‘If the orders come, we will be ready,’ says French group’s chief
The chief executive of Thales has challenged European governments to follow through on pledges they are making to boost defence spending as the US pulls back from its traditional role of supporting the region’s security.
Reporting annual results on Tuesday, the French defence electronics group forecast higher sales in the current financial year on the back of stronger demand from armies that use their air defence radars and software for fighter jets.
“Does Europe have the necessary technology to produce the full spectrum of defence equipment that it needs? The answer is yes,” said chief executive Patrice Caine. “Production capacity adjusts naturally to the level of contracts.
“It is more a question for buyers, governments and armies,” he added. “Will the declarations be backed by extra contracts? The proof is in the pudding. If the orders come, we will be ready.”
The update came as the US on Tuesday said it was suspending military aid to Ukraine, with President Donald Trump seeking to increase pressure on President Volodymyr Zelenskyy to make concessions for a peace deal with Russia.
The decision will add urgency to efforts in many European capitals to bolster their own military support for Kyiv. The UK and Germany have already announced plans to increase military budgets in the coming years, while France has hinted it will also do so.
Thales’ shares rose 10 per cent on Tuesday, after it published a jump in sales, driven by its defence business, which generates more than half of revenue and operating profit.
The group’s shares had already risen 16.7 per cent on Monday amid a blistering defence stocks rally, as investors bet that the weakening of the transatlantic alliance would lead European countries to boost their defence spending, if the US withdrew its support.
Thales UK has in recent days agreed a new contract with the British government to supply 5,000 lightweight multi-role missiles. Prime Minister Keir Starmer announced the order immediately after hosting a summit of European leaders to rally support for Ukraine.
Caine said the order would lead to a tripling of production at its Belfast factory.
“For Thales it represents the equivalent of about one year of revenues generated in Britain,” he added, putting the figure at around £1.5bn.
Thales is 26.6 per cent owned by the French state and 26.59 per cent owned by French fighter jet maker Dassault Aviation. Alongside defence, it also serves civilian aviation customers and provides cyber security services.
The company on Tuesday reported annual sales of €20.6bn, up 8.3 per cent on an organic basis — a measure that strips out the effects of currency and acquisitions or divestments. It predicted sales of between €21.7bn and €21.9bn this year.
Operating profit rose 5.7 per cent on a comparable basis to €2.4bn, and Thales said it would raise its dividend to €3.7 per share, from €3.4 the previous year.
“This performance was notably driven by the strong growth in defence,” said Caine. The company said the division grew 13 per cent on an organic basis.
Analysts at Berenberg said investors would now be monitoring “the extent to which growth can be maintained at this level”.
Thales manufactures radar systems for air defence, as well as electronics and software for fighter jets and thermal imaging systems for the military among other products. It has increased production since the full-scale invasion of Ukraine began in 2022, including through expanded hiring.
Source: www.ft.com