Rheinmetall Moves Skyranger Production to Germany as Investors Scrutinise Cash Flow and Backlog Execution

Rheinmetall faces pressure to convert €73bn backlog into cash; relocates Skyranger production to Germany to boost margins, as stock remains 23% below year-start.

Rheinmetall is walking a tightrope between a record order book and operational friction. The defence group’s €73 billion backlog points to years of demand, but negative free cash flow in the first quarter has put the spotlight on how quickly it can turn those orders into revenue. As management faces institutional investors at a London conference today, the tension between scale and cash management is front and centre.

The company’s decision to shift production of its Skyranger mobile air-defence system from Switzerland to Neuss in Germany is a direct response to that challenge. The relocation addresses two bottlenecks at once: restrictive Swiss export rules that complicate deliveries to certain buyers, and capacity constraints at the existing Oerlikon site. By establishing a modern series-production line in Neuss, Rheinmetall hopes to shorten delivery times and improve margin performance on one of its most in-demand systems. The move ties into a broader strategic push under Chief Executive Armin Papperger, who is steering the group further into cruise missiles and layered defence solutions. A joint project with Deutsche Telekom to develop a drone-protection shield for civilian and military infrastructure underscores the shift from component supplier to full-system integrator.

At the London “European Leadership Conference”, CFO Klaus Neumann and head of investor relations Dirk Winkels are fielding pointed questions. The first-quarter figures rattled the market: revenue of €1.94 billion was solid, but a negative free cash flow in the opening period raised concerns about working capital management and the pace of capital spending. The stock, which remains roughly 23% below its start-of-year level, edged up 1.7% to €1,226 on Wednesday — a tentative sign of stabilisation after hitting a mid-May low of €1,118. The recovery is fragile, and the shares still trade 25.88% below their 200-day moving average, a technical indicator of persistent weakness.

Operationally, the outlook remains ambitious. For the full year, management has guided revenue between €14.0 billion and €14.5 billion, with an operating margin around 19%. Analysts expect operating profit to jump as much as 45% in 2026, roughly double the average forecast for European defence peers. That optimism rests on Rheinmetall’s ability to convert its backlog into cash flow at scale — a process the Skyranger relocation is designed to accelerate.

Shareholders have already seen some reward. The annual general meeting on 12 May approved a dividend of €11.50 per share for the 2025 financial year, up sharply from €8.10 a year earlier. The payout signals confidence in the earnings trajectory, but the market’s focus is now squarely on execution.

The next major checkpoint comes on 6 August, when second-quarter results are due. Until then, new call-offs from framework agreements and progress on international partnerships will be the key drivers for the share price. Rheinmetall’s balance between a bulging order book and the realities of production ramp-up remains the defining story for investors.