Rheinmetall’s €285m Cash Burn Overshadows a Record €73bn Order Book

Investors are looking past Rheinmetall’s swelling order book and focusing on the cash drain. The defence group’s shares touched a fresh 52-week low of €1,264 on Friday, extending a year-to-date decline of more than 21%, even as the company reported a 17% jump in operating profit to €224 million for the first quarter.

The disconnect between operational momentum and market sentiment is stark. Revenue rose nearly 8% to €1.94 billion in the three months through March, but that figure fell short of analyst expectations. Management pointed to timing issues: deliveries of military trucks worth around €200 million were deferred at customer request, and the ramp-up of production at a new Spanish munitions plant has slipped. Both are expected to flow into the second-quarter accounts.

Naval Ambitions Take Shape

The newly integrated Naval Systems division, formed after Rheinmetall’s acquisition of shipbuilder NVL earlier this year, contributed €77 million in revenue from new-build programmes during its first month. The unit posted an operating margin of roughly 10%, and the group’s total order backlog swelled to a record €73 billion, with €5.5 billion attributable to the naval arm.

Rheinmetall is already eyeing further expansion. The Düsseldorf-based company is working with shipping giant MSC on a joint bid for an insolvent Romanian shipyard. The longer-term target is to push naval sales to €5 billion by 2030. However, reports of cost overruns on the F126 frigate programme have introduced an element of uncertainty into the shipbuilding push.

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Cashflow Squeeze, but Guidance Intact

The real sore point for investors is the cash position. Operating free cash flow swung to minus €285 million as the group aggressively stockpiled materials to secure supply chains. The build-up in inventories weighed heavily on liquidity, though management insists the cash outflow is temporary and expects a positive free cash flow over the full year.

The operating margin improved to 11.6% in the first quarter, with the air defence segment growing at more than 30%. Despite the rocky start, the board is standing by its full-year guidance: revenue of up to €14.5 billion and an operating margin of around 19%.

Analysts are largely backing the company’s outlook. Sam Burgess at Goldman Sachs described the weak quarterly numbers as a temporary blip, while Berenberg’s George McWhirter highlighted the accelerating air defence business as a key growth driver.

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Dividend Vote in Focus

All eyes now turn to Tuesday, 12 May, when Rheinmetall holds its annual general meeting. The supervisory board has proposed a dividend of €11.50 per share. Shareholders will also be looking for clarity on the naval strategy and the timeline for the Romanian shipyard deal.

For now, the stock is trading near its lowest point in a year, having shed nearly a fifth of its value since January. The question hanging over the market is whether the cash burn and delivery delays are merely growing pains or the first cracks in a defence giant’s expansion story.

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