Half Year 2026 Rheinmetall AG Earnings Call

August 6, 2026

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

Speaker #1: followed by a Q&A session. You can register for questions at any time by pressing "*" and "1" on your telephone. Cooperator assistance, please press "*" and "0". not be recorded for publication or broadcast.

Armin Papperger: Thank you very much. Good afternoon, ladies and gentlemen. Thank you for your interest in the quarterly call with Rheinmetall. My colleague, Klaus Neumann, and myself will put you through now the presentation. Please take care about the disclaimer that we have on page number two. Let's go to slide number three. On this slide, you see that in Q2, the sales of Rheinmetall is going up to EUR 3.289 billion. This is a plus of nearly +70%. In the H1, the growth is around 40%, which is exactly in line to that what we guided. The operational result was +115% to EUR 562 million. It is also in line with us and is, for what we see, very positive. Operating margin with 70.1% is on a very good level, and we are very happy that the applications with more than 160,000 is still very high.

Speaker #2: much. Good afternoon, ladies and gentlemen. Thank you for your interest in the quarterly call of Rheinmetall. My colleague Klaus Neumann and myself will put you through now the presentation.

Speaker #2: Let's Please go to slide number 3. On this slide, you see that in Q2, the sales of Rheinmetall is going up to 3.289 billion.

Speaker #2: This is a plus of nearly 70%. So in the first half year, the growth is around 40%, which is exactly in line to that what we guided.

Speaker #2: The operational result was plus 115% to 560,2 million is also in line with us and is for what we see very positive. Operating margin was 70.1%, is on a very good level, and we are very happy that the applications with more than 160,000 is still very high.

Speaker #2: So as you know, we at the moment hire about 10,000 people per year, so we can pick up a lot of good people out of this 160,000 applications.

Armin Papperger: As you know, we at the moment hire about 10,000 people per year, so we can pick up a lot of good people out of this 160,000 applications. What is the reason that the operational free cash flow with -EUR 1.331 billion is in that figure? We have in between, in Q2, supplies of about EUR 6.2 billion. We need these goods in our stocks, otherwise it is impossible to grow. We wait, and this is only to compensate, if we get some down payments and we wait for some down payments, especially from the big contracts. There is a down payment that will come from Romania, but especially also the down payment that we get from Germany, if we book the Arminius contract, which is the big elephant in the room. The second point is CapEx.

Speaker #2: What is the reason that the operational free cash flow was minus 1.331 billion is in that figure? So we have in between in Q2 supplies of about 6.2 billion euros.

Speaker #2: And we need this goods in our stocks and otherwise it's impossible to grow. And we wait, and this is only to compensate if we get some down payments and we wait for some down payments, especially from the big contracts.

Speaker #2: There is a down payment that will come from Romania, but especially also the down payment that we get from Germany if we book the Arminus contract, which is the big elephant in the room.

Speaker #2: So the second point is CAPEX. We reduce CAPEX at the moment, and not because we reduce the factories, and you will see that later.

Armin Papperger: We reduce CapEx at the moment, not because we reduce the factories, and you will see that later. We found a way to find synergies and to reduce costs, which is for us a very positive signal. The capacities of our production lines are absolutely in line what we planned. On the CapEx side, we can reduce the costs. Rheinmetall nominations with a plus of +476% is for us very good, with EUR 11.371 billion. The Rheinmetall backlog is growing up to EUR 80.4 billion. If you have now a look to page number four, you see what I said before. The execution is very well managed. Same what we told you in Q1 is that we had a growth rate on revenues between the H1 2025 to the H1 2026 of 39%, from EUR 3.7 to 5.5 billion.

Speaker #2: We found a way to find synergies and to reduce costs, which is for us a very positive signal. So the capacities of our production lines are absolutely in line what we planned.

Speaker #2: But on CAPEX side, we can reduce the costs. Rheinmetall nominations with a plus of 476% is for us very good. With 11.371 billion, and so the Rheinmetall backlog is growing up to 80.4 billion euro.

Speaker #2: If you have now a look to page number 4, you see what I said before. The execution is very, very well managed. Same what we told you in Q1 is that we had a growth rate on revenues between the first half year 25 to the second to the half year in first half year in 26 of 39% from 3.7 to 5.5 billion.

Speaker #2: So the first half year growth rate is so in line with the full year guidance. The margin increase is especially because we have favorable product mix and we have an operating leverage for sure because of this growth rate.

Armin Papperger: The H1 growth rate is still in line with the full-year guidance. The margin increase is especially because we have a favorable product mix and we have an operating leverage for sure because of this growth rate. The total operating performance is like last year with about 40%. This supports exactly and is in line with our guidance for the full year. On the next page, you see a little bit the story that we had on the F126, and we expected, as you know, that we can book this contract, but at the end of the day, the minister made another decision.

Speaker #2: And the total operating performance is like last year with about 40%. And this supports exactly and is in line with our guidance for the full year.

Speaker #2: So on the next page, you see a little bit the story that we had on the F1 26, and we expected as you know that we can book this contract, but at the end of the day, the minister made another decision.

Speaker #2: And for us, it was really astonishing, and the reason is also very clear because the story is that the government came to us and said, "Okay, make a technical due diligence." We made this technical due diligence with about 70 people from our naval group.

Armin Papperger: For us, it was really astonishing, and the reason is also very clear because the story is that the government came to us and said, Okay, make a technical due diligence. We made this technical due diligence with about 70 people from our naval group. After this technical due diligence, we told that everything is possible. We can make it happen. We made final negotiations with BAAINBw about the contract, and even BAAINBw was astonished when the program was stopped because we also had the forecasted approval for the F126. The money was there on 8 July. Then we got the information on 24 June that the minister will stop it. What are the reasons? The reasons, and I think one of the main reasons is for sure the litigation issues that the Ministry of Defence had with Damen.

Speaker #2: After this technical due diligence, we told that everything is possible. We can make it happen. We made final negotiations with BinBV about the contract and even BinBV was astonished when the program was stopped because we also had the forecasted approval for the F1 26.

Speaker #2: So the money was there on 8th of July. And then we got the information on the 24th of June that the minister will stop it.

Speaker #2: What are the reasons? The reasons, and I think one of the main reasons is for sure the litigation issues that the Ministry of Defense had with Damen.

Speaker #2: But the calculations they had is that the micro program is faster and to be faster to have as he said, steel in water on one side and to be able to reduce a little bit the cost even if this is a total different ship program.

Armin Papperger: The calculations they had is that the MEKO program is faster, and to be faster, to have, as he said, steel in water on one side and to be able to reduce a little bit the cost, even if this is a total different ship program, and especially the litigation issues are the points that he stopped it. What is the business impact? For sure, we have an impact on the workforce, so we have to load our shipyards now with other programs. We are on a good way, and I come later about our new frigate program and the impact of the revenue, and that is the reason that we reduced also the revenue. We cannot overcompensate in so short time, EUR 300 million. That was the reason that we reduced the expectation of about EUR 300 million on the sales side.

Speaker #2: And especially the litigation issues are the points that he stopped it. What is the business impact? For sure, we have an impact on the workforce.

Speaker #2: So we have to load our shipyards now with other programs. We are on a good way. And I come later about our new frigate program.

Speaker #2: And the impact of the revenue, and that is the reason that we reduced also the revenue. We cannot overcompensate in so short time 300 million euros.

Speaker #2: So that was the reason that we reduced the expectation of about 300 million on the sales side. The long term, on the long term side, we really hope that we can compensate this programs with national and international programs and hear how different programs from the German side we look that we get some milesweepers but also some drone ships we call it Muse.

Armin Papperger: On the long-term side, we really hope that we can compensate these programs with national and international programs. Here are different programs from the German side. We look that we get some minesweepers, but also some drone ships. We call it MUsE. Which is possible over the next years, but also international programs where we offer our new frigate. This is what you can see on the next slide, on slide number six. The GMF 140 is designed, and we started a year ago on that, because it's impossible to design in 5 months a frigate. It is designed for operations in highly complex threat scenarios. This frigate should combine air defense, ballistic missile defense, and anti-submarine. This is also very important for us.

Speaker #2: Which is possible over the next years but also international programs where we offer our new frigate. And this is what you can see on the next slide on slide number 6.

Speaker #2: So the TMF 140 is designed and we started years ago on that because it's impossible to design in 5 months a frigate and it is designed for operations in highly complex threat scenarios.

Speaker #2: And this frigate should combine air defense, ballistic missile defense, and anti-submarine. And this is also very important for us. It is possible to integrate the AEGIS combat systems and the combat management systems 330 where we incorporation with Lockheed Martin in that program.

Armin Papperger: It is possible to integrate the Aegis combat systems and the Combat Management System 330, where we, in cooperation with Lockheed Martin in that program. This frigate, as the name says, has a length of about 140 meters, has a speed of 30 knots and a crew size of around 90 people from the marine side. We think it's a good standard for the international business, and we will see the decision of different customers. We are in negotiations with different customers. At the moment, there is nothing official, therefore I cannot speak about the nations by themselves. I believe that this is one of the future drivers of the business of the naval system. By the way, the midterm and also long-term strategy of naval did not change. It was, and is absolutely the right decision to go into the naval business.

Speaker #2: So this frigate, as the name says, has a length of about 140 meters, has a speed of 30 knots, and the crew size of around 90 people from the marine.

Speaker #2: And we think it's a good standard for the international business and we will see the decision of different customers. We are in negotiations with different customers at the moment.

Speaker #2: There is nothing official. Therefore, I cannot speak about the nations by themselves. But I believe that this is one of the future drivers of the business of the naval system.

Speaker #2: By the way, the midterm and also long-term strategy for Naval did not change. So, it was and is absolutely the right decision to go into the Naval business over a period up to 2030.

Armin Papperger: Over a period of up to 2030, we believe still that the naval business can grow up to EUR 5 billion. If you have a look now to the next slide number seven. Here you see the unmanned systems and air defense. That was a focus on Eurosatory and on ILA. Here you see the innovation and how we structure the company. If you start with Comodo, which is an unmanned breaching system, fully automized, we see a huge potential for that area in different areas. If you only see in the Ukraine, the big need. It will be a huge business over the next years. Skyranger on the HX truck is another opportunity, a relatively cost-effective opportunity for our Skyranger technology.

Speaker #2: We believe still that the naval business can grow up to 5 billion euro. If you have a look now to the next slide, slide number 7, here you see the unmanned systems and air defense that is that was a focus on Eurosatiri and on ILA.

Speaker #2: And here you see the innovation and the how we structure the company. So if you start with Komodo, which is an unmanned breaching system fully automatized we see a huge potential for that area in different areas.

Speaker #2: If you only see in the Ukraine the big need yeah, it will be a huge business over the next years. Sky Ranger on the HX truck is another opportunity relatively cost-effective opportunity for our Sky Ranger technology.

Speaker #2: And but also containerized missiles missile launchers where we implemented the FV014. Our new drones which we started now also on the international marketing and sales campaign because the production line and you see that also later will be ready end of this year or in end of Q3 this year here in Düsseldorf or Neuss.

Armin Papperger: Also containerized missiles, missile launchers, where we implemented the F-3014, our new drones, which we started now also on the international marketing and sales campaign because the production line, and you see that also later, will be ready end of this year or in end of Q3 this year here in Düsseldorf or Neuss. The same is on the SAR satellites. We are now starting the production processes for there. We build it up a capacity of one SAR satellite per week. Very similar is the Rooter Block 2 and the Kriller in cooperation with Destinus. We are on the way also to start the production end of this year. It is planned that we really can make the first sales end of this year with that product.

Speaker #2: The same is on the SAR satellites we are now starting the production processes for there. We built it up a capacity of one SAR satellite per week.

Speaker #2: And very similar is router block two and the Kriller incorporation with Destinous and we are on the way also to start the production end of this year.

Speaker #2: So it is planned that we really can make the first sales end of this year with that product. The 81 motor the Amos integrated motor and new technology the unmanned surface vessel the 8.8 meter vessel and as you know we are in development also for larger vessels but autonomous vessels and the ghostbed.

Armin Papperger: The 81 mortar, the AMOS integrated mortar and new technology, the unmanned surface vessel, the 8.8-meter vessel, and as you know, we are in development also for larger vessels, but autonomous vessels, and the Ghostbat. This is a part of our product portfolio, of our innovative portfolio, how to enlarge the product portfolio. We do it relatively riskless because most of that things we do with technology, which is available or with technologies with our partners that we implement into the Rheinmetall product portfolio. If you have now looked to page eight, you see that the market and the market mechanisms here are valid and are in line. Europe is on track for higher spendings, and you see the tendencies from Great Britain with 2.56, Germany 2.69 of the GDP, Poland with 4.6, et cetera. You see there is a growth rate in 2026.

Speaker #2: So this is a part of our product portfolio, of our innovative portfolio—how to enlarge the product portfolio. And we do it relatively riskless because most of the things we do are with technology which is available, or with technologies from our partners.

Speaker #2: That we implement into the Rheinmetall portfolio. If you have now look to page 8 you see that the market and the market mechanisms here are valid and are in line.

Speaker #2: Europe is on track for higher spendings and you see the tendencies from Great Britain with 2.56, Germany 2.69. Of the GDP, Poland with 4.6, etc., etc.

Speaker #2: You see there is a growth rate in 26. But on the right side, you see the total spendings and as you know over the next years there is an immense growth and they want to grow up to this 3.5%.

Armin Papperger: On the right side, you see the total spendings. As you know, over the next years, there is an immense growth, and they want to grow up to this 3.5%. I believe that Germany is able to come near to the 3.5%. It will be between 3% and 3.5%, which is a huge amount of money, a lot of other countries will go also that way. Not every country will reach it because of the budget problems, but there is a strong growth rate inside. If you have now a look to the contracts, these are only the numbers of the EUR 25 million proposals in Germany. As you know, if you have a contract of more than EUR 25 million, you have to go to the German Bundestag. That proposals are growing from 2022, where we have 24 proposals, to 2025 with 103.

Speaker #2: I believe that Germany is able to come near to the 3.5 and it will be between 3 and 3.5% which is a huge amount of money.

Speaker #2: But a lot of other countries will go also that way. Not every country will reach it because of the budget problems but there is a strong growth rate inside.

