German defense contractor Rheinmetall reduced its full-year sales outlook on Thursday following the cancellation of Germany’s planned acquisition of six large warships, a project in which the company was positioned as lead contractor. The revised guidance set full-year sales between 13.7 billion euros and 14.2 billion euros, representing a reduction of 300 million euros from prior expectations.
Despite the guidance cut, the company demonstrated strong underlying business momentum in the first half of the year. Sales reached 5.2 billion euros over the six-month period, reflecting 39% growth, while profits expanded 74%. Performance was supported by increased deliveries of military vehicles, ammunition, and air-defense systems, along with contributions from its newly acquired naval division, which generated 334 million euros in sales.
Stock movement reflected investor uncertainty about the outlook. Shares opened approximately 3% lower before reversing to trade up roughly 2%, ultimately settling near flat levels. The company has benefited significantly from heightened European defense spending and global demand for military equipment, booking new orders valued at 14.9 billion euros during the six-month period and maintaining an order backlog of 80.5 billion euros. However, negative cash flow of 1.6 million euros was attributed to shifts in advance payments, inventory expansion, and elevated investment spending.
Rheinmetall’s guidance reduction underscored broader investor concerns about whether valuations in the European defense sector have outpaced actual production capacity, particularly given industry-wide challenges with delivery delays and cost increases. The F126 warship cancellation served as a reminder to markets that government procurement plans remain subject to reversal. The broader sector has experienced significant valuation pressure in recent months, with Rheinmetall shares down 25% before Thursday trading despite gains exceeding 1,000% over the past five years.
Article Attribution | Read More at Article Source
Article summary produced by Claude AI