go. So I'm -- it's very convenient for us.

Indeed, it is. Very likely and quickly go back to my first question, the 50% question. Is that a number that you still feel comfortable with after everything that you have been seeing and discussing.

We are going a good way. We are going on a good way at the moment. So the -- I cannot 100% whatever, if it is 45-55 of our debt, but I think around that, I'm still convinced that we are able to catch a big part of this order the German government will give 100%.

The next question comes from Alessandro Pozzi from Mediobanca.

I have two, I believe, in the opening remarks, you mentioned. You talked about TaWAN contract that potentially could double. I was wondering if you can give us a bit more color around that. And second question is over the last few quarters, I would say you've substantially expanded the number of partnerships with Lockheed, Anduril, Reliance and potentially enable as well. Maybe can you talk about just the last two partnership with Reliance and Anduril in terms of upside? And also, where do you think is the line between the trade-off in terms of expanding your product portfolio and maintaining focus on execution.

Yes. Let's start, Alessandro with TaWAN. On the TaWAN side, this is the information we got over the last 2 weeks that they need. And this is also very clear. The fleet is growing strong. So especially Germany is looking for a lot of new vehicles. and much more than we expected some months ago. If we have more vehicles and if we try to get also more people, new brigade, you need also more electronics, you need more communication. And that is the reason that there is a potential at the moment to double the need on the TaWAN side to have the communication from the front line to 500 kilometer, let me say, into the back.

The second point is also -- and this is what I told also to have better and more satellite communication yes. And we are also now on the way, especially on the legal satellite, and that is the reason that we are investing in that point that we will not only build the building of the satellite for us it's a door opener, but we have to be a service company also. And this is part of our digitalization strategy. This will also grow, and this will also or could be part, let me say, on top on TaWAN. The second point is that -- or the third point is that the cooperations with Lockheed are running into the right direction. So as you know, we are in discussions with this missile production. And I think we will have the first success this year. So the production line of rocket motors and Missiles in the north of Germany are on a very good way.

The reason for that is that we got green light and permissions for these factories. We are now in 12 months ready. In 12 months' time, we will have all the mixers, all the curing stations, et cetera, et cetera, to be able to create 5,000 rocket motors. Anduril is a partnership in different areas. We check different software, if we can implement software. And what we do is we are checking also, let me say, long-range missile technologies, but totally different technologies than on the Lockheed side because Anduril has, let me say, very cheap version. So what we want to do is we want to go into the maximum technology version, which will be, for sure, a Lockheed version and Then the Anduril version where we have a cheaper missile version.

So in the -- and the unmanned plane side, we have a look at the moment to all partners. There is Anduril, there is Lockheed but there is also Boeing, who is taking care about that thing. And we take care of what the German government wants and the advantage that we have is that this unmanned planes have to act with the F-35. And on the F-35 side, we have a lot of technologies of F-35 and we have especially the IT infrastructure to handle restricted data from the U.S. government. Nobody has that at the moment. So we are the only one who are able to do it because on the fuselage of the F-35, yes, it's a very restricted area from the U.S. government.

And this, I think, will help us a lot to be a good partner for the German government and to handle a U.S. IT structure and especially restricted IT structures. On the Naval side, we are, at the moment, in some negotiations with partners, and I hope that we can give you as an investor over the next 5, 6, maybe 7 weeks an overview about that what we are doing. We are in non-disclosures in this area, but we think we are able to create really a big business also on the naval side and we will make investments. It is at the moment, our target on the naval side to invest in this area to enlarge our product portfolio.

So missiles is enlarging of the product portfolio. Naval side is enlarging of the product portfolio and the artificial intelligence corporations, is it. But we don't -- we not only do it with Lockheed, with Anduril, yes, we speak with Deutsche Telecom about that thing on the satellite side, on the artificial intelligence side. We speak with a lot of digital providers in this area because we think we could be a good interface manager on the defense side. Is that good for you, Alessandro?

Yes. So very clear. But also I think your product portfolio is getting quite big. And I guess you have to prioritize management time, but also financial resources. And I was wondering how you prioritize that?

Yes. So it's a very clear thing what we do. The biggest investment at the moment is going into the ammunition side and also into the missile side. So a huge investment on building up the capacity of energetics, so of powder, of [indiscernible] and this is strong thing and of production of ammunition. So in ammunition, there are missiles and artillery where we, at the moment, focus because we think and we know that up to -- in some areas like powders, we are fully booked up to '33 in between.

So this is the point where we need more capacities. The second point is, we have to take care about the vehicle production on the Vehicle side. The investments are not as big as in the energetics because in the energetics is our very clear strategy that we have a vertical integration and in this vertical integration, we invest at the moment in nitroguanidine in other things, but also we will make investment in AP, so ammonium perchlorate because we want to have a vertical integration also on the rocket motors.

Vehicles coming back to that, we make automization, so automated welding shops, automated chassis production and also helping on the robot side on the tariff production, et cetera. This is the next point. And if you see the factory that we implemented in Unterlüß, it's unbelievable. There is a nearly manless factory. We can drive those shifts where the third shift is only, let me say, with 2, 3 people with 2 technicians who take care of by the robots and the automized side. So this is where we do that investment. Our investment level on the CapEx will be on the level or at the moment of 8%, which is we can guide that very clear with the down payment.

