Rheinmetall Aims to Start Producing Cruise Missiles as Soon as This Year -- 3rd Update

By Cristina Gallardo

Rheinmetall said it aims to start production of cruise missiles with Dutch defense technology company Destinus as early as this year in a move that would boost Europe's sovereignty in missile manufacturing.

Last month, the two companies agreed to form a joint venture during the second half of this year focused on producing advanced cruise missiles and ballistic rocket artillery for Europe and some members of the North Atlantic Treaty Organization, with Rheinmetall holding a 51% stake in the venture.

Rheinmetall Destinus Strike Systems plans to start production of the missiles by the fourth quarter of this year or early 2027, Germany's biggest arms manufacturer said Thursday.

The announcement comes after the Trump administration said it would cancel a plan to deploy Tomahawk cruise missiles and Dark Eagle hypersonic missiles in Germany next year.

Several European countries, including France and the U.K., are trying to speed up cruise-missile production, after the war in Ukraine highlighted the importance of the weapons.

On Monday, Andrius Kubilius, the European Union defense commissioner, said Russia is outpacing the bloc in the production of missile and artillery ammunition. Last year, he said, Russia produced 1,100 cruise missiles versus 300 made in the EU.

In late April, Destinus said it had completed a flight test of its Ruta Block 2 cruise missile, designed to strike critical infrastructure and concrete buildings. It has a range of more than 700 kilometers, or 435 miles, considerably less than the Tomahawks.

Rheinmetall Chief Executive Officer Armin Papperger said that progress on forming a partnership with U.S. defense contractor Lockheed Martin to produce rockets and missiles in Germany is going slower than desired.

Papperger on a call with reporters pointed to tough discussions regarding the division of costs between both companies as one of the reasons. He said Rheinmetall is exploring additional missile partnerships with other manufacturers including Raytheon, a business unit of RTX Corporation.

A Lockheed Martin spokesperson said any collaboration between Lockheed Martin and Rheinmetall is subject to U.S. and German government approval, and that discussions are continuing.

"Lockheed Martin is working with our European allies to identify opportunities for collaboration to meet the global demand for U.S. munitions and precision strike capabilities," the spokesperson said.

Rheinmetall's expansion in the missile market is part of the company's strategy to enter new weapon domains and capture a much higher stake of Europe's growing defense budgets.

Also on Thursday, Rheinmetall said it had submitted a nonbinding bid for German Naval Yards Kiel as part of its push to expand in naval-defense manufacturing, without disclosing financial terms. German shipbuilder TKMS made a nonbinding offer for the shipyard in January.

Papperger said that the company is also looking to buy part of the Mangalia shipyard in Romania in order to expand its naval manufacturing capacity.

The company is in talks with several Middle East countries for the delivery of up to 10 air defense systems this year, Papperger said. The negotiations are a result of the U.S.-Israel war against Iran, which has seen a number of Gulf countries being hit by Iranian retaliatory strikes.

Meanwhile, Rheinmetall reported sales of 1.94 billion euros ($2.28 billion) for the three months through March, up 8% on year, but below a consensus estimate of 2.27 billion euros compiled by Vara Research.

The Frankfurt-listed company, which published preliminary results earlier this week, said its order backlog increased 31%, to around 73 billion euros, at the end of March.

Papperger said he expects stronger growth in sales and order intake in the second quarter, with large-volume orders in the naval and vehicles businesses, and full-scale production at the company's ammunition plant in Murcia, Spain, after an explosion last year.

Net profit for the period reached 111 million euros, compared with 84 million euros a year earlier, while the quarterly operating result--closely watched by analysts and investors--was 224 million euros, lifting its operating margin to 11.6% from 10.5%.

Analysts expected an operating profit of 261.9 million euros with an 11.6% operating margin.

For 2026, Rheinmetall said it continues to forecast an increase in sales of between 14 billion and 14.5 billion euros, and an operating margin of around 19%.

Write to Cristina Gallardo at [e-mail]

(END) Dow Jones Newswires

05-07-26 1605ET