Soaring Demand for War Supplies: Rheinmetall Primed to Reach €40 Billion by 2030
Mounting order backlog may erase $40 billion worth of profits imminently.
The war in Ukraine and the advent of a new government in the US have fueled a frenzy in Western countries to beef up their arsenals. And Rheinmetall, the German artillery powerhouse, is reaping the benefits. The Düsseldorf-based behemoth is on the brink of smashing sales records, with plans to venture into space. CEO Armin Papperger asserts that if everything falls into place, Rheinmetall could rake in over €40 billion by 2030 - a massive leap from the €9.6 billion they recorded in 2024. With a projected increase in production, Rheinmetall anticipates an onslaught of orders, forcing them to convert factories from their civilian division.
Rheinmetall is plunging headfirst into a growth spree unseen in its history. Papperger proclaimed that the company is inching closer to its dream of becoming a global defense juggernaut. The company's profit after tax nearly doubled from January to March, reaching €108 million. Rheinmetall had already announced a staggering 46% increase in sales to €2.3 billion in April, and now they've affirmatively confirmed this figure. Military sales surged by approximately 73%, and the order intake - particularly from the German Armed Forces - skyrocketed by over 180% to €11 billion.
Rheinmetall is maintaining its projected growth targets, aiming for a 25-30% increase in overall sales and a 35-40% rise in military sales. The company isn't satisfied with just growth; they're determined to do it profitably. They plan to elevate their operating result margin to roughly 15.5%, up from last year's 15.2%. However, the threatened armament expenditures aren't explicitly integrated into the forecast. Should these materialize, the projections will be revised accordingly.
Netherlands' Leader Predicts Increased Armament Spending
The attack on Ukraine has sparked a sea change in the global armaments industry. The industry is urgently needed for bolstering armies, gathering additional steam from the stance of US President Donald Trump, who demands a beefed-up defense budget from NATO countries and distances himself from liberal democracies in Europe.
In a recent conversation with NATO Secretary General Mark Rutte, Papperger learned that NATO countries should boost defense spending to 3.5% of their GDP - doubling the current target of 2%. Trump has been relentless in his pursuit of increased military spending, and Papperger estimates an order potential of €300 billion from the anticipated augmentation in defense spending across Germany and the EU by 2030 alone.
Manufacturing Satellites in Neuss by 2026
Faced with burgeoning demand, Rheinmetall is shifting part of its civilian production for the automotive industry to the rapidly expanding defense sector. Their Neuss plant, which currently focuses on civilian production and houses around 1,500 employees, will transition towards manufacturing satellites. Rheinmetall has partnered with Finnish company ICEYE to form a joint venture, Rheinmetall ICEYE Space Solutions, where Rheinmetall will hold a 60% majority stake. The manufacturing of these spacecraft could commence in the Neuss plant as early as the second quarter of 2026. The company may also consider acquiring facilities from car manufacturers like Volkswagen, provided the conditions are favorable. The conversion of plants of other companies represents another avenue for growth - as are mergers and partnerships. Papperger envisions the joint venture with ICEYE achieving annual sales of €1 billion.
In addition, Rheinmetall has struck a significant partnership with US defense titan Lockheed Martin to establish a European center of excellence for missile and missile system production and distribution. This venturesome project, largely operating in Germany and other European nations, aims to bolster European security and strategic independence. Rheinmetall intends to produce ATACMS and Hellfire missiles in Germany together with Lockheed Martin.
The sole decline in sales in the first quarter was observed in the civilian department of Power Systems, which caters to the struggling automotive industry. Sales here dipped by roughly 7% to €505 million, and the operating result shrank by 70.4% to €9 million. Should a suitable buyer emerge, Rheinmetall might disgorge itself of this division.
- With the construction of satellites planned at the Neuss plant by 2026, Rheinmetall is expanding its reach beyond traditional war supplies, venturing into the space-and-astronomy sector through a joint venture with ICEYE.
- In a concerted effort to bolster European security and strategic independence, Rheinmetall has partnered with Lockheed Martin to establish a European center of excellence for missile and missile system production and distribution.
- As the demand for vocational training in the growing aerospace industry increases, Rheinmetall is considering partnering with educational institutions to facilitate training programs, ensuring a steady pipeline of skilled professionals to meet the needs of their expanding business.
