Rheinmetall AG (RHM) Earnings Call Transcript & Summary

Welcome to the Rheinmetall AG Fiscal Year 2024 Report Call followed by a Q&A session. We apologize for the technical issues. May I now hand over to the speakers.

Thank you very much. Good afternoon, ladies and gentlemen. 20 minutes later as planned, but welcome to our full year 2024 conference call. I appreciate your time and that you join us today. Looking back last year, and it was a really remarkable year for Rheinmetall. Before we dive in into the details, I'd like to take a moment to welcome my new colleague, Klaus Neumann. Klaus Neumann is our new CFO. Klaus brings very deep expertise and a strong track record, and I'm very, very happy to have him in the team, and I'm confident that he will be a tremendous asset to Rheinmetall as we continue our growth journey. With that, it's now let's start. But before we move into Page 3, please be advised of our legal disclaimer on Page #2. Now let's go to Page #3, and you have here the group highlights. On the sales side, it's around EUR 9.8 billion. We have another EUR 250 million ready products and -- but we had a delay on the ships on the delivery. So it was impossible to take it into the turnover. So with that, it would be 100% fit of the expected EUR 10 billion, but we are around EUR 10 billion. Operating result is nearly EUR 1.5 billion with EUR 1.478 billion, plus of 61%, so that our operating margin is 15.2%. It's very important also on the sales side that we are very flat on the civilian business. So that we have a growth rate of more than 50% on the defense business, 0 growth or it's exactly minus 2% on the civilian business. So on the operating margin, we are on the level of 19% in defense, which is the most important figure also for us. Applications. We, at the moment, has -- I don't speak about full-time equivalents, but I speak about people. At the moment, we have around 32,000 people on board. We had more than 250,000 applications. And our expectation that over the next 2 years, we will grow up to 40,000 people who work for Rheinmetall. Operational free cash flow is extraordinary good because, as you know, we have strong investment programs. And even if we had this investment program, the operational free cash flow is more than EUR 1 billion. And the Rheinmetall nomination, there is another delay that we have in, as you know, for digitization, nearly EUR 10 billion, which came in, in February, which we expected in December. But sorry, we have a 6 weeks delay in this area. So that nomination is EUR 26 billion and not the expected EUR 38 billion that we discussed last time. So the Rheinmetall backlog is also on EUR 54 billion. So expectation was EUR 60 billion. We could reach the EUR 65 billion if we see the delay of 6 weeks on the digitization if we add that. And the positive thing is also the dividend. We bring the dividend from EUR 5.70 to EUR 8.10 which is on a level that we always discussed between 35% and 40% of net profit. We are on a level of 39% of net profit. Now let's go to the next slide. On the next slide is and I think it's not new for you. Europe has to grow to emancipate itself. And the Americans gave a very clear sentence on the Munich Security Conference, Vice President, Vance, said, you have to invest. U.S. will no longer protect you. So we felt immediately reactions. And over the Munich Security Conference, I personally had 42 meetings with Prime Ministers and Ministers, and they gave us a very clear picture that Europe is willing to invest, and we will invest much more. So we prepare ourselves for, and we call it Zeitenwende 2.0. And we'll discuss a little bit later about Zeitenwende 2.0, what does it mean for Rheinmetall? What does it mean for our business? But on Zeitenwende 2.0, a very important man will be, and I think it will be the new chancellor of Germany, Friedrich Merz, and he said, we have to invest into defense whatever it takes. So the new rules of regulations that all defense spending is above 1% of the GP would be not part of the debt break restrictions is a very clever move. And if next week, we have a breakthrough in -- with that at the parliament, the old parliament makes that decision. I think then we can have over the next 2, 3 months, a lot of tender negotiations with especially the Ministry of Defense. What does it mean for the industry in Germany, for the industry in Europe and especially also for Rheinmetall, because, as you know, last time, we had a 42 billion list about that, and I still have my list ready. But I -- we only can speak about that after having the decision of Zeitenwende 2.0. So the next page gives you now an overview about our simulation. So we made our simulations. We prepared ourselves immediately after Munich Security Conference, we made that simulation. I had several chats. I spoke with Mr. Merz. I spoke with Mr. Rutte. I spoke with a lot of ministers about that. And most of the people told me the minimum should be 3% and the maximum I see at -- what we see at the moment is 3.5%. But even if you go on a level of 3%, so we simulated the GDP on the European countries. And if you have a look to the 3%, you will -- you see that from EUR 690 billion, it will grow up to EUR 831 million. If it would be 3.5%, some countries, but smaller countries will spend more than 3.5% and it will grow up nearly to EUR 1 trillion. So it's EUR 1,000 billion. It's an unbelievable figure. The second point in our simulation is that the fixed cost for personnel and other things will not grow as much as if you grow from 2% to 3%, so that the investment rates, yes, will grow at the moment from a level of 31% to 40% in the first years, because then the personnel costs will also grow maybe also up to 50%. So in '25, '26, level of 50% and later is on 40% of equipment spendings, which is going up. If that -- if you calculate all that things, then we calculated what is the annual potential of Rheinmetall. And I make the story short. There is a potential between EUR 300 billion and EUR 400 billion potential, very clear. Last time, we spoke also about a potential of EUR 42 billion. Now it's nearly 10x bigger, potential up to 2030. Don't kill me if it is 2031 or whatever, but it's a huge number, and it doesn't matter if it is EUR 300 billion, if it is EUR 400 billion, it's much bigger than the first, that's because -- figure because, Zeitenwende 1.0 was a typical German thing and Zeitenwende 2.0 will be a European thing. So this is a big differentiator, and therefore, the potential is much higher. Now we simulated another thing. Is it possible to grow as fast? And a lot of discussion, say, yes, we have to buy from America and whatever then. It will not happen, because I can tell you, especially in the equipment that we have, the Americans don't have the capacity. So we will have a bigger capacity over the next years than the United States will have. So that is impossible. So we have to grow, and we have to invest more. But later about that, and also for sure in the Q&A because for me, this page is the most important page also for the future, what happens over the next 5 years. Coming back to 2024, because this is the main issue that we have today. So the backlog, as I said, is growing from EUR 38 billion to EUR 55 billion. In between, we are on about EUR 65 billion. So from today on. And you see the top 10 nominations, and I only have a look to the three big things. This is the frame contract 155, which is also very good because now it is not longer a frame contract, because if everything next week is going on green lights, it's good for us because then the frame contracts immediately could come into fixed contracts if the government wants. So this is also a very important thing because then they have a much more budget under control. Then the frame contract of UTF, and I expect there is much more in now for the trucks, because Germany needs 25,000 or more trucks. So in between, there is something about 6,000, 7,000 trucks, but you see there is much more in also for us. So our capacity is also growing very strong, and we have a truck capacity now of more than 4,000 vehicles per year. And the heavy weapon carrier especially on the German side, this is a contract government-to-government with Australia, we prepared everything at the moment to deliver heavy weapon carrier also in time. So in a nutshell, backlog is fine. Backlog is exactly what we expected. Again, sorry, we have a delay of 6 weeks about that thing, but you never ever can plan, so exact if it is year-end decisions