CSG's Q1 Reveals Two Diverging Trajectories: Defence Surges While Ammo+ Seeks Government Lifeline

CSG Q1 revenue up 13.8% to €1.544bn; Defence Systems jumps 26.5% while Ammo+ falls 20.5%. Stock rises 4% but remains 40% below Jan high. Management reaffirms FY guidance.

The Czechoslovak Group has turned in a solid first quarter as a publicly traded company, but beneath the headline numbers lie two very different stories. Defence Systems powered ahead with double-digit growth, while the consumer-focused Ammo+ division stumbled — and the market is now betting on a pivot toward government contracts to mend the weakness.

Group revenue climbed 13.8% to €1.544bn in the three months ended March, with operating EBIT rising to €372m — a margin of 24.1%. Net profit from continuing operations nearly doubled to €299m. The figures were enough to push the stock up around 4% to €19.74, though the shares remain more than 40% below their January high of €33.81.

The engine room was once again Defence Systems, where revenue jumped 26.5% to €1.251bn. Within that segment, Land Systems posted an extraordinary 82.8% gain to €173m, while medium- and large-calibre munitions contributed €1.049bn, up 22%. Geographically, the order book is broadly spread: Europe excluding Ukraine accounted for 49% of quarterly sales, Ukraine for 21%, and the US for 16%, with NATO countries representing 64% of the total.

Ammo+ was the laggard. The commercial small-calibre ammunition business saw revenue fall 20.5% to €291m, and its operating margin cratered to 4.3% from far healthier levels a year earlier. Management pointed to tough conditions in the US trade channel, combined with investments in headcount and capacity. Around 80% of Ammo+ sales come from the US, and 82% from civilian customers, leaving it acutely exposed to swings in American consumer demand.

Yet the segment may be turning a corner. After a weak start to the quarter, demand picked up in February and March, accompanied by firmer pricing. The company said March margins had returned to levels seen in the 2025 financial year. More important for the long term, The Kinetic Group — CSG’s Ammo+ unit — has struck significant deals with US law enforcement agencies and expanded its ammunition supply relationship with the FBI. Production capacity for 5.56mm rounds is being scaled for US defence and government customers. The customer mix is slowly shifting from pure consumer to a more stable state-sector base.

On the balance sheet, the IPO proceeds did their work. Net debt fell from €3.004bn at year-end 2025 to €2.228bn at the end of March, and the net-debt-to-EBITDA ratio stood at 1.3 — inside the company’s own target corridor of 1.5. Operating cash flow, however, was a meagre €6m, as management deliberately built inventories, made prepayments to suppliers, and suffered timing effects on receivables. These funds are expected to flow back as delivery contracts are completed over the rest of the year.

Management confirmed its full-year guidance: revenue between €7.4bn and €7.6bn, with an operating EBIT margin of 24% to 25%. Growth will be led by Land Systems and large-calibre ammunition, supported by a recovery in Ammo+.

The macro backdrop remains supportive. The European SAFE instrument has made up to €150bn available for joint defence procurement, the EU has agreed a €90bn credit for Ukraine in 2026 and 2027, and NATO’s 2%-of-GDP spending target is still in place. For a munitions manufacturer with a heavy defence tilt, the structural tailwinds are clear.

The next test comes on 7 August 2026, when CSG releases its half-year results. By then, the market will want to see whether the Ammo+ recovery is real — and whether the pivot toward government customers can compensate for the volatility of the civilian market.