Speaker #2: And if you have now a look to the contracts and these are the only the numbers of the 25 million proposals in Germany as you know this is if you have a contract of more than 25 million you have to go to the German Bundestag and that proposals are growing from 22 where we have 24 proposals to 25 with 103 and it will be even more in 26 because up to July we still have 45 25 million proposals to the German Bundestag.

Armin Papperger: It will be even more in 2026, because up to July, we still have 45, EUR 25 million proposals to the German Bundestag. This is also a point that you see that you grow and in a lot of that contract. Over the years, as you know, Rheinmetall has a big part or is the main company who takes care about these contracts. Next page is page number nine. On page number nine, you see the Rheinmetall product portfolio tailored to the NATO capabilities. What is the reason that we show that? Because what we do is two times a year, every six months, to have a look what is really what NATO is looking for. These are the clusters where they have. From deep precision to digital transformation, is a lot of different areas where Rheinmetall is in.

Speaker #2: So this is also a point that you see that you grow and in a lot of that contract over the years as you know Rheinmetall has a big part or it's a main company who takes care about this contract.

Speaker #2: Next page is page number 9. On page number 9 you see the Rheinmetall product portfolio tailored to the NATO capabilities. What is the reason and that we show that because we what we do is two times a year every six months to have a look what is really what NATO is looking for and so these are the clusters where they have from deep precision to digital transformation is a lot of different areas where Rheinmetall is in.

Speaker #2: And the only missing point that you see is that we are not in the raw materials. But the rest if it is space technology, ammunition, strike capability, etc., etc., we build up a product portfolio or we have a strong product portfolio in this area.

Armin Papperger: The only missing point that you see is that we are not in the raw materials. The rest, if it is space technology, ammunition, strike capability, etc. We build up a product portfolio, or we have a strong product portfolio in this area. That's very important, and we hear to the customers, and it's better to hear to the customers and to make him happy, than to anyone else. Rheinmetall is continuously monitoring what the NATO requirements are. It's not only what we need at the moment in Ukraine, or what the Ukrainians need, it's what the NATO really needs and what the NATO says for a conflict, what they need, which kind of product they need. These are multinational procurements, and that is the reason that we make also international corporations, and we must be fast in that area.

Speaker #2: And this is that and that's very important and we here to the customers and it's better to hear to the customers and to make him happy than to anyone else and Rheinmetall is continuously monitoring what the NATO requirements are.

Speaker #2: And it's not only what we need at the moment in Ukraine. Or what the Ukrainians need. It's what the NATO really needs and what the NATO says for a conflict what is what they need which kind of product they need.

Speaker #2: This is these are multinational procurements. And that is the reason that we make also international cooperations that we that we must and we must be fast in that area and our target is usually that we should be able in one or latest in one and a half years to bring new products to the NATO capabilities and the NATO gaps.

Armin Papperger: Our target is usually that we should be able, in one or latest in one and a half years, to bring new products to the NATO capabilities and the NATO gaps. Now have a look to the next page. It's page 10. In that, we gave you an overview about the joint ventures, the M&A activities, and partnerships and MOUs that we are doing. Here you see, Rheinmetall in comparison to different peers. We picked out five peers. A lot of them are doing partnerships, and that's a good signal for us. Rheinmetall is strong and is number one, also on the M&A side, but especially on the joint ventures.

Speaker #2: So now, have a look at the next page. It's page number 10. And in that, we give you an overview about the joint ventures, the M&A activities, and partnerships and MOUs that we are doing.

Speaker #2: And here you see Rheinmetall in comparison to different peers. We picked out five peers, and a lot of them are doing partnerships, and I think that's a good signal for us.

Speaker #2: Rheinmetall is strong and is number one also on the M&A side. But especially on the joint ventures. And we believe in joint ventures because a lot in joint of these joint ventures is very strategic for us is that we had this joint a lot of that joint ventures also with governmental agencies or with companies where the government says okay let's do it together.

Armin Papperger: We believe in joint ventures because a lot of these joint ventures, it's very strategic for us, is that we had a lot of that joint ventures also with governmental agencies or with companies where the government says, "Okay, let's do it together." This give us a very high customer retention without additional operational complexity. We believe that this is one of the key issues that we are able to grow also as fast together for sure with M&A and our investments that we are doing. As I said before, investments are absolutely not reduced, but only they found the synergy effects. So far the introduction, and now I take over to Klaus and he takes care about the financial.

Speaker #2: So this give us a very high customer retention without additional operational complexity. And we believe that this is one of the key issues that we are able to grow also as fast together for sure with M&A and our investments.

Speaker #2: That we are doing. And as I said before investments are absolutely not reduced but only the found the synergy effects. So so far the introduction and now I take over to Klaus and he takes care about the financial.

Speaker #1: Thank you Ahmed. As you stated we do report a very strong result for Q2 and also we did deliver on our promise that we made after our Q1.

Klaus Neumann: Thank you, Armin. As you stated, we do report a very strong result for Q2, we did deliver on our promise that we made after our Q1 conference call. We saw an outstanding Q2 growth with 69% to EUR 3.3 billion, all the segments, and I will go into more detail later, all segments contributed to this very strong growth. Organic growth was above 50%, also important for our 2026 numbers, there were no major pull-forward effects from Q3. The Naval Systems accounts for the bulk of our M&A number, there were limited impacts from FX, both on sales and on operating result. Operating result grew even stronger than our sales by 115%. Our result calls benefited from the higher volumes and also could leverage on this additional scale. Moving on to next page. Let's have a quick look at all the different segments.

Speaker #1: Conference call. We saw an outstanding Q2 growth with 69% to 3.3 billion euros. And all the segments and I will go into more detail later all segments contributed to this very strong growth.

Speaker #1: Organic growth was above 50% and also important for 2026 numbers there were no major pull forward effects from Q3. The neighbor system accounts for the bulk of our M&A number and there were limited impacts from FX both on sales and on operating result.

Speaker #1: Operating result grew even stronger than our sales by 115%. Our sales growth our result calls benefited from the higher volumes and also could be leverage on this additional scale.

Speaker #1: Moving on to next page. Now let's have a quick look at all the different segments. Vehicle assessments showed the strongest absolute growth as more programs are now in the execution phase.

Klaus Neumann: The ecosystems showed the strongest absolute growth as more programs are now in the execution phase. Sales increased by 53% to nearly EUR 1.5 billion, supported by strong truck deliveries to Germany, as we had indicated during our Q1 call. The operating margin improved to 12.5% year over year due to a more favorable product mix and higher sales volumes. Sales in our Weapons and Ammunition segment grew by nearly 60%. Main drivers were deliveries for artillery and medium caliber ammunition. The sales catch-up in our Murcia plant is ongoing and will continue to contribute to stronger growth in 2026. Operating margin increased significantly year over year to almost 26%, benefiting from the increased volumes. Sales in Digital Systems increased by 30% to EUR 470 million, largely attributable to the TAVAM program for the German Army and the further production ramp-up at our F-35 production site near Düsseldorf.

Speaker #1: Sales increased by 53% to nearly €1.5 billion, supported by strong truck deliveries to Germany as we had indicated during our Q1 call. The operating margin improved to 12.5% year over year due to a more favorable product mix and higher sales volumes.

Speaker #1: Sales in our weapons and ammunition segment grew by nearly 60%. Main drivers were deliveries for artillery in medium caliber in ammunition. The sales catch up in our Murcia plant is ongoing and will continue to contribute to stronger growth in 2026.

Speaker #1: Operating margin increased significantly year over year to almost 26% benefiting from the increased volumes. Sales in digital systems increased by 30% to 470 million euros largely attributable to the Tavarn program for the German army and the further production ramp up at our F-35 production site near Düsseldorf.

Speaker #1: Operating result profited from a favorable leverage effect and increased by 80% pushing margin to 9.6% and increase of 2.7 percentage points. Air defense showed the highest percentual growth of all segments.

Klaus Neumann: Operating result profited from a favorable leverage effect. It increased by 80%, pushing margin to 9.6%, an increase of 2.7 percentage points. Air defense showed the highest percentual growth of all segments. The sales grew by almost 80% to EUR 285 million due to strong execution on air defense programs. Operating result increased by 140%, supported by a strong leverage effect of around 22%. Margin increased as a result by four percentage points to 16.3%. Our new Naval Systems segment contributed sales at around EUR 260 million. Main drivers were the contracts with Germany on Fleet Service Boat and the Naval Fuel Supply Vessel, as well as repair and service business. Operating result reached EUR 25 million, which resulted in a margin of 9.7%.

Speaker #1: The sales grew by almost 80% to 285 million euros due to strong execution on air defense programs. Operating result increased by 140% supported by a strong leverage effect.

Speaker #1: Of around 22%. Margin increased as a result by 4 percentage points to 16.3%. Our new neighbor systems segment contributed sales of around €260 million.

Speaker #1: Main drivers were the contracts with Germany on fleet service boat and the naval fuel supply vessel. As well as repair and service business. Operating result reached 25 million euros which resulted in a margin of 9.7%.

Speaker #1: On the consolidation line, sales consolidation increased to 325 million euros as a result of stronger intersegmental sales, and the result impact was slightly lower than in 2025 at 32 million euros.

Klaus Neumann: On the consolidation line, sales consolidation increased to EUR 325 million as a result of stronger intersegmental sales, and the result impact was slightly lower than in 2025 at EUR 32 million. Let's turn to page 14. Our Q2 saw a very strong book-to-bill ratio above 3, with a very high share of firm orders. Rheinmetall nomination of EUR 11.4 billion showed a plus compared to 2025 of almost 500%. The high majority of the nominations are firm orders at a level of almost EUR 11 billion. Main orders were the Romanian package of around EUR 6 billion, the load general ammunition contract for the German Army, and the training program for the UK, the GTTP. As a result, backlog increased to EUR 80 billion. This is an increase of around 44%, with 70% of fixed orders contributing to the total of Rheinmetall backlog.

Speaker #1: Let's turn to page number 14. Our second quarter saw a very strong book to bill ratio above 3 with a very high share of firm orders.

Speaker #1: Rheinmetall nomination of €11.4 billion showed a plus compared to 2025 of almost 500%. The high majority of the nominations are firm orders at a level of almost €11 billion.

Speaker #1: Main orders were the Romanian package of around 6 billion euros the low general ammunition contract for the German army and the training program for the UK.

Speaker #1: The GTP. As a result, backlog increased to €80 billion. This is an increase of around 44%, with 70% of fixed orders contributing to the total Rheinmetall backlog.

Speaker #1: The 70% fixed orders share is an increase from 58% at the end of Q2 in 2025. Now let's move to page number 15 for detailed look on our order backlog.

Klaus Neumann: The 70% fixed orders share is an increase from 58% at the end of Q2 in 2025. Let's move to page 15 for a detailed look on our order backlog. Over the last years, our order backlog grew at an average rate of 45%. From 2022, we grew the backlog from EUR 18.4 billion to now over EUR 80 billion at the end of June 2026. During those years also, basically, the quality of the order backlog increased, and we have a very strong visibility on our sales growth in the coming years. As you can see on the top right corner of the slide. For the next two and a half years, we have already fixed the order backlog that covers the next two and a half years already is to 90% fixed. Only 10% of the orders that we anticipate to turn into sales are from frame backlogs.

Speaker #1: Over the last years our order backlog grew at an average rate of 45%. From 2022 we grew the backlog from 18.4 billion to now over 80 billion at the end of June 2026.

Speaker #1: As a during these years also basically quality of the order backlog increase and you have a very strong visibility on our sales growth in the coming years.

Speaker #1: As you can see on the top right corner of the slide for the next two and a half years we have already fixed the order backlog for that covers the next two and a half years already is to 90% fixed only 10% of the orders that we anticipate to turn into sales are from frame backlogs.

Speaker #1: Beyond 2028 we already have strong visibility with an order backlog of 47 billion euros. Let's turn to page number 16. As indicated we had a we had a negative operational free cash flow of around 1.3 billion euros after a negative cash flow in the first quarter that gets us in total for the first half of the year to 1.6 billion euros.

Klaus Neumann: Beyond 2028, we already have strong visibility with an order backlog of EUR 47 billion. Let's turn to page 16. As indicated, we had a negative operational free cash flow of around EUR -1.3 billion. After a negative cash flow in Q1, that gets us in total for H1 of the year to EUR 1.6 billion. The main driver is an increase of inventory that we are doing to secure supply readiness for H2 of 2026 and the coming years 2027. The buildup is mainly driven by the vehicle systems. As I mentioned, the MEIL programs are going into the execution phase and digital systems that receive stronger growth in the years to come. One impact that also basically burdens the operational free cash flow is the continuously high level of CapEx, that is in absolute terms, higher even than in 2025.

Speaker #1: The main driver is an increase of inventory that we are doing to secure supply readiness for the second half of 2026 and the coming years 2027.

Speaker #1: The build up is mainly driven by the vehicle systems as I mentioned the mayoral programs are going into the execution phase and digital systems that receive stronger growth in the years to come.

Speaker #1: One impact that also basically burdens the operational free cash flow is the continuously high level of capex that is in absolute terms higher even than in 2025.

Speaker #1: Let's move now to page number 17 for a more detailed look at our capex spending and expectations for 2026. During our capital market day at the end of 2025 we indicated that we anticipate an capex number of around 16% for 2026 and the main driver for this high number were energetics plants that we anticipated to start constructing in 26.

Klaus Neumann: Let's move now to page 17 for a more detailed look at our CapEx spending and expectations for 2026. During our Capital Markets Day at the end of 2025, we indicated that we anticipate a CapEx number of around 16% for 2026. The main driver for this high number were energetics plants that we anticipated to start constructing in 2026. Several of these contracts, as you may have read in the news, have now been rescheduled and will only start serious construction in 2027. That significantly reduces our CapEx number here for 2026. At the same time, this reschedule does not have an impact on our 2030 sales guidance. Also, we do not expect any impact for 2027 and 2028 because these are long-term construction contracts. There were some other project-related adjustments, also as a result of somewhat delayed order intakes, as discussed earlier.

Speaker #1: Several of these contracts as you may have read in the news have now been rescheduled and will only start serious construction in 2027. And that significantly reduces our capex number for 2026.

Speaker #1: At the same time, these reschedulings do not have an impact on our 2030 sales guidance. Also, we do not expect any impact for 2027 and 2028, because these are long-term construction contracts.

