By Francesca Landini

MILAN (Reuters), – Leonardo, an Italian defense and aerospace group believes that Russia’s invasion in Ukraine will speed up plans for European common defence capability creation and increase military spending.

Alessandro Profumo (Leonardo CEO) stated, “I’m sure this tragedy will cause higher coordination and expenditure in defense (in Europe),” adding that Leonardo had been part of several EU programs such as the EuroMale drone project and Tempest fighter plane project.

Profumo also stated that EU countries need to work more closely on their land defence.

The German Chancellor Olaf Scholz last month announced that a new 100 billion euro fund ($109.82 trillion) was being created to modernize the country’s military. This new fund is twice as large as its annual defense budget.

According to Prime Minister Mario Draghi, Italy will spend approximately 26 billion euro on defense this year.

Denmark, Poland, and Sweden all stated they are increasing defense spending when war is at their door.

This year, the state-controlled company expects to see its cash flow more than double compared to 2021 and reach 500 million euros.

The future growth in cash generation, fueled by increased sales of its defense and governmental businesses, is predicted to continue, according to Alessandra Genco, CFO.

This activity accounted for 88% in the Group’s 14.1 billion Euros revenue last year. The group had to reduce its production of parts and components for commercial aviation, which forced it into restructuring its Aerostructures division.

The group saw a rise in its net profit to 587million euros despite restructuring costs of 70 million euro and cash absorption by the Aerostructures Division.

Leonardo’s shares rose over 12% to 1100 GMT Milan, their highest point in two years.

After the Russian invasion, the group controlled by the state claimed that it was limited in its civil helicopter-related activities and had suspended them.

Leonardo stated that it witnessed growth in the aerospace, defense and security markets at an average of 6% per year over the next five-years and that its target market was about half the total.

It stated that the company had not been exposed to Russia or Ukraine.

($1 = 0.9106 euros)