Germany-based military technology firm Rheinmetall has reported strong profit growth in the 2017 fiscal year on the back of a growing demand for better security “in Germany and abroad”.
In a statement, the company, which recently secured the $5.2 billion LAND 400 Phase 2 contract, reported a 5 per cent year-on-year increase in group sales.
This growth, the statement said, was spurred on by the 3 per cent growth enjoyed by the firm’s defence division, up to €3,036 million ($4.8 billion) for the 2017 fiscal year.
Rheinmetall chief executive Armin Papperger said the current global push towards better defence systems placed the business in good stead to drive further profits.
“We have every opportunity to continue our growth in sales and earnings. With our presence on key global markets, we are excellently positioned with our two segments and have laid the foundations for further profitable growth,” he said.
“In defence, the general trend towards increased security in Germany and abroad will have a positive impact on our business.”
However, the company’s incoming orders fell slightly during the reporting period from €3,050 million in 2016 to €2,963 million in 2017.
Similarly, the value of the order backlog decreased from €6,656 million in 2016 to €6,416 million.
According to the statement, Australia’s LAND 121 logistics vehicle project (currently in the delivery phase) represented one of the largest orders on the backlog, alongside Germany’s PUMA infantry fighting vehicles and parts of the Algerian Fuchs vehicles.
“Despite this, the company’s operating earnings “increased significantly”, the statement said. Operating earnings (EBIT before special items) amounted to €174 million in the past fiscal year, soaring by €27 million or 18 per cent as against the previous year,” it said.
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“Special items of -€2 million – resulting from the capacity adjustment at a Dutch site – led to reported EBIT of €172 million for the fiscal year.”
Rheinmetall added that “positive development” in the business’ weapon and ammunition and vehicle systems divisions were responsible for the earnings improvement, particularly high-margin ammunition sales and “good capacity utilisation” in the vehicle systems arm.
The company expects annual sales for the current fiscal year to increase 8 or 9 per cent based off the 2017 figures, the statement said.
More specifically, the company is “projecting double-digit sales growth” of 12 to 14 per cent within its defence arm throughout the 2018 fiscal year.
“As in the previous year, the sales forecasts for 2018 are largely covered by the relatively high order backlog,” the statement said.
“Rheinmetall is also assuming a further improvement in operating earnings in defence division in 2018 with an operating margin of between 6.0 per cent and 6.5 per cent. Taking into account holding costs and low double digit million expenses for realising and marketing new technologies, the Rheinmetall Group will achieve a margin of around 7 per cent.”