Thales expects an exceptional charge of about 450 million euros after Germany scrapped its F126 frigate program, on which the French group worked as a sub-contractor. Even so, Thales raised its order intake and cash targets for the year, citing strong defense momentum.
French aerospace-and-defense group Thales said Friday it would book an exceptional and mostly non-cash charge of about 450 million euros after Berlin scrapped a project to procure F126 frigates. The company said the figure covers costs it already paid plus a conservative estimate of the compensation it expects to receive.
Thales worked as one of the sub-contractors on the program, with Dutch shipbuilder DSNS as prime contractor. Berlin had expected the first batch of frigates in 2033, but DSNS couldn't hit the budget and timetable, prompting the government to start transferring the project to Rheinmetall.
Why Berlin walked away
The German government said last month it had opted not to order six F126 frigates from Rheinmetall for about 15.2 billion euros ($17.38 billion), citing delays and cost increases. It chose instead to buy eight MEKO A-200 frigates from German shipbuilder TKMS. The cancellation had already rippled through the sector: Rheinmetall said a day earlier that the move would dent its second-quarter orders, now expected in a low double-digit billion-euro amount against a prior forecast of 20 billion euros.
Targets raised despite the hit
Thales said the charge would have no effect on its adjusted EBIT and adjusted net profit but will harm net profit by about 350 million euros in the first half.
Yet the group said its defense business continued to benefit from strong momentum and raised its order intake and cash generation targets for the year. It now expects a book-to-bill ratio above 1.10, up from a prior forecast above 1.0, with a cash conversion rate between 100% and 110%. Thales still expects organic sales growth between 6% and 7%, with an adjusted EBIT margin between 12.6% and 12.8%.
Source: MarketScreener
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