Operator: Q3 2026. Please note that this call will be recorded. I would now like to turn the call over to Maximilian König, Head of Investor Relations. Please go ahead.
Maximilian König: Yeah, thank you, operator. Good morning, everyone. Thank you for joining today's pre-close call for the third quarter and first nine months of 2026. In the next few minutes, I will walk you through a short set of key messages, giving a reminder of publicly disclosed information provided by us recently and potential implications on Q3 2026. After that, there will be no Q&A session.
Maximilian König: We will, of course, be happy to take all of your questions at our 9:00AM results call on 5 November, where the full details will be published. Please bear in mind, our 9M closing process is still ongoing. Everything I say today therefore reflects our current view. The key message is very clear. Our story is fully on track, and Q3 might not be as bad as some market participants have commented so far.
Maximilian König: The first nine months unfold as planned and communicated and are in full alignment with our full year 2026 guidance. We continue to target the upper half of the adjusted EBIT range. Overall, we continue to see robust demand across our relevant defense markets. European land force and naval rearmament remain a strategic necessity, as supported, among others, by the NATO doctrine concluded at the The Hague Summit and confirmed at the latest Ankara Summit.
Maximilian König: Customers all around the world continue to significantly invest in existing and next-gen land and navy platforms. Looking at the recent weeks and months, to only mention a few examples, Italy was making good progress with the NMBT and A2CS projects, Finland and Sweden initiated the first procurement of TRACKX vehicles, and Spain decided to further modernize its army artillery with a K9 self-propelled howitzer.
Maximilian König: On top, Germany is preparing to order further Leopard 2 main battle tanks. With respect to our order intake, let me remind you that during Q3, we could secure a EUR 30 million follow-on order from Patria for the TRACKX vehicle family, where RENK will supply HSWL 076 transmissions starting in 2027. This order is strategically highly important because, as you know, this transmission type serves as the basis for Patria and RENK's joint efforts for unmanned ground vehicles between 10 and 20 tons.
Maximilian König: Furthermore, some of you might have seen our signing event with KNDS at the AUSA, we have secured a contract extension with KNDS worth around EUR 130 million, where we will supply our HSWL 354 transmission for Leopard 2 MBTs and family vehicles. While we have published the respective press release in October, the contract was booked in Q3.
Maximilian König: First deliveries will start in 2029 and will be concluded by 2032. The Leopard 2 is truly the backbone of Western armed forces, and already today, you find this transmission in more than 3,300 Leopard 2 MBTs and family vehicles in more than 23 countries. Hence, also here, the global installed base is further growing. Development work with KNDS on the next-gen Leopard 2 makes good progress as well.
Maximilian König: End of September, we enjoyed the successful completion of the final assembly and the first commissioning of the HSWL 354B, a bridging solution between the HSWL 354 and future transmission generations, and a clear contribution to the future viability of the Leopard 2. This positive overall market momentum will certainly translate into another strong and internationally diversified order intake during Q3, even exceeding the EUR 300 to 400 million corridor we expected for Q3 2026.
Maximilian König: This development is very supportive of our full year ambition to secure approximately EUR 2 billion in new orders and will further enhance the strong visibility of our growth outlook until 2030 and beyond. This strong order intake will again significantly be driven by our VMS division, which should contribute around 75% of group order intake in Q3.
Maximilian König: While below levels seen in Q1 and Q2 of this year, we expect another significant growth in order intake year over year. Again, good to see a very internationally diversified order intake for our mission-critical mobility solutions. Our M&I division is expected to show an unchanged supportive order intake momentum as well, with levels almost in line with the previous quarter, again driven by a strong navy business and clearly above average levels seen in 2025.
Maximilian König: Supportive for our full year 2026 order intake ambition is certainly the fact that Germany has in the meantime approved the procurement of eight MEKO A-200 frigates, the so-called F128, where we expect to get contracted in Q4 2026. Order intake momentum in slide bearings in Q3 is expected in line with what we have seen during Q1 and Q2 this year.
Maximilian König: Ladies and gentlemen, a brief word on execution, as we understand that without it, a strong order intake is just another high number. The orders we receive this year, and same holds true for all the other contracts in our order backlog, foresee clear customer delivery schedules. Some foresee first deliveries in 2027, some during 2028 and 2030, and some even after 2030.
Maximilian König: To guarantee conversion of orders into revenue and EBIT, we keep on doing our homework and significantly expand our production capacities based on our existing production footprint during Q2 and Q3, and according to specific delivery schedules. A strategically very important milestone was the official inauguration of three new machining centers at Rheine end of August.
Maximilian König: As a reminder, Rheine was so far used for civil applications only and offers plenty of idle capacities which we can make use of, on top of the actual capacity expansion. This inauguration marks a next important step to systemically scale up our global production for series production and to further support our target to increase output of transmissions to more than 2,000 units per year by 2030. In Rheine, we already started to produce components for the HSWL 256 transmission used for various IFV platforms.