As I told you, the governments are very flexible with the down payment. So it will not hurt us. And return on invest is of all that investment is mostly less than 3 years. So it's not a big risk. In some areas, it's less than 2 years. So this is a very good investment also, and we are not suffering in that area. So now the missiles are coming.

And on the missile side, the investments are not as big. And the reason for that is also that we are not investing in R&D. We are not investing in 10 years R&D programs, to say, okay, we want to do. We want to cooperate. And that's the reason that we make this joint venture, and this joint venture with Lockheed, for example, it gives us a good opportunity with less spendings to make very fast business as an example. And so we make a risk analysis for every product group and for sure, we don't overspend, the point and we want -- we don't want to overspend. We take care about our resources.

The next question comes from Sven Weier from UBS.

The first one, Mr. Papperger is kind of circling back to our previous discussions we had on kind of the mid- and long-term sales potential. I think last time we spoke, you pointed to kind of a 2030 vision of EUR 40 billion to EUR 50 billion. And I think you were confident to grow the defense business also like at a 20% clip thereafter. I mean, now you talked about getting sales visibility from the German government until 2035, Italy even longer. Do you want to give us update, how you feel about this after what has happened in the last 2 months? That's the first one.

So I say what the expectation we had. I stay on that level, there is really the potential to grow up in this area. And this is what we said, and I stay on that in 2027, this is the outlook that we gave, we will be between EUR 20 billion. There is an opportunity to grow up to EUR 20 billion to EUR 25 billion and EUR 40 billion to EUR 50 billion is in 2030 is that what we say.

There are -- there will be also some M&A activities in between. And what you count is, and this is our target. At the end of the day, we want to buy every -- and we have to buy, let me say, to enlarge our product portfolio, but also to deepen the vertical integration in some areas. Every year a company, and I expect that we are able to buy every year a company who makes around EUR 1 billion or a little bit more than EUR 1 billion sales. So if you count that up, then at the end of the day, between now and 2030, there are also EUR 6 billion, EUR 7 billion only with coming out of M&A. So this is our target.

And beyond 2030, is that still something you're confident with to continue to grow the defense business at a double-digit rate?

If we are -- look, if we -- I'm very clear at the moment, up to, as I said, we will be very clear up to 2035 after booking these points because then a 10-year period especially from the German side. From the international side, I think we get not such a good overview. But I'm very convinced that we are able to grow further because we have the contracts.

Yes, I guess, by the time of the CMD, you probably know more about this. So we'll come back to that. And the second question I have was just maybe following up also a little bit on what Sebastian asked at the beginning on the kind of longer-term pipeline beyond the next 12 months. And I wanted to speak to you about specifically, obviously, about the drone decision from the German government. It seems that Airbus is in the race, Helsing is in the race and you guys are in the race. I mean, what do you think is your edge over those two groups and what you can potentially offer?

Yes, the -- as I said, we are at the moment in discussions with these three main partners and these partners are Boeing, Lockheed and Anduril. And we have not, let me say, a development version to say, okay, we want to develop ourselves. And what we do is, as you know, Boeing at the moment is flying in Australia. The Americans, this is a black program that we have is connected with the F-35 program. And at the end of the day, we speak about 400 unmanned vehicles that the Germans need in that area, yes.

And if you count up what is that, that's a huge business. We think that the running programs and the companies who have developed over the last 15 years, so like a company like Lockheed Martin has technology, let me say, a huge opportunity. So and other companies are starting now with -- in the R&D phase.

They are starting now with PowerPoint work. And I think at the end of the day, and this is what I hear from the Ministry of Defense, you have to make it happen. And a lot of people are always discussing to say, okay, yes, we can do this, we can do that. You remember last time we discussed about new powder technologies, blah, blah, blah, which are coming up, but you have to deliver. And you have to deliver fast and I think we are able to deliver fast. So the [ USP ] time is one thing where we think that we are not bad.

And maybe lastly, I mean, also circling back to the pipeline a bit on Ukraine and the ammunition contract. I mean what's the current status there? Is that all influenced by the geopolitics and whether the U.S. wants this or not? Or how should we think about this contract?

So as you know, the first contract from the Ukrainian side is signed. At the moment, not happy with the speed that we have on the Ukrainian side but because not of us also because you know that there is a new factory that we build up. But we started in Ukraine on the same level or nearly at the same time that we started in Germany, in Germany, we are ready, and in the Ukraine, we are not ready. The bureaucracy in Ukraine is unfortunately very, very high. I'm not happy about that. But they want to double the capacity now on the factory #1. This is the good thing of the story. And the other thing is still that they won't go forward with higher numbers, but at the moment, there is missing money.

The next question comes from Christoph Laskawi from Deutsche Bank.

The first one would be just coming back to the prepayments on the order potential. I think you said before that the prepayment was roughly 20%, 30% of the order value, considering the pipeline that is from Germany that could be quite substantial this year and next year. You also commented that you don't want to get too much. So the implication would be if I take the correctly that the share is likely coming down and you manage it a bit. And then linked to that, what do you think is the share of money you need for CapEx requirements to build the capacity. And what do you need in order to get the supply chain ready, right? So financing your suppliers, getting their capacity ready.

