Rheinmetall expects robust 2025 in ‘era of rearmament’

Berlin — Rheinmetall, a major beneficiary of Europe’s big push to invest in defence, said on Wednesday it expects significant sales growth in 2025 and that it would update its outlook to take into account recent developments in the war in Ukraine.

“An era of rearmament has begun in Europe that will demand a lot from all of us. However, it also brings us at Rheinmetall growth prospects for the coming years that we have never experienced before,” CEO Armin Papperger said in a statement.

The group’s shares jumped 6.2% in midday trading, making it was the top gainer in percentage terms on Germany’s benchmark Dax index. The stock has more than doubled within a year to about €1,230.

Europe’s top arms manufacturer is betting on a surge in spending by European leaders who back Ukraine in its conflict with Russia, amid ructions in US policy towards the region after President Donald Trump’s inauguration.

On Tuesday, the US agreed to resume military aid and intelligence sharing with Ukraine, which said it would accept a US proposal for a 30-day ceasefire.

Rheinmetall forecasts sales will surge 25%-30% this year, after coming in slightly under €10bn in 2024, and an operating margin of 15.5%, slightly above last year’s 15.2%. The defence business accounts for up 80% of the company’s sales.

The outlook does not take into account “improvement in market potential that is expected to arise”, Rheinmetall said, adding that it expected to update that guidance soon.

The European Commission wants to mobilise as much as €800bn for European defence, and Germany’s likely next chancellor, Friedrich Merz, wants to amend the constitution to allow for a big increase in state borrowing to revamp the military.

Beating expectations

Rheinmetall calculated that a rise in the Nato defence spending target to 3.5% of GDP would translate to as much as €400bn for the company by 2030, assuming a capture rate of 20%-25%.

“We have not done enough work yet to endorse this view, but if it were to be correct then Rheinmetall could significantly beat even the highest of investor expectations for its sales and ebitda [earnings before interest, taxes, and amortisation] in the coming five years,” said JPMorgan analysts.

CEO Papperger played down the effect German defence spending plans could immediately have, saying it would take months before contracts would materialise.

Rheinmetall, which aims for €2bn in business in the US by 2027, is vying for a contract to develop a successor to the Bradley Fighting Vehicle.

Rheinmetall reported 2024 group sales of €9.75bn, up 36% on the year but below the €9.99bn in a company-provided estimate of analysts surveyed by Vara Research.

Papperger said that the company came in just short of the €10bn mark due to a logistics delay that forced it to shift about €250m to the 2025 financial year.

The company’s civilian business offered a mixed picture, with products for carmakers in particular on the decline.

Rheinmetall said last month it intended to repurpose two of its automotive plants in Germany to mostly make defence equipment, and Papperger on Wednesday left open the possibility of even more civilian factories being converted.

Volkswagen’s factory in Osnabrueck would be a good fit for a conversion to military production, the CEO of Rheinmetall said on Wednesday.

Papperger said that while Rheinmetall could repurpose more of its own automotive plants, buying sites from carmakers such as VW under the right conditions was also possible.

Reuters