Arab News, Thursday, Mar 14, 2019 | Rajab 7, 1440
Rheinmetall ready to ship Saudi trucks as defense drives profit
Rheinmetall is ready to ship 120 military trucks to Saudi Arabia as soon
as Berlin decides on an export license the German firm said on Wednesday as it
reported a 40 percent rise in full-year profit driven by growth in its defense
The German government imposed an arms export embargo on Saudi Arabia following
the killing of journalist Jamal Khashoggi in October, leaving the Rheinmetall
trucks deal, which is worth 136 million euros ($154 million), in limbo.
Despite the uncertainties surrounding doing business with Saudi Arabia, one of
the world’s top arms buyers, Rheinmetall said its defense division, with a
record order-book worth 8.57 billion euros, helped lift net profit to 354
million euros, beating an analyst consensus forecast of 277 million euros.
“Germany has to make a decision,” Rheinmetall CEO Armin Papperger said, adding
that it was not necessary to sue the government as German law determined the
compensation Dusseldorf-based Rheinmetall would be entitled to.
“According to the law, I would be allowed to deliver today,” Papperger added
with reference to the military trucks.
Berlin, which has repeatedly said it was aware of the urgency, has said that it
would decide before the end of March whether to extend the embargo.
But Berlin’s governing coalition appears divided between Angela Merkel’s
conservatives and the Social Democrats who want to impose a ban on arms exports
to Saudi Arabia.
Rheinmetall, which said it will propose a dividend of 2.10 euros ($2.37) per
share against analyst estimates of 2 euros, is targeting revenue growth of 4 to
6 percent in 2019, mainly by driven by its defense units. It aims to maintain
its operating profit margin at around 8 percent.
“Noticeable contributions to grow from the Automotive division cannot be
expected in fiscal 2019,” Rheinmetall’s executive board said in its annual
report, adding that global defense budgets, on the other hand, are set to
Rheinmetall expects defense sales, which contributed around 52 percent of total
sales in 2018, to rise by as much as 9 to 11 percent, while automotive sales are
expected to only grow by 1 or less this year.
The operating profit margin of its defense branch should rise to 8.5 percent
from 7.9 percent, while its automotive branch is expected to fall to around 8
percent from 8.9 percent in the previous year, Rheinmetall said. ($1 = 0.8853