(News Bulletin 247) – The manufacturer of tanks, munitions and other military equipment has revealed a publication that exceeded expectations. Rheinmetall confirms its objectives for the current year.

While in France, the bulk of corporate publications are in the rearview mirror, in Europe the flow of announcements is far from drying up. Particularly in Germany, where investors learned this Thursday morning of the latest quarterly performances of the insurer Allianz, the industrialist Siemens and the defense group Rheinmetall.

The manufacturer of tanks, ammunition and other military equipment confirmed this Thursday that it had achieved a very good second quarter, a few weeks after having communicated its preliminary results at the end of July.

Between April and the end of June, Rheinmetall reported a sharp increase in order books of 62% over the year, reaching a “record level” of 48.6 billion euros compared to 30 billion euros a year earlier. It was supported by strong order intake, also a record amount of 11 billion euros.

A race for rearmament

Rheinmetall is benefiting from the rearmament race that has been underway since Russia’s invasion of Ukraine in 2022. At the end of June, for example, the German army placed an order with the industrial group worth more than 8.5 billion euros for 155mm shells, NATO’s standard caliber. This mega order for shells is the largest “in recent history,” Rheinmetall stressed.

On the revenue side, they were recorded at 2.234 billion euros in the second quarter, representing a 49% increase in sales. Sales thus exceeded the consensus which was housed at 2.064 billion euros in the second quarter.

Rheinmetall attributes this improvement in its financial elements to an “early recognition of sales in the Arms and Munitions division and to the proportionally higher than expected contribution of sales from Rheinmetall Expal Munitions in the first six months”.

Over the entire first half, revenues increased by 33% year-on-year, to 3.8 billion euros. This is 5% above the initial consensus, notes AlphaValue.

“Exceptional” results for AlphaValue

In other lines of business, Rheinmetall’s operating profit reached 271 million euros in the second quarter, largely exceeding market expectations of 226.2 million euros. The corresponding margin also climbed to 12.1%, exceeding the consensus quoted by the company, which was set at 11%.

Over the entire half-year, the performance is just as impressive, with operating income jumping 91% year-on-year to reach 404 million euros, which is 12% above the consensus, the independent research office specifies. The corresponding margin also progressed year-on-year, going from 7.4% to 10.6% as of June 30, or 71 basis points (0.71 percentage points) above the consensus cited by AlphaValue.

“In addition to sales growth, the improvement in operating profit is particularly due to the profit contribution of Rheinmetall Expal Munitions in Spain, which was acquired the previous year,” the German group said.

“Rheinmetall has posted exceptional results for the second quarter of 2024, with superior results in both sales and profitability,” the independent research firm said.

They are “supported by strong order intake and excellent momentum in the Arms and Ammunition division, in the context of assistance to Ukraine by EU and NATO partner nations, and strong demand from the German armed forces,” he continued.

However, Saïma Hussain, the analyst in charge of covering the stock, remains unsatisfied. “Despite a record order book and a strong increase in sales and profitability, Rheinmetall has simply reiterated its forecasts,” regrets the specialist.

Regarding its outlook for 2024, Rheinmetall still expects to achieve sales of 10 billion euros. For the operating margin, the company anticipates a rate of between 14% and 15%, which would mark a significant improvement compared to the 12.8% achieved in 2023.

On the Frankfurt Stock Exchange, Rheinmetall rose 1.3%, to 500 euros, doing much better than its benchmark index the Dax (-0.6%) which is giving in to the ambient gloom. Since the beginning of the year, the share price has soared 68%, driven by a revival of geopolitical tensions in the Middle East and a demand for weapons that is not weakening in Europe.

Let us recall that the German group made a remarkable entry into the flagship index of the Frankfurt Stock Exchange in April 2023, after seeing its share price quadruple since the outbreak of the war in Ukraine at the start of 2022.