After the skid marks left by the corona pandemic in the first half of 2020, the automotive sector returned to profitability in the third quarter. In conjunction with the strength of the defense division, which is still growing, the Düsseldorf-based technology group has thus exceeded the previous year's figure for operating consolidated earnings in the third quarter.
Armin Papperger, CEO of Rheinmetall AG, commented on the company's results as follows: “We owe our robust business development to the strong Defense sector as well as the strict cost management at Automotive. We were well prepared for the restart of our automotive customers' production after the industry-wide shutdown in spring. As a result, we at Automotive managed to pick up speed again in the third quarter and partially offset the pandemic-related losses. We are now doing everything we can to continue on this course even under the demanding conditions of the corona situation and to bring the operating result of Automotive back into profitability for the year as a whole. "
Armin Papperger continued: “Defense remains our anchor of stability. We are benefiting from the sustained global demand for security products in both civil and military sectors. ”The high-margin growth at Defense ensured the Group's robust business development. The Rheinmetall Group's sales in the first three quarters of 2020 fell year-on-year by EUR 315 million or 7.3% to EUR 3,979 million. Even if the positive effects of the recovery in the global automotive economy again had an impact at Automotive, especially in the third quarter, the Group's nine-month figures are still characterized by the very different development of the two divisions, especially in the first half of the year.
The Defense division was able to significantly expand its business volume. Automotive sales in the third quarter approached the level of the previous year; After nine months, however, automotive sales still lag behind the previous year.
The different sales development of the two divisions was also reflected in the operating result after three quarters: While the Defense division was able to improve its operating result significantly in the first nine months, the Automotive division recorded a decline despite the continued difficult economic conditions. After three quarters, Rheinmetall achieved a consolidated profit of EUR 170 million compared to EUR 262 million in the same period of the previous year.
Earnings before interest and taxes (EBIT) were EUR -166 million in the first three quarters, EUR 435 million below the previous year's result. This decline results from the drastically reduced production volume in the automotive industry as a result of the corona pandemic, as well as lower growth in passenger cars and commercial vehicles expected by experts.
Automotive: pandemic-related losses in sales and earnings
The corona pandemic has left deep cuts in the production figures of the automotive industry. Worldwide, the production of light vehicles (vehicles under 6 tons) fell by 23% in the period from January to September 2020 compared to the previous year. The Automotive division generated sales of EUR 1,528 million in the first nine months of 2020, which is 27% or EUR 571 million below the previous year's figure.
The negative effects of the pandemic were mitigated with cost savings in personnel, material and administrative costs. Earnings before interest and taxes (EBIT) at the end of the first nine months of the current year were EUR -352 million and were also significantly below the previous year's figure of EUR 146 million.
The Defense sector achieved order intake of EUR 1.9 billion in the first nine months of 2020, 11% below the previous year's figure of EUR 2.2 billion. However, the major order signed in September 2020 for the delivery of Lynx armored personnel carriers to the Hungarian armed forces worth well over EUR 2 billion is not yet included in the order intake.
Outlook for the 2020 financial year
Rheinmetall does not expect the Corona crisis to have any impact on business development in the Defense sector. Therefore, sales growth of around 6% is expected for the Defense sector.
On the basis of the development in the first nine months of the 2020 financial year and provided that there is no new lockdown in international automobile production by the end of the year, Rheinmetall expects a decline in sales of between 20% and 23% for the Automotive sector.
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