Rheinmetall shares fall after Q2 miss on sales, EBIT and cash flow

Published 07/08/2025, 08:46
© Reuters

Investing.com -- Rheinmetall (ETR:RHMG) shares fell more than 4% on Thursday after the company reported second-quarter results that missed analyst expectations on sales, earnings and free cash flow, while maintaining full-year guidance.

Quarterly sales came in at €2.43 billion, 4% below consensus, primarily due to delays in Vehicle Systems and a facility-related disruption in the Weapons and Ammunition division. 

Adjusted EBIT stood at €276 million, missing expectations by 3%. Group EBIT margin declined 70 basis points year over year to 11.4%, though this was a smaller contraction than analysts had forecast.

Free cash flow dropped to €911 million from €169 million a year earlier. The company cited a major inventory build in Vehicle Systems, increased capital expenditures and a lower level of customer prepayments.

“The main weak point of the release in our view is the FCF, at €(911)m, driven by a major inventory build in VS, higher capex, and lower level of prepayments on a somewhat soft nomination level of €2.6bn,” said analysts at Jefferies in a note. 

By segment, Vehicle Systems generated €945 million in sales, 4% below expectations. 

Weapons and Ammunition reported €724 million in revenue, with a €170 million impact from the Murcia incident and a €140 million shift in revenue to the prior quarter. 

Electronic Solutions exceeded forecasts with €517 million in sales but posted a lower year-over-year margin at 8.5%, down from 10%. Power Systems recorded €482 million in sales, a 6% drop from estimates.

Adjusted EBIT in Weapons and Ammunition rose to €164 million, up from €152 million last year. 

Vehicle Systems EBIT fell to €97 million, while Electronic Solutions declined to €44 million. Power Systems posted €14 million in adjusted EBIT, down sharply from €25 million in the year-ago period.

The company reiterated its 2025 guidance, including 25% to 30% sales growth, with 35% to 40% growth in defense and flat civil sales.

Rheinmetall also maintained its full-year operating margin target of about 15.5% and a cash conversion rate above 40%. It expects the order backlog to surpass €80 billion.

Rheinmetall said third-quarter results would reflect pronounced seasonality and emphasized a heavier weighting toward the fourth quarter. 

The company estimates total nomination potential at more than €80 billion between 2025 and the first half of 2026. 

This includes €30-35 billion in Vehicle Systems, €10-15 billion in Weapons and Ammunition, €6-8 billion in Electronic Solutions and €13-15 billion across international operations. Current backlog stands at €13.7 billion.

The company is expected to provide further details during a scheduled call Thursday, including commentary on full-year free cash flow projections, the scale of potential German armored vehicle orders, and reported talks about building a $250 million semiconductor plant in Switzerland.

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