Speaker #1: There were some other project related adjustments also as a result of someone delayed order intaks as discussed earlier. That also has pushed some investment into 2027 and also we are able to reduce the budget on existing and executed programs for that from as of today we anticipate an capex percentage of around 8 to 9% for 2026.

Klaus Neumann: Also we are able to reduce the budget on existing and executed programs for that from, as of today, we anticipate a CapEx percentage of around 8% to 9% for 2026. Let's move to page 18. We successfully returned to the bond market after more than 10 years of absence with a planned bond issuance in Q2. The bond, maturing in 2031, offers us financial flexibility for further growth. It opens up a new way of financing our business activities and acquisitions. The equity ratio came down to 28% as a result of the acquisition of the naval business, the expansion of the balance sheet due to the increased build-up of inventory as discussed.

Speaker #1: Now let's move to page number 18. We successfully returned to the bond market of a more than 10 years of absence with the plain bond issuance in the second quarter.

Speaker #1: The bond maturing in 2031 offers us financial flexibility for further growth. It opens up a new way of financing our business activities and acquisitions.

Speaker #1: The equity ratio came down to 20 8% as a result of the acquisition of the naval business but also the expansion of the balance sheet due to the increased build up of inventory as discussed.

Speaker #1: Our net financial position is now at minus 2.7 billion euros mainly driven by the 1 billion euro syndicated loan that we took out to finance the acquisition of the naval business.

Klaus Neumann: Our net financial position is now at EUR -2.7 billion, mainly driven by the EUR 1 billion syndicated loan that we took out to finance the acquisition of the naval business. As an update on our convertible bond, all bonds from the series A and B are now fully converted. That increases the numbers of shares in our business. With this, I would like to hand over back to Armin.

Speaker #1: As an update on our convertible bond, all bonds from Series A and B are now fully converted. That basically increases the number of shares in our business.

Speaker #1: With this I would like to hand over back to Armin.

Speaker #2: Thank you Klaus. So on the next page in page page 20 you see first of all the backlog that we have or the orders that we that we brought in.

Armin Papperger: Thank you, Klaus. On the next page, in page 20, you see, first of all, the backlog that we have or the orders that we brought in. In H1 2026, we are on a level, as I said before, of more than EUR 80 billion. At the moment, the backlog is on about 60% Germany and 40% on the international program. It changed a little bit because before we had usually 60% or more international programs and the rest was Germany. Germany is more now in the focus. I think a very important information is the information from yesterday also, what we see or what we got also from the customer side on Boxer, the Arminius program. Yesterday, also from customer side, that the final discussion should be end in the second week of September, for the Arminius program.

Speaker #2: So in H1 26 we are on a level as said before of more than 80 billion. At the moment the backlog is on about 60% Germany and 40% on international program.

Speaker #2: So it changed a little bit because before we had usually 60% or more international programs and the rest was Germany. So Germany is more now in the focus.

Speaker #2: Now I think a very important information is the information from yesterday also what we see or what we got also from the customer side on Boxer.

Speaker #2: The Arminus program. So now the yesterday also from customer side that the final discussion should be end in the second week of September. For the Arminus program.

Armin Papperger: The Deutsche Bundestag should make a decision in the beginning of December, the meeting is on 9 December. Over the next 5, maximum 10 days, the contract should be signed. Like last year on the Caracal program, the discussion at the moment is that end of the year, there should be also a down payment. What is in now for Rheinmetall? There are two contracts which are fixed. There is a fixed contract about the vehicles, this EUR 12.4 billion for vehicles. Another contract, which I believe could be signed in January, February, is a service contract, which is a total contract of EUR 4 billion, where Rheinmetall gets 50%, EUR 2 billion. Again, end of the year should be signed a EUR 12.4 billion fixed contract and should be final negotiated service contract.

Speaker #2: The Deutsche Bundestag should make a decision in the beginning of December. So the meeting is on the 9th of December. Then over the next five maximum 10 days the contract should be signed.

Speaker #2: And like last year on the Shakal program the discussion at the moment is that end of the year there should be also a down payment.

Speaker #2: So what is in now for Rheinmetall. There are two contracts which are fixed there is a fixed contract about the vehicles and this is what we spoke about this 12.4 billion euro for vehicles.

Speaker #2: And another contract which I believe could be signed then in January February is a service contract which is a total contract of 4 billion where Rheinmetall gets 50% so 2 billion euro.

Speaker #2: So again end of the year should be signed a 12.4 billion fixed contract and should be final negotiated a service contract. We expect if everything runs well end of December as last year we got the money on the 30th of December we negotiated 30% down payment so that would be more than 3 billion down payment that we could get end of the year or let me say in January maybe also but as in as in this is for this is something in weeks but this is at the moment what the government told us.

Armin Papperger: We expect, if everything runs well, end of December. Last year, we got the money on 30 December. We negotiated 30% down payment, that would be more than EUR 3 billion down payment that we could get end of the year. Or let me say in January, maybe also. This is something in weeks, but this is at the moment what the government told us. There are two options, and this is what we also offered and also negotiate. The option 1 is another EUR 14 billion contract and an option 2, and this option 1 is then for the next piece from 2030 to 2035, and then option 2 of EUR 12 billion, which are additional vehicles. This is the offer that we have. At the moment, everything seems in line.

Speaker #2: There are two options. And this is what we also offered and also negotiate the option number one is another 14 billion contract and an option number two and this option number one is then the for the next piece from 2030 to 2035 and then option number two of 12 billion which is which are additional vehicles.

Speaker #2: So this is the offer that we have. At the moment everything seems in line. We are very careful of the F126 what really can happen but we are in line that and there is no signal at the moment that they want to cancel a program because they need it and there is no other opportunity that the 12.4 billion fixed contract plus the service contract should be final negotiated end of end of the year.

Armin Papperger: We are very careful of the F126, what really can happen, but we are in line, and there is no signal at the moment that they want to cancel a program because they need it. There is no other opportunity that the EUR 12.4 billion fixed contract plus the service contract should be final negotiated end of the year. It's a strong race to do it end of the year, but at the end of the day, the most important thing is that the contract will come. After having that information, there are more trucks, ammunitions, but also missiles that we negotiate so that the piece from the German side is a big one. But there are also international. As you know, the Italian programs where we expect the next lots. There is a Portugal Boxer program, which is inside the SAFE program from Austria, Caracal, et cetera.

Speaker #2: Yeah it's a strong race to do it end of the year but at the end of the day the most important thing is the contract that the contract will come.

Speaker #2: So after having that information there are more trucks ammunitions but also missiles that we negotiate so that the piece from the German side is a big one.

Speaker #2: But there are also international as you know the Italian programs where we expect the next lots there is a Portugal Boxer program which is inside the safe program from Austria Caracal etc etc.

Speaker #2: So these are the international programs so and if you see what we see so we expect this 130 5 we reduced that with this F126 contract so that if you calculate it at the end of the day between 100 and 120 billion in this area should be the backlog that we have end of 2026.

Armin Papperger: These are the international programs. If you see what we see, we expect this EUR 135 billion, we reduced that with this F126 contract, if you calculate it at the end of the day, between EUR 100 billion and EUR 120 billion in this area should be the backlog that we have end of 2026. For sure, it depends if we can book in December or if something happens in January, but at the end of the day, at the moment, everything looks like we want to do it in December. If you have a look now to next page 21, you see, and this is only a small part of that, what we are doing, the key capacity expansions that we have and where is the status, we are on track with our expansion.

Speaker #2: And for sure it depends if we can book in December or if something happens in January but at the end of the day at the moment everything looks like we want to do it in December.

Speaker #2: If you have a look now to next page the only a small part of that what we are doing the key capacity expansions that we have and where is the state the status so that we are on track with our expansion.

Speaker #2: So you see that the only yellow painted is the Ukrainian artillery plant, and the reason for that is that the civils are not ready.

Armin Papperger: You see that the only yellow painted is the Ukrainian auxiliary plant, and the reason for that is that the civils are not ready. There is a special equipment on the civils, and it's a strong delay. It's a delay of 2 years in that area. Lithuania is online. We are in time there, and the start should be in Q2 2027. The capacity that we have on this auxiliary plant is up to 100,000 per year. Then we have the medium caliber plant in Albacete. Here is Burgos. Sorry, there is a failure. It's Albacete, where we produce upper medium caliber plant, and this medium caliber plant is able to produce more than 1 million rounds. We are in line, and we will, in the middle of 2027, we will have the grand opening there in Spain.

Speaker #2: There is a special equipment on the civils and it's a strong delay. It's delay of two years in that area. Lithuania is online we are in time there.

Speaker #2: And the start should be in Q2 2007. The capacity that we have on this artillery plant is up to 100,000 per year. Then we have the medium caliber plant in Albasete here is Spurgos sorry there is a failure.

Speaker #2: It's Albasete in where we produce upper medium caliber plant and this medium caliber plant is able to produce more than 1 million rounds. So we are in line and we will in the middle of 2027 we will have the ground opening there in Spain.

Speaker #2: On the explosive side we have an RDX plant in Varfalota which should be ready also next year planning facilities in Switzerland this is for powders a special also for the single based powders and as you know we together with the premier of Bavaria on the powder plant in Aschau we made the groundbreaking ceremony where we are able to produce starting then in Q3 in Q3 2007 so in one year's time up to 4,500 tons of triple based powder.

Armin Papperger: On the explosive side, we have an RDX plant in Várpalota, which should be ready also next year. Blending facilities in Switzerland, this is for powders, special also for the single-base powders. As you know, we, together with the Premier of Bavaria on the powder plant in Aschau, we made the groundbreaking ceremony, where we are able to produce, starting then in Q3 2027, so in one year's time, up to 4,500 tons of triple-base powder. We have a rocket plant in Burgos. That's right, and the rocket motor plant in Unterlüß. The rocket motor plant in Unterlüß will be also ready in Q1 next year. Everything is in line. The only thing that we miss at the moment is the Ukrainian side.

Speaker #2: Then we have a rocket plant in Burgos that's right and the rocket motor plant in Unterlös the rocket motor plant in Unterlös will be also ready in Q1 next year.

Speaker #2: So everything is in line the only thing that we miss at the moment is the Ukrainian side but this doesn't hurt us a lot because what we see is that the plant capacities that we have in that factories usually we can minimum reach 10% more capacity that we planned if the system is really running.

Armin Papperger: This doesn't hurt us a lot because what we see is that the plant capacities that we have in that factories, usually we can minimum reach 10% more capacity that we planned if the system is really running. We have much more. On air defense, the Skyranger turret assembly in Neuss, and also the drone production that we do in Neuss, all of them are in green lights. We will start also middle of next year, the turret production, and end of this year, the production of drones in Neuss. On the vehicle side, also Neuss is that the truck cabin assembly will be ready in Q2 2027, where we are able to produce more than 1,200 protected cabins for our protected trucks.

Speaker #2: Then we have much more. So on air defense the Sky Ranger turret assembly in noise and also the drone production that we do in noise all of them will are in green lights we will start also middle of next year the turret production and end of this year the production of drones.

Speaker #2: In noise, and on the vehicle side also, noise is that the truck cabin assembly will be ready in Q2 2007, where we are able to produce more than 1,000 200-protected cabins for our protected trucks.

Speaker #2: By the way, the capacity of the air defense turrets is about 100 turrets per year. Also, in Nossen, which is a huge piece, then also on our sales.

Armin Papperger: By the way, the capacity of the air defense turrets is about 100 turrets per year, also in Neuss, which is a huge piece then also on our sales. Now let's have a look to page 22. This is only an overview about that with on the activities on the United States. I must say we invest at the moment to the United States. This investment cost us, at the moment, double-digit millions, also this year. We have to invest it for qualification for new R&D programs, where we have to make an Americanization, and we need the money also for market development. This is an impact that we have on vehicle systems, but you really don't feel it because the margins are good.

Speaker #2: Now let's have a look to page 22 and this is only an overview about that with on the activities on the United States. I must say we invest at the moment to the United States.

Speaker #2: This investment cost us at the moment double digit millions also this year but we have to invest it for qualification for new R&D programs where we make we have to make an Americanization and we need the money also for market development.

Speaker #2: This is an impact that we have on vehicle systems but you really don't feel it because the margins are good but at the end of the day if the US margins are really growing up then to the level where we are this is a trigger point for us that vehicle systems can be can grow up to our expected 15% EBITDRAs.

Armin Papperger: At the end of the day, if the US margins are really growing up, then to the level where we are, this is a trigger point for us that vehicle systems can grow up to our expected 15% EBIT growth. The programs are very interesting. On the vehicle side, you know the XM30 program. I think we are, and last week we had the program meeting about that, we are on a very good way. The customer is happy with us. The technology is superb. We know at the end of the day it's a political decision. CTT is becoming smaller because I think of budget issues also, XM30 has still very high priority on the Army, and a new high priority is also the RCH 155, so the new artillery program in the United States.

Speaker #2: But the programs are very interesting. On the vehicle side you know the XM30 program. I think we are and last week we had the program meeting about that.

Speaker #2: We are on a very good way. The customer is happy with us. The technology is superb. That they have we know at the end of the day it's a political decision.

Speaker #2: CTT is becoming smaller because I think of budget issues also but XM30 has still very high priority on the army and a new high priority is also the RCH 155.

Speaker #2: So the new artillery program in the United States. So we go into competition there and also on the unmanned ground vehicles we go into competition.

Armin Papperger: We go into competition there and also on the Unmanned Ground Vehicles, we go into competition. These are highly automated vehicles, and the US is also very happy with the technology that they see because the automation kit, the A-Kit, is from Rheinmetall. It's a Rheinmetall algorithm. It's Rheinmetall KE that is inside, and the US is very happy about that. If you have a look to weapon and ammunition, there are ammunition programs like the 25mm FAP program. This is for the Air Force. This is frangible, 25mm frangible ammunition, so an ammunition which is if you have an impact that you have a lot of splinters and you destroy, for example, the whole wing of an airplane. But also the KETF 30mm for the Navy. This is the airburst ammunition that we also have in our air defense systems.

Speaker #2: These are highly automatized vehicles and the US is also very happy with the technology that they see because the automatization kit the kit A is from Rheinmetall.

