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(Bloomberg) — Germany’s biggest naval shipbuilder raised its full-year outlook again as Europe’s rearmament boom drives surging demand for warships, submarines and underwater electronics.
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TKMS AG & Co., which was spun off from Thyssenkrupp AG last year, said Wednesday that it expects sales to rise 10% to 12% in the year through September, up from 2% to 5%, with its adjusted operating margin reaching as much as 6.5%. It’s the second guidance upgrade this fiscal year as surging military budgets turn into orders for scarce naval hardware.
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The outlook underscores the rapid transformation of TKMS since it was spun off from Thyssenkrupp, the German industrial conglomerate that is breaking itself up into more independent businesses. Thyssenkrupp retained a 51% stake, while the separation gave the shipbuilder greater independence to pursue growth as defense spending jumps.
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At the heart of that growth are TKMS’s non-nuclear submarines and MEKO warships, a family of modular frigates and corvettes. Its broader portfolio includes torpedoes, sonar, and uncrewed underwater systems — equipment that’s increasingly in demand as European governments rebuild their naval forces.
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The boom may only be beginning. Years of post-Cold War under investment have left fleets depleted and shipyards stretched, just as governments race to rebuild military capacity in response to Russia’s war in Ukraine and mounting pressure to shoulder more of their own defense.
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TKMS said earnings are benefiting from the ramp-up of higher-margin new-build projects like the Type 212CD submarines it’s building for Germany and Norway and Type 218SG submarines for Singapore. Adjusted earnings before interest and taxes rose to €110 million ($127 million) in the nine months through June 30, up from €98 million a year earlier, helped by a fourfold increase at its submarine business.
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Revenue and earnings are set to grow further after TKMS was selected as preferred supplier for Canada’s new submarine fleet and secured a German frigate order. The company said it is working to conclude negotiations with Canada, while the frigate order is expected to enter its backlog in the final quarter.
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