And another question linked to cash and also M&A and capacity would be if you buy the Iveco truck business, would you still look at VW is also on work trial either in contract manufacturing or to produce, or is that then essentially gone? And last question, if I may, just on your Q3 indications you gave on the slides. Is it fair to assume that Q3 top line wise would be a slower quarter versus the target run rate for the full year? Or should we read that into the segment?

Yes. So first of all, on the prepayment side, I think it's a very important thing that at the end of the day, we guide a little bit at that point because it's a very nice and it's a great story, and it's also a great story for you as investors. If we say, okay, we have one quarter where we have whatever some billion down payment. But you cannot have this in every quarter, and we don't need all that money, and we are not a bank, so which is doing going forward. That is the reason that our financial guys at the moment take care about that, that we are always positive.

But it makes also not a lot of sense to get all the money, let me say, on one pile. And then over the next 5 quarters, there is money missing and you as investors and also -- you had a great cash conversion rate of some 100% on 1 day, but in the next quarter, then you are negative. So at the end of the day, we want to do it that it is good for the customer, and it is good for us and it is good for the shareholder. So this is one thing where we try to find at the moment the best way.

The other thing is what is also very important, if you have 20% to 30% down payment and if you have a 10 years contract, for example, to go forward, we speak about huge figures, huge figures. And -- this is a point that we have to handle. I think a good idea would be at the moment to get a down payment for 2, 3 years and then to have the next slide to go forward to mix it a little bit at the end of the day and also not to make the team lazy, but because, let me say, if you swim in money, at the end of the day, the team should not be lazy, they should fight also for all that thing. So that is -- let me say, it's not easy, but on the other thing, it's a better situation that we have at the moment than some years ago where no down payment and no other things were possible.

Second point is on the Iveco side. On the Iveco side, we, at the moment, and this is the common target that we have with Leonardo, that at least, let me say, end of this year, at least at March next year, we will have a solution. There must be a carve-out process of this, and we have to know which machine is working for trucks, which machine is working for tactical vehicles. And this is the job that we have to do now, most of the jobs we have to do in this year, so this is, let me say, a second due diligence after the due diligence we did with Iveco that we have to do now also on the Leonardo side.

And then I think we are very safe to go into a process to take that out. So Osnabrück for us is a point that, we made no final decision about that. What we always said is what we need is a very clear plan about all the things because we want to make on one side automization. With automization, I think we need less space and also less people that we expected some years ago in such a growth rate. But it is also very clear that the capacity on the vehicle side, these are not huge investments, but these are investments that we have minimum, let me say, to double the capacities on the vehicle side.

And then we will see what's going on with our friends on the automotive side, how can we help, but I cannot make a decision today about that thing. Is that fair enough?

And just following up on the Q3 indication that you gave.

Yes. On the Q3 side -- and I'm coming back because this is very, very important to understand what's going on. So Murcia is giving us on the ammunition side a problem because we cannot sell full shots. The customer want to have full shots. The powder is ready. But the sealing of the powder, this is the last step of the production side. So the powder production is ready.

All the productions are running. That's the reason that we pile up different things, it depends on the ammunition side, especially on -- and you know that this is at the moment, the biggest factory on ammunition that we have in Spain. And it depends a little bit when we get the final permission from the Spanish government to start again the sealing process. We still, at the moment, have not this permission.

So is there something wrong with the market? No. Is there something wrong with production? No. It's at the end of the day, a stamp that we need from the Spanish government. We try to get it as fast as possible. If we do that, then we will work 24/7 in the sealing process to give full shots to our customers. So therefore, if it is September, October? I don't know. And therefore, I cannot say how big is the impact in Q3. And if not a disaster or whatever, but at the end of the day, we must be careful and we want to be very transparent to you, for the whole year, we see no impact because we believe 100% that we get the permission in this time frame September, October. But still, at the moment, we don't have it. And so there will be absolutely an impact on that.

The second point is that we deliver worth EUR 300 million trucks now week by week, but in Q3, at the moment, [ Aschau ] has not the capacity because we continue production that maybe some of the deliveries also have to come from the 1,400 trucks into Q4. So there could be the effect that we have seen in Q2 could be also in Q3, there could be an infection, if I call it that way, that at the end of the day, it is more back end loaded on Q4. We only want to give you the transparency. It's not a problem of production. It's not a problem of market. It's not a problem of contracts. It's really a point an issue of delivery, how to deliver to the customer. This is exactly what happened on the truck side, and it's part of permission on the ammunition side. These are the two things this could impact. Is there a growth? Yes, for sure. Is there a good growth for the year? Yes.

We stay on that what we told you and what we said on the outlook, where we will be. The defense growth will be between 35% and 40%. But it will be what we don't want, but it will be very back end loaded on the Q4 side, and we hope that we can do as much as possible in Q3. Is that transparent? Is that clear? It's not a risk, but it's, let me say, to be transparent to you.

And this question comes from Marie-Ange Riggio from Morgan Stanley.

