TKMS, the defence business that German conglomerate Thyssenkrupp aims to spin off this autumn, plans to raise its profit margin to more than seven per cent to close a gap with rivals, banking on soaring military demand amid fears of Russian aggression.
TKMS, which makes submarines, frigates as well as sensor and mine-hunting technology, has more than tripled its order backlog in five years. It now stands at €18.6 billion ($21.8 billion) as governments around the world beef up warship fleets.
In the medium term, TKMS plans to raise its operating profit margin to more than seven per cent, compared with 4.3 per cent in the 2023/24 fiscal year, and is targeting average annual sales growth of 10 per cent, it said on Tuesday at a capital markets day.
"As TKMS, we are not only ideally positioned for the spin-off, but also to meet the dynamic demand of the market," TKMS CEO Oliver Burkhard said.
TKMS has helped parent Thyssenkrupp's shares to triple in value this year, as investors have flocked to defence stocks amid Russia's war in Ukraine and dwindling certainty over US military support for Europe.
As a result, TKMS expects its addressable market to double to €61 billion by 2033, up from €31 billion in 2024.
Shares in Thyssenkrupp were 1.8 per cent lower at 08:35 GMT, with a local trader saying the margin target was "not ambitious enough" relative to peers.
Last year, the maritime division of Britain's BAE posted an underlying operating profit margin of 7.7 per cent, while France's Naval Group delivered a seven per cent margin on its profit from continuing operations.
TKMS is also targeting a payout ratio of 30 to 50 per cent of net profit and wants to distribute its first dividend in 2027, it said.
(Reporting by Christoph Steitz and Tom Kaeckenhoff. Additional reporting by Zuzanna Szymanska. Editing by Miranda Murray and Mark Potter)