Leonardo weighs options for Iveco truck business after buyout

Leonardo is reassessing what to do with the truck side of the Iveco defence vehicles business it acquired earlier this year, with a possible sale to Rheinmetall now only one option among several and other parties having approached the group, according to its chief executive and finance chief.

Iveco Defence Vehicles, referred to by the company as IDV, was consolidated into Leonardo’s accounts from 1 April and contributed three months to the first-half results. Chief financial officer Giuseppe Aurelio told the group’s results call that the acquired business brought a backlog of around €6 billion, with orders of €0.6 to €0.7 billion and revenues of €0.4 billion in the period, both in line with full-year expectations for the nine months it will be consolidated.

A prior understanding with Rheinmetall over the truck operations was described as informal. “There was a gentlemen’s agreement, but nothing formally binding or something like that with them to look at this opportunity,” Aurelio said. “It is still one of the options, so not the only one.”

He said the business had performed better than expected and that early concerns had eased. “We are seeing that the business, the truck business, is growing. It is profitable,” Aurelio said, adding that an integration team had worked “to make safe the supply chain, which was an area of concern for us, not being an automotive group.” As a result, he said, “I think we are now in a position to better evaluate the different alternatives and decide based on the most convenient option we can have.”

Chief executive Lorenzo Mariani said talks with the German group were continuing within the framework of their existing relationship. “We are continuing, in any case, our talks with Rheinmetall in the frame of the continuous contact we have with them within the joint venture. No hurry, no hurry, but it is still an hypothesis,” he said, before disclosing outside interest: “And in the meantime, we received inquiries from others who would like to discuss potential buying.”

On the mix between the two halves of IDV, Aurelio said the full year was expected to run at roughly 50% to 55% in favour of armoured vehicles, but that the second quarter had been “much more unbalanced in favour of the armoured business, where we have a higher margin,” which explained a stronger than usual profitability figure for the period. The company confirmed a return on sales of 11% for IDV over the nine months.

Leonardo completed the acquisition of IDV from Iveco Group for a consideration of €1.6 billion, a payment Aurelio said was the main driver of net debt rising to an expected €3.2 billion, though he described the balance sheet as solid and in line with the leverage target set for 2026 to 2028. Excluding Leonardo’s share of cash held in the MBDA joint venture, he put net debt at around €1 billion.

The purchase gives Leonardo a position in land systems, combining IDV with Oto Melara in a new division. Mariani said the deal provided entry to “a new domain that is the land battlefield” and also delivered industrial footprint and manufacturing capacity that could be made available to other parts of the group.

Leonardo separately operates a land systems joint venture with Rheinmetall, which Mariani said was already running with a first contract for Italy. He said he was optimistic about finalising two further contracts in the coming months, covering a follow-on tranche of the armoured infantry combat vehicle programme and a new main battle tank based on the Panther, adding that both could be signed with or without funding from the European SAFE instrument.

Image Suradnik13, CC BY-SA 4.0, via Wikimedia Commons.