and -- but we are very happy to give you that information that we are absolutely online. So if you go to Page 8. Here you see the next phase in Ukrainian localization strategy, and at the moment, on the localization side, we expect for this year, air defense for EUR 300 million. Vehicles, and this is the Lynx to implement the first the Lynx vehicles. It's EUR 200 million. And the big pile again is ammunition. And on the ammunition, we will get the first contract for production now in Ukraine, because, as you know, we are on the way to build up the factory in Ukraine, and this is EUR 1.5 billion. So a potential of EUR 2 billion on the Ukrainian side paid from the Ukrainian government. So we are strong at the moment. I think what we learned, we were the only industrial team who got also a meeting with President Zelenskyy on the Munich Security Conference, you see some pictures there. And the maintenance is really running very well at the moment. So Marder is running. Leopard 1 is running. Leopard 2 is on the way. Ammunition production, as we said, we started to build up the production lines in 2026 will be the next step where we have SOP and the Skyranger on Leopard 1 and additional Skynex systems will go to Ukraine. The Skyranger on Leopard 1 will be an outstanding system for them, because it's on the front line. And on the hotspots on the front line, we can catch artillery rounds. We can catch all the UAVs as you know, in a distance of 4 x 4 kilometers. So a corridor of 8-kilometer is relatively safe. And it's a very important discussion that we have with the Ukrainian because there is at the moment, there are -- some people create a narrative at the moment in Germany that UAVs are the changing strategy about these things, so with that system, UAVs are very easy to catch. It's a point and it doesn't matter if it is an intelligent drone or if it is a dumb drone, because it doesn't matter for the system, it kills all the drones. And this is a game changer, as I said, in that area. But the Russians don't have it at the moment, and that's good for the Ukrainians. So the group sales, the revenue over the next years will be always on the level about -- of about 13% for Rheinmetall. If you go to Page #10. Joint venture is established by end of Q1 '25. We have an interim joint venture now, an interim company that we can go into the negotiation with the contract. And the first prototypes will be now delivered in Q4 '25. The first Lynx was end of last year. In Italy, we made the first firing test on that. The government is very happy about that. We will build more than 1,000 Lynx with 16 different variants. And the peak -- on the peak side, we will produce 150 of vehicles per year. And you see that will grow in 2030, 2031 will be going up to a level of 150, 160 vehicles. And it's slowly going down. So that we are then on the level of 100 vehicles. So very good contract up to 2040, which helps us a lot, starting in '28 really 0 production and then going up to 2040. So it's a 12 years program which revenue for both companies for Leonardo and Rheinmetall of EUR 23 billion. So it's about EUR 12 billion for Rheinmetall. Next page will show us the strong growth path ahead of the United States of America. As you know, we -- the acquisition of Loc Performance helps us a lot at the moment to book new businesses. In the U.S., the U.S. guys, the U.S. boys are at the moment, grabbing new contracts going into the planning side to fill the factories, we have huge factories, we have more capacities that they have, but I must say it's outstanding, what -- they are nearly part of every vehicle program in the United States. So -- and we have such a lot of tanks standing there in our factories for maintenance, for other things where we have -- where we implement a bunch of new things where we sometimes have some hundred, thousand bucks, but sometimes also some million on refurbishment work on this tank, if it is AMPVs or if it is inventory fighting vehicles, it's really outstanding, and our expectation is -- was not as high as we -- at the moment, the U.S. boys are doing. We are in very good shape there. So -- and we want to grow up. And this is without the big programs in 2027 in the United States to more than EUR 2 billion. But if we are able to win XM30, it will be much higher. And at the end of the day, we can grow up to about EUR 5 billion over the years. So in 2030, it's a high expectation from us to grow strong. So the next picture show you now our expectations up to a Vision 2030. And this picture is a clear picture before Zeitenwende 2.0. This is our calculation of Zeitenwende 1.0. And the first is on the Vehicle Systems side. On Vehicle Systems side, we grew from EUR 3.8 billion, have a growth of 35% to 40% in '25. The expectation for 2027 is EUR 8 billion to EUR 9 billion. And in 2030, it is more than EUR 10 billion, and if we win one of the U.S. programs, it's much more of EUR 10 billion. But if Zeitenwende 2.0 comes and if everything what I heard in between that there are really ideas that say, okay, now we order 1,000 vehicles of that type or whatever, then it's totally different figures. I cannot say more about that, because we have no details from the government. But if that works, yes, we need much more capacity, and we have to invest much more and then the numbers are much bigger. Page 13 is Weapon and Ammunition. So we will grow up again from EUR 2.8 billion to -- with a plus of 35 -- 30% to 35%. This is, as you know, a strong and quick-turning business. So if we get contracts here, we will do everything to fill these contracts or -- to fulfill this contract as soon as possible. But only if you see that, there's only some expectations, if we have 2024, EUR 2.8 billion, we nearly make EUR 2 billion with artillery. So this is the biggest driver or we made the EUR 2 billion with artillery. So we grow up strong in that area and the capacities in artillery are now growing because we start next month the production in Unterlüss for Werk Niedersachsen. And we now made a new calculation in Unterlüss, and we made an investment in bottlenecks. And in between, now in Unterlüss, we are ready to produce 500,000 shelves. First of all, the first calculation was 250,000. Now on the shelve side, it's going up to 500,000 because we made some extra investments on the bottleneck side. And now we have to make also, especially for hardening the ammunition, this is a tempering effect. If we invest in these areas, my expectation is that from 250,000, we can grow up to 350,000 and maybe more rounds also in Unterlüss. So there is enough space if the contracts are coming to grow faster. But in the Vision 2030 is also EUR 10 billion. And a very strong driver is over the next years, the digitization and also air defense. As you know, we have a new structure in that area. And the Vision 2030 here is always, as I said, it's the picture of Zeitenwende 1.0 and not Zeitenwende 2.0, it's more than EUR 6 billion, so that, in total, this expectation is around then the some civilian business of EUR 2 billion or EUR 2.5 billion, so around EUR 30 billion in 2030. So the growth rate that we have is only in defense, and that means that at the moment, we dilute ourselves with the civilian business, because the profitability is 4% to 5% in this area. And with growing on the defense side, we grow also the group profitability strong. So if we stay on the level of 19%, 20% EBIT ROS, everything is limited. Yes, you cannot grow more and more and more in these areas, because we want to give also fair prices to our customers. But it is possible, let me say, to be on a level of 19% or 20% because of the vertical integration. The EUR 30 billion is under Zeitenwende 1.0, a good, let me say, vision. Next page shows our power system and a very depressed market environment. It's at the moment, very hard for our people to work in that areas, no growth, a lot of pressure on the prices. And as you see from '23 to '24, we had a decline of 2%, and we are now around EUR 2 billion. We make no loss. And as I said, the loss is always between 4%, 5%. So in this area, that's not comparable to the defense business. But I must say very hard working people in this area. The -- and what we do is we try to make a transformation now also to -- for some factories from the automotive side to the defense side to use our people, our well-educated people to take care about them, and to transfer these people from automotive to defense. Now I will take over to Klaus and Klaus takes care about the financials.

