Iveco Defense Vehicles (Idv) will be the supplier of Leonardo in the production of tracked combat vehicles for the 'Italian army in the context of joint venture with Rheinmetall. Idv's participation in the Jv will be included between 12 and 15%.
They communicated it yesterday to markets closed Iveco Group and Leonardo who this morning were awarded by Business Square with a rise, in a generally heavy list (-0,68%). The title Leonardo continues its positive streak on the stock market (between the quarterly report and the prospects of an increase in defense spending on the market) with a rise of 1,75% to 26,23 euros after the +4,3% of the previous day. The Iveco Group title which recorded a +2,3% to 10,08 euros, still far from the record of last April above 14 euros.
Analysts expected a lower participation of Idv
"The news follows what was reported in the press at the end of October - say the analysts of Intermonte - however we note that the value assigned to Idv is higher than what previously emerged. The annual contribution is higher by 0,2 billion euros (12-15% of 50% of the total, against what was previously calculated to be around 0,13 billion, deriving from the 15-17% of 50% due to Leonardo)'.
Considering the backlog of approximately 4,5 billion euros of the division against revenues of approximately 1,1-1,2 billion euros, Intermonte imagines the contribution of the contract as "mainly additional with an upside of approximately 0,6 euros per share". In light of these developments, however, the effects on the M&A appeal of the division must also be evaluated, with Leonardo as the main interested party.
Leonardo and Rheinmetall's goals
La joint venture between Leonardo and the German Rheinmetall, which was finalized in mid-October after the memorandum of understanding signed last July, has as its immediate objective the mega-orders of 23 billion in 10 years from the army to renew the old fleet of 'Ariete' and 'Dardo' with 280 heavy tanks and more than a thousand light tracked vehicles. It also looks at exports, a market of 50 billion in 10 years for tanks and combat vehicles, betting on the future program for the European heavy tank next generation.
As for Iveco's involvement, "all roads are open", Leonardo's CEO had indicated a few days ago Roberto Cingolani, mentioning the space for a supply and without excluding that in the future, in agreement with the German partner, a acquisition: the hypothesis had been circulating in recent months but the time and conditions for an M&A operation do not yet seem ripe: "At the moment we do not see the need for it", said Cingolani last week in response to a question from financial analysts during the Presentation of the results of Leonardo in the first nine months of the year.
Idv leader in propulsion and transmission systems for military vehicles
The Bolzano-based company of the Iveco group stressed that “the collaboration will leverage the company’s experience, which ranges from advanced propulsion and transmission systems for military vehicles to highly specialized protection technologies,” and that “this will also ensure a significant portion of the main supplies for the joint venture.” The work is expected to be split 50/60 between Leonardo and Rheinmetall, with 2023% carried out in Italy. The agreement will allow the Idv brand – the company further indicates – “to continue to contribute to the development of vehicles for defense and civil protection, as demonstrated by an order portfolio that in 4 exceeded XNUMX billion euros.”
