Rheinmetall Group’s defense sales fell to €1.263 billion ($1.467 billion) in the first half of 2018 while earnings rose €17 million to €31 million, the company said in its latest earnings report.
Overall sales for the first half of 2018 decreased by €55 million (1.9 percent) from the same period last year, falling to €2.753 billion from €2.808 billion.
But defense sector sales in the second quarter showed growth year-on-year, Rheinmetall said in its report on Thursday, August 2. Operating earnings were increased from €14 million to €31 million even as sales fell 6 percent to €1.263 billion from €1.343 billion in the same period last year.
A sales decline in the first quarter to €509 million was partly offset in the second quarter, where sale volume increased to €754 million.
Business value in the sector was in part impacted by the delay in forming a government in Berlin, which held up import licenses, as well as bottlenecks in the supply chain and deliveries postponed at customer request.
Defense sector operating earnings rose despite the fall in sales volume due to larger individual incoming orders in the Weapon and Ammunition and Electronic Solutions divisions totaling €1.427 billion, Rheinmetall said.
Order backlog fell slightly to €6.510 billion from €6.661 last year.
Defence sector sales growth for the year is projected at 12 percent, on the lower end of the previous sales forecast. The forecast assumes exchange rates will not change significantly for the rest of the fiscal year, but is “largely assured based on relatively high coverage through the existing order backlog,” the company said.
Rheinmetall also anticipates further improvement in defense operating earnings, with a margin of around 6.5 percent, corresponding to the upper end of the previous forecast range.
Overall annual sales are expected to grow by around 8 percent in the current fiscal year from €5.9 billion reported in 2017.
Vehicle Systems operating earnings more than doubled year-on-year, increasing to €34 million.
But division sales fell 2 percent year-on-year to €15 million, remaining on the same level as the previous year when adjusted for currency effects.
The drop was attributed to a fall in military truck sales due to bottlenecks in supplier capacity in the second quarter. Sales of other types of vehicles increased, Rheinmetall said.
In March, Rheinmetall’s Boxer 8×8 Combat Reconnaissance Vehicle won Australia’s Land 400 Phase 2 Project contract. The Au$5.2 billion ($4.1 billion) acquisition, the largest ever for the Australian Army, will include 211 vehicles to replace the Army’s current ageing Australian Light Armoured Vehicle fleet.
Weapon and Ammunition
In the Weapon and Ammunition division, sales fell by €108 million or 22 percent year-on-year, primarily because the previous year still included a trading contract amounting to around €110 million, the report said. One undisclosed international customer placed an order worth around €380 million for the delivery of artillery and tank ammunition.
The division’s operating earnings fell to €4 million after €12 million in the previous year, although the company said they “improved significantly quarter-on-quarter” from €-19 million in Q1 to €23 million in Q2.
Sales in the Electronic Solutions division were €44 million, a 16-percent increase year-on-year. Operating earnings improved by €9 million to €4 million due to sales growth and cost reduction measures.
The division also saw larger individual orders, namely a €102 million order to supply air defence products to Asia.