Rheinmetall (RHMG.DE), the German defense manufacturer known for tanks, grenades, and infantry fighting vehicles, reported second-quarter sales and profit below market expectations on Thursday, citing delays in German defense contract awards. Despite this, the company reaffirmed its full-year sales growth forecast, anticipating a surge in orders in the second half of the year.
The company posted sales of €2.43 billion ($2.8 billion) for the quarter ending in June, falling short of the consensus forecast of €2.53 billion. Shares dropped nearly 6% by mid-morning trading, making Rheinmetall the largest decliner on Germany’s blue-chip DAX index, News.Az reports, citing Reuters.
However, analysts remain optimistic about the company’s outlook. Rheinmetall expects over €80 billion worth of orders between 2025 and mid-2026, predominantly from the German military. JPMorgan analysts predict a significant upward revision of the company’s medium-term guidance later this year as investments yield results and large contracts start flowing in.
Germany, after months without a government in the second quarter, recently exempted defense spending from debt limits, enabling borrowing of up to €380 billion for defense from 2025 to 2029. This policy shift is expected to benefit Rheinmetall substantially.
“Our order books are full and will continue to grow in the future,” CEO Armin Papperger said. “Rheinmetall is successfully on its way to becoming a global defense champion.”
The company is expanding production capacity across Europe to meet increasing demand in its key markets of Europe, Germany, and Ukraine, where heightened military spending follows Russia’s invasion in early 2022.
The order backlog rose to €63.2 billion in the first half, up from €48.6 billion a year earlier. Yet, operating profit of €276 million missed forecasts, weighed down by challenges in Rheinmetall’s civilian business and costs from its new manufacturing site in Weeze, Germany, which will produce F-35 fighter jet components.
Rheinmetall plans to decide on the future of its underperforming Power Systems division — which serves civilian industries — by year-end. CEO Papperger indicated that this division is no longer central as the company refocuses on its growing defense segment.
