Germany's Rheinmetall has raised its sales expectations for 2025, its chief executive said on Tuesday, as the defense equipment company benefits from a surge in demand for weapons due to the war in Ukraine.
Shares in Rheinmetall, which together with Krauss-Maffei Wegmann makes the Leopard tanks Germany is under pressure from Kyiv and some allies to send to Ukraine, have risen 170% in the past year.
CEO Armin Papperger told German magazine Stern that he expects sales to grow to between 11 billion and 12 billion euros ($12 billion to $13 billion) in 2025, up from a range of 10 billion to 11 billion euros given by the company in November.
For 2022 the company expects sales of 6.5 billion euros.
Rheinmetall has so far supplied Ukraine with air defense systems, which are also used to combat drones, along with various types of ammunition, military trucks and a field hospital, Papperger said.
He added that the group had also sold Leopard tanks and Marder infantry fighting vehicles as well as trucks as part of a swap system whereby countries that still have Soviet equipment hand it over to Ukraine and Germany backfills with more modern Western equipment.
"And we are setting up a production facility for Gepard ammunition in Germany," Papperger was quoted as saying by the magazine.
Asked how much the company earns from Leopard 2 battle tanks, he said Rheinmetall was targeting a profit margin before tax of at least 10%.
"I know a high-tech company like us could charge more, but we want our customers to be satisfied and maintain good long-term relations with the countries to which we sell defense equipment," 59-year-old Papperger said.
"We're working for national and European security - and that includes fair prices."
Germany has so far resisted pressure from Ukraine and some NATO allies, such as Poland, to allow Kyiv to be supplied with German-made Leopard 2 tanks to defend itself against Russia.
The Leopard 2 battle tank is armed with Rheinmetall's 120mm smoothbore gun and the company also supplies ammunition, fire control technology and C4I systems for it.
A company spokesperson told media group RND that it could deliver 139 Leopard tanks to Ukraine if needed.
Rheinmetall could send 29 Leopard 2A4 tanks by April/May and a further 22 around the end of this year or early 2024, the spokesperson was quoted as saying.
It could also supply 88 older Leopard 1 tanks, the spokesperson said, without giving a timeframe for potential delivery.
Rheinmetall, which also makes Marder infantry fighting vehicles, could gain further from the German government's 100 billion euro defense spending plans announced by Chancellor Olaf Scholz shortly after Russia invaded Ukraine.
However most of those plans, hailed at the time as a new era of more assertive German foreign policy backed by military spending, are still unclear.
UBS last week downgraded Rheinmetall to "neutral" from "buy." It said positives, including mid-term defense spending, had been priced into the stock.
Further upside depends on the order flow from the government's spending plans, which is not yet reflected in Rheinmetall's order log, the bank said.
($1 = 0.9205 euros)