CSG cuts its 2026 margin forecast and shares fall despite a record EUR 18bn backlog
The Prague-based ammunition and vehicle maker kept its revenue forecast but said cheaper sales of standard ammunition and lower-margin land systems would weigh on profitability.
Czechoslovak Group (CSG) lowered its 2026 operating EBIT margin forecast to about 21% from 24% to 25% on Wednesday 11 November, according to its nine-month trading statement. It kept its revenue guidance of EUR 7.4 billion to EUR 7.6 billion.
The Amsterdam-listed defence group's shares fell as much as 23% before trimming losses, Investing.com reported. Reuters listed CSG among the biggest losers on the STOXX 600 in early trading.
Why the margin is falling
CSG gave two reasons. Demand has shifted towards long-range ammunition, so the group accelerated sales of standard-range ammunition from its inventory, at lower market prices than in previous periods. It also expects strong growth at year end in Land Systems, its vehicle business, where margins are still building as programmes ramp up.
The effect is visible in the third quarter. Revenue fell 11.7% to EUR 1.51 billion from EUR 1.71 billion a year earlier, which the company attributed to delivery timing, especially in Land Systems. Operating EBIT dropped 20.9% to EUR 317 million, a margin of 21.0%, according to Investing.com. About EUR 300 million of revenue moved from the third into the fourth quarter.
Nine months in numbers
For January to September, revenue rose 6.1% to EUR 4.76 billion, led by the core Defence Systems businesses, where revenue grew 9.5%. Operating EBIT rose 0.4% to EUR 1.1 billion, and the margin fell to 23.1% from 24.5% a year earlier. Defence Systems earned a margin of 27.9%, while Land Systems was at around 15.5%, Investing.com reported.
A record order book
Demand is not the problem. CSG's backlog reached a record EUR 18 billion at the end of September, up from EUR 15 billion at the end of 2025, with Land Systems as the largest contributor. Including the pipeline under negotiation, the figure is EUR 47 billion, the company said.
Cash and debt
Pre-tax operating cash flow was minus EUR 200 million for the nine months, which CSG attributed to deliberate pre-stocking of inventory. It expects working capital to unwind in the fourth quarter, but longer lead times mean some deliveries and cash will slip into 2027. The group now expects net working capital below 35% of revenue in 2026, compared with its earlier forecast of below 20%.
Net debt rose to EUR 4.32 billion from EUR 3.0 billion at the end of 2025, according to Investing.com. Net debt was 2.4 times operating EBITDA over the last twelve months. Excluding EUR 731 million invested in joint ventures and strategic stakes and EUR 700 million of financing for key suppliers, the ratio would be about 1.6 times, CSG said. The group also refinanced EUR 3.1 billion of senior facilities, cutting its interest cost by 125 to 150 basis points and extending maturities to six years.
CSG reaffirmed its medium-term guidance. It said a shift to fully in-house production of extended-range ammunition is on track for completion by the end of 2027.
Market reaction
After the early fall of as much as 23%, the shares were trading 16.7% lower later in the morning, according to Investing.com. Handelsblatt reported a drop of 17.7% and noted that the record backlog had not been enough to offset the weaker margins.
What it means for European founders and investors
European defence spending is rising, but CSG's update shows that revenue growth does not automatically translate into higher profits. Product mix, pricing for standard munitions and the cost of ramping up new vehicle programmes all matter, and investors are punishing guidance cuts quickly. Rheinmetall faced a similar reaction when it cut its 2026 sales and margin outlook last week.
For defence tech founders, CSG's plans also point to opportunities. The group is investing heavily in joint ventures, strategic stakes and supplier capacity, and is moving more production in-house. Start-ups that can help large manufacturers ramp up output, manage inventories or cut lead times are addressing a real bottleneck. For the wider picture, see our coverage of Germany's stake in KNDS and Helsing's new air defence systems.
Spotted an error? Email contact@europreneursmedia.com and we'll correct it. See our corrections policy and editorial standards.
