Key Takeaways:
German defense company Rheinmetall AG (RHM) reported an 8% rise in first-quarter sales to €1.94 billion and announced plans to begin producing cruise missiles with partner Destinus as early as the fourth quarter of this year.
"I expect stronger growth in sales and order intake in the second quarter, with large-volume orders in the naval and vehicles businesses," Chief Executive Officer Armin Papperger said on Thursday.
The Frankfurt-listed company’s results showed a mix of strong growth in its order book against a miss on revenue expectations. The company's operating margin improved to 11.6% from 10.5% a year earlier.
Rheinmetall is expanding into new weapons domains to capture a larger share of Europe’s increasing defense spending. The company formed a joint venture with Dutch firm Destinus to produce advanced cruise missiles and ballistic rocket artillery, with Rheinmetall holding a 51% stake. The venture, Rheinmetall Destinus Strike Systems, aims to start production between Q4 2026 and early 2027.
The move comes as European nations work to increase ammunition and missile manufacturing capabilities, a need highlighted by the war in Ukraine.
As part of a push into naval-defense manufacturing, Rheinmetall also confirmed it submitted a nonbinding bid for German Naval Yards Kiel. This follows a nonbinding offer for the same shipyard by shipbuilder TKMS in January.
For the full 2026 fiscal year, Rheinmetall maintained its forecast for sales between €14 billion and €14.5 billion, with an operating margin of around 19%.
The company's massive 31% increase in its order backlog to €73 billion suggests a strong pipeline of future revenue despite the Q1 sales miss. Investors will watch for the conversion of this backlog and progress on the new missile and naval ventures in the upcoming quarters.
This article is for informational purposes only and does not constitute investment advice.
