Earnings call transcript: Avioane Craiova’s Q3 2025 growth and strategic focus

Avioane Craiova SA reported strong financial performance for the third quarter of 2025, with significant year-over-year growth in both revenue and EBITDA. According to InvestingPro data, the company has maintained impressive revenue growth of 33.69% over the last twelve months. Despite a slight dip in its stock price, the company remains optimistic about its future growth prospects, driven by a robust backlog and strategic expansions in the defense and space sectors.

Key Takeaways

• Nine-month revenues increased by 26% year-over-year to €351 million.
• EBITDA rose by €3 million year-over-year, reaching €15.2 million.
• The company confirmed its 2025 guidance, with revenues expected between €450 million and €480 million.
• Avioane Craiova is expanding its U.S. defense operations with a new plant.
• The stock price declined by 1.49% following the earnings call.

Company Performance

Avioane Craiova demonstrated robust growth in the third quarter of 2025, driven by strong demand in the space and defense sectors. The company reported a record high backlog of €1.86 billion, indicating healthy future revenue streams. This performance aligns with the broader industry trend of increasing investments in defense and space technologies.

Financial Highlights

• Revenue: €351 million, up 26% year-over-year.
• EBITDA: €15.2 million, an increase of €3 million from the previous year.
• Positive net financial position of €47 million.
• Order intake reached €480 million, contributing to a strong backlog.

Market Reaction

Despite the positive earnings report, Avioane Craiova’s stock price fell by 1.49%, closing at €3.96. This decline may present an opportunity, as InvestingPro analysis indicates the stock is currently in oversold territory. With a beta of 0.62, the stock typically shows lower volatility than the market and often moves in the opposite direction, potentially offering diversification benefits. The stock remains within its 52-week range, with a high of €4.44 and a low of €2.02, suggesting a stable long-term outlook. Discover more insights and 6 additional ProTips with an InvestingPro subscription.

Outlook & Guidance

Avioane Craiova confirmed its 2025 guidance, projecting revenues between €450 million and €480 million and EBITDA between €27 million and €33 million. While the company’s liquid assets currently exceed short-term obligations, InvestingPro data shows the company is quickly burning through cash, which investors should monitor. The company aims to achieve a long-term revenue target of over €1.2 billion by 2035, with an expected annual EBITDA growth of 20%. Access the comprehensive Pro Research Report for detailed analysis of the company’s financial health and growth prospects. Key strategic initiatives include the development of new propulsion technologies and the expansion of U.S. defense manufacturing capabilities.

Executive Commentary

CEO Giulio Ranzo highlighted the company’s vertical integration in solid rocket motor manufacturing as a competitive advantage, stating, "Our solid rocket motor manufacturing activities are already quite significantly vertically integrated." He also emphasized the company’s growth potential in the U.S. market, noting, "We will be able to generate a positive EBITDA from the U.S. Rather, we will have costs, but not yet revenues."

Risks and Challenges

• Potential delays in the Ariane 6 and Vega C launches could impact revenue.
• The expansion into the U.S. market involves significant upfront costs, with profitability expected over the long term.
• The competitive landscape in defense and space sectors poses ongoing challenges.
• Macroeconomic factors, such as exchange rate fluctuations, could affect financial performance.

Q&A

During the earnings call, analysts inquired about potential new U.S. defense clients and opportunities with the Ariane 6 satellite deployments. The company is in ongoing negotiations for additional defense contracts and exploring potential opportunities with the Danish SAMP/T contract. These discussions highlight Avioane Craiova’s strategic focus on expanding its market presence in the defense sector.

Full transcript - Avioane Craiova SA (AVIO) Q3 2025:

Conference Operator, CORSCO: Good morning. This is the CORSCO Conference Operator. Welcome and thank you for joining the Avio 9 Months 2025 Results Web Call. All participants are in listen-only mode, and after the presentation, there will be an opportunity to join a Q&A session. At this time, I would like to turn the conference over to Mr. Nevio Quattrin, Investor Relations. Please go ahead, sir.

Nevio Quattrin, Investor Relations, Avio: Good morning. Good morning, everyone, and welcome to the 9 Months Results Conference Call of Avio. I’m here, as usual, with Mr. Giulio Ranzo, CEO of Avio, and for the first time, the newly appointed Chief Financial Officer of Avio, Mr. Roberto Garavasi. In a moment, we will go through the presentation we just released on our website, and as usual, in the end, we will welcome your questions. Thank you for your attention, and I leave the floor to Giulio.