Yes. Thank you, Armin. Thank you also for the kind introduction. I will have -- start with a look at the overall view of our group KPIs. As Armin already mentioned, we had a very strong growth in sales and also on the operating profit. We closed the year with a very strong set of results. And more importantly, we delivered on what we promised during the year. Sales growth was about 50% compared to previous year. And as you can see on this slide, although there are some impact from M&A due to our acquisition of Expal in 2023 and Loc in 2024, the overwhelming driver for our growth in profit and in sales is our operational performance. Also you can see that our Civil business, as mentioned, is relatively weak. We have more or less stable sales with a slightly declining margin. Operating results rose by EUR 560 million to almost EUR 1.5 billion. Overall, this is an increase by 61% that led us to an operating margin of 15.2% compared to 12.8% in the previous year. The main driver was clearly the performance in our Weapon and Ammunition division. Overall, the defense margin for all our divisions was about, as mentioned, 90%. One element that basically drove the results for the group outside the civil and the defense business was onetime effect in others in consolidation of around EUR 50 million profit in Q4. Moving on to the next page. As mentioned, we had the strong growth in profitability is also the driver for the increase in our EPS. This is EPS from ongoing activities pre-PPA, that uses as also the main benchmark to derive our dividend proposal. We propose EUR 8.1 per share to our Annual General Meeting in May 2025. This proposal is consistent with the approach for 2024 as it rents about 39% of our benchmark EPS. Let's turn to Page #19. We did see a strong improvement in our Rheinmetall nomination numbers. As you can see, is very strongly driven by hard orders of about EUR 16.5 billion, of which basically are almost EUR 4 billion basic converted from frame contracts that we have already booked earlier. Taking it away almost EUR 10 billion from sales, we get to the EUR 55 billion Rheinmetall nomination as mentioned earlier. In the increase, we also have EUR 1.2 billion of order backlog, Rheinmetall nomination coming from the acquisition of Loc Performance that came in at the end of November 2024. Let's flip to Page 20 for a detailed look at our operating free cash flow. It was a very strong performance in 2024. In previous years, the main quarter that is relevant for our operating cash flow was the fourth quarter. We managed to achieve almost EUR 1 billion in Q4. So in total for the year 2024, we exceeded the EUR 1 billion threshold for the first time in our company history. This is a very strong number considering our investment in future business through CapEx and basically increase in inventory to support our future growth. On the slide to the right, you can see basically develop on our working capital. As mentioned, we invested strongly in inventory for future growth that makes about EUR 750 million. That was compensated by really good payments from our customers towards the end of the year on basically invoices for deliveries in achieved milestones, but also because of good payment conditions that resulted in prepayments that we substantially improved our working capital and basically is the main contributor to the strong cash flow in 2024. Let's turn to Page 21 to look at basically on our debt position. We are very solidly financed. We have on the financial position and net financial liability of around EUR 1.2 billion. But it's important to consider that a large part of it is the convertible that we issued early in 2023. As a result of our strong share price performance, holders of the convertible are starting to convert the debt into equity. And we expect that a large portion of these verticals convertibles will be converted throughout 2025. So in a positive scenario for 2025, we might have no debt at all by the end of 2025, considering our expected strong cash performance also in this year. Net debt-to-EBITDA at the moment is 0.71%, but that already includes -- still includes the convertible that will be kind of converted into equity during the year of '25 further improving our ratio on the side. Let's change to Page 22. This is a summary of basically all our divisions with the strong performance in the Defense segments. You can see the very strong growth in all of the divisions from Vehicle Systems, Weapon and Ammunition and Electronic Solutions, a stable situation in Power Systems, leading to an overall growth of 36% in sales for Rheinmetall, and also, it's quite clear that the main driver for our profitability is defense with an average of 19%, supporting our profit margin of 15.2% for the group. This closes my presentation, and I hand over to Armin for the outlook.

