Good afternoon, everybody, and welcome to the presentation of nine-month results of Leonardo. My name is Claudia Introvigne, and I am the Investor Relations Director here in Leonardo. I am pleased to have here with me today our CFO, Giuseppe Aurilio, who will make the presentation going through the results and the outlook. After, we will have a Q&A session. Let us begin, and I leave the floor to Giuseppe.
Thank you, Claudia, and good afternoon to everyone. I am pleased to be here, driving you through our Q3 and nine-month results, which show a significant improvement across the board. Some key highlights before entering into the details. Top line is increasing. We have orders up 24% like-for-like at the end of September, book-to-bill at 1.5, with a record backlog exceeding EUR 60 billion, including Iveco Defence Vehicles. Revenues are up by 10% like-for-like, so excluding IDV and net of the negative impact deriving from the translation of the U.S. dollars. Top line is increasing, but execution is on track, and this is driving our strong growth in profitability and cash flow. If we look at the income statement, we see EBITA up by around 30% like-for-like, with a return on sales expanding to 8.5%.
Remember, it was 7% in 2025, so it is a very significant increase and improvement. We are really on track to deliver our double-digit ROS at full year, which is our target of profitability for 2026. As said, the performance is strong across the board, but we want to highlight the outstanding performance in Electronics, then we will enter into further details, but clearly, this is driving up performances for all the group. Free Operating Cash Flow is going very well. It is positive for the first time at this point of the year. As you know, our cash flow is seasonal, and so it is usually negative in the first part of the year. This year, excluding the contribution from IDV, we are positive at the end of September with a strong third quarter, positive for EUR 250 million, excluding IDV contribution.
We see a strong commercial momentum, continuing a strong commercial momentum across all the business. We will see when looking at the orders that our commercial performance are outstanding across all the business, very strong in Electronics defense, and this is leading us to further upgrading our guidance for orders up to EUR 29.5 billion. You may remember that our guidance were already subject to review and increased in July when presenting the half-year accounts. Positive performance and growth across all key financial metrics. Backlog is now EUR 60 billion, so covering production for more than two years and a half. The orders for the year are EUR 23.3 billion, with revenue above EUR 15 billion, and an EBITA at 8.5% return on sales at 1.3. Free Operating Cash Flow, including IDV, is negative by around EUR 70 million, but it will be positive excluding the contribution of IDV.
Net debt is now at EUR 3.3 billion, which compares to EUR 2.3 billion at the end of the nine months 2025. You may remember that in the meantime, we have acquired IDV for EUR 1.6 billion. Very strong results, very solid performance across all the business. Looking at order first, we see that orders year-on-year, and excluding IDV contribution, are up by 24% with a total backlog, as said, above EUR 60 billion, including IDV. The performance is good across all the business. You see that there is a plus in all the sectors. Starting from defense Electronics, book-to-bill is 1.6. The increase compared to 2025 is above EUR 2 billion, and it is driven by both Europe and U.S. performance. Electronics Europe is growing by 44% compared to 2025, driven, of course, by domestic, but also export contract awards.
Just to remember some of the contracts that we acquired during these nine months, we have the SAMP/T contract for Italy, the BMD+ contract, which is very important also for the potential benefits for the Michelangelo projects, the export for Grifo, and the combat naval system for Kuwait. A long list of not jumbo orders, but medium orders, which makes a big difference compared to last year. Leonardo DRS as well is growing by around 10%, which means around 14% net of the effect of the translation of the dollar into euros. Very strong performance as well. Main contracts are referring to the Ohio Replacement Program, the submarine program, the KDDX for Korea, and M-SHORAD, which are the main contracts acquired during these nine months.
Helicopters is growing by 28%, so a strong contribution and a strong increase also from helicopters, which is mainly driven by the contract with the UK MoD for the supply of AW149 helicopters. You remember the UK NMH contract, which was very important. It was a milestone of our commercial plan for 2026, and it was very important to get it during 2026 for our Yeovil site. Very good performance also in the customer support business, where the most important contract is again in U.K., and is the extension of the IMOS contract with the UK MoD. Strong performance in helicopters. The number of units ordered is 131 compared to 102 last year, so a strong increase. Aeronautics, in the two components, we have aircraft marking a significant performance, more than EUR 4 billion.
