By Miranda Murray and Matthias Inverardi
BERLIN (Reuters) -Rheinmetall on Thursday reported second-quarter sales and profit below expectations, citing delays in German defence contract awards, but affirmed its full-year forecast on expectations for a flood of orders later in the second half.
The German defence company reported sales of 2.43 billion euros ($2.8 billion) in the three months to June, below the 2.53 billion consensus forecast according to a company-provided poll.
Difficulties in Rheinmetall’s civilian business, which it is looking to offload, as well as costs of its new site in Weeze, Germany, where it will produce F-35 fighter jet parts, had also weighed on its quarterly operating profit margins.
Shares in the maker of tanks, grenades and infantry fighting vehicles were down by 6.5% by 1404 GMT, making it the biggest loser in the DAX index of blue-chip stocks.
Analysts said the miss on the headline figures could weigh on the shares, but were upbeat about Rheinmetall’s outlook.
The company confirmed its 2025 sales growth guidance, and CEO Armin Papperger said he expects Rheinmetall’s order backlog to rise to 120 billion euros by the middle of 2026 – primarily from the German military – if everything goes well.
The order backlog reached 63.2 billion euros in the first half of 2025, up from 48.6 billion in the same period last year.
JPMorgan analysts expect the company to meaningfully raise its medium-term guidance later this year, once its investments pay off and large orders begin rolling in in the second half.
Europe’s biggest ammunitions producer continues to benefit from increased spending on defence as European countries invest in their militaries to deal with the threat posed by Russia after it invaded Ukraine in early 2022.
Germany, which did not have a government in place for much of the second quarter, approved exempting defence spending from debt rules in March, opening the way for Europe’s largest economy to be able to borrow a total of 380 billion euros between 2025 and 2029 for defence in the budget last month.
“Our order books are full and will continue to grow in the future,” said Papperger.
“Rheinmetall is successfully on its way to becoming a global defence champion,” added the CEO, who was reportedly the target of a Russian assassination attempt last year.
The company is investing in several European countries to create new capacity, and is pursuing alliances with other defence firms to meet demand in its core markets of Europe, Germany and Ukraine.
Rheinmetall, which aims to fill gaps in its product portfolio through acquisitions, is in discussions with partners about creating a big naval business and can hopefully disclose more details in the coming weeks, Papperger said.
The CEO had initially shown an interest in Thyssenkrupp’s marine division TKMS before the German conglomerate decided to pursue a spin-off of the unit, to be voted on this week, instead of a sale.
Rheinmetall also plans to build tanks in a joint venture with Italy’s Leonardo, with which it is also in exclusive talks about acquiring Iveco’s military trucks business, with Papperger promising a decision by March.
($1 = 0.8569 euros)
(Reporting by Miranda Murray and Matthias Inverardi; Editing by Louise Heavens, David Holmes and Jan Harvey)
