Armaments industry: Naval shipbuilder TKMS has a brilliant start to the stock market

Germany’s largest naval shipbuilder TKMS started on the stock market with a significant price increase. The market value of TKMS temporarily exceeded that of the parent company Thyssenkrupp.

After starting at 60 euros, the shares spun off from Thyssenkrupp got a run that temporarily brought them close to the 100 euro mark. After that, the rally leveled off again. At lunchtime the rate was 89 euros.

The premiums at TKMS reflect investors’ arms fantasy. The first price setting took an unusually long time in the morning because demand for the securities was high.

As part of the spin-off, Thyssenkrupp shareholders automatically received one share in TKMS for every 20 of their shares. The parent company Thyssenkrupp retains 51 percent of the shares.

While the value of all Thyssenkrupp shares temporarily shrank below the 6 billion mark due to the spin-off, TKMS was valued at its peak at 6.2 billion euros. Combining both stocks mathematically, Thyssenkrupp shareholders now have around 14 percent plus in their portfolio.

TKMS CEO Oliver Burkhard called the step towards independence a strong signal for maritime security. The company has around 9,000 employees and an order backlog of 18.6 billion euros. “We are the maritime powerhouse in Europe,” he said. The IPO enables direct access to the capital market.

Submarines, corvettes and frigates in the portfolio

According to its own information, TKMS is the world market leader for non-nuclear submarines, but also builds frigates and corvettes. Other locations include Wismar, where TKMS wants to build submarines like in Kiel and have 1,500 jobs in the future, and Itajaí in Brazil. The company also operates locations in Hamburg, Bremen and Emden. Burkhard announced extensive investments for both Kiel and Wismar.

Deutsche Börse board member Thomas Book said seven out of ten NATO submarines came from TKMS in Kiel. A new chapter is now beginning for TKMS, which brings with it independence and freedom of choice. Book spoke of a political signal for defense capability.

The CEO of Thyssenkrupp, Miguel Lopéz, emphasized that his company remains the majority shareholder and guarantees stability for customers and a clear perspective for employees.

Spin-off part of the Thyssenkrupp group restructuring

The independence of the marine division is part of a group restructuring planned at Thyssenkrupp in the coming years. Even after the IPO, Thyssenkrupp AG will remain the strategic majority shareholder through a new holding company.

The submarine builder’s order books are full. In December, the Bundestag Budget Committee approved the construction of four more Class 212CD submarines for the German Navy. Ten such boats have been commissioned – six for Germany and four for Norway. The shipyard will therefore be at full capacity until the early 2040s. According to the information, the order volume currently amounts to 18.5 billion euros.

According to Burkhard, TKMS is aiming for annual sales growth of ten percent, and the EBIT margin is aimed at more than seven percent. 30 to 50 percent of net profit should be distributed to shareholders as dividends.

Among other things, TKMS is applying for a large arms contract to build eight to twelve conventional submarines for Canada. In his speech at the start of the stock market, Burkhard announced that he would fly to Canada on Monday. In August, Canadian Prime Minister Mark Carney visited the submarine forge in Schleswig-Holstein. The competitor is a shipyard from South Korea.

If TKMS wins the contract, the boats will be built both at the headquarters in Kiel and in the second shipyard in Wismar in Mecklenburg-Western Pomerania. TKMS recently missed out on an order for frigates from Australia. This one went to Japan.