CSG N.V. (CSG) Earnings Call Transcript

Welcome to the CSG's Half Year 2026 Earnings Presentation. Today's presenters are Michal Strnad, CEO and Chairman of the Board; and Zdenek Jurak, CFO. Michal will begin with an update on the group's strategy delivery and the first half financial highlights. Zdenek will then walk through the performance in more detail. [Operator Instructions] Please take a moment to familiarize yourself with the disclaimer information at the start of the presentation deck. I'll now hand over to Michal Strnad.

Good morning to all of you, and thank you for being with us. The first half was a period of delivery against the commitments we set out. We achieved a strong financial performance across the group. Before we come to the numbers, I want to highlight the strategic progress behind that performance. Let me start with Land Systems, which doubled revenue year-on-year. Land Systems now represents 46% of our order backlog. We are scaling this business exactly as planned. That is changing the shape of the group. The share of revenue from Ukraine is down from 27% at year-end to 17%. Europe, excluding Ukraine, is now more than half of our business. The United Sates has become our second largest market, and we are making significant gains in Southeast Asia and the Middle East. We win that business through a reliable supply and capability at a competitive cost. The result is a better quality of earnings, more customers, longer programs and less than on any particular geography or end customer. The market is moving our way. Customers want integrated systems that is exactly what CSG delivers. In [indiscernible], we own backbone, critical layers and the integration. The vehicle, the radars, the command and control system and the launchers, [indiscernible] and other sectors on top. Trident, the layered air defense system we represented -- we presented in June, brings those capabilities together into one [ stem ] we can offer worldwide. The air defense contracts we won in Southeast Asia worth nearly $2.5 billion demonstrate the value of this approach. Also, air defense and related capabilities, CSG became a strategic investor in North Vector Dynamics. This is the Canadian developer of [indiscernible], precision-guided missiles and country UAV systems. CSG will provide its industrial expertise and commercial network to help North Vector Dynamics production and gain access to global markets. In armored vehicles, we have agreed a new joint venture with Turkish company, FNSS, protection of the armored vehicles, which includes our new [ carpet ] bank will be based at our own facilities in Slovakia. This extends the same integration strategy into a new platform for the group. In the medium and large core ammunition, we are delivering on 2 priorities: expanding production and increasing vertical integration. Our annual production capacity increased to [ 850,000 ] [indiscernible] at the end of June. We remain firmly on track to reach about 1.1 million [ rounds ] by the end of 2027. At the same time, demand continues to shift towards long-range 155-millimeter ammunition. This market has a few European producers and offers stronger unit economics. Our investment in securing critical components creates value across the portfolio, more so in long range where each round requires more critical inputs. By increasing vertical integration, we are taking greater control of the supply chain. This takes cost out of every round up on [indiscernible] margin expansion. I am pleased to report that our German propellant plant, Greek explosive plant and Slovak bimodular charge facility are all on the schedule and on budget. Just this week, we also announced the acquisition of the Gnaschwitz industrial site in Germany. At this site, CSG will produce nitroglycerin as well as ammunition and components. This is yet another step towards self-sufficiency in energetic materials. It also enables us to sell to [indiscernible]. CSG is building an ever stronger presence in the United States, the world's largest defense market. Last month, we broke ground on the future artillery complex in Iowa designed to load 36,000 artillery shells each month. I am pleased by our success here. No European Defense Group has been trusted with a program of this kind on American soil. Our small caliber businesses also won contracts valued at about $100 million with the FBI and other law