I have a first on the full year '25 guidance because it seems quite reassuring to see that during Q2, you did build up EUR 1 billion in inventories, which is what one of the record level that you had during Q2. And you just mentioned during the presentation that your Q3 and Q4 deliveries for trucks are already prepared. So my question is what is your level of confidence in your current '25 guidance? And is there any element of conservatism given the recent development in Europe? Or we have to think about this year like everything has been pushed to the right. And so that's why you have not been able to update the guidance in H1?

And the second question that I have is on your capital allocation. Very strong balance sheet since like now a few quarters. We know that your priority and you have said several times that is remain M&A, but given your current firepower that you currently have, does it imply that you can be willing to focus on large acquisitions? Or will you consider further shareholder return.

Maybe I start with the second point, Marie-Ange. On the acquisition side, we are looking at the moment really to fill our gaps that we have in the product portfolio. And as I said, year-by-year, we want to grow, let's say, a minimum EUR 1 billion on the sales, and we are able to invest also EUR 1 billion for the M&A because -- and this is what I tried to tell you before, we don't want to be a bank. We don't want to select all the money only to have it on our bank accounts, so we want to use it, but we don't want, let me say, to overspread, let me say, our balance sheet. On the other side, and maybe it's a good idea that my colleague, Klaus is going about that. He's a financial star here in the company.

Yes. In terms of the capital allocation, we really don't see any change to what we mentioned earlier. As Armin mentioned, we don't want to be a bank. We see capital as a buyback of shares as basically the ultimate option if we don't find any better use of -- for the money, we want to balance also the prepayments and the cash inflows, and there are several ways to balance this, one way also is to basically extend our product portfolio, as mentioned, through M&A activity.

And as you rightly mentioned, we are prepared also for larger acquisitions, but at the moment, that is not in clear view. In terms of the other questions, in terms of confidence for the full year, as Armin mentioned, there have been some delays in the order placement by the German government due to the setup of the new government and the negotiations also following the NATO Summit.

So we didn't think it appropriate now to change our guidance given that the contract negotiations are all ongoing. We will have more clarity in the upcoming months. But as of the moment, we are very confident that we will achieve what we have promised.

The next question comes from David Perry from JPMorgan.

Two questions, please, maybe Munich. Armin, there's lots and lots of press reports coming out about these huge numbers of vehicles that Germany may want to buy in particular Boxers. So just wondering if there's anything you can share with us that's may be more concrete than press reports. I'm also curious how quickly you can industrialize in particular on the Boxer, like what sort of annual production rates you think are possible in the coming years?

And then maybe the second one is for Klaus, if possible. If I take the midpoint of your margin guidance for this year for vehicles and electronics, both of them would imply a very strong margin in the second half, I think, higher than you've done before. Are you comfortable with that?

Yes, David, first of all, as you said, we have an agreement now that not to speak about numbers, but I can give you one thing that what you can read in the press at the moment is conservative.

Okay. With regard to Boxer or the whole package of vehicles?

The whole package of vehicle and especially on the on the Boxer side. It's what you can see in the press is a very conservative number. And the reason for that is also that the press is feeding with conservative numbers because the government don't like that, at the end of day they edit everybody knows what we want to do. This is number one. The second point is what I told you is, let me say, we have to build up capacities and not capacities in -- to have the factories. We have factories above that. What we want to do in the factory side is we want to do more like we did on the ammunition automization.

So -- and in a period, and we must be ready in 2027, we must be ready to produce, let me say, in full capacity. We have a very clear picture with the government, how many vehicles they want per year. And we are ready in this area. We started the investment. We started the area of automization. There will be automated -- totally different than we produce at the moment.

As I said, automating chassis production, automating welding stations, automated cutting stuff, finding synergies between different areas, better vertical integration like we did on the ammunition side. So exactly what we discussed, especially both of us discussed several times, about this vertical integration effect that we do. This is also a margin effect at the end of the day. We are at the moment in that way to make a better vertical integration also on the vehicle side.

The concept is ready. It's harder for me now because I could be also very transparent, not, let me say to have a very clear guidance from the government not to speak about these numbers. I can give you the numbers, 100%, but I could give it, but I cannot because of this agreement that we have with the government. But believe me, it's a very conservative press release that you have.

In terms of the margins for Electronic Solutions Vehicle Systems, these are both of the divisions that were kind of a little bit pulled back into the margin into the Electronic Solutions and the growth for Vehicle Systems, as we discussed. So once, as mentioned, big production for F-35 will start the ramp-up cost will be compensated, and we won't have the same burden on our P&L, together with the additional growth, that will significantly lift the margins in Electronic Solutions.

And for Vehicle Systems, we have the preproduced trucks ready for delivery. The deliveries have now started, and that will basically push the margin for Vehicle Systems as well considering that we will not have the same level of preproduced trucks by the end of this year. So these are two drivers for improvement of both margins in these two divisions, as that you questioned.

The next question comes from George Mcwhirter from Berenberg.

I've also got two, please. Firstly, on Slide 5 on the presentation again. I understand you don't want to go into the details, but on the EUR 30 billion to EUR 35 billion order intake for the vehicles. Are you able to broadly split out that by vehicle type, if possible?