Giulio Ranzo, CEO, Avio: Thank you, Nevio, and good morning to you all. Thank you for joining the 9 Months Results Conference. In the interest of time, I will jump to page 4 of our presentation, which provides a summary of what we’ve done in the course of the first three quarters. In a nutshell, I would say the results are on track, except that we are ahead of schedule with our backlog. The backlog exceeds what we had expected. The launch activity is on track. The third Vega launch is scheduled by year-end, I would say by the end of November, the very first days of December. Ahead of that, we will have another Ariane 6 launch next week. I would say the launch activity is as planned, pretty much.

In the space business, I think what is very relevant for the first nine months is the launch of another Vega C launch service with Space Launch. We’ll talk a little bit about that, and a new contract with the European Space Agency for a reusable upper stage. In the defense business, we had reported to you not too long ago the signature of a contract with Raytheon to expand the collaboration for the qualification of the Mach 104 solid rocket motor for the Standard Missile 6. Very relevant development. Earlier than that, we had signed a multi-year agreement with the U.S. Armed Forces for manufacturing, assembly, and integration, which overall consolidates a little bit our efforts to grow in the U.S. defense market.

As you know, the capital increase resolution was approved by shareholders last week with a very ample majority, so the rights offering is expected to be completed by year-end. We are awaiting the last green lights from authorities to actually launch the transaction effectively. Regarding the financials, as I said, the backlog is ahead of schedule, exceeding €1.8 billion, which, by the way, is our record high of all times. It’s a very relevant development, I would say. Revenues and EBITDA continue to grow at a rate of about 26% versus last year. As you know, the first nine months are just a relatively small fraction of the overall 2025 financials. Nonetheless, we confirm, of course, the guidance of 2025. If we move to page 5, some of the contractual developments in the space business.

First and foremost, I’m very happy to report we signed a new launch service agreement with Space Launch in our new capacity as a launch service provider, as you know. I am very happy about that because this was an open international competition on a commercial customer, whose name is still undisclosed. We will be able to disclose that in the course of 2026, but no earlier than that. It’s very important because it proves that Vega C is a competitive product when sold, you know, even outside Europe in competition with other solutions. In parallel, as you know, we have signed a contract with the European Space Agency for €40 million for the very first phases of technology development of a reusable upper stage.

As you know, we are placing lots of efforts to continue developing our technologies for upper stage, given our efforts with Vega E first and with the other activities on liquid oxygen methane technology. At some point, it will be very important to see whether we can have a fully reusable upper stage for it to be even more competitive for the future. On page 6, Ariane 6 is getting ready to launch. Here you see some pictures of our boosters and, sorry, of the central core stage getting ready for launch. In fact, by now, I think the rocket is fully integrated on the pad. It’s an important launch. It’s an Earth observation satellite, Sentinel-1D. We’re quite happy to see that Ariane 6, as I had reported earlier, is staying on track with its launch frequency as expected.

As you can see on page 7, this is pretty much what the manifest will tend to look like towards the end of the year. A total of four launches for Ariane and three launches for Vega C, which represents a significant improvement with respect to last year’s launch frequency. I would say this goes pretty much in the direction of what we expected, meaning the growth in the flight rates. Now, in terms of what we have in backlog for both Ariane and Vega, Ariane continues to have more than 30 flights in backlog, containing mega constellations, subcoms such as Project Kuiper, the Galileo constellation, and some military satellites, with the possibility of soon closing the loop with the IRIS² opportunity.

Regarding the Vega C launches, we have, give or take, 15 launches in backlog, which include obviously the Copernicus constellation, further satellites for the Copernicus constellations, the IRIDE, IRIDE Italian constellation, Platino, the Italian satellite, and some more opportunities around the world that are in pipeline that we hope to be able to announce soon. Now, switching gears, on page 8, on the technology evolutions, we had reported to you about our efforts in liquid oxygen methane. Now we are at a very important point. Our liquid oxygen methane technology demonstrator is being readied for flight, for experimental flight next year. Here you can see a glimpse of what we’re doing on the engine itself, on the cryogenic tanks, on the fairing, on the avionics that we have developed.