Thanks a lot. Thank you very much, Klaus, well done. On the outlook side, let's go to Page #24. And you see that quarter 1 in 2024, we had EUR 3.9 billion. The first quarter for the outlook, we expect around EUR 12 billion, most of them is still book, because it's TaWAN and the Soldier Systems, so the two digitization. By the way, that's a breakthrough strategy now for Rheinmetall. Digitization is so important for us. And over the last 12 months, we could book now EUR 15 billion for digitization, and this will be not the end. This is only the starting point, because we now have our apps inside. We now have our algorithms inside the systems. And we want to go that strategy that we go with the German government also with other governments in Europe, and there is a good chance to go forward. So digitization is a big driver. So what are the next programs on the vehicle side, we expect. And again, I say it again, even I don't want to be boring for you, but is Zeitenwende 1.0. If we get next week, a decision, green lights for everything, we press the button and then we think that over the next 3, 4 months, we have a chance to really to book huge numbers if everything is going right. But we are now on that level, because there is no decision. Boxer with turret in Germany, Panther and Lynx with Italy and Boxer in Middle East is around EUR 10 billion on the vehicle side. Medium Caliber 155 and 40 million-meter around EUR 3 billion. Air Defense is EUR 3 billion. Then Lynx for Romania, Ukraine, et cetera, et cetera. This is a potential that you see on the right side. So we expect EUR 40 billion is another, let me say, good year in order intake and the book-to-bill ratio is extraordinary good, was last year, very good and is also this year extraordinary. So let's go to the next page in Page 25. We see now where we are and the current annual production capacities on the tactical vehicle side is around 1,000 vehicles. We can grow very strong in most of the vehicle production lines we produce in one shift. And so we have much more capacity, and with the -- when the capacity is growing, if we are ready with the preparation in the United States. So in the U.S., our expectation is that we are able to produce 200 and 300 vehicles on top, so that our tactical vehicle capacity would be grow then up to 1,300 with U.S.A., so that's very positive. The logistical vehicle, the capacity is ready. We prepared everything. We invested everything and there we are on a level of 4,000 vehicles. So what does it mean with 4,000 vehicles, we are on a level of EUR 2 billion between, let me say, conservative EUR 1.5 billion and EUR 2 billion sales only on the logistical vehicle side. 155, so we are already now on a level of 750,000 rounds as we always said, and we grew up to 1.1 million rounds, and there is one point which is very important also for investors. The Ukraine gave us a very clear picture now. They need usually during war minimum 3 -- better more than 3 million rounds of artillery. If there is peace, if we have ceasefire, they need over 10 years, 1.5 million round artillery, and the Ukrainian government asked us if we are able or willing to build up a factory in the Ukraine to produce 1.5 million rounds. This would be 15 million rounds over 10 years, and that would be nearly a EUR 50 billion compact. So this is not our figures at the moment. But this is what the Ukrainians need, because they have to prepare themselves, and this is what the government told us they have to prepare themselves even if there is ceasefire for the next war, because they believe that the next war will come up. The new plant in Unterlüss is nearly completed. So we needed 13 to 14 months. So we are a little bit lazy because we said we want to do it in 12 months, but we will be need 14 months. So we had smaller delays, but it's really smaller delays. And the Lithuanian plant groundbreaking in February is done. And we will also produce now over the next 15 months in Lithuania. In 15 months, 16 months, we will produce in Lithuania also, artillery. This brings us another, we calculated 75,000, but it will be 100,000 or more than 100,000 because what we learn now in Unterlüss is that in some areas, we can double the production if we invest a little bit more, really some millions, we can double the production and this bottleneck analysis we do at the moment for all factories around the world because never -- we never expected that the Zeitenwende 2.0 program will come as fast and we have to do it now to prepare ourselves to grow faster. On rocket engines, we have the groundbreaking now. In Q2, will be the groundbreaking for that. The planning is ready and the permissions are on the way. Also for that, we try to do it as fast as we did on the artillery side. But the sales contribution will start in '27, but you really will feel it in '28, because it's a little bit longer to -- with that technology is to produce a rocket motors in Unterlüss. We also do investments for the pools rockets, the long-range artillery rockets from Israel in Spain. And here, we are faster, and here, we will be ready end of the year to produce the first rocket engines in Spain. But it's on a smaller level than in Germany. So in Germany, we are able now to grow up to 5,000 of these rocket motors, which will bring us if we have -- if we drive the factory in full capacity. We can make EUR 2.5 billion, maybe EUR 3 billion per year on that. F-35 is then the last information on that page. We really build it up in record time. 1.5 years, the fuselage. If the U.S. build it up in California, they needed 4.5 years. So it's loss of rocket and it's unbelievable what happened here. This new German Geschwindigkeit, it's Rheinmetall Geschwindigkeit is absolutely great. So we love it, and all the audits at the moment, we passed all the audits, and we got nearly full points in all the audits. So very happy and very grateful about the team. The team is doing a great job there. The first deliveries, we start production in July, and the first deliveries must be done in '27 or end of '26. So if you go to the next page is that you see that we create a European defense ecosystem. So we want to implement nearly all countries who want to cooperate with us. And these countries who cooperate with us, we create thousands of jobs. And this is now from Ukraine to Great Britain and from Spain and Italy in the south, going up to the Baltics and Estonia and Latvia is also looking at the moment. And there is a new opportunity to build up new factories also, we gave an offer to Denmark. We gave an offer to the other two Baltic countries, and they are very interested to create also jobs in their countries. So a true Pan-American -- Pan-European player, but also a transatlantic player with the investments that we have there. And we are -- I think, we can say a strong driver for European consolidation, because we do the consolidation via our products. We don't do the consolidation only to buy the companies, but also through our products to grow so strong that at the end of the day, the market will make a decision about the consolidation. If you have a look to the next page, Page 27. We can say that we had a very strong start in the new year, strong start on TaWAN and Soldier Systems. As we said before, brought us an order intake of nearly EUR 12 billion in Q1, and the sales growth is in line with the guided annual growth rate, where we said on the defense side to grow 35% to 40%. Profitability is still good for sure, because these are the same contracts than before. Operations is doing very well. The organizational changes that we made to have now our COO and René is doing a great job there as COO to find opportunities also to make an acceleration in the programs on one side and to find also profitability on the other side because acceleration means that we also should have synergy effects, and this is really, really good. On the other side, Uslar, Bernard is doing a great job on the HR side. We never ever had such a lot of feedbacks from the HR side. Young people want to join us, highly motivated areas. And I'm very happy with my colleagues to work for Rheinmetall and I'm very grateful also for that. The cash flow, as you know, last year, we had a brilliant cash flow more than 70% cash conversion rate and the high cash for Rheinmetall nomination, it will stay. And the -- we expect only for TaWAN, a down payment of nearly EUR 0.5 billion in the first quarter. So it will start very well, so that we are still in good shape. And as Klaus said, it seems to be that at the end of the year, we are debt free. And so we have more firepower. And with more firepower, we can have a look on one side to more investments to enlarge our factories. And with more firepower, we also have the opportunity on the M&A market to say, okay, we can buy more companies. And we prepared always between EUR 1 billion and EUR 2 billion per year with from this firepower for M&A, and we are looking for the right partners for us, which -- where we can grow our business. So let's have a look to the next page, Page 28. So as I said, 35% to 40% defense growth, flat civilian business. And we prepare that because that's more important for -- we think more important for you, because our civil business, for sure, is not the driver for the business over the next years. Absolutely not. Now the first question is always what is the reason that you guys are not selling the civilian business? It's at the moment really hard to find a good partner for that. We have to also look to our people. And we have thousands of people who are working hard, very, very hard on the civilian business. And believe me, we take care about them. And the point for us is we only want to sell some of our business if we find the right partners. Operating margin on the defense business, and this is also important at the end of the day, will be also around, and this is what we expect 19%, and there is maybe something in over the next years. And -- but we discussed it also last time, is it 19%, is it 20%, I think it's not the most important thing, but it is possible, because there is also a leverage effect. And on the operational free cash flow, we want to stay on this level to have minimum 40%. As I said, 70% -- 71% cash conversion rate last year is an outstanding figure. So thank you very much for your time. And now we can go to the Q&A. The floor is yours.

[Operator Instructions] And the first question now comes from Sven Weier, UBS.

The first two relate mostly to Slide #6, which I found quite useful in terms of the nomination potential that you see. The first question I have, Mr. Papperger is in the footnote, you say you assume a capture rate of 20% to 25% of these investments. I was just curious, I mean, we all know that the NATO capability review is currently on. And when you look at some of the features, you obviously look like you could be a winner in this. So I assume that the 20% to 25% capture some of this already? Or how have you gone about assuming this market share? That's the first one.