Yes. I'm sure I'm able to do that -- to do this. So the biggest pack is Boxer. So the 8x8 are by far the biggest. And as I said, the numbers you can see in the press are conservative. So the potential is very, very high on Boxer. I would say the second biggest part is the infantry fighting vehicle and the main battle tank area. And the -- on the Boxer, we speak about really double-digit billions, the midsized double-digit billion. On the main battle tank, we say midsized single-digit billion in that area. And then there is coming also then the auxiliary. There are a lot of auxiliary stuff also coming up. It's a self-propelling howitzer RCH 155. So, but Boxer 8x8 is by far the biggest.

Thank you for the detail. The second question is on the same slide. I don't think the U.K. is on the list of international opportunities there. I think you've already won that gun barrel contract to make gun barrels in the U.K. Do you still see potential for winning contracts on how to supply an ammunition in the U.K.?

So the gun barrels are at the moment, the point where we go forward. We are in discussions with the British government about special ammunitions. And we are in discussion with the British government, especially also about powder technologies. I believe that this year, we will get a final decision from Great Britain. If they want to go with us. But you see at the moment, it is not in our plan, it's a potential to go forward in, but it is not safe. And if it is not relatively safe, we don't take it into our potential.

The next question comes from Benjamin Heelan from Bank of America.

I had a couple. First of all, you've announced obviously your Capital Markets Day in November, can you just talk a little bit about what we can expect there? Is there going to be midterm guidance? Is it going to be on capital allocation? Just high-level framework of what we can expect at CMD that would be awesome. Also, there's been a couple of articles now about the German government potentially launching a strategic fund to invest in defense companies. Just wondered if you have any thoughts around this? Is German government wanting German industry, an opportunity for you from a consolidation perspective? Just any thoughts around that.

And then just coming back on some of your comments on Anduril. It sounds as though you feel the opportunity is more in the missile side of the portfolio at Anduril. Obviously, they have quite a wide-ranging autonomy portfolio as well. Is there an opportunity in drones and autonomy with Anduril? Just how can we think about that?

Yes. So on the Capital Markets Day, for sure, we have a clear picture because then mostly of the contracts are signed or nearly signed in that point. So on the Capital Markets Day, I think we can give you a more detailed figures what we did last time for '27 and also for '30. Maybe I can have a few, then also a little bit more behind '30 because of the contracts that we will book. You know we are as much transparent as we can be. And this is exactly what we want to do on the CMD.

I'm -- we're preparing different things. Also some -- maybe we can officially -- we made officially then also some decisions on the M&A side to implement that into our growth story. I think there will be a lot of good news for you in that area. Strategic found or also consolidation, German government is much more active at the moment, and that in that area.

German government is, let me say, weekly, nearly daily in contact with us and especially also with me. What we can do in this point. They love those. On one side, they love the boys who let -- who make the job who have the factories, who make the job, who make it happen.

And the last also to say, okay, what are possible also in investments that we do, but these are smaller investments in start-ups and other things. The point for me is that we do at Rheinmetall and that's our bloody job to do both. We have to look for the innovative small companies, and this is what we do. We cooperate with different companies, Anduril is one of them. Other smaller companies or others. We cooperate at the moment with 4, 5 drone factories, there is something going forward.

We bought one of the companies now also here in Germany who gives us more capacities. So -- but this is not the big story. That's not the reason that we say, if a small company who at the moment doing nearly no sales. And if they make one small agreement, this is, let me say, a huge -- a huge point. If Rheinmetall is booking EUR 100 million for drones, nobody takes care about that. And this is very clear. I understand that because you expect billions and multibillions of that of the big boys there. But we do it, and we have an own group. We have an own department who is taking care about that.

On Anduril, we are very flexible. What we are doing is our team, our technology team is checking all the technologies Anduril has. The CEO of Anduril says, it's hard for me make business here in Europe. I need, let me say, one guy who is really taking care about my technologies. And he said, Rheinmetall would be a good partner.

So he offered us all the technologies they have to do something also in joint ventures where Rheinmetall has the majority. And this is our idea to create joint ventures with Rheinmetall majority to create European hubs for companies like Anduril, like Lockheed, et cetera, et cetera, that we open let me say, the business for the United States to make 30%, 40% for the U.S. companies, the rest for European companies. And then we can, if they have good technologies, we can implement that technology to Germany. So if you say autonomy and if you say, yes, but what's going on, if you ask me for Fury and other things in this area, I don't know who is now the winner in that point.

And we, as Rheinmetall must be open if Anduril, Lockheed or if Boeing is making the race, at the moment, I think that the newcomers who want to develop some new things are not the preferred guys because the time line is so long as I discussed before.

The last question for today's call comes from Sash Tusa from Agency Partners.

I've got two questions. Firstly, on the orders that you're expecting or hoping for over the next 12 or so months. None of these orders seem to include the missile programs that you highlighted as potentially part of your joint venture with Lockheed Martin. And I mean that included a ATACMS, PAC-3, GMLRS, JAGMs and so forth. So when do you see those coming into German spending requirements, and what are the issues in terms of, I mean, I think on the last call, you said you thought ATACMS would be the first missile you put into production. Is that still the case? And do you have all the authorizations from the U.S. for an overseas production of a ballistic missile. That's my first question.

