Q3 2026 TKMS AG & Co KGaA Earnings Call

August 12, 2026

Speaker #1: Not enough TKMS. Also, on behalf of the entire investor relations team, I wish you a very warm welcome to our quarterly earnings presentation for our nine-month results of the financial year 25/26.

[Company Representative] (TKMS): of TKMS. Also, on behalf of the entire investor relations team, I wish you a very warm welcome to our quarterly earnings presentation for our nine-month results of the financial year 2025, 2026. With me in the room are Oliver Burkhard, our CEO, and Paul Glaser, our CFO, and we appreciate you joining us today to our nine-month reporting event. Our CEO, Oliver Burkhard, will start with an overview of the actual key highlights and the recent developments shaping our market. Then our CFO, Paul Glaser, will walk you through the detailed financial results and share our outlook for the year ahead. Finally, before I hand over, please allow me some housekeeping remarks. All the documents from today's earnings release and for this conference call are available on our investor relations website.

Jacques Esser: -of TKMS. Also, on behalf of the entire investor relations team, I wish you a very warm welcome to our quarterly earnings presentation for our nine-month results of the financial year 2025, 2026. With me in the room are Oliver Burkhard, our CEO, and Paul Glaser, our CFO, and we appreciate you joining us today to our nine-month reporting event.

Speaker #1: With me in the room are Oliver Burkert, our CEO, and Paul Glaser, our CFO, and we appreciate you joining us today for our 9-month reporting event.

Speaker #1: Our CEO, Oliver Burkert, will start with an overview of the key highlights and the recent developments shaping our market. Then, our CFO, Paul Glaser, will walk you through the detailed financial results and share our outlook for the year ahead.

Jacques Esser: Our CEO, Oliver Burkhard, will start with an overview of the actual key highlights and the recent developments shaping our market. Then our CFO, Paul Glaser, will walk you through the detailed financial results and share our outlook for the year ahead. Finally, before I hand over, please allow me some housekeeping remarks. All the documents from today's earnings release and for this conference call are available on our Investor Relations website.

Speaker #1: Finally, and before I hand over, please allow me some housekeeping remarks. All the documents from today's earnings release and for this conference call are available on our Investor Relations website.

Speaker #1: We will also be recording the call today, and the replay will be available shortly afterwards on our IRR homepage. After the presentation, we will open the floor for questions from analysts and investors.

[Company Representative] (TKMS): We will also be recording the call today, and the replay will be available shortly afterwards on our IR homepage. After the presentation, we will open the floor for questions for analysts and investors. When asking a question, please raise your virtual hand. My colleagues will open your line, and then please state also your name and institution so everyone in the room and on the webcast can follow. Now, I would like hand over to you, Oliver.

Jacques Esser: We will also be recording the call today, and the replay will be available shortly afterwards on our IR homepage. After the presentation, we will open the floor for questions for analysts and investors. When asking a question, please raise your virtual hand. My colleagues will open your line, and then please state also your name and institution so everyone in the room and on the webcast can follow. Now, I would like hand over to you, Oliver.

Speaker #1: When asking a question, please raise your virtual hand. My colleagues will open your line, and then please state your name and institution so everyone in the room and on the webcast can follow.

Speaker #1: And now, I would like to hand over to you, Oliver.

Speaker #2: Yeah, thank you very much, Jacques. I mean, welcome everyone to the call. A smiling CFO is quite an introduction for this call, and Paul is smiling in the picture you saw just recently. So let me just jump into that.

Oliver Burkhard: Yeah. Thank you very much, Jacques. Welcome, everyone, to that call. A smiling CFO is quite setting the scene for this call, and Paul is smiling on the picture you saw just recently. Let me just jump into that. I think we all know that defense budgets are further growing. It is not any more a question of demand, it is a question of how to translate this into stable financial figures. I think that is what we are interested in, and this is where we have our main working area for the next months and years.

Speaker #2: I think we all know that different budgets are further growing, so it's not anymore a question of demand; it's a question of how to translate this into stable financial figures.

Speaker #2: I think that's what you're interested in, and this is where we have our main working area for the next month and years. Let me add that I think we believe that the IRR conflict had and will have a profound impact on our industry, and it is more highlighting the high demand for our products, especially for mine countermeasures, which is quite topical, let's say, in these days, and we get a lot of questions asked to that out of that region, which was not the case before.

Oliver Burkhard: Let me add that I think we believe that the Iran conflict had and will have a profound impact on our industry, and it is more highlighting the high demand for our products, especially for mine countermeasures, which is quite topical, let us say, in these days, and we get a lot of questions asked to that out of that region, which was not the case before. But I cannot translate it into figures now. That is too early for that. But there is something going on which also will have an impact on our businesses. While I will not read out all these bullets, let me state that TKMS is an industrial partner of naval forces, and I think we are very well-positioned to equip its customer with state-of-the-art naval warfare equipment, and we are able to execute.

Speaker #2: But I cannot translate it into figures now—that is too early for that—but there is something going on, which also will have an impact on our businesses.

Oliver Burkhard: But I cannot translate it into figures now. That is too early for that. But there is something going on which also will have an impact on our businesses. While I will not read out all these bullets, let me state that TKMS is an industrial partner of naval forces, and I think we are very well-positioned to equip its customer with state-of-the-art naval warfare equipment, and we are able to execute.

Speaker #2: While I will not read out all these bullets, let me state that TKMS is an industrial partner of naval forces, and I think we are very well-positioned to equip its customers with state-of-the-art naval warfare equipment, and we are able to execute.

Speaker #2: You will see that later, the rising demand in budget and in time, and we have shown this in the last nine months because we delivered three of our ships and boats already before the year closes by end of September.

Oliver Burkhard: You will see that later, the rising demand in budget and in time. We have shown this in the last 9 months because we delivered three of our ships and boats already before the year closes by end of September. With this context, let's take a closer look at TKMS performance. You are aware of the figures, EUR 20.1 order backlog, EUR 110 in the EBIT. A negative free cash flow, which will turn over the next month. Paul will elaborate on that. This is not unusual for a company like us because if you look at the schemes of the down payments, it does not matter whether it is quarter ending or not. It matters if we deliver at the right time, which we have, and sometimes it fits to quarterly announcements, sometimes not. I think overall, it is important that the year will be positive.

Speaker #2: So with this context, let's take a closer look at TKMS's performance. I mean, you're aware of the figures: a €20.1 billion order backlog, €110 million in EBIT, a negative free cash flow—which will turn over the next month. Paul will elaborate on that.

Oliver Burkhard: A negative free cash flow, which will turn over the next month. Paul will elaborate on that. This is not unusual for a company like us because if you look at the schemes of the down payments, it does not matter whether it is quarter ending or not. It matters if we deliver at the right time, which we have, and sometimes it fits to quarterly announcements, sometimes not. I think overall, it is important that the year will be positive.

Speaker #2: But this is not unusual for a company like us, because if you look at the schemes of the down payments, it doesn't matter whether there's a quarter ending or not. It matters if you deliver at the right time, which we have, and sometimes it fits to quarterly announcements, sometimes not.

Speaker #2: But I think overall it's important that the year will be positive, and again, Paul will tell you later. Sales 8.9, 1.0, 8.9 is a bit high, right?

Oliver Burkhard: Paul will tell you later. Sales EUR 8.9. EUR 1.9, EUR 8.9 is a bit high. EUR 1.89 and EBIT margin 5.8%. Maybe to jump into some of those big events over the last 3 months. Of course, for us, we are very pleased that the German parliament cleared TKMS' largest surface vessel contract to date. Following the termination of the F126 program in June, the German Navy selected TKMS' MEKO A-200 as the solution for its anti-submarine warfare frigates. This is what those A-200 are built for. The German Budget Committee approved the procurement of four of them on 8 July, which is after our reporting period, plus an option, and this will be in that reporting unit maybe then for the first quarter, that there is an option for an additional four vessels as well.

Speaker #2: 1.89, and EBIT margin 5.8. So, maybe to jump into some of those big events over the last three months—of course, for us, we are very pleased that the German parliament cleared TKMS's largest surface vessel contract to date.

Speaker #2: Following the termination of the F-126 program in June, the German Navy selected TKMS's Meko A200 as the solution for its anti-submarine warfare frigates, and this is what these A200 are built for.

Oliver Burkhard: This is what those A-200 are built for. The German Budget Committee approved the procurement of four of them on 8 July, which is after our reporting period, plus an option, and this will be in that reporting unit maybe then for the first quarter, that there is an option for an additional four vessels as well.

Speaker #2: So, the German budget committee approved the procurement of four of them in July, on July 8, which is after our reporting. Plus an option, and this will be in that reporting unit, maybe then for the first quarter, that there's an option for an additional four vessels as well.

Speaker #2: So the formal contract is now signed, and the delivery of the first frigate is targeted as early as 2029, by the end of the year.

Oliver Burkhard: The formal contract is now signed, and the delivery of the first frigate is targeted as early as 2029 by the end of the year. I am very happy, and honestly, that was a lot of work and really a lot to do to convince people because 8 months ago, this was not a contract, this was not an idea at all. After we have lost Australia, I think we made the utmost best of that and offered this as a solution to bridge, let us say, the big delay of the F126. It was not a debate of neither nor. We have 126 or 100. That is now a nor, is new. This is a decision made by the ministry and by the administration, which I can follow because a lot of money was already spent, and there was no clearance on how to finish those boats.

Speaker #2: So I'm very happy. And honestly, that was hard—that was a lot of work, and really a lot to do to convince people, because eight months ago this was not a contract, this was not an idea at all.

Speaker #2: But after we lost Australia, I think we made the utmost best of that and offered this as a solution to bridge, let's say, the big delay of the F-126.

Speaker #2: So, it was not a debate of either, nor do we have 126 or 800; that is now a 'nor' is new. I mean, this is a decision made by the ministry and by the administration, which I can follow because a lot of money was already spent and there was no clearance on how to finish those boats.

Oliver Burkhard: We have 126 or 100. That is now a nor, is new. This is a decision made by the ministry and by the administration, which I can follow because a lot of money was already spent, and there was no clearance on how to finish those boats.

Speaker #2: And four years' delay, that should not happen. This is not where we are in, so I think you can trust an order book as long as you execute your order book safely, and this is what we're doing.

Oliver Burkhard: Four years delay, that should not happen. This is not where we are in. I think you can trust an order book as long as you execute your order book safely. This is what we are doing. Again, three units we have delivered in the first 9 months. Secondly, you see the picture below, Andreas Görgen and Gonzalo from Navantia. We signed an update MOU to capture, let us say, advancing discussions towards collaboration on submarine projects towards the end of the year. We had a first MOU some months ago. Now we have layered it, let us say, one layer deeper. This partnership will compile complementary industrial capabilities to enhance capacity, innovation, and long-term competitiveness for customers worldwide, while leaving existing projects and contracts unchanged. This is important.

Speaker #2: Then, 3 units we have delivered in the first 9 months. And secondly, see the picture below: Andreas Görgen and Gonzalo from Navantia—we signed an updated MOU to capture, let's say, advancing discussions towards collaboration on submarine projects towards the end of the year.

Oliver Burkhard: We signed an update MOU to capture, let us say, advancing discussions towards collaboration on submarine projects towards the end of the year. We had a first MOU some months ago. Now we have layered it, let us say, one layer deeper. This partnership will compile complementary industrial capabilities to enhance capacity, innovation, and long-term competitiveness for customers worldwide, while leaving existing projects and contracts unchanged. This is important.

Speaker #2: We had a first MOU some months ago, and now we delayed it, let's say, one layer deeper. We compile complementary industrial capabilities to enhance capacity, innovation, and long-term competitiveness for customers worldwide.

Speaker #2: While leaving existing projects and contracts unchanged—and this is important—I mean, you may have noticed that we are spinning an idea of a 'sea bus' or a 'sub bus,' or whatever you want to call it. But compared to what Airbus did in the '70s, I think to join forces here is a brilliant idea to become faster and maybe to spend the money of the taxpayers of Europe more efficiently.

Oliver Burkhard: You have maybe noticed that we are spinning an idea of a Sea Bus or a Sub Bus or whatever you want to call it, but compared to that, what Airbus did in the 1970s, I think to join forces here is a brilliant idea to become faster and maybe to spend the money of taxpayers of Europe more efficiently. We can be the consolidation nod for that because we have everything under one roof. This is why we are striving this partnership as well. Another highlight, of course, that is a once in a lifetime story because we never had the opportunity, up to 12 submarines selling at once. We were selected as a preferred bidder for the Canadian program.

Speaker #2: And we can be the consolidation—not for that, because we have everything under one roof. This is why we are striving for this partnership as well.

Oliver Burkhard: This is why we are striving this partnership as well. Another highlight, of course, that is a once in a lifetime story because we never had the opportunity, up to 12 submarines selling at once. We were selected as a preferred bidder for the Canadian program.

Speaker #2: Another highlight, of course, is that it's a once-in-a-lifetime story, because there never had been the opportunity to sell up to 12 submarines at once. But we were selected as the preferred bidder for the Canadian program.

Speaker #2: We left Honda Ocean behind us, which was a tough competitor, and I think we acknowledged that they'd also done a very good job. But at the end, I think we won because of some reasons—maybe more favorable for us than for their concept.

