By Pierre Tran
Saint Cloud, France – Thales and Dassault Aviation reported respectively March 4 and 5 buoyant 2024 financial results, as European political leaders sought to raise €800 billion ($869 billion) to rearm in response to what they saw as the U.S. turning away from Europe, with Washington leaning on Kyiv to yield ground to Moscow.
The share price of those two French companies were among those of arms manufacturers, including BAE Systems, Leonardo, and Rheinmetall, which soared March 3, in response to European pledges of boosting military spending.
A tense climate between the U.S. president, Donald Trump, and his Ukrainian counterpart, Volodymyr Zelenskiy, could be seen with the former suspending arms shipments to Kyiv, to put pressure on the latter to reach a settlement with Russia.
Dassault Aviation, a builder of fighters and business jets, reported 2024 adjusted net profit of €1.1 billion, up 19.2 percent from a year ago. That was a net profit margin of 17 percent.
Asked about U.S. suspension of military aid to Ukraine, the Dassault executive chairman said the matter was in the hands of European governments.
“I have no reply to that,” said Eric Trappier. “This is a matter for the state.
“The reply is really from the European nations, and French policy. The scale of support needed to substitute for American aid is high, and the decision is to be taken by the European nations.”
Trappier was speaking at a news conference on the 2024 results. The company held the news conference on its barge, The Talisman, moored on the banks of the river Seine, at Saint Cloud, the smart suburbs of the capital.
Time to Buy European
On the sidelines of the news conference, Trappier said it was time for European nations to switch procurement to European weapons away from the U.S.
“What I would like to see is the European governments favor European industry, in the present context,” he said. “I have said that for 30 years – I am not happy to say we were perhaps right – it is another context. Remember what General de Gaulle said at the time – we are in the alliance, we are allied to the United States, but be careful not to put all your eggs in the one basket.”
France had followed that Gaullist approach and built a domestic defense industry which had developed and supplied aircraft, submarines, and onboard electronics, he said. That had allowed development of French kit, and not to depend exclusively on the United States for defense.
“Which is not to say we are outside the alliance,” he said.
Trappier welcomed the Berlin announcement of a large increase in defense spending, in response to the chill in transatlantic relations ushered in by the Trump administration.
“Germany realized that they have to invest in defence,” he said.
The European Commission should bolster the defence industry with the use of European funds, he said, with the money spent equitably across the European defence industry.
“I was pleading for the cause of European defence back in 2000,” he said.
Previously, leaders in the European Union kept their distance from a constant call from French president Emmanuel Macron for a European strategic autonomy, but there now appeared to be wider support for a military capability on the Continent, separate from Washington.
The European Commission has proposed a €150 billion fund to lend to member nations as part of an €800 billion package for rearming their services.
Faster Build
Dassault was now building three Rafale a month, Trappier said, and was looking at increasing to four, and perhaps five, but only if that production rate could be maintained over a period of time, not for just a year or two.
An Indian order for 26 Rafales for the navy was “programmed,” he said, and “discussions,” have begun with Saudi Arabia for sale of the twin-engined fighter.
The 80 Rafale ordered by the United Arab Emirates will be delivered in the F4 version, he said, “and they envisage the F5” at a later date.
There was an operational autonomy for client nations in the use of French-built fighters, he said. Since the 1950s, there has been a “good track record,” he said, as France has not imposed a “geopolitical framework” for use of those fighters by nations such as India and the Middle East client nations.
They are allies which will have signed defense or strategic agreements, but they enjoy autonomy, he said.
There were difficulties in the French supply chain, and companies were capable of responding, but not with immediate response, he said. Companies were on a long cycle.
Previously, industry had been told to structure itself to build one fighter a month, he said. As there lacked sales in the export market, fewer than one fighter a month was built, as was the case back in 2020, he said.
Production has changed with export wins, and industry has increased fighter production, he said, but it took time to recruit qualified staff and re-train them, and build hangers. The supply chain had to do the same, he said.
“It takes time,” he said, maybe two or three years.
Volatile Share Markets
Asked about the rise in share price of arms companies he said stock price movements were “very circumstantial” – things can change in very little time. Stock prices were sensitive to factors as such trade tariff increases, commercial instability, and worries on the stock market.