You see the increase is not so big, 3%, but you may remember that in Q3 of 2025, we booked a jumbo order relating to the integrated logistics support for Kuwait. The comparison, when comparing the two years, you need to remember this. Despite this, aircraft is marking a significant progress, +3%, with some very important contract acquired during these nine months. On M-346, we signed the contract for the provision of M-346 to the Austrian Air Force. We signed the contract with Italy for the acrobatic planes. Two very important orders, two very important success for M-346. We signed additional orders on EFA, very important. Both with the domestic countries, but also on the export market, and we are still having the contribution from GCAP, which is important and growing as a program. Very significant core programs driving the performance of the division.
Aerostructure as well is growing. This is clearly linked to the demand, to the increasing demand from OEM, and we will see the impact on the income statement of this increase. Also in cyber and space, we are marking very good progress. Cyber is growing at 9% growth rate. Here, we highlight the additional orders from the National Strategic Hub, which is contributing significantly at the development of the division. Space, where we have a positive contribution, both from payload and robotics business and also from the service side. Book-to-bill is 1.5 at group level, so very good progress. Total backlog, as said, is EUR 60 billion. So strong commercial momentum, and this has clearly, this has driven us to increase our guidance for the full year, as we will see later on.
Revenues are up by 10%, again, excluding IDV and the impact from the exchange differences. Again, it's an improvement which is spread across all the business, starting from Electronics, where, as said, we have outstanding performance. Electronics Europe is growing at 15%, and this growth is spread across all the business area of the Electronics in Europe. So a very significant performance. Leonardo DRS is growing at 9%. You read 5% because of the negative impact of the dollars, otherwise it would be 9%. Again, a significant increase and a significant improvement. Helicopters is growing at 5%, which is more compared to our expectation for the full year. So this is a sign of a very good performance for helicopters. The growth is driven by strong deliveries over the nine months and also from the customer support. In terms of new deliveries, we reached 120 new helicopters.
It was 115 in the first nine months of 2025. Also the mix is different, and this is clearly another positive element, because last year we had the last portion of deliveries on the TH-73 contract with the US Navy, which was over at the end of 2025. In the first nine months, we had 18 deliveries under that contract. So this year, the mix is more on medium and AW family helicopters. So we have an increase of deliveries with the 139, plus seven. We have a strong increase in 189 compared to last year, and also 149. So the mix is more favorable and less exposed to light helicopters. Aeronautics, we see the overall performance is 7%, split in aircraft, 1% increase.
In aircraft, as we discussed also at the end of July, clearly we have been affected by a lower level of revenues in our customer support contract in Kuwait mainly, and this is because clearly of the geopolitical situation. Despite this, we are growing compared to last year by around 1%, with a solid contribution from our core programs, so EFA, M-346, GCAP, JSF, but also with customer support contract. Aerostructure is growing by 44%, and this is clearly driven by the rate of production on Boeing 787 Dreamliner. You know that 50% of our Aerostructure business is with Boeing and mainly on Boeing 787 Dreamliner. In 2025, we started the year at five fuselage per month rate of delivery, which was very low, dramatically low. This year, we started the year at seven. We went up to eight during the year.
So clearly, the volumes on Boeing 787 Dreamliner makes a big difference on the results of Aerostructures and the progress of revenues. We have increased also the number of deliveries on ATR. It was 17 last year. This year, we have delivered 30 deliveries in total over the nine months. So, this is leading the division to progress by 7%. As Aeronautics, 44% if we look at Aerostructures standalone only. Cybersecurity is progressing at 17% rate. So again, like last year, strong growth in cyber and security driven by the new orders we are getting also on the National Strategic Hub as seen before, but also on the backlog, on the development of the backlog. So, good solid progress also in cyber and security, like in Space, where we are growing at 10% rate.
A gain, this growth is spread over across all the business areas, so payload and robotics, but also in services.
We see an increase in, strong increase in SATCOM, satellite systems and operations, and geoinformation as well. So overall, a strong growth in line with our target and our guidance for revenues for the full year, +10% excluding the impact of the exchange rate. Now, you know that I have been appointed exactly one year ago. It was November 5th, 2025. So it is the anniversary. It is time also to look at the, take the stock, and see what are the really good progress of the group, which are clearly for me the strong commercial momentum, the progress in margin, and the progress in cash flow. Focusing on margin expansion, we want to highlight these three levers that are driving up our return on sales from when I arrived, it was, we were at 8.4%. This year, we are targeting 10%.
So, why are we growing so much in terms of profitability? I think there are a number of reasons. The main one is that we are doing well across all the business, which is also de-risking our growth. The ROS is improving across all of our business. Group EBITA has grown this year by 30%, before IDV contribution. And this is clearly driven to me by scale effect, especially in some sector, and we will see, and solid program execution, which is key both for the income statement, but also for the cash flow. The improvement we are seeing derive a lot from our solid program execution. Clearly, we are benefiting from outstanding performance of Defense Electronics, as said. Return on sales of that division is up to 12.6%, and it is doing very well in all the three different components.
