Mounting Backlog Threatens to Erase $40 Billion from Economy
Western nations scrambling for defense, with Russia's invasion of Ukraine and the US administration stirring up a firestorm, is a boon for Rheinmetall. This German manufacturer is on a roll, set to reach record-breaking sales and eyeing forays into space.
CEO Armin Papperger paints a rosy picture for Rheinmetall, a Düsseldorf DAX company, as it aims to rake in over €40 billion by 2030. In 2024, the company made around €10 billion, and Papperger predicts a flood of orders, sparking plans for significant production expansion. The company is even reallocating factories from the civilian sector, planning to produce satellites in Neuss.
Rheinmetall's recent growth is "unprecedented" in the company's history, Papperger declared while presenting the first-quarter financials. The operating earnings more than doubled from January to March, reaching €108 million. The company had initially announced a 46% increase in sales to €2.3 billion based on preliminary figures, which has now been confirmed. Military business sales soared by approximately 73%. Order intake shot up by over 180% to €11 billion, primarily from the German military.
Rheinmetall maintains its annual goals of a "least" 25-30% sales increase, with the military business anticipated to grow by 35-40%. The company also aims to enhance profitability, projecting an operating margin to reach around 15.5% (up from 15.2% last year). However, these forecasts do not include any firm plans for defense spending yet.
Rutte Predicts Heftier Defense Spending
The Russian invasion of Ukraine signaled a turning point for Western defense industries. The sector is racing to beef up armed forces, receiving an additional push from US President Donald Trump's policies promoting higher defense spending among NATO countries. His push for a shift away from liberal democracies in Europe adds more momentum.
Papperger anticipates a rapid surge in defense spending in NATO following a conversation with NATO Secretary-General Mark Rutte. Rutte indicated that NATO countries should boost their defense spending to 3.5% of their respective GDP (currently 2%), with Trump pressing for significantly more. Papperger forecasts an order potential of €300 billion from increased defense spending in Germany and the EU by 2030.
Civilian Production Shift to Military
In light of the current boom, Rheinmetall is considering redirecting some of its civilian production for the automotive industry towards military manufacturing. While the Neuss plant, with around 1,500 employees, has primarily focused on civilian production, the company is now exploring military manufacturing. Rheinmetall has founded a joint venture with the Finnish company ICEYE for satellite production. From the second quarter of 2026, satellites could potentially be manufactured at the Neuss plant, among other locations. Papperger also mentioned the possibility of acquiring plants from automakers like Volkswagen if conditions align. This, along with acquisitions and collaborations, is seen as a path to further growth. Papperger expects the joint venture with ICEYE to generate annual sales of €1 billion.
Expanded Production Facilities
In the recently announced joint venture with US giant Lockheed Martin for missile production, the numbers are even higher - Papperger forecasts annual sales of €5 billion. Rheinmetall plans to produce ATACMS or Hellfire missiles together with its US partner in Germany.
The only declining revenue in the first quarter was recorded in the civilian Power Systems division, which supplies the struggling automotive industry. Revenue here fell by around 7% to €505 million, and the operating profit shrank by 70.4% to €9 million. If an appropriate buyer is found, Rheinmetall could divest this division, according to Papperger.
Sources: ntv.de, als/rts
- Rheinmetall
- Russian Invasion of Ukraine
- Arms
- Arms Trade
- NATO
- Mark Rutte
- Ministry of Defense
- German Defense Policy
- Satellite
- According to CEO Armin Papperger, Rheinmetall aims to reach €40 billion in revenue by 2030, with a significant portion coming from the defense sector.
- In 2024, Rheinmetall made around €10 billion, and Papperger predicts a flood of orders, sparking plans for significant production expansion.
- Rheinmetall is considering redirecting some of its civilian production for the automotive industry towards military manufacturing, especially at the Neuss plant.
- In the recently announced joint venture with US giant Lockheed Martin for missile production, Rheinmetall plans to produce ATACMS or Hellfire missiles in Germany, projecting annual sales of €5 billion.
- Armin Papperger anticipates a rapid surge in defense spending in NATO following a conversation with NATO Secretary-General Mark Rutte, predicting an order potential of €300 billion from increased defense spending in Germany and the EU by 2030.
