France's Thales to Take Hit After Germany Scraps Frigate Program — Update

By Mauro Orru

French aerospace-and-defense group Thales said it expects to record a charge after Berlin scrapped a project to procure F126 frigates, the latest casualty from the country's decision not to move forward with what could have been Germany's biggest class of warship since the end of World War II.

Dutch shipbuilder DSNS was the prime contractor for the project and Thales one of the sub-contractors. The German government had expected the first batch of frigates to be delivered in 2033, but DSNS couldn't hit the targeted budget and timetable, prompting Berlin to start transferring the project to Rheinmetall.

However, Berlin said last month that it had opted not to pursue an order for six F126 frigates from Rheinmetall for about 15.2 billion euros ($17.38 billion) due to delays and cost increases, and opted instead to purchase eight MEKO A-200 frigates from German shipbuilder TKMS.

Thales said Friday that it would book an exceptional and mostly non-cash charge of about 450 million euros, an amount it said included costs it already paid on the project and a conservative estimate of compensation it expects to receive.

"Thales will claim all its rights in order to obtain compensation for the work carried out as part of this project and for the prejudice suffered as a result of termination of the program," the company said.

The announcement comes a day after Germany's Rheinmetall said the cancellation of the F126 frigate program would dent second-quarter orders, now expected to be in a low double-digit billion-euro amount compared to a prior forecast of 20 billion euros.

Thales, for its part, said the charge it expects to book would have no effect on its adjusted earnings before interest and taxes and adjusted net profit, but will harm net profit by about 350 million euros in the first half.

Despite the hit to profit, the company said its defense business continued to benefit from strong momentum and raised its order intake and cash generation targets for the year. It now expects a book-to-bill ratio above 1.10 compared with a prior forecast above 1.0, with a cash conversion rate between 100% and 110% compared with 95% to 100% previously.

The group said it continued to expect organic sales growth between 6% and 7% for the year, with an adjusted EBIT margin between 12.6% and 12.8%.

Write to Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

July 03, 2026 13:06 ET (17:06 GMT)