So, Electronics Europe this year is growing by 17% in term of EBITA compared to 2025. Leonardo DRS is growing by more than 25%. As you have probably seen, Leonardo DRS has just revised their guidance for the full year, increasing revenues and EBITDA guidance. And also, MBDA is contributing with a +19% compared to last year. MBDA, in particular, is growing at around 8% in terms of revenues, with a profitability which is double digit as well in terms of return on sales, and a net income which has grown by 19%. MBDA, you may remember, we touched this point in July also, has now a backlog of EUR 50 billion. So it is clearly a key asset inside our Defense Electronics business. Third point, Aeronautics is improving. We have a very solid profitability in Aircraft. This year, we are running at 11.6% return on sales.
This is driven, as said, by our core programs, so EFA, now GCAP. M-346 is expanding a lot, so very good success, very good progress in our profitability. Aerostructures is reducing the level of losses, thanks to the ramp-up on Boeing 787 Dreamliner program. We clearly have still issues on Aerostructures. The result is negative, as we will see in a while, but it has improved by around 30% compared to last year, and this clearly makes the issue much more manageable and much less painful for the whole group. Looking at the details of EBITA, we see that like-for-like, the return on sales goes up from 7%- 8.3%, so it is more or less a 29% increase. One-third is driven by additional volumes. Two-thirds are the effect of the margin improvement, as we were describing earlier, so a very significant margin improvement.
If we look at the breakdown by segment, we start from Electronics. I said it is a 12.6% return on sales this year. It was 11.5% in 2025. We see the contribution positive by Electronics. Electronics Europe is double digit, is already double digit in 2026, already in September. Leonardo DRS is above 11% in terms of return on sales. MBDA, as said, is +19% compared to last year, so the contribution is increasing, as well as Hensoldt. You may have seen the conference call today, earlier in the morning. They are increasing their net income, their profitability. They are revising their guidance for the full year, so a positive trend also in Hensoldt. Overall, strong contribution from Electronics, EUR 800 million of EBITA contributed by the defense electronic business.
Helicopters is growing 8% compared to last year, and as you see, the return on sales is perfectly in line with the full year expectation, where we are supposed to grow from 9% to 9.2%. The increase over the nine months is perfectly in line with the target for the full year, and it means that we are doing well in executing our optimization actions on Helicopters. Aeronautics is growing clearly also because of the reduction of the loss in Aerostructures. If we look at Aircraft, we see that the EBITA is progressing, despite there is a zero volume effect, as we have seen revenues are quite flat, but the marginality is expanding. We have an improvement of 4% compared to last year. Aerostructures and also ATR are improving, so they are still negative, but clearly they are improving compared to last year, around +30%.
Cyber and Security is growing at 37%, and clearly we see the impact and the benefit from the scale. The division is growing a lot in terms of revenues, but costs are not growing at the same pace, so we are benefiting from additional scale. The same for Space, which is growing by 27%. Of course, like for Aeronautics, we have also the impact of the lower losses of Thales Alenia Space, which is still negative at net result level. As you know, in our EBITA, we put the net result of Thales Alenia Space, but it is now positive at EBITA level, so they are running in line with the recovery plan. Overall, a very strong EBITA, which makes us confident in confirming our double-digit target for the full year. Now a focus on IDV.
As you know, we have consolidated Iveco Defence Vehicles since April 1st, 2026, so we are including in our nine months only Q2 and Q3 of IDV. We see a trend which is perfectly in line with our estimation at the beginning of the year. We are now in orders at EUR 1 billion. The orders is driven by some important orders, the SUPERAV in Spain. It is an armored amphibious platform. The tactical truck for Romania, and the Centauro Brazil, which is an important order also for the land defense activities inside Electronics defense. Revenues are at EUR 0.7 compared to the trend that we've seen in Q2. Truck weight is now higher. You may remember that we touched this point during the presentation. The contribution of armored vehicle was higher in the first quarter.
Now we go more or less in line with what we expect for the full year in terms of contribution for trucks. Trucks have a lower margin compared to armored vehicles, and that explain why the return on sales is now at around 11%. Cash is negative by around EUR 90 million. Of course, as for us, it is in line with the usual seasonality of the business, where most of the cash in are concentrated over the last quarter of the year. It is in line with the trend of the business. As we touch the point about Free Operating Cash Flow, let's focus now on the Free Operating Cash Flow for the group, which is up 80%, driven again by a strong operating performance and clearly also working capital management.
