00:00We move tantalizingly closer, it seems, or there's more and more talk, at least, of some sort of peace coming to Ukraine.
00:07But as yet, any deal remains elusive.
00:10If we do see a peace deal, what does that mean in the short term and the longer term for the defense project in Europe?
00:18First of all, thanks for having me.
00:19So, yes, any kind of peace deal would, of course, which would be durable and just, would, of course, be welcome for the people of Ukraine.
00:31I've recently visited the country and seen the population suffering, so we all hope for peace.
00:37However, a ceasefire would not change the security situation in Europe, not globally.
00:47So I think any effect on what we are doing would be very, very low.
00:55So do you think the U.S. is talking about this in terms of a peace deal, but do you think the European take would be this is just a short term ceasefire?
01:03Well, peace deal or ceasefire, anyway, both things are strongly connected.
01:08But I think still it calls for action in Europe to actually ramp up, fill up stockpiles.
01:15And here I see still defense spending.
01:19I mean, the plans are there that the demand is structurally high, which has been confirmed in a couple of meetings I had with German politicians.
01:27So we expect that the next 10 to 15 years defense spending will continue.
01:32Your share price high for the year 113.
01:36We're now trading at 68.
01:37Do you think the stock is priced for peace now?
01:39Well, I think that's definitely the markets are driven by sentiment at the moment.
01:45So looking at year to date, I think we're still 90 percent up.
01:49Yes, we lost about 30 percent in the last four weeks.
01:53But still, I see it's not about fundamentals.
01:56I mean, our fundamentals are strong.
01:58Growth is coming in.
02:00We approach probably a double-digit backlog, a billion backlog next year.
02:06So we have invested heavily into our capacity.
02:09It's significantly materializing at the moment.
02:13And above all, I think we have a very strong strategy.
02:15I mean, just recently at our Capital Markets Day, we have released our new multi-domain core.
02:20It's an AI-driven software stack, which definitely will disrupt the battlefield in the sense of connecting heterogeneous sensors together.
02:27How easy is that to do?
02:29Like, how...
02:30We seem to be on sort of the cusp of AI.
02:32I hear a lot about AI on the battlefield now.
02:35Yeah.
02:35But anybody that's kind of ever been in an armored personnel carrier or a tank or any of these other pieces of kit knows that these are...
02:43These are big, lumbering pieces of metal that struggle to connect with others.
02:48And I'm just kind of...
02:50How...
02:50We talk about the connected battlefield.
02:52How connected is the battlefield now?
02:54How good is Europe at this stuff?
02:57Well, actually, at the moment, there's a lot of things to do.
02:59So we have just signed, as we saw in the media, a landmark contract.
03:04So almost a billion for the new reconnaissance vehicle, the Lux 2 in Germany.
03:09Yeah.
03:09So that is really groundbreaking in the sense of the future battlefield.
03:13It's 360 degrees reconnaissance.
03:15It's real-time decision support.
03:18All of that has a lot of AI.
03:20But AI, coming back to your question, Guy, is in various dimensions.
03:24So we have AI at the sensor edge, actually, with a mass of data to kind of sort it out.
03:30Because also, bandwidth is limited on the battlefield.
03:33So that's one element.
03:35Second is in the network to really connect the field, where we use also automated software development.
03:41And last is on the user interface, where we use large language models to have your small battlefield Ziri that will actually give you the data based on native language.
03:54You've talked at your Capital Markets Day recently, Oliver, about wanting to buy other parts of your value chain.
04:01And maybe you're talking about the supply chain here.
04:04Which are the areas that you think it would be helpful for you as a business to own?
04:08What difference would that make?
04:10Well, it's about resilience at the moment.
04:13So our natural M&A target was always technology and internationalization.
04:18So as supply chain is at the core with our strategic element deliver at scale.
04:23So, of course, here we consider M&As as well.
04:25But it's not only, you know, organically bringing those topics in.
04:29We are also working.
