Bund's Delay Leaves Rheinmetall in Anticipation
Rheinmetall, a defense conglomerate based in Düsseldorf, is currently experiencing delays in upcoming major orders. These delays, however, are not due to a drop in demand for the company's products but are primarily caused by political factors in Germany.
The delayed approval of the federal budget following the 2025 elections and the subsequent government transition period have effectively put procurement on hold, pushing expected defense contract orders into the second half of the year.
The change of government after the 2025 elections and the subsequent budget approval being postponed until after the summer parliamentary recess have contributed to the delays. These political timing and administrative hold-ups have caused a slowdown in the rollout and signing of new defense contracts.
Despite these delays, Rheinmetall's order backlog has reached a new record high (€63 billion), demonstrating strong underlying demand and expectation for future orders to grow. Once Germany’s parliament finalizes the budget, order flow and contract awards are expected to increase significantly, especially with Chancellor Merz relaxing fiscal rules to boost defense spending.
In addition to these delays, Rheinmetall's half-yearly operating free cash flow dropped to -644 million euros from -19 million euros in the previous year. The company's second pillar, the automotive supply business, is also up for sale, with a decision expected by the end of the year.
On a positive note, Rheinmetall's operating result increased by 18% to €475 million in the first half, with the operating margin coming in at 10% and expected to rise to around 15.5% for the full year. The company is also constructing Europe's largest ammunition factory in Unterluess, Lower Saxony, and has set up a production facility in Weeze for fuselage components for the F-35 fighter jet from Lockheed Martin.
In the midst of these challenges, Rheinmetall's stock, which has been one of the biggest winners on the German stock market since the Russian invasion of Ukraine in February 2022, fell by 6% in an otherwise positive market environment, making it the worst performer in the DAX. The expected large orders from the Bundeswehr, Germany's armed forces, including potentially large orders for transport, reconnaissance, and armored vehicles, are being delayed, putting pressure on the stock.
Rheinmetall is also negotiating with Italian defense conglomerate Leonardo about the acquisition of Iveco's military truck business. This potential acquisition could further bolster Rheinmetall's position in the military vehicle market.
In conclusion, while Rheinmetall is currently facing delays in major orders, these delays are primarily due to political and budgetary processes in Germany. Once these issues are resolved, Rheinmetall expects a significant increase in order flow and contract awards. The company's strong financial performance, strategic initiatives, and potential acquisitions position it well for future growth.
[1] Reuters, "Rheinmetall sees delays in major orders due to German budget delays," 23 July 2025. [2] Financial Times, "Rheinmetall hit by delays in major orders," 23 July 2025. [3] Bloomberg, "Rheinmetall's Order Backlog Hits Record High Despite Delays," 23 July 2025. [4] Handelsblatt, "Rheinmetall: Verzögerungen bei großen Aufträgen durch politische Faktoren," 23 July 2025.
- Amidst the delays in Rheinmetall's major orders due to political and budgetary factors, many industry analysts see investing in the company as a promising venture, given its strong financial performance and strategic initiatives.
- The delays in Rheinmetall's defense contract orders have led to a slowdown in the growth of the finance sector, as banks and investors have increasingly paused their investments in the defense industry until market conditions stabilize.
- With Rheinmetall's order backlog reaching a new record high, business leaders are optimistic about future growth opportunities in the defense and stock-market sectors, as the company continues to expand its presence in various industries, such as the military vehicle market.
