Leopard Tank Maker Rheinmetall Rides Arms Boom But Misses Profit Target

German arms group Rheinmetall posted a 60 per cent rise in first-quarter profit on Tuesday, as the joint manufacturer of Leopard tanks rides a defence spending boom triggered by Russia's invasion of Ukraine. Rheinmetall's profit was below consensus forecasts, however, and its shares were down 3 per cent at 1220 GMT. Berenberg analysts attributed the miss to delayed ammunition and truck shipments, which they said could catch up in the second half of 2024. As Western governments beef up their military and replenish their stocks after supplying substantial amounts of arms to Kyiv, Rheinmetall, whose market value more than quadrupled since the war in Ukraine, is seeing a sharp increase in orders. Arms manufacturers typically have a strong seasonality to their business as their main customers are governments, which tend to pay later due to long procurement procedures. "More than 40 per cent of annual sales are expected to come in the fourth quarter," Rheinmetall Chief Financial Officer Dagmar Steinert said on a conference call after Rheinmetall confirmed 2024 sales guidance at around 10 billion euros. Although the Duesseldorf-based firm's quarterly operating profit and revenue were 6 per cent below Vara's consensus estimates, its order backlog grew by 43 per cent to 40.2 billion euros (USD 43 billion). CEO Armin Papperger expects to win orders worth as much as a third of the 100 billion euro (USD 108 billion) special defence fund introduced by Germany, Ukraine's second-biggest arms supplier, shortly after the Russian invasion in 2022. Steinert reiterated that Rheinmetall was open to further acquisitions, including in the United States, but gave no further details. Asked about a potential win for Donald Trump in the US presidential election, Papperger said that he expected Washington to make clear that Europe needs to "grow up" and invest more in security, regardless of the result. He also said he was sure that Rheinmetall would have a stable flow of orders in the next decade as Europe needs to replenish its depleted arms stocks. "Europe is not ready for a conflict," he said.