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Rheinmetall is benefiting from the arms boom

Rheinmetall once again achieved record figures in the past financial year. The largest German arms company sees the dawn of a “new decade in security policy” and wants to continue to grow.

Germany's largest defense company Rheinmetall expects sales and profits to continue to rise. “A new decade in security policy has begun,” said Rheinmetall boss Armin Papperger today, referring to the Russian invasion of Ukraine and the rearmament of NATO states.

Rheinmetall expects “continued strong sales and earnings growth,” said Papperger. For the first time in the company's history, revenues this year are expected to reach ten billion euros. That is slightly more than analysts had previously expected Rheinmetall to achieve on average. The group also wants to work more profitably: The operating return on earnings is expected to be 14 to 15 percent after 12.8 percent in 2023.

Records for results and Order backlog

Last year, Rheinmetall recorded an increase in operating profit of 19 percent to a record level of 918 million euros. The order backlog also reached a record level of 38.3 billion euros at the end of the year, after 26.6 billion euros in the previous year.

In terms of revenue, however, the DAX group missed both its own forecast and the average expectations of the experts, with an increase of twelve percent to 7.2 billion euros. The company justified this with projects that have been postponed into the current year.

Sharp increase in demand for military equipment

Since Russia's war of aggression against Ukraine began a good two years ago, NATO countries have been providing a lot of money to bring their military into shape. Rheinmetall is one of the companies that is benefiting from the sudden increase in demand.

The company sells tanks, artillery, anti-aircraft defense, military trucks and ammunition. The administrative headquarters is in Düsseldorf and the largest factory is in Unterlüß, Lower Saxony. In addition to replenishing and modernizing the NATO armories, Rheinmetall also produces military goods for Ukraine – the company is paid for by the federal government.

Rheinmetall shares set their sights on record highs

In an initial comment, the bank UBS was generally encouraging about the annual report. Sales and operating earnings (EBIT) fell short of expectations in the fourth quarter, wrote analyst Sven Weier in a study. But in his opinion this should not be so important given the EBIT outlook, which on average is slightly above expectations.

The annual figures and the outlook are extremely well received on the stock market. Rheinmetall shares rose up to 4.2 percent to 439.00 euros in early trading. The DAX stock is now approaching its record high from the beginning of March at EUR 441.10. Within a year, Rheinmetall shares have increased by almost 80 percent.

Investors also appreciate the significantly increased dividend: shareholders should receive a dividend of 5.70 euros per share for the 2023 financial year. A year earlier, the group had paid out 4.30 euros per share.

Volker Hirth, HR, tagesschau, March 14, 2024 11:58 a.m

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