Speaker #2: It's a Rheinmetall algorithm; it's Rheinmetall KI that is inside, and the US is very happy about that. If you have a look at weapon and ammunition, there are ammunition programs like the 25-millimeter FAB program.

Speaker #2: This is for the air force. This is Frenchable 25 millimeter Frenchable ammunition. So an ammunition which is if you have an impact that you have a lot of splinters and you destroy the for example the whole wing of an airplane but also the Ki TF 30 millimeter for the navy this is the airburst ammunition that we also have in our air defense systems.

Speaker #2: This is for the Mark 340 where the Americans want to implement the 30 millimeter. The US programs are huge programs. And these are always billion billions of dollars.

Armin Papperger: This is for the Mk 340, where the Americans want to implement the 30mm. The US programs are huge programs, and these are always $billions that they spend. The Precision Grenadier System is a new system that we developed, and the US is very interested to use that against the anti-drone fight, especially that the soldiers have the possibility to protect himself against drones. This is also an airburst ammunition, very similar to the KETF, but on a 40mm caliber. If that is implemented on the US side, we believe there is a huge opportunity also in Europe to implement it, because at the moment, most of the soldiers are not protected against these Category 1 drones. We gave an offer to the Radford Army Ammunition Plant.

Speaker #2: That they spend. The precision grenadier system is a new system that we developed and the US is very interested to use that against the anti-drone fight especially that the soldiers have a possibility to protect himself against drones.

Speaker #2: This is also an airburst ammunition very similar to the Ki TF but on a 40 millimeter caliber and if that is implemented in the on the US side we believe there is a huge opportunity also in Europe to implement it because at the moment most of the soldiers are not protected against this category one drones.

Speaker #2: And we gave an offer to the Redford Army ammunition plant. This is especially for the powder production and this is what we do in cooperation with Honeywell because you need also a second US source to go forward.

Armin Papperger: This is especially for the powder production, and this is what we do in cooperation with Honeywell, because you need also a second US source to go forward. If you have now a look to page 23, we see that, as we said before, the delivery is in line. We have a +40%. In total, we have again, this H2 here, which is back and loaded. This is year-by-year the same, and Q4 is always what we have to produce for sure, nearly everything in Q3, but in Q4 it comes into the sale, and this is especially because of the contracts that we have on one side, and that the customers also want to get the deliveries mostly then end of the year. We are in line with the expectations that we had with our plan.

Speaker #2: If you have now a look to page 23 and we see that the as we said before the delivery is in line. We have a plus of 40% but in total we have again this second half year which is back end loaded this is year by year the same and Q4 is always what we have to produce for sure everything nearly everything in Q3 but in Q4 it comes into the sale and this is especially because of the contract that we have on one side and that the customers also want to get the deliveries mostly then end of the year.

Speaker #2: So we are in line with the expectations that we had with our plan and on the next page on page 24 you see that we but this is what we told you also in our ad hoc message that we took out 300 million from the naval side because we are not able to overcompensate that.

Armin Papperger: On the next page, on page 24, you see that we, but this is what we told you also in our ad hoc message, that we took out EUR 300 million from the naval side because we are not able to overcompensate that, so that the sales are now between EUR 13.7 billion and 14.2 billion. The operating margin of around 19%, it could be a little bit better because we reduced EUR 300 million from the lowest profitable business. The operational free cash flow is a very digital decision. If we get the down payment, as I said before, it's more than EUR 3 billion down payment of Arminius. It could be higher.

Speaker #2: So that the sales is now between 13.7 and 14.2 billion the operating margin of around 19% it could be a little bit better because we reduced 300 million from a not from the lowest profitable business and the operational free cash flow is a very digital decision.

Speaker #2: If we get the down payments and as I said before it's more than 3 billion down payment of Arminius it could be higher if we don't get the down payment it could be also lower but we stay on that area of about 40% because at the end of the day and we really believe that we are very near to get this Arminius contract maybe then we would have a delay of one month or maximum.

Armin Papperger: If we don't get the down payment, it could be also lower, but we stay on that area of about 40%, because at the end of the day, we really believe that we are very near to get this Arminius contract, maybe by then we would have a delay of one month or maximum two. So far the presentation, now we are very happy to go into Q&A. Thank you very much for your time.

Speaker #1: Sure. So so far the presentation and now we are very happy to go into Q&A. Thank you very much for your time.

Speaker #3: We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue.

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

Speaker #3: We should remove yourself from the question queue. You may press star and two. Participants are requested to disable the loudspeaker mode while asking a question.

Speaker #3: The interest of time please limit yourself to two questions. Anyone with a question may press star and one at this time. Our first question comes from Alessandro Pozzi from Mediobanca.

Speaker #3: Please go ahead.

Speaker #4: Thank you for taking the questions. First of all I think it's good to see that we're seeing again a strong growth in Q2. But the first question is on the one to six.

Alessandro Pozzi: Thank you for taking the questions. First of all, I think it's good to see that we're seeing again the strong growth in Q2. The first question is on the F126. If you can give us your view on exactly what happened, because there was clearly a disconnect between the minister and the procurement agency. I think this is a key point in the context of big programs that are coming up, being the Arminius or the F127. I think on the Arminius, that has been talked about extensively even in the Renk call as well. Can you give us your view of what you think you can book in terms of value by year-end? Is it just the fixed or is it the frame contract as well? Maybe an idea of margins for the service contract as well. Thank you.

Speaker #4: If we can go back to if you can give us your view on exactly what happened because there was clearly a disconnect between the minister and the procurement agency.

Speaker #4: And I think this is a key point in the context of big programs that coming up being the menus of the one to seven.

Speaker #4: And I think only Arminius has been talked about extensively, even in the rank call as well. But can you give us your view, or what you think you can book in terms of value by year-end?

Speaker #4: Is it just the fixed or is it the frame contract as well? And maybe an idea of margins for the service contract as well.

Speaker #4: Thank you.

Speaker #1: Okay. Yes Alessandro. I will do that. So on the one to six for me the biggest issue was the liabilities and it's a big difference between the one to six and the Arminius program.

Armin Papperger: Okay. Yes, Alessandro. I will do that. On the F126, for me, the biggest issue was the liabilities, it's a big difference between the F126 and the Arminius program. The Arminius program was not a program that was fixed with another company. As you know, the F126 was a Damen program. We wanted to rescue the program, we gave the opportunity to rescue the program. The final negotiation between the Ministry of Defence and Damen was not ready. The point was that Damen is looking for sure that the German government is taking out the liabilities because, as you know, they nearly spent EUR 3 billion about that, the government had to take care about that. This was nearly impossible for the minister to do that. The second point is, as you know, there was a proposal for the MEKO.

Speaker #1: The Arminius program was not a program that was fixed with another company. As you know the one to six is a was a Diamond program.

Speaker #1: We wanted to rescue the program and we gave the opportunity to rescue the program. But the final negotiation between the Ministry of Defense and Diamond yes was not ready.

Speaker #1: And the point was that Diamond is looking for sure that the German government is taking out the liabilities because as you know they nearly spend it 3 billion about that and the government has to take care about that.

Speaker #1: And this was nearly impossible for the minister to do that. So and the second point is as you know there was a proposal for the MECO there is no proposal there is no other vehicle at the moment than the boxer.

Armin Papperger: There is no proposal, there is no other vehicle at the moment than the Boxer, so you cannot compare both cases. The most important thing for me for the F126 is very clear that the Minister has to protect the government and has to protect also the money the government spent. They could not release Damen to say, "Okay, there are no longer liabilities." At the end of the day, maybe, it's not my job to do this, but maybe at the end of the day, there will be a court case also. They could not reduce that. This was the biggest problem. Money was not an issue because money was prepared. As I told you also, and for me, I was convinced 2 weeks before the decision, I had all the traffic lights on green.

Speaker #1: So you cannot compare both cases. But the most important thing for me for the one to six is very clear: the minister has to protect the government and has to protect also the money the government spends, and they could not release the diamond to say, 'Okay, there are no longer liabilities,' and, you know, at the end of the day—maybe, yeah, it's not my job to do this—but maybe at the end of the day there will be a court case also.

Speaker #1: And they could not reduce that. So this was the biggest problem. Money was not an issue because money was prepared. And as I told you also and for me I was convinced two weeks before of the decision I had all the traffic lights on green.

Speaker #1: From Ministry of Defense from everyone was green but at the end of the day the minister together with the chief of the navy has to make a decision and said okay I must be politically correct and go the politics correct way.

Armin Papperger: From Ministry of Defence, from everyone was green, at the end of the day, the Minister, together with the Chief of the Navy, had to make a decision and said, "Okay, I must be politically correct and go the politically correct way." It was not a money issue.

Speaker #1: It was not a money issue.

Speaker #4: Okay. Understood. And on the Arminius you mentioned a couple of options. Can you take us through the numbers again and whether you think a frame can be awarded?

Alessandro Pozzi: Okay. Understood. On the Arminius-

Armin Papperger: Yeah

Alessandro Pozzi: You mentioned a couple of options. Can you take us through the numbers again-

Armin Papperger: Yeah

Alessandro Pozzi: Whether you think a frame can be awarded?

Speaker #1: Sure. So we offer a frame contract for option one and option two of about 26 billion. This is what we offered and a fixed contract of 12.4 billion for vehicle and these are only the numbers for Rheinmetall.

Armin Papperger: Sure. We offer a frame contract for option 1 and option 2 of about EUR 26 billion. This is what we offered, a fixed contract of EUR 12.4 billion for vehicle. These are only the numbers for Rheinmetall. This is what we offered, the fixed contract of EUR 12.4 billion for me is at the end of the day a must. The frame contract is an option 1 and option 2 that we offered. I don't know if we get everything. It's not a big risk for them if they also take the options. The EUR 12.4 billion at the end of the day is up to 2029. All the productions that we have to do is up to 2029.

Speaker #1: Yeah. This is what we offered and the fixed contract of 12.4 billion for me is at the end of the day a must. And the frame contract is an option one and option two.

Speaker #1: That we offered, I don't know if we get everything. It's not a big risk for them if they also—12.4 billion at the end of the day is up to 29.

Speaker #1: So then they're all the production that we have to do is up to 29. What we want is to have also minimum option one because of the investments that we have to do and then we would be safe up to 35.

Armin Papperger: What we want is to have also minimum option 1 because of the investments that we have to do, then we would be safe up to 2035. What I can say today is that I believe that the EUR 12.4 billion plus a service contract, because without a service contract, it will not work, and this is EUR 2 billion for Rheinmetall. At least I believe EUR 14.4, EUR 14.5 billion, it's a must, and the rest are the options. It would be unfair if I say it's 100% safe or it will not happen. This is a point which is not finally negotiated with the Ministry of Defence.

Speaker #1: Yeah. But what I can say today is that I believe that the 12.4 billion plus a service contract because without the service contract it will not work and this is 2 billion for Rheinmetall.

Speaker #1: So at least I believe 14.5 14.4 14.5 billion it's a must and the rest are the options. And it would be unfair if I say it's 100% safe or it will not happen.

Speaker #1: This is a point which is not finally negotiated with the Ministry of Defense.

Speaker #4: Okay. Understood. And when you look at the backlog the and you mentioned that boxer you have the full value of the boxer there I guess with the frame as well.

Alessandro Pozzi: Okay. Understood. When you look at the backlog, you mentioned the Boxer, you have the full value of the Boxer there, I guess, with the frame as well? Okay.

Speaker #4: Okay. And I guess a follow on.

Armin Papperger: No, on the backlog, it's easy if you count the Boxer and the rest. That is the reason that we said it's more than EUR 100 billion. It's between EUR 100 and 120 billion. If everything is going well, we are on this level of EUR 100, EUR 120 or a little bit more. Yeah. If you only have a case of that, it's more than EUR 100. This is the point.

Speaker #1: No on the backlog it's easy if you count the boxer and the rest and that is the reason that is that it's more than 100 billion.

Speaker #1: It's between 100 and 120 billion. So if everything is going well we are on this level of 120 or a little bit more. Yeah.

Speaker #1: And if you only have a case of that it's more than 100. So this is the point.

Speaker #4: Okay, that's very clear. And just on the final one regarding the CAPEX—there is a reduction in CAPEX in 2026, partly because of some delays in the energetics facilities in the build-up.

Alessandro Pozzi: Okay. That's very clear. Just a final one on the CapEx. There is a reduction in CapEx in 2026, partly because of some delays in the energetics facilities in the buildup. Can you reassure about the medium-term target in weapons and ammunitions despite the lower CapEx in 2026?

Speaker #4: Can you reassure us about the medium-term targets in weapons and munitions despite the lower capex in '26?

Speaker #1: Yeah. Absolutely. The point is very clear. The investment on the energetic side that we do is at the moment on a nitro cellulose it's in line.

Armin Papperger: Yeah. Absolutely. The point is very clear. The investment on the energetic side that we do is at the moment on the nitrocellulose, it's in line. We expected that we have a strong cash-out also this year for Romania, for example, for the energetic factory there. This will not happen, number 1. Number 2, we get, also from the Romanian side, a down payment on that area. This is also helping us to reduce on the cash side and on the CapEx side. We have a lot of synergies that we found. We can, if we produce 3 factories, the factory number 3 is, at the end of the day, also cheaper than number 1.

Speaker #1: We expected that we would have a strong cash out also this year for Romania, for example, for the energetic factory there. This will not happen, number one.

Speaker #1: Number two we get also from the Romanian side a down payment on that area. So this is also helping us to reduce on the cash side and on the CAPEX side.

Speaker #1: We have a lot of synergies that we found. So we can if we produce three factories the factory number three is at the end of the day also cheaper than number one.

Speaker #1: And I believe, and this is a point—and you see this also in the planning that we will show you at the end of the year—that the whole CAPEX situation for us is much better than expected in between.

Armin Papperger: I believe, this is a point, you see this also in the planning that we will show you end of the year, that the whole CapEx situation for us is much better than expected in between. It does not reduce our capacities. On the capacity side, it's at the moment that we really bring 10% to 15% more out on the big factories. Sometimes in different areas, we must not invest such a lot of money in the smaller factories. That's the reason that we can reduce also the CapEx side.

Speaker #1: But it does not reduce our capacities. So on the capacity side it's at the moment that we really bring 10 to 15 percent more out on the big factories.