Oliver Burkhard: We left Hanwha Ocean behind us, which was a tough competitor. I think we acknowledged that they have done also a very good job, but at the end, I think we won because of some reasons maybe more favorable for us than for their concept. Now the work starts. As I said earlier, we will try to achieve the contract signing for the boats by the end of the year 2026. There are some contracts, let us say, in the flow of that and behind that which have maybe time to do them in 2027, so there is no rush. On the other side, we are quite keen of the situation that we will be not the bottleneck. We have to negotiate in three different countries with Canada, of course, but anything we change to do the boats will have an impact also on Norway and Germany.

Speaker #2: But now the work starts. As I said earlier, we will try to achieve the contract signing for the boats by the end of the year 2026. But there are some contracts, let's say, in the flow of that and behind that, which maybe have time to do them in 2027, so there's no rush. But on the other side, we are quite keen on the situation that we will not be the bottleneck, and we have to negotiate in three different countries—with Canada, of course—but anything we change due to the boats will have an impact also on Norway and Germany.

Oliver Burkhard: There are some contracts, let us say, in the flow of that and behind that which have maybe time to do them in 2027, so there is no rush. On the other side, we are quite keen of the situation that we will be not the bottleneck. We have to negotiate in three different countries with Canada, of course, but anything we change to do the boats will have an impact also on Norway and Germany.

Speaker #2: But I think at the moment we are really good on track. A big team from Canada just visited us last week, and we started the negotiations. We will follow up within the next week already, in Ottawa as well.

Oliver Burkhard: I think at the moment we are really good on track. A big team of Canada just visited us last week. We started the negotiations. We will follow up within the next week already in Ottawa as well. As you are following our company and looking forward to what we are planning and doing, again, execution is what we are striving for, but we do not forget our future. Just a small slide for you, gives you a glimpse of that, what is going on when it comes to R&D, to new products, to what we try to achieve in the future. On the left side, you see what we are doing. I think it is a big advantage that we have platforms above and below the sea level. We have all the technology when it comes to software, to combat management systems, to sensors, to effectors.

Speaker #2: As you are following our company and looking forward to what we are planning and doing—again, execution, execution, execution is what we are striving for—but we don't forget our future. So just a small slide for you gives you a glimpse of that, what is going on when it comes to R&D, to new products, to what we try to achieve in the future.

Oliver Burkhard: Just a small slide for you, gives you a glimpse of that, what is going on when it comes to R&D, to new products, to what we try to achieve in the future. On the left side, you see what we are doing. I think it is a big advantage that we have platforms above and below the sea level. We have all the technology when it comes to software, to combat management systems, to sensors, to effectors.

Speaker #2: On the left side, you see what we are doing, and I think it's a big advantage that we have platforms above and below the sea level. We have all the technology, when it comes to software, to combat management systems, to sensors, to effectors.

Speaker #2: And if you translate that into the new time to create the so-called future naval company—we are doing a lot there. I don't have the time now to go into details, but if you have questions, I'm more than happy to answer, because becoming, let's say, the tactical systems of systems coming from a platform idea means that hardware will be less important and software will have more importance in the future. This is what we are preparing ourselves for.

Oliver Burkhard: If you translate that in the new time to create a so-called future naval ecosystem, I think we are a brilliant starting point as a company and doing a lot there. Given not the time now to go in details there, but if you have questions there, I am more than happy to answer because to become, let us say, the tactical systems of systems coming from a platform idea means that hardware will be less important and software will have more importance in the future. This is what we are preparing ourselves for. A view to the order backlog, EUR 20.1. Honestly, as we have signed the contract, it is even more. At the BAAINBw, it is about more than EUR 25 at the moment when it comes to these dates today, but we are reporting the first 9 months. So in June it was EUR 20.1.

Oliver Burkhard: This is what we are preparing ourselves for. A view to the order backlog, EUR 20.1. Honestly, as we have signed the contract, it is even more. At the BAAINBw, it is about more than EUR 25 at the moment when it comes to these dates today, but we are reporting the first 9 months. So in June it was EUR 20.1.

Speaker #2: A view to the order backlog: 20.1. Honestly, as we have signed the contract, it's even more—it's above, it's about more than 25 at the moment, when it comes to this date today. But we're reporting the first 9 months, so in June it was 20.1.

Speaker #2: Relevant orders, as you are aware, were Norway end of January, but also included then the four vessels for Germany; heavyweight torpedoes was a big contract in the beginning of the year, and some, let's say, updates on SATCOM as well.

Oliver Burkhard: Relevant orders, as you are aware, were Norway in end of January, but also included then the four vessels for Germany. Heavyweight torpedoes was a big contract in the beginning of the year and some, let's say, updates on SATCOM as well. Ongoing campaigns, we still have four. I still count Canada as a campaign. We are preferred bidder. I think we have done more than half of the way, definitely. It is over when it is over. This is what it is called. I think, we have to be clear that there is not yet a full contract, but we are striving for that. We will not be the bottleneck. We are optimistic that we achieve that. I can only book it into the order backlog when it is booked and when it is signed. This is not yet the case.

Speaker #2: And ongoing campaigns—we still have four, and I'd still count Canada as a campaign. I mean, we're the preferred bidder; I think we have done more than half of the way, definitely, but it's over when it's over.

Oliver Burkhard: I think we have done more than half of the way, definitely. It is over when it is over. This is what it is called. I think, we have to be clear that there is not yet a full contract, but we are striving for that. We will not be the bottleneck. We are optimistic that we achieve that. I can only book it into the order backlog when it is booked and when it is signed. This is not yet the case.

Speaker #2: This is what it's called, and I think we have to be clear that there's not yet a full contract, but we're striving for that.

Speaker #2: We will not be the bottleneck. We're optimistic that we achieve that, but I can only book it into the order backlog when it's booked and when it's signed, so this is not yet the case.

Speaker #2: But we're in a brilliant position, and again, very happy, and, yeah, confident, and it was very trustful from Canada, and now we have to show that we have, let's say, deserved the trust in us.

Oliver Burkhard: We are in a brilliant position, and again, very happy and confident and it was very trustful from Canada, and now we have to show that we have, let's say, deserved the trust in us. Do not mix it up. There are four A-200 already in the order book, in July, in August now. There are four more coming by latest the end of the year. I expected earlier, maybe September or October, when the German Bundestag will give its blessing. India is still there. You are following us, you know that India is always a topic, and the timeline there is, I think, getting a bit cautious, but not because I am not aware that we will win it.

Speaker #2: Don't mix it up. There are two—sorry, four—A200 already in the order book: in July, in August now. But there are four more coming by latest the end of the year. I expect it earlier, maybe September, October, when the German Bundestag will give its blessing.

Speaker #2: India is still there. I mean, you're following us—you know that India is always a topic. The timeline there is, I think, getting a bit cautious, but not because I'm not aware that we will win it; I think we will win it. But there were some hiccups also in the Indian budget, due to the fact that the Ireland conflict had maybe more hiccups in their financial budgets than it maybe had in the German defense budget. But this is proved already—our project will come, there's the money for it. The Finance Minister already stated that, and we are really close to the finish line, to end the negotiations with the Indian government and the shipyard, which will be the general contractor, MDL, in Mumbai.

Oliver Burkhard: I think we will win it, but there were some hiccups also in the Indian budget due to the fact that the Iran conflict had maybe more hiccups in their financial budgets than it maybe had in the German defense budget. It is proved already our project will come. There is the money for it. Finance minister already stated that, and we are really close to the finish line to end the negotiations with the Indian government and the shipyard, which will be the general contractor, MDL in Mumbai. Again, where we are together with MDL, former MDL, now Rheinmetall, together in a special purpose company to build the F127, which is a complete different ship to all that what is out there at the moment because the Germans never had such a one.

Speaker #2: And again, where we are together with MDL—former MDL, now Rheinmetall—together in a special purpose company to build the F127, which is a completely different ship to all that is out there at the moment, because the Germans never had such a one. And we are also working on that campaign to finish that as soon as the Parliament gives its blessing.

Oliver Burkhard: Again, where we are together with MDL, former MDL, now Rheinmetall, together in a special purpose company to build the F127, which is a complete different ship to all that what is out there at the moment because the Germans never had such a one.

Oliver Burkhard: We are also working on that campaign to finish that as soon as the parliament gives its blessing. What I think is notable for you as well is that we have delivered. That is what we are saying. We are convinced that we delivered on time. We did. We delivered three different submarines over the last nine months. This is fading out our so-called legacy contracts and bringing more and more importance to the new contracts. As I told you earlier, I think we are not any more in a buyer's market, we are in a seller's market, so terms and conditions are more favorable than they were in the past. This also helps our balance sheet and helps in the profitability because the new contracts are more profitable than the older ones were.

Speaker #2: What I think is notable for you as well is that we have delivered, I mean, that is what we're saying, we are convinced that we delivered on time, we did, and we delivered 3 different submarines over the last 9 months, and this is fading out, our so-called legacy contracts, and bringing more and more importance to the new contracts, as I told you earlier, I think we are not anymore in a buyer's market, we are in a seller's market, so terms and conditions are more favorable than they were in the past, and this also helps our balance sheet and helps in the profitability, because the new contracts are more profitable than the older ones were, and going forward you will see a fade out of those legacy orders latest by the end of this decade, but as you see here, we're quite optimistic that we have the right drumbeat at the moment, and again, 3 in 9 months, means there is something going on on the shipyard which increases the speed, and we have understood that everybody has budget, but not anymore time, so we have to concentrate on time, because there is the critical factor.

Oliver Burkhard: This is fading out our so-called legacy contracts and bringing more and more importance to the new contracts. As I told you earlier, I think we are not any more in a buyer's market, we are in a seller's market, so terms and conditions are more favorable than they were in the past. This also helps our balance sheet and helps in the profitability because the new contracts are more profitable than the older ones were.

Oliver Burkhard: And going forward, you will see a fade-out of those legacy orders latest by the end of this decade. But as you see here, we are quite optimistic that we have the right drumbeat at the moment. Again, three and nine months means there is something going on on the shipyard, which increases the speed. We have understood that everybody has budget but not any more time, so we have to concentrate on time because that is the critical factor. That is more or less my CEO overview. Now I am more than happy to give that to a smiling CFO, and Paul is putting you into the latest news on our figures. Please, Paul.

Speaker #2: That's more or less my CEO overview, and now I'm more than happy to hand that over to our smiling CFO. Paul will update you with the latest news on our figures.

Speaker #2: Please, Paul.

Speaker #1: Thank you, thank you very much, Oliver. Also, a very warm welcome from my side to our financial update and outlook, and I would like to jump right in with regards to our group results.

Paul Glaser: Thank you. Thank you very much, Oliver. Also, a very warm welcome from my side to our financial update and outlook. I directly would like to jump right in with regards to our group results. You can see it here on the page. I am not going to read out all figures to you, but I think our intake for the first nine months stands very strong now with over EUR 3.6 billion. Keep in mind that we, in these nine months, not yet have seen the MEKO A-200 that Oliver just referred to. So for Q4, definitely going see a higher value there, expecting over EUR 5 billion for the MEKO A-200.

Speaker #1: I mean, you can see it here on the page. I'm not going to read out all the figures to you, but I think our intake for the first 9 months stands very strong now, with over €3.6 billion. And keep in mind that we in those 9 months have not yet seen the Miko A200 that Oliver just referred to, so for Q4, it’s definitely going to see a higher value there, expecting over €5 billion for the Miko A200s.

Speaker #1: With regards to sales, we are up 19%, so momentum really picked up, and this is due to the conversion from our order book into sales, which is very, very important for us in order to get the execution right, in order to get delivery speed right, and in order then to also get profitability right, where will I also will walk you through through the segments, so when looking into our adjusted EBIT, it's up 13% year over year, so it rose to 110 million euros, and we are all, as a management team and leadership team, very proud of that, because this comes despite the spin-off related G&A cost increases, and also despite the higher selling expenses, that were driven by the various campaigns, and this year, so it's a very, very excellent development, and very solid and fundamental development here that we can see in our profitability profile.

Paul Glaser: With regards to sales, we are up 19%, so momentum really picked up and this is due to the conversion from our order book into sales, which is very important for us in order to get the execution right, in order to get delivery speed right, and in order then to also get profitability right, where I also will walk you through the segment. When looking into our adjusted EBIT, it is up 13% year over year, so it rose to EUR 110 million. We are all as a management team and leadership team, very proud of that because this comes despite the spin-off related G&A cost increases and also despite the higher selling expenses that were driven by the various campaigns this year. So it is a very excellent development and very solid and fundamental development here that we can see in our profitability profile.

Paul Glaser: We are all as a management team and leadership team, very proud of that because this comes despite the spin-off related G&A cost increases and also despite the higher selling expenses that were driven by the various campaigns this year. So it is a very excellent development and very solid and fundamental development here that we can see in our profitability profile.

Speaker #1: And also, in terms of the adjusted EBIT margin, it was a very solid level of 5.8% for the first nine months. So this is, even if compared to the first half, better, where we achieved 5.1%. And of course, you may see here that year over year, the margin is slightly down by 0.3 percentage points, but please do not get distracted by that. We had to do some accounting work last year in order to prepare our combined financial statements for the spin-off. So, especially, this was true for Q3 last year, where we had several one-off accounting gains that we prepared for the spin-off, including some necessary changes in accounting methods and reversal of provisions. So overall, the operational tendency and trend is clearly showing a more sound and very strong underlying profitability, and we are very much on track—especially with the development of our adjusted EBIT margin.

