CSG’s Q1 Earnings Show 24% Margin and €17bn Backlog as Munition Output Ramps Up

Czech defense contractor CSG posts 13.8% revenue rise, targets 1.25M large-calibre rounds by year-end, as order backlog hits €17B and geographic diversification expands.

The Czechoslovak Group is turning a production ramp into a powerful rebuttal. Just weeks after a short-seller attack sent its shares tumbling, the Prague-based defence contractor has unveiled quarterly figures that underscore an accelerating industrial build-out. By year-end, CSG expects to produce around 850,000 rounds of large-calibre munition in-house, up from 550,000 last year, with an additional 400,000 rounds coming from reactivated lines. That combined 1.25-million-round pipeline directly challenges the production-capacity doubts raised by Hunterbrook Media.

For the first quarter, CSG posted revenue of €1.544bn, a 13.8% year-on-year increase. Operating profit climbed to €372m, yielding a margin of 24.1% — squarely within the company’s target range. The defence systems division led the charge, with sales rising 26.5% and the order book swelling to €17bn by the end of March. A further €27bn in projects sits under negotiation, giving CSG multi-year revenue visibility that few peers can match.

Investors responded with a sharp but partial recovery. The stock closed at €18.96 yesterday, good for a weekly gain of 16.5%. Yet the rebound has done little to repair the chart damage: the share price remains 43.85% below its annual peak and trades roughly 15% beneath its 50-day moving average of €22.40. The Hunterbrook report, which questioned everything from revenue recognition to governance, continues to hang over the name even as CSG calls the allegations selective and misleading.

Management is leaning on diversification to spread geopolitical risk. The Ukraine share of revenue has fallen to around 20%, while newer contracts stretch from Southeast Asia to southern Europe. In Greece, CSG has formed a joint venture with Hellenic Defence Systems to produce 155mm ammunition at a facility in Lavrio, with plans to add calibres and upstream steps. In Hungary, a 49% stake in 4iG Space & Defence Technologies gives CSG indirect control of 37% in Rába Automotive Holding, strengthening its military-vehicle business. And in Southeast Asia, an order worth more than $300m for over 100 armoured Patriot vehicles was secured, further spreading the geographic footprint.

Cash generation is improving, too. Operating cash flow before tax rose by €476m compared with a year earlier, though much of that gain is being ploughed back into working capital to support capacity expansion. The company expects net working capital to stay below 20% of sales, while total investment for the year is pegged at roughly 8.5% of revenue.

For the full year, CSG reaffirmed its revenue guidance of €7.4bn to €7.6bn and an EBIT margin of 24% to 25%. The next major check point comes on 7 August, when half-year results for the period to 30 June are released. By then, the market will be watching two things: whether the production ramp can sustain those margins, and whether the growing order pipeline is enough to rebuild the trust that the short-seller attack eroded. On both fronts, CSG is betting that hard numbers — and more than a million artillery shells — will speak louder than any report.