War in Ukraine propels arms maker Rheinmetall to Frankfurt stock exchange
March 20, 2023 at 10:00 am EDT
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Rheinmetall expects a strong 2023 after the German defense contractor reported its highest-ever operating profit last year, due to the war in Ukraine and increased defense spending in Europe.
The conflict in Ukraine currently appears to be a major boon for major Western defense contractors. The war has prompted many countries, including Germany, to greatly increase their military and security spending to replace or upgrade equipment.
The gist: German auto and arms manufacturer Rheinmetall joined the German DAX index of 40 leading stocks on the Frankfurt Stock Exchange on Monday.
"The war in Europe has also ushered in a new era for Rheinmetall," CEO Armin Papperger said last week as the company reported its positive annual results. "We see ourselves as an integral part of the German and European security infrastructure."
Since Russia's invasion of Ukraine last year, the company has seen its share price rise more than 150 percent.
Rheinmetall, headquartered in Düsseldorf, produces, among other things, the cannon for the and the Panzerhaubitze 2000, a long-range howitzer deployed by the Ukrainian army.
According to Papperger, increasing geopolitical pressure, from the war in Ukraine to tensions in Asia, has created a "period of unprecedented growth" for Rheinmetall. This year, he said, will be "by far the best year in the company's history."
The German CEO recently said the company could win up to 40 billion euros in contracts in areas ranging from vehicle systems to the digitization of specific army units as part of Germany's spending stimulus.
War in Ukraine
As several European countries their in response to the Russian invasion, Rheinmetall predicts strong growth in 2023.
Papperger noted to Deutsche Welle: "We want to participate with our products in the rising budgets for military capabilities."
Some projects on the horizon for the German company include a , which the CEO expects Kyiv and Berlin to decide on in the next two months, and a weapons factory in East Germany that will be decided on within a few weeks.
"For about 200 million euros, a Rheinmetall plant can be set up in Ukraine that can produce up to 400 Panthers per year," Papperger said. Panthers are the latest models for the company's battle tanks.
Rheinmetall could additionally cover about 50 percent of Ukraine's ammunition needs, the manufacturer said.
Other European defense companies, such as Dassault Aviation - the French manufacturer of the Rafale fighter jet - Sweden's Saab and Britain's BAE Systems, have all reported record orders for 2022.
"Stock prices are rising not because of earnings growth, but because of the expectation of it," George Zhao, an analyst at Bernstein, told the Wall Street Journal.
Rheinmetall AG specializes in the design, manufacture and marketing of equipment, components and solutions for the military and civilian industries. Net sales break down by family of products as follows:
- vehicle systems (35.1%): multi-purpose wheeled and tracked vehicles (tactical military vehicles, support vehicles, logistics vehicles and special vehicles);
- sensors and actuators (20.5%): actuators, exhaust gas recirculation systems, throttle valves, exhaust gas dampers for electric motors, solenoid valves, pumps, etc. used in thermal and fluid management applications in the mobility and industrial sectors;
- weapon and ammunition systems (19.5%): automatic cannons for land, air and sea vehicles, smooth-bore weapons, artillery systems, smart projectiles, high-energy lasers, etc.;
- electronic solutions (13%): sensors and networking systems, cyberspace protection solutions, air defense systems, radar systems, technical documentation solutions, integrated electronic systems, drones and automated ground robots, training and simulation solutions;
- engine components and systems (11.6%);
- other (0.3%).
At the end of 2022, the Group had 132 production sites worldwide.
Net sales are distributed geographically as follows: Germany (29.5%), Europe (35.7%), Asia and Middle East (16.3%), Americas (9%) and other (9.5%).
RHEINMETALL AG 