enforcement agencies. These are important endorsements from different parts of the U.S. government. In addition, the opening of the CSG Land Systems, North America brings our vehicle and artillery portfolio directly to the U.S. Army. Our new Washington office means U.S. executives are closer to our customers. Very little of this is reflected in today's revenue. We are very excited by the opportunity in the U.S. for CSG. Finally, unmanned systems are taking a growing share of defense spending. CSG is building strong positions in the technologies behind them. Propulsion is one of the most demanding parts of long-range drones and missiles. We are one of only a few western suppliers of these engines. This summer, we announced a new production plant in Wisconsin that will serve U.S. and allied customers. The first engines will be produced this year, and the serial production begin in 2027. CSG is also developing the digital systems that manage airspace. This includes radar detection and the software that coordinates drones alongside [indiscernible]. These moves gives as early positions in fast-growing markets, and we intend to grow with them. Our horizon does not stop there. We are actively exploring further opportunities in autonomy, artificial Intelligence and space, while our core businesses continue to strengthen, we are investing today in what will drive our next phase of the growth. I want to turn briefly to our leadership. We have made major investments here. This significantly strengthened our team, recruiting senior executives from the world's leading defense companies. Benjamin Hudson joined CSG as the CEO of Land Systems and Group Chief Technology Officer. He came to us from Hanwha with earlier roles at Rheinmetall, BAE Systems and General Dynamics. David Jacobs is President CSG Defence North America, and is building out our new Washington, D.C. office. Jason Monahan leads our newly established Land Systems business in North America. Both bring deep experience of the U.S. defense market. They are joined by several other senior appointments across Excalibur, Tarta Export, Fiocchi and the group strategy. They come from companies, including Rheinmetall, KNDS, Leonardo and RWS. [ Hires ] help take us to the next level. They strengthen our team to execute on strategy. That includes scaling Land Systems growing in the United States and expanding across the nation. Let's now turn to our half year financial highlights. The headline figures demonstrate a strong performance across all key metrics. [ Revenue ] was up 17% to EUR 3.3 billion. This was driven by strong momentum across our core Defence Systems business, which grew by 27%. Our main measure of profit, operating EBIT, increased by 13% to EUR 784 million. This gave a margin of [ 24.1% ]. This margin performance keeps us at the top of our European defense peer group. Our total backlog and pipeline reached a record EUR 46 billion. This proved strong revenue visibility and evidences the long-term structural demand we see in the market. The group remains highly capital efficient. Net leverage at period end was 1.6x. Net leverage, therefore, remains within our long-term financial framework. We maintained strong cash conversion at 86%. CapEx intensity was 3.8%. As the year progresses, we will continue to invest significantly in production capacities and moderation to service demand. Net working capital as a percentage of the revenue was 40%. This reflects our strong build of inventory to support a record order backlog. We remain confident in our full year guidance of below 20%, and expect the ratio to improve through year as [indiscernible] are completed and working capital is released. Zdenek will talk more about it later. Looking at our revenue composition, Defence Systems drove close to [ 81% ] of the group revenue. This segment includes our medium and large caliber ammunition and Land Systems businesses. These made up 65% and 14% of store revenue, respectively. Our other business segment, Ammo+, contributed 19%. The chart also shows CSG diversification away from Ukraine, with the revenue share from NATO and other allied countries, excluding the Ukraine increase to 83% from 73% at the year-end. Overall, it was an excellent set of results, thanks to this strong first half, we remain confident in our full year guidance. Now I will pass to Zdenek, who will take you through our performance in more detail.