Yes. So let's start with the ATACMS side. As you know, the ATACMS production in the United States will be closed because they focus on PRISM. And the -- what we are doing at the moment, the work out is still not done. So we are underway and it's not easy to handle all this permission stuff which is going forward. So -- but my expectation is that end of the year, we are able to do it. In 12 months, we are ready for the rocket motors. And first of all, the rocket motor qualification must be done. We start in 12 months, the rocket motor production. Then we need the rocket motor qualification.

So then we are -- end of '26 so that we see the first impact in, let me say, middle of '27.So this is our time frame. That's the reason that at the moment, I'm not looking for that because this will not happen in H1 '26. And without rocket motor and without the qualification in this area, I think it's very hard. For example, there are discussions also if, let me say, in HIMARS, GMARS or -- as you know, we had the first firing on GMARS now also in White Sands. It was very positive. And -- but I cannot book it because we are, at the moment, not qualified. We prepare ourselves for that. And as I said, my time line that you see something on the top line will be in '27. And in 1 year's time, maybe in '26, if we are on a good way, if the customer sees that the production lines are ready, et cetera, et cetera, then we can speak about order intake. So it will be after the period as you see on Page #5, yes. Is that clear because that's the reason that it's not in?

Yes. Okay. That's very useful. So just to be clear on the rocket motors, is the rocket motor that you will be qualifying, is that an ATACMS motor or a GMLRS motor or a generic design to show that you can do the extrusions and get the reliability in terms of the mix?

I think that we have to -- as you know, we have to qualify every rocket motor, and we are -- we have a multifunctional production line. And in that with 3 mixers so that we can produce also different rocket motors, let me say, in one time slot. And it's a huge business, a huge factory that we built up there. So that my target is very clear. At the end of the day, it should be 10 different rocket motors that we have to produce. And then we are a real international player on rocket motors.

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

Thank you very much. Thank you very much for this interesting discussions. And as I said, I 100% believe that the way that we are going forward is the right way. The team is prepared. We have the right people on board. We build up at the moment our supply chain, which is really great. We qualify ourselves with new products in the product portfolio. So let's make it happen. We have now to deliver. Thank you very much for your time. And hopefully, I see you very soon. Thank you.

Okay. Good afternoon, everybody, or good morning, wherever you are. Welcome to the Rheinmetall Recap Call. It's going to be a rather uneventful call here, since we are only repeating the messages from the latest weeks. I think most excitingly, we have some decisions on the macro level, which were favorable for the overall defense industry. Now with the move and the NATO Summit confirming that we're talking about 3.5% core defense spending and 1.5% infrastructure. And in addition to that, we are basically here at the upper end of our expectation that we presented in the first quarter during the full year call.

Apart from that, you have noticed that the order intake in the second quarter was on the low expected level due to the fact that the German government transition took place at the beginning of the month and that we had here a situation where the nomination of all subcommittees took some time. The expectation is now that we will see an acceleration of orders in the second half more towards the fourth quarter. But recent discussions with the customer here in Germany suggests that they are going to take advantage of the possibility to convert the contracts to fixed contracts and to take advantage of the 50% upgrade potential.

And the second thing is that we are now seeing that more and more countries are coming up, that discussions with customers are accelerating, but the expectation is now that with the finalization of the German budget discussion in September, all order intakes led by Germany will be more geared towards the end of the year.

We have already said that -- the second thing is we have now successfully started operations in our new plant in Unterlüss. We just had the inauguration in Weeze. So we are actually putting some concrete and steel to the money that we have spent, and we are really happy that we can now start with the production in the plant in Unterlüss and that we can pick up production here at the F-35 plant in Weeze.

Regarding the Q2 sales development, I think here already in the Q1 call, we have mentioned that we had some pull forward effect to the first quarter that were quantified to be around EUR 140 million and that we had some delay in the Weapon and Ammunition business due to the Murcia incident where a fire had destroyed some of the equipment and where we have had situation that we had to replace the production, that will now take place or has taken already place and expectation is that we will be able to catch up the delay until the end of the year. We quantified that effect in the call -- in the Q1 call to be around EUR 200 million from Q2 in Q3.

The situation on the operating free cash flow, obviously, is related to the order intake. We -- since we have not seen major order intakes here in the second quarter, there hasn't been any major prepayment activities in that quarter either. We have seen in the civil business here, a relatively slow market demand in the relevant market with almost minus 4% here and the business could not here work against that overall negative trend.

Apart from that, I think, here, we are looking forward that we are going to see here the strong acceleration of the order intake over the next quarters with an expectation that this is going to increase up to EUR 70 billion over the next 12 months and that we are expecting here in total for the full year to be on a very good track to achieve the full year guidance.

We have had some discussions around potential updates on the guidance. And obviously, we are looking here to integrate all the information that we have available once the orders are in with the time line of the orders, so that a very likely moment here to upgrade guidance and midterm guidance as well will be later in the year, most likely during the Capital Market Days.

That would be my -- the summary of my introduction. And if you have any questions, I'm now open for your questions. Sven, you are the first.

