Rheinmetall defence business ‘robust and resilient’

Harry Lye 11 May 2020 (Last Updated May 11th, 2020 13:22)

In its first-quarter results, Rheinmetall has said it does not expect the Covid-19 coronavirus pandemic to have a lasting impact on its defence business this year adding that despite the outbreak it expects the division’s sales to continue to grow.

Rheinmetall defence business ‘robust and resilient’
Image: Rheinmetall.

Across the board, Rheinmetall saw a slight consolidated sales increase of 1.1% to €1.358bn ($1.47bn), however, the company’s consolidated earnings fell by €20m ($21.66) to €36.81m. Sales in the group’s automotive division fell by 14% while defence saw an 18% growth.

The company said: “Strong performance at defence sees Rheinmetall through coronavirus crisis”.

As a result of the solid defence finances, Rheinmetall released a 2020 outlook for its defence business, which ‘anticipates sales growth of between 5% and 7%’, while the group said an outlook for its automotive division is ‘currently impossible’.

In its statement, the company added that the strong performance of its defence division played a decisive role in its increasing earnings, helping the company stave off further damage caused by the ongoing effects of the Covid-19 coronavirus pandemic.

Rheinmetall AG CEO Armin Papperger said: “Our defence sector has proven robust and resilient under these challenging macroeconomic circumstances and will help us to soften the impact of the crisis at the group level. This is currently expected to remain the case over the further course of the year, too. We had a successful start to the fiscal year in Defence and profitably expanded the business volume during the first quarter.

“Like all other automotive suppliers, we have had to significantly limit our production in the Automotive sector. This will have a considerable negative impact on us in the second quarter in particular. However, in light of the market recovery beginning to take effect in China and the resumption of production by our international customers, we are confident that we will be able to ramp up manufacturing further at a number of our Automotive sites in the second quarter.”

Defence ‘largely unaffected’ by Covid-19

In its results, Rheinmetall said: “The defence sector has been largely unaffected by the coronavirus, and has had a successful start to the new fiscal year. The sector strongly increased its sales, with growth of about 18% to €740 million following €629 million in the corresponding quarter of the previous year.”

Across its defence division, operating earnings more than tripled from €9m ($9.74m) to €29m ($31.39m), the company’s defence operations also saw a 30% increase in its order intake with a backlog worth over €10bn ($10.82bn).

Rheinmetall’s Weapon and Ammunition division saw a slight fall in sales of 6%, while its Electronic Solutions division saw a 4% increase when compared to Q1 of 2019. The company’s Vehicle Systems division also increased its sales by a third following strong delivery of tactical and logistical vehicles.

In its 2020 outlook, Rheinmetall said: “Rheinmetall does not currently expect the Covid-19 crisis to have any lasting impact on the Defence sector’s business performance in the current year.

“For this reason, it is confirming the annual forecast for the defence sector published in mid-March 2020, which anticipates sales growth of between 5% and 7% for 2020 as a whole. The Defence sector’s operating margin is expected to come to between 9% and 10%.”