Thank you, Michal. I will start on Page 8 of our presentation. Growth in second quarter accelerated to EUR 1.7 billion according to our expectation. Looking also to the contribution of the second quarter to the full year, that is as well in line with our guidance from last quarter, meaning that first half of 2026 is approximately 43% of the guidance we provided for 2026, so similar to the last year. Total revenue for first half of 2026 represents 17.2% year-on-year growth. At the same time, 90% of the Defence System [indiscernible] for the second quarter -- for the second half of the 2026 is already under contract, and further derisking the delivery. Profitability remains firm with margin at 24.1% and within [indiscernible] [ 25% ] guidance range. In addition, and highlighting here the Ammo+ margin, which is recovering according to our expectation in second quarter, coming to 8% from 4% during the quarter this year. Finally, we continue to diversify growth across our platforms and geographies. Land Systems balance medium and large caliber ammo in terms of backlog contribution as you will see next slide. We continue to diversify the end market geography, resulting into decrease of Ukraine contribution from 27% as of the year end 2025 to 17%, including both direct and indirect sales, and even though the demand from Ukraine remains strong at the same time as we don't see any change from the last quarter. On Page 9, we [ highlight ] the continued increase in our backlog and pipeline over first half of the year. It reflects strong intake in new orders across the period. Total backlog increased to EUR 17 billion in 2026, up from EUR 15 billion in December 2025. That means 15% year-to-date growth and represents 2.4x coverage ratio of our half year LTM revenue. To get [indiscernible] increased to EUR 29 billion, means EUR 46 billion of total opportunities as of the end of June 2026. Total order intake ratio in first half of 2026 remains [indiscernible] 1.5x, similar to what we presented on our previous earnings call for Q1. Sizable and growing backlog gives us multiyear revenue visibility. Our active pipeline, combined with our demonstrated track or converting pipeline into firm contract drives our long-term growth momentum. On Page 10, we are showing that the revenue growth is driven [ partly ] from strong momentum across our Defence Systems business. This reflects the sustained demand we are seeing, both within our core European and NATO markets as well as demand coming from increased -- and increasing from urban markets. Within our different systems, medium and large caliber ammo continues with a very high demand, but starts to be more balanced by the Land Systems at the same time. Group EBIT margin was [indiscernible] at 24.1% for the half year. Within Defence Systems, we keep focusing on our vertical integration program and strategy, confirming our target we've set for it to be by end of this year by [indiscernible] 2027. For the time being and as of the June 2026, we achieved EBIT margin 29% for the Defence Systems segment. What is also important is the recovery in Ammo+ margin through the record quarter to 8%, which means the same level as we achieved for the full year of 2025. At the same time, Ammo+ is still improving further on a U.S. market that is enabling us to rebuild volumes and improve pricing to mitigate majority of the impact from increased copper price and achieve better margins. By the way, the margin in second quarter has been [indiscernible] on EBIT. At the group level, looking ahead to the remainder of the year, and as typical also for European defense peers, deliveries and revenue recognition are weighted towards second half of the year. Our strong execution to date means that we are well positioned for the second half of 2026. And at the same time, we've secured majority of critical components needed to fulfill the backlog for the remainder of this year. As a result, all full year 2026 and medium-term guidance is reaffirmed. Let me now turn to performance and operational developments across our 2 core segments, Defence Systems and Ammo+. Starting with Defence Systems on Page 11, which made up about 81% of group revenue and which brings together our businesses in Land Systems, medium and large caliber and related technologies through aerospace and defense electronics and advanced systems. Execution remains our primary operational focus here. Order intake remained strong and continues to build. At the same time, we continue to effectively manage the supply chain lead times, including, for example, export licensing. All of that means that our backlog is converted this into deliverables and revenue. Revenue was EUR 2.6 billion in the first half of 2026, 27% up year-on-year. Operating EBIT increased 22% in [indiscernible] to EUR 754 million and margin of 29%. Continuous work on efficiency and ongoing vertical integration supported the achieved results. At the time, split of revenue by geography continues to diversify, as we have already mentioned. We've seen continuous growing demand from both NATO members as well as from NATO-allied countries from Southeast Asia and Central particularly. The revenue contribution from outside of Ukraine now stands at nearly 80%. In parallel, the strong growth of Lands System means that this subsegment is now [ 17% ] of the Defence System business. We continue in our strategy and plans increasing our own production capacity and focusing on automation, robotics and new production lines. These all underpin our sustained growth and ambitions to expand the margins. On Page 12, I would like to focus a bit on our medium and large caliber ammo subsegment, which delivered another period of growth, up 