This is a very first opportunity for Avio to develop its own launcher technology with a lot of in-house new technologies of, I would say, next generation. It’s by all intentions an experimental vehicle. It will essentially enable us to demonstrate if our technologies are as competitive as we think, but it’s greatly improving our competitiveness for the next decade, I would say. Moreover, on page 9, we can report a successful completion of a number of tests of our multipurpose green engine. The multipurpose green engine is an orbital propulsion system. It’s the part of the propulsion we use when in space to allow for orbital maneuvers and potentially for reentry from space. You see all the parts of what we’re doing are now connecting with each other.

This technology, the hydrogen peroxide technology, is a very innovative one that a few around the world are developing, and it’s very promising because it’s very simple in a way and quite flexible to perform orbital maneuvers. We are very glad that this is a genuine Avio design, all done in-house, and it’s working pretty well. We will keep on reporting to you progress, but for now, we can say the first tests have been very successful and therefore very encouraging. On page 10, on the defense side, as we had reported some time ago, we have signed with Raytheon an agreement for up to $26 million to continue the engineering work to prepare the Mach 104 solid rocket motor for qualification. What does that mean? It’s essentially preparing ourselves to manufacture this solid rocket motor in the U.S.

Ahead of kicking off production by some time in 2028, we need to be able to demonstrate that what we manufacture is essentially meeting 100% of specifications. Unless you start this activity well ahead of time, you won’t be able to manufacture them. The fact that we are doing this well ahead of the start of manufacturing is what essentially secures that we will be able to manufacture that in the U.S. plant as soon as the U.S. plant is available. It also testifies the intention of the customer to essentially prepare the production phase ahead of time with some activity that is conducted for the time being in Italy, but paves the road for successful manufacturing thereafter. In fact, on page 11, you can see that the backlog on the defense side continues to grow extremely fast.

If we were to measure the compound annual growth rate of the defense propulsion backlog over the last six years, you would come to something like a 60% compound annual growth rate. Extremely fast. Therefore, what we will see in terms of the defense propulsion production, which we are now better off measuring in tons of propellant per year, will be certainly observing a significant growth rate. We do prepare to measure that in terms of the amount of tons of propellant produced per year, because, as you will appreciate, this is a mix of different products, some of which are small, some of which are large. It’s very difficult to measure them by the units. It’s so much better to measure them in terms of the overall tonnage per year.

Now, as soon as we start overlapping the European forecast of deliveries with that of the U.S., we will see an extremely rapid ramp-up with definitely a double-digit growth, also in terms of volume. In the very near term, meaning 2026, 2027, we will observe also a rapid growth only of the European part, by the way, to which the U.S. part is starting to overlap because, as you know, what we will be manufacturing for the U.S. Army will be first carried out in the Italian facilities until at least 2028. That means that we will add to the growth side some of the U.S. customer work performed in Italy until the U.S. plant is actually ready. Now, let’s go back to the U.S. plant for one moment on page 12.

We have presented to shareholders in the context of our pitch for the capital increase, we have presented our plans for erecting a plant in the U.S. We have explained that we are chasing pretty much three customers to perform against 10 plus programs with an overall capacity that will be in the range of about 700 tons of propellant per year to be ready by 2028. On this project, we have identified the site. We have signed an exclusivity agreement for us to work on, and we have completed the preliminary design. We are kicking off the detailed design and the early procurement activities to be able essentially to serve our current customers, so namely Raytheon and potentially the U.S. Army, but also some other customers with which we are entertaining final negotiations to hopefully lead very soon to an announcement of other agreements of long-term nature.

What we are aiming to do is to reserve a portion of the capacity of this plant to each of these customers, such that by the time the plant is ready, it will be essentially nearly filled with demand coming from each of these customers. Each customer will have what we call a portion, a share of reserved capacity, against which they will commit to transfer to us production orders, and we will therefore aim at a good capacity utilization of the plant from the very beginning. Through interaction with investors, we have received lots of questions as to, you know, are we ready to erect such a big plant, you know, from scratch on a greenfield project, which represents undoubtedly a challenge.

