CSG's Land Systems Bet Pays Off as Order Book Swells to €46 Billion — Even as Shares Give Back Gains

Czech arms group CSG posts record H1 revenue and profit, but shares fall 6.9% on profit-taking after a 28% rally, with Land Systems driving order growth.

The arithmetic of defence contracting is rarely straightforward, and Friday's session for CSG proved the point in spectacular fashion. The Czech arms group unveiled half-year numbers that would normally trigger a celebration — revenue up 17.2 percent, net profit surging 84.8 percent, and a record order backlog — yet the shares closed 6.88 percent lower at €18.10 in Amsterdam. At one point during the day, the stock had climbed as much as 7.3 percent to its highest level since April, before investors evidently decided that a 28.37 percent rally over the preceding 30 days was profit-taking opportunity enough.

The disconnect between the headline figures and the market's reaction says less about the quality of the results than about the pace of the run-up that preceded them. CSG's first-half revenue reached €3.251 billion, with the defence systems core growing 27 percent to €2.6 billion. Operating EBIT rose 12.7 percent to €784 million, translating to a margin of 24.1 percent — comfortably inside the company's own guidance range. Net profit from continuing operations jumped 84.8 percent to €572 million, fuelled by governments restocking ammunition and lifting military budgets across Europe and beyond.

Land Systems Emerges as the New Centre of Gravity

The most striking shift in the group's profile is happening beneath the surface of the aggregate numbers. Land Systems, still the smallest division by revenue, has become the single largest contributor to the order book, accounting for 46 percent of the backlog after roughly doubling its first-half sales to €445 million. That marks a decisive break from the company's origins as an ammunition specialist and validates the diversification strategy that majority owner Michal Strnad has been pursuing.

The order pipeline tells the same story. Combined backlog and contracts under negotiation reached €46 billion, up from €44 billion in March, with the confirmed backlog alone standing at €17 billion. Strnad, speaking to Bloomberg, described demand as robust and pointed to land systems as the biggest driver of both orders and ongoing negotiations. The company also disclosed that production of its own large-calibre ammunition is expected to reach around 850,000 rounds by the end of 2026, up from 550,000 in 2025.

Southeast Asian Breakthrough and a Shifting Geographic Mix

Alongside the financials came concrete contract news. CSG secured an air defence order in Southeast Asia worth nearly $2.5 billion, and Strnad indicated the company is "in" on the US market for mobile howitzers — both with its complete system and, with high probability, as a chassis supplier to competitors. On the ammunition side, he pointed to a framework agreement between Slovakia and Croatia worth €58 billion that Zagreb recently joined, plus ongoing contract negotiations with more than eight European customers.

The geographic composition of revenue is also evolving in ways that reduce the group's exposure to a single conflict zone. Ukraine's share of group sales fell to 17 percent from 27 percent at the end of 2025, while NATO and allied countries outside Ukraine now account for 83 percent. Europe excluding Ukraine represents more than half of the business, and the United States has become the second-largest market.

Cash Flow Squeeze and the Road to Deleveraging

Not everything in the half-year report was cause for cheer. Operating cash flow before taxes came in at minus €411 million, the result of a deliberate build-up of component inventories, particularly in medium- and large-calibre ammunition. Management expects this effect to reverse in the second half, especially in the fourth quarter. Net debt stood at 1.6 times EBITDA at the reporting date, with a year-end target of below 1.3 times.

To hit the guidance of net working capital below 20 percent of sales, the company will need to release €1.35 billion in the second half — a goal that depends on timely deliveries and customer prepayments. CSG has, however, strengthened its financing position: it refinanced its credit lines, cutting borrowing costs by 125 to 150 basis points and extending maturities to six years.

Strategic Moves and New Leadership

The operational momentum has been flanked by a series of strategic steps in recent weeks. On August 5, CSG took a strategic stake in Canadian firm North Vector Dynamics, whose valuation now exceeds $90 million. A day earlier, German subsidiary CSG Energetic Materials Germany completed the acquisition of the 57-hectare industrial site at Gnaschwitz near Bautzen from MAXAM, with more than €100 million earmarked for the first expansion phase.

On the personnel front, Ben Hudson joined the board of Czechoslovak Group a.s. as member and vice-chairman on August 1, having arrived from Hanwha. He had already taken charge of the CSG Land Systems division in June and now also serves as group chief technology officer. The half-year report additionally confirmed several other leadership appointments, including positions in the newly created CSG Land Systems North America unit.

For the full year, CSG reiterated its guidance: revenue between €7.4 billion and €7.6 billion, an operating EBIT margin of roughly 24 to 25 percent, capital expenditure of about 8.5 percent of sales, and net working capital below 20 percent of revenue. The ammunition segment, meanwhile, is showing steady margin improvement — 8 percent for the first half and 11 percent in the second quarter alone — suggesting that the group's transformation is still very much a work in progress.