On the other hand, there was opportunity for companies with defense capabilities, he said. In France, Dassault and Thales were two companies with fairly autonomous capability. That was effectively the Dassault group, as Thales is part of the “logic” of the Dassault group, he said.
Trappier in January succeeded Charles Edelstenne as chair of the supervisory board of Groupe Industriel Marcel Dassault (GIMD), the family-held holding company which oversees Dassault Aviation. Edelstenne was previously executive chair of the fighter company. He launched Dassault Systèmes, which builds computer-aided design and manufacturing computer systems.
Edelstenne was appointed honorary chair of the holding company.
Dassault holds 26.6 percent of Thales, which contributed €507 million net profit, up from €453 million. That delivered an adjusted consolidated net margin of 17 percent, down from 18.5 percent, due to the lower weight of net financial income and a contribution from Thales.
Dassault’s capacity to lift the production rate of the Rafale caught the attention of Agency Partners, an equity research firm.
“We were particularly interested that Dassault is not only now apparently comfortable moving to building 4 aircraft per month, but could, especially in the event of another significant order from France, envisage 5pm in the early 2030s. And, on top of that, an Indian assembly line could add another 2-3 aircraft to the rate,” the research note on Dassault said.
There was another striking factor, with Dassault’s “offer” of the Rafale as a “nuclear-capable aircraft in the event that the US withdraws its own nuclear bombs and/or reduces support for European F-35s,” the note said. Such an offer could only be made with the approval of the French government, the note said.
There was also rising awareness of a need for European air forces to diversify fighter fleets, dependent on the F-35, with a second, European-sourced fighter, the note said.
Such military procurement could be easier as European military budgets were due to rise to three percent of GDP, and beyond that for some nations, the note said.
Thales Eyes Long Program Times
The British prime minister, Keir Starma, said March 2 the U.K. would support a £1.66 billion ($2.1 billion) deal to supply a further 5,000 lightweight multirole missiles (LMM) to Ukraine. The Thales U.K. unit builds the LMM weapon in Belfast, Northern Ireland.
Ukraine was of little “consequence” for orders for Thales in 2025 and 2026, Thales executive chairman Patrice Caine told a news conference, when asked how he saw the suspension of American military kit for Ukraine.
Caine was speaking on the 2024 results at offices just a short walk from the Arc de Triomphe, a Napoleonic tribute to the French military, and the resting place of the unknown soldier.
The Thales order book was “very large,” he said, and orders for Ukraine were “not material” for the group. The company had limited exposure to Ukraine, with orders for Kyiv accounting for less than one percent of the group’s orders, he said.
Australia, France, and the U.K. were the core markets, with the company not dependent on just one nation in the world market, he said.
The company seeks to maintain its book-to-bill ratio above 1, stacking up orders to sales.
Thales’ business cycle ran five, six, or 10 years, he said, with the long cycles tied to multi-year military budget laws, which offered decades of “strong growth.”
There has been little growth in markets in Europe for the company, apart from Britain and France, he said. Growth came from the Middle East, Asia, and Southeast Asia, with some nations keeping up a steady development path. Client nations such as the United Arab Emirates, Saudi Arabia, India, and Indonesia were investing, he said.
“Europe has rediscovered a certain reality,” he said.
France and the U.K. are leading efforts to form a “coalition of the willing” to back Ukraine, with formation of a European peacekeeping force if Kyiv and Moscow agree a ceasefire.
If French and British troops were deployed to Ukraine as peacekeepers, “it would be hard for Merz to stay out,” a researcher from the European Council on Foreign Relations, a think tank, said March 3 at an informal discussion of the German election results.
That was a reference to Friedrich Merz, leader of the CDU conservative party, expected to be the next chancellor of Germany.
There were political announcements, and there was converting announcement into orders, which gave “long-term visibility,” Caine said. There was a “translation” of increasing defense spending to two percent – or three or 3.5 pct – of gross domestic product.
That would have medium and long-term effect, but it would not change 2025 company results, he said. Growth came from execution of orders. A valuation was not just for 10 years, but for “a generation,” and it did not just come from Ukraine.