Paul Glaser: Also in terms of the adjusted EBIT margin, it was also a very solid level of 5.8% for the first nine months. So this is, even if compared to the first half, better where we achieved 5.1%. Of course you may see here that year over year, the margin is slightly down by 0.3 percentage points, but please do not get distracted of that. We had to do some accounting work last year in order to prepare our combined financial statements for the spin-off. So especially this was true for the Q3 last year where we had several one-off accounting gains that we prepared for the spin-off, including some necessary changes in accounting methods and reversal of provisions.

Paul Glaser: We had to do some accounting work last year in order to prepare our combined financial statements for the spin-off. So especially this was true for the Q3 last year where we had several one-off accounting gains that we prepared for the spin-off, including some necessary changes in accounting methods and reversal of provisions.

Paul Glaser: So overall, the operational tendency and trend is clearly given to a more sound and very strong underlying profitability where we are very much on track, especially the development of our adjusted EBIT margin. When we now look into our segments, it is very good to see, and you know the order intake, I am not going to spend some time there. It is very good to see the strong growth of our submarine segment, 17%, slightly above EUR 1 billion in sales, so that is very good. It comes from our new programs that are contributing, but also comes from service business, so we very much see a strong trend here. You can also see that in the comparison from Q3 last year to Q3 this year. Also, I think this is most important for us here, that profitability follows. Sales itself is nice, but profitability is what counts most.

Speaker #1: So when we now look into our segments, it's very good to see and you know the order intake, I'm not going to spend some time there, but it's very good to see the strong growth of our submarine segment, 17%, slightly above 1 billion euros in sales, so that's very good, it comes from our new programs that are contributing, but also comes from service business, so we very see much strong trend here, you can also see that in the comparison from Q3 last year to Q3 this year, and also and I think this is most important for us here, that profitability follows, and sales itself is nice, but profitability is what counts most, we have very, very strong quadrupling from 11 million to now to 46 million even the relative margin now over 6.4% for Q3, this is clearly due to the efforts the team puts in here that we not only are successfully executing the order book, but that we have a very strong and sound cost control, especially in the legacy programs, that Oliver just mentioned, so that we are getting these old orders out of our order book with a very stable and solid progression with regards to our execution track record.

Paul Glaser: It comes from our new programs that are contributing, but also comes from service business, so we very much see a strong trend here. You can also see that in the comparison from Q3 last year to Q3 this year. Also, I think this is most important for us here, that profitability follows. Sales itself is nice, but profitability is what counts most.

Paul Glaser: We have a very strong quadrupling, from EUR 11 million to now to EUR 46 million, even the relative margin now over 6.4% for Q3. This is clearly due to the efforts the team puts in here that we not only are successfully executing the order book, but that we have a very strong and sound cost control, especially in the legacy programs that Oliver just mentioned, so that we are getting these old orders out of our order book with a very stable and solid progression with regards to our execution track record. Overall, I think it is a very strong statement here from the submarine segment. It is always, as I told you, we will need some time, but then quarter over quarter, year over year, we are going to convert that over EUR 20 billion order book into a very attractive and profitable margin profile.

Speaker #1: So, overall, I think it's a very strong statement here from the submarine segments. As I told you, we will need some time, but then, quarter over quarter, year over year, we are going to convert that over $20 billion order book into a very attractive and profitable margin profile.

Paul Glaser: Overall, I think it is a very strong statement here from the submarine segment. It is always, as I told you, we will need some time, but then quarter over quarter, year over year, we are going to convert that over EUR 20 billion order book into a very attractive and profitable margin profile.

Speaker #1: Having that said, I'd like to take a closer look to our surface vessels segment. Here on the order intake, I mean, of course, as we have closed the 9 months end of June, and middle of July have signed the contract for the frigates, you are not seeing the order intake here yet, but you're going to see that in the Q4, and if you then make the comparison year over year, you see a very strong progression with regards to order intake in the surface vessel segment, so we're very happy to have that potential and have that opportunity to build the Miko A200 product now also for the German Navy, and even without that program, I think you can see a robust development, although a little bit flat when it comes to terms of sales, 9 months to 9 months, slightly up, but Q3 to Q3, slightly downward trend, this is going to stabilize, and I think it's going to pick up now quarter over quarter over the years with the A200 program that we have booked, and profitability looks very, very good from our perspective, now with 30 million and 7.4% for the first 9 months, and especially Q3, now with 9.5% relative EBIT margin, very attractive despite that we had some one-off gains in Q1 due to the currency, as you remember, so overall, I think a very solid performance here from our surface vessel team, and I and the, you know, the execution that you have also seen with regards to the delivery of the first unit from our Brazilian program, the Jamanda Ray, it really shows that we are fully capable of performing in the A200 class as well, with our modular concept, which gives us a very cutting edge and fast delivery times here, so much to come from the surface vessel segments now in the near future.

Paul Glaser: Having that said, I would like to take a closer look to our surface vessels segment. Here on the order intake, of course, as we have closed the nine months, end of June and middle of July have signed the contract for the frigates. You are not seeing the order intake here yet, but you are going to see that in the Q4. If you then make the comparison year over year, you see a very strong progression with regards to order intake in the surface vessel segment. So we are very happy to have that potential and have that opportunity to build the MEKO A-200 product now also for the German Navy. Even without that program, I think you can see a robust development, although a little bit flat when it comes to terms of sales.

Paul Glaser: If you then make the comparison year over year, you see a very strong progression with regards to order intake in the surface vessel segment. So we are very happy to have that potential and have that opportunity to build the MEKO A-200 product now also for the German Navy. Even without that program, I think you can see a robust development, although a little bit flat when it comes to terms of sales.

Paul Glaser: Nine months to nine months slightly up, but Q3 to Q3, slightly downward trend. This is going to stabilize, and I think it is going to pick up now quarter over quarter over the years with the A-200 program that we have booked. Profitability looks very, very good from our perspective now with EUR 30 million and 7.4% for the first nine months, and especially Q3 now with 9.5% relative EBIT margin, very attractive despite that we had some one-off gains in Q1 due to the currency, as you remember. Overall, I think a very solid performance here from our surface vessel team.

Paul Glaser: And the execution that you have also seen with regards to the delivery of the first unit from our Brazilian program, the Tamandaré, really shows that we are fully capable of performing in the A-200 class as well with our modular concept, which gives us a very cutting edge and fast delivery times here. Much to come from the surface vessel segments now in the near future. What we have seen in surface vessels in the last months is already happening since a couple of quarters now at Atlas Elektronik. We have spoken about that in our H1 results call. The overall order intake this year, very, very strong, very robust, close to EUR 2 billion that we are seeing here, mainly from the heavyweight torpedo contract that was placed in the H1 of the running fiscal year.

Speaker #1: What we have seen in surface vessels in the last months is already happening since a couple of quarters now at Atlas Electronic, we have spoken about that in our half-year results call, so the overall order intake this year very, very strong, very robust, close to 2 billion euros, that we are seeing here, mainly from the heavyweight torpedo contract that was placed in the first half of the running fiscal year, but the conversion, that's very important from my perspective, is really picking up, we have a strong conversion here of over 600 million in sales, clearly outpacing what we have seen previous year, it's very nice to see profitability follows in absolute term, close to 60 million now, and narrowing down to a double digit profitability profile, 9.6, which is even better than last year, and again, it's not a quarter to quarter business, I know that a lot of you still need that comparison, we had some stronger service gains in last Q3, 24, 25, that we have not seen now in this quarter, but overall, the tendency for this year is very, very promising for Atlas, so we are going to expect a solid year over year improvement in the adjusted EBIT for our Atlas Electronic segment for the full year, so from all three segments, I think very positive news, very strong news, fundamentally driven news that are really highlighting the capabilities from TKMS.

Paul Glaser: What we have seen in surface vessels in the last months is already happening since a couple of quarters now at Atlas Elektronik. We have spoken about that in our H1 results call. The overall order intake this year, very, very strong, very robust, close to EUR 2 billion that we are seeing here, mainly from the heavyweight torpedo contract that was placed in the H1 of the running fiscal year.

Paul Glaser: But the conversion that is very important from my perspective is really picking up. We have a strong conversion here of over EUR 600 million in sales. Clearly outpacing what we have seen previous year. It is very nice to see profitability follows an absolute term, close to EUR 60 million now and narrowing down to a double-digit profitability profile, 9.6%, which is even better than last year. Again, it is not a quarter-to-quarter business. I know that a lot of you still need that comparison. We had some stronger service gains in last Q3 2024, 2025, that we have not seen now in this quarter. But overall, the tendency for this year is very, very promising for Atlas. We are going to expect a solid year-over-year improvement in the adjusted EBIT for our Atlas Elektronik segment for the full year.

Paul Glaser: I know that a lot of you still need that comparison. We had some stronger service gains in last Q3 2024, 2025, that we have not seen now in this quarter. But overall, the tendency for this year is very, very promising for Atlas. We are going to expect a solid year-over-year improvement in the adjusted EBIT for our Atlas Elektronik segment for the full year.

Paul Glaser: From all three segments, I think very positive news, very strong news, fundamentally driven news, that are really highlighting the capabilities from TKMS. Breaking that down, and the dynamics from our segments into the EBIT bridge, I think it is really nicely showing again how stable and robust our businesses are performing. You see the strong improvement from the submarines unit, a very strong improvement from Atlas Elektronik, already on a very high level. Then there is going much more to come from the surface vessels units as we are chunking and progressing down the A-200 order. You also see there are a package of others in group consolidation. Let me give you some light with regards to that. You have seen this development also in the previous quarters, and it is basically only a temporary phenomenon for the first financial year post the spin-off.

Speaker #1: So breaking that down, and the dynamics from our segments into the EBIT bridge, I think it's really nicely showing again how stable and robust our businesses are performing. You see the strong improvement from the submarines unit, a very strong improvement from Atlas Electronics already on a very high level, and then there's much more to come from the surface vessels unit as we are chunking and progressing down the A200 order.

Paul Glaser: Then there is going much more to come from the surface vessels units as we are chunking and progressing down the A-200 order. You also see there are a package of others in group consolidation. Let me give you some light with regards to that. You have seen this development also in the previous quarters, and it is basically only a temporary phenomenon for the first financial year post the spin-off.

Speaker #1: You also see there is a package of others in group consolidation. So let me give you some light with regards to that. You have seen this development also in the previous quarters, and it's basically only a temporary phenomenon for the first financial year post the spin-off. So, the increasing costs that we had due to being a listed company—rather than just being a segment of TKAG—and of course there was also a negative effect from a one-off pension funding exercise in the mid single-digit million euro region in Q2, that we already, I think, have stated to you in the first half-year conference call. And secondly, the mentioned G&A costs as main drivers here.

Paul Glaser: The increase in cost that we had due to being a listed company than just being a segment of Thyssenkrupp AG. Of course, there were also a negative effect from a one-off pension funding exercise in the mid-single digit million euro region in Q2 that we already, I think, have stated to you in the H1 conference call. Secondly, the mentioned G&A cost as main drivers here. But overall, the operational performance from the segments has even overcompensated as those structural headwinds that we have as a one-off, and they were leading to that 30% increase of adjusted EBIT to EUR 110 million. Overall, a very strong and robust performance from a P&L perspective.

Paul Glaser: Secondly, the mentioned G&A cost as main drivers here. But overall, the operational performance from the segments has even overcompensated as those structural headwinds that we have as a one-off, and they were leading to that 30% increase of adjusted EBIT to EUR 110 million. Overall, a very strong and robust performance from a P&L perspective.

Speaker #1: But overall, the operational performance from the segments has even overcompensated those structural headwinds that we have as a one-off, and they were leading to that 30% increase of adjusted EBIT to €110 million, so overall a very strong and robust performance from a P&L perspective.

Speaker #1: So when moving now from P&L to a balance sheet perspective, we continue to run our operations and our business model on a very, very efficient way, with the negative networking capital approach, which I think is unique in the industry, and also gives us the strengths and muscles to look into a very solid net financial position, and also funding the capital expenditures that are needed, especially in order to ramp up our Visma sites, which is running very well, and is progressing as we are planning it, and also hiring of people is progressing, as we are planning it, so therefore, the overall position of TKMS shows a pure strengths of our balance sheet here, and of course you may have seen that, and as we now are going to speak about free cash flow, that this was a negative free cash flow on the next side for the first 9 months, those who are following us now for a longer period in time, this is nothing to be concerned about or anything, it's just a classical milestone payment driven approach that we are seeing in the EPC industry, so relying on certain cash milestones and payment milestones, they are somehow bundled in our Q4 now, including a down payment and prepayment with regards to the A200 order, so overall we are expecting a positive free cash flow for the end of the fiscal year, and this is just the normal fluctuations that you see as also Oliver mentioned quarter by quarter, overall it's a very, very cash generative business, a business that you can run on negative networking capital, which gives you a very, very good and strong view with regards to a return on capital employed, which I think is a very, very strong sign of our productiveness and profitability.

Paul Glaser: When moving now from P&L to a balance sheet perspective, we continue to run our operations and our business model on a very, very efficient way with the negative net working capital approach, which I think is unique in the industry and also gives us the strengths and muscles to look into a very solid net financial position and also funding the capital expenditures that are needed, especially in order to ramp up our Wismar site, which is running very well and is progressing as we are planning it, and also hiring of people is progressing as we are planning it. Therefore, the overall position of TKMS shows a pure strength of our balance sheet here.