20%. The business here delivered on 3 fronts. First, our vertical integration and projects are all on track. Second, we are looking at supply and critical components. And third, pricing is holding firm and strong demand as well. Starting with vertical integration. Our new facilities and projects are progressing on schedule, and each one takes us further up to supply chain. In Greece, our Lavrio site is already producing 155-millimeter ammo. Base breed production starts this year and TNT production is [indiscernible] for the end 2027, as we already mentioned. Our German nitrocellulose facility remains on target for the end of 2027. And our propellant and joint venture with EURENCO in Slovakia should start the production by end of 2027 as well. Extended or long range, as we may name it, is where it matters the most now. Demand is shifting [indiscernible], and we are ready for it and removing bottlenecks to address that. Energetics as well as the propellant bimodular charges and others which are setting the range of the medium and large caliber [ ammunition ] accounts for around 50% of production costs when talking about 155-millimeter long-range type. Producing such energetics ourselves is our goal within the vertical integration programs, and we are running it and it's expected to cut [indiscernible] cost by approximately half once fully run. This is the main driver behind our margin ambitions beyond the current level. Our own production of artillery and tank ammunition for 2026 is expected to be around 850,000 pieces, supported by approximately another 400,000 pieces from the recommissioning. At the same time, 60% of 155-millimeter production should be long range as of the end of this year, which will have a positive mix impact on our financials. Our pricing demand and constraints on critical components continue to support the price levels. We see no meaningful pricing pressure in the current order book. Land Systems subsegment on Page 13 is showing fast growing with revenue approximately doubled in the first half of the year to EUR 445 million. Operating EBIT margin at a healthy 17% remains weighted to the production phase. Land Systems now contribute approximately half of overall group backlog and pipeline. We also launched CSG Land Systems North America, opening up a significant new addressable for our products. On Integrated Solutions, our vehicles are becoming the foundation for a growing range of advanced defense capabilities, air defense in particular, and complete our [ Tatra ] platform with radars, common control system and others is giving customers flexibility and complete mission-ready solutions. Aerospace Defence Electronics stands on Page 14 is where we build -- where we are building for the next phase of the growth. Demand is evolving quickly, and we are expanding existing capacities and [indiscernible]. Contribution to the group revenue in first half of 2026 was EUR 58 million as a stand-alone business. But more important is strategically as a part of integrated solution, we [indiscernible]. Recently, CSG unveiled Trident, a new modular air defense system combining short, medium and long range, together with the ground-based command platforms, advanced electronics warfare integrations and protection against drones. This is only one of the examples how significant integral part defence electronics is into these one system products. We also launched MAESTRO, [indiscernible] remote air traffic control tower platform with AI, which should extend our dual use radar and air traffic management portfolio. In Advanced Systems, we are building a leadership position in [indiscernible], which is one of the most demanding part of the long-range drones and missiles. Demand for CSG products from Middle East and Asia is a growing driver here. We also secured a strategic partnership with [indiscernible] armor for the development and supply of advanced propulsion systems for guided missiles and unmanned platforms. In the U.S., we announced a new Wisconsin plant to serve U.S. customers with first engine produced this year and serial production from 2027, as Michal already mentioned in his speech. While we are confident about our core capabilities, we don't [indiscernible], we are looking further not only developing what we have, but also moving into the new fields. Autonomy, AI and space are the areas where we are actively exploring. Ammo+ division on Page 15. For that, we can see 2 main positive developments in first half of 2026. The commercial market has turned, and our position in the U.S. government and law enforcement is getting stronger. Revenue was EUR 631 million for -- or 19% of the group revenue in the first half of this year, with EBIT EUR 51 million, but more important, with the EBIT margin improving to 8% back to the 2025 level. On the commercial side, we have seen a steady recovery in both volumes and profitability since Q1 2026. Pricing firmed after increase, and this has helped us to offset some inflation pressure, particularly when talking about the copper as a critical constituent to produce small caliber. We also deliver on our strategy to increase defence business and law enforcement business there. We strengthened our relationship with intelligent agencies to approximately $100 million contract [indiscernible] and we reached an agreement with the U.S. Army to use patented peak alloy case technology across multiple cartridges and weapon systems. On Page 16, it is worth spending some time and moment on working capital, it's shape through the year and what drives it. Net working capital at June stood at about EUR 2.9 billion, representing about [ 40% ] of LTM revenue. The build is deliberate. We are investing