Booming Defense Sector: Ukraine War Fuels Record Orders for Rheinmetall, Anticipated Revenue Soaring to 40 Billion
Overflowing order backlog may wipe out $40 billion worth of assets
With the Russian invasion of Ukraine and the latest US administration in play, Western nations are massively enhancing their defense allocations, giving Rheinmetall a significant boost. The German powerhouse is poised for record revenues, planning to break into space technology.
Rheinmetall is thriving under escalating military expenditures in Western countries and aims to manufacture satellites within Germany. The company's CEO, Armin Papperger, anticipates sustained growth for the Düsseldorf-based DAX corporation, forecasting potential revenues exceeding 40 billion euros by 2030, up from approximately 10 billion euros in 2024. He projects a surge in orders and plans to elevate production dramatically, including converting factories from the civilian division. Neuss might soon become a satellite production hub.
Rheinmetall is experiencing unprecedented expansion and is inching closer to its aspiration of becoming a worldwide defense frontrunner, as Papperger announced during first-quarter results presentation. Profit after tax doubled to 108 million euros in January - March. Rheinmetall previously announced a 46% increase in revenue to 2.3 billion euros, a figure now confirmed. Military business revenues skyrocketed by around 73%, and orders spiked over 180% to 11 billion euros, largely due to orders from the German military.
Rheinmetall reaffirmed its annual targets of at least a 25-30% increase in revenue, with military business growth projected at 35-40%. The company also intends to boost its operating profit margin to around 15.5% (compared to 15.2% last year). Current planned defense spending is yet to be incorporated into the forecast, but Papperger mentioned updates would be made once the details become clearer.
Rutte Foresees Higher Defense Spending
The Russian onslaught on Ukraine has marked a major transition for the Western defense sector, which is promptly required to strengthen military forces. The sector is further propelled by US President Donald Trump's policy of encouraging NATO members to increase their defense spending and shifting away from European democracies.
Papperger foresees a swift increase in defense spending within NATO following a conversation with NATO Secretary-General Mark Rutte. Rutte suggested that NATO countries should hike their defense spending to 3.5% of their respective GDP, up from the current objective of 2%. Trump has been advocating for substantial increases. Papperger estimates an order potential of 300 billion euros from planned increases in defense spending in Germany and the EU by 2030.
Satellite production in Neuss is slated to commence in 2026.
Owing to the surge in defense orders and budgets due to the ongoing geopolitical tensions following Russia’s invasion of Ukraine, Rheinmetall has already amassed impressive order backlogs and revenue growth records. The company's order backlog reached an all-time high of €62.6 billion, with order intake surging 181% to €11 billion, predominantly fueled by Germany's increased defense budgets. Rheinmetall's management anticipates an "order potential of up to €300 billion by 2030" across the industry, signifying a favorable environment for revenue growth in defense-related sectors.
- Rheinmetall
- Ukraine War
- Arms
- Arms Trade
- NATO
- Mark Rutte
- Ministry of Defense
- German Defense Policy
- Satellite
Additional Insights:According to some estimates, Rheinmetall's revenues might reach up to €60 billion by 2030. This projection assumes continuous increases in NATO defense budgets to 3% of GDP, pricing and product mix improvements, and Rheinmetall capturing a larger share of European defense procurement[5].
BofA Securities analysts forecast group revenues for Rheinmetall at around €37 billion by 2030[2]. This projection reflects their confidence in the company's medium-term growth fueled by new ventures and expansions of production capabilities, such as a rocket motor facility in Germany[2].
- In light of the increased defense expenditures within NATO, anticipating a rise to 3.5% of GDP, Rheinmetall's CEO, Armin Papperger, envisions an order potential of up to €300 billion by 2030 across the industry, indicating a favorable environment for revenue growth in defense-related sectors.
- To capitalize on the booming defense sector due to the Ukraine War and the strategic shift in US policy, as well as projected growth, Rheinmetall plans to diversify its portfolio by entering the aerospace industry with satellite production in Neuss, aiming to capture a larger share of European defense procurement.
