Rheinmetall's €300m Naval Setback Collides With a Record-Breaking Quarter
Published on 08/13/2026 at 15:01 | Redaktion boerse-global.de
The arithmetic at Rheinmetall has grown stranger by the day: a defence contractor that just watched a multi-billion-euro frigate programme slip through its fingers, yet still managed to double its operating profit and swell its order book to more than €80 billion.
The Düsseldorf-based group lowered its full-year sales guidance last Thursday to a range of €13.7–14.2 billion, trimming roughly €300 million from its earlier ambitions. The culprit is the loss of the F126 frigate project, a programme Berlin scrapped after years of delays and ballooning costs. Germany's defence ministry opted instead for the smaller MEKO-A-200-DEU design from rival ThyssenKrupp Marine Systems, with the parliamentary budget committee approving four vessels and an option for four more back in early July.
What makes the guidance cut bearable for investors is the sheer momentum elsewhere in the business. Second-quarter revenue jumped 69% year-on-year to €3.289 billion, while operating profit more than doubled to €562 million — a 115% surge. The operating margin expanded from 13.4% to 17.1% in the quarter, and for the first half as a whole, Rheinmetall booked sales of €5.227 billion, up 39%, at a margin of 15.0%.
The order book tells an even more striking story. At the end of June, it stood at €80–80.5 billion, a 44% increase from roughly €56 billion a year earlier. Around 70% of that backlog is already firm orders, and the book-to-bill ratio sits above 3 — meaning the company is taking in new business at more than three times the rate it is processing existing contracts. Management still targets a full-year operating margin of roughly 19% and a cash conversion rate above 40%, while the dividend is slated to rise 36% to €15.60 per share.
Should investors sell immediately? Or is it worth buying Rheinmetall?
The F126 loss did force one additional concession: the 2026 order intake target was trimmed from an original ambition of over €100 billion. Yet the pipeline remains thick with new mandates. In the second quarter alone, nominations reached €11.371 billion, including a loitering munition contract with the Bundeswehr and a SAFE package with Romania. July brought a laser-weapon deal worth up to €462 million, a joint project with MBDA Deutschland for drone defence on frigates, plus a €100 million Bundeswehr order to digitalise vehicle fleets under the D-LBO programme, backed by framework agreements totalling around €1.2 billion.
CEO Armin Papperger is also steering toward what he calls the final decision phase of the Arminius project — a potential order for up to 3,000 Boxer wheeled armoured vehicles for the German military. Negotiations are scheduled for August, with a conclusion expected in September and a final go-ahead pencilled in for the first or second week of December. In parallel, Rheinmetall is working with Lockheed Martin to produce Atacms rockets at its Unterlüß facility, part of an effort to replenish depleted US arsenals.
Not everything glitters. Free cash flow turned deeply negative in the first half, landing at minus €1.660 billion compared with minus €644 million in the prior-year period. Management frames the deterioration as a deliberate investment — building inventories and expanding working capital to fuel future growth — but it remains a drag on near-term liquidity.
The security situation around Papperger has added an unsettling dimension to the corporate narrative. According to dpa, the 63-year-old now receives personal protection matching the level afforded to the German chancellor, amid suspected Russian assassination plots. His garden shed burned down, demonstrations have taken place outside his home, and he has been accompanied by bodyguards even inside the company's Düsseldorf headquarters. Papperger's own response to the threats was characteristically blunt: "Kneifen gilt nicht" — "No chickening out." He had earlier called for greater German investment in drone defence following the discovery of an explosive-laden drone at Leipzig airport.
Analysts remain split on the shares. mwb research downgraded Rheinmetall from Hold to Sell on 6 August, cutting its price target from €1,150 to €1,050. Other houses took a more constructive view of the operational performance, keeping buy recommendations even where they trimmed price targets.
The market's verdict, for now, leans toward the optimists. The stock traded at €1,181.40 on the day, up 0.5%, having gained 21% over the past 30 days. The recovery from the year's lows, however, is only partial — the shares remain 24% below their level at the start of 2025, and still sit 41% beneath the 52-week high of €2,007.00 reached in October 2025. Rheinmetall has clawed back ground, but the road back to its former valuation is a long one.
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