Rheinmetall AG (RHM) Earnings Call Transcript & Summary

Okay. Now it looks like we have almost everybody in. So as usual, the purpose of this call is to review recent public developments and ensure the messaging is well aligned. This call does not provide any public, nonpublic information, especially not after we have just released the adhoc statement a couple of minutes ago. We will make the document that I'm prepared for this call, make available on our Investor Relations website in the sections Publications or it is already available in this section. So first, an update on the defense spending. Starting with the macro environment. End of April, the German Finance Ministry published its new budget draft. This suggests that a debt Defense budget spend of close to EUR [ 145 ] billion for 2027, representing an approximate 21% increase compared to 2026, which further underpins the midterm visibility in our domestic markets. A more detailed draft is expected to be published in the coming days before the parametry summer recess starts. Trading update on Q2. Moving to Rheinmetall's financial performance. Rheinmetall remains fully on track to achieve the guided quarter-over-quarter growth rate of above 40%. This implies an H1 growth rate of approximately 35% to 40%. Key drivers were planned project ramp-ups for several contracts, which had been signed before the word started as well some support from the EUR 100 million coming from Osia restart and from the weapons and the EUR 200 million from trucks and vehicle systems. The portfolio optimization continued as planned. The disposal of the power system was signed on June 3 for a consideration of EUR 350 million, with the closing expected in Q4. In connection with this transaction, please be reminded of an additional EUR 200 million noncash impairment for euro financial models. Next up, I would like to address the cancellation of the F126 program. The German Ministry of Defense issued a press release on June 24 and gave 3 key reasons for their decisions. First, they want to mitigate further cost overruns that stemmed from the past; possible recourse issues with Diamond was second; and third, an assumed shorter delivery time line for the alternative platforms. Rheinmetall is currently assessing the potential implication of the program cancellation for the F126, while the company confirms the prior trading update for the second quarter, meeting the exact growth rate, the probe cancellation will result in a shortfall of the expected quarterly -- termination of EUR 20 billion, including F126. Despite strong order momentum in all other segments, including the first order for long ammunition in April and the remaining order package under the Safe regime at the end of May, in some of the total metal nomination volume is expected to reach low double-digit euro billion level in the second quarter. The company is currently investigating whether the order cancellation has any additional impact on the full year guidance, and we'll provide a more detailed update with the Q2 earnings release on August '26. In case that no mitigation measures -- can be identified, the 2026 revenue impact could reach a level of up to EUR 300 million. The F126 made up less than 3% of the planned group sales in 2030. Update on Looking ahead, the approval for the Box order is still expected to be around the late Q3, early Q4. They present a bit structure consists of two components, the EUR 12.5 billion fixed contract for Phase 1 to be delivered until 2029 and EUR 25 billion frame contract for Phase 2 until 2035. This concludes here my information that I have to share. There will be no Q&A and we are entering now into a quiet period. I would like to thank you for today closing this call now. Thank you very much.