In the nine months of 2025, we've been able to be positive before IDV or slightly negative, including IDV. I said it's the first time ever of positive Free Operating Cash Flow at the end of September. We've been able to be at this point despite two negative impacts that we know since the beginning. It was already planned, but it is positive to see that we've been able to offset these two negative elements. First, higher tax paid. You may remember that we were having a huge amount of tax losses in Italy. The tax losses expired during 2026, so this year, we are starting paying fully taxes in Italy, and this has an impact of around EUR 120 million compared to 2025 of additional tax paid.
We have also the settlement of NH90 Norway litigation, which are cash out in the period of more than EUR 110 million. Overall, we've been able to offset these two negative elements and make better, much better compared to last year. Clearly, the Free Operating Cash Flow is part of the net debt, which is now at EUR 3.3. I have to say that we have a very solid balance sheet. You may notice that there is no new debt as a consequence of the acquisition of IDV, so we paid IDV consideration without making additional debt. At the end of March, we refinanced a debt which was already in place and expired at the beginning of January, but without making additional debt.
We have a net debt, excluding lease liabilities and payables to joint venture, we are talking mainly about MBDA now, of EUR 0.9, which is the number I look at when looking at the treasury situation of the group. Last year, in September, it was EUR 0.6, so you can understand that we are managing also the debt very well and keeping it very in line with our target leverage. I said at the beginning, the strong commercial momentum has driven us, has made us confident in increasing again the guidance in terms of orders, now up to EUR 29.5. We started the year, we closed 2025 at EUR 23.8. The original guidance was EUR 26.2. We raised that to EUR 28.2 in July, and now EUR 29.5. Revenues, we confirm the guidance at EUR 22.1 compared to EUR 19.5 in 2025.
EBITA, we confirm the guidance at EUR 2.21, as increased in July, which marks a +20% compared to the results of 2025. Free Operating Cash Flow, we confirm that we will deliver the target of EUR 1.37 compared to EUR 1.0 in 2025, leading the net debt down to EUR 2.2. We have increased the guidance. We have confirmed the guidance as increased in July. We feel confident that we will deliver these targets at the end of the year.
Thank you, Giuseppe. It is now time to open our Q&A session. I leave the floor to the analysts. The first question is coming from Sam Burgess from Goldman Sachs.
Great. Thank you very much. Good afternoon, Giuseppe and Claudia. Just two questions, please. Firstly, group EBITA margin has increased year-on-year in each quarter this year, and it was 170 basis points higher in Q3. But when I look at the full year guidance, it implies a Q4 margin which is broadly unchanged from Q4 2025. Just want to know if there is any specific headwinds that you are expecting in Q4, or are you allowing for a bit of conservatism there? Secondly, net financial payables to joint ventures increased by nearly EUR 500 million since year-end. Out of interest, is this mainly cash funding for MBDA expansion? Could you just talk a little bit about the lower cash dividends received this year? Is this also MBDA expansion and them paying a little less in dividends?
Thank you, Sam. EBITA margin, as said, one of the actions we have taken, starting from, I think, last year before my arrival, was to make the trend more linear, which means de-risking the full year guidance at the end, because I think we were too heavily back-ended loaded in the past. Now, we try to be more linear over the year, and this has a clear impact on EBITA and Free Operating Cash Flow as well. The improvement that you see on Free Operating Cash Flow derives from this. When we talk about strong program execution, we talk about this action to make the trend more linear, which clearly means that the Q4 is going to be less exceptional, let's say in this way. It was exceptional in the past. It was a huge step up over the last weeks of the year.
We want Q4, clearly it will be always the best quarter for the year. Clearly, it will be the quarter in which we make most of our cash and most of our EBITA, but we want Q4 to be a little bit more normal than in the past. This is the action we are taking, and that's why Q4 now seems a little bit lower compared to the past. I remember that last year when presenting the full-year result, it was my first presentation, I received the same questions, which means we are doing well from our side. We are making last quarter less exceptional. It was too much. It was a risk for the full-year guidance. Now, you're right, we are projecting a Q4, which is more in line with this trend, but with always more than EUR 6 billion, EUR 6.2 billion in terms of revenues, excluding IDV.
