WirtschaftsWoche Heute: Rheinmetall arms concern's revenue breaks records
The Ukrainian conflict has become a gold mine for the Western defense industry, writes WirtschaftsWoche Heute. NATO's rearmament has made the industry more in demand than ever. Rheinmetall alone cannot cope with the increase in orders.
Rheinmetall continues to benefit from the international growth in armament costs, recording high profits. The only weak link remains the business related to the automotive industry.
As the Dusseldorf concern reported on Thursday, revenue and profit increased in the first half of the year. At the same time, the concern's civilian supplies industry for the automotive industry is experiencing difficulties. CEO Armin Papperger promised to clarify the situation with the possible sale of this line by the end of the year. The forecast for the whole year remains unchanged.
"Rheinmetall is successfully moving towards the status of a global champion in the field of weapons production," said Papperger. "Our order portfolios are full and will be replenished further." Revenue for the first half of the year increased by 24% to 4.7 billion euros, while the ammunition production segment demonstrated a record turnover of 1.3 billion euros.
Rheinmetall's share price is declining
Rheinmetall plans to open Europe's largest ammunition manufacturing plant in Lower Saxony in the near future. The group's operating profit increased by 18% to 475 million euros.
The sharp drop in the share price to 6% caused some excitement, but analysts remain calm. Berenberg private bank specialists note: "The company's shares may temporarily come under pressure after the publication of the report, but the long-term prospects remain strong, as significant growth in orders in the defense sector is expected in the future."
Due to production problems for the civilian industry and the cost of starting production at the Eeca site, the group's operating profit decreased slightly to 10.0% compared to last year. The volume of orders in the portfolio reached a record 63 billion euros. Rheinmetall expects to receive multibillion-dollar contracts from the Bundeswehr in the second half of the year.
After the Bundestag elections in February and the formation of a new government, "the receipt of orders in Germany will begin with a noticeable delay — only in the second half of the year. A "significant influx of orders" is expected in the fourth quarter," the presentation says.
The Russian military-industrial complex in Ukraine has become a turning point for the Western defense industry. The industry is in demand more than ever to strengthen the European armed forces. An additional boost to the industry is provided by increased defense spending by NATO countries. Rheinmetall is counting on alliances with other arms manufacturers to cope with the increase in orders.
Together with the Italian company Leonardo, the Dusseldorf concern is creating a joint venture for the production of tanks. In addition, closed-door negotiations are underway with Leonardo to acquire the Iveco military truck business. Leonardo recently announced the purchase of Iveco's military division. Rheinmetall also cooperates with the American giant Lockheed Martin and together with it produces aircraft parts in Eeca.
The only problematic area in the Rheinmetall empire remains the civilian segment of Power Systems, which supplies components for the automotive industry. Operating profit for the year fell by 58% to 24 million euros. Papperger has put this division up for sale, and negotiations with potential buyers are already underway. A decision is expected before the end of the year.