Thank you, Dirk. I hope you can hear me.

Yes.

Good. That's good. I was just wondering, just coming back on what you just said on the guidance for the year. So does it mean that even if the German customer orders like end of September, October, it would be still in time to give you some additional revenues for this year? Is that fair to say?

We are continuing to produce here, for some of the products, a full range like for the truck business, where we have said that we keep up the high level. So we are ready for any call-offs.

And then the other question I had just on the Q2 impacts, right? You mentioned some of the negative effects, but sometimes there may be also other pull forward, also some compensating positive effects for Q2 or nothing worth mentioning.

Nothing worth mentioning.

First one is also around these one-off effects. So you said, I think, the pull forwards were EUR 140 million in the quarter 1 from quarter 2 that I understood. And then you said for the Murcia impact, it was around EUR 200 million, if I understood that correctly.

Yes.

So a very simple question is you have this guidance for the defense activities of 35% to 40% of our top line growth. So how should we think about the offset between sort of what the pull forward is eating into that very growth against what you might see as a catch-up or offset on the positive side than from this Murcia incident that you might [indiscernible] the second quarter?

Here, the expectation is clearly that the acceleration of sales in the second quarter once we have the capacity in Murcia fully back online. The point is that we have here components, which need to be ready, that is basically some energetics. The rest of the product of the delivery is already sitting on our books. So once we have solved that issue, we can immediately get the product to the customer since the customer is asking for full shots and not for separate delivery. We're now waiting to finalize here the step of the energetics production.

Okay. So overall, about the 35%, 40% minus a haircut, that would be fair summary probably. Okay. And the other question because I think you haven't touched at all, to be honest, on the profitability side. Could you at least directionally provide some color what to expect?

I think the only indication here would be that given that one of the larger effects was in the Weapon and Ammunition business, the mix in the quarter will have an impact here on the group margin. Pull forward was mostly in the ammunition supply and the delay as well is in the ammunition supply.

Okay. And then the last one goes back to also Sven's first question around are you ready to benefit from any step up. You also mentioned in the prepared remarks, the conversion of frame contracts and also the very likely usage of the 50% step-up option. That would all apply in quarter 4 after the talks are done in September and very likely then everything falling into the fourth quarter. So that is basically the way to look at it.

Given the discussion that we have to present the budget in September to the parliament, it's very likely that the decisions on additional orders will only start in September. So there is a very high likelihood that it will be end of September and maybe only starting in Q4. But discussions with the customers are very good. We have very active communication right now. And we do see that on the political side, but as well as on the actual procurement and administrative side, there is now a strong wish to accelerate here the procurement and get the power on the street.

Currently, there is one question from David. David, I can't hear you, you have to unmute yourself.

Can you hear me now, Dirk?

Yes.

You gave some help on Weapon and Ammunition and also on Power Systems. Can you just talk a little bit about the Q2 growth in Vehicles and in Electronics? Is that on a steady growth trajectory? Or is there a bit more lumpiness there?

There hasn't been any further details to be shared on that respect in all those 2 divisions. Here, we are on a normal development path. I mean last year, we had a relatively slow quarter in the logistical vehicles, which only picked up at the end of June when the call-off was actually placed for the trucks. We have continued to produce the trucks. And as soon as we have here orders in place, we are able to release the vehicles similar to last year that we can send like 100 vehicles per week to the customer.

Okay. And you said -- I think you said the full year guidance was on track, but just to check, I heard, were you just referring to orders? Or are you referring to everything, sales, EBIT, cash?

Everything.

There are two hands still up in the air from Sebastian and from Sven. I don't know whether this is new hands or is it the old hands. New, okay. Sven, then unmute yourself, please.

I was just wondering, I mean, the momentum from the German customer is pretty clear, right? I mean the plan is clear. The ambition is high. Activity is high. But what are you seeing from the others? I mean, is it much lower? Do you expect those orders to move ahead then?

I think what we have as well communicated here during the recent road shows is that the easy approach is to look at actual defense spending, a deeper look in what is actually being ordered here really reveals the potential for us. And here, clearly, we can say that, for example, Spain and Italy, where customers are starting to spend here heavily in the renovation of their armored fleets that this is coming.

Italy is expected to sign here the first contract for Panther and for Lynx in the second half. That is all as expected and as communicated. The Spanish development, here, we have had some discussion around the upgrade of the Leopard fleet together with Spanish Indra, following a similar pattern to what we have seen in Italy, where we formed a joint venture with Leonardo.

So we do see acceleration here in those activities. You just read the press release about a new customer for ammunition orders here that is in one of the geographies we have mentioned earlier here where we did not deliver historically and where we now have seen first orders. So it continues that there are new customers here approaching us with additional either buildup of capacity in the respective countries or with additional direct orders. The expectation is that for the second half, we will continue to see here Southeastern European countries to place orders. So we are here confident that we're going to see some activities as well in that region. So no slowdown here.

I think the summit in the Netherlands here put some clarity to where the direction is. Some of the countries will be slower to achieve the 3.5%, but that does not necessarily affect the actual programs, which might here like in the case of Italy and Spain follow a completely different time line than the overall GDP targets.