04:30Yesterday, I attended a roundtable in Germany with Economy Minister Reiche and Defence Minister Pistorius, where they brought together automotive and defence industry, other sectors.
04:42Where probably we're talking about build to print, also enlarging our supply chain to multiple sources.
04:49So that's quite a diverse set of measures we are taking at the moment.
04:53Yes, yesterday we spoke to the ARX Robotics Management.
04:56And they were saying that Germany needs to activate the industrial base across Germany rather than leaving cars to do cars and defence to do defence.
05:07Is that something, and we've talked to you about that before, about the hiring opportunities that you have within the auto sector.
05:13Is that something that is increasingly happening, these two sectors coming together?
05:17Well, it's not only about personal.
05:18Yes, indeed, we talked about it.
05:19Personal is one element.
05:21The second element is really sourcing.
05:23So, I mean, in many parts of our supply chain, we had sole source, just unique sources of supply.
05:31So here we're really diversifying the supply chain where we take a lot of advantage of automotive.
05:37So looking at PCBs, we just outsourced many of our PCBs to suppliers which traditionally serve the automotive market.
05:45And last but not least, we also saw some or see some of the automotive suppliers getting bankrupt, getting into financial trouble.
05:54So we took over one plant from an automotive supplier to be faster, quicker in setting up our own production.
06:01What's the latest on FCAS?
06:02You're a sensor supplier.
06:04We've got Airbus, Dassault, trying to figure out what they're going to do.
06:08Yeah, I mean, everybody's looking.
06:10They announced the end of December we will have a settlement between Macron and Mertz.
06:15And do you think that's going to happen?
06:16Well, let's see.
06:17I still believe it's a great opportunity for Europe.
06:20It's a big chance, I mean, what we're facing globally to work together.
06:25But, I mean, we as Hensault, we take it pragmatic.
06:27I mean, I still support FCAS.
06:30But anyway, we are looking at the building blocks in next generation sensors, electromagnetic warfare.
06:36And that is happening with Tranche 5 for the Eurofighter.
06:39It is happening with the UCAF that Germany is setting up.
06:42So we have multiple venues where actually we're trying to drive those building blocks.
06:46Should FCAS go ahead?
06:48If it didn't, what would happen?
06:51If it did, what would happen?
06:52Is it for the best that it does go ahead?
06:56Or is it for the best at this point that we decide that actually it is not a requirement,
07:01so the French can go their own way, the Germans can go their own way?
07:03What do you think would be the best solution here?
07:06Well, look, the situation is very heterogeneous.
07:09We have this trouble on the fighter.
07:11But on the other hand, I mean, we work with Thales, with Indra on the sensor pillar,
07:15where actually the industry, the engineers are really doing a great work.
07:18So in that regard, if we can capture this spirit in the broader context of the program,
07:24I think it would be the best to continue.
07:25Oliver, can I ask you about the German government
07:27and how politics could get in the way of the defence spending plans or not, in your view?
07:34I mean, right now we're dealing with headlines around their pension reforms
07:36and there are some talking about, well, if they can't get these through,
07:39maybe the coalition collapses.
07:41And I wonder what you think about Germany's commitment to defence spending with that in mind.
07:47Indeed, Anna, there are inner political tensions, as I would call it.
07:52However, just also reflecting what I heard yesterday from Minister Pistorius and Minister Reiche,
07:58I see there is a very, very strong alignment on defence spending,
08:03on really building a credible deterrence and defence capability in Germany.
08:09So in that regard, I expect stability.
08:12I expect that those tensions will be overcome,
08:16because I think which is happening out there in the world,
08:19we need to have a strong government.
08:20We need to stand strong. The pressure from the right is there.
08:24So I think many reasons to come to a conclusion.
08:27You started this conversation by saying that a peace deal would not change the EU security situation.
08:34Is there any kind of peace deal that would, or is that that ship has sailed?
08:39It's too late.
08:40Well, unfortunately, I don't see it.
08:42I see, I would say, a decade of iron.
08:46And in that regards, we are prepared to serve our customers.
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