ahead of the production ramp-up to address the demand and growth. It follows exactly the pattern we described at Q1 and follows our expectations. We are prestocking key long lead time components to secure our supply position ahead of accelerating our deliveries in second half of [ this year ]. This is mainly in medium and large caliber ammo through both direct purchases and advances given to the suppliers. Second reason is that first [indiscernible] advance payment received has been converted into delivered revenues. That represents a mechanical reduction and it rivers -- and it reverses to new advances in second half of the year. This seasonally has been accepted -- expected -- I'm sorry, expected, and mirrors year 2025 when a comparable first half build was followed by a material unwind during the second half of the year and [indiscernible] particularly. Decrease of the net working capital by 20% to reach guided 20% net working capital level at year-end 2026 represents a number approximately [ EUR 1.5 ] [indiscernible] That is the amount which would be released as the cost of production and finally will be converted together with the margin into the revenue in second half of 2026. [indiscernible] reporting revenue to go to meet the year-end 2026 guidance, such 1.5 billion of net working capital to be released represents approximately 35% of the production costs. Taking into consideration fact, first, majority of that is medium and large caliber ammo, and majority of that will be long-range production, where the components and energetics are approximately 50% of the production costs. And second, that we expect other advanced payments from the customers in second half of this year are coming. I'm confident to confirm our guidance of net working capital level to be below 20% of the revenue at the end of this year. On Page 17 and on the next slide, we are giving more clarity to the drivers. We have broken the working capital build into 5 components. Across the demand. Second, Land Systems, share of backlog and pipeline, addressing the longer program cycle, more demand to working capital levels. Third is Land Systems delivery in second half of 2026, which is also a bit more demanded on the net working capital. Four, long-range mix. And fifth, our own production share in the medium and large caliber ammunition for the plans for 2026. Land Systems delivery, long range mix and our own production confirms my previous comment about cash to be released from the net working capital and our confidence about this. On Page 18, our cash flow and CapEx funding strategy. Operating EBITDA less CapEx was EUR 740 million in the first half of 2026, up EUR 54 million or about [ 8% ] year-on-year. That's a strong underlying cash result. Free cash flow reflects 2 things: first, EUR 1.2 billion deployed into the working capital to address the ramp-up; and second, higher tax payments, which are weighted into the first half of the year, particularly in second quarter, are not linear, but rather a one-off for only second quarter. CapEx was just below 4% of revenue, with cash conversion at 80%. This reflects pace of investments so far in capacity expansion and automation as we've guided. Free cash flow is expected to be according to the guidance by year-end 2026, mostly through release of the net working capital. At the same time, we expect the CapEx intensity to end up at expected level of 8.5% of the revenue as of the year-end. Connecting cash flow to the debt position and capital allocation on Page 19. Here, I would like to highlight steps we have taken to optimize our financing profile. Last month, we announced a refinancing of certain senior facilities. That reduces our cost of debt by approximately 125 to 150 bps per annum, and extended the maturity profile to 6 year without impact on leverage position. It also includes new sizable commitment -- committed RCF, and this gives us a flexibility in financing net working capital versus free cash to be used for the investments and CapEx. Net leverage, 1.6x, is according to expectation, copying the same trajectory as in the year 2025, and we expect to reach our year-end leverage target of below 1.3x as guided. To summarize the key takeaways on the Page 20. First, I would like to highlight that the revenue momentum is strong with a record backlog in Defence Systems. Second, we are winning in our core markets and diversifying beyond them, both in geography and by products, and that gives better quality of earnings. Third, we are scaled [indiscernible] large caliber ammo capacity successfully, and our vertical integration projects are on track. Four, Land Systems is growing strongly, and it's providing -- it can deliver in demand integrated programs, just not a vehicle. Fifth, in Ammo+, U.S. market has recovered, and we are investing to make sure capacities achieve the demand. And finally, strong moves into high-growth, air defense and counter UAS market. We are very active in these areas today, and we intend to increase our role there. And that brings me to the Page #21, where I would like to reaffirm the guidance as we've provided at the IPO, for the revenue to reach EUR 7.4 billion to EUR 7.6 billion as of the 2026, with the operating EBIT margin range between 24% to 25%. CapEx intensity, 8.5% of the revenues. Net working capital, as already mentioned, below 20% of the revenue, and the net leverage below 1.3x. All the midterm guidance is also reaffirm that we will be growing mid-teens organic CAGR with the margin to be up 26% to 28% [indiscernible], with the CapEx intensity, 4% to 5% in the midterm. And then brings us to the end of our presentation, and we are now happy to answer whatever questions you may have.

