Shares in Czech defence group CSG fell 18% on Wednesday 11 November after the ammunition and arms producer cut its full-year profit margin outlook, even though its order book reached a record high. The company lowered its expected operating EBIT margin for 2026 to about 21%, down from between 24% and 25% previously, and said the change reflected lower-priced sales of standard-range ammunition and a shift in its business mix. ## Why the market reacted CSG said it had sped up sales of standard-range ammunition held in stock at lower market prices as demand shifted towards longer-range rounds. That move, together with strong year-end growth expected in its Land Systems business, where margins are still building as programmes ramp up, pulled down the margin forecast for the year. The fall weighed on the wider European defence sector on a day when most of the region's main share indices were higher. ## Trading update in numbers For the first nine months of 2026, CSG reported revenue of €4,761 million, up 6.1% on the same period a year earlier, with sales in its Defence Systems division up 9.5%. Operating EBIT edged up 0.4% to about €1.1 billion, giving the group a margin of 23.1% over the nine months. Third-quarter revenue fell to €1.5 billion from €1.7 billion a year earlier, while operating EBIT dropped to €317 million from €401 million, as delivery timing pushed some revenue into the fourth quarter. ## Record backlog despite the cut CSG kept its 2026 revenue guidance unchanged at €7.4 billion to €7.6 billion, and its order backlog rose to a record €18 billion at the end of September, up from €15 billion at the end of December 2025. Chief Executive Michal Strnad said demand remained strong for land systems and for medium- and large-calibre ammunition. He said contracts with Poland's HSW and Dezamet worth more than €250 million combined had taken CSG's partnership with Polska Grupa Zbrojeniowa to a strategic level. ## What happens next Strnad said nearly all the ammunition CSG made in-house in the third quarter was of the extended-range type, and that full in-house production of energetics by the end of 2027 was the main driver of future margin growth, alongside production capacity of 1.1 million rounds by the same date. The company also raised its expected working capital for 2026 to below 35% of revenue, from below 20% before, as longer lead times for extended-range ammunition and land systems push some deliveries into 2027 and delay the release of cash tied up in working capital.