Paul Glaser: Therefore, the overall position of TKMS shows a pure strength of our balance sheet here. And, of course, you may have seen that, and as we now are going to speak about free cash flow, that this was a negative free cash flow on the next side for the first 9 months. Those who are following us now for a longer period in time, this is nothing to be concerned about or anything. It is just a classical milestone payment-driven approach that we are seeing in the EPC industry.

Paul Glaser: And, of course, you may have seen that, and as we now are going to speak about free cash flow, that this was a negative free cash flow on the next side for the first 9 months. Those who are following us now for a longer period in time, this is nothing to be concerned about or anything. It is just a classical milestone payment-driven approach that we are seeing in the EPC industry. Relying on certain cash milestones and payment milestones, they are somehow bundled in our Q4 now, including a down payment and prepayment with regards to the A-200 order. Overall, we are expecting a positive free cash flow for the end of the fiscal year. This is just the normal fluctuations that you see as also Oliver mentioned quarter by quarter.

Paul Glaser: Relying on certain cash milestones and payment milestones, they are somehow bundled in our Q4 now, including a down payment and prepayment with regards to the A-200 order. Overall, we are expecting a positive free cash flow for the end of the fiscal year. This is just the normal fluctuations that you see as also Oliver mentioned quarter by quarter.

Paul Glaser: Overall, it is a very, very cash generative business, a business that you can run on negative net working capital, which gives you a very, very good and strong view with regards to a return on capital employed, which I think is a very, very strong sign of our productiveness and profitability. As you saw me smiling on the first page, you cannot see me now smiling, but I am smiling with regards to our fiscal year guidance. You have most likely already done

Speaker #1: So as you saw me smiling on the first page, you cannot see me now smiling, but I am smiling with regards to our fiscal year guidance, you have most likely already done your homework and have read it, so we are increasing and updating our full year guidance for the second time this year, we are now expecting a sales to grow by 10 to 12%, this is up from the previous range from 2 to 5%, and the reason for the upgrade is the overall performance so far this year, and the strong execution of our order book, and based on that, we rather expect the upper end of this new range, and for the adjusted EBIT, we now target a precise margin of up to 6.5% compared to our previous guidance of more than 6%, and this also reflects ongoing good progress in the margin mix, especially being driven from the submarines units as well as Atlas and also surface vessels units, and with regards to our midterm guidance, this is fully confirmed, as you can see on the slide here, and with this being said, I will hand back over to Oliver who's going to, yeah, summarize the key messages from our call.

Paul Glaser: You have most likely already doneyour homework and have read it. We are increasing and updating our full-year guidance for the second time this year. We are now expecting sales to grow by 10% to 12%, and this is up from the previous range from 2% to 5%. The reason for the upgrade is the overall performance so far this year and the strong execution of our order book. Based on that, we rather expect the upper end of this new range.

Paul Glaser: your homework and have read it. We are increasing and updating our full-year guidance for the second time this year. We are now expecting sales to grow by 10% to 12%, and this is up from the previous range from 2% to 5%. The reason for the upgrade is the overall performance so far this year and the strong execution of our order book. Based on that, we rather expect the upper end of this new range. For the adjusted EBIT, we now target a precise margin of up to 6.5% compared to our previous guidance of more than 6%. This also reflects ongoing good progress in the margin mix, especially being driven from the submarines units as well as Atlas and also surface vessels units. With regards to our midterm guidance, this is fully confirmed, as you can see on the slide here.

Paul Glaser: For the adjusted EBIT, we now target a precise margin of up to 6.5% compared to our previous guidance of more than 6%. This also reflects ongoing good progress in the margin mix, especially being driven from the submarines units as well as Atlas and also surface vessels units. With regards to our midterm guidance, this is fully confirmed, as you can see on the slide here. With this being said, I will hand it back over to Oliver, who is going to summarize the key messages from our call.

[Company Representative] (TKMS): With this being said, I will hand it back over to Oliver, who is going to summarize the key messages from our call.

Speaker #2: Thank you, thank you, Paul. I mean, I have the privilege to just give you the last slide and the last word. Then it's up to you, ladies and gentlemen. But I think looking back at the development of this year so far, after nine months, and also looking ahead to what's to come, I think we have a lot of positive messages to tell.

Oliver Burkhard: Thank you. Thank you, Paul. I have the privilege to just give you the last slide and the last word, then it is up to you, ladies and gentlemen. I think, looking back at the development of this year so far after 9 months, and also looking ahead to what come, I think we have a lot of positive messages to tell. We are really proud of the deliveries, and again, take it for granted and take it as an evidence therefore, that we mean it serious. We keep our promises, we deliver. Second is, we are really happy that we are back in the game on surface levels in a way we have not expected 8 months ago, because 8 months ago it was just an idea. It was a lost campaign in Australia, and we switched it to something which German parliament has blessed in July.

Speaker #2: We are really proud of the deliveries, and again, take it for granted and take it as evidence, therefore, that we mean it seriously. We keep our promises. We deliver. Second is, we're really happy that we're back in the game in surface vessels in a way we hadn't expected eight months ago, because eight months ago, it was just an idea, and it was a lost—lost—campaign in Australia, and we switched it to something which the German parliament has blessed in July. So very speedy, let's say, on one side, but also, when it comes to execution, we know what we're doing here. And we still have 40 months left to deliver. In December 2029, the first of the, maybe eight, A200.

Oliver Burkhard: We keep our promises, we deliver. Second is, we are really happy that we are back in the game on surface levels in a way we have not expected 8 months ago, because 8 months ago it was just an idea. It was a lost campaign in Australia, and we switched it to something which German parliament has blessed in July.

Oliver Burkhard: Very speedy, let us say, on one side, but also when it comes to execution, we know what we are doing here and we still have 40 months left to deliver in December 2029, the first of the maybe 8 A-200. The order backlog. The question, I think, is no longer whether there is a demand. There is a demand out there for our products. The question is how fast and how profitably, let us say, we can convert this exceptional backlog, and already it is 25, into revenue and into cash. This is what Paul told you, that this is exactly where we are working on, where we are heading for. Still something out there when it comes to campaigns. CPSP, it means the Canadian Patrol Submarine Project, is one of the things I think we can make a ticket at when the contract is there.

Speaker #2: The order backlog, I mean, the question I think is no longer whether there's a demand, there is a demand out there for our products, the question is how fast, and how profitably, let's say, we can convert this exceptional backlog, and already it's 25, into revenue, and into cash, and this is what Paul told you, that this is exactly where we're working on, where we are heading for.

Oliver Burkhard: This is what Paul told you, that this is exactly where we are working on, where we are heading for. Still something out there when it comes to campaigns. CPSP, it means the Canadian Patrol Submarine Project, is one of the things I think we can make a ticket at when the contract is there.

Speaker #2: There's still something out there when it comes to campaigns. CPSP means the Canadian Patrol Submarine Program is one of the things I think we can make ticketed when the contract is there. But again, very good chances to achieve all goals.

Oliver Burkhard: Again, very good chances to achieve all goals. Another 4 batches, 4 of the another batch and 4 of A-200, and still India and of course the F127. This is the reason why we upgraded our financial guidance. You know that we have always told you from the beginning where we are in conversations in our capital market say, for example. We want to have a prudent growth. We know what we are doing, but we are not, let us say, having the target to double us every 4 years. This is not what we are aiming for. This company is debt-free, which is nice as well, and given the fact that the story going public in October last year was the right way. Looking forward, it has also something to do with where you are coming from.

Speaker #2: Another four batches, four of the another batch and four of A200s, and still India and of course the F127. So this is the reason why we upgraded our financial guidance, and you know that, we have always told you from the beginning where we are in conversations in our capital markets, say for example, we want to have a prudent growth, we are know we know what we're doing, but we are not, let's say, having to target to double us every four years, this is not what we're aiming for.

Oliver Burkhard: We want to have a prudent growth. We know what we are doing, but we are not, let us say, having the target to double us every 4 years. This is not what we are aiming for. This company is debt-free, which is nice as well, and given the fact that the story going public in October last year was the right way. Looking forward, it has also something to do with where you are coming from.

Speaker #2: This company is debt-free, which is nice as well, and given the fact that the story going public here in October last year was the right way.

Speaker #2: And looking forward, I mean, it also has something to do with where you're coming from. I think we told you we have done our homework in the past years, and this is the reason why now our EBIT margin has tripled if I look just three years back. This is really nice to achieve and gives a good mood, and I can tell you, really, everywhere in our shipyard and all our facilities, people know what they're doing and they like what they do.

Oliver Burkhard: I think we told you we have made our homework in the past years, and this is the reason why now our EBIT margin has tripled if I look just three years back. This is really nice to achieve and gives a good mood. I can tell you, really everywhere in our shipyard and all our facilities, that people are knowing what they are doing and that they like what they do. Let me state the last one. A large order backlog does not create shareholder value, but execution does, and this is what we are doing. Therefore, thank you very much for listening so far. Now it is back to Zach, and we are looking forward to your questions.

Speaker #2: Let me state the last one: a large order backlog does not create shareholder value, but execution does, and this is what we're doing. So, therefore, thank you very much for listening so far. Now it's back to Zach, and we're looking forward to your questions.

Speaker #1: Thank you, Oliver. Thank you, Paul. With that, we are ready for your questions. When asking a question, please raise your virtual hand. My colleagues will open the line. As I said, please note that it's necessary for you to unmute yourself as well. Please state your name and institution so everyone can follow.

[Company Representative] (TKMS): Thank you, Oliver. Thank you, Paul. With that, we are ready for your questions. When asking a question, please raise your virtual hand. My colleagues will open the line, and as I said, please consider it is necessary that you have to unmute yourself in addition, and please state your name and institution so everyone can follow. The first question comes from Olfa. Please. Olfa, I think you have to unmute yourself or

Jacques Esser: Thank you, Oliver. Thank you, Paul. With that, we are ready for your questions. When asking a question, please raise your virtual hand. My colleagues will open the line, and as I said, please consider it is necessary that you have to unmute yourself in addition, and please state your name and institution so everyone can follow. The first question comes from Olfa. Please. Olfa, I think you have to unmute yourself or

Speaker #1: And the first question comes from Oliver. Please, Oliver, I think you have to unmute yourself, or...

Speaker #3: Hi, do you hear me?

Speaker #1: Hi, yes.

Speaker #3: So, this is Oliver Tamala from Odoo BHF. Congratulations, Oliver, for the strong performance and the guidance update. May I have three questions? First, in terms of the guidance update, could you comment for us on business development and the main driver behind this upgrade? Which division is, at least, I mean, performing better than original expectations?

Olfa Tlemçani: Hi, do you hear me?

Olfa Taamallah: Hi, do you hear me?

[Company Representative] (TKMS): Hi. Yes.

Jacques Esser: Hi. Yes.

Olfa Tlemçani: This is Olfa Tlemçani from Oddo BHF. Congratulations, Oliver, for the strong performance and guidance upgrade. I may have three questions. First, in terms of guidance upgrade, could you comment further business development and main driver behind this upgrade, which division is at least better performing than original expectation? Second question is on order intake development over Q4. You mentioned already the MEKO A-200. Should we expect other contracts to come? Maybe if you can help us a little bit on prepayment and flows and free cash flow development to, let's say, be more specific than the positive guidance. Finally, I know it is a bit early, but if you can share any thoughts or insights into 2017 fiscal year. Should we expect the same trends in this current fiscal year with further margin improvement? Thank you very much.

Olfa Taamallah: This is Olfa Tlemçani from Oddo BHF. Congratulations, Oliver, for the strong performance and guidance upgrade. I may have three questions. First, in terms of guidance upgrade, could you comment further business development and main driver behind this upgrade, which division is at least better performing than original expectation?

Speaker #3: Second question is on order intake development of Q4. You mentioned already the 200; should we expect other contracts to come? And maybe, if you can, help us a little bit on prepayment flows and free cash flow development—to, let's say, be more specific than the positive guidance.

Olfa Taamallah: Second question is on order intake development over Q4. You mentioned already the MEKO A-200. Should we expect other contracts to come? Maybe if you can help us a little bit on prepayment and flows and free cash flow development to, let's say, be more specific than the positive guidance. Finally, I know it is a bit early, but if you can share any thoughts or insights into 2017 fiscal year. Should we expect the same trends in this current fiscal year with further margin improvement? Thank you very much.

Speaker #3: And finally, I know it's a bit early, but if you can share any thoughts on or insights into the '27 fiscal year, should we expect the same trends as in the current fiscal year, with faster margin improvement?

Speaker #3: Thank you very much.

Speaker #2: Thank you. I think those are some for Paul, right?

Oliver Burkhard: Thank you. I think those are some for Paul, right?

Speaker #1: Yeah, thank you, Oliver, also for your questions. So, with regards to the communicated guidance increase—the main drivers, and you have asked for really coming from the submarines unit—so we see strong momentum here with regards to sales growth. That led us to the fact of also increasing our guidance for the running fiscal year. And also Atlas, and the strong Atlas demand that we have seen, is leading to that fact.

Paul Glaser: Yeah. Thank you, Oliver, also for your questions. With regards to the communicated guidance increase, main drivers, you have asked for, really coming from the Submarines unit. We see a strong momentum here with regards to sales growth that led us to the effect of also increasing our guidance for the running fiscal year and also Atlas and the strong Atlas demand that we have seen is leading to that fact. We always expected for Surface Vessels a flat development this year, which did hold true. However, as I said, this is going to change now with regards to the MEKO A-200 and let us add something here. Oliver said it. It is something that we really hard worked for that was not a part of the original planning. As you know, there was the F126 program that now got canceled.