[Operator Instructions] We will now take the first question from the line of Ross Law from Morgan Stanley.

Two questions, if I may. The first is on your M/L ammo division. You continue to invest in vertical integration here most recently with the nitroglycerine site. How close are you now to being fully vertically integrated within the subsegment? What more needs to be done? And the second question is on the Ammo+ segment. We saw a very strong recovery in margin in the second quarter. How sustainable is this? And how should we think about the Ammo+ margin for the full year?

Yes. So I will start with the medium and large caliber ammo. Overall, we are more or less done. We have invested into all the necessary strategical components. So as we said by the end of 2027, we will have all the strategic ones under one roof so we will not be missing any of the strategic component, including propellants, different times [indiscernible] and the nitroglycerine and other components, which are needed for the short range and mainly long-range ammunition.

And on the Ammo+ margin, let me answer that. How sustainable is that in the second -- in the second quarter, as I mentioned, the margin reached 11% [ unit ], and we feel this is the sustainable level, and it should even improve slightly throughout the year. I was mentioning on the last earnings call that we expect this year, the EBIT margin to reach a double digit, which we can reaffirm now. This is the trajectory we can see. The demand is there, and we don't see any signals that it should be otherwise.

We will now take the next question from the line of Chloe Lemarie from Jefferies.

I will start with a follow-up on Ross' question on the nitroglycerine site acquisition actually. Does that create new cost-saving opportunities from user perspective from vertical integration of triple base propellant? Or is it more so that you secure your production needs going forward? And the second one, I wanted to ask about the own production indication on your medium, large ammunition slide. I just wanted to understand why H1 went down to 500,000 versus the end of 2025 or if it's really the half year production? Why wouldn't you be able to read [Audio Gap]

Answering to your question. The first part is -- the answer is both. So it should first increase our vertical integration as such and secure our supply. And the second, it's a [indiscernible] part of our vertical integration strategy in terms of the cost savings and the ramping up of the margin. So it should be both. And the second one, 500,000, I'm not sure where this is coming from. It's a production, but the capacities are 850 as we stated at Q1, and it is expected to reach [ 840,000 ] pieces our own production this year, as I mentioned. So the capacities are elsewhere, 500 is now currently being our own production, roughly plus/minus.

We will now take the next question from the line of Sebastian Growe from BNP Paribas.

[ Three ] overall. And the first one would be on Land Systems. So you mentioned that Land Systems already contributes half to the group order backlog. And now we have also launched CSG Land Systems in North America business. So my question is if you could comment on the opportunity that you see there and which programs are you targeting? And how should we think about product certification, et cetera. And we can start there and [indiscernible].

Yes. So I will maybe comment the opportunities. So -- as you know, U.S. defense market is the biggest defense market in the world. We can see that the next year budget should be around 1.3, $1.3 trillion. So we would like to definitely be here. Coming back to your question in terms of the Land Systems, we don't need any special certification. Our products are [ NATO-certified ]. What we need is the localization on which we are working on through the partnership or through the possible acquisitions. We are currently running more than 3 programs in the Land Systems which are worth of billions of U.S. dollars. I think that that's all what we can say now because we are obviously in some kind of confidential mode there.

