Thales raises 2025 sales growth forecast on strong defence demand

By Anna Peverieri

July 23 (Reuters) - French defence and aerospace group Thales TCFP.PA raised its 2025 sales growth forecast on Wednesday after posting higher first-half sales and profit amid higher military spending in Europe.

Europe's largest defence electronics firm also said its widely watched adjusted operating profit rose 12.7% on a comparable basis to 1.25 billion euros, fractionally above market forecasts, led by the Aerospace and Defence units.

The company, whose portfolio spans fighter radars to seat-back screens for airlines, now expects 2025 sales growth of between 6% and 7% instead of the 5% to 6% it had forecast previously, pointing to full-year revenue between 21.8 billion euros ($25.62 billion) and 22 billion euros.

Thales, partially owned by the French state, said sales rose 8.1% on a like-for-like basis to 10.27 billion euros in the first half, while new orders fell 4% to 10.35 billion due to a tough comparison with last year's surge in big-ticket deals.

Revenues were slightly lower than expected, though orders came in ahead of expectations.

Analysts had on average been forecasting half-year sales of 10.35 billion euros and 9.02 billion euros of fresh orders, as well as an adjusted operating profit of 1.22 billion euros, according to a company-compiled consensus.

The increase in sales was mostly driven by defence and avionics activities, CEO Patrice Caine told reporters.

Thales confirmed that it expects revenues to exceed new orders this year and its adjusted operating margin to reach between 12.2% and 12.4% for the full year.

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The Paris-based company's shares have risen about 78% so far this year, as military spending soars in Europe in the wake of Russia's invasion of Ukraine and signs the region will need to shoulder more responsibility for its own defence.

French President Emmanuel Macron pledged earlier this month to double defence spending by 2027, three years ahead of the original 2030 target.

Macron’s move “clearly supports business momentum,” Caine said, noting that accelerating investment under France's defence budget would fuel growth in the group's operating performance.

Thales is also one of many European companies watching for any impact of trade tensions, particularly on civil businesses.

CFO Pascal Bouchiat said U.S. tariffs would have a limited operational impact, however, estimating a hit of "several tens of millions of euros" in 2025 if 10% reciprocal duties were imposed between the U.S. and Europe.

More than half of Thales’ revenue comes from defence, which is exempt from such duties, he added, noting that the group's “multi-domestic” structure limits cross-border flows.

The group’s tariff exposure involves aerospace repairs between Europe and the U.S. and bank card exports from Mexico to the U.S., Bouchiat said.

"We are relatively well protected (from tariffs). We can benefit from alternative import schemes, namely temporary imports, which allow us to significantly reduce import tariffs in the United States".

The CFO added that the group could shift bank cards production from its Mexican plant to other facilities, such as Singapore, to serve the U.S. market if tariffs on Mexico rose sharply.

($1 = 0.8508 euros)