KNDS Charts a Factory Conversion Sprint as Audit Hurdle Shadows Ambitious Dual Listing

European defence group KNDS plans €1bn expansion using former car factories, with a €33.1bn order backlog and IPO preparation underway.

The European defence giant KNDS is taking an unusual route to expand its production firepower: turning mothballed car plants into tank assembly lines. Chief executive Jean-Paul Alary confirmed on 26 May that the group is in talks with Volkswagen and Mercedes-Benz to take over facilities in Osnabrück and Ludwigsfelde. At the Mercedes site near Berlin, the plan involves a phased handover — Sprinter vans will continue rolling off one line while Boxer infantry fighting vehicles are assembled on another, with full conversion targeted down the road. The shift could see some 2,000 workers switch employers. In Osnabrück, the situation is more tangled: Rafael Advanced Defense Systems of Israel has already signed a letter of intent for the Volkswagen factory, setting up a bidding contest.

The factory acquisitions are part of a roughly €1bn investment in new capacity, driven by a record order backlog that now sits at €33.1bn — more than seven times last year’s revenue. The backlog swelled after a stunning €13.5bn in new orders flooded in during 2025, far outstripping the €4.4bn in sales the company posted for the year. Revenue climbed 15.9% while operating profit jumped to €661m from €500m, pushing the EBIT margin from 13.2% to 15.0%. All three divisions — Germany, France and ammunition — delivered double-digit growth, with the munitions unit leading at 24.7%.

The biggest single order came from the United Kingdom, which contracted 72 remotely controlled howitzers of the RCH 155 type for just under £1bn ($1.35bn), with first deliveries scheduled for 2028. The guns will be mounted on Boxer vehicles, firing eight rounds per minute over distances up to 70 kilometres. The Boxer chassis is produced at KNDS UK in Stockport, where 100 jobs are secured; another 100 positions open up at Rheinmetall’s Telford facility, and the broader supply chain supports around 300 roles.

Meanwhile, KNDS has already started up new production lines beyond its core. In Levanger, Norway, a joint venture with local specialist RITEK was completed in just 18 months and includes a laser track, steep gradients and a submersible testing pit. Output of the Leopard 2 NO variant — 37 of the 54 tanks Norway ordered will be built there — can reach 36 units annually, with assembly set to begin in autumn 2026. In Belgium, a new 155mm ammunition line is already running.

All this scaling has pushed the workforce to around 11,000 employees, up 7.3%, and KNDS plans to add more staff in manufacturing, assembly and research this year. Yet the expansion is unfolding against a backdrop of delays that could dent investor confidence as the company prepares for a dual listing in Frankfurt and Paris, likely in June or July 2026. About a quarter of the capital will be sold to outside investors. Germany’s defence ministry wants to retain roughly 40% of the shares, while the economy ministry and chancellery favour 30%. Over time, both Berlin and Paris aim to pare back to about 30% each, but the exact structure remains under negotiation.

Bank valuations of the company have been trimmed to between €18bn and €20bn, down from an earlier €25bn, though some analysts still pencil in a range of €20bn to €25bn. A bigger worry for IPO timing is the audit. PricewaterhouseCoopers has withheld its sign-off on the 2025 accounts pending the outcome of an internal investigation by law firm Freshfields into a €1.89bn deal with Qatar struck in 2013. That contract covered howitzers, Leopard tanks, services and training. No evidence of wrongdoing by current or former employees has emerged, but PwC says it will not issue the audit certificate until the final report lands.

KNDS therefore faces a dual test: can it convert its record order book into metal and steel without production bottlenecks, and can it clear the governance cloud that hangs over its financial reporting in time for the summer listing? The autoworker conversions, the Norwegian ramp-up and the British supply chain are its answer to the first question. The Freshfields report will determine the second.