Let's talk without the IDV for a second, for which we confirm the results, so it is not changing the picture. EUR 6.2 billion revenues in a quarter. This quarter, we were at EUR 5 billion. So it means that in the last quarter, we're going to increase revenues by more than EUR 1 billion. EBITA of the last quarter is 14%. So it is true that we are making a lot of progress in making the trend more linear, but Q4 is still at 14%, as it is normal. Said that, I think that the guidance we provided on EBITA is something we can deliver. We feel confident that we can deliver. We follow a very serious process in determining our guidance, and we think we will deliver that guidance.
As regards net payables to MBDA, you're right, that's the cash from MBDA, so there is a treasury agreement in place between the shareholders. MBDA gets the cash because of its commercial activities, and then it deposits cash to shareholders. That's our portion of cash, and that is why I was saying when commenting the debt that when I look at the net debt of the group for treasury purposes, this is not debt for me because this is my share of cash of MBDA. So, MBDA has recorded a positive cash flow in line with the numbers I was quoting when discussing about MBDA, and that's the portion of Free Operating Cash Flow generating over the period that is deposited to Leonardo. You are right, we have lower dividend this year, but it was because last year the dividend was extraordinary.
There was around EUR 100 million more in comparison with what was right to be distributed. Last year, we included an extraordinary dividend of around EUR 100 million.
Thank you, Sam. The next question comes from Alessandro Pozzi from Mediobanca.
Hi, good afternoon. Two questions from me. The first one is on the upgrade in order intake guidance. I was wondering if you could clarify the new contracts that you have included with the new guidance. I think there are still a couple of large ones, like the KDDX and the main battle tank in Italy. Can you confirm whether that will be Q4 or maybe Q1 as well? The second question on Aerostructures, I think it's good to see positive progress. I think there is a target of reaching 10 units per month. I don't think it's quite clear yet whether it's still on the table for year-end or next year. If you can give us any update there, and maybe given that we are on the topic, if you can comment on the potential JV in Aerostructures on where we are. Thank you.
Okay, Alessandro. Regarding the upgrade on orders, clearly is a balance between risk and opportunities we have at this point of the year. You can imagine that this year now under the new guidance, we are factoring around EUR 6 billion of additional orders. You can imagine there are a number of programs, and the commercial team is working to put in parallel all these processes and make this target achieved. Of course, the orders you quoted are part of this balance that we are factoring to build up our new guidance of EUR 29.5. It is part of our risk and opportunity. At this point of the year, clearly we are working on a pipeline which is clear. It could be in 2027 or in 2026, but clearly it's not going to change the profile of the business and the execution next year.
We are factoring different orders, also other big orders. That is a weighted average of what we see at the moment. KDDX is part of this weighted average. NMBT is part of this weighted average as well. These are two big orders. For NMBT, you know that there is a process in place. For both of these orders, what I can tell you is that we will book the orders only when all the administrative steps are completed. It is not just the sign-off, but we wait for the whole administrative process to be completed. Aerostructures, you are right. The assumption was to go up to 10 over the year. We are not at that stage at the moment. We are still at 8. As you know, Boeing is delaying the moment in which they go up to 10.
It is something we will They said during the presentation, I think it is a target for the year-end. It means that for us, it will be probably end of the year or beginning of 2027 more likely. About the JV, you know that there is this discussion in place with a potential partner, which is now clearly affected also by the geopolitical situation. You know what are the main open points, because I think we have disclosed clearly, and they require also the local activities to be done in that country. Clearly, you can understand that both the progress of our discussion and the meetings, but also that specific discussion about the local content is somehow affected by the geopolitical situation.
I think for Aerostructures, we are working at the same time on the standalone plan, which is really key in both the scenarios, because if we do the partnership or we do not do the partnership, I think we need to start from a solid business plan, and that is why we are working a lot on making that plan more sustainable. We will update the situation when presenting the new industrial plan. Clearly, a key milestone is the plan from Aerostructures because it is, as said, losses are decreasing. This makes the Aerostructures issue more manageable, but of course, it is something we want to solve, so it will be part of our industrial plan.
Okay, thank you. Next question is coming from David Holmes from Bank of America.
Hello. Good afternoon, guys. Couple of questions, please. First one is on the Helicopters business. You had an acceleration in revenue growth in Q3. Orders are now +27% year-on-year, I think. I suppose the question from me is that kind of momentum still consistent with the 4% revenue CAGR that you have guided to as part of the industrial plan? The second question is on the Aircraft segment. You called out being flattish on the nine months with some headwinds from the service contracts, but again, I think there was a decent improvement in revenue growth in Q3. Is that improvement sustainable, or is there ongoing headwinds from the support contracts for us to consider in the coming quarters? Thank you.