Yes. Yes, Mr. Weier, the point of us is, as we said, it's a simulation. And what is the -- in Germany, we can catch more. But in Europe, there are some countries, let me say, like France, where we are not very strong. So that is the reason that we said in total with all the informations that we have. Let me say, from Norway to Spain and from U.K. to Ukraine, this is the best guess that they have at the moment to calculate it in that way. But if you ask me, is all the EUR 300 billion better or the EUR 400 billion better? I must say the reason that we have that range, we don't know it better. But what we need is we need our first indication to go into our planning for investments. But if that happens, we have to double our ammunition capacity. If that happens, we have to double our vehicle capacity. And to be very clear, it does not longer work with the factories that we have. We have to do it like Werk Niedersachsen, and Werk Aschau, and Weeze and all the other things. We have to build something, and we have to do it as fast as we did before. And that is the reason that we share that informations with you. Yes, it's very clear that this is not our planning, but this is our simulation for the future, but we have to prepare ourselves. If we don't prepare ourselves, if I don't prepare, okay, what does it mean? If we bring Unterlüss from 250,000 rounds to 500,000 rounds, if we bring Aschau from 4,000 tonnes to 8,000 tonnes or whatever, I'm not prepared. I want to press the button if the customer says, go run, then we have to run. Is that fair?

That's quite fair. And I was just wondering, I mean, would you generally agree with me that what we have seen in the NATO capability targets that have leaked last year, it seems all quite in your favor, right? So it's probably fair to assume that your market share could be quite good on these targets. Or is that still going to be the determinant factor the capability targets now? Or do you think there's something else? Or what should we expect there?

No, it's -- look, if more is coming out about that, it's always right, but the range is very big, from between EUR 300 billion and EUR 400 billion is a big beast. And as I said, we catched from the first EUR 100 billion, we catched EUR 45 billion if we count everything. So -- and if you see what happens now, now the opportunity is 10x bigger than before. That's a big piece. Please don't hit me if it is EUR 300 billion or EUR 400 billion.

No, I won't. The second question is just in terms of this slide, how that translate into thinking about revenues because I remember after the Munich Security Conference, we said we can do EUR 30 billion to EUR 40 billion by 2030. Now we have the German election. We have the Zeitenwende 2.0. I mean, I would guess if you have like a minimum nomination of EUR 50 billion per year and each year until 2030 that also your revenues will kind of hit that level at some point, I guess.

You're 100% right, but the point it's too early. Please give me 3 months or give us as team 3, 4 months after having the chance to speak with the ministers about that to have clear. You know that in June, July, there will be a new NATO convent. And I spoke with Mark Rutte about that. And Mark said me, I mean, I give you in July latest all the informations what we need, the need of NATO. And with the new budgets of the European countries, I think we have a very, very good Capital Markets Day end of this year to give you a very clear overview about that. It's too early. It's only too early to say for us. And I as you know, the hit rate that in Rheinmetall we have is not so bad. So if I discussed, I remember, 3 years ago, a lot of people told me, if you say, Papperger is crazy because he gave us EUR 42 billion never ever happens, it happened. So our hit rate was not so bad, but give me a little bit time, because I want to be as precise as we were before.

I'll try to be patient. Maybe the last question, if I may, because you touched upon the consolidation aspect, right? And now we also saw Chancellor, Scholz, pushing for big defense mergers. I mean, I guess the elephant in the room for you guys have always been KMW, KNDS. I think last time you tried it was before the Ukraine war. Now we can publicly reach that KNDS tries to go to the market. I mean, do you think that brings in a new momentum to the debate or so far not changed?

Maybe. But at the moment, there are no discussions. I think it's a very easy thing if KNDS goes to public. And if then there is an opportunity and if we see an opportunity to do something, then we will do that. At the moment, we have all technologies under control that we need. And at the moment, we can grow as much as possible to invest a lot and the expectation is clearly -- surely also that there are some -- a lot of billions we have to pay for that thing. At the moment we invest that in enlarge our capacities. We don't must invest it in other things. And -- it's the same on the submarine side, what we said, okay, we stay on our way. If there are opportunities that we can buy and if it really works, and if the payback is good enough. Look, as I always said, if there is a payback of 10 years, we don't need it for that. But if there is a payback of Expal -- like Expal and we, at the moment, have a payback of a little bit more than 3 years, that's a great investment for my investors and that's a great investment for Rheinmetall.

The next question then comes from Christoph Laskawi, Deutsche Bank.

A bit of a follow-up to what Sven just asked slightly differently phrased though. You talked about doubling capacity for what is potentially needed when we look at the scenario analysis that you have provided. How quick could you do that? You already gave handful comments on smaller investments that you did, that could raise capacity in some areas, quite meaningful already. Is that, say, a 20%, 25% capacity increase that you can get through that? And the rest would be essentially need to be done through greenfield investments on the capacity side? And then, where would you see the bottlenecks on MO, you're vertically integrated quite a bit on vehicles. That looks slightly different. Is there the bottlenecks in the supply chain also in certain components like, for example, barrel production, et cetera? If you could comment on that, would be great.

Yes, yes. Yes, the point is there are no real bottlenecks to say, okay. What we said is, as we made this bottleneck management, the bottleneck at the moment on the ammunition side is securing equipment, but this is only ovens, yes. We buy some more ovens, and then we are able to do. The curing is -- curing time is at the moment, the bottleneck on these things. Shelves is absolutely nothing. No bottleneck, we can produce millions of shelves in between. We have such high capacities. We have three presses in Spain. We built up two presses in Unterlüss. We have two presses also for shelves in South Africa. So we have such huge capacities bigger than any other one. So this is unbelievable what we can do. So really, I think we can produce 2.5 million shelves if we want. So we are there -- we are still there to double everything, because our target was EUR 1.1 million. Curing is the second point. Then there is one bottleneck on filling capacities, pressing of explosives is another bottleneck, but this is easy investment. So buy another two presses and you have doubling the capacities. It's only investment. It's only money, it's no technology. So this is the point. And a room, we created a lot of room for that. So we have space and we have production lines. Another bottleneck is to store for storages. But what we do is at the moment is, we build up new storages, for example, in Bavaria. This is in our plan that there are new storages for high explosives and for ammunitions and for charges that we build that up, and we buy whatever we can buy by worldwide. And we use also the storages of some governments. For example, we have storages in Romania. The Romanian government is giving us storages, and this is only logistics, it's only transportation that we have to do. So we take care about that. So the other -- the biggest bottleneck ever on the ammunition is like always, is powder. But in powder, we are investing a lot at the moment. So there is a huge program at the moment running to -- and we doubled the capacities in South Africa, and we still double again the capacity, especially for modular charges and for artillery charges in Bavaria, where we have a very, very big investment program. The total investment program in Bavaria is on a level of EUR 400 million. And this is important, and we prepared ourselves, and to be fair enough, Mr. Laskawi, so if the customer needs 2 million rounds, we make another EUR 200 million investment, and we double it again. So this is the point we still have space. We buy some space also. This is a point which is not a bottleneck, because we get from the states like Bavaria or whatever, a lot of help at the moment to create a larger plot so that we have space for all that thing. So steel is absolutely no problem. So we have enough steel under contract. So if I do everything at the moment, and this is what also our new purchasing director is doing. We prepare ourselves, and we will take money in our hands to fill the stocks again, and we prepare ourselves for the next years. We do the same what we did before that we are able to stay on a growth level of 30% over the years or more. Is that okay for you?

