Delays persist in the fulfilment of orders for Rheinmetall, a prominent German defense company. - Germany's orders to Rheinmetall, a prominent defense company, are dwindling
Rheinmetall Defence Slows Down Due to Political Delays, but Long-Term Outlook Remains Positive
Rheinmetall Defence, Germany's largest defence conglomerate, has experienced a slowdown in its order intake, primarily due to political delays following the spring 2025 elections and the subsequent postponement of the German government’s defence budget approval.
The election and government formation after spring 2025 caused uncertainty and delayed the budget process for defence procurement in Germany. As a result, contract awarding and order intake expected in the first half of 2025 were postponed, causing a weaker-than-anticipated order intake for H1.
However, Rheinmetall’s overall order backlog reached a record high of approximately €63 billion at mid-2025—more than six times their annual sales—indicating very strong demand and future order visibility. Germany’s defence budget is projected to increase significantly, by about 70% by 2029, which is expected to spur a sharp increase in orders in the second half of 2025 and beyond.
Despite the short-term order intake slowdown, the company maintains confidence in meeting or exceeding its full-year 2025 sales and earnings forecasts, expecting 25%-30% revenue growth driven by existing backlog and new contracts post-budget approval. Rheinmetall’s strategy to expand its footprint in Central and Eastern Europe and improve production capacity positions it well for sustained growth fueled by increased NATO and European defence spending commitments.
In summary, the slowdown in Rheinmetall’s order intake in Germany is a timing issue tied to political transitions and delayed defence budget approvals, not a decline in demand. The large backlog and budget expansions signal that the company’s growth trajectory remains strong with a sharp pickup expected in the second half of 2025 and beyond.
The awarding of orders in Germany is picking up in the second half of the year after the spring elections. Rheinmetall CEO Armin Papperger stated that the company's order books are full and will continue to fill up in the future. The company's core business includes artillery, tanks, ammunition, and air defense systems. Almost a third of Rheinmetall's revenue in the first half of the year came from Germany, with the Bundeswehr playing a crucial role.
Rheinmetall is actively investing in expanding capacity in Europe, including constructing new plants and converting civilian facilities for defence production, preparing to meet the anticipated demand surge. The company is also considered a serious partner for US companies, positioning itself for global growth.
In the morning, Rheinmetall's share temporarily traded around 4.5 percent below the previous day's level at €1,703, due to investors taking profits. However, the company's strong financial performance and positive outlook have the potential to drive its share price higher in the future. In the second quarter, Rheinmetall's order intake plummeted by 77 percent to €2.6 billion, but the operating group profit rose by 18 percent to €475 million. For the first half of the year, Rheinmetall increased its revenue by 24 percent to €4.7 billion.
In Düsseldorf, Rheinmetall presented its quarterly figures, reporting a successful first half of the year despite the order intake slowdown. The company is on its way to becoming a global defense champion, with a strong foundation for future revenue visibility provided by its backlog. The current order backlog, which includes order backlog and expected calls from existing framework agreements with military customers, reached a record high of 63.2 billion euros.
Rheinmetall's quarterly figures were presented in Düsseldorf. The company's revenue in the military business alone increased by 36 percent. Despite the temporary dip in share price due to profit-taking, the company's strong financial performance and positive outlook have the potential to drive its share price higher in the future. Rheinmetall is now considered a serious partner for US companies, positioning itself for global growth.
Vocational training programs could be beneficial for Rheinmetall Defence in the long run, as the increase in Germany's defence budget is expected to spur a sharp increase in orders in the second half of 2025 and beyond. This growth could create opportunities for training skilled workers to meet the demand for defense systems, such as artillery, tanks, ammunition, and air defense systems.
As Rheinmetall continues to expand its footprint in Central and Eastern Europe, it may find it advantageous to collaborate with local vocational training institutions to develop a skilled workforce in these regions, thereby positioning itself for sustained growth fueled by increasing NATO and European defense spending commitments.