On page 13, we wanted to recap for the benefit of investors and analysts some of the past experience that Avio has had in erecting new solid rocket motor manufacturing plants. In particular, between 2018 and 2022, we have been refacilitating all of the Ariane 6 and Vega C solid rocket motor facilities, both in Europe and in French Guiana. Here you see some of the photos of the activities we have carried out in this period. We have built factories for an equivalent of 60,000 square meters with an overall investment in the range of about $300 million, financed by the European Space Agency in this case. We have put in place a capacity that today exceeds pretty much 6,000 tons per year. This is something of an order of magnitude larger than what we are aiming to do in the U.S.

This is important because it’s inevitably a risk factor. Erecting a new plant in execution is a risk factor, and we believe that our recent past experience with equipment suppliers, with the construction of these types of plants, provides a very relevant mitigation to this execution risk. A second point I wanted to focus on on page 14 and on which we’ve had lots of questions is what is the degree of vertical integration with the supply chain? Many of the investors have asked about our ability to ramp up with volume so quickly and whether or not the supply chain will follow. Okay, so one point we want to clarify is that our solid rocket motor manufacturing activities are already quite significantly vertically integrated. Here you see a snapshot of some of the things we do in-house that are typically done by external suppliers instead.

For solid rocket motors, we manufacture, we produce our own polybutadiene material, which is the main glue that puts together all of the ingredients of the solid propellant. It’s a very important chemical. It’s a fundamental chemical for the mixing of the propellant. We also manufacture our own thermal protection material, which, by the way, it’s a patented material. It’s an Avio patented material. Similarly, for the prepreg carbon fiber material that we use for the solid rocket motor cases, we use our own formulation and patented formulation of the resin, and we have our own preimpregnation factory. This is just a glimpse, but to convey to you the message that we plan on mitigating the risk of such a rapid ramp-up by integrating vertically within the supply chain as much as we can.

We cannot integrate 100%, but of course, we tend to integrate ourselves on the most critical sources of materials that will otherwise become bottlenecks in our quest to reach a high volume increase. A quick recap on page 15 for all of you on which are the revenue targets. The revenue targets are essentially moving from the current, give or take, $500 million in revenues that we are targeting for 2025, as per our guidance, to something in excess of $1.2 billion by the end of 2035. If we go along this route, we will be cruising at an annual compound growth rate of about 10% or actually exceeding 10%. This will happen by shifting the mix of the revenues, essentially moving the contribution of the defense revenues from the current 20% to something that will be well in excess of 50%, probably closer to 60% share.

As you may appreciate, more focus will be on production than what we have today, where revenues are equally shared between production and new research and development activities. Geographically, revenues will tend to be at least 35% to 40% from the U.S., whereas today we have less than 5% probably. On the long-term EBITDA targets on page 16, one important point here. The European activities will continue to grow, as you know, both for space and defense, and we expect, as we move towards the future years, to have an increasing operating leverage and therefore a growing European EBITDA as we move along. However, in the meantime, we will have to ramp up the U.S. business. Between now and 2028, we will not be able to generate a positive EBITDA from the U.S. Rather, we will have costs, but not yet revenues.

What we expect when we add up on these first few years, we expect an overall flat EBITDA until, you know, the midterm or let’s say 2028 timeframe when we actually start to have the plant in operation, and then a rapid growth in the U.S. EBITDA that will imply an overall EBITDA at group level growing at more than 20% all the way to 2035. As you may appreciate, the peak of the investment activity in the U.S. will be between now and 2028. The EBITDA will grow as a function of the new volumes and improved operating leverage, although, as you know, in our activities, in particular in solid propulsion, the operating leverage is somewhat limited because the fixed cost is relevant, and as you grow in volume, also the fixed cost.

The overall EBITDA will improve because the mix of the different businesses will be improved with respect to that. More focus on propulsion activities versus system-level activity will provide a better EBITDA margin. By 2035, we should end up with an EBITDA that is essentially five-fold what it is today. On page 17, one rapid touch on the capital increase. The result of the shareholders’ meeting was that we had two resolutions. One was a $400 million capital increase by way of a rights issue, with preemptive rights to existing shareholders. This has been approved with an overwhelming majority of 99%, which I think is very encouraging because I believe that this means that shareholders are fully aligned with the targets we have in mind and that we need to invest in order to capture this growth opportunity.