Okay. That is helpful. And the other question is just a quick follow-up to the comments that you made before then also along the M/L ammo business. So it's actually 2 quick ones. The first is on the latest announced acquisition, if you could also help us with the agreed purchase price. And then secondly, and I don't want to [ confuse ] you, but quarter-on-quarter, it seems that the M/L ammo business margin was a little down from 32, I think, in the first quarter to now 30 or so in the second quarter. Is there anything to call out in terms of mix, et cetera? I think you raised the overall target for the large -- or long-range part for the full year. I was just curious to hear the exact sort of developments in quarter 2.

Medium large caliber ammo margins are 31%, so it's pretty much stable, above 30. Two is that -- and that's also one thing why we are confirming our guidance for the revenue. Two is that the longer range, together with the Land Systems is somewhat longer. So in terms of transferring from production to revenue may be a little bit longer than it gives to -- so the swing of the margin by 1%, we see as a technicality rather than whatever else behind it material.

On the purchase price?

The prices are stable. We don't see any price pressure, as I mentioned, on the -- on our backlog.

I mean for the assets acquired in Germany, the other one?

For the Gnaschwitz?

Exactly, yes.

I don't know if we can disclose...

It's been several dozen millions of euro.

Okay. And very lastly if I may, just quickly on M&A, I think you had a bit of a commentary made on the strategy on the last conference call. In the meantime, apparently, we have seen some developments around KNDS, and I was just curious if you might be willing to share what and how it might have impacted your discussions here?

We cannot comment it at this stage, but it's the same like we still monitor the situation, but there are no let's say, current concrete actions.

We will now take the next question from the line of Atinc Ozkan from Wood & Co.

I have 3 actually. The first one is regarding Ukraine, Evidently, the share in -- of Ukraine in your revenues has been declining. Given that now country has access to EUR 90 billion of funding from EU, do you think there will be a reversal in these trends? That's the first one. The second question is regarding U.S. market opportunity. As you know, there is the [indiscernible] modernization program where some of your competitors such as [indiscernible] are already pitching the prototype testing has already started. Do you think is it too late for you? Or do you see yourself as still lucky given your expertise in mobile [ hosters ]? That's the second question. And the third one is given the recent trend in affordable mass and containerized missile tender in U.S. and your Wisconsin plant investments, can you give us an updated guesstimate about future revenue contribution from Propulsion Systems under your Advanced Systems division?

Okay. So let's start from the last question regarding the turbo jet engines and then I will address the Ukraine and NTC.

Well, the strategy with the turbo jet engines following what we've presented already during our previous earnings calls. So the Wisconsin one should be an integral part of the overall capacities and backlog and pipe [indiscernible]. So if you are asking me what should be the contribution that should be in the midterm, several hundreds millions of euro equivalent coming from that.

What is important to say that this Wisconsin facility will mainly supply to the U.S. producers of unmanned solutions and missiles because of the localization and because of being closer to the customer. If it is okay, I will go to the next one. So MTC, mobile tactical canon, just for your information, we are in -- we are in our system, our complete [indiscernible], and we are there also as a chassis supplier to the -- our competitor. So we have basically much higher probability that we will get at least the part of the business, if not the whole mobile tactical canon then at least the chassis, which we can possibly supply as a chassis pro either to our competitors.

Is that -- Sorry, does that mean you'll be producing Tatra in U.S.?

There is such a probability, yes. Regarding Ukraine, look, we can see some significant movements in Ukraine and now there are the new tenders coming out. We are in these tenders. So if we will be successful, if we win some of those, obviously, the possibility that we will get additional revenues from the Ukraine, it's true, but I don't think so that it will increase overall percentage of the group revenue.