CSG’s Q1 Progress: Land Systems Rockets 82.8% While Ammo+ Sputters and Cash Flow Narrows

Defense group CSG posts strong Q1 revenue and profit growth, but anaemic free cash flow and working capital strain keep shares 45% below January highs.

A 14 percent weekly gain in CSG’s stock suggests investors are looking past the company’s cash-crunch concerns and focusing on a record order book. The defence group reported first-quarter revenue of €1.544 billion, up 13.8 percent year-on-year, and adjusted operating profit of €372 million, a 8.7 percent increase that translated into a margin of 24.1 percent.

The real driver of confidence sits in the order backlog, which swelled to €17 billion from €15 billion at the end of 2025. Management also disclosed a negotiation pipeline of €27 billion, putting the total addressable opportunity at €44 billion. The stark contrast between this bonanza and the company’s anaemic free cash flow — just €6 million pre-tax during the quarter — explains why the shares remain a long way from their January issue price of €25.

Land Systems takes off

The Defence Systems segment delivered the heavy lifting, with revenue climbing 26.5 percent to €1.251 billion. Within that unit, Land Systems posted a stunning 82.8 percent jump to €173 million, while medium- and large-calibre ammunition advanced 22 percent to €1.049 billion. The surge in tracked and wheeled vehicles as well as heavy munitions reflects the accelerating pace of NATO rearmament: 64 percent of CSG’s first-quarter sales came from alliance countries.

Not all divisions shared the good fortune. The Ammo+ business, which serves the civilian US market, saw revenue tumble 20.5 percent to €291 million. Management acknowledged that a recovery in this segment remains elusive.

Geographically, Europe excluding Ukraine accounted for 49 percent of sales, Ukraine itself for 21 percent, and the United States for 16 percent.

Stock remains under water despite weekly bounce

CSG shares closed Friday at €18.63, paring a near 4 percent intraday dip that looked like profit-taking after the strong rebound. The week’s range was a rollercoaster: from a Monday low of €15.24 to a Thursday high of €19.83, a swing of roughly 30 percent. The stock still trades 15 percent below its 50-day moving average of €21.90 and a chunky 45 percent off the January 52-week high of €33.81.

With net working capital ballooning to nearly €2.2 billion, the balance sheet shows the strain of inventory build-up ahead of large deliveries. Management expects working capital to normalise by year-end and reiterated its full-year guidance: revenue between €7.4 billion and €7.6 billion, and an operating margin of 24 to 25 percent.

Next test on August 7

The immediate technical support lies between €18.56 and €17.56; if that zone holds, the weekly momentum could extend. A break lower would resurrect the danger zone near €15.24, just above the 52-week trough from early May. Investors will get a clearer picture when half-year results land on August 7, when management must demonstrate that the €17 billion backlog is translating efficiently into cash and revenue.