Speaker #1: So sometimes in different areas we must not invest such a lot of money in the smaller factories to and that's the reason that we can reduce also the CAPEX side.

Speaker #4: All right. Thank you very much. Very useful.

Alessandro Pozzi: All right. Thank you very much. Very useful.

Speaker #1: It's a pleasure.

Armin Papperger: It's a pleasure.

Operator: The next question comes from Sebastian Groh from BNP Paribas. Please go ahead.

Speaker #2: The next question comes from Sebastian Growe from BMP Paribas. Please go ahead.

Speaker #4: Yeah. Good afternoon. Thanks for taking my questions. It's two one on the well and the other one on partnerships and broadly. I'm going to invite system side.

Sebastian Groh: Good afternoon. Thanks for taking my questions. It's two, one on Naval and the other one on partnerships more broadly. On the Naval system side, you've reiterated the 2030 sales goal of up to EUR 5 billion. I was wondering whether you could talk us or talk about the margin ambition, really, of the business and whether this has changed following the reduced margin target for 2026, or is this only a function of a lack of fixed cost absorption this particular year? More broadly speaking, do you see that the overall kind of discussions that you're having with customers for Naval systems contracts would still allow you to get to the 15% level that you had put out before? The second question on the partnership side, you labeled the teaming and partnering approach to then also satisfy customer requests and also fulfill capabilities.

Speaker #4: You've reiterated the 2030 sales goal of up to 5 billion. I was wondering whether you could talk us or talk about the margin ambition really of the business and whether this has changed following the reduced margin targets for 26 or this is solely a function of a lack of fixed cost absorption in this particular year.

Speaker #4: So more broadly speaking do you see that the overall kind of discussions that you're having with customers for Naval Systems contracts would still allow you to get to the 15 percent level that you had put out before?

Speaker #4: And the second question on the partnership side you labeled the team and partnering approach to then also satisfy customer requests and also fulfill capabilities.

Speaker #4: There have been some meter reports that the drone partnership with the US partners came back. So my question there is can you comment on the root cause and more broadly speaking are you seeing the risk that there might be more such cases especially with probably more or less mature companies when I say so?

Sebastian Groh: There have been some media reports that the drone partnership with a US partner has scaled back. My question there is, can you comment on the root cause? More broadly speaking, are you seeing the risk that there might be more such cases, especially with probably more or less mature companies, if I may say so?

Speaker #1: Yeah. So let's go to the naval side our margin target is very clear. It's still the around 5 billion and around 15 percent profitability.

Armin Papperger: Let's go to the naval side. Our margin target is very clear. It's still around EUR 5 billion and around 15% profitability. For sure, you need the shipbuilding programs. This is one thing, and we lost now one, but we will win other programs. I am sure about that, because I think we have a very good product portfolio. As you see, we have minesweepers, we have these drone carriers, et cetera, and the national and the international need is there. I also trust that our team will be successful on the new frigate program because the feedback that we got, and we spoke for sure with different customers before we started the development, was a very positive thing.

Speaker #1: And it's for sure you need the shipbuilding programs. This is one thing. And we lost now one but we will win other programs. I'm sure about that because I think we have a very good product portfolio.

Speaker #1: If you see we have Minesweepers. We have this drone carriers etc. etc. and the national and the international need is there. And I also trust that our team is will be successful on the new frigate program because the feedback that we got and we spoke for sure with different customers before we started the development was a very positive thing.

Armin Papperger: This frigate will be in a price level which is much better or lower price than most of the people expect, but you still can have margins, and we brought in also in this area and will bring in production technologies that Rheinmetall is doing in other areas. Automation of welding, et cetera. Yes, we stay on that. This must be our target, and this is the target that the management team also got. Partnerships. Most of the partnerships are running very well. What we will not do that we said we have in our plan, sales fixed with different partners where the products are not ready. You spoke, for example now, about the partnership that we have with Anduril. We stay on that point, but at the moment, we have no products that we can sell which are ready.

Speaker #1: This frigate will be in a price level which is much better or lower price than most of the people expect but you still can have margins and we brought in also in this area and will bring in production technologies that Rheinmetall is doing in other areas.

Speaker #1: So automatization of welding etc. etc. So yes we stay on that. That this must be our target and this is the target that the management team also got.

Speaker #1: Partnerships the partnerships most of the partnerships are running very well. But what we do not we will not do that we said we have in our plan sales fixed with different partners where the products are not ready.

Speaker #1: And you spoke, for example, now about the partnership that we have with Unreal. We stay on that point, but at the moment, we have no products that we can sell which are ready.

Speaker #1: And if we have ready products and we said we started with Barracuda in this area but the Barracuda I need Barracudas for qualifications then here in Germany and if they would be ready we could help there but they were not.

Armin Papperger: If we have ready products, and we said we started with Barracuda in this area, but the Barracuda, I need Barracudas for qualifications than here in Germany. If they would be ready, we could help there, but they were not. We stepped into other partnerships also, and this is the reason that we stepped into the also Destinus, because Destinus is ready. Thousands of that cruise missiles are fired in Ukraine. We want to get the first contract end of this year also with these cruise missiles. Can I say that 100% every partnership is able to be successful? No, it's impossible. At the end of the day, you must be agile, and if you don't be agile, you cannot be fast. You see how fast the Ukrainians are in different areas.

Speaker #1: So then we stepped into other partnerships also and this is the reason that we stepped into the also Destinous because Destinous is ready. Thousands of that cruise missiles are fired in Ukraine.

Speaker #1: And we want to get the first contract end of this year also with this cruise missiles. So can I say that 100 percent every partnership is able to be successful?

Speaker #1: No, it's impossible. But at the end of the day, if you don't be, you must be agile. And if you don't be agile, you cannot be fast.

Speaker #1: And you see how fast the Ukrainians are in different areas. Yes. And we cannot go into development programs where we need 5, 6, 7 years and then maybe we have a product.

Armin Papperger: We cannot go into development programs where we need five, six, seven years and then maybe we have a product. We need the product in less than 12 months. This is exactly what we do now. For the cruise missiles, we build up the factory, and the factory will be ready next year. End of the year, as I said, the first cabins are ready to produce the missiles. Is that fair enough?

Speaker #1: We need the products in less than 12 months. And this is exactly what we do now. For the cruise missiles we build up the factory and the factory will be ready next year.

Speaker #1: And end of the year as I said the first cabins are ready to produce the missiles. But fair enough.

Klaus Neumann: Thank you so much. Absolutely. Thank you.

Speaker #4: Thank you so much. Absolutely. Thank you.

Speaker #2: Next question comes from Rory Smith from Oxcab Analytics. Please go ahead.

Operator: The next question comes from Rory Smith of Oxcap Analytics. Please go ahead.

Rory Smith: Good afternoon. Thank you for taking my questions. First is just on CapEx. You've already talked a lot about this, thank you for bearing with me, but I just wasn't clear on what you said the outlook was for CapEx as a percentage of sales going into 2027 and 2028, and then how we should think about that beyond the next two years, just on the kind of phasing there of the energetics. That's my first question.

Speaker #5: Good afternoon. Thank you for taking my questions. First is just on CAPEX. You've already talked a lot about this. So thank you for bearing with me.

Speaker #5: But I just wasn't clear on what you said the outlook was for CAPEX as a percentage of sales going into 27 and 2028 and then how we should think about that beyond the next.

Speaker #5: Two years just on the kind of phasing there of the energetics. That's my first question.

Speaker #3: Yeah, thank you for the question. We will provide a more detailed update on the CAPEX expectations during a Capital Markets Day. But from what we see today, we see potential that basically the level will be lower than we indicated at the end of last year, also for '27 and '28.

Klaus Neumann: Yeah. Thank you for the question. We will provide a more detailed update on the CapEx expectations during capital market dates, but from what we see today, we see potential that basically the level will be lower than we indicated at the end of last year, also for 2027 and 2028.

Speaker #5: Okay. Thank you. And then my second question it's more of a big picture question. I guess we heard the chief executive of Renk this morning saying that he was very sure that 99 percent of German defense suppliers land business would still involve crude vehicles by 2030.

Rory Smith: Okay. Thank you. Then my second question is more of a big-picture question. I guess we heard the chief executive of Renk this morning saying that he was very sure that 99% of German defense suppliers' land business would still involve crewed vehicles by 2030, and that drones and loitering munitions would not make heavy armor obsolete. I was just wondering what your thoughts on that were, and how that flows into some of the partnership and capital allocation decisions that you're making in land. Thank you.

Speaker #5: And that drones and loitering munitions would not make heavy armor obsolete. Now I was just wondering what your sort of thoughts on that were.

Speaker #5: And how that flows into some of these partnership and capital allocation decisions that you're making in land. Thank you.

Speaker #1: Yeah. I try to bring that information also with my presentation what we look what NATO wants. And I have not to look what some guys and what professors or whatever are telling us.

Armin Papperger: Yeah. I tried to bring that information also with my presentation, what we look what NATO wants. I have not to look what some guys and what professors or whatever are telling us. Every six months, we check what NATO is doing. NATO is telling us or is telling the different countries what they have to buy or what that they should buy. I believe that drones are important. You see that in Ukraine also, that drones are important. If you have a look to the chief of the German Army and the former deputy chief of the German Army, and if you see what they say is drone is one effector.

Speaker #1: So every six months we check what the NATO is doing. And NATO is telling us or is telling the different countries what they have to buy or that they should buy.

Speaker #1: I believe that drones are important and you see that in Ukraine also that drones are important. But if you have a look to the chief of the German army and the former deputy chief of the German army and if you see what they say is drone is one effector.

Speaker #1: We need a mixture of effectors. And drones are able to fight against vehicles or against personnel. As you have seen yesterday also in the videos from where the Russians are hunting people in cities.

Armin Papperger: We need a mixture of effectors, drones are able to fight against vehicles or against personnel, as you have seen yesterday also in the videos, from where the Russians are hunting people in cities. At the end of the day, the protection against drones will also go forward. You need vehicles. You need also a lot of vehicles, not as much as expected ten years ago, but you need still vehicles to have a safe transport also for people. The next 20, 30 years, there will be no robotic war by themselves. There will always be people in the battlefield. If you see what happens in Russia or wherever, a lot of these drones are still at the moment one and one guided with drone pilots. Yeah. This is a point where you need people.

Speaker #1: But at the end of the day the protection against drones will also go forward. And you need vehicles. You need also a lot of vehicles.

Speaker #1: Not as much as expected 10 years ago. But you still need vehicles to have safe transport, also for people. And in the next 20, 30 years, there will be no robotic war by themselves.

Speaker #1: There were always will be people in the battlefield. If you see what happens in Russia or wherever a lot of this drones are still at the moment one and one guided with drone pilots.

Speaker #1: Yeah. This is a point where you need people. You need people. Infantry people. Going to the front line and especially if you do not have a stuck war a stall which you have at the moment between Russia and Ukraine which is as I always said it's a war like in the First World War.

Armin Papperger: You need infantry people going to the front line, especially if you not have a stacked war, a store which you have at the moment between Russia and Ukraine, which is, as I always said, it's a war like in the First World War. You have a death zone there, and then you go in the death zone 100 meters in front or 100 meters back. This is not a war that NATO is doing. NATO has air forces. NATO has perfect air defense part, has a lot of firepower to bring in to have a mobile war and not a static war. This is the big difference that you see. I see, and the point is from me, very clear that we need a mixture, and in that mixture, there are also protected vehicles.

Speaker #1: You have a dead zone there and then you go in the dead zone at 100 meters in front or 100 meters back. This is not a war that NATO is doing.

Speaker #1: NATO has air forces. NATO has a perfect air defense pod. It has a lot of firepower to bring in, to have a mobile war and not a static war.

Speaker #1: And this is the big difference that you see. So I see and the point is from me very clear that we need a mixture.

Speaker #1: And in that mixture there are also protected vehicles.

Speaker #5: That's very clear. Thank you for the question.

Rory Smith: That's very clear. Thank you for the question.

Speaker #1: Thank you.

Armin Papperger: Thank you.

Operator: The next question comes from Christoph Laskawi from Deutsche Bank. Please go ahead.

Speaker #2: Next question comes from Christoph Lasquani from Deutsche Bank. Please go ahead.

Speaker #4: Good afternoon. Thank you for taking my questions. First just coming back to Armenians and your statements. On option one and two what do you think are the main decision levers that the MOD is taking there and what would be the risk to sign both options basically this year or early next?

Christoph Laskawi: Good afternoon. Thank you for taking my questions. First, just coming back to Armin and your statements on option one and two. What do you think are the main decision levers that the MoD is taking there, and what would be the risk to sign both options basically this year or early next? Could you elaborate on that, what the discussions look like and what you think, again, the MoD is focused on in evaluating taking both options? The second one, just a clarification question. I think you stated that despite the CapEx shifts or cuts, 2027 and 2028 revenues will not be impacted. Could you just elaborate again on why there is no impact on revenues despite the shifts? The last question, very short. You indicated that there is an XM30 impact on Q3 earnings.

Speaker #4: Could you leverage on that what the discussions look like and what do you think the again the MOD is focused on evaluating taking both options?

Speaker #4: And then the second one sorry just a clarification question. I think you stated that despite the CAPEX shifts or cuts 27 and 28 revenues will not be impacted.

Speaker #4: Could you just elaborate again on why there is no impact on revenues despite the shifts? And then the last question sorry very short. You indicated that there's the XM30 impact on Q3 earnings.

Armin Papperger: Yeah.

Christoph Laskawi: With that, we probably cannot expect the usual step up Q3 over Q2 margins, but could margins still be flat to up in Q3 versus Q2? No comment at this stage? Thank you.

Speaker #4: With that we probably cannot expect the usual step up Q3 over Q2 margins. But could margins still be flat to up in Q3 versus Q2 or no comment at this stage?

Speaker #4: Thank you.

Speaker #1: So if you go to the investment side I try to precise that again. So if you go to the factories that are ready now and that we are becoming ready also next year like for example the powder side on the powder side the raw materials are fine.

Armin Papperger: If you go to the investment side, I try to precise that again. If you go to the factories that are ready now, and that are becoming ready also next year, for example, the powder side. On the powder side, the raw materials are fine. The nitrocellulose is coming also from our factory that we have in North Germany, and we have no gap there on that area. The Aschau plant is overcompensating a lot of other plants. If you see, the Aschau plant is growing up to 4,500 tons. Most of the other things, for example, even if Romania will be delayed of half a year, for example, we can compensate it because the Romanian capacity is much, much lower. We speak about 1,000 tons in that area.