As you know, we also had a second resolution to potentially further increase the capital by another 10% within the next five years at the discretion of the Board of Directors, with the exclusion of preemptive rights. In this case, also, the majority was 77%. I think there was an overwhelming majority of positive votes on this. This, as you know, is the flexibility that we are keeping in the system. Should we find in the future further opportunities for growth? Should we aim to an even better business plan for the future? We want to be quick in raising more capital, making more resources available, invest more for the benefit of all shareholders to get a better result. Overall, that’s what we have done in the first nine months. We’ve covered a lot of ground.

I will stop here and pass the word to Roberto Garavasi, our new Chief Financial Officer, to whom, by the way, I wish best of luck on his new mandate. He will report to you our results. Once again, one word of big thank you to Alessandro Agosti, who has been with us for a long time, as you may recall. He has been instrumental also in a very smooth transition with our new CFO. We want to take once again the opportunity to thank him for his excellent professional performance. Roberto, to you.

Nevio Quattrin, Investor Relations, Avio: Thank you very much, Giulio. Thank you very much, Nevio, and good morning, everybody. Now we can move on slide 19, and then we can comment on the backlog performance of the company. The company has achieved this record-high backlog, reaching €1,860 million backlog. This astonishing performance has been possible thanks to the very strong order intake during the first nine months. The company booked more than €480 million. Most of them, €250 million, are related to the Vega program as a result of the transfer of the activity from Arianespace to Avio for the launch service provider activities. A larger portion of the order intake is also due to the defense propulsion for over €200 million, and this is the result of the orders we booked from both the European and the U.S. customers.

In terms of composition of the backlog, Vega still represents 50% of the overall backlog, with the defense propulsion that has increased to reach 32% of the total. In terms of composition, the production activities account for 60% of the backlog, with the remaining 40% related to technological developments. If we move to the next slide, slide 20, we can comment here the revenue performance. The company has generated €351 million of revenues in the nine months, significantly higher than last year, with an increase of 26%. This is due to the strong contribution coming from Ariane and Ariane 6, mainly Vega program as well. This is due to the higher production rate that is related to the increased flight cadence on both rockets. The defense propulsion contributed with almost €60 million and generating this important result for the nine months.

In terms of composition, the revenues have been generated for 58% by production activity, with an increase of 4 percentage points compared to last year, with the remaining 41% coming from the technological developments. If we move to the following slide, slide 21, here we can comment the overall performance of the company. We have already commented the backlog that has achieved, I repeat once again, €1,860 million in the nine months. The net revenues achieved €351 million, with a significant increase by €73 million compared to last year, and in percentage terms by 26%. This huge increase in the revenues has led to a very positive result in terms of EBITDA reported, despite a higher increase of the energy cost, with an EBITDA reported that achieved $15.2 million, with an increase of $3 million compared to last year.

This performance at the EBITDA level generated a positive EBITDA reported of $0.2 million, despite higher depreciation costs, mainly related to the higher flight cadence of the Vega program and the new ICT improvement projects. This enhancement of reported result generated a corresponding increase in the adjusted result as well. In terms of net financial position, the company closed the nine months with a positive net financial position of $47 million. This is declining from the $90 million booked at year-end 2024. This is the result of the flow down, mainly to the flow down to sub costs and suppliers of the advanced payments that the company booked in December last year, and benefiting from the $10 million coming from the exercise of space holding warrants.

Moving to the following slide, slide 22, we can here comment a bit the quarterly evolution of the EBITDA reported and of the net financial position. On the top of the slide, you can appreciate the linear growth of the EBITDA during the nine months, achieving the $15.2 million at September end. It’s worth highlighting that the performance in the various quarters has been always better compared to last year. As typical for the company, as the company experienced also on the last exercises, there is a large part of the EBITDA that is expected to be generated in Q4 as a result of the revenue growth in the fourth quarter. In terms of the net financial position, again, we achieved $47 million of positive net financial position at the September end.

In the previous quarters, as well as in the third quarter, the net financial position has been higher, much higher compared to last year. This will position the company to have a positive net financial position at the end of the year. Moving to the last slide, based on the nine months’ result that we have just commented, the company confirms the guidance for the year-end, specifically with the backlog that will be in the range of $1.7 to $1.8 billion at the year-end, revenues between $450 and $480 million, EBITDA reported between $27 and $33 million, with an EBITDA adjusted of $30 to $36 million, considering $3 million of non-recurring costs, and with a net income of between $7 and $10 million at the year-end. Thank you very much. I leave the floor again to Nevio. Thank you, Giulio. Thank you, Roberto.

