Rheinmetall CEO Says Arms Boom Is the Biggest He’s Ever Seen
(Bloomberg) -- Rheinmetall AG is seeing record growth because of Europe’s defense ramp-up in response to Russia’s invasion of Ukraine, with annual jumps in revenue expected for years to come.
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“We have never seen such growth,” Chief Executive Officer Armin Papperger said Thursday. “The supercycle is clearly accelerating.”
For the coming years, the German maker of Leopard tanks and ammunition expects an annual surge in sales of about €2 billion ($2.2 billion) after “massively” investing in additional capacity as well as making acquisitions since Russia’s annexation of Crimea in 2014. For 2024, Rheinmetall sees revenue rising to around €10 billion.
The company is also building new plants in countries like Lithuania, Hungary, Romania and Ukraine.
Rheinmetall is among a number of European weapons contractors that has seen sales surge amid the growing threat from Russia and questions around the US commitment to the NATO military alliance. Its order backlog came in at €48.6 billion at the end of June and is expected to swell to as much as €70 billion by the end of this year.
The results are solid, with very strong operating free cash flow and confident messaging from management on reaching targets for this year and beyond, Morgan Stanley analysts led by Marie-Ange Riggio said in a note.
Operating profit more than doubled to €270 million in the second quarter, outpacing a rise in sales. The company will likely reach the upper end of its full-year margin guidance of 14% to 15%, Papperger said Thursday on a call with analysts.
Rheinmetall shares rose as much 2.6% in Frankfurt. They’re up 75% this year.
The manufacturer, which plans to build an ammunition factory in Ukraine, has had a turbulent few weeks after reports in July that American and German security services foiled a Russian plot to assassinate Papperger. He has been given special protection as a result.
Rheinmetall and Leonardo SpA in July said they’ll work together developing and selling a new main battle tank and platform for an armored infantry combat vehicle to the Italian Army.
(Updates with analyst comment in sixth paragraph.)
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