I mean we all read these reports the other day, right, that U.S. probably pulling back on 155 deliveries for Ukraine. I mean is there also, aside from the EUR 50 billion contract that you're obviously probably still discussing, also an opportunity to do something more short term in terms of additional deliveries? Or are you kind of maxed out for now?

Well, to the extent that we are possible here, we would, of course, help. I cannot quantify the additional potential for new deliveries to Ukraine.

And then the final point for me is just, I mean, you mentioned at the beginning that this could be a quick call because you flagged those factors like the pull forward and the fire, a ton of times. So I guess you feel we have listened to you. Is that fair?

I just want to make sure that you have understood the messages here. Yes, absolutely. These were placed in the call and sometimes there are so many things going on that it just slips your attention.

Because consensus just has a low double-digit revenue growth rate for Q2. So I guess that seems to reflect a lot of the factors that you've just mentioned.

Sebastian, your hand is still raised, or raised again?

It's still risen, the old hand, but it's fresh in the year. So on the free cash flow part, you just made the comment that there is no major prepayment activities in the quarter. At the same time, there was most recently also an article in the German press saying that especially smaller suppliers would have some issues eventually on getting financing, et cetera. So the similar question I simply have is how should we think about how that might impact you guys as the larger players apparently in the country, the largest player, actually, in the sense of do prepayments terms or working capital terms, more generally speaking, change for you? Would you have to support more strongly, especially smaller companies or this is kind of a wash because it's safeguarded that you would get the respective support from the German Army and then you pass it along?

Yes, the expectation is that with the order flow here in the second half, prepayments will again start to come in. And one thing here for the supply chain is really to have a max transparency for the smaller suppliers here to plan their capacities and their operating working capital and to help them as well with prepayments from our side to the sub-suppliers here to enable them to prepare for the deliveries on time. So long-term contracts here are really key with corresponding payment terms. We have seen that this is a good argument and a good mechanism here to help the industry and to have everybody on board for the increase of the output.

Okay. Understood. And if I may just push my luck here around the free cash flow commentary that you can make at this juncture. We had apparently this tailwind from working capital in the first quarter. You mentioned this had the prepayments. But when we think about quarter 2, would you then rather believe it's fair to assume sort of a seasonal step-up in working capital and with that free cash flow rather turn in again into more the reddish spectrum?

Yes. I mean typical seasonality would suggest that there is here a continued investment in operating working capital. We have now seen the finalization of the investment into the plants in Unterlüss and in the Weeze. And at the same time, we have 8 additional sites where we are spending. So CapEx is relatively higher at the moment.

Sebastian -- Okay. I don't see any other hands being raised right now. Sesh, you raised your hand.

Okay. I'll try now. I want to just reflect on another press release that you sent out, I think, yesterday or the day before about the MARTE armored vehicle project. Should we read this as being something that is complementary to Panther? Is it replacing the main ground combat system? Where does it fit in your spectrum of heavy armored vehicles? And what do you see as being the costs and the likely profile of the program? The press release was very interesting in terms of the whole industry group involved, but didn't provide a huge amount of financial detail.

Yes. I think MARTE is an additional initiative here to improve the main metal tank landscape here with a lot of countries signing up to this initiative. Mostly -- well, differently put, I think there is no French participation in that program, but it's an initiative led by the European Union to speed up development of technology here for main battle tank. And I think clearly, as one of the leading producers of technology, which is relevant for main battle tanks, we, of course, have to be interested in participating in that business. And they have already been low to mid-double-digit million support or investments and development here from the European government be ready for that initiative.

I'm interested that you noticed that France didn't seem to be involved. That would seem, therefore, to suggest that MGCS is dead.

It's an additional initiative here. I think MGCS, we had just seen the announcement of the joint venture here in April. It's -- MGCS is clearly a German -- or Franco-German corporation here for the replacement of the Leclerc and Leopard in the 2045. I'm not exactly sure what the time line for MARTE looks like, but it is an additional initiative to strengthen the main battle tank technology in Europe, supported by the European government -- parliament.

Sven, your hand is up.

Yes. Last not least, I think Mr. Papperger has talked about EUR 40 billion of order potential in Germany in the next 12 months. I was just wondering, I mean, to what extent is this just ramping the equipment level of the existing fighting brigades to 100%? And because we all know there's going to be 6 or 7 additional fighting brigades under the capability requirements. I mean, is that possible to say how much of the 40% is just ramping the existing brigades to 100 and the others would come on top in the long term?

Since we are currently at levels of 50% to 60% equipment of the existing troop, a lot is still required to equip the German Army and the existing structure. I do not know the quantitative structure of the additional brigades and what is here required.

But could be a fair share of the 40% just for the existing ones, I guess.

The point is that we have currently not only a supply to the existing troop, there is as well a discussion to have here a reserve here because we have seen that the -- due to the limited capacity, reserve of armored vehicles is necessary to keep up the fighting levels like the Russians are taking their armored vehicles from depots. So there is an additional element of reserve now being introduced. I don't know yet how big those -- this reserve is, but that plays into that -- those orders as well.

Okay. I don't see any raised hand. So then I would like to thank you for your attention, and all the best. Talk to you soon.