Rheinmetall Breaks Ground on Bavarian Powder Plant as Orders Surge but Portfolio Doubts Linger
Published on 07/23/2026 at 19:02 | Redaktion boerse-global.de
Rheinmetall formally launched construction of a major powder production expansion at its Aschau am Inn site on July 23, with Bavarian premier Markus Söder, state secretary Schmid, and economy minister Hubert Aiwanger attending the ceremony. The facility is slated to become one of Europe's largest and most advanced powder plants, underpinning the defence group's ambitions to dramatically scale ammunition output in response to sustained military demand.
The company is investing €350 million directly into the Aschau site as part of a broader group-wide powder programme totalling €650 million. The goal is to reach annual capacity of 20,000 tonnes of propellant powder by 2030, with 4,200 tonnes coming from Aschau. The site's footprint has already expanded from 90 to 110 hectares, and headcount is expected to rise from around 800 to 1,300 employees. Current production stands at 1,700 tonnes of powder and 300,000 propellant charge modules annually, with a phased expansion beginning in 2027. Full capacity — exceeding one million modules and five million moulded parts — is targeted for 2028.
Handelsblatt, citing the project under the code name "Firepower," pegged the expansion volume at roughly €500 million and projected a workforce increase from 850 to over 1,400 employees, alongside planned annual production of 750,000 artillery propellant charges. The discrepancies between company figures and media reports likely reflect different scoping — direct site investment versus the broader expansion programme.
CEO Armin Papperger framed the plant's strategic importance in stark terms: "Without this plant, NATO would not be combat-capable." Aschau will supply Rheinmetall's facilities in Unterlüß, Lithuania, Latvia, and Hungary, with Ukraine remaining the primary customer. State secretary Schmid noted that Ukraine consumes several thousand rounds of 155-millimetre calibre ammunition daily. Rheinmetall aims to boost annual artillery shell production to 1.5 million units by 2030, up from just 70,000 before the Ukraine war began. Munitions revenue is projected to climb from €3.5 billion to between €10 billion and €15 billion.
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To reduce reliance on Chinese nitrocellulose, the group is building four-year inventory buffers and sourcing from Turkey and the United States. The order book could potentially surpass €100 billion, and Rheinmetall is evaluating a takeover of German Naval Yards Kiel, with a decision expected within weeks.
The expansion comes amid heightened security concerns for the defence industry. Germany's Federal Office for the Protection of the Constitution has warned arms companies about Russian espionage and sabotage, citing attacks on railway infrastructure in Poland and a discovered camera near a pioneer bridge battalion in Minden. Papperger is already under special protection, and Russia's defence ministry reportedly compiled a list of 21 European companies.
A mixed picture at the bourse
The stock has shown recent resilience but remains far from its highs. On the day of the groundbreaking, shares gained 0.89% to €1,023.20. Over the past week, the stock has risen 6.56%, recovering from a 52-week low of €902.50 in late June — now trading 13.37% above that trough. In a separate session, the share price climbed 2.39% to €1,038.40, marking an 8.14% recovery over seven trading days, supported by strong half-year results from European peers Dassault Aviation and Thales.
Yet the broader year-to-date picture remains negative. By contrast, US defence contractors have delighted investors: Lockheed Martin beat consensus with earnings per share of $7.94 versus $7.19 expected and raised guidance, while RTX posted a 29% net profit increase and lifted its 2026 revenue target. Both stocks jumped sharply — a contrast that sharpens expectations for Rheinmetall's own second-quarter report due August 6.
Analyst scepticism and a failed shipyard deal
Bank of America cut its price target for Rheinmetall on July 21, citing concerns about the portfolio mix. The bank argued the group is overly concentrated on conventional munitions while demand is shifting toward drone defence and precision systems. On the same day, talks to sell German Naval Yards Kiel collapsed after ThyssenKrupp Marine Systems and the bidding side failed to agree on terms. Rheinmetall had been involved as a potential co-bidder and now exits the process empty-handed.
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A flurry of new contracts
Despite the portfolio critique, Rheinmetall has been booking orders across multiple domains. The British Army awarded a contract worth nearly €1 billion to digitise combat training, while UK military personnel are simultaneously being trained in autonomous logistics operations ahead of international exercises. Germany's BAAINBw procurement office entrusted Rheinmetall with overall responsibility for the InterRoC VII research project developing autonomous military convoys. The Bundeswehr also activated a call under its existing framework contract for digitising land-based operations, ordering additional hardware and support services worth €100 million. In the maritime domain, Rheinmetall partnered with Norway's Space Norway for joint maritime space surveillance.
Whether the recent order momentum can dispel doubts about the portfolio structure will become clearer when Rheinmetall publishes its second-quarter figures on August 6. For now, the Aschau groundbreaking underscores the group's bet that conventional artillery demand will remain robust for years to come — even as some investors question whether the product mix is evolving fast enough.
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