Speaker #1: So the nitrocellulose is coming also from our factory that we have in North Germany. And we have no gap there on that area. And the Ashao plant is overcompensating a lot of other plants.

Speaker #1: If you see the Ashao plant is growing up to 4,500 tons. Most of the other things for example even if Romania will be delayed of half a year for example we can compensate it because the Romanian capacity is much much lower.

Speaker #1: We speak then about 1,000 tons in that area. So that is the reason that our plan and also a huge amount of money that we invested in Ashao where we grow to the modular charges that you need on the auxiliary business where we have then enough capacity from South Africa from Spain and also from Ashao where we are ready.

Armin Papperger: That is the reason that our plan, and also a huge amount of money that we invested in Aschau, where we grow to the modular charges that you need on the artillery business, where we have enough capacity from South Africa, from Spain, and also from Aschau, where we are ready. The second point is, and this is the second biggest source, is the investment that we made in Spain. Spain is also ready next year on the powder side. The third biggest investment was in South Africa. These are the three big pillars. The rest that we have is, if you see Romania, if you see Bulgaria, if you see Lithuania. The Lithuanian plant of about 1,000, we could overcompensate also with Unterlüß if we really drive Unterlüß full throttle.

Speaker #1: So the second point is and this is the second biggest source is the investment that we made in Spain. Spain is also ready next year on the powder side and the third biggest investment was in South Africa.

Speaker #1: So these are the three big pillars and the rest that we have is if you see Romania if you see Bulgaria if you see Lithuania the Lithuanian plant of about 1,000 we could overcompensate also with Unterlis if we really drive Unterlis full throttle.

Armin Papperger: That is the reason that we think that we are able to, as I said, 10% or 15% plus in Unterlüß or in Aschau will nearly compensate a full factory.

Speaker #1: This is—that is the reason that we think that we are able to, and as I said, 10% or 15% plus in Unterlüß or in Aschau will nearly compensate a full factory.

Christoph Laskawi: Yep.

Speaker #1: Yeah. Is that clear?

Armin Papperger: Yeah. Is that clear?

Speaker #3: Yeah. And one additional comment. The construction programs that are being pushed the big energetic plants would have had a construction time of around two years.

Klaus Neumann: Yeah. One additional comment. The construction programs that are being pushed, the big energetic plants would have had a construction time of around two years until they really go into capacity. Simply because of the construction time, we never anticipated significant sales contributions in 2027 and 2028.

Speaker #3: Until they really go into capacity. So simply for the because of the construction time we'd never anticipate a significant sales contributions in 2027 and 2028.

Speaker #1: Mr. Laskavi. Is that clear?

Armin Papperger: Mr. Laskawi, is that clear?

Christoph Laskawi: That is clear. Thank you.

Speaker #4: That is clear. Thank you.

Speaker #1: Yeah. So this is the point. And what was the last point? I've lost it.

Armin Papperger: Yeah. This is the point. What was the last point? I've lost it.

Klaus Neumann: Arminius option one and two.

Speaker #3: Arminious. Option one and two.

Armin Papperger: Yeah. Look, everything what I say at the moment is, I believe that the government wants to sign also this frame contract, but it is not fixed. Therefore, whatever I say now in the point could be right or could be wrong. What I believe, which is very, very safe, is that we get, as I said before, the EUR 12.4 billion plus the EUR 4 billion, which is EUR 2 billion for Rheinmetall, the EUR 14.4, EUR 14.5 billion safe. There is a need. This is what is positive for me. There is not a gap of money at the moment, which is also helpful. Therefore, up to 2030, everything is financed, but up to 2035, for me, I cannot say yes, or I cannot say no. I have to wait, what is coming out now in the negotiations, and then you get the information.

Speaker #1: Yeah. So yeah. Look everything what I say at the moment is I believe that the government wants to sign also this frame contract but it is not fixed.

Speaker #1: So therefore whatever I say now in the point could be right or could be wrong. What I'm I believe which is very very safe is that we get as I said before the 12.4 billion plus the 4 billion which is 2 billion for Rheinmetall.

Speaker #1: So the 14.4 14.5 billion safe. And there is a need. And this is for me what is positive for me. And there is not a gap of money at the moment.

Speaker #1: Which is also helpful. So therefore up to 2030 everything is financed but up to 2035 for me I cannot say yes or I cannot say no.

Speaker #1: And I have to wait what is coming out now in the negotiations and then you get the informations. But I'm very careful about this area and I try to be conservative in this area because on the other side I try to be also always as in that positive in this area but I'm very conservative and we will see what's going on.

Armin Papperger: I'm very careful about this area, I try to be conservative in this area, because on the other side, I try to be also always, as I said, positive in this area, I'm very conservative, we will see what's going on.

Speaker #4: Thank you. And on the Q3 margin question? Sorry to follow up on that.

Christoph Laskawi: Thank you. On the Q3 margin question? Sorry to follow up on that.

Armin Papperger: Q3 is in line. The margins are good. As you know, end of the year, usually the margins are higher than at the beginning of the year because the fixed costs are done. We are on a very good way to reach, let me say, at least the targets that is in your expectations.

Speaker #1: Q3 is in line. So the margins are good, and as you know, at the end of the year, usually the margins are higher than at the beginning of the year because the fixed costs are done.

Speaker #1: So, we are on a very good way to reach, let me say, at least the targets that are in your expectations.

Speaker #4: Thank you.

Christoph Laskawi: Thank you.

Operator: The next question's also Claire. Marie from Jefferies. Please go ahead.

Speaker #2: The next question is also clear. Le Marie from Jefferies please. Go ahead.

Claire Marie: Yes. Good afternoon. Thank you for taking my question. I have one just to confirm on the EUR 100 billion backlog that you target by the end of the year. Would it be achievable without the frame contract from Arminius? Then one on the US. When do you expect a decision on the RCH 155, please? Thank you.

Speaker #5: Yes. Good afternoon. Thank you for taking my question. I have one just to confirm on the 100 billion backlog that you target by the end of the year.

Speaker #5: Would it be achievable without the frame contracts from Arminious? And then one on the US. When do you expect a decision on the RCH 150 please?

Speaker #5: Thank you.

Speaker #1: First question, yes. It's possible, without the frame. And the second point is that, at the moment, we don't speak about the time schedule on the frigate because this frigate program is very new.

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

Speaker #1: And we even don't speak about the so RCH I didn't understood wrong. On the RCH 155 the Americans want to make a decision also next year.

Speaker #1: But first of all, we have to go into a qualification program.

Speaker #5: Very clear. Thank you.

Claire Marie: Very clear. Thank you.

Speaker #1: Thank you.

Armin Papperger: Thank you.

Operator: The next question comes from Marie Rigaux from Morgan Stanley. Please go ahead.

Speaker #2: The next question comes from Marie-Ange Rindjo from Morgan Stanley please. Go ahead.

Speaker #5: Yeah. Hi Armin and hi Klaus. Thanks for taking my question. I have three. The first one is on the German defense budget because we all know that we have seen recent headlines around the potential draft suggesting lower cash outlay for ammunition and land system.

Marie Rigaux: Yeah. Hi, Armin and hi, Klaus. Thanks for taking my question. I have three. The first one is on the German defense budget, because we all know that we have seen recent headlines around a potential draft, suggesting lower cash outlay for ammunition and land system. I know it's quite difficult to comment because it's a draft, but I have two question here. Are you seeing any change in the German procurement priorities or allocation of spending? Can you probably just help us to understand what can be the drivers of lower cash spending? Could it reflect program timing or industry capacity rather than weaker order opportunities? Lastly, on this topic, and probably more importantly, should we read anything into these figures regarding Rheinmetall sales by 2030? That's the first question.

Speaker #5: I know it's quite difficult to comment because it's a draft but I have two questions here. Like are you seeing any change in the German procurement priorities or allocation of spending?

Speaker #5: Can you probably just help us to understand what can be the drivers of lower cash spending? Could it reflect program timing or industry capacity rather than weaker other opportunities?

Speaker #5: And lastly on this topic and probably more importantly should we read anything into these figures regarding Rheinmetall sales by 2030? So that's the first question.

Speaker #5: The second one is on air defense. Because your performance is very strong in H1 and well ahead of your full year guidance. So it will almost imply a significant slowdown in H2.

Marie Rigaux: The second one is on air defense, because your performance is very strong in H1 and well ahead of your full year guidance. It will almost imply a significant slowdown in H2. I just would like to understand if there's any specific reason why growth should moderate in the second half or if it is simply a conservative assumption. Lastly, on your operating free cash flow, could you just quantify how much of the advanced payment shifted from H1 into H2? And how much of the inventory build relates to products already manufactured in Q2 that are expected to be delivered in H2? Thanks.

Speaker #5: So I just would like to understand if there is any specific reason why growth should moderate in the second half or if it is simple simply a conservative assumption.

Speaker #5: And lastly on your operating free cash flow. Could you just quantify how much of the advanced payment shifted from H1 into H2? And how much of the inventory is built relates to products already manufactured in Q2 that are expected to be delivered in H2.

Speaker #5: Thanks.

Armin Papperger: Let's start, Marie Rigaux, with the ammunition side. We made a very strong analysis about that. By the way, it's not 100% clear what the government really wants because it's not a fixed check. What we can do, we spoke with the government and said, "Okay." I think at the moment it's between EUR 11.5 billion, they want to reduce the ammunition budget to EUR 9.5 billion. We analyzed, first of all, tank ammunition. We see no influence on the tank ammunition because most of the contracts are signed on the tank ammunition side. There is no reduction on this area. On the artillery ammunition, we are, as you know, in the discussions at the moment for another 114,000 plus 600,000 rounds.

Speaker #1: Yeah. Let's start Marie-Ange side. So we made a very strong analysis about that. By the way it's not 100% clear what the government really wants because it's not a fixed check what we can do.

Speaker #1: We spoke with the government and said okay what is I think it's at the moment it's between 11.5 then they want to reduce the ammunition budget to 9.5 billion.

Speaker #1: So we analyzed first of all tank ammunition. We see no influence on the tank ammunition because the contracts most of the contracts are signed on the tank ammunition side.

Speaker #1: There is no reduction in this area. On the artillery ammunition, as you know, we are currently in discussions for another 114,000 plus 600,000 rounds.

Speaker #1: Nobody gave us a stop and said okay no we don't. We want to do it. And as you know and as you have seen the backlog on the ammunition is a very high one.

Armin Papperger: Nobody gave us a stop and said, "Okay, no, we don't want to do it." As you know and as you have seen, the backlog on the ammunition is a very high one, that we see no impact also over the next years. Medium caliber is the big area where we have a growth rate. On the medium caliber side, there are at the moment negotiations about 5 million plus 5 million rounds. It's two contracts, and this is nearly a EUR 10 billion contract, which is coming up. The big contracts are coming there. This is what I see, not big reductions on our side. If I speak about this contract, this contract for sure are always for 5, 6 years, sometimes 7 years, if you have this frame contract.

Speaker #1: So that we see no impact also over the next years. Medium caliber is the big area where we have a growth rate. On the medium caliber side, there are at the moment negotiations about 5 million plus 5 million rounds.

Speaker #1: It's two contracts and this is nearly a 10 billion euro contract which is coming up. So the big contracts are coming there. So this is what I see not a big reduction on our side.

Speaker #1: And if I speak about this contract this contract for sure are always for 5, 6 years sometimes 7 years if you have this frame contract.

Speaker #1: So I think that the government at the moment still don't know what where are reductions or where they really want to reduce. Air defense on the air defense side yes we made our calculations and as you know we built up the capacities now for 400 systems.

Armin Papperger: I think that the government at the moment still don't know where are reductions or where they really want to reduce. Air defense. On the air defense side, yes, we made our calculations, as you know, we built up the capacities now for 400 systems. In building up these 400 systems, there is more in than that what we have in our calculations or what is in our forecast on the air defense side. We will see next year how we really can ramp up the production line and call it conservative. At the end of the day, I have to wait that we really book. We book a lot of business at the moment. That we really book the big pieces, and Arminius is the first step. Of course, the whole bunch is between 600 and 650 systems.

Speaker #1: And in building up this 400 systems there is more in than that what we have in our calculations or what is in our forecast on the air defense side.

Speaker #1: But next year we will see next year how we really can ramp up the production line. And call it conservative but at the end of the day I have to wait that we really book we book a lot of business at the moment.

Speaker #1: Yeah. That we really book the big pieces and Arminious is the first step because you know the whole bunch of is between 600 and 650 systems.

Speaker #1: In the first lot we will have let me say at least 200 systems and so that's at the end of the day a lot of order intake that we would have.

Armin Papperger: In the first lot, we will have, let me say, at least 200 systems. That's, at the end of the day, a lot of order intake that we would have. On the operational free cash flow, Klaus, do you want to say something about that?

Speaker #1: And on the operational free cash flow, Klaus, do you want to say something about that?

Klaus Neumann: Yeah.

Speaker #3: Yeah. We were asking about, basically, how the inventory balance will develop towards the end of the year. We expect that the growth will significantly slow down as we increase sales in the second half.

Operator: No, you were asking about basically how the inventory balance, how we develop towards the end of the year. We expect that the growth will significantly slow down as we basically increase sales in H2. We anticipate a more or less similar level as of at the end of June.

Speaker #3: So we anticipate as I more or less similar level as of at the end of June.

Speaker #1: What we have in stocks.

Armin Papperger: What we have in stock.

Speaker #3: What we have in stocks. Yeah.

Klaus Neumann: What we have in stock?

Armin Papperger: Yeah.

Armin Papperger: This is-

Armin Papperger: Marie-Ange

Speaker #1: Marie-Ange.

Marie Rigaux: Oh, good. Just probably on the advanced segments that shifted into H2, can you quantify?

Speaker #5: Yes. Yeah. All good. And just probably on the advanced segment that shifted into H2. Do you have can you quantify?

Marie Rigaux: Oh, good. Just probably on the advanced segments that shifted into H2, can you quantify?

