Naval Group steps up Europe push as defence spending rises

By Florence Loeve

LORIENT, France, Oct 8 - French warship builder Naval Group is stepping up efforts to capitalise on Europe's higher defence spending, betting its ability to deliver frigates quickly will give it an edge over European rivals, executives said.

The state-controlled company, which competes with Britain's BAE Systems and Germany's TKMS, said European clients outside France now account for 20% to 25% of its €4.7 billion ($5.3 billion) annual turnover, up from zero in 2019, thanks to contracts in the Netherlands, Belgium, Greece and Sweden.

It is now preparing a bid to build frigates for Denmark, one of Europe's most closely watched defence tenders, as war in the Middle East and Russian manoeuvring at sea prompt Western governments to strengthen their navies.

"One of the European market's characteristics now is the need for rapid delivery with systems that work," said Guillaume Weisrock, senior vice president for sales and business development in Europe and North America.

DELIVERING ON TIME

Facing growing threats from Russia and waning confidence in US security guarantees, European governments have sharply increased defence spending since Moscow's invasion of Ukraine, including on naval capabilities.

Naval Group, which is 35% owned by French defence technology company Thales, is winning a share of that spending as competitors struggle to deliver ships on time. 

Germany scrapped a landmark frigate programme in June, six years after launch, after Dutch group Damen failed to meet deadlines and budget targets. Belgium is also facing delays to a frigate programme involving Damen.

At Naval Group's shipyard in Lorient, western France, last week, three ships for Greece were at various stages of construction or testing following contracts signed in 2022 and 2025. A first frigate was delivered to the Greek navy last year. 

Steel was also being cut for the first of four frigates ordered by Sweden under a contract signed in August, while two vessels for the French navy were being built and tested.

"The main advantage our ship has is that it already exists, that there's a production line up and running, and that we are delivering them on time," said Jean-Marie Dorbon, director of Naval's frigate programme.

Naval Group says it can build two Defence and Intervention Frigates per year in Lorient, cutting delivery times to less than four years and ultimately aiming for around three.

Competition remains intense. The company lost a contract to build Norway's frigates to BAE Systems last year and is competing with Britain's Babcock for the Danish deal. 

In Germany, TKMS has been tasked with building small Meko frigates to replace vessels initially ordered from Damen.

To win contracts, Naval Group works with local suppliers, including Salamis Shipyards in Greece. In Sweden, where the contract requires Swedish equipment to be integrated on board, it is working with Saab, Dorbon said.

"That also includes incorporating their solutions to our catalogue of options," he said.

($1 = 0.8945 euros)

(Reporting by Florence Loève. Editing by Mark Potter)