Rheinmetall (ETR:RHM) executives said fiscal 2025 marked a “good year” for the group, highlighting strong organic growth in defense, expanding profitability, and solid cash generation despite production disruption tied to an incident at its Murcia site. Management also outlined an aggressive capacity ramp across ammunition, air defense, and vehicles, while pointing to large near-term order opportunities led by the German Boxer “Carinus” program and renewed demand for air defense systems amid heightened geopolitical tensions.
Full-year 2025 results: sales near €10 billion and margin expansion
CEO Armin Papperger said Rheinmetall generated “nearly €10 billion” in sales in 2025, noting the figures now exclude the company’s civilian business and naval activities previously in the perimeter. Operating result rose 33% to €1.841 billion, while operating margin expanded to 18.5%. Papperger said the group saw “smaller impacts” on the ammunition side due to the Murcia accident.
Operational free cash flow from continuing operations was €1.218 billion, up 15% year-over-year, even as the company expanded inventory to support future deliveries. Lellé said Rheinmetall’s largest quarterly cash inflow occurred in Q4, when cash flow exceeded €2 billion, helped by “substantial advance and early payments” negotiated with customers for new orders.
Segment performance and shareholder returns
Rheinmetall’s segment performance in 2025 reflected strong growth across key defense activities:
- Electronic Solutions sales rose 45% to €2.5 billion, with profitability increasing to 14.6% from 12.6%.
- Vehicle Systems grew by more than €1 billion, supported by LOC Performance, and improved profitability to 11.7% from 11.2%.
- Weapon and Ammunition grew 27% despite Murcia-related constraints that Lellé said reduced 2025 sales by more than €200 million. Profitability climbed to 29.3%, and the division generated an operating result above €1 billion for the first time.
Earnings per share increased to €25.28, and management said contributions from minority interests—primarily in South Africa and a vehicle joint venture in Vienna with MAN—also supported the result. Rheinmetall plans to propose a dividend of €11.50 per share to the annual general meeting in May, with executives noting the payout ratio is above the company’s previously communicated range and was driven by the group’s stronger equity position.
The company also emphasized the impact of reporting automotive operations as discontinued following a mid-December decision to proceed with a disposal process. Lellé said that if the automotive business were still included, 2025 backlog would have been about €70 billion, sales about €12 billion, and operating result €1.9 billion (about 16% margin on €12 billion of sales).
Backlog, nominations, and major 2026 order drivers
Rheinmetall ended 2025 with an order backlog of about €64 billion, with €41 billion in fixed orders. Nominations totaled €26 billion, including €20 billion of fixed orders, and management said the book-to-bill remained above 200%.
Papperger said some customer-side delays pushed business from 2025 into 2026, but emphasized “nothing canceled” and “nothing…in danger.” He attributed timing issues mainly to limited customer capacity rather than Rheinmetall execution.
On the 2026 pipeline, executives repeatedly pointed to the Boxer “Carinus” program as the largest near-term order opportunity. Papperger said Rheinmetall sees total potential of €38 billion for Carinus through a long-term program that could extend to 2035 and, in discussions, potentially out to 2040. For 2026, he said a €12–€13 billion fixed order could arrive in Q2 or Q3, with expected down payments of 20% to 30%.
Additional large order opportunities described on the call included:
- A fixed ammunition contract for 600,000 to 700,000 rounds of full-shot artillery, characterized as multi-billion euros, with 20% to 30% down payments.
- A new Puma contract with potential of €3 billion in 2026 (within an overall €3–€5 billion potential).
- A new protected-truck procurement process described as “more than €2 billion.”
Management also described a defense service business opportunity related to handling and transporting ammunition and weapon systems—initially framed as a €200 million to €300 million contract that could arrive in April, but potentially scaling to €7 billion if structured as a framework contract.
Capacity ramp and growth outlook for 2026 and beyond
Rheinmetall said it is expanding capacity across domains, citing recruiting momentum (“more than 300,000 CVs came in”) and what Papperger called a stable supply chain, with efforts to add second and third sources for resilience.
In ammunition, Papperger said expansion work in Spain is ready, Unterlüß is ramping, and the company expects to produce about 140,000 rounds in Unterlüß in 2026, rising to 250,000 next year and a maximum capacity of 350,000. He said Murcia is “back on track” and in full production again for powder and packs. Rocket artillery is expected to start qualification in Q1 2027, with larger sales beginning in 2028.
In air defense, Papperger pointed to a €3 billion backlog to convert into sales, and described plans for additional capacity that would support scaling to 400 systems. He said the company is producing systems even without contracts to enable faster deliveries, and told analysts Rheinmetall could potentially deliver initial gun-based systems to the Middle East as early as August.
For 2026, management guided:
- Sales growth of 40% to 45% to €14.0 to €14.5 billion, described as “100% defense sales.”
- Operating margin of 19% (up from 18.5%).
- Operational free cash flow expected to be “good,” with commentary that cash conversion could be highly volatile depending on prepayments and timing of large orders.
Papperger said 2026 revenue guidance has a 91% coverage rate already, with additional service business potentially lifting coverage close to 100%.
Geopolitics, air defense demand, and expansion into naval and space
Executives tied demand to a “disruption of the geopolitical order,” citing Middle East conflict dynamics and rising tension. Papperger said many Middle Eastern countries operate Rheinmetall air defense systems—including Oerlikon twin gun, Millennium Gun, and Oerlikon Revolver Gun—and that recent events prompted urgent customer requests for faster deliveries.
He also emphasized the economic rationale of gun-based air defense against drones, contrasting lower-cost ammunition solutions with higher-cost missiles. At the same time, he said missile stockpiles in the West are under pressure, creating opportunities for Rheinmetall’s planned missile production line—though he cautioned missiles require new technologies and are “not as easy as our ammunition.”
Strategically, Rheinmetall discussed integrating a newly acquired naval business into its digitization portfolio and pursuing vertical integration to improve profitability. Papperger said Rheinmetall took over nine sites and about 2,100 employees, with a backlog of €5 billion to €6 billion in the naval unit and expected decisions for F126 and F127 programs that he described as a potential of more than €12 billion in orders in 2026.
In space, management said a first SAR contract of €1.7 billion plus nearly €1 billion option was signed, and Rheinmetall is pursuing a joint venture with OHB. Papperger also described a potential €8–€10 billion opportunity in communications satellites, with up to 200 satellites expected by 2029, and said discussions included a possible working arrangement with Airbus to form a single bidding consortium for German requirements.
About Rheinmetall (ETR:RHM)
Rheinmetall AG provides mobility and security technologies worldwide. The company operates in five segments: Vehicle Systems, Weapon and Ammunition, Electronic Solutions, Sensors and Actuators, and Materials and Trade. The Vehicle Systems segment offers combat, logistics, support, and special vehicles, including armored tracked vehicles, CBRN protection systems, artillery, turret systems, and wheeled logistics and tactical vehicles. The Weapon and Ammunition segment provides firepower and protection solutions, such as weapons and munition, protection systems, propellants and international projects and services.