I think we are ready to open up the Q&A session.

Conference Operator, CORSCO: Thank you. We will now begin the question and answer session. To enter the Q4 questions, please click on the Q&A icon on the left side of your screen. When announced, please click Continue on the pop-up window. If you are connected in audio only, please press Star and 1 on your telephone. First question is from Martino D’Ambrogi.

Giulio Ranzo, CEO, Avio: Good morning. Thank you. Good morning, everybody. The first question is on Giulio, on the interview on Il Sole 24 Ore today. You mentioned that one of the two U.S. clients, the new ones, is in advanced negotiation. Obviously, I do not ask you anything in particular, should we expect a similar timetable to Raytheon with 18, 24 months of development and thus production after 2028, or could it be a different timetable? The second question, I know I cannot ask you for the amount, what is the reasonable timetable or the timing for the government grants to be obtained? The third question is on the ministerial conference. What are your best expectations for the upcoming event? Thank you.

Nevio Quattrin, Investor Relations, Avio: Yes, Martino, thank you for your questions. On the new customer timeline, yes, I expect something similar as to what we have done pretty much with Raytheon. We need to kick off some activities that precede manufacturing, so qualification of the production lines, which we might as well be able to do in Italy, I believe. This largely depends on what type of program you are engaging on. Typically, in the U.S., you will have two types of programs: one that can be shared in terms of technology disclosure, also in Europe, where we can help from here, or there might be some specific programs that will be for U.S. eyes only. In such case, we will have to work only with U.S. people and U.S. citizens. In this case, we will have to wait until we ramp up also the team and the personnel in the U.S.

I think there will be plenty also with other customers of work to be done in Italy ahead of time before the production in the U.S. This is also in the interest of the customers to get ready sooner for production. I expect a similar timeline. Now, timing of grants, very good question. First of all, grants will be split into two different pursuits. On one side, you have the state grants relative to the place where we plan to erect the plant that we hope to be able to announce very soon. These are similar to what we have even in Italy. These are somewhat automatically proportional to the number of people you hire, to the overall investment you place, and so on. They come in the form largely of tax cuts and funds for the training of new personnel. This, I think, will have a relatively shorter timeframe.

Whereas on the federal government level, the answer is I don’t know, because, as you know, the new U.S. administration has largely changed the practices and the relevant interfaces. We are interfacing with the new administration. The dialogue is active, and our requests are on the ground. Since the administration changed, of course, we need to deal with new practices. This may take a longer period of time. I am unable to forecast how long this may take, but what I can tell you is we are in active discussion for this part as well. Now, on the ministerial conference of 2025, our expectation is good, something probably like we had in the previous ministerial conference or even slightly less would already be a good success for us. You may recall that at the last ministerial conference, we had a very substantial contribution.

In this case, I’m not sure we can achieve the exact same amount, but close to. I think the support from the European Space Agency will be essentially on two fronts. On one side, the support for the exploitation of Vega C, as you know, with all kinds of concurrent funds supporting the obsolescence of certain technologies, the activities for maintenance and operations of all of our assets on the launch site, and so on. This will enable essentially our expectation for growing the flight cadence of Vega C, or, in one way, securing flight rates compatible with market demand. On the other front, the ministerial conference will focus on extending our development programs, in particular on the liquid oxygen methane technology for the future.

As you know, also coming from the previous ministerial conference and from the projects we received out of the NextGen EU, we have a number of different programs on liquid oxygen methane technology development. What we will try to achieve with this ministerial conference is a consolidation of all these programs, Vega E, the liquid oxygen methane demonstrator, the MR60 engine, and the reusable upper stage to make them all converge towards a consistent and organic preparation of a next-generation launcher, which may have a significant portion in liquid oxygen methane. Now, of course, you are talking about the far future because Vega C has just entered in service. We’ll likely be in service for 10 to 15 years. This effort will continue across the years, and at some point, we will most probably overlap Vega E. Further on, we may field something even more sophisticated than Vega E.