Just a follow-up on that. So it sounds like you would be able to double capacity in, call it, 3 to 4 years from here by 2030?

That's right. We are now prepared to do it. We are now prepared to do it. But if you said, if we really press the button again, we not double it. So we have a 4x higher capacity. Everything what is in plan is that we double the capacity. But if we start press the button again after the next 2 months, then we have 4x higher capacity.

Then the next question comes from George Mcwhirter, Berenberg.

At a high level, what level of defense spending as a share of GDP does your 2030 Vision assume in Europe? And the second question is just on the German defense budget, specifically. What share of the procurement budget do you expect to capture in the coming years?

My expectation is 2.5%. I'm not so optimistic like Mark Rutte. I think, that the Europeans in a meal value will spend 2.5% -- in the mean value. And let me say, if you -- because I have not a glass ball, yes, but let me say, maybe between 2.5% and 3%. That is my expectation for that. And the second point is that we stay in Germany on a very high level. And as I always said, it -- we catch big parts from the German side from this EUR 100 billion Zeitenwende #1. And on the German side, in total, I think it should be possible for Rheinmetall if all the frame contracts and all the things converted into fixed contracts that is still on a level of more than 30% in Germany. Is that fair?

That's fair.

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

I have some follow-up questions as well on the Slide 6 and especially on the fact that you will capture 20%, 25% of the market share of Europe. Is it fair to assume that basically the 20%, 25% of the market share is likely to happen by 2030, meaning that you are increasing your market share from now to 2030? And if yes, do you have an idea of what is your current market share in Europe? Just to have a rough idea on that. And so I have another question around what can feed basically in Rheinmetall P&L because indeed your calculation of equipment spending, so it represents 40% of the total project. How much do you think will be spend in Europe? I know that you have said that basically a lot will be spent in Europe, but do you have any number around this 300, 400 if you believe 100% will be spent in Europe or more 50%. And just if the volume goes like such in a high level, how do you see your margin evolving by 2030?

Yes. So let me start with -- on the margin side. I think that the prices that we have, it's -- it doesn't matter if it is digitization, vehicles or whatever. The prices are very fair. The prices, as you know, the profitability on the ammunition is only high and we discussed it, Marie-Ange, several times because of our vertical integration. And so that will stay on this level. So I believe that we can stay on that level, because our competitors, yes, most of them or nearly all of them are not so vertically integrated. So margin will stay. Is it possible to find a little bit more leverage on this? Maybe yes, because if we buy in more -- if we double, let me say, the purchasing, we have more purchasing power and then we want to look for that and maybe we can find another 100 basis points or whatever, but I'm very happy if we stay on the level on the defense side of around 20%. So if that works, it would be great. On the other questions, I -- to be very clear about that, and this is what I said before, give us please another 1, 2 months to go more into more details, because at the moment, I'm on a simulation level. And this simulation level is not fair to share, let me say to you to say these are the exact numbers. It is fair if I spoke with the Minister of Defense, with the Prime Ministers of the countries to say, okay, what is it what you really want to do, I need 2, 3 months, together with my team and then I think we have a much better picture what is behind all that figure. The simulation, usually, our simulations are not so bad. The hit rate that we had last time was perfect. But I need a little bit more confidence in all that figures, and then I share that immediately with you, Marie-Ange. Is that fair enough?

Yes. I just have probably there some follow-up on that. So if I rephrase probably my question, does the 20%, 25% market share that you have assumed is because it's your current market share or is because it's something that you believe you can achieve given the fact that the land domain projects would be in very high demand?

No, it's our profit share. I think, we have even more higher profit -- a higher share of the market. And the biggest driver for that is for sure, Germany. But if you see what happened over the last years, is that we catched nearly 50% of the budget on the German side. And Germany will be the big driver, because these are the big numbers. And so therefore, I said if we have 25%, maybe 30% of that. But if you calculate with 25%, I think it's a good and it's maybe -- I don't want to say conservative, but I think, it's a good figure. If it is more, it is fine. But Marie-Ange, it's at the moment, yes, the task that we have now for the next years is much, much bigger than the task that we had 3 years ago. Because the figures are much bigger, the factories will be bigger, and we have to prepare ourselves for that, whatever we can do. So the driver is so -- so if you're a golf player, we are going now from Iron 7 to the driver.

The next question comes from Sash Tusa, Agency Partners.

I've got a couple of questions. And the first one on rocket motors. I'm interested that it takes quite so long to build up your capacity in rock motors compared to artillery, ammunition and powders and so forth. And I wondered if you could just explain why it takes so long and what, if anything, you could do to reduce that? But then, in terms of your contract relationships, you're building -- you're making motors in Spain for that country's purchase of pools. That seems to be the system that's being procured by Germany now. Do you have a contract for the German requirement? And do you work with Elbit? Or do you work with the German prime contractor to supply those measures?

First of all, we have no contract at the moment with Germany because the Germans -- really, the Germans wanted to buy five test systems about that. But there is no big numbers of rockets. But the point is, there is no capacity at the moment of rocket motors around the world. So we are very, very safe that the German government will place contracts to us, and they place contracts to us, but not on the pools at the moment, because that's too early, but on other rockets. What we want to do is we want to produce rocket motors from all different calibers. We are not only going to high-motor or pulse, we go. At the end of the day, we look from 50 kilometer to 500 kilometers. And also, we have an equipment, and this is based on the mixer side and on the length that you -- on the rocket grains, where we look, if it is also possible up to more than 2,000 kilometers to produce these rocket motors. So the first thing, you asked about the timing. From the timing side at the moment, there are some bottlenecks inside. One bottleneck is, we have a longer time for the mixer to get the mixes than for the pressing equipment that we have at the moment, we tried -- we try hard to push down the time. But at the moment, the time frame is that we need not 14 months, but we need 2 years for that. If it is -- I really pushed my team to do it faster, but I have no better information at the moment for that. That is the reason that we told you that we need maybe 2 years about that. The second point is -- our third point is the artillery rounds, all the rounds that we have, if it is German type, American type, all the types that we have, we are qualified for that. But we must qualify ourselves, and there is also to build up a test center for rocket motors. We have qualified ourselves on all the motor types. And -- but again, there is a huge need worldwide at the moment for rocket motors. The Americans looking for capacities, the Europeans looking for capacities. Some of our competitors are also investing, but they are also then fully equipped, for example, MBDA with the Patriot stuff that is going on. And I really believe that we can build this factory. It's an entrepreneurial decision from us to go that way after analysis of what we need and what are the mega trends for the next 20 years. And yes, I think the last decisions we made to develop a Lynx, to develop a Panther and whatever, all of them were good. And I hope that we are again on the right track.

