Rheinmetall (ETR:RHM) reported sharply higher second-quarter sales and operating profit as demand for military vehicles, ammunition and air-defense systems accelerated, while the company lowered its 2026 revenue outlook following the loss of Germany’s F126 frigate program.
Chief Executive Officer Armin Papperger said second-quarter sales rose nearly 70% to €3.289 billion, while first-half revenue increased about 40% to €5.5 billion. Operating result for the second quarter increased 115% to €562 million, supported by higher volumes, favorable product mix and operating leverage, according to the company.
Strong order intake lifts backlog to €80 billion
Rheinmetall said nominations, or newly secured business, rose 476% to €11.371 billion in the quarter. The majority of these nominations, nearly €11 billion, consisted of firm orders, Neumann said. Major orders included a Romanian package valued at about €6 billion, a long-term German Army ammunition contract and the U.K.’s Global Training and Transformation Programme.
The company’s total backlog reached €80.4 billion at the end of June, up about 44% from a year earlier. Fixed orders represented 70% of backlog, compared with 58% at the end of the second quarter of 2025. Rheinmetall said its backlog covering the next two-and-a-half years is 90% fixed, while €47 billion of backlog extends beyond 2028.
Papperger said the company expects year-end backlog of between €100 billion and €120 billion, depending in part on the timing and scope of German Boxer armored-vehicle orders.
- Vehicle Systems sales increased 53% to nearly €1.5 billion, aided by truck deliveries to Germany. Its operating margin rose to 12.5%.
- Weapons and Ammunition sales rose nearly 60%, driven by artillery and medium-caliber ammunition deliveries. The segment’s operating margin approached 26%.
- Digital Systems sales increased 30% to €417 million, supported by the German Army’s TAVARM program and the ramp-up of Rheinmetall’s F-35 production site near Düsseldorf.
- Air Defense sales climbed almost 80% to €285 million, while its operating margin increased to 16.3%.
- The newly acquired Naval Systems segment generated about €260 million in sales and €25 million in operating result, for a 9.7% margin.
F126 cancellation reduces 2026 sales outlook
Rheinmetall reduced its 2026 sales outlook by about €300 million after Germany’s defense ministry stopped the F126 frigate program. Papperger said the decision was unexpected because Rheinmetall had completed technical due diligence and conducted final contract discussions with the German procurement agency, BAAINBw.
He said the ministry’s decision reflected potential liabilities associated with Damen, the original contractor, as well as the possibility that the MEKO program could be delivered more quickly and at lower cost. Papperger said Rheinmetall must now seek other programs to utilize shipyard capacity.
The company now expects 2026 sales of €13.7 billion to €14.2 billion, with an operating margin of around 19%. Papperger said the company maintained its longer-term objective for Naval Systems to generate up to €5 billion in sales by 2030 with profitability of around 15%.
Rheinmetall introduced its GMF 140 frigate, designed for air defense, ballistic-missile defense and anti-submarine operations. Papperger said the company is in discussions with potential international customers but did not identify countries or announce orders. He also said Rheinmetall continues to cooperate with TKMS on Germany’s F127 program, while any decision on whether the GMF 140 could serve German Navy requirements would be for the customer.
Boxer decision expected late in the year
Papperger said final discussions on the German Army’s Arminius Boxer program are expected to conclude in the second week of September, followed by a planned Bundestag decision on Dec. 9. He said the company expects a fixed vehicle contract worth €12.4 billion for Rheinmetall and a separate service contract worth €4 billion in total, of which Rheinmetall would receive €2 billion.
Rheinmetall is also offering two options together valued at about €26 billion, including an option intended to support production through 2035. Papperger cautioned that those options are not yet finally negotiated. He said the company believes it can achieve more than €100 billion in backlog even without the Boxer frame-contract options.
The company has negotiated a 30% down payment on the fixed vehicle contract, which Papperger said could exceed €3 billion if received at year-end or in January. The timing of that payment is important to Rheinmetall’s cash-flow outlook.
Inventory build weighs on cash flow as investment plans shift
Operational free cash flow was negative €1.331 billion in the second quarter and negative €1.6 billion in the first half. Management attributed the outflow primarily to inventory buildup to support deliveries in the second half and production needs in 2027, particularly in Vehicle Systems and Digital Systems.
Neumann said Rheinmetall had approximately €6.2 billion of supplies in inventory during the quarter. The company expects inventory growth to slow materially in the second half as sales rise, while anticipated customer prepayments could improve cash flow.
Rheinmetall lowered its expected 2026 capital expenditure ratio to around 8% to 9% of sales, from the roughly 16% indicated at its 2025 capital markets day. Neumann said several planned energetics-plant construction projects have been rescheduled into 2027, while the company also found cost synergies in existing projects. Management said the lower 2026 spending does not change its sales targets through 2030 and is not expected to affect 2027 or 2028 revenue.
The company returned to the bond market during the quarter with a bond maturing in 2031, which Neumann said provides flexibility for growth investments and acquisitions. Rheinmetall’s equity ratio declined to 28%, reflecting the naval-business acquisition and expanded inventory. Its net financial position was negative €2.7 billion, including a €1 billion syndicated loan used to finance the naval acquisition.
Papperger said the company remains focused on expanding production capacity for artillery ammunition, medium-caliber ammunition, powders, rocket motors, drones, air-defense turrets and protected truck cabins. Most projects are on schedule, though construction of Rheinmetall’s Ukrainian artillery plant has been delayed by about two years because civil works are not yet complete.
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.