Speaker #1: We always expected, for surface vessels, a more flat development this year, which did hold true. However, as I said, this is going to change now with regards to the Mako A200. And let us add something here—Oliver said it—it's something that we really hard worked for, that was not part of the original planning. As you know, there was the F126 program, that now got canceled. So this is why we have a much more positive outlook now for the surface vessels unit going ahead.

Paul Glaser: We always expected for Surface Vessels a flat development this year, which did hold true. However, as I said, this is going to change now with regards to the MEKO A-200 and let us add something here. Oliver said it. It is something that we really hard worked for that was not a part of the original planning. As you know, there was the F126 program that now got canceled.

Paul Glaser: This is why we have a much more positive outlook now for the Surface Vessels unit going ahead. With regards to your questions in order intake Q4, main driver that we are expecting will be the four frigates for Germany and, of course, smaller order intakes in the service units and so forth, but the majority of portion will come from the Surface Vessels unit. Last but not least, the prepayments development. Overall, as I said earlier, all our contracts are overpaid. If you look to a contract from a single perspective, they are always in the money, as I call it, so they are cash positive. That is a clear requirement that we have prior to signing that contract. This, of course, with the capital expenditures that we have and other cash outflows always can fluctuate a little from quarter to quarter.

Speaker #1: With regards to your questions on order intake in Q4, the main driver that we are expecting will be the four frigates for Germany, and of course, smaller order intakes in the service units and so forth. But the majority of the portion will come from the surface vessels unit.

Speaker #1: And last but not least, the prepayments development. So overall, as I said earlier, all our contracts are overpaid, so if you look at each contract from a single perspective, they are always in the money, as I call it, so they are cash positive. That's a clear requirement that we have prior to signing that contract. This, of course, with the capital expenditures that we have and other cash outflows, always can fluctuate a little from quarter to quarter, but overall we do expect that rolling three-year average free cash flow guidance to be in that €400 million range. For us, it's not needed to receive high prepayments; it's only what we need in order to stay cash positive, and it's always a question of how we can also offset, with lower prepayments, the risk of getting fewer escalation gains, so that we can therefore then balance our escalation formulas that we have in our contracts.

Paul Glaser: Last but not least, the prepayments development. Overall, as I said earlier, all our contracts are overpaid. If you look to a contract from a single perspective, they are always in the money, as I call it, so they are cash positive. That is a clear requirement that we have prior to signing that contract. This, of course, with the capital expenditures that we have and other cash outflows always can fluctuate a little from quarter to quarter.

Paul Glaser: But overall, we do expect that rolling three years average free cash flow guidance to be in that EUR 400 million range. For us, it is not needed to receive high prepayments. It is only what we need in order to stay cash positive. It is always a question of how we can also offset with lower prepayments the risk of getting fewer escalation gains that we can therefore then balance our escalation formulas that we have on our contract. Overall, you are going to see that from a quarter-to-quarter perspective, and I know that it is difficult for you in the modeling, but overall, from a modeling point of view, if you can start calculating with the positive free cash flows for the single contracts, you are doing with the right approach. You have to look at this over the cycle and over a quarter-to-quarter basis.

Speaker #1: So overall, you're going to see that from a quarter-to-quarter perspective—and I know that it's difficult for you in the modeling—but overall, from a modeling point of view, if you can, and start calculating with the positive free cash flows for the single contracts, you are doing with the right approach.

Paul Glaser: Overall, you are going to see that from a quarter-to-quarter perspective, and I know that it is difficult for you in the modeling, but overall, from a modeling point of view, if you can start calculating with the positive free cash flows for the single contracts, you are doing with the right approach. You have to look at this over the cycle and over a quarter-to-quarter basis. With regards to 2027, I think it is a little bit too early to call. We are good with our midterm guidance that we have communicated so far, and we will let you know, once there is an update.

Speaker #1: So, you have to look at this over the cycle and on a quarter-to-quarter basis. With regards to '27, I think it's a little bit too early to call. We are good with our mid-term guidance that we have communicated so far, and we'll let you know once there is an update.

Paul Glaser: With regards to 2027, I think it is a little bit too early to call. We are good with our midterm guidance that we have communicated so far, and we will let you know, once there is an update.

Speaker #2: And the good thing for 2027 is it starts already in October. And our house, so we might be the first ones saying something for the prospectus on 2027, right?

Oliver Burkhard: And the good thing on 2027 is it starts already in October in our house.

Paul Glaser: Yeah.

Oliver Burkhard: You might be the first one saying something for perspectives on 2027, right?

Speaker #1: Great. The next question comes from Svivam. Please go ahead.

[Company Representative] (TKMS): Great. The next question comes from Sriram. Please go ahead.

Jacques Esser: Great. The next question comes from Sriram. Please go ahead.

Speaker #4: Can you hear me now?

Speaker #1: Yes. Yes.

Speaker #4: Perfect. I have quite a few questions. Probably, I will restrict myself to three for this round and this opportunity, but maybe I'll come back.

Sriram: Can you hear me now?

Sriram Krishnan: Can you hear me now?

Paul Glaser: Yes.

Oliver Burkhard: Yes.

Sriram: Perfect. I have quite a few questions. Probably I will restrict myself to three for this round and if opportunity arises, then maybe I will come back. My first question is, and probably it is a two-part question, and it is regarding the submarines. Compared to what you provided to us during the capital markets day last year, are you seeing a shift from the legacy to the new construction contract happening a bit quicker than your own original plans? In a related note, the 700 bps better margin, which you communicated to the market from a gross margin level between the legacy and the new orders. Are you seeing any improvement in that one? Because I see the execution is going pretty well when it comes to construction of the submarines. So those are the two-part questions on submarines.

Sriram Krishnan: Perfect. I have quite a few questions. Probably I will restrict myself to three for this round and if opportunity arises, then maybe I will come back. My first question is, and probably it is a two-part question, and it is regarding the submarines. Compared to what you provided to us during the capital markets day last year, are you seeing a shift from the legacy to the new construction contract happening a bit quicker than your own original plans?

Speaker #4: Now, my first question is—and probably it's a two-part question—and it's regarding the submarines. Compared to what you provided to us during the Capital Markets Day last year, are you seeing a shift from the legacy to the new construction contract happening a bit quicker than your own original plans?

Speaker #4: And in a related note, the 700 basis points better margin, which you communicated to the market, from a gross margin level between the legacy and the new orders, are you seeing any improvement in that one?

Sriram Krishnan: In a related note, the 700 bps better margin, which you communicated to the market from a gross margin level between the legacy and the new orders. Are you seeing any improvement in that one? Because I see the execution is going pretty well when it comes to construction of the submarines. So those are the two-part questions on submarines.

Speaker #4: Because I see the execution is going pretty well when it comes to construction of the submarines. So those are the two-part questions on submarines.

Speaker #4: The second one—and this is a bit of a long-term question, so to speak—is on the autonomous market. I know you touched upon it briefly in your presentation, but just wondering: how do you think about this market? You have some offerings already in place, and from a product level, how do you think about the future?

Sriram: The second one, and this is a bit of a long-term question, so to speak, is on the autonomous market. I know you touched upon it briefly in your presentation, but just wondering, how do you think about this market? You have some offerings already in place and from a product level. How do you think about the future? Do you need to look at M&A as a potential option to enhance any more capability to address this future market? The third question is a very simple one and a clarificatory one, if I may. The provision release which came out in the surface vessels division, I know it is a small number, I think around EUR 4 million, EUR 5 million this quarter, but just trying to understand what was the reason behind that.

Sriram Krishnan: The second one, and this is a bit of a long-term question, so to speak, is on the autonomous market. I know you touched upon it briefly in your presentation, but just wondering, how do you think about this market? You have some offerings already in place and from a product level. How do you think about the future? Do you need to look at M&A as a potential option to enhance any more capability to address this future market?

Speaker #4: Do you need to look at M&A as a potential option to enhance any more capability to address this future market? And the third question is a very simple one and a clarificatory one, if I may.

Sriram Krishnan: The third question is a very simple one and a clarificatory one, if I may. The provision release which came out in the surface vessels division, I know it is a small number, I think around EUR 4 million, EUR 5 million this quarter, but just trying to understand what was the reason behind that. Is it a conventional warranty release or is it something else which is a bit more encouraging for the surface vessels division? Thank you.

Speaker #4: The provision release, which came out in the Surface Vessels division—I know it's a small number, right? I think around $4 to $5 million this quarter. But I'm just trying to understand, what was the reason behind that?

Speaker #4: Do you see—is it a conventional warranty release, or is it something else that is a bit more encouraging for the Surface Vessels division?

Sriram: Is it a conventional warranty release or is it something else which is a bit more encouraging for the surface vessels division? Thank you.

Speaker #4: Thank you.

Speaker #2: Mm-hmm. Thank you, Svivam. I've started, and maybe Paul will jump into it. When it comes to submarines, I think your observation is a very friendly one, but not unexpected for us.

Oliver Burkhard: Mm-hmm. Yeah, thank you. Sriram, I start and maybe Paul jump into it. When it comes to submarines, I think your observation is a very friendly one, but not unexpected for us. We want to became quicker, and we did. Why is this so? Because of ramping up. This man, you will see maybe that there is an acceleration as well because we do not only have one shipyard, we have two in the future. It shifts indeed from the legacy contract. You know that. You are aware of this branch, and you know contracts in the past were a bit different to negotiate than today. Today, I think we are more, let's say, in favor to bring our terms and conditions on paper and a signature under it as it was in the past.

Speaker #2: We want to become quicker, and we did. And why is this so? Because of ramping up. This month you will see, maybe, that there's an acceleration as well, because we do not only have one shipyard—we have two in the future.

Speaker #2: And it shifts, indeed, from the legacy contract. I mean, you know that, you're aware of this branch, and you know contracts in the past were a bit different to negotiate than today.

Oliver Burkhard: It shifts indeed from the legacy contract. You know that. You are aware of this branch, and you know contracts in the past were a bit different to negotiate than today. Today, I think we are more, let's say, in favor to bring our terms and conditions on paper and a signature under it as it was in the past.

Speaker #2: And today, I think we are more, let's say, in favor of bringing our terms and conditions on paper, with a signature under it, as it was in the past.

Speaker #2: So you can expect that fading out the legacy and bringing in the new contracts, and I think this has started, but not fully. It has started with the first contract of Germany, Norway—just remember, it was two and four, and then the Germans added another four, and the Norwegians another two.

Oliver Burkhard: You can expect that fading out the legacy, and bringing into the new contract, and I think this has started, but not fully. Has started with the first contract of Germany, Norway. Just remember, it was two and four, and then the Germans added another four and the Norwegians another two. Those second, let's say, term of contract is a bit different definitely to that what we had before. It really started in 2021 when we made this six submarines, Type 212CD. Canada is now jumping into that. I think they will take a lot of that what is already negotiated with Germany and Norway and just do copy and paste more or less. We know that those terms and conditions will be quite favorable. Legacy, there are still some to go when it comes to Turkey.

Speaker #2: Those second, let's say, terms of contracts are different, a bit different definitely, than what we had before. So it really started in 2021, when we made these six submarines, two 12CD.

Oliver Burkhard: It really started in 2021 when we made this six submarines, Type 212CD. Canada is now jumping into that. I think they will take a lot of that what is already negotiated with Germany and Norway and just do copy and paste more or less. We know that those terms and conditions will be quite favorable. Legacy, there are still some to go when it comes to Turkey.

Speaker #2: And Canada is now jumping into that. I think they will take a lot of what is already negotiated with Germany and Norway and just do copy and paste, more or less.

Speaker #2: So we know that those terms and conditions also will be quite favorable. Legacy-wise, there are still some to go when it comes to Turkey.

Speaker #2: Yeah, Türkiye, but I think we also have shown that despite all complications we had over the last years, and almost a decade, I think we also have sped up there. But it's not in our hands only, because it's a Turkish shipyard which constructs there.

Oliver Burkhard: I think we also have shown that despite all complications we had over the last years and for almost a decade, I think we also have speeded up there, but it's not in our hands only because it's a Turkish shipyard which construct that. You will see, and you have to expect that there will be further improvement when it comes to how long does it take to build a submarine and doing a testing phase and commission it to a new customer. You touched the point of the autonomous market. What is our future view on that? We are not interested in building hardware, honestly, because that is not what we're aiming for. Paul and I did discuss that. If you're going to a trade fair or somewhere, Euronaval or wherever, in the past, there were five, four who offered this.

Speaker #2: But you will see, and you have to expect, that there will be further improvement when it comes to how long it takes to build a submarine, and during the testing phase, and commissioning it to a new customer.

Speaker #2: You touched on the point of the autonomous market. What is our future view on that? We are not interested in building hardware, honestly, because that is not what we're aiming for, and Paul and I discussed that.

Oliver Burkhard: You touched the point of the autonomous market. What is our future view on that? We are not interested in building hardware, honestly, because that is not what we're aiming for. Paul and I did discuss that. If you're going to a trade fair or somewhere, Euronaval or wherever, in the past, there were five, four who offered this.

Speaker #2: If you're going to a trade fair or somewhere, the Euronaval or wherever, in the past there were five, four who offered this. Now it's 30, 40 who offer some carriers where you can put any stuff on it.