Great. And I've just got two slightly more detailed financials questions. The tax rate seemed very high in the fourth quarter, and I wondered what drove that and whether we should take that as the planning level going forward? And then your guidance of CapEx this year being about 9% of revenues would imply that in absolute terms, it nearly doubles. Is that the right way to think about it? Or will there be some offsetting grants that you would expect to receive?

Yes. So first of all, is it -- there are no offset stuff inside. We calculated the 9% because the powder productions and all the other things are coming up now. We had also a delay from last year to this year from investment. As I said, we have much -- we invested in much more programs but the investment rate stays exactly on that what we planned. So usually, we should have EUR 100 million more. But Sash, at the end of the day, it doesn't matter, because we have to invest. Otherwise, we cannot grow. The second point is the government pay for that. This is also very positive about that things. And if we -- if we have a 51% minimum shares, we have to show it after IFRS, yes, on the investment page, but you see that our cash is much better than what you see out of the investment rates. And the reason for that is that the governments are paying cash inside. But we cannot reduce our investments, because if you have 50%, you have 100% of your investments inside. So we are on the safe side.

Great. And just on tax, I just want to check whether the...

The tax rate is -- my colleague is speaking, yes, so he is finance -- he is my finance minister.

So the tax rate in the quarter was indeed a little bit higher than the average rate, but you should use the annual rate for '24 basically as a guide for the years to come. We are slightly higher than 2023, because in 2023, we had some non-taxable income, mainly due to sale of investments that will -- did not happen in 2024. So the average rate for the year is a good guide for the years to come.

The next question comes from David Perry, JPMorgan.

So I've got three questions as well. The first one, just for a British person, struggles a bit with German politics. Could you just tell us if the greens don't approve the vote, I think it's March 18 on the debt break, what the plan B is, what other solutions that could be to try and have higher defense spending? The second one is, do you want to take them one at a time?

Yes, yes. So give me the chance about that, because that's very, very important. The Green Party is not against the defense budget. The Green Party said we don't want to link the defense budget to the EUR 500 billion package of normal investments. If the EUR 500 billion package is not 100% defined. And the reason is that the Green Party said they love the defense budget. They said, okay, we want to do it. They are pressing me to invest more in these areas. So they're not against bad debt. So I'm -- on the political arena, there are two points. First of all, Friedrich Merz wants to bring two packages through. If we don't can bring its room to define, let me say, the investment package and the Green said, don't use the investment package to pay the pension system. Don't use it -- not to do it, let me say, into that area. And then, maybe they can separate it, to say, okay, we make a breakthrough strategy to separate the EUR 500 billion with the decision of defense. And what I believe is, I personally believe -- I have also no glass ball, but I personally believe that 90% plus next week, we have a positive decision about that. And I don't think, for some days, I don't think what if, if, when. So because then we have another political decision. But what the government or the new government wants to do is, is an outstanding thing, because it would be nearly unlimited money for defense. So that is an outstanding thing. I never have seen that before. And so -- and the reason for that is because -- the decision of Social Democrats and Christian Democrats was a very clear one to say, okay. We don't want to be in a situation that an aggressor is attacking Europe and Germany, and we don't have enough money. And the right wingers and the left wingers can stop us. That is the reason that they make that decision. And that is the reason that I believe that it will go through.

Okay. Great. And my next question is, Slide 12 on the vehicles. It goes up from a small business to a massive business, but there's not a lot of commentary there. So just like in '27 and maybe in 2030, like could you just give us a high level like how much is Puma, how much is Lynx? How much is trucks? How much is support, just maybe break down you can choose your year '27 or '30?

Okay. So on Page 12, yes, it is right. So Puma is not a lot, Lynx will be one of the drivers, which is coming up. So if you go -- if I go to the 2027 picture, so it's around EUR 2 billion is trucks, okay? Then around EUR 2 billion will be service. Okay? The rest will be Boxer, huge amount of Boxers which are coming, then the Lynx, which will be also a big driver, then the ramp-up curve of the Caracal will come. This is -- we also have this frame contract from the Caracal side is EUR 2 billion, which are here. So I can give you for 2027, let me say, 85% transparency about that what is really there. I haven't prepared it, but -- so only if you see what's going on, on Lynx EUR 1 billion, on the Boxer side is EUR 1 billion. Then we are on a level of EUR 6 billion, then we have spare parts and other things also inside, et cetera, et cetera. So this is what is inside and then a lot of smaller contracts for sure. We have hundreds of smaller contracts, EUR 50 million here and whatever there, which is coming up. So that is how the figure is coming.

Okay. That's helpful. And then my last one, if I may. Can you talk a little bit about M&A. You said you're going to have this unbelievably strong balance sheet, probably an industry that needs consolidating. There's been press speculation about -- would you look at thyssenkrupp's marine business? I don't know, would you look at getting bigger in electronics. You just talk about the things that interest you and how you think about the pros and cons of different areas?

We're no longer looking to thyssenkrupp. The thyssenkrupp stopped the process. As you know, last October, the government contacted me, the German government to say okay, have a look to that, we had it, but we do nothing in this area. So thyssenkrupp is now looking for the spinoff and they want to go forward. But this only would be an opportunity for us if we could find synergies and not only the pure business, because the business by themself has not the same profitability, has not the same growth rate that we have in that point. That was the reason that was never ever priority #1 of us, but we looked on that. But we not longer look it, not longer look on that. Digitization is one of the things where we are really looking for. If there is an opportunity, also, I said if there would be an opportunity that I can buy a company who is producing nitrocellulose. I would buy it. David, that I'm not going into the details about that point, but it could be that if there are companies on the ammunition side that we buy there. And because I want to buy everything in this area because this is horribly -- will be horribly growing over the next years. So if I must not invest. But if there is, for example, a company for nitrocellulose who is producing another 5,000 tonnes of nitrocellulose, maybe I would buy. Yes? So this is an opportunity. There are opportunities on electronics, like we did on Black Net, yes. So if there are some smaller companies who make artificial intelligence, we would go forward in these areas. We are not going forward to say, okay, wow, I want to buy now a company where I have to pay EUR 10 billion and then my balance sheet is not longer good, it is bad. And so this is not what we do. We -- if we grow, and I think that's very, very clear. If we are able to grow an operational growth of 30% to 40% per year, we are not under pressure at the moment to go forward. And consolidation can work to buy something, and consolidation can work to have, let me say, better products and to convince the customer that he orders more from us, and we work organically. This is also consolidation because then the market share of the others is going down. So these are the two opportunities. And at the moment, we are working on Level 2.

The next question then comes from Dario Dickmann, HSBC.

