Rheinmetall's 36% Sales Surge: A Military Order Boom on the Horizon

Düsseldorf-based Rheinmetall AG has closed the third quarter of 2024 with record-breaking sales and earnings, driven by an unprecedented surge in demand for military equipment. The company's sales increased by 36% to €6,268 million, marking a significant milestone in its financial performance. This growth is attributed to the dynamic market situation in the military sector, with high demand from the armed forces of Germany, EU, and NATO nations, as well as ongoing aid for Ukraine. The civilian sector, however, remained slightly below the previous year's performance.

The company's operating result amounted to €705 million, a 72% increase compared to the previous year. This improvement was driven by sales growth and the earnings contribution from Rheinmetall Expal Munitions, which was acquired in August 2023. The operating margin improved to 11.3%, up from 8.9% in the previous year. Earnings per share from continuing operations also improved, rising from €4.88 to €7.32 in the first nine months of 2024.

Rheinmetall's operating free cash flow advanced significantly, increasing by €527 million to €99 million. This positive development was driven by large-volume customer advance payments, although it was mitigated by multiple capex projects and the build-up of inventories for the anticipated sales development in the fourth quarter.

The value of Rheinmetall Nomination, which includes traditional incoming orders and the volume from future call-offs under new framework agreements, increased by 48% to €21.4 billion. This was driven by orders from Germany, primarily from the special fund for the Bundeswehr, and orders to aid Ukraine. As a result, the Rheinmetall Backlog increased by 41% to €51.9 billion, indicating a strong order pipeline.

The company's Vehicle Systems division, which focuses on military wheeled and tracked vehicles, saw a 52% increase in sales to €2,537 million. This growth was driven by the delivery of pre-produced swap body systems and the start of tactical vehicle programs. The division's backlog rose by 37% to €6.8 billion, with the largest orders including a new framework agreement to supply UTF category military trucks to the Bundeswehr worth €2.9 billion and an order for the manufacture and supply of the German armed forces’ heavy weapon carrier based on the Boxer wheeled vehicle worth over €1.6 billion.

Rheinmetall's strategic plan, which includes capacity expansion, acquisitions, and global partnerships, positions the company to capitalize on the current and future demand for military equipment. The company has "massively expanded capacities" and is building new plants in countries like Lithuania, Hungary, Romania, and Ukraine. These expansions ensure that Rheinmetall can meet the increased demand for military equipment from Germany, EU, NATO nations, and Ukraine.

The company's acquisitions, such as Rheinmetall Expal Munitions, have significantly contributed to its growth. The acquisition generated €230 million in sales during the first half of 2024 and has been a key driver in the substantial growth of the Weapon and Ammunition segment. The acquisition has also helped in increasing the operating result margin to 19.5% despite rising labor and material costs.

Rheinmetall has secured numerous framework agreements and orders, which provide a steady stream of revenue and ensure future growth. For example, the company has a new framework agreement to supply UTF category military trucks to the Bundeswehr worth €2.9 billion, and an order for the manufacture and supply of the German armed forces’ heavy weapon carrier based on the Boxer wheeled vehicle worth over €1.6 billion. These orders, along with the associated service contracts, ensure that Rheinmetall will continue to see growth in sales in the years to come.

The company's global partnerships bring it closer to its goal of becoming a global champion in the defense industry. For instance, the company's largest contracts to date include a €1.6 billion order to produce and deliver heavy weapon carriers based on the Boxer wheeled vehicle for the German armed forces, and a service contract for these vehicles worth over €620 million.



In conclusion, Rheinmetall's strategic plan, which includes capacity expansion, acquisitions, framework agreements, global partnerships, and a strong order pipeline, positions the company to capitalize on the current and future demand for military equipment. The company's proactive approach and strategic investments have enabled it to achieve record highs in sales and earnings, and it is well-positioned to continue this growth in the coming years. The anticipated 'major' military order boom is expected to drive further growth in Rheinmetall's sales and earnings, with the company aiming for an operating result margin at the upper end of the guidance.