Rheinmetall AG

Reported 2025 group sales were nearly EUR 10 billion, or about EUR 11.8 billion on a pro forma basis including the discontinued civilian business. Operating result increased 33% to EUR 1.841 billion, and operating margin improved to 18.5%; ammunition profitability reached 29.3%, Electronic Solutions margin was 14.6%, and Vehicle Systems margin was 11.7%. Earnings per share rose to EUR 25.28, operational free cash flow was EUR 1.218 billion, capex was 7.8% of sales, backlog was about EUR 64 billion, and nomination growth was 9% to EUR 26.4 billion. For 2026, management guided to sales of EUR 14 billion to EUR 14.5 billion, roughly 40% to 45% growth, operating margin of about 19%, and continued strong free cash flow, although cash generation will depend on prepayments and timing of large orders.

Armin Papperger’s tone was confident and expansionary, emphasizing that Rheinmetall is benefiting from a structural rearmament cycle and from urgent demand in air defense, ammunition, vehicles, and digital systems. He repeatedly framed the current geopolitical environment as creating long-duration opportunities, including large contracts in Germany, Europe, the Middle East, naval systems, space, drones, and the U.S. He stressed that capacity build-out, hiring, and supply-chain expansion are on track, and that delays are customer-side timing issues rather than cancellations.

Klaus Neumann focused on the financial quality of the year: 29% sales growth was mostly organic, with about EUR 0.5 billion from acquisitions, and operating profit rose 33% to EUR 1.8 billion. He highlighted strong cash generation, including more than EUR 2 billion of positive cash flow in Q4, which helped deliver EUR 1.218 billion of operational free cash flow for the year and fund about EUR 1 billion of inventory build with customer prepayments. He also cited an equity ratio of 33.5% at year-end, Series A convertible fully converted in 2025, 83% of Series B converted by end-February 2026, and said dividend payout was increased after reviewing the stronger balance sheet and performance.

Analysts pressed management on order timing, with concerns that roughly EUR 6 billion of expected 2025 orders slipped into 2026; Papperger said the delays were mostly due to customer-side capacity and approval processes, not cancellations, and reiterated that large contracts such as Arminius, ammunition, and Puma remain in negotiation. Questions on cash conversion and prepayments drew a response that 2026 cash will depend heavily on advance payments, with management saying the current EUR 5.6 billion of prepayments would need to rise by about EUR 2 billion to reach the 40% cash-conversion starting point, and that major contracts could lift cash conversion materially above that. Analysts also asked about Power Systems timing, U.S. programs like XM30, and D-LBO/air defense execution; management said Power Systems disposal could close in Q2 or Q3, XM30 remains a realistic opportunity with a likely indication by year-end or early next year, and D-LBO is a priority but complex integration program.