Rheinmetall, a major beneficiary of Europe's big push to invest in defence, said today it expects significant sales growth in 2025 and that it would update its outlook to take into account recent developments in the war in Ukraine.
"An era of rearmament has begun in Europe that will demand a lot from all of us. However, it also brings us at Rheinmetall growth prospects for the coming years that we have never experienced before," CEO Armin Papperger said in a statement.
Shares jumped 6.2% in midday trading, making Rheinmetall was the top gainer in percentage terms on Germany's benchmark DAX index. The stock has more than doubled within a year to about €1,230.
Europe's top ammunition maker is betting on a surge in spending by European leaders who back Ukraine in its conflict with Russia, amid ructions in US policy towards the region following President Donald Trump's inauguration.
The US yesterday agreed to resume military aid and intelligence sharing with Ukraine, which said it would accept a US proposal for a 30-day ceasefire.
Rheinmetall expects sales to surge 25% to 30% this year, after coming in slightly under €10 billion in 2024, and an operating margin of 15.5%, slightly above last year's 15.2%. The defence business makes up 80% of the company's sales.
The outlook does not take into account "improvement in market potential that is expected to arise," Rheinmetall said, adding that it expected to update that guidance soon.
The European Commission wants to mobilise up to €800 billion for European defence, and Germany's likely next chancellor, Friedrich Merz, wants to amend the constitution to allow for a big jump in state borrowing to revamp the military.
Rheinmetall calculated that a rise in the NATO defence spending target to 3.5% of gross domestic product would translate to up to €400 billion for the company by 2030, assuming a capture rate of up to 20-25%.
"We have not done enough work yet to endorse this view, but if it were to be correct then Rheinmetall could significantly beat even the highest of investor expectations for its sales and EBITA in the coming five years," said JP Morgan analysts.
CEO Papperger played down the effect German defence spending plans could immediately have, saying it would take months before contracts would materialise.
Rheinmetall, which aims for €2 billion in business in the US by 2027, is vying for a contract to develop a successor to the US Bradley infantry fighting vehicle.
The company reported 2024 group sales of €9.75 billion, up 36% on the year but below the €9.99 billion in a company-provided estimate of analysts polled by Vara Research.
Papperger said that the company came in just short of the €10 billion mark due to a logistics delay that forced it to shift around €250m to the 2025 financial year.
The company's civilian business offered a mixed picture, with products for carmakers in particular on the decline.
Rheinmetall said last month it intended to repurpose two of its automotive plants in Germany to mostly make defence equipment, and Papperger today left open the possibility of even more civilian factories to be converted.
