Leopard tank maker Rheinmetall rides arms boom but misses profit forecast

Arms manufacturers typically have a strong seasonality to their business as their main clients are governments, which tend to pay later due to long procurement procedures. "More than 40% of annual sales are expected to come in the fourth quarter," Rheinmetall Chief Financial Officer Dagmar Steinert said on a conference call after Rheinmetall confirmed its 2024 sales guidance at around 10 billion euros.

German arms group Rheinmetall posted a 60% rise in first-quarter profit on Tuesday, as the joint manufacturer of Leopard tanks rides a defence spending boom triggered by Russia's invasion of Ukraine. However, Rheinmetall's earnings were below consensus forecasts, Stifel analyst Alexander Wahl said, and its shares were down 5% at 0720 GMT.

Berenberg analysts attributed the below-expectation profit to delayed shipments of trucks and ammunition, which they said in a note could be caught up over the second half of the year. Rheinmetall, whose market value more than quadrupled since the war in Ukraine, is seeing a sharp increase in orders as Western governments beef up their military and replenish their stocks after supplying substantial amounts of arms to Kyiv.

"The shares may underperform on the P&L miss versus consensus although we would be buyers on weakness," they added. Arms manufacturers typically have a strong seasonality to their business as their main clients are governments, which tend to pay later due to long procurement procedures.

"More than 40% of annual sales are expected to come in the fourth quarter," Rheinmetall Chief Financial Officer Dagmar Steinert said on a conference call after Rheinmetall confirmed its 2024 sales guidance at around 10 billion euros. Although the Duesseldorf-based firm's quarterly operating profit and revenue were 6% below Vara's consensus estimates, its order backlog grew by 43% to 40.2 billion euros ($43 billion).

CEO Armin Papperger expects the firm to get orders worth as much as a third of the 100 billion euro ($108 billion) special defence fund introduced by Germany, Ukraine's second-biggest arms supplier, shortly after the Russian invasion in 2022. Steinert reiterated that Rheinmetall was open to further acquisitions, including in the United States, backed by its strong balance sheet. She did not provide further details. ($1 = 0.9271 euros)