A company could invest in plant, and speed up production, once an order was signed and the equipment developed, he said. Development took time for kit such as radar and sonar.
Higher Output
One of the priorities for 2025 was boosting production, he said, which included tripling onboard systems for the Rafale fighter, notably the radars; tripling output of the Ground Master radar; quadrupling missiles and rockets, dubbed “effectors”; and also tripling satellite communications and kit for cockpits.
The company’s shareholder base was around two thirds in North America and the U.K., with a third in France, Caine said. That trend was likely to continue.
The U.S market for inflight entertainment, military kit, cybersecurity, and ID products generated some 500 million, he said, which meant the company was “below the radar” in the expected transatlantic tariff war.
Thales reported 2024 adjusted operating profit of €2.4 billion, up 5.7 pct on a like-for-like basis, on sales of €20.6 billion, up 8.3 pct.
The electronics company reported a six percent rise in orders to €25 billion, with a five percent gain in orders for its defense sector to €14.7 billion, which was a record for that segment, the company said in a statement with results. Those orders took the defense order book to a record €39 billion, up 12 pct, the equivalent of 3.6 years of sales, Thales said.
Thales reported 9.6 pct growth in orders from emerging markets, worth €4.3 billion. Orders rose 7.9 pct from mature markets to €16.3 billion.
“The record order book provides unprecedented visibility for all our activities,” Caine said, forecasting “accelerated, profitable and sustainable growth over the coming years, starting in 2025.”
On the U.K. ’s £1.66 billion deal for LMM for Ukraine, that was “the largest contract ever received by Thales in Belfast and the second largest MoD has placed with Thales,” the U.K. ministry of defense said in a March 2 statement.
That large deal followed a £162 million contract signed September 2024 for 650 LMM, the ministry said, with the first batch of that September order shipped before last Christmas.
“This new contract will continue deliveries,” the ministry said March 2. That LLM order will create 200 new jobs, while supporting 700 current positions. Thales Northern Ireland will deliver on the contract, worth an initial £1.16 billion, with a prospective further £500 million order, the MoD said. The Thales U.K. unit will work with a Ukrainian industry partner, which will build launchers, and command and control vehicles for the missiles in Ukraine.
That March 2 announcement of missiles draws down on the U.K.’s £3 billion a year financial package for Ukraine. The September 2024 order was mainly funded from that £3 billion package, with contributions from Norway through the International Fund for Ukraine, the MoD said.
Thales supplies the active electronically scanned array (AESA) RBE2 radar for the Rafale, which is being upgraded to the Mk 4.1 standard.
Ukraine said March 7 the Ukrainian air force flew Mirage 2000 and F-16 fighters to hit Russian cruise missiles, marking the first announcement of use in combat of the French-built fighter.
France announced March 6 the launch of its Composante Spatiale Optique-3 (CSO-3) military spy satellite on the new Ariane 6 rocket, from the Kourou space center, French Guiana. That was the third and last satellite in the MUSIS (Multinational Space-based Imaging System) program.
“It illustrates the ambition of the (military budget law) to maintain and strengthen the national capability on the mastery of space,” the armed forces ministry said in a statement.
Berlin and the European Way
Meanwhile in Berlin, Friedrich Merz, a former lawyer, has called for talks with London and Paris to explore putting Europe under a European nuclear umbrella, in case the Trump administration pulls out of the Nato alliance.
Merz has also called for increased German spending on military and infrastructure, funded by an easing of the “debt brake” written into the German constitution to avoid over-borrowing by the state.
The Green party has resisted Merz’s bid to boost the nation’s debt, but was ready to support moves to strengthen the military and stimulate economic growth, Reuters reported March 10.
A detailed think tank report on the European call to arms sets out the delicate task at hand.
“The European defense industry finds itself at the center of forces both centrifugal and centripetal, a perilous situation which makes it all the more urgent for the agreement of European states on common aims on equipment and industrial ambitions, under the threat of future consolidation moves pursued purely out of national pressure or influenced by factors outside Europe,” said a report titled European Re-armament: Defense Industry on the Precipice, from the Fondation pour la Recherche Stratégique (FRS).
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