Starting from Helicopters, clearly, we are getting very important commercial success, which are not short-term, so they will be the foundation for the plan of Helicopters, and clearly in medium and long term, rather than in short term. For 2026, we confirm our expectation on Helicopters, which is a growth at around 4%, so not far from the 5% we marked in the nine months, with a profit improvement, which is our priority for Helicopters. You may remember that we were at 8.7% or 8% in 2025. We have been up to 9%. We need to increase to 9.2% because the target over the plan is to be double digit. So, we are working a lot on that to make this target achievable, of course. We are working on optimizing costs.
We are working on the mix because we have a growing impact from customer support activities, where margins are higher compared to the pure sale of helicopters. So, this is our priority, improving profitability in Helicopters with the target of having the double digit over the plan. Aircraft, I think the negative impact deriving from the situation in Kuwait is there already. So, we see Q4 and full year will be in line with this trend, no additional headwinds.
Okay, thank you. Next question is coming from Martino De Ambroggi from Equita.
Hi, thank you. Thank you, and good afternoon, everybody. The first question, I am sorry to bother you, is still on the guidance, because in any case, Leonardo DRS slightly revised upwards full year guidance. The U.S. dollar is favorable. Hensoldt, okay, it is very small consolidated equity. In any case, there are elements which are better than before. I clearly understand your view that you have a more linear evolution among the quarters, but it seems very conservative, number one. Number two, on Aerostructures, I understand that the increase in the run rate for deliveries. If I look at your guidance, your business plan, if I am right, you should deliver a positive EBITA in Q4 in order to achieve the guidance for division.
And very last, on the Michelangelo Dome, you mentioned that by the end of the year, you would have tested on the field the system in Ukraine, and I just wonder if your timetable is confirmed also for the following steps. Thank you.
Thank you, Martino. You are right. I mean, if you make a calculation, we have Leonardo DRS revising its EBITDA. If I take the midpoint of the new guidance, we are talking about [inaudible] , which means around EUR 10 million. Hensoldt, something like that. Of course, we are not going to revise the guidance for small numbers, which, by the way, we try to look forward and so to anticipate the trends, and not to wait the actuals. So, it is not surprising us that revision, of course. But these are quite small numbers, so we are not going to touch the guidance, to revise the guidance for such a small number. But I can tell you again that we think we will deliver the guidance for EBITA. We think that it is a very solid number, and we think we may go beyond, clearly.
If this is the case, we will do. I do not know if this means being conservative. This means being rigorous, of course, and update the target when there is a big update. At the moment, we see that we can be better. We feel, again, very confident about our ability to deliver that target. The target is not easy because it is a double-digit ROS, but we think we can manage the risk and deliver at least that target. Q4 of Aerostructures, if we compare to the budget, the full year Aerostructures was at around EUR 0.08 billion. Now we are at (EUR 0.88 million), let us say, for the end of September. So, clearly, we will not hit the EUR 0.08 target in Aerostructures. We will not be far from that, because we clearly have a couple of deviation. One is the rate on Boeing 787 Dreamliner.
The budget was built up on the assumption of being at rate 10. We are now at rate eight, so there is a small deviation, also for the income statement of Aerostructures. As you know, we have still issues on both ATR and Airbus program. I think we will be at around EUR 0.1 billion in terms of negative losses. So, a small deviation, very small. It is still +25% or something like that compared to last year, but a small deviation compared to the EUR 0.08. Michelangelo Dome, yes, I confirm that we are working on that implementation for defensive purpose in Ukraine. At the moment, we are working still not there, but testing the system, and then it will be implemented there for defensive purposes.
Okay, thank you. Next question is coming from Ross Law from Morgan Stanley. Please go ahead.
Hi, evening. Thanks for taking my question. So, the follow-up on Aerostructures. What is your willingness to actually continue with the current partner, obviously given the continued delays, and also given the performance of the division is heading in the right direction? So, is it now fair to say that it is more likely than not that the JV does not go ahead? The second question is on Italian defense spending. Just wondering if you have seen or thought of any changes to your assumptions here, given some recent news flow around reallocating some planned incremental defense spending towards energy costs. Thanks.
Yeah. Regarding the first point, the strategy does not change. We think that for making Aerostructures sustainable, we need to enlarge the customer base. You know that we are dependent upon Boeing, ATR, which is, by the way, our joint venture, and Airbus. So, to make Aerostructures business sustainable, we need to increase the customer base, and this is the target of that partnership or of any other partnership. I think the discussion are still there with the potential partner, and clearly we understand the situation. It is not the time to make a go/no-go because of the geopolitical situation, and we understand it. But this doesn't mean that the strategy is changing. I think that the work we are doing with Aerostructures is good if we are able to finalize a partnership, because we need to enlarge the customer base.
