Investing.com -- Rheinmetall AG (ETR:RHMG) shares fell as much as 16.3% on Thursday after the German defence group cut its 2026 sales and margin targets for the second time this year and largely abandoned its cash-generation goal.
The company cited delays to a major German vehicle order and ammunition deliveries, which will push revenue into 2027, despite third-quarter operating profit beating expectations.
The German defence group now expects 2026 sales of around €13.20 billion, down from a previous €13.70 billion to €14.20 billion, because the Arminius vehicle order is delayed and ammunition sales will be lower than planned. The analyst consensus was €13.88 billion.
The operating margin is now seen at around 18.5%, versus around 19% before, because the mix of products sold this year has changed. Consensus was 19.2%.
Cash conversion, which compares free cash flow with operating profit, is now expected at just over 0%, versus more than 40% before, because advance payments tied to Arminius are no longer expected this year.
In Vehicle Systems, the delayed Arminius order moves advance payments and sales to 2027, so the margin is seen at around 12%, versus 12% to 13% before. Sales are seen at €5.80 billion to €5.90 billion, from €5.90 billion to €6 billion.
In Weapon and Ammunition, sales are seen at €4.40 billion to €4.50 billion, from €4.90 billion to €5 billion, because new-business sales, notably the Destinus collaboration, will not fully arrive in the fourth quarter and artillery ammunition batches face late acceptance. The margin is seen at 28% to 29%, from 29% to 30%.
Air Defence was the exception: its sales forecast rose to €1 billion to €1.10 billion from €0.90 billion to €1 billion after strong nine-month sales growth. Digital Systems and Naval Systems targets were unchanged.
Third-quarter operating profit was €553 million, versus the €531.4 million consensus, and the margin was 17.5%, versus 16.3% expected and 14.8% a year earlier. Sales of €3.15 billion missed the €3.25 billion consensus.
Reported EBIT of €515 million, versus €492.8 million expected, included positive special items of €18 million.
Earnings per share from continuing operations came in at €5.99, below the €6.17 consensus, while adjusted EPS was €6.42, against expectations of €6.92. Operating free cash flow was an outflow of €82 million, compared with consensus for an inflow of €123.1 million.
Nine-month operating free cash flow was -€1.70 billion, versus -€798 million a year earlier, as inventories built up. Net financial debt was €2.90 billion at Sept 30, versus net liquidity of €369 million at end-2025.
The company wrote off €2.15 billion of Naval Systems orders in July after Germany's defence ministry dropped the F126 frigate programme.
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