Rheinmetall Q1 Earnings Call Highlights

07 May 2026, 10:14 by Scott Moore · The Cerbat Gem

Rheinmetall (ETR:RHM) reported first-quarter 2026 sales growth of about 8% and an operating result increase of 17% as the defense contractor pointed to delayed deliveries that it expects to shift into the second quarter, setting up what management said should be a significantly stronger Q2.

CEO Armin Papperger told investors that roughly EUR 200 million of trucks were “ready” but not delivered in Q1 due to customer-set delivery dates, mainly in Germany. In addition, he said another EUR 100 million shifted into Q2 because the company began powder production in Q1 but could not deliver due to acceptance testing. “The reason that quarter two will be in growth rate much better than quarter one,” Papperger said, adding that Rheinmetall expects Q2 sales growth of “more than 50%” versus the prior year.

Margins rose as inventory built for planned growth

Rheinmetall posted an operating result of EUR 224 million, with the operating margin rising to 11.6%, Papperger said. CFO Klaus noted that the quarter’s sales growth “does not give the full picture” because the company built inventory in preparation for shipments expected in Q2.

Klaus said about EUR 0.5 billion of material moved into finished and pre-finished goods “ready to be shipped in Q2.” Operating free cash flow was negative EUR 285 million, which Papperger attributed to investing heavily in materials ahead of growth. Management said it still expects a “very positive” cash conversion over the full year.

On capital spending, Papperger said CapEx was around 10% and should remain elevated this year and next, before declining to about 5% to 6% (and “maybe 7%”) in later years.

Order intake and backlog expanded; fixed contracts increased

Rheinmetall nominations in Q1 totaled EUR 4.866 billion and backlog rose 32% to nearly EUR 73 billion, supported by the addition of the naval business, management said. Klaus noted that Q1 2025’s nomination was unusually high at roughly EUR 11 billion, driven by two major digital projects in Germany (TaWAN and IDZ), while 2026’s mix was broader.

Papperger emphasized the rising share of fixed contracts within the backlog. He said fixed contracts totaled “more than EUR 44 billion,” while the remainder was nomination. He added that Rheinmetall is seeing a trend from nomination to fixed orders, particularly in Germany.

Looking forward, Papperger said Rheinmetall expects Q2 nominations of around EUR 20 billion, referencing multiple items including loitering ammunition (about EUR 2 billion signed in April), an MBT-related signing in Italy expected in May, a Lynx program in final negotiations with Romania, and the F126 frigate program as the largest potential Q2 signing. He also cited “around EUR 60 billion opportunities” in the second half of the year, including Ukraine-related packages and the Boxer “Arminius” program.

Segment performance: Air defense led growth; Naval Systems added a month

Klaus detailed Q1 results by segment:

Vehicle Systems: sales rose 3% to nearly EUR 1 billion, driven by wheeled tactical vehicles and Lynx production in Hungary. Operating margin improved to 9.6% on a more favorable mix. Klaus and Papperger both pointed to truck deliveries moving into Q2.
Weapon and Ammunition: sales were flat at about EUR 600 million. Klaus said a key factor was that the Macassar plant, which had been impacted by an incident in Q1 2025, was fully operational again, but the output would contribute to Q2 sales. Operating margin edged up to 19.4%.
Digital Systems: sales increased 16% on the TaWAN project and consolidation of blackned (acquired in Q1 2025). Operating margin improved to 5.2%.
Air Defense: sales grew more than 30%, with operating margin rising from 12.5% to 15.6%, which Klaus described as the strongest profitability improvement among the segments.
Naval Systems: included for the first time, contributing EUR 77 million in sales for one month at around 10% EBIT, in line with expectations.

Papperger said the acquisition of NVL (former Lürssen) closed in February and that integration had started, citing steel cutting, launching ceremonies, and the corvette “Lübeck” baptism as early milestones. He said Rheinmetall had submitted a non-binding offer to acquire German Naval Yards and started due diligence to potentially expand shipyard capacity.

In Q&A, Papperger said Rheinmetall aims to grow the naval business to EUR 5 billion by 2030 through vertical integration and expanding its “work share” from about 30% to 50%. He discussed the F126 program as “more than EUR 10 billion,” saying Rheinmetall and partner Damen conducted a technical due diligence and believe they can “sort it out” using program management and IT capabilities. He described F125 as a lower-risk upgrade program and said he does not expect F127 to come this year.

Investments, partnerships, and capacity buildouts

Management highlighted multiple initiatives tied to autonomy, drones, long-range strike, and missiles. Papperger said Rheinmetall has been in the drone business for decades and is positioning for growth via partnerships, including with Boeing and Lockheed Martin on “CCA” concepts and with Indra in Spain for military vehicles and trucks.

He also described a planned joint venture with Destinus—Rheinmetall Destinus Strike Systems—covering cruise missiles and ballistic rocket artillery. Papperger said Rheinmetall will focus on rocket motors and warheads and is building infrastructure in Unterlüß for cruise missile assembly starting “end of this year or beginning of next year.” He said the rocket motor production and missile integration factory in Unterlüß should be ready by the end of 2026, with qualification in 2027 and “full scale production” hoped for in 2028.

On the Lockheed missile venture, Papperger said Rheinmetall is continuing work but is seeking a broader partner base, adding that he is “not happy with the progress at the moment with the U.S.” and that negotiations include both government approvals and “monetary packages of transfer of technologies.” He said Rheinmetall is also speaking with Raytheon about “cheap missiles” and wants multiple partners to fill its production lines.

On capacity and operations, Papperger said production ramp plans are “absolutely in the plan,” citing activities including powder and modular charge scale-up, 24/7 operations, and ongoing work to increase output. He said modular charge production is rising from historical levels of 150,000–200,000 to 400,000 and targeting growth toward 2 million. He also pointed to an investment program in Aschau am Inn totaling EUR 450 million for powder production capacity.

In air defense, Papperger said Rheinmetall has built capacity for about 400 air defense systems per year and roughly 1 million rounds of air defense ammunition, while indicating further investments may be needed in fuses and medium-caliber production.

Guidance reiterated; balance sheet and financing update

Management said it remains on its full-year 2026 guidance, including expectations for EUR 14 billion to EUR 14.5 billion in sales and an operating margin range described as “from 18.5% to around 19%.” Papperger also said Rheinmetall expects “more than 40%” operational cash conversion in 2026.

Klaus said net debt to EBITDA was 0.39, and the equity ratio stood at 30.7% after the naval acquisition. He added that most of the company’s convertible bond had been converted, with 8% of Series B still outstanding at the end of April 2026. Klaus also said Moody’s confirmed Rheinmetall’s Baa1 rating with a positive outlook.

On supply chain, Klaus said energy costs represent about 1% of sales and that Rheinmetall has 77% of electricity and 84% of gas covered by long-term procurement. He added that the company is stockpiling strategic raw materials and has pass-through mechanisms in some sales contracts for cost increases.

Separately, Papperger said Rheinmetall is “nearly finished” with the disposal of its Power Systems business and expects signing in Q2 2026.

About Rheinmetall (ETR:RHM)

Rheinmetall AG provides mobility and security technologies worldwide. The company operates in five segments: Vehicle Systems, Weapon and Ammunition, Electronic Solutions, Sensors and Actuators, and Materials and Trade. The Vehicle Systems segment offers combat, logistics, support, and special vehicles, including armored tracked vehicles, CBRN protection systems, artillery, turret systems, and wheeled logistics and tactical vehicles. The Weapon and Ammunition segment provides firepower and protection solutions, such as weapons and munition, protection systems, propellants and international projects and services.