On the other hand, I think we are marking very good progress on the standalone plan of Aerostructures. We need to do more. We need to implement all the actions which are necessary and which are in the plan, but I think we are doing well and we are improving. On the Italian defense budget, because we said since the beginning that we were not factoring any peak in the budget for defense. We were factoring in our plan a smooth and progressive increase, mainly program-based. We knew what were the priorities in our mind to be funded. We put those programs on our plan, and I think things are going in that direction. They are increasing defense, which is very good. This makes our plan much more solid, clearly. They are funding the programs that we need are important. We mentioned NMBT.
Today, I was looking at some press about GCAP. I think that this is going in the right direction and fully consistent with our assumption.
Okay, thank you. Next question is coming from David Perry from JP Morgan.
Hi, Giuseppe, Claudia. Hope you are well. Two questions, they are linked in some way. Maybe I am wrong, but my understanding is with IFRS 18, sorry, IFRS 18, excuse me, next year, you will have to remove the associates from the operating profit. I just wondered if you were planning to do that. The second part of the question, which is linked, you talked about your double-digit margin this year. If you take the associates out, my estimate is it would be more like 9%, which would put you at the low end of the range for your peers. I just wonder in terms of benchmarking and how you think about the new industrial plan next year, whether that would make you feel you had to do more on the efficiency plan? Thank you.
Thank you, David. On IFRS 18, you know that this is an accounting standard that will be applicable in 2027 and focus on the presentation of the, let's say, statutory income statement. So, the income statement you find inside the accounts and not the reclassified income statement. When looking at our KPIs, which include the share of associate, as you said, we think we will keep the KPIs as they are. Also, I mean, like everyone, we can agree or disagree on the way they are built up, but I think it is important for us, besides the accounting standard, which are clearly applicable to the income statement as a whole, I think it is important for us to find a way to describe the contribution of our joint venture to our business.
We cannot treat MBDA or in the future Bromo, because we will have the same point on Bromo, as an associate, because those are part of our business. They are really part of our activities, of our operation, of our business. So, I think it is not a matter here of the income statement for accounting purposes. It is a matter of how we want to represent the contribution they give to our group. So, I said, not sure 100% that the way we do today is the right one, because we put only the net income, so maybe it is not the right way. We are trying to be consistent with the past, not making change, because otherwise it is difficult for you and for the market to make a trend and compare the results.
We think that we need to find, and we will keep this way of representing things, we need to find KPIs which include the contribution from our joint venture. That's again, when we talk about the double-digit target, we want to give the picture of the group, including our share in the joint venture. The 10% digit, double-digit ROS, you're right, includes the contribution from MBDA and from Hensoldt in a lower manner. If we focus on MBDA, of course, but we want MBDA to be part of our KPI because it is part of our business. So, it is something that I don't think we are going to change. Clearly, the target for the budget, for the plan is not to stay at 10%, is to increase and improve over the plan. With or without MBDA, it is the same point.
We want MBDA to improve over the plan, and we want us to improve over the plan.
Thank you. Next question comes from Ian Douglas-Pennant from UBS.
Thanks very much. Yes, it is Ian Douglas-Pennant at UBS. A question on the dividends. You have obviously made great progress in the business, not only in the last year, but over the last several years, and the dividend increased from EUR 0.1463 in the past four. Any thoughts on, or any revised thoughts on how this develops from here? Should we expect that to grow in line with earnings, ahead of earnings? Maybe you could just help us there. I have a follow-up, which I will come back to, please.
Yeah. On dividends, you are right, we have been increasing the dividend paid over the last year by significant proportion. We set out in our capital allocation also a clear dividend policy, so distributing between 30% and 40% of our net adjusted income. It is normal. As we progress in making more profits, we think it is right to remunerate the shareholders accordingly. It will be a matter of decision, of course, for the board of directors first and then for the shareholders meeting, clearly. But our dividend policy is to be consistent with the increase in profits.
Thanks. The second question is, could you talk about your conversations with the Italian government? What is their kind of key focus for you over the next several years? I mean, should we think about financial stability? Should we think about product innovation? Should we think about increasing industrial capacity? I mean, what is their focus in conversations with you? Thank you.