Overall, I have a good expectation for this ministerial conference. I understand that the different countries are projecting to invest a lot, potentially more than in the previous ministerial conference, but we will not know until November 25, I believe. As we have traditionally done in the past, we will convene a conference call with investors and analysts the day after the ministerial conference to report to you the outcome and provide you with our read across on the outcome. That will be essentially very telling of the type of orders that we should be getting through 2026 and the beginning of 2027. I think that by the end of the year, we will have a picture not only of, you know, the content of the ministerial, but also a good hint of what the orders might be in the course of 2026 and the beginning of 2027.

Giulio Ranzo, CEO, Avio: Thank you, Giulio.

Conference Operator, CORSCO: Next question is from Gabriele Camparova in Intesa Sanpaolo.

Yes, good morning, everyone, and thanks for taking my questions. The first one is on Ariane 6. In your slide, you mentioned a major upside. Is it possible to understand what could this program mean to you? I mean, how many flights it could entail for Vega or Ariane? This is the first question. The second one is on the space alliance between Leonardo, Thales, and Airbus. Does this change anything for you? Do you think it can benefit, let’s say, the overall situation in Europe? The third one is on the results, the nine months’ results. We saw a very nice, let’s say, growth in the top line almost without operating leverage. You mentioned energy costs. Is it possible to understand better how energy costs impacted margins and what are you doing to protect them, to protect margins in the future? Thank you.

Nevio Quattrin, Investor Relations, Avio: Gabriele, on Ariane 6, we have limited visibility of what the launch schedule would be. What we know for the time being is that this is 280 satellites of medium size. We don’t know what is their deployment strategy. To be honest with you, I think not even the customers would know. We would have to see exactly how they want to deploy them. I expect the majority of them will represent an important opportunity for Ariane 6 to launch them. This will mean that we will have more opportunities to manufacture boosters at the end of the day, which is, as you know, profitable for us. The more we grow the rate of production, the more we utilize the capacity, the better we are in terms of margin.

Therefore, we see this as a positive and relevant expectation for the future, also because it may pave the way for the possibility of growing the cadence of production for boosters beyond what we have installed capacity for, by another, say, another 20%. We may debate this at the next ministerial conference. I hope that at this ministerial conference, also this subject will be on the table. If this were to be the case, I think this will represent incremental opportunity because if we were to go for an even higher production of boosters, I think at some point the operating leverage will show up. Now let me go to your third question. The growth in the top line without much of an operating leverage. The operating leverage, by the way, is difficult to fully exploit in the first nine months.

As you know, we accumulate most of the profit in the last quarter, unfortunately, and this is due to the fact that most suppliers push their costs through the last quarter because almost none of them is listed. They don’t care about the quarters. They tend to wait until the year-end to push all the costs out. I think we should see this year a modest improvement in the operating leverage. We are not yet where we would like to be in terms of capacity utilization rates, but definitely better than the year before. As you correctly pointed out, with a better situation on energy costs than we had anticipated. In fact, this year, starting from March this year, we have consistently seen energy prices somewhat below what we had expected.

Unless nothing changes between now and year-end, which we don’t think, we should have a positive surprise towards the end of the year, which may lead to some good improvement of the operating leverage. I want to be cautious and see what the numbers turn out to be in the last quarter to finalize on this. Let’s say it’s a positive expectation. On the space alliance, I don’t know. I have read the press release, just like you. I am not completely into this project. I don’t know much about it. What I know is that before this becomes an industrial reality, it would be a couple of years, at least. Therefore, we will see the effects of this not immediately, but maybe in some time. Overall, my tendency would be to believe that this is somewhat neutral to launch service providers.

Both ourselves and Ariane Group are not part of this joint venture. We provide launch services. We used to work well with Thales Alenia and with Airbus. Now that they are joined, we hopefully will work well with them joined. Ex ante, we don’t see any reason for it to change much for us in the future. Therefore, we await to see how this joint venture shapes up. I think to a large extent, the intent of the joint venture is to extract synergies within the satellite manufacturing activities, some of which are under severe loss, reportedly. Therefore, if they succeed in extracting these synergies and become more successful, we will be somewhat happy to see that and hopefully continue working with them as we have done in the past.

Giulio Ranzo, CEO, Avio: Okay, thank you very much, Giulio.

Conference Operator, CORSCO: Next question is from Andrea Bonfa.

