Rheinmetall Shares Rise as Car Parts Help Profit Beat ForecastRichard Weiss
Rheinmetall AG rose the most in more than nine months in Frankfurt trading after the German maker of car parts and defense equipment said profit exceeded its forecast because of record earnings at the auto-component business.
Rheinmetall jumped as much as 8.7 percent, the steepest intraday gain since May 8, and was trading up 7.2 percent at 43.11 euros as of 1:46 p.m. The stock has gained 19 percent this year, valuing the Dusseldorf-based manufacturer at 1.71 billion euros ($1.94 billion).
Earnings before interest and taxes and excluding one-time effects totaled 160 million euros, beating a forecast for 150 million euros, Rheinmetall said in a preliminary statement of 2014 figures. The automotive unit’s operating profit jumped 17 percent to 184 million euros, more than making up for a 9 million-euro loss at the military-equipment business resulting from a Russian contract cancellation and provisions for a naval gun project in the Middle East and North Africa region.
“Automotive again beat expectations, and defense was not as bad as expected,” Thomas Rau, an analyst at Equinet Bank AG, wrote in a report to clients. “It is more than obvious that it will take a much longer time for the defense business to recover to a more appropriate margin level.”
European vehicle-parts makers have reported earnings growth as a recovery in the region’s auto market and rising demand for cars in Asia boosted component deliveries. Faurecia SA, Europe’s largest maker of car interiors, said a week ago that it’s raising its dividend after operating profit jumped.
German defense companies have struggled as Vice Chancellor Sigmar Gabriel tightens the granting of export licenses for military goods. The government halted a deal by Rheinmetall to supply a combat training facility to Russia after Vladimir Putin’s annexation of Crimea last year, prompting the German manufacturer to cut financial targets twice.
Rheinmetall’s group Ebit including one-time gains or costs fell 8 percent last year to 102 million euros. Revenue increased 6.1 percent to 4.69 billion euros.
The Russian order cancellation and provisions for potential warranty claims from the naval gun project reduced operating profit by about 20 million euros each, said Peter Ruecker, a Rheinmetall spokesman. The company also settled criminal proceedings related to an arms deal in Greece in December by accepting a fine of 37 million euros. Restructuring charges and a purchase-price adjustment from selling a drone unit in 2012 contributed another 20 million euros in charges.
(An earlier version of this story corrected an operating profit decline figure.)