Defense: Rheinmetall shares continue to rise

The defense company Rheinmetall and its shareholders continue to benefit from the growing defense spending as a result of the war in Ukraine. The Düsseldorf-based company started the year better than expected, posting a jump in sales and profits, and announced an increase in its forecast. The company's shares, listed on the DAX index, jumped more than five percent to €1,414 in early trading and then continued to rise – six months ago, they were trading below €500.

CEO Armin Papperger stated that the annual targets would be achieved "at least." They anticipate a sales increase of 25 to 30 percent and an operating profit margin of approximately 15.5 percent. However, this outlook does not yet take into account the expected "improvement in market potential" due to geopolitical developments. Rheinmetall will adjust the forecast as customer demand becomes more concrete, Papperger announced.

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In the first quarter, the group, which also manufactures components for the automotive industry, increased sales by around 46 percent to €2.305 billion, significantly exceeding analysts' estimates of €1.95 billion. Revenues in the military business alone soared by around 73 percent. The group's operating result also rose by 49 percent to €199 million, while the market had only expected €165.8 million. Earnings in the military business nearly doubled, it was reported. The full quarterly results are scheduled to be published on May 8.

Rheinmetall stated that the positive development was entirely attributable to the strong performance in the defense business and, in particular, to pull-forward effects from the second to the first quarter. Orders from Germany, in particular, drove incoming orders by 181 percent to €11 billion, and the order backlog reached an all-time high of €62.6 billion. Papperger had recently forecast an unprecedented order boom due to the planned significant increase in defense spending in Germany and the European Union. "We see order potential of up to €300 billion by 2030," he said. Rising defense spending following the Russian attack on Ukraine had already brought Rheinmetall record growth. Papperger had spoken of an "era of rearmament." The news was well received by investors.