Bonn — Rheinmetall will increasingly focus on markets outside of Europe, and has decided not to split out its Automotive division to concentrate solely on defense, CEO Armin Papperger announced.
At a recent press conference, Papperger unveiled a new strategic program, “Rheinmetall 2015,” that will push growth outside traditional markets.
“Both the Defence and Automotive sectors still harbor huge potential for profitable growth,” Papperger said. Under his predecessor, Klaus Eberhardt, there had been plans to sell the automotive activities and concentrate on defense over the long run.
The new plan is supposed to generate annual savings of 55 million euros ($71 million) to 70 million euros beginning in 2015, Papperger said.
“2013 marks for us the beginning of a strategic program which we will use to drive forward the development of our group into an international partner for security and mobility,” said Papperger, who became CEO of Rheinmetall in January.
For its defense activities, the Düsseldorf-based company, which has subsidiaries worldwide, is focusing on markets outside of Europe, for instance in Asia and Australia. The Defence division is supposed to expand into regions with high-growth defense budgets, and Rheinmetall expects after 2015 that about 50 percent of its sales will be generated outside of Europe.
In addition, Rheinmetall wants a broad defense product portfolio with a mix of components, such as ammunition, and long-term, large-volume projects, like armored vehicle production, he said. It was also announced that units could be relocated, adjusted or closed.
The company’s strategy for its Automotive division also aims at further internationalization. After 2015, more than one-third of its sales are expected to be generated from outside Europe. In this context, the Chinese and Indian markets are of particular interest to Rheinmetall.
“Rheinmetall 2015” also announces a need to improve the cost structure of this division, especially in the European production.
“However, we still have some work to do in order to be able to realize our next growth spurt,” said Papperger. “For us, 2013 will become a year of transition toward improved profitability.”
For 2013, the Rheinmetall Group expects sales of between 4.8 billion and 4.9 billion euros and earnings before interest and taxes (EBIT) of between 240 million and 260 million euros.
However, the company also said it would introduce restructuring measures that would impact the income statement for the current fiscal year by between 60 million and 80 million euros.
At the press conference, Papperger also presented the official numbers for 2012.
Rheinmetall increased its sales by 6 percent to around 4.7 billion euros; 72 percent of the sales were achieved outside Germany with the rest of Europe combined heading the list with 40 percent. The EBIT fell to 301 million euros from 354 million euros in 2011.
Rheinmetall Defence increased its sales by 9 percent to about 2.3 billion euros. Its EBIT reached 146 million euros compared with 223 million euros in 2011. The order intake was 2.9 billion euros. Rheinmetall Automotive increased its sales by 2.5 percent to around 2.36 billion euros.