August 1, 2019 / 8:26 AM / 18 days ago

Rheinmetall cuts sales forecast for automotive division

FILE PHOTO: Chairman of Supervisory Board Ulrich Grillo, Franz Josef Jung and CEO Armin Papperger of Germany's Rheinmetall AG attend the shareholder meeting at a hotel in Berlin, Germany, May 28, 2019. REUTERS/Fabrizio Bensch/File Photo

BERLIN (Reuters) - Germany’s Rheinmetall (RHMG.DE) on Thursday downgraded a forecast for its automotive division, saying it now expects sales in the business to fall 2% to 3% in 2019 compared with its previous forecast for them to stagnate or rise slightly.

The defence contractor and automotive parts maker company said it expected to post an operating margin of around 7% in the automotive sector - down from its previous prediction of around 8%, which it said had been based on the market recovering notably in the second half of the year.

“Although, as expected, Automotive is unable to distance itself entirely from the downward trend on global automotive markets, the Group remains on track for growth with respect to sales and earnings,” said Armin Papperger, Rheinmetall Chief Executive Officer.

Rheinmetall said it expected annual group sales to rise organically and before currency effects by about 4% - at the lower end of its previous forecast for 4% to 6%.

Earlier on Thursday, the world’s biggest steelmaker ArcelorMittal (MT.AS) cut its forecast for global steel demand on Thursday, with a sharper reduction now envisaged in Europe due to a lean automotive market.

Rheinmetall was more upbeat about its defence division - which accounts for roughly half of its overall sales -, predicting sales would rise organically and before currency effects by around 11% - at the upper end of its previous estimate for 9% to 11%.

Shares in Rheinmetall were up 4.4% at 0721 GMT.

Carmaker BMW (BMWG.DE) also on Thursday reiterated that it expected a significant decrease in group profit before tax in 2019. Rival Daimler (DAIGn.DE) has lowered its outlook as a global trade war hits consumer confidence and contributes to falling demand, particularly in China.

Reporting by Michelle Martin; editing by Emelia Sithole-Matarise

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