Oliver Burkhard: Now it is 30, 40 who offer some carriers where you can put any stuff on it. I think this is not what we are aiming for, and this is not following the sentence I brought you earlier saying we are shifting more from hardware to software. Because I want to get our, let us say, intelligence on those carriers. Who is carrying it does not matter. So an example for that is the BlueWhale one, the BlueWhale project, which is together with us, IAI, and Elta, not Elbit, well of course it is, and us. And we are bringing the sonar on this carrier. They are delivering the carrier. This is what we see in the future because this market is far behind when it comes to air or to the land, because the physics are a bit more complicated in the water.

Speaker #2: I think this is not what we're aiming for, and this is not following the sentence I brought you earlier, saying we're shifting more from hardware to software, because I want to get our, let's say, intelligence on those carriers.

Speaker #2: Who's carrying it? It doesn't matter. So an example for that is the Blue Whale one—the Blue Whale project—which is together with us, IAI, and LTA, not LDIT (cautious), and us, and we are bringing the sonar on this carrier.

Oliver Burkhard: So an example for that is the BlueWhale one, the BlueWhale project, which is together with us, IAI, and Elta, not Elbit, well of course it is, and us. And we are bringing the sonar on this carrier. They are delivering the carrier. This is what we see in the future because this market is far behind when it comes to air or to the land, because the physics are a bit more complicated in the water.

Speaker #2: They are delivering the carrier. This is what we see in the future, because this market is far behind when it comes to air or to land, because the physics are a bit more complicated in the water.

Speaker #2: And one of our big advantages is we know a lot about physics underwater, and we do know how torpedoes work, we do know how sonars work, and we don't have to learn how to, let's say, manufacture carriers, 10 to 8 meters, just circling around and following a given procedure.

Oliver Burkhard: One of our big advantages is we know a lot about physics underwater, and we do know how torpedoes work. We do know how sonars work. We do not have to learn how to, let us say, manufacture carriers 10 to 8 meters, just circling around, and following a given procedure. If there are any M&A opportunities, we will have a deeper look on that. At the moment, I do not see so much, or let me say it in my words, I do not see anything worth paying so much money for it. Therefore, I say, "Well, let us concentrate on that, what we can, and let us bring more intelligence in the water," because I think there are, not only you can see that Atlas, better margins. There is also, let us say, opportunity for growth, but it will not replace. I always try to repeat that constantly.

Speaker #2: If there are any M&A opportunities, we will have a deeper look at that. At the moment, I don't see so much, or let me say, in my words, I don't see anything worth paying so much money for.

Oliver Burkhard: At the moment, I do not see so much, or let me say it in my words, I do not see anything worth paying so much money for it. Therefore, I say, "Well, let us concentrate on that, what we can, and let us bring more intelligence in the water," because I think there are, not only you can see that Atlas, better margins. There is also, let us say, opportunity for growth, but it will not replace. I always try to repeat that constantly.

Speaker #2: So therefore, I say, well, let's concentrate on what we can, and let's bring more intelligence into the water, because I think there are not only—as you can see with Atlas—better margins, there's also, let's say, opportunity for growth. But it will not replace—I'm always trying to repeat that constantly—replace the big platforms, whether it's a big ship or a big submarine, because they have a completely different mission profile, which is also needed, given the threats of these days that we are living in.

Oliver Burkhard: Replace the big platforms, whether it is a big ship or a big submarine, because they have a complete different mission profile, which is also needed, and those threats of those days we are living in. So it will be complementary. It will be adding those systems, but it will not replace them. Therefore, I think we are concentrating on the platforms and concentrating on how to get intelligence into the water, whoever carries it. Let us make it simple, yeah. The third one I already forgot, but my CFO has still his remarks.

Speaker #2: So, it will also be complementary; it will be adding those systems, but it will not replace them. Therefore, I think we're concentrating on the platforms and concentrating on how to get intelligence into the water, whoever carries it.

Speaker #2: Let's make it simple, yeah? I already forgot the third one, but my CFO still remembers.

Speaker #1: I have it, I have it, yes. With regards to your question, for the surface vessels unit and the provision release—so those warranty provisions work as follows.

Paul Glaser: I have it. Yes. With regards to your question for the surface vessels unit and the provision release. So, those warranty provisions work as follows. Normally, you always have a warranty budget in your calculation of a contract. And once that warranty expires and there were no or nearly no warranty claims, which normally is a sign for very solid and proven produced and high-quality product, you can then release those warranties. So that is a classical approach that we have. After a couple of months, then we can release those warranties. So it is an operational, if you want to so call it, sign of how effective and how good our products are actually working.

Speaker #1: Normally, you always have a warranty budget in your calculation of a contract, and once that warranty expires, and there were no or nearly no warranty claims—which normally is assigned for very solid and proven products and high-quality products—you can then release those warranties.

Speaker #1: So that's a classical approach that we have. After a couple of months, then we can release those warranties. So it's an operational, if you want to call it, sign-off on how effective and how good our products are actually working.

Paul Glaser: So that is a classical approach that we have. After a couple of months, then we can release those warranties. So it is an operational, if you want to so call it, sign of how effective and how good our products are actually working.

Speaker #3: Great. The next question comes from Charles.

[Company Representative] (TKMS): Good. The next question comes from Charles.

Jacques Esser: Good. The next question comes from Charles.

Speaker #4: Yes, good morning. Thank you. I'm struggling a bit with your sales guidance for the year. It seems to me that everything is going quite well.

Charles: Yes, good morning. Thank you. I am struggling a bit with your sales guidance for the year. It seems to me that everything is going quite well. Your comments being submarines ramping up on new programs, surface ships, you have an accounting catch-up in Q4, and Atlas is going very nicely. When I take even the 12%, that implies Q4 is down 7%. Is it milestones? What is going on to get I am struggling to get my numbers low enough. Help me out here.

Charles Armitage: Yes, good morning. Thank you. I am struggling a bit with your sales guidance for the year. It seems to me that everything is going quite well. Your comments being submarines ramping up on new programs, surface ships, you have an accounting catch-up in Q4, and Atlas is going very nicely. When I take even the 12%, that implies Q4 is down 7%. Is it milestones? What is going on to get I am struggling to get my numbers low enough. Help me out here.

Speaker #4: So, you know, your comments being submarines ramping up on new programs, surface ships, you've got an accounting catch-up in Q4, and Atlas is going very nicely.

Speaker #4: But when I take even the 12%, that implies Q4 is down 7%. So is it milestones? What's going on to get—I'm struggling to get my numbers low enough.

Speaker #4: So help me out here.

Speaker #1: Yeah, what we normally see, Charles, is that it always depends on a cost-to-cost account and what kind of cost milestones we are reaching in which quarter.

Paul Glaser: Well, what we normally see, Charles, it always depends from a cost to cost accountant, what kind of cost milestones we are reaching in which quarter. This is why you cannot take a linear approach or mathematical approach. It always depends on what kind of cost progress also us and our suppliers are doing, and what of those costs we can account as progress costs or prepayment costs. This is the differentiator that you have to take into account. Then also with regards to the MEKO A-200, although it is ramping up much quicker than, for example, a Polarstern where we had much more engineering to do, it will take some time until the conversion comes. We will see that large order intake booking, but not so much of sales progress coming from that order in the last remaining 3 months of that fiscal year. Okay? Good?

Speaker #1: So this is why you cannot similarly take a linear approach or mathematical approach. It always depends on what kind of cost progress also us and our suppliers are doing, and which of those costs we can account as progress costs or prepayment costs.

Speaker #1: This is the differentiator that you have to take into account. Also, with regards to the MECO A200, although it’s ramping up much quicker than, for example, a Polar Star—where we had much more engineering to do—it will take some time until the conversion comes, so we will see that large order intake booking, but not so much of sales progress coming from that order in the last remaining three months of that fiscal year.

Paul Glaser: Then also with regards to the MEKO A-200, although it is ramping up much quicker than, for example, a Polarstern where we had much more engineering to do, it will take some time until the conversion comes. We will see that large order intake booking, but not so much of sales progress coming from that order in the last remaining 3 months of that fiscal year. Okay? Good?

Speaker #3: Okay.

Speaker #4: So just to.

Speaker #3: Good. Sorry, Charles, do you have another question or...? Good. Okay, then the next question comes from Adrian. Please go ahead.

[Company Representative] (TKMS): Sorry, Charles, do you have another question? Good. Okay, then the next question comes from Adrien. Please go ahead.

Jacques Esser: Sorry, Charles, do you have another question? Good. Okay, then the next question comes from Adrien. Please go ahead.

Speaker #4: Good morning. Thank you. I've got one quick follow-up and one momentary question, if that's okay, please. Firstly, could you update us on your expectations for the timing of the F-127 order? You've mentioned Parliament approvals.

[Analyst] (Bernstein): Good morning. Thank you. I have one quick follow-up and one longer-term question, if that is okay, please. Firstly, could you update us on your expectations for the timing of the F127 order? You have mentioned parliament approval, so I am just wondering, do you expect it to come in early 2027, is that fair? Then question on margins, please. You have obviously made very strong progress towards your medium-term targets. So I am wondering, on the longer term, say 2030 environment, when all the legacy orders have phased out, what is the target? Do you think you will be at 10% or above for submarines and surface vessels, or even higher than this?

Adrien Rabier: Good morning. Thank you. I have one quick follow-up and one longer-term question, if that is okay, please. Firstly, could you update us on your expectations for the timing of the F127 order? You have mentioned parliament approval, so I am just wondering, do you expect it to come in early 2027, is that fair?

Speaker #4: I'm just wondering, do you expect it to come in early 2027? Is that fair? And then, a question on margins, please. I mean, you've obviously made very strong progress towards your medium-term target.

Adrien Rabier: Then question on margins, please. You have obviously made very strong progress towards your medium-term targets. So I am wondering, on the longer term, say 2030 environment, when all the legacy orders have phased out, what is the target? Do you think you will be at 10% or above for submarines and surface vessels, or even higher than this?

Speaker #4: So I'm wondering, on a longer term, say the 2030 environment, when all the legacy orders are phased out, what's the target? Do you think you'd be at 10% or above for submarines and surface vessels, or even higher than this?

Speaker #2: That doesn't mean agree—just understood, Adrian, right? Let me start with the expectation, given, let's say, the blessing and the way forward on F-127.

Oliver Burkhard: That does not mean agree, just understood, Adrien, right? Let me start with the expectation given the, let us say, the blessing and the way forward on F127. We have all, let us say, noticed what has happened, and it was quite disruptive, wasn't it? When F126 was just stopped by the minister, and there is still, let us say, a lot of rumor in the branch, and there were a lot of marine projects at one time which showed that there is a big need, but also a big need for money. That was also swapping into the debate about F127.

Speaker #2: We have all, let's say, noticed what had happened, and it was quite disruptive, wasn't it, when F-126 was just stopped by the minister. And there is still, let's say, a lot of rumor in the branch, and there were a lot of marine projects at one time which, let's say, showed that there's a big need, but also a big need for money.

Speaker #2: And that was also, let's say, swapping into the debate about F-127. Just to make that clear, the F-127 is a ship the German Navy never had, but it has promised it to NATO to have it sooner or later.

Oliver Burkhard: Just to make that clear, the F127 is a ship the German Navy never had, but it has promised it to the NATO to have it sooner or later, and cannot be replaced by an A-200, or would also not be possible to replace it by an F126 because it is a BMD frigate, means ballistic missile defense frigate. Has a, I do not know, I am waiting for it. Displacement, sorry. I do not want to talk to you about depreciation, I want to have a displacement. Has a displacement for more than 10,000 tons. This means we do not have such a ship. At the moment, I think we have to educate a bit the parliament, as we did with the A-200, was not unsuccessful, so I am confident that we maybe can reach that. That we will have a decision by the first half of 2027.

Speaker #2: It cannot be replaced by an A200, or it also would not be possible to replace it with an F-126. Because it's a BMD frigate—which means Ballistic Missile Defense frigate—has a, Schönerwort, right, to wait for it... displacement. Sorry, I don't want to talk you to depreciation, I want to have the displacement.

Oliver Burkhard: Displacement, sorry. I do not want to talk to you about depreciation, I want to have a displacement. Has a displacement for more than 10,000 tons. This means we do not have such a ship. At the moment, I think we have to educate a bit the parliament, as we did with the A-200, was not unsuccessful, so I am confident that we maybe can reach that. That we will have a decision by the first half of 2027.

Speaker #2: Has a displacement of more than 10,000 tons. So, and this means we don’t have such a ship at the moment. I think we have to educate the Parliament a bit, as we did with the A200. That was not unsuccessful, so I’m confident that maybe we can reach that.

Speaker #2: That we will have a decision by the first half of 2027. So, maybe not early in the year because there's still a lot to do, as a lot went, let's say, in different directions.

Oliver Burkhard: So maybe not early in the year because there is still a lot to do, because a lot went, let us say, in different directions. All what I know, and heard nothing else from our peers, is that we have a special purpose company together with MBL, aka MBL, now Rheinmetall, where we try to build this ship together. It is our IP, so we have the design, we know what the ship can do, and others will help us to build it. There was, let me just maybe try to take that point. There was an offer in the last week about a GMF 140 from Rheinmetall, just a design study, which is nice. We also have design studies. We do not publish them every day. Why should we? Because we have a common and proven design.

Speaker #2: All I know, and I heard nothing else from our peers, is that we have a special purpose company together with NVL, ACA NVL, now Rheinmetall, where we tried to build this ship together.