I think it is public because it is on legislative acts. We see that they have found a route to fund defense expenses in the right way. They think the amount is the right one. From our side, what it was really important was, and it is the same for U.K., it was to see that programs which are key for us are funded, and that is what is happening at the end. This is the important milestone. I am talking also about U.K. because we mentioned during the presentation the NMH order that was a key order for us, for our Yeovil site, and at the end, it has been funded. So, besides the talks, what it is important is to see the translation into legislative actions, and I think these are consistent with our focus on some key programs.
Thank you. The next question is from Gabriele Gambarova from Intesa Sanpaolo.
Thank you, Giuseppe and Claudia. Thanks for taking my question. The first one regards Aerostructures. I was wondering if, assuming a rate of 10, it is, let us say, realistic to think that you reach break-even. The second question regards the UJTS opportunity, this big program in the U.S. Basically, yesterday, news was circulated that you remained alone together in team with Textron to compete for this program. Any color on this would be interesting. Finally, just a housekeeping question on financial charges. They are down year on year in the nine months, despite the huge acquisition of IDV. I was wondering what could I assume for 2026, maybe 2027? Thank you.
Okay. Starting from the last one, interest charges are lower. I said we have been very careful on making additional debt. There was a bond expiring at the beginning of January, and in the meantime, the acquisition of Iveco to be paid at the end of March. So, we have managed those operations with the cash in our hands, and we entered into a term loan agreement only at the end of March. Clearly, we had the benefit of not having the bond for three months and having the term loan at a lower rate for the moment. Clearly, this is a benefit. It is going to be stable also over the last quarter, of course, because it is something we recognized over that period. Clearly, 2027 will be affected by an increase of interest rates, so we are planning now.
We see, as everyone, that interest rates are increasing. Again, we will be focusing on a very careful management of our cash, because we try to use the cash in the best way we can, and so to minimize, or even not to have, like this year, any withdrawal of the revolving. For instance, this year, we have never used the revolving credit facility. Clearly, there is a benefit in terms of financial charges. Aerostructures rate 10, this is an important milestone, of course. You know that the Grottaglie plant was designed for 14 deliveries, but 10 is already a rate in which we put on the safe side, let's say, the Boeing 787 Dreamliner program. The issue with Aerostructures is more on ATR and Airbus at the moment. Not on Grottaglie plant, but on the other plants which are working for ATR and Airbus.
To accelerate the recovery, we need to work on those activities. Of course, you are right, clearly, Boeing 787 Dreamliner increasing the rate of production is a big help. The third question was?
The U.S.
The U.S., yeah. Yeah. We read on the press the withdrawal of Sierra Nevada. We are part of a process. We submitted the offer that we know is a competitive process. We do not know who else is part of that. We know that it should be assigned in 2027, so we will see. It is clearly a very important program for us, a program which will be affected in the long term, but a very important program, so we will see.
Okay. Thank you. Last question comes from Afonso Osório from Barclays.
Hello, Giuseppe and Claudia. Thank you very much for your time. Just two last ones from me, if I can. In light of the recent elections in the U.S., Giuseppe, can you just I'm curious to hear your thoughts on the potential impact it could have in your business from 2027 and beyond that. Then secondly, I guess this is like a follow-up on David's earlier question. On your Electronics margin, is there a ceiling for margin here? I mean, you got to 15% overall by 2030. If we exclude the joint ventures, that's probably around 4%. Is that the ceiling for the business, or do you think there's scope for doing more than that? Thank you.
I didn't get very well the first question because the line was not clear, so if you can repeat it.
U.S. elections. Yeah, so on the U.S. elections and the potential impact that could have in your business.
Okay. Again, like we were talking earlier about the Italian budget, I think Leonardo and Leonardo DRS in particular has never factored in the plan a jump of the budget from EUR 1 trillion- EUR 1.5 trillion. We expect that defense budgets in U.S. will remain strong. We know that Leonardo and Leonardo DRS are very well positioned to benefit from any budget increase or from the budget staying stable as it is now, which is already EUR 1 trillion, by the way. We don't see any particular negative impact at this stage from the election, and clearly we will see.
Electronic business, we see that in our plans, you may remember also when presenting industrial plan, we see room to further growth in Electronics, of course, in Electronics Europe, but also in Leonardo DRS . MBDA clearly is growing a lot. Remember that we are talking about a EUR 50 billion backlog company, so we expect also the contribution from MBDA to increase.
Okay, thank you. This was the last question, so we are closing the Q&A session. Thank you all for your participation. If you have any other question, the IR team is available for any follow-up. Now, have a nice evening. We will see each other in the next appointment, which will be our business plan presentation. Thank you. Bye.
Bye.