Thales maintains full-year targets after reporting higher nine-month revenue
Defence company reports lower-than-expected orders, sending its shares lower
French defence company Thales on Tuesday posted a 7.5% underlying rise in nine-month revenue to €12.85bn, led by demand for jetliner components and military equipment, but its shares fell on disappointment at new orders.
Europe’s largest defence electronics maker, which also provides civil aircraft systems and digital security equipment, said its order intake fell 18% from the same period last year, which had been buoyed by a Rafale fighter order from the United Arab Emirates.
Nine-month orders came in at €12.37bn, below the level of revenue and missing market expectations, but Thales reaffirmed its full-year targets including a book-to-bill ratio above one, meaning it expects orders to exceed revenues.
Jefferies analysts said the lower-than-expected order intake was related mainly to the timing of the second tranche of a recent Indonesian order for Dassault-made French Rafale fighters, for which Thales makes the radar.
CFO Pascal Bouchiat told reporters the sale of a further 18 jets would be reflected in the fourth quarter.
Shares in Thales were down 3% in mid-morning trading.
Bouchiat said the order comparison had also suffered from particularly strong demand for the company’s satellites in 2022, but said civil aviation had demonstrated a “strong commercial dynamic” this year.
“I have no doubt that we will be above one [in the full-year book-to-bill],” Bouchiat said, adding that orders at Thales tend in any case to be weighted towards the final quarter.
Jefferies analysts said the third-quarter order intake was below expectations but that this appeared to be driven mainly by the timing of the Indonesian Rafale order in Thales’ accounts.
In the Digital Identity & Security division, Thales said cybersecurity and biometrics experienced strong growth offset by a decline in payment and SIM cards in the third quarter, notably in Asia.
Bouchiat said a recent supply crisis in electronic chips appeared to be over as far as the digital division was concerned, while supply gaps remained in aerospace.
More broadly, the supply chain remains under significant pressure in several countries for hardware and mechanical components, affecting satellites and radars, he added.
Thales is paying close attention to the fate of small suppliers that were unable to invest adequately during the pandemic and are now struggling to keep up with demand. In some cases, Thales has had to pay advances or provide other support.
“We remain very vigilant,” Bouchiat said, adding he hoped the situation would stabilise progressively in 2024.
The company remains embroiled in a legal battle in SA over an arms deal it signed with Jacob Zuma when he was deputy president.
Zuma is accused of accepting R500,000 annually between 1995 and 2001 from the company, then known as Thompson-CSF, in exchange for protecting the company from an investigation into a deal to supply military hardware.
Zuma and Thales deny any wrongdoing.
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