Rheinmetall’s Shipyard Bid Adds a New Layer to a €73bn Order Book

Rheinmetall accelerates naval expansion with bid for German Naval Yards Kiel, reports Q1 revenue miss but strong margins, and maintains €14-14.5bn full-year guidance.

The transformation of Rheinmetall from a land-systems specialist into a full-spectrum defence powerhouse is accelerating on multiple fronts. On Thursday, the Düsseldorf-based group submitted a formal offer for German Naval Yards Kiel, pitting itself directly against Thyssenkrupp Marine Systems in a bidding contest that could reshape Germany’s naval shipbuilding landscape.

The move is the logical next step after Rheinmetall’s integration of Naval Vessels Lürssen. Winning the Kiel yard would give the company the ability to build surface vessels such as corvettes and frigates in-house, completing a maritime division that has already been factored into the group’s record order book.

That backlog stood at roughly €73bn as of March 31, a 31 percent jump from a year earlier. The figure includes the newly consolidated Naval Systems segment and a single nomination worth €4.9bn. AlphaValue captured the mood succinctly: the structural defence theme and the massive order book are intact, but Rheinmetall is increasingly becoming an execution story.

A Revenue Gap with an Explanation

The first-quarter numbers, however, told a more nuanced story. Revenue came in at €1.938bn, up 7.7 percent year-on-year but roughly €360m short of analyst expectations of €2.3bn. Rheinmetall attributed the shortfall to timing: pre-produced trucks for a German customer and higher ammunition deliveries from its new plant in Murcia, Spain, are expected to be booked in the second quarter. The company was explicit that this is a shift, not a demand problem.

Profitability painted a brighter picture. Operating profit rose 17 percent to €224m, pushing the operating margin to 11.6 percent from 10.5 percent a year earlier. The Vehicle Systems division was the standout, driven by infantry fighting vehicle deliveries to European partners and Bundeswehr programmes.

The cash story was less flattering. Free cash flow from operations came in at minus €285m, weighed down by rising capital expenditure and working capital build-up amid low customer advance payments. That figure will need to improve if the group is to hit its full-year cash conversion target of more than 40 percent.

Dividend Hike and Steady Guidance

Management is sticking with its full-year forecast: revenue between €14bn and €14.5bn, an operating margin of around 19 percent, and cash conversion above 40 percent. For the annual general meeting in May, the board has proposed a dividend of €11.50 per share, up from €8.10 last year.

Analysts remain broadly constructive. DZ Bank reaffirmed its buy recommendation and nudged its price target up to €2,188, arguing that the weak first quarter reflects timing effects and a gradual capacity ramp-up rather than any structural issue.

Shares Under Pressure Despite Fundamentals

The market took a less forgiving view on Thursday. Rheinmetall shares fell 2.6 percent to €1,396, with the relative strength index hitting 80 — technically overbought territory. The stock has lost nearly 13 percent since the start of the year and trades roughly 30 percent below its September 2025 high of €1,995.

The Kiel shipyard auction now becomes the next potential catalyst. If Rheinmetall prevails over Thyssenkrupp Marine Systems, it will have completed the build-out of a fully integrated maritime business — one that could begin to convert the €73bn order book into tangible revenue growth. The second quarter, with the expected production surge from Murcia and the truck delivery to the German customer, will be the first real test of whether that conversion is on track.