Klaus Neumann: We mentioned that we do get the 15% for the remaining contract that we anticipate. We have some other programs where we anticipate significant prepayments, the big prepayment that we expect is a prepayment on Arminius, as Armin detailed, the timing could be quite close for 2026. It really depends that all the relevant parties are doing what they're supposed to do to make sure that it comes at the end of the year. We also highlighted that we often have the situation that we get material prepayments really just days before the year-end, and this year might be another example of this pattern.

Speaker #3: We mentioned that we do get the 15% for the remaining contracts that we anticipate. Then we have some other programs where we anticipate significant prepayments but the big prepayments that we expect is a prepayment on Arminious and as Armin detailed the timing could be quite close for 2026.

Speaker #3: It really depends that all the relevant parties are doing what they're supposed to do to make sure that it comes at the end of the year.

Speaker #3: And we also highlighted that we often have the situation that we get material prepayments really just days before the year end. And this year might be another example of this pattern.

Speaker #1: But if you only see Marie-Ange Romania is more than 1 billion in two tranches and 3.5 billion up to 3.5 billion is Arminious. So that is a total game changer in everything.

Armin Papperger: If you only see, Marie Ange, Romania is more than EUR 1 billion in 2 tranches, up to EUR 3.5 billion is Arminius. That is a total game changer in everything, the money will come, because if we sign it, the money will come, it depends if we book it in December or if we book it in January. At the end of the day, for me, it doesn't matter as an entrepreneur if I get it 4 weeks earlier or later, as I always say in that area, we try to get it in in December.

Speaker #1: And the money will come because if we decided the money will come and it depends if we book it in December or if we book it in January at the end of the day for me it doesn't matter as an entrepreneur if I get it four weeks earlier or later as I always say in that area.

Speaker #1: But we try to get it in in December.

Speaker #5: Okay. Perfect. Very clear. Thank you.

Marie Rigaux: Okay, perfect. Very clear. Thank you.

Speaker #1: Thank you.

Armin Papperger: Thank you.

Speaker #2: The next question comes from Sven Weier from UBS. Please go ahead.

Operator: The next question comes from Sven Weier from UBS. Please go ahead.

Speaker #4: Yeah. Good afternoon. Thanks for taking my questions. First of all I think it was a right decision to have a different type of guidance on the boxer.

Sven Weier: Yeah. Good afternoon. Thanks for taking my questions. First of all, I think it was the right decision to have a different type of guidance on the Boxer. Even if we don't like the answer, maybe, I think that's good. First follow-up question I have is just coming back again on 2027 and 2028, because you said it doesn't have really an impact on the expected growth rate. If I remember correctly, I think you said in the past that a 30% annual growth business for the defense business should be possible in the coming years.

Speaker #4: So even if we don't like the answer maybe but I think that's good. First follow-up question I have is just coming back again on 2027 and 2028 because you said it doesn't have really an impact on the expected growth rate.

Speaker #4: I mean if I remember correctly I think you said in the past that like a 30% annual growth business for the defense business should be possible in the coming years.

Speaker #4: I mean with all the delays we now had also on the boxer the F-126 would you still underwrite that statement? That's the first question.

Sven Weier: With all the delays we now had also on the Boxer, the F126, would you still underwrite that statement? That's the first question.

Speaker #1: Yeah. No. It is right. And the reason for that is that for example also for the boxer for 27 and 28 all do you remember that we have Shakal booked.

Armin Papperger: No, it is right, the reason for that is that, for example, also for the Boxer, for 2027 and 2028. Do you remember that we have Caracal booked? This was also a Boxer program. This should be also part of an Arminius program, we got that contract. We booked it. Heavy Weapon Carrier, we booked it. This is all the programs that we are there. This is part of our growth rate. As Klaus Neumann said before, most of the business in 2027 is booked. Therefore, there is no impact about that. What is coming in from the order intake. If we have order intake where we can make very fast, where we can create very fast sales, then there is a potential of more growth.

Speaker #1: This was also a boxer program. This should be also part of an Arminious program but we got that contract. So we booked it. Heavy weapon carrier we booked it.

Speaker #1: So this is all the programs that we are there. So this is part of our growth rate. So as Klaus said before most of the business in 27 is also is booked.

Speaker #1: So therefore there is no impact about that. What is coming in on from the order intake. So if we have order intake where we can make very fast where we can create very fast sales then there is potential of more growth.

Speaker #1: So and as we discussed also before the 40% of this year yeah is around 40% tick in a box and over the next years I think 30 or a little bit more than 30% is possible.

Armin Papperger: As we discussed also before, the 40% of this year, is around 40% tick in the box. Over the next years, I think 30% or a little bit more than 30% is possible, and this is possible with the backlog that we have and the continuous order intake. Over the next years, we will, year by year, to have a positive book-to-build ratio, much more than one. That will help us, and that can grow up also the backlog. Something happens always, yeah. You have seen that on the F126. What could happen in the last minute. This is always clear, but that's business. Then we, as businessmen, have to compensate that. We have to find new ways and we have to go into new opportunities, and this is exactly what we do.

Speaker #1: And this is possible with the backlog that we have. And the continuous order intake then over the next years we will year by year to have a positive book to build ratio much more than one.

Speaker #1: And that will help us and that can grow up also the backlog. Something happens always. Yeah. And you have seen that on the F-126.

Speaker #1: What could happen in the last minute. Yeah. This is always clear. But that's business. And then we as businessman has to compensate that. We have to find new ways and we have to go in two new opportunities.

Speaker #1: And this is exactly what we do. We are not sitting down and said okay wow now something happened and crazy world or whatever. This does not help.

Armin Papperger: We are not sitting down and said, Okay, wow, now something happened and crazy world or whatever. This does not help. No, we go forward and we look for new opportunities, the new frigate program is a huge opportunity. This is much bigger. We didn't tell that even if we had it two years in our point, we didn't tell that point because it was very early, but now we are ready. Now we are ready to launch that, and now we are ready to go into marketing processes. At the end of the day, I think there is also a lot of opportunities to compensate and overcompensate different areas. I stay on my prognosis.

Speaker #1: No. We go forward and we look for new opportunities and the new frigate program is a huge opportunity. This is much bigger. We didn't tell that even if we had it two years in our point.

Speaker #1: We didn't tell that point because it was very early. But now we are ready. Now we are ready to launch that. And now we are ready to go into marketing processes.

Speaker #1: Yeah. So at the end of the day I think there is also a lot of opportunities to compensate and overcompensate different areas. So I stay on my prognosis.

Speaker #4: Sounds good. Thank you. Second question I had was just on the Navy business and your current opinion on German naval yards whether you think that's exhibit and still makes sense or whether you should also pull out like TKMS.

Sven Weier: Sounds good. Thank you. Second question I had was just on the Navy business and your current opinion on German naval yards, whether you think that acquisition still makes sense or whether you should also pull out like TKMS.

Speaker #1: Yeah. At the moment we are we cannot make a decision. And this is very clear. Because we miss now the work of the F-126.

Armin Papperger: At the moment, we cannot make a decision, and this is very clear, because we miss now the work of the F126. If we would have signed the F126, we need it. That was the reason that we stepped into the process. We have, with KNDS, a non-binding offer. We did not stop it because we wait at the moment what are the next steps on the market side. In some areas, we think that we get, up to end of the year, the first decisions or nearly decisions how to go forward with different shipbuilding programs. We will make our decision. We can, at the moment, make no decision because it makes no sense if I don't need the capacity.

Speaker #1: If we would have signed the one F-126 we needed. That was the reason that we stepped into the process. We have with GNUC a non-binding offer.

Speaker #1: We did not stop it because we wait at the moment what are the next steps on the market side and in some areas we think that we get up to end of the year the first decisions or nearly decisions how to go forward with different ship building programs.

Speaker #1: And then we will make our decision. So we cannot make a decision at the moment, because it makes no sense if I don't need the capacity.

Speaker #4: So there is no like expiration date for your non-binding offer where decision has to be made.

Sven Weier: There is no expiration date for your non-binding offer where a decision has to be made?

Speaker #1: No. This is a point what at the end of the day if GNUC wants to step out of the process it's fine because at the moment we got no signal.

Armin Papperger: No, this is a point what, at the end of the day, if KNDS wants to step out of the process, it's fine because at the moment, we got no signal.

Speaker #4: And then the very last one, if I missed, just unlock it and take another chance. Obviously, that seems to be now going ahead. I mean, what kind of order potential should we see on this one short term?

Sven Weier: The very last one, if I may, is just on Lockheed and ATACMS. Obviously, that seems to be now going ahead. What kind of order potential should we see on this one short term?

Speaker #1: Yeah, the lot eight should be produced in Germany because, as the statement of Lockheed was also very clear, they need the space. And my colleague, the CEO of Lockheed, also made it very clear that he wants to install now the PRISM production line.

Armin Papperger: Yeah. The Lot 8 should be produced in Germany because as the statement of Lockheed was also very clear that they need the space. My colleague, the CEO of Lockheed, also told very clear that he want to install now the PrSM production line. We build up the production line next year, and we want to produce next year, starting end of the year with the Lot 8. We see a lot potential also in Europe to produce the ATACMS. As we always said, to have really to see really sales about that, it needs up to 2028.

Speaker #1: So we build up the production line next year. And we want to produce next year starting end of the year with the lot eight.

Speaker #1: But we see a lot potential also in Europe to produce the attack camps. But to have a as we always said to have really to see really sales about that it needs up to 28.

Speaker #4: Understood. Thank you Mr. Papperger.

Sven Weier: Understood. Thank you, Mr. Papperger.

Speaker #1: And this is not in the plan at the moment for sure because this is because we this is how we do it always. We only do something in the plan where we are where we are relatively safe.

Armin Papperger: This is not in the plan at the moment, for sure, because this is how we do it always. We only do something in the plan where we are relatively safe.

Speaker #4: Understood. Thank you.

Sven Weier: Understood. Thank you.

Speaker #1: Thank you.

Armin Papperger: Thank you.

Speaker #2: The next question comes from David Perry from JP Morgan. Please go ahead.

Operator: The next question comes from David Perry from JPMorgan. Please go ahead.

Speaker #4: Hi, Armin. Hi, Klaus. Hope you're both well. Am I allowed three questions, seeing as a few people asked three? If not, I will tailor my two.

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

Armin Papperger: No, good. Take your time, David.

Speaker #1: No. No. Take your time.

Speaker #4: Thank you. The first one is a very short one. It's just could we have a little bit more color on the trade receivables that you referred to for Q2.

David Perry: Thank you. The first one's a very short one. It's just, could we have a little bit more color on the trade receivables that you referred to for Q2? Just which products are you awaiting payment on? Do you want to take them one at a time, or should I ask them all?

Speaker #4: Just which products are you awaiting payment on. Do you want to take them one at a time or should I ask them all? One at a time.

Armin Papperger: Yeah, please.

Armin Papperger: One at a time.

David Perry: Okay. Second question, just on the Boxer, could I ask the question in a slightly different way? Bottom up rather than top down, because I think on the Q1 call, Armin, you talked about a plan to go to 500 vehicles a year. Some of the suppliers, like Rheinmetall and KNDS, have both talked about 1,800 in the first phase. I'm not sure if the 1,800 is just for Rheinmetall or for Rheinmetall and KNDS, because if I was a supplier, I guess I'd be agnostic. Maybe I misunderstand, but if it's 1,800 vehicles across the whole program, I just don't see how you get to 500 a year, if you could clarify that. Then my third one, please, which is a bit more conceptual.

Speaker #4: Second question. Just on the boxer. Could I ask the question in a slightly different way bottom up rather than top down because I think on the Q1 call Armin you talked about a plan to go to 500 vehicles a year.

Speaker #4: But some of the suppliers like Rheinmetall and Vincorin have both talked about 1800 in the first phase. And I'm not sure if the 1800 is just for Rheinmetall or for Rheinmetall and KNDS because if I was a supplier I guess I'd be agnostic.

Speaker #4: But if it was maybe I'm misunderstand. But if it's 1800 vehicles across the whole program I just don't see how you get to 500 a year if you could clarify that.

Speaker #4: And then my third one, please, which is a bit more conceptual. Because you talked about the JVs, and it sounds like a lot of them you've not put in your plan or your sales guidance. And indeed, I think 11 of them that I've tracked have been announced this year.

David Perry: You talked about the JVs, it sounds like a lot of them you've not put in your plan, in your sales guidance. Indeed, I think 11 of them that I've tracked have been announced this year, so they wouldn't have been, you may have known about them, but they may not have been in last year's guidance. I'm just wondering, when we get to the CMD this year, is it the plan that you're going to reiterate the target for 2030 sales? We may find the mix changes quite a bit. You may say, Look, the world's changing. We might not have as many vehicles or as much ammo, but we've got more on the drones, more on the missiles, more on the autonomy. Am I getting ahead of myself there? Thank you.

Speaker #4: So they wouldn't have been you may have known about them but they may not have been in last year's guidance. I'm just wondering when we get to the CMD this year is it the plan that you're going to reiterate the target for 2030 sales but we may find a mix changes quite a bit so you may say look the world's changing we might not have as many vehicles or as much ammo but we've got more on the drones more on the missiles more on the autonomy.

Speaker #4: Or am I getting ahead of myself there? Thank you.

Speaker #1: Yeah. Let's start with the last thing. I believe that the drone business will grow. And I know that the missile business will grow and this will be more than expected before.

Armin Papperger: Yeah. Let's start with the last thing. I believe that the drone business will grow, I know that the missile business will grow, and this will be more than expected before, 100%. This is the point. The other thing, David, is also very clear. If you make a five-year forecast, yeah, I have no glass ball. Something changed in the world, we have to change the company, and we do that. We do this. We are very fast in changing the company in that area. Yes, it could be that there is a change, but it's not a dramatic change. It's not that we say, Okay. Oh, wow, there are not longer, it's not longer tank ammunition or not longer artillery ammunition. I think that we can add something, in some areas, it's a plus, in some areas will be a minus.

Speaker #1: 100%. So this is a point. And the other thing David is also very clear. If you make a five year forecast yeah. I have no glass ball.

Speaker #1: Something changed in the world. But we have to change the company. And we do that. We do this. We are very fast in changing the company in that area.

Speaker #1: And yes it could be that there is a change but it's not a dramatic change. It's not that we say okay. Oh wow there are not longer is not longer tank ammunition or not longer artillery ammunition.