Speaker #2: It's our IP, so we have the design, we know what the ship can do, and others will help us to build it. There was just maybe—trying to take that point—there was an offer in the last week about a GMF 140 from Rheinmetall, just a design study, which is nice.

Oliver Burkhard: There was, let me just maybe try to take that point. There was an offer in the last week about a GMF 140 from Rheinmetall, just a design study, which is nice. We also have design studies. We do not publish them every day. Why should we? Because we have a common and proven design.

Speaker #2: We also have design studies; we do not publish them every day. Why should we? Because we have a common and proven design, and at the moment, especially the administration is very cautious about what you promise and how you can deliver.

Oliver Burkhard: At the moment, especially the administration is very cautious of what do you promise and how can you deliver. This was the reason why we have won the A-200. If we win together with Rheinmetall the F127, then we have to make clear how the ships look like, what capabilities should be on it, how much is it, and how will it be finished, and then when will it be finished? I think this is something we have to clarify, but I am an optimistic guy. I see that in the H1 2027, this could be possible because there is no other design out there. This is why I mentioned this GMF 140, because it only has 6,000 tons displacement. It has only ASW, that means anti-submarine warfare capabilities, which are on the A-200.

Speaker #2: This was the reason why we have won the A200. And if we win together with Rheinmetall, the F-127, then we had to make clear how this ship looks like, what capabilities should be on it, how much it is, how it will be finished, and then when it will be finished.

Speaker #2: I think this is something we have to clarify, but I'm an optimistic guy. I see that in the first half of 2027, this could be possible, because there is no other design out there.

Oliver Burkhard: I think this is something we have to clarify, but I am an optimistic guy. I see that in the H1 2027, this could be possible because there is no other design out there. This is why I mentioned this GMF 140, because it only has 6,000 tons displacement. It has only ASW, that means anti-submarine warfare capabilities, which are on the A-200.

Speaker #2: This is why I mentioned this GMF 140, because it only has 6,000 tons displacement. It has only ASW—that means anti-submarine warfare—capabilities, which are on the A200.

Speaker #2: So, there is nothing where they can help, let's say, to replace the F-127, because it's a common design—it's our design—and a common approach to build that.

Oliver Burkhard: There is nothing where they can help to replace the F127, because it is a common design, our design, and a common approach to build that. I am still optimistic on that, even though that there was a kind of disruptness. But again, if you are lacking four years behind, don't have a plan how to get out of that, I would not recommend to bring TKMS in such a situation. It doesn't look like this. Therefore, our order book is stable and cannot be canceled overnight because the project is running that bad as this was. I also invited all of them who are, let's say, victims of F126, as long as they deliver in time and they make no complications and no further difficulties, they are invited to help us to build the second batch if we get it in September. That is not a must.

Speaker #2: So I'm still optimistic on that, even though there was a kind of disruptiveness. But again, if you are lacking—four years behind—and don't have a plan how to get out of that.

Speaker #2: I would not recommend bringing TKMS into such a situation. It doesn't look like this, so therefore, our order book is stable and cannot be canceled overnight because a project is running as badly as this one was.

Oliver Burkhard: Therefore, our order book is stable and cannot be canceled overnight because the project is running that bad as this was. I also invited all of them who are, let's say, victims of F126, as long as they deliver in time and they make no complications and no further difficulties, they are invited to help us to build the second batch if we get it in September. That is not a must. We invite them as long as they meet the expectations regarding time and the difficulty. Maybe second thing?

Speaker #2: And I also invited all of them who are, let's say, victims of F-126, as long as they deliver on time and they make no complications and no further, let's say, difficulties—they are invited to help us to build the second batch.

Speaker #2: If we get it in September—but that's not a must—we invite them as long as they meet the expectations regarding time and difficulty.

Oliver Burkhard: We invite them as long as they meet the expectations regarding time and the difficulty. Maybe second thing?

Speaker #2: Maybe second thing.

Speaker #1: Yes, with regards—I mean, I know that everyone is somehow trying to get something out of us with regards to a long-term guidance or margin profile.

Paul Glaser: Yes. I know that everyone is somehow trying to get something out of us with regards to a long-term.

Paul Glaser: Yes. I know that everyone is somehow trying to get something out of us with regards to a long-term. Yeah, a guidance or margin profile. Just to say the following here. You can see where our business is going at the moment. I think it's overall progressing very positively throughout the sectors.

Speaker #1: Just to say the following here: I mean, you can see where our business is going at the moment. I think it's overall progressing very, very positively.

Oliver Burkhard: Yeah, a guidance or margin profile. Just to say the following here. You can see where our business is going at the moment. I think it's overall progressing very positively throughout the sectors. You know what we always have said with regards to our Atlas Elektronik unit, how we are going to see it with regards to competition, if you compare it to Saab or Thales in the electronics and sensors, where we want to see it. You also have heard of where we can see, during our talks, the submarine unit. And of course, now the, I think, surface vessels division is changing its profile. It's looking much more positive than it has seen before the A-200, but I think it's too early to call now to go for that direction.

Speaker #1: Throughout the sectors, you know what we always have said with regards to our Atlas electronic unit—how we are going to see it with regards to competition.

Paul Glaser: You know what we always have said with regards to our Atlas Elektronik unit, how we are going to see it with regards to competition, if you compare it to Saab or Thales in the electronics and sensors, where we want to see it. You also have heard of where we can see, during our talks, the submarine unit. And of course, now the, I think, surface vessels division is changing its profile. It's looking much more positive than it has seen before the A-200, but I think it's too early to call now to go for that direction.

Speaker #1: If you compare it to Saab or Thales in the electronics and sensors, where we want to see it, you also have heard of—where we can see during our talks—the submarine unit, and of course now the, I think, surface vessels division is changing its profile.

Speaker #1: It's looking much more positive than it has since before the A200. But I think it's too early to call now to go in that direction.

Speaker #1: But once we have made our sound evaluation of the overall situation and dynamics, certain topics are going to play a crucial role, like Canada, contract award date, about what volume we are going to speak, and so forth.

Oliver Burkhard: Once we have made our sound evaluation of the overall situation and dynamics, so certain topics are going to play the crucial role, like Canada contract award date, about what volume are we going to speak and so forth. There will be then a given time where we are going to update our guidance and also our timeframe. Good?

Paul Glaser: Once we have made our sound evaluation of the overall situation and dynamics, so certain topics are going to play the crucial role, like Canada contract award date, about what volume are we going to speak and so forth. There will be then a given time where we are going to update our guidance and also our timeframe. Good?

Speaker #1: There will be, then, a given time when we are going to update our guidance and also our timeframe.

Speaker #2: Good.

Speaker #3: Very good, thanks very much.

Speaker #2: All right. The next question comes from Sven. Please go ahead.

[Analyst] (Bernstein): Very good. Thank you so much.

Adrien Rabier: Very good. Thank you so much.

[Company Representative] (TKMS): All right. The next question comes from Sven. Please go ahead.

Jacques Esser: All right. The next question comes from Sven. Please go ahead.

Speaker #3: Yes, hello. Sven Sauer from Kepler Cheuvreux. Thank you for taking my questions. The first one is from a quote from Reuters for you, Oliver.

Sven Sauer: Yes, hello. Sven Sauer from Kepler Cheuvreux. Thank you for taking my questions. The first one is from a quote from Reuters, from you, Oliver, from this morning. I was wondering if you could provide some color on this.

Speaker #3: Earlier this morning, I was wondering if you could provide some color on this. If it is correct—I’m not sure if they translated it correctly—but apparently, you said you expect that you will get the Indian contract, but the competition will try to destroy this, which would be the translation from the German.

Oliver Burkhard: Of course, yeah.

Sven Sauer: If it is correct, I am not sure if they translated it correctly. But apparently, you said you expect that you will get the Indian contract, but the competition will try to destroy this, which would be the translation from the German.

Speaker #2: There might be somebody who messes something up, I tell you. Okay, yeah.

Speaker #3: And the second question would be on Belgium. There was some news that Belgium is, yeah, also not happy with replacing their M-class frigates. And there was also some news that maybe TKMS could offer their anti-submarine warfare frigate for their program.

Oliver Burkhard: Oh, yeah. Somebody messed something up. I told you.

Sven Sauer: Okay

Oliver Burkhard: okay. Yeah.

Sven Sauer: The second question would be on Belgium. There were some news that Belgium is also not happy with replacing their M-class frigates.

Sven Sauer: The second question would be on Belgium. There were some news that Belgium is also not happy with replacing their M-class frigates. There was also some news that maybe TKMS could offer their anti-submarine warfare frigate for their program. I was wondering if you could also provide your thoughts on this as well.

Sven Sauer: There was also some news that maybe TKMS could offer their anti-submarine warfare frigate for their program. I was wondering if you could also provide your thoughts on this as well.

Speaker #3: I was wondering if you could also provide your thoughts on this as well.

Speaker #2: I will do. Sven, let me state it clearly. This morning I said, as we were talking about the Canadian campaign—and we really acknowledge that Hanwha has done a really good campaign—and I'm pretty sure they also can build boats, but maybe, call me biased, we build the better ones, and we have won this competition.

Oliver Burkhard: I will do, Sven. Let me state it clear. This morning, I said, as we were talking about the Canadian campaign, we really acknowledge that Hanwha has done a really good campaign, and I am pretty sure they also can build boats. But maybe call me biased, we built the better ones, and we have won this competition. Now we are the preferred bidder. But I said nobody should be too aware and should be, let's say, too calm and relaxed that this competition is already over because the Koreans are still there, and their only target at the moment is to destroy our campaign to come back into the game. This has nothing to do with India. India, there is a situation where we are not the preferred bidder, we are the last one because all others were sorted out. The Canadians did it quite smart.

Speaker #2: Now we are the preferred bidder. But I said nobody should be too aware, and shouldn't be, let's say, too calm and relaxed that this competition is already over, because the Koreans are still there.

Oliver Burkhard: But I said nobody should be too aware and should be, let's say, too calm and relaxed that this competition is already over because the Koreans are still there, and their only target at the moment is to destroy our campaign to come back into the game. This has nothing to do with India. India, there is a situation where we are not the preferred bidder, we are the last one because all others were sorted out. The Canadians did it quite smart.

Speaker #2: And their only target at the moment is to destroy our campaign, to come back into the game. This has nothing to do with India.

Speaker #2: In India, there's a situation where we are not the preferred bidder. We are the last one, because all others were sorted out. And the Canadians, they did quite smart.

Speaker #2: They said, well, TKMS is the preferred bidder. I'm pretty sure that we'll get along with them. But if not, in case we don't—which is a very low percentage.

Oliver Burkhard: Well, TKMS is the preferred bidder. I am pretty sure that we get along with them. But if not, in case if not, which is a very low percentage, then we could go back to the Koreans and ask them again to bring them into the submarine contract. I do not expect any interference, let us say, with India, but I am still aware and cautious and, let us say, prudent, whatever you want to name it, that we are not yet done with Canada. We have achieved, let us say, more than 50%, definitely, because we are the preferred bidder. But now we have to make a contract for the submarines, which we expect by the end of the year. If that contract is there, then we will talk about the so-called in-service support, which will last for the next 40 years.

Speaker #2: Then we could go back to the Koreans and ask them again to bring us into this, them into the submarine contract. So I do not expect any interference, let's say, with India, but I'm still aware and cautious, and let's say prudent, whatever you want to name it, that we are not yet done with Canada.

Speaker #2: We have achieved, let's say, more than 50% definitely, because we are the preferred bidder. But now we have to make a contract for the submarines, which we expect by the end of the year.

Oliver Burkhard: We have achieved, let us say, more than 50%, definitely, because we are the preferred bidder. But now we have to make a contract for the submarines, which we expect by the end of the year. If that contract is there, then we will talk about the so-called in-service support, which will last for the next 40 years.

Speaker #2: If that contract is there, then we will talk about the so-called in-service support, which will last for the next 40 years. We will talk about where they put their harbors and how we help them to build them up for submarines.

Oliver Burkhard: We will talk about where do they put their harbors and how do we help them to build them up for submarines. We will talk about the ITB or offset, as you want to name it, where we, let us say, make of every MOU, and we did 40 of them during that campaign, bring it into life and bring them into our supply chain and helping us also from a Canadian perspective, very worthy, but also from our perspective to speed up maybe the production time. It is a bit messed, let us say. I do not know what Reuters quoted. We are working here, as you know, with you at the moment, so later on I have the time to look at it.

Speaker #2: We will talk about the ITB, or offset, as you want to name it. Where we, let's say, make out of every MOU—and we did 40 of them during that campaign—bring it into life and bring them into our supply chain and helping us.

Speaker #2: Also, from a Canadian perspective, very worthy, but also, from our perspective, to speed up maybe the production time. So, it's a bit messed—let's say, I don't know what Reuters quoted.

Speaker #2: We're working here, as you know, with you at the moment. So later on, I'll have time to look at it, but it was not that I expect any destroying, let's say, activities, despite the fact that the French are still there and talking about how they will all chunk it.

Oliver Burkhard: It was not that I expect any destroying, let us say, activities, despite the fact that the Frenchies are still there and talking about how will they all trunk it. But again, India is a different thing because India is the construction site and the general contractor is an Indian shipyard. We are only delivering the material packages, so it does not block our capacities here. Therefore, I do not expect any, let us say, interruption there. Canada is also a kind of alarming, not alarming, saying a wake-up call, but they are not sleeping. But just saying to our politicians, you have really contributed very good in that campaign, Norway government and the German government, and still keep on, let us say, the good work until the signature is made, because then only the contract is really ready to come into our order book.

