Thales new orders jump 26%, but space business woes weigh on shares

FILE PHOTO: The logo of French defence and electronics group Thales is seen in La Defense business district near Paris·Reuters
Olivier Sorgho and Pauline Foret
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By Olivier Sorgho and Pauline Foret

(Reuters) -Europe's largest defence electronics company Thales beat market expectations for fresh orders on Tuesday as military clients bought more gear, but margin worries in its space business sent its shares falling more than 4%.

Thales has benefited from rising demand for military gear, bolstered by renewed engagements of NATO countries in Ukraine and deals with various armies.

Its order intake jumped 26% to 10.77 billion euros ($11.72 billion) in the first half of 2024, beating a company-provided consensus of 10.38 billion euros.

That was mostly driven by large orders including F126 frigates for the German Navy, rifled ammunition for France's Joint Munitions Command, and radars for the Dutch Ministry of Defence, it said.

"The (geopolitical situation) is not going to change because of such and such election, in such and such country," CEO Patrice Caine told analysts in a call, referring to the wars in Ukraine and Gaza and tensions in Taiwan.

Caine added that the U.S. elections would bring more volatility, while the newly appointed EU Commission has reiterated the bloc's involvement in Ukraine's defence and its own security.

SPACE CONCERNS

Shares in Thales were down 4.4% at 0912 GMT, among the worst performers on Europe's benchmark STOXX 600 index.

Berenberg analysts pointed to a disappointing surprise in the space segment that supplies satellite systems to governments and businesses.

Thales warned the 2024 operating profit margin in the space business would be negative due to falling demand for commercial telecommunication activities and restructuring costs.

Industry sources have said Airbus and Thales were in discussions to combine some of their space operations to better compete with U.S giants.

Caine referred to such talks as "rumours" that have kept resurfacing in his 10-year tenure as a CEO.

"We really need to focus on what I call plan A, to restructure the (space) business, to put it back on track by 2027," he said.

Thales upgraded its full-year outlook, expecting organic sales growth of between 5% and 6%, against previously expected growth of 4% to 6%.

($1 = 0.9189 euros)

(Reporting by Olivier Sorgho and Pauline Foret in GdanskEditing by Christina Fincher and Milla Nissi)