Andrea Bonfa, your line is open.

Giulio Ranzo, CEO, Avio: Okay, can you hear me?

Conference Operator, CORSCO: Yes, we can hear you now.

Giulio Ranzo, CEO, Avio: Okay. Good morning to everybody. Very quickly, my question, some of the questions have already been answered, but I would like to expand a little bit further on the potential two new U.S. clients, in particular the one with the advanced stage. Can we expect some news flow in terms of potential order backlog or size of the initial contract by year-end? If this client is in the same potential sales as Raytheon, just to give an idea. Thank you.

Nevio Quattrin, Investor Relations, Avio: Andrea, we didn’t get the second part of your questions.

Giulio Ranzo, CEO, Avio: No, the second part of the question was if you can also comment or elaborate on the potential size of this potential new client, if he’s of the same potential size of Raytheon, or if he’s smaller or even bigger, just to sense a potential dimension on this.

Nevio Quattrin, Investor Relations, Avio: I would say it’s equally very big and capable. It’s one of the large U.S. OEMs. In terms of potential, it has comparable prospects as to Raytheon. In terms of new orders, we have other things in pipeline, by the way, that we need to accomplish, in particular orders for the P160. The P160, we have to recharge, so to speak, the orders booked for the P160 now that we are ramping up. As you know, we haven’t bothered to close the loop on new orders for P160 because in that, it did not fly. There was no need to work on a contract now. They’re consuming the stock pretty quickly. We have to work on that. I would expect, you know, earlier to see an order coming on that front. On the fence, we will see. There might be something more coming that we are working on.

Between now and the first quarter, you know, this would be the things to watch.

Giulio Ranzo, CEO, Avio: Okay, thank you very much.

Conference Operator, CORSCO: As a reminder, if you wish to ask a question, please click on the Q&A icon on the left side of your screen or press Star 1 on your telephone. Next question is a follow-up from Gabriele Camparova in Intesa Sanpaolo.

Yes, thank you for taking this follow-up. It is on the Danish SAMP/T contract. I mean, the country announced it chose the SAMP/T system one month ago, something similar. I wonder if you have any idea of when the contract could be signed, what is the size of the missile component, and even if this contract, which is an $8 billion contract for the overall system, was included or is included or not in your projections?

Nevio Quattrin, Investor Relations, Avio: The honest answer is that I don’t know. Gabriele, we don’t know exactly what the flow down might look like. We have started to hear this from MBDA, but we don’t have the figures yet. We anticipate that this may be quite significant, you know. For example, last year on a completely different project for CAMM-ER with Poland, we have had, as you may recall, a very important flow down. I believe that this contract for them may be of similar relevance, but honestly, we don’t have the numbers yet. We have interacted with MBDA, but this is not yet clear.

Okay, thank you. Just a reminder, the CAMM-ER Polish contract, what was the size for you?

It was 150 order miles.

Okay, thank you very much.

Conference Operator, CORSCO: For any further questions, please click on the Q&A icon on the left side of your screen or please press Star 1 on your telephone. Next question is a follow-up from Andrea Bonfa, Banca Akros. Andrea Bonfa, your line is open.

Giulio Ranzo, CEO, Avio: Okay. Now, my question is basically I’m attaching to the one of Gabriele. Thales, let’s say, keeps mentioning that there are potentially other orders similar to the Danish one. I was wondering if you are part of this negotiation, if you can see these orders coming, and if the magnitude can be of the similar size of Denmark or bigger or smaller. Thank you very much.

Nevio Quattrin, Investor Relations, Avio: No, Andrea, we don’t have this visibility. Honestly, we don’t know. We know that there is an expectation for growth that is well commented here and there from our institutions, the other institutions, as a consequence also of the SAFE program. This has not yet been defined at the level of ourselves, which we represent. Our supply chain has not yet been defined in quantitative terms. As soon as we have an understanding of that, we will promptly report that.

Giulio Ranzo, CEO, Avio: Thank you very much.

Conference Operator, CORSCO: For any further questions, please click on the Q&A icon on the left side of your screen or Star 1 on your telephone. Mr. Quattrin, gentlemen, there are no more questions registered at this time.

Nevio Quattrin, Investor Relations, Avio: Thank you. Thank you, everyone, for joining this call.

Conference Operator, CORSCO: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.

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