I have three. Basically, the first one is on the speed of the German procurement office since we are still working off projects from the first special fund. So do you think we can already expect Germany spending significantly more than the currently budgeted EUR 30 billion on equipment in 2025? And could you share some thoughts on the decision timelines from the procurement office? Second one would be on the minimum capability requirements leak at the beginning of the year, which already hinted at a significant increase in fighting regards and air defense. And we also had a German newspaper with success to the document reporting it implied German defense spending of more than 3%. And would you agree that the potential partial U.S. retreatment from Europe will increase this gap even more. So I assume that this paper was basically published before the U.S. topic came up. And the last one is on a recent Polish article reporting that a Polish state company, PG, that is looking for an ammunition licensing partner, but they does list KNDS, Turkish MKS and Czech CSG as potential candidates. So are still involved in Polish ammunition discussions. Could you confirm they are just looking for a licensing partner instead of a JV partner? And maybe last -- but last question. Do you think that European funding increases your probabilities on the Polish heavy inventory fighting vehicle tender?

Yes. We start from -- with the European funding. I'm always very relaxed about the European fundings, because it was funny what we discussed on the ammunition side. You remember when we spoke about the 1 million rounds for Ukraine from the European funding at the end of the day, there was 0, and so I'm not taking care about that thing that there is maybe an opportunity in the future. But at the moment, I think I'm very relaxed about that. So I'm -- the national fundings for me are more important. On the Polish side, we spoke with BGZ and we could not be there inside, because I don't want to give a license. I don't give licenses for that. I only create joint ventures for that, if there are some people who give licenses, but they were not very successful with that. They wanted to have licenses for tanks. They wanted to have licenses for Anders. And at the end of the day, nothing happened. So -- but license no, joint venture, yes. We gave an offer with joint ventures in Polish like Italy, like what we had -- what we made in Italy on the 50-50 base. What I know is today, the German government and the Polish government are sitting together to discuss these things. But at the moment, our business case is without Poland. There is no Polish order intake inside. And at the moment, I think, they are not so successful like they want it to be. Minimum capability requirements, I 100% agree about that, that it could be that there is -- there must be do more from the European side, because if the American said, okay, take care about your own sheet, we don't longer take care about yours, then it's -- so that the nature requirements and also requirements for Europeans are growing up. But even what we have now inside and if the growth rate must be not 2.5% to 3%, but 3.5%, the figures are higher for sure, but we don't know it. And as again, it's all speculation. And as a businessman, I have to take care about the reality. So I have to wait what's coming out now next week, then I have to wait what we see over the next 2 months with especially the German government. And the biggest driver will be Germany, for sure, because there is some money at the moment. And so therefore, it's very clear that we can give you better information in 2 or 3 months about that. So the first was on the procurement side, yes.

Yes, exactly. So how fast do you think that the German procurement office could come up with some additional projects? I mean, they're still working on the last of the old fund?

Now I must really say that they are blaming always a lot to bind the way. I cannot blame them. And the blaming is that especially from the smaller companies because they have the big whale fishes at the moment are always in the front. But look what we did. TaWAN has from T-0 a delay of 6 weeks. If you negotiate a EUR 7 billion, EUR 8 billion program and you have a delay of 6 weeks come on, this is -- this is great. And the procurement agency made such a lot of contracts over the last 2 years that they made the last [ 2 years ] now. So they are fast, that for sure, we can do something better. For sure, there are some guys who are still think they are 10 years. What they do their work like 10 years ago. But most of the people and especially the President of Procurement Agency, she's doing a great job, and I cannot blame them. It's worthwhile. So they are doing a really great job.

Okay. So we could have significantly more than -- so EUR 40 billion currently assumed under Zeitenwende 1.0, let's call it like that.

Absolutely right.

Of order intake.

Absolutely right.

So there is one more question in the queue. [Operator Instructions] And the last question for the moment comes from Carlos [indiscernible] Bank of America.

Just a follow-up on CapEx, how should we think about your CapEx guidance through 2027 in the context of you presumably growing more than what you anticipated in November 2024? I guess, it's fair to assume that CapEx could be perhaps a little bit more elevated than your current midterm guidance?

Yes. The guidance that we gave on CapEx during the Capital Markets Day last year was based on a basic scenario before Zeitenwende 2.0, so it's very difficult to predict how it's going to turn out in 2027 given the political uncertainty, there's a moment. As Armin said, we need a little bit more time to really understand and plan out with the government, what it will mean for our business going forward. So at the moment, the guidance stands as we mentioned, prior to these changes that we expect to happen in the next coming weeks.

But Carlos, it's I think a very important thing that if the government and especially the German government stays on the level that we get 20% or 30% down payment, what we got, let me say, also on the TaWAN side, it doesn't matter because we need -- we have to invest. But at the end of the day, we have no burden on our balance sheet, because we are very cash positive out of that thing. Is that fair enough?

Yes.

Okay. Now there it seems to be just one follow-up question from Marie-Ange Riggio.

Sorry, just last follow-up that we don't touch on the call, which is on Power Systems, because they continue to be the division to be a bit weak. And you mentioned at the last result that you're looking for transforming the division. You have mentioned that, too, you're taking over two facilities. Do you have any other plans for '25 for that division? And any ambition by 2030 because you didn't mention it on your slide as well?

First of all, we want to do it with the two factories. And the two factories are now in Neuss and in Berlin. And if that is successful, we can have a look to other factories. And there are some ideas to do it. And -- but this -- we cannot tell that officially because if I go officially about that, the unions immediately start discussions, but we are still in planning phase. So we cannot speak officially about that. But if it is successful, Marie-Ange, and if we can take 1,000 or more than 1,000 people from the automotive industry and highly qualified people. We have very good people there to the defense, and if we can reduce the education time with that people, because they are well educated to create high-quality defense goods, I'm very happy. I'm very happy about that. So this very new ideas and maybe that's also very important for all investors is -- for example, in Neuss, we are looking now to produce components for loitering ammunition and also for satellites, because we are with ICEYE in the satellite business. And if we build up that, we would create here nearby Düsseldorf, an absolutely high-tech factory, where we have protection systems, where we have electronic systems, where we have from -- for the loitering ammunition components and for satellite technology. And with ICEYE, because, as you know, the American stopped now the conversation with the satellites and they don't help longer the Ukrainian, and maybe we can step in, and we are in agitations with the government at the moment that we are the satellite house. At the end of the day, the idea is to have minimum six LEO satellites and then we can build over the next years always between, let me say, 6 and 10 satellites on the layer LEO here in Germany in a licensed production. That's a new business model that's brand new. It's not a big driver for that. But at the end of the day, maybe we make another EUR 200 million. So it's a good business, okay?

Sorry. That's it for the Q&A. I'd like to hand it back to you, Mr. Papperger.

Yes. Thank you very much for your time. Thank you very much for the very interesting Q&A. And at the moment, we really try to shape our team to fulfill everything and very happy to see all of you again live in the investor conferences. Thanks a lot. Thanks for your time. Bye-bye.