GuruFocus -
- Sales Growth: 40% increase to EUR2.5 billion in Q3.
- Operating Result: EUR302 million, a 52% increase.
- Operating Margin: Increased to 12.3%.
- Order Intake: EUR6.1 billion in Q3.
- Order Backlog: Grew by 41% to nearly EUR52 billion.
- Defence Segment Growth: 55% increase in sales.
- Defence Profitability: 15.3% EBIT margin.
- CapEx: 7.4% of sales.
- Operating Free Cash Flow: EUR118 million in Q3, an improvement of EUR221 million.
- Vehicle Systems Revenue: 88% increase to over EUR1.2 billion.
- Vehicle Systems Operating Margin: 13.1% in Q3.
- Weapons and Ammunition Margin: 26.5%, including a special effect.
- Cash Position: Close to EUR0.5 billion.
- Net Debt to EBITDA Ratio: Below one.
- Full Year Sales Guidance: Around EUR10 billion.
- Full Year Operational Margin Guidance: Around 15%.
- Operational Free Cash Flow Guidance: More than 40%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rheinmetall (ETR:RHMG) AG (RNMBF) reported a 40% increase in sales for Q3, driven by significant truck deliveries and a strong performance in vehicle systems.
- The company's operating result improved by over 50%, reaching EUR302 million, with an operating margin increase to 12.3%.
- Rheinmetall AG (RNMBF) secured a substantial order intake of EUR6.1 billion in Q3, with significant contributions from vehicle systems and weapon and ammunition sectors.
- The order backlog grew by 41% to nearly EUR52 billion, indicating strong future revenue potential.
- The company is expanding its international presence through strategic alliances, such as the joint venture with Leonardo in Italy and collaboration with Honeywell (NASDAQ:HON) in the US.
- There are potential delays of four to eight weeks in some order intakes due to political uncertainties in Germany.
- The civilian business showed no growth, with profitability significantly lower than the defense segment.
- Rheinmetall AG (RNMBF) faces challenges in the power systems segment, with declining sales and operating results.
- The company is undergoing an IT transformation process, which is increasing costs and impacting the 'other' line in financial results.
- There is uncertainty regarding the timing of large contracts, with some expected to be booked in early 2025 instead of 2024, potentially affecting short-term financial performance.
A: Armin Papperger, CEO: I believe they will have to do it due to the high pressure to invest in Germany's security. There are mechanisms that allow for investment without needing a 2/3 majority, similar to the EUR100 billion budget setup.
Q: Regarding the EBIT guidance, it seems the other line has changed. Can you explain the increase in IT costs?
A: Dagmar Steinert, CFO: The increase is due to our ongoing IT transformation process, which is both time-consuming and costly. You should expect an additional EUR20 million for the full year.
Q: On the projects in Germany, have any seen changes in size recently? And when should we expect the Italian order intake?
A: Armin Papperger, CEO: Yes, some projects have increased in size due to higher price indications. For Italy, the first budget for the Lynx is EUR2.5 billion, and the Panther budget next year is EUR8-9 billion. The first contract is expected in Q1 2025.
Q: Can you update us on the status of the factories in Ukraine and their revenue contributions?
A: Armin Papperger, CEO: We have two factories in Ukraine for vehicle maintenance and production. The ammunition factory is under preparation, with artillery production expected in 13-14 months. We have signed contracts with down payments from the Ukrainian government.
Q: Regarding the UK and the new artillery and gun factory, can you provide more details on the timeline?
A: Armin Papperger, CEO: We plan to build a gun shop in the UK within the next 12 months, aiming for completion by the end of 2025. This will serve both the UK market and export needs, ensuring an independent UK source for British programs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.