Maximilian König: Also, we keep on rolling out our RENK Production System to the entire RENK production network, as well as our modular assembly line concept to our spare part assembly shops in Q3 and MRO lines in Q4 2026 and Q1 2027. These measures will make sure that we will have the right capacities in place in order to timely work off the order backlog and turn it into profitable revenues.
Maximilian König: This in a very CapEx-friendly manner, with 3% on average until 2030, while at the same time keeping enough flexibility to avoid any overcapacity risks. Turning to revenue. Q3 should be well anchored within our transparent communication that full year 2026 will be very backend loaded.
Maximilian König: As such, in full alignment with existing customer delivery schedules, and hence without bigger surprises, we expect a return to double-digit growth rates on group level for Q3 at levels somewhat below the previous quarter. Therefore, we clearly reiterate our full year 2026 guidance. Let me also emphasize that we are realizing this revenue generation while simultaneously doing our capacity ramp-up without any production interruptions.
Maximilian König: One comment on Israel. According to close discussions with the relevant authorities, we are moving forward in terms of production to realize roughly EUR 80 to 100 million of revenues to Israel in H2 2026, strictly in line with customer delivery schedules. In line with the overall backend-loaded pattern, we plan to ship roughly 80% of those volumes in Q4 2026. On a divisional level, VMS remains the clear growth engine of the group.
Maximilian König: From what we see right now, it looks like the division will exceed the level seen in Q2 2026, with significant double-digit growth year-over-year in Q3 2026. Based on unchanged external factors, a supportive Navy business with a soft civil business, M&I growth dynamics in Q3 are expected to be below, but fairly in line with growth seen in H1 this year.
Maximilian König: Slide bearings should see a strong Q3 based on supportive business during the quarter, supporting the switch from negative growth in H1 to flat growth as per 9M. Last technical housekeeping comment on revenues. Eliminations should be at levels comparable to Q1 and Q2 of this year, maybe slightly higher. Let me continue with group-level earnings. Current operational dynamics clearly show a positive continuation of margin expansion.
Maximilian König: The magnitude of margin expansion per 9M should be in line with the dynamics seen in H1, so on an unchanged high level. For the full year, this is supportive of our ambition to reach the upper half of the guidance. Based on ongoing improving operational excellence and the mentioned continued rollout of the RENK Production System to our production network, VMS growth of adjusted EBIT in Q3 will presumably land well above H1 2026 growth, fully supportive of our full year 2026 ambition of 21% adjusted EBIT margin for VMS.
Maximilian König: These levers, combined with a significantly more pronounced volume effect in the next years, will drive this business slowly but steady to the approximately 25% adjusted EBIT margin. Within M&I, based on tough comps, adjusted EBIT is expected to come in significantly below previous years' level.
Maximilian König: However, with a margin for 9M in line or even slightly better than H1 2026. Slide bearings should show adjusted EBIT levels significantly better than both previous quarters in 2026. Also here, a quick remark on accounting technicalities. Eliminations on adjusted EBIT level are expected somewhere between Q1 and Q2 of this year. Ladies and gentlemen, before coming to an end of today's pre-close call, let me again spend a short moment on the debate about so-called old tech versus new tech.
Maximilian König: We always made it quite clear that the modern battlefield is and will be a combination of both. Conventional platforms and drones, manned and unmanned platforms, connected in a digital battle space across all domains. RENK is well-positioned at this future intersection of manned and unmanned battlefield.
Maximilian König: The NATO Theory of Victory, presented at the Warsaw Security Forum on 12 October by General Alexus Grynkewich, NATO Supreme Allied Commander Europe, reinforces the strategic importance of credible, combat-ready land forces in deterring, and if necessary, defeating a potential enemy. Its approach, approved by all 32 NATO allies, combines forward-deployed ground forces with drones, AI-enabled targeting, integrated intelligence, and precision strike capabilities to stop an attack, disrupt the enemy's command systems, and ultimately defeat its combat formations.
Maximilian König: Importantly, this evolution in warfare does not make conventional platforms obsolete. Rather, it highlights the need to integrate advanced technologies with protected, mobile, and highly capable land systems. For RENK, this underlines the enduring relevance of mission-critical mobility solutions for military vehicles, alongside the growing importance of lifecycle support for an expanding installed base.
Maximilian König: We believe that the combination of conventional combat capabilities and emerging technologies will remain a key driver of long-term requirements for modern land forces. Ladies and gentlemen, let me come to the end of today's pre-close call. We are now entering into our quiet period. We look forward to speaking with you at our 9M 2026 results call on 5 November. Thank you very much for joining, and have a good day. Over to you, operator. Bye-bye.
Operator: This concludes the RENK Group AG pre-close call for Q3 2026. Thank you for joining. You may now disconnect.
