Rheinmetall’s €300m Delivery Snag Undermines Record Orders as Telekom Alliance Opens New Front

Rheinmetall’s annual general meeting on Tuesday unfolded against a starkly contradictory backdrop: a record order book of around €73 billion and a share price languishing at a 52-week low. The stock touched €1,169 during the session, extending a year-to-date decline of roughly 27% that has wiped more than 40% off the value from last September’s all-time high.

The immediate trigger for the latest leg lower was a disappointing first-quarter performance. Revenue came in at about €1.94 billion, some €360 million below what analysts had pencilled in. The shortfall stems from significant delivery delays, with roughly €300 million in shipments — €200 million of that tied to military trucks and the remainder to the powder business — now sliding into the second quarter.

Despite the revenue miss, profitability improved. Operating profit rose 17% year-on-year to €224 million, lifting the operating margin to 11.6%. Management stressed the weakness is temporary and reiterated its full-year guidance for revenue of €14–14.5 billion and an operating margin of around 19%.

Dividends, Naval Ambitions and a Wider Strategic Pivot

Shareholders are being offered a bigger slice of the growing pie. The board has proposed a dividend of €11.50 per share, a 42% increase from last year’s €8.10. The payout is subject to a vote at the virtual meeting and underscores the group’s confidence in its long-term trajectory.

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That trajectory increasingly points seaward. Rheinmetall’s newly formed Naval Systems segment — built through acquisitions — contributed €77 million to first-quarter sales and already carries an order backlog of roughly €5.5 billion. Projects such as Germany’s future fleet service boat and a Bulgarian shipbuilding programme are driving momentum. CEO Armin Papperger wants to expand naval revenues to around €5 billion by 2030, reducing the group’s historical reliance on land systems.

The land-based business, however, remains the core earnings engine, and the delivery delays there are a near-term headache. The broader order book still grew 16% to about €73 billion, fuelled by sustained demand for air-defence systems such as Skynex and artillery munitions. The group expects growth to accelerate from the second quarter onward.

A New Alliance for Civilian Defence

Papperger is also pushing Rheinmetall beyond traditional armour and ammunition into the protection of critical infrastructure. The company announced a strategic alliance with Deutsche Telekom, combining its sensor and counter-drone technology with the telecom group’s secure cloud, network and data analytics capabilities. The jointly developed system is designed to repel both physical and digital attacks, and the partners will unveil initial details at the AFCEA security trade fair in Bonn.

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The move broadens the addressable market at a time when the stock is suffering from sector-wide headwinds. JPMorgan analysts cut their rating on Rheinmetall from “Overweight” to “Neutral”, arguing that much of the positive news is already priced in. Reports of possible peace negotiations in the Ukraine conflict triggered heavy profit-taking on Monday and Tuesday, sending the shares down more than 11% at one point.

Management, for its part, is brushing off the market’s mood. Papperger and his team are investing heavily in new capacity while betting that the combination of a record backlog, a new naval franchise and a civilian-security push will ultimately convince investors to look past the current turbulence.

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