Dark outlook: Rheinmetall slump in earnings despite strong armaments business – share falls back | message

—The still strong defense technology business was unable to compensate for the declines in the automotive sector. For the year as a whole, the MDAX group Rheinmetall confirmed the outlook for the defense business, but in the auto sector, due to the uncertainty among automakers as a result of the corona pandemic, no outlook is yet possible.

In the three months, sales rose by 1.1 percent to 1.358 billion euros, according to the announcement. The operating result plummeted to EUR 34 million from EUR 54 million, the operating margin correspondingly to 2.5 percent from 4.0 percent in the previous year.

According to Factset, analysts had expected sales of 1.327 billion euros, the EBIT was only seen at 30 million euros.

Rheinmetall outlook bleak

Rheinmetall anticipates a noticeable downturn in the automotive business due to the effects of the corona pandemic. The MDAX Group announced that both sales and the operating result in the area and also at group level will be significantly below the previous forecasts. So far, however, the Düsseldorf company had not considered the impact of the pandemic in their outlook.

Rheinmetall had announced organic sales growth of 1 to 3 percent for 2020 in March. The operating profit margin should decrease to around 7 percent from 8.1 percent in the previous year.

The continuing strong business in defense technology, the outlook of which Rheinmetall confirmed on Friday, cannot compensate for the weaker business with the automakers. In the Defense sector, sales are expected to increase by 5 to 7 percent in 2020, and the operating margin is expected to be between 9 and 10 percent. Due to the high level of uncertainty, no concrete outlook is currently possible for the automotive business, according to Rheinmetall AG.

Rheinmetall shares turn negative after initial gains

After gains in early Xetra trading, Rheinmetall shares turned negative on Friday. Finally, they lost a good three percent and traded at EUR 64.08. This made them one of the biggest losers in the MDAX for medium-sized stocks.

Analysts and traders unanimously praised the industrial group’s good performance in the armaments business and the comparatively good prospects for it. However, disappointment prevailed on the market with regard to the supply of cars.

“The numbers in the automotive segment were below consensus estimates,” commented analyst Gordon Schönell from Bankhaus Lampe. Goldman Sachs’ Chris Hallam pointed out that the profit in the auto supply business was almost a third below the market expectations.

FRANKFURT (Dow Jones) / FRANKFURT (dpa-AFX broker)