Speaker #2: But again, India is a different case, because India is the construction site and the general contractor is an Indian shipyard. We are only delivering the material packages.

Speaker #2: So it doesn't block our capacities here. And therefore, I don't expect any, let's say, interruption there. And Canada is, you know, it's also a kind of—alarming? Not alarming—let's say a wake-up call, but they're not sleeping.

Oliver Burkhard: Therefore, I do not expect any, let us say, interruption there. Canada is also a kind of alarming, not alarming, saying a wake-up call, but they are not sleeping. But just saying to our politicians, you have really contributed very good in that campaign, Norway government and the German government, and still keep on, let us say, the good work until the signature is made, because then only the contract is really ready to come into our order book.

Speaker #2: But just saying to our politicians, you have really contributed very, very well in that campaign—Norwegian government and the German government. And still, keep on, let’s say, the good work until the signature is made, because then only the contract is really ready to come into our order book.

Speaker #2: Today, it's an opportunity which is very highly likely that we get it, but it's not yet in the order book. And the work that we have to do now is really tough right until the end of the year, but I'm sure we will make it.

Oliver Burkhard: Today, it is an opportunity which is very high likely that we get it, but it is not yet in the order book, and the work that we have to do now is really a tough ride until the end of the year, but I am sure we will make it. We will not be the bottleneck, let us say. Belgium, yes, indeed. There were a few questions, let us say, brought to us if we can maybe jump into their program. It is, as you said, an ASW frigate, so ideally exactly the A-200. But I circled it back and say, well, if they do know what they want to have, then maybe we can talk. They want to step into the delivery of the A-200 of the Germans. This is something I cannot negotiate with them. This has to be negotiated between the German government and the Belgian government.

Speaker #2: We will not be the bottleneck, let's say. Belgium, yes, indeed. There were a few questions, let's say, brought to us as to whether we can maybe jump into their program.

Speaker #2: It's, as you said, an ASW frigate, so ideally exactly the A200. But I circled back and said, well, if they do know what they want to have, then maybe we can talk.

Oliver Burkhard: It is, as you said, an ASW frigate, so ideally exactly the A-200. But I circled it back and say, well, if they do know what they want to have, then maybe we can talk. They want to step into the delivery of the A-200 of the Germans. This is something I cannot negotiate with them. This has to be negotiated between the German government and the Belgian government.

Speaker #2: They want to step into the delivery of the A200s of the Germans. This is something I cannot negotiate with them. This has to be negotiated between the German government and the Belgian government.

Speaker #2: So, I think we are on that level. Yes, but I can confirm they were interested in how the A200 is doing and what the capabilities are on board, and if that may be sufficient also for them.

Oliver Burkhard: I think we are on that level. Yes, but I can confirm they were interested in how is the A-200 doing and what are the capabilities on board, and is that maybe sufficient also for them. We are talking about two only. Belgium is a bit smaller and lower, coastline is not that long, but I can confirm that there were official outreach to us. Yes.

Speaker #2: We're talking about two only. I mean, Belgium is a bit smaller and the lower coastline is not that long, but I can confirm that there was official outreach to us, yes.

Speaker #1: Okay.

Speaker #3: Thank you.

Speaker #2: Thanks.

Speaker #1: Okay. We are already a bit out of time. However, there's a follow-up question from Sriram. Sriram, please go ahead again.

Sven Sauer: Okay. Thank you.

Oliver Burkhard: Great. Thanks.

[Company Representative] (TKMS): Okay. We already run a bit out of time. However, there is a follow-up question by Sriram. Sriram, please go ahead again.

Jacques Esser: Okay. We already run a bit out of time. However, there is a follow-up question by Sriram. Sriram, please go ahead again.

Speaker #4: Hey, thank you so much for the second opportunity. So, it's just a couple of quick follow-up questions, if I may. First, with regard to the MIGO 200, the first batch of orders compared to the original estimate of around $4 billion, which was what was speculated in the media, the initial amount is supposed to be $6.3 billion.

Sriram: Hey, thank you so much for the second opportunity. It is just a couple of quick follow-up questions, if I may. One, with regards to the MEKO A-200 first batch of orders. Compared to the original estimate of around EUR 4 billion, which was what speculated in the media, the initial amount is supposed to be EUR 6.3 billion. I am interested to understand what is driving this significant increase in cost. How much is it inflation prediction? How much is it on a capability improvement? That is question one. Second one, can you update us on the progress happening at Wismar? When exactly are you planning for the first production to start at Wismar? What challenges are you currently facing in that particular ramp-up, especially when it comes to the labor part?

Sriram Krishnan: Hey, thank you so much for the second opportunity. It is just a couple of quick follow-up questions, if I may. One, with regards to the MEKO A-200 first batch of orders. Compared to the original estimate of around EUR 4 billion, which was what speculated in the media, the initial amount is supposed to be EUR 6.3 billion.

Speaker #4: So, I'm interested to understand what is driving this significant increase in cost. How much is it inflation protection? How much is it a capability improvement?

Sriram Krishnan: I am interested to understand what is driving this significant increase in cost. How much is it inflation prediction? How much is it on a capability improvement? That is question one. Second one, can you update us on the progress happening at Wismar? When exactly are you planning for the first production to start at Wismar? What challenges are you currently facing in that particular ramp-up, especially when it comes to the labor part? Because I am just thinking for the medium term, are you seeing any upside risk to your labor cost at Wismar? Thank you.

Speaker #4: That's question one. And the second one: can you update us on the progress happening at Visma? When exactly are you planning for the first production to start at Visma?

Speaker #4: And what challenges are you currently facing in that particular ramp-up, especially when it comes to the labor part? Because I'm just thinking, for the medium term, are you seeing any upside risk to your labor cost at Visma?

Sriram: Because I am just thinking for the medium term, are you seeing any upside risk to your labor cost at Wismar? Thank you.

Speaker #4: Thank you.

Speaker #2: Okay. Thank you, Sriram. Yes, the MIGO 200 has a higher price, as was indicated very early on. Why is this so? Because of the capabilities.

Oliver Burkhard: Okay. Thank you, Sriram. Yes, the MEKO A-200 has a higher price, as it was very early indicated. Why is this so? Because of the capabilities they want to have on the boat. If you want to have something special, just look at the basic version of a Volkswagen Golf and look at the better, let us say, version of it, then you have to pay prices. That is exactly what rose this. I think it is still more than EUR 500 million away from the old F126 approach, but it has almost 80% of the capabilities of F126 had. I think it is still worthy to spend this money in this direction rather than another direction. The capabilities are always driven by the customer.

Speaker #2: They want to have on the boat. So if you want to have something special, just look at the basic version of a VW Golf and look at the better—let's say—version of it, then you have to pay prices.

Speaker #2: And that is exactly what Rose did. But I think it's still more than $500 million away from the old F-126 approach. But it has almost 80% of the capabilities that F-126 had.

Oliver Burkhard: I think it is still more than EUR 500 million away from the old F126 approach, but it has almost 80% of the capabilities of F126 had. I think it is still worthy to spend this money in this direction rather than another direction. The capabilities are always driven by the customer.

Speaker #2: So I think it's still, let's say, worthy to spend this money in this direction rather than another direction. So the capabilities—and the capabilities are always driven by the customer.

Speaker #2: What the customer wants to have, we show him how we can engineer it on the boat or on the ship. And then they have to decide whether they want to pay for it, or can afford it, or not.

Oliver Burkhard: What the customer wants to have, we show him how we can engineer it on the boat or on the ship, and then they have to decide whether they want to pay for it or want to afford it or not. Wismar is going well, really, as Paul already also stated. I think we have finished the production of the pressure hull production line, which means that one of the key aggregates, which is necessary to build submarines, is already installed. EUR 100 million later, but anyhow, we made it in time, in budget. It is in the testing phase at the moment, and we will start the production in September for the first submarines from a customer, which I do not have to name here or should not name, but they are still very friendly and they are already in our order book.

Speaker #2: Visma is going well, really, as Paul already also stated. I think we have finished the production of the pressure hull production line, which means that one of the key, let's say, aggregates which is necessary to build submarines is already installed.

Speaker #2: €100 million later, but anyhow, we made it in time and on budget. It's in the testing phase at the moment. We will start production in September for the first submarines for a customer whom I do not have to name here—or should not name—but they're still very friendly and already in our order book.

Oliver Burkhard: It is in the testing phase at the moment, and we will start the production in September for the first submarines from a customer, which I do not have to name here or should not name, but they are still very friendly and they are already in our order book.

Speaker #2: And we will start the production of the Polars, the Polarstern, which is also starting in September. So we're not anymore in a ramp-up; we are, let's say, trying to achieve a new normal then, and this has all the, let's say, challenges that such a new shipyard brings with it.

Oliver Burkhard: And we will start the production of the Polarstern, which is also starting in September. So we are not anymore in a ramp-up. We are, let's say, trying to achieve a new normal then, and this has all the challenges which such a new shipyard brings with it, but I think we can handle it quite well. When it comes to the labor market, CHR always sitting in front of me, not too far away. We are very happy that a lot of people apply for jobs there and for every vacant position at the moment, we have 30 people who apply for it. So a one to 30 ratio is quite comfortable, but it has to do also with a good employer branding and with some, let's say, work beforehand where we could convince people to work at that shipyard.

Speaker #2: But I think we can handle it quite well. When it comes to the labor market, the CHRO is sitting in front of me, not too far away.

Speaker #2: We're very happy that a lot of people apply for jobs here. And for every vacant position at the moment, we have 30 people who have applied for it.

Oliver Burkhard: We are very happy that a lot of people apply for jobs there and for every vacant position at the moment, we have 30 people who apply for it. So a one to 30 ratio is quite comfortable, but it has to do also with a good employer branding and with some, let's say, work beforehand where we could convince people to work at that shipyard.

Speaker #2: So, a 1 to 30 ratio is quite comfortable. But it also has to do with good employer branding and, let's say, some work beforehand where we could convince people to work at that shipyard, because working in a shipyard in the past was always, well, muddling through from contract to contract.

Speaker #2: So you were three years safe, and then, in the last year, you were looking for how it was going on. We can offer really long-term employment with us, as long as both sides are happy with it.

Oliver Burkhard: Because working in a shipyard in the past was always where the muddling through from contract to contract. So you were three years safe, and then the last year you were looking for how is it going on. We can offer a really long-term employment with us as both sides are happy with it, and this gives a lot of, let's say, planning security for people, even though to come to Wismar. We have a lot of applications coming from the automotive industry at the moment, mid-management, who seeks, let's say, for new opportunities. I think it is not that bad to work in that branch as it maybe was in the past. A lot of people have understood that the security narrative has changed, and that is quite a proudful thing to do and to work on the security of your home country.

Speaker #2: And this gives a lot of, let's say, planning security for people, even those who come to Visma. We have a lot of applications coming from the automotive industry at the moment—mid-management who are seeking, let's say, new opportunities.

Oliver Burkhard: We have a lot of applications coming from the automotive industry at the moment, mid-management, who seeks, let's say, for new opportunities. I think it is not that bad to work in that branch as it maybe was in the past. A lot of people have understood that the security narrative has changed, and that is quite a proudful thing to do and to work on the security of your home country.

Speaker #2: I think it's not that bad to work in that branch as it maybe was in the past. A lot of people have understood that the security narrative has changed.

Speaker #2: And that is quite a proud thing to do, to work on the security of your home country. So therefore, I think we're not going into any shortages, as maybe others have.

Oliver Burkhard: So therefore, I think we are not going into any shortages as maybe others have in smaller branches or small and medium-sized branches. Ours is doing very well at the moment, and we are quite confident that it will keep on.

Speaker #2: In smaller branches or smaller medium-sized branches, ours is doing very well at the moment, and we're quite confident that it will keep on that.

Speaker #1: Good. Sriram, does it answer?

Speaker #4: Absolutely. Thanks so much.

Speaker #1: Perfect. Great. All right. Yeah. And with that, we come to an end for today. Thank you all for your interest and for participating in today's conference call.

[Company Representative] (TKMS): Good. Sriram, does it answer?

Jacques Esser: Good. Sriram, does it answer?

Sriram: Absolutely. Thank you so much.

Sriram Krishnan: Absolutely. Thank you so much.

[Company Representative] (TKMS): Perfect.

Jacques Esser: Perfect.

Sriram: Really appreciate it.

Sriram Krishnan: Really appreciate it.

[Company Representative] (TKMS): All right. With that, we come to an end for today. Thank you all for your interest and for participating in our today's conference call. Of course, if there are questions left, the entire investor relations team is available, and we look forward to stay in touch with you. With that, I would like to conclude the call for today. Thank you, and bye-bye.

Jacques Esser: All right. With that, we come to an end for today. Thank you all for your interest and for participating in our today's conference call. Of course, if there are questions left, the entire investor relations team is available, and we look forward to stay in touch with you. With that, I would like to conclude the call for today. Thank you, and bye-bye.

Speaker #1: Of course, if there are questions left, the entire Investor Relations team is available, and we look forward to staying in touch with you. With that, I would like to conclude the call for today.

Speaker #1: Thank you and bye-bye.

Speaker #2: Bye-bye. Thank you.

Oliver Burkhard: Bye-bye. Thank you.

[Company Representative] (TKMS): Bye-bye.

Paul Glaser: Bye-bye.

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Q3 2026 TKMS AG & Co KGaA Earnings Call

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