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Rheinmetall AG, a leading German defense contractor, has announced a significant 49% increase in sales for the second quarter of 2024, driven by a surge in orders for ammunition and weaponry amidst ongoing conflict in Ukraine. Despite this robust performance, the company has maintained its full-year guidance.
For the three months ending June 30, Rheinmetall achieved sales of €2.23 billion ($2.44 billion), surpassing the consensus estimate of €2.08 billion, as reported by Visible Alpha. The sales growth reflects a continued strong demand for defense equipment, primarily driven by European governments enhancing their military capabilities in response to the war in Ukraine.
The company’s vehicle-systems division, which includes combat, support, and tracked vehicles, remained the largest contributor to sales, generating €807 million. This was followed by the weapon-and-ammunition business, which brought in €692 million. Rheinmetall's net profit for the quarter rose to €62 million, although this fell short of the anticipated €126.1 million. However, the operating profit saw a dramatic increase, more than doubling to €270 million, and the operating margin improved to 12.1% from 7.4% a year earlier.
Rheinmetall’s impressive sales figures are part of a broader trend of increased defense spending across Europe. The company’s order backlog reached a new record high of €48.64 billion by June 30, marking a nearly 62% increase compared to the previous year. Noteworthy contracts include components for 22 howitzers and a major agreement for supplying 155mm artillery ammunition worth up to €8.5 billion, both destined for the German armed forces.
To keep pace with the booming demand for ammunition, Rheinmetall is expanding its production capacity. The company plans to acquire a 51% stake in Resonant Holdings, a South African firm specializing in plant engineering for the chemical industry. This acquisition aims to boost Rheinmetall’s production of propellants and explosives. Additionally, the company is establishing new ammunition plants in several countries, including Lithuania, Hungary, Romania, and Ukraine, despite heightened security concerns in the latter due to potential Russian threats.
Despite the surge in sales, Rheinmetall has decided to stick with its full-year 2024 guidance. The company expects to achieve sales of approximately €10 billion for the year, up from €7.18 billion in 2023. Rheinmetall's CEO, Armin Papperger, also anticipates annual sales growth of around €2 billion in the coming years, with an operating earnings margin projected to be between 14% and 15%.
The decision to maintain the guidance comes in the wake of U.K. rival BAE Systems raising its full-year outlook, following stronger-than-expected sales. Rheinmetall’s outlook for the third quarter remains positive, bolstered by additional German orders funded by a special €100 billion defense modernization fund.