Speaker #1: I think that we can add something and in some areas is a plus in some areas will be a minus. But the total thing is I believe is very clear is a growing story that we have.

Armin Papperger: The total thing is, I believe, is very clear, is the growing story that we have. The second point is what we build up, we build up a capacity on Boxer of 500 vehicles per year. The reason for that is because we have a German business, we have also international business in this area. It makes not a lot of sense if you have a peak about this area, because the costs are, if you build it up to 400 or 500 vehicles, the costs are nearly the same. Because what we want is we want to make some automatization. There are a lot of people in the supply chain who get information from us, I think most of them have not the full picture about that, what is going there.

Speaker #1: The second point is the what we build up we build up a capacity on boxer of 500 vehicles per year. And the reason for that is because we have a German business and we have also international business in this area.

Speaker #1: And it makes not a lot of sense if you have a peak about this area because the costs are if you build it up to 400 or 500 vehicles the costs are nearly the same.

Speaker #1: And so, because what we want is, we want to make some automation. And there are a lot of people in the supply chain who get information from us.

Speaker #1: But I still I think most of them have not the full picture about that what is going there. It's KNDS and us at the moment who are in the negotiations.

Armin Papperger: It's KNDS and us at the moment who are in the negotiations. I think it's so fair that at the end of the day, we have to wait now, this is not a very long time because we have now, this is now August. If you see, I said in the second week of September, we are ready with that. It's another four weeks or five weeks, then we have a full picture about that. Yes, our investments at the moment are on a level of 500 vehicles per year that we want to produce for national and international businesses. There is a business in the Netherlands. There is a business coming out from Portugal.

Speaker #1: And I think it's so fair that at the end of the day we have to wait now and this is not a very long time because we have now and this is now August.

Speaker #1: And if you see and I said in the second week of September we are ready with that. It's another four weeks or five weeks.

Speaker #1: And then we have a full picture about that. But yes our investments at the moment are on a level of 500 vehicles per year that we want to produce for national and international businesses.

Speaker #1: There is a business in the Netherlands. There is a business coming out of Portugal. There are other countries who are looking for that. And it does not make a lot of sense to go there and say, okay.

Armin Papperger: There are other countries who are looking for that, it makes not a lot of sense to go there and say, "Okay, after this investment, if there is a peak, let me say, from 350 to 500 vehicles, to make another investment." This makes not a lot of sense. Is that fair for you, David?

Speaker #1: After this investments if there is a peak let me say of 5 from 350 to 500 vehicles then to make another investment. So this makes not a lot of sense.

Speaker #1: Is that fair for you David?

Speaker #4: Yeah. That's helpful. The international piece is probably what I'm missing. And just from Klaus on the trade receivables.

David Perry: Yeah. That's helpful. The international piece is probably what I'm missing. Just from Klaus on the trade receivables.

Speaker #3: Yeah, and the one area where we have a lot of trade receivables—more than in other quarters—is logistic vehicles, where we had a really strong push of deliveries, as we had indicated earlier.

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

Speaker #3: These deliveries have a payment term of normally 30 days. So they will now be paid in within now have been paid in July. And the other is ammunition or we had a very strong June.

Speaker #3: And also there lots of payments then come in the following month.

Speaker #4: Okay. Thank you very much.

David Perry: Okay. Thank you very much.

Speaker #1: It's a pleasure David.

Armin Papperger: It's a pleasure, David.

Operator: The next question comes from Sash Tusa from Agency Partners. Please go ahead.

Speaker #2: The next question comes from Sasha Souza from agency partners. Please go ahead.

Sash Tusa: Thank you very much, indeed. Good afternoon. I just wanted to probably ask, hopefully from your point of view, ask the last question on partnerships and missile. Specifically with Anduril, you said that they haven't been able to deliver Barracuda to you for qualification. Is the issue there that Barracuda is basically not past the vaporware level yet, or is this an ITAR issue, and therefore, does that have any knock-on effect? Then on your relationship with Destinus. Destinus is being fairly active in signing deals with other players, including the one with Thales a couple of weeks ago, several of which appear to overlap the scope of your particular relationship. I wondered if you could just unpick what it is that you want to do with Destinus, do you see any conflict with any of the other partnerships that they are signing? Thank you.

Speaker #4: Thank you very much indeed. Good afternoon. I just wanted to probably ask but hopefully from your point of view ask the last question on sort of partnerships and missile.

Speaker #4: But specifically with Anduril you said that they haven't been able to deliver Barracuda to you for qualification. Is the or is the issue there that Barracuda is basically not part of the vaporware level yet?

Speaker #4: Or is this an ITAR issue? And therefore does that have any knock on effects? And then on your relationship with Destinous. Destinous is being fairly active in signing deals with other players including the one with Thales a couple of weeks ago.

Speaker #4: Several of which appear to overlap the scope of your particular relationship. And I wondered if you could just unpick what it is that you want to do with Destinous.

Speaker #4: And do you see any conflict with any of the other partnerships that they are signing? Thank you.

Speaker #1: Yeah. It's a pleasure. Destinous is for us the point that we have a list of countries where we are responsible for where we make the sales where the joint venture which Rheinmetall has the majority is responsible for.

Armin Papperger: Yeah. It's a pleasure. Destinus is for us, the point that we have a list of countries where we are responsible for, where we make the sales, where the joint venture, which Rheinmetall has the majority, is responsible for, and where we build up the production lines also in the joint venture, and where Rheinmetall is also responsible for warhead production and some other production in this area. This is a very clear picture, and we make not everything worldwide. If there are countries where other players like Thales are more effective in this area, Destinus is able to do this and should do this with them. The big business is big enough also for us to go forward. By the way, we do also business with others, not only with Destinus. As you know, the ATACMS is with Lockheed.

Speaker #1: And where we build up let me say the production lines also in the joint venture. And where Rheinmetall is also responsible for warhead production and some other production in this area.

Speaker #1: So this is a very clear picture. And there is we do not we make not everything worldwide. And if there are countries where other players like Thales are more effective in this area Destinous is able to do this and should do this with them.

Speaker #1: But the big business I think is big enough also for us to go forward. And by the way we do also business with others.

Speaker #1: Not only with Destinous. As you know the attackers is with Lockheed. We tried to bring others other partners inside to produce it. So on the air defense side with LIGNEX is where we can produce a lot of things also here.

Armin Papperger: We try to bring other partners inside to produce it. On the air defense side with LIG Nex1 is where we can produce a lot of things also here. There is a mixture and what we do, we have to do what the customer wants at the end of the day and to be sought. The second point is on the Barracuda side. I think at the end of the day, it's a mixture of all that things. What I can say is I can, at the moment, not make a testing program with the German government, and that is, for me, the most important thing, because Germany is looking for that. The other thing is that we also need, then we have to participate on this very long-range strike, and there is also one of the missing points.

Speaker #1: So there is a mixture. And what we do, we have to do what the customer wants at the end of the day.

Speaker #1: And to be the second point is on the Barracuda. Side. I think it's at the end of the day it's a mixture of all that things.

Speaker #1: But the what I can say is I can at the moment not make a testing program with the German government. And that is for me the most important thing because Germany is looking for that.

Speaker #1: And the other thing is that we also need then this we have to participate on this very long range strike. And there is also one of the one of the missing points.

Armin Papperger: I don't want to say more in details about these areas, because this is between the companies.

Speaker #1: I don't want to say more in detail about these areas because this is between the companies.

Speaker #4: Thank you very much.

Sash Tusa: Thank you very much.

Operator: The next question comes from George McWhirter from Berenberg. Please go ahead.

Speaker #2: Next question comes from George McWheater from Bloomberg. Please go ahead.

Speaker #4: Good afternoon. Thank you very much for my question. It's just on the German budget. Vehicle assumptions. And what are your latest thoughts on the quantity of Puma and Leopard 2 tanks that Germany will order in the next 10 years?

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

Speaker #4: Thank you.

Speaker #1: Yeah. So on Puma it's very clear as you know we signed the second lot Puma. So this is signed. This was this 1.1 billion.

Armin Papperger: Yeah. On Puma, it is very clear. As you know, we signed the second lot Puma. This is signed. This was this EUR 1.1 billion. Germany is looking for a lot 3, and this lot 3 is another EUR 2.5 billion, where the opportunity is to get it, let me say, I think we cannot get it this year, because there are too many 25 million programs. This is the need that they have, and I believe that is it. There is no more need at the moment. The need of the main battle tank, it is better if you ask KNDS because they guide this program at the moment is the only program that we see is what we signed. At the moment, we are in discussions with KNDS also in these areas. I see no further programs.

Speaker #1: And then Germany is looking for a lot number 3. And this lot number 3 is another 2 and a half billion. Where the opportunity is to get it let me say I think we cannot get it this year.

Speaker #1: But because there are too many 25 million programs. But this is the need that they have. And I believe that's it. So there is no more need at the moment.

Speaker #1: The need of the main battle tank it's better if you ask KNDS because they guide this program at the moment. Is the only program that we see is on the is what we signed.

Speaker #1: So at the moment we are in discussions with KNDS also in this areas. I see no further programs for the new Leopard 3. This is another story but this is not ready.

Armin Papperger: For the new Leopard 3, this is another story, this is not ready, this is now too early to speak about that.

Speaker #1: And this is now too early to speak about that.

George McWhirter: Thank you very much.

Speaker #4: Thank you very much.

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

Speaker #2: Next question comes from Dario Dickman from MP Capital Markets. Please go ahead.

Speaker #5: Good afternoon. Thanks for taking my question. I've got one on the GMF 140 that you have just presented. For the North American and international market.

Dario Dickmann: Good afternoon. Thanks for taking my question. I've got one on the GMF 140 that you have just presented for the North American and international market. Do you see this platform as a potential fit for the German Navy as well, specifically as a smaller footprint alternative to the recently criticized F127?

Speaker #5: Do you see this platform as potential fit for the German Navy as well? Specifically as smaller footprint alternative to the recently criticized F-127?

Speaker #1: Yeah. Look this is a decision. You know that we are in cooperation with TKMS also on the F-127. At the end of the day the customer has to make decisions about that.

Armin Papperger: Yeah, look, this is a decision. You know that we are in cooperation with TKMS also on the F127. At the end of the day, the customer has to make decisions about that. What we know is that he said, Okay, we have to change something on the F127. He is looking to Spain and also to Italy to have a look to other frigates and if he has a look to the GMF 140, this is a decision of the customer.

Speaker #1: What we know is that his advocate we have to change something on the F-127. He is looking to Spain and also to Italy. To have a look to other frigates.

Speaker #1: And if he has a look to the GMF 140 this is a decision of the customer.

Dario Dickmann: Okay. Thank you.

Speaker #5: Okay. Thank you.

Operator: The last question for today's call comes from Joe Orchard from Rothschild & Co. Please go ahead.

Speaker #2: The last question for today's call comes from Joe Orchard from Rothschild & Co. Please go ahead.

Speaker #5: Yes. Good afternoon. Thank you for taking my questions. Hopefully just a couple of quick ones. The first one relates to naval systems and the F-126.

Joe Orchard: Yes, good afternoon. Thank you for taking my questions. Hopefully, just a couple of quick ones. The first one relates to naval systems and the F126. Have you had any discussions with TKMS about taking on some work as a subcontractor for the MEKO frigates in order to utilize some of your spare capacity? The second one, please could you provide an update on the deal to acquire the Iveco Defence business from Leonardo, if possible? Thank you.

Speaker #5: Have you had any discussions with TKMS about taking on some work as a subcontractor for the Miko frigates in order to utilize some of your spare capacity?

Speaker #5: And the second one. Please could you provide an update on the deal to acquire the Iveco defense business from Leonardo if possible. Thank you.

Speaker #1: So Iveco defense it's still an open issue because Lorenzo and myself have to discuss in details. That area so you know the statement from Leonardo's side.

Armin Papperger: Iveco Defence, it's still an open issue because Lorenzo and myself have to discuss in detail that area. You know the statement from Leonardo's side. We still have our agreement, there are also others interested in this area. We still think it's a good idea to implement the trucks from Iveco into the RMMV fleet, it's not a must to do it. We are in good shape. The F126, we are looking at the moment to fill the production lines. There are always discussions. As you know, TKMS and Rheinmetall is a cooperation partner and a good cooperation partner for a very long time in a lot of things because of the Lürssen relationship before, which is now Rheinmetall, also in other areas because of simulators, et cetera.

Speaker #1: We still have our agreement, but there are also others interested in this area. We still think it's a good idea to implement the trucks from Iveco into the RMMV fleet.

Speaker #1: But it's not a must to do it, so we are in good shape. The F-126 is what we are looking at the moment to fill the production lines.

Speaker #1: There are always discussions as you know. TKMS and Rheinmetall is a cooperation partner and a good cooperation partner for a very long time in a lot of things because of the Lürsen relationship before which is now Rheinmetall but also in other areas because of simulators etc.

Speaker #1: etc. We do what the customer wants. But I think for the first four ships TKMS gave the contract to shipyards and this is at the moment I think absolutely fixed.

Armin Papperger: We do what the customer wants, I think for the first four ships, TKMS gave the contracts to shipyards, and this is at the moment, I think, absolutely fixed. I believe that we cannot help for the first four ships and the second four ships are still not in contract. Therefore, it makes not a lot of sense to discuss if there is nothing to discuss.

Speaker #1: So I believe that we cannot help for the first four ships. And the second four ships so are still not in contract. So therefore it makes not a lot of sense to discuss if there is nothing to discuss.

Speaker #5: Okay. Thank you very much.

Joe Orchard: Okay. Thank you very much.

Speaker #1: A pleasure.

Armin Papperger: A pleasure.

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

Speaker #2: Ladies and gentlemen, this concludes today's question-and-answer session. I would now like to turn the conference back over to Armin Papperger for any closing remarks.

Speaker #1: Yeah. Thank you very much. I hope you we could give you a real good overview about that where we are at the moment. Yeah.

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

Speaker #1: We are on track. And thanks for your time. And thanks to go with us and with Rheinmetall. Thanks a lot. Bye bye.

Operator: Ladies and gentlemen, the conference is now over. Thank you.

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Half Year 2026 Rheinmetall AG Earnings Call

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