KNDS Courts Idle Car Plants as Record €33bn Backlog Drives IPO Push

KNDS is converting mothballed car factories into tank lines as it races to deliver on a record €33.1 billion backlog, with revenue up 15.9% ahead of a dual IPO.

The Franco-German defence giant KNDS is looking to convert mothballed automotive factories into tank production lines as it races to meet a record €33.1 billion order book. CEO Jean-Paul Alary confirmed ongoing talks with Mercedes-Benz over its plant in Ludwigsfelde and has also held discussions about Volkswagen’s Osnabrück site — both casualties of Europe’s overcapacity in car manufacturing.

The expansion push comes as KNDS finalises a dual initial public offering in Frankfurt and Paris, expected later this year. Management is betting that the IPO will give it the capital-market firepower to finance the capacity upgrades needed to deliver on its growing backlog.

Financials show broad-based growth

Revenue rose 15.9% to €4.4 billion in 2025, with growth spread across all divisions. Land Systems Germany posted €2.5 billion in sales, up 17.4%, while Land Systems France added €1.3 billion, a 9.6% increase. The munitions segment surged 24.7% to €612 million as European governments replenish depleted stocks.

Operating profit (EBIT) jumped 32% to €661 million, lifting the margin to 15.0%. The improvement reflects better factory throughput and higher-margin export contracts — a key selling point for institutional investors weighing defence stocks.

New orders totalled €13.5 billion, pushing the year-end backlog to €33.1 billion, compared with €23.5 billion a year earlier. The visibility that provides is critical for the IPO pitch. Among the recent wins is a £1 billion contract from the UK Ministry of Defence for 72 RCH 155 self-propelled howitzers, with deliveries starting in 2028.

Governance and ownership structure take shape

To shield the company from political interference post-listing, KNDS is crafting a "market-ready governance" framework. The challenge is that the state will remain a dominant shareholder. France already owns half of the company alongside German family interests, and Berlin plans to acquire a 40% stake — matching the French government's intended holding. The governance model is designed to reassure minority investors that strategic decisions will be driven by commercial logic rather than political whim.

Portfolio fine-tuning ahead of listing

KNDS has also trimmed its stake in RENK Group AG from 15.83% to 10.03%, notified under German securities law on 19 May 2026. The sale frees up capital for the core business and simplifies the group structure ahead of the dual listing.

With defence budgets rising across Europe and KNDS systems like the Leopard 2 tank and Caesar howitzer already in service with more than 40 armed forces, the company enters its IPO year with robust numbers and a clear production challenge — one it hopes to solve by repurposing the very factories that once built cars.