BERLIN (Reuters) - Germany’s Rheinmetall on Thursday confirmed its outlook after a 15 percent rise in first-quarter operating profit on higher defence sales, boosting its shares.
“Given the extensive backlog of demand in armed forces’ procurement, we continue to see major opportunities in the Defence sector – in Germany and internationally,” CEO Armin Papperger said in a statement.
Earnings before interest and taxes (EBIT) rose to 54 million euros (46 million pounds) from 47 million a year earlier and topped the 41 million expected by analysts.
Rheinmetall shares were up 2.8 percent at 0914 GMT to lead Germany’s midcap MDAX index.
Revenue rose 6.6 percent led by defence sales, which account for roughly half of its total, which jumped by 24 percent to 629 million euros ($704 million), topping a consensus forecast of 604 million.
Rheinmetall made no reference to any possible negative impact from Germany’s decision to prolong an embargo on arms exports to Saudi Arabia following the killing of journalist Jamal Khashoggi last year.
In March Rheinmetall said it stood ready to ship 120 military trucks to Saudi Arabia in a deal worth 136 million euros ($154 million) which remains in limbo.
The export ban prompted planemaker Airbus to take a 190 million euro charge last month related to a Saudi border security contract.
The Duesseldorf-based maker of tanks, ammunition and electronic defence devices confirmed its full-year targets, saying it expected defence to power group organic growth of 4 to 6 percent while its automotive sector is not be expected to grow.
Its automotive sales fell 5 percent to 714 million euros, in line with expectations. The unit, which produces components including engine blocks, pumps and electronics, posted an operating profit margin of 6.9 percent, Rheinmetall said, despite the industry’s current slowdown.
“We are in particular surprised by automotive,” a broker at Bankhaus Lampe said, noting Rheinmetall’s overall operating profit came in much better than expected.
Weaker demand in China along with global trade tensions and new emissions legislation are weighing on the margins of automakers and their suppliers.
German automotive supplier Continental on Thursday reported a 22 percent fall in quarterly net profit.
Reporting by Tassilo Hummel; editing by Michelle Martin and Jason Neely