H1/2019 report

Rheinmetall Automotive with robust performance in weak market environment

In the first half of 2019, Rheinmetall Automotive AG though again outperforming the international auto sector, failed to escape the downturn in global demand. The number of Light Vehicles produced worldwide (vehicles under 6 tons) declined by 6.7 percent in the first half of 2019. Rheinmetall Automotive posted sales of €1,441 million, down €50 million or 3.4 percent from €1,491 million a year earlier, a decline well less than industry's overall fall in production. Adjusted for currency effects, sales shrank by 4 percent.

The company's operating earnings dropped by €31 million to €102 million. At 7.1 percent, the operating margin nevertheless remained at a relatively high level (previous year: 8.9 percent).

Horst Binnig, CEO of Rheinmetall Automotive AG, commented: "Even against the backdrop of a weakening unit sales situation on the international automotive markets, Rheinmetall Automotive has shown that our strong product portfolio, especially in the key areas of emission reduction and lightweight engineering, means that sales and earnings are still well above the general market trend."

In the first six months of 2019, the Mechatronics Division posted sales of €808 million, €38 million less than in the previous year. This decline is largely attributable to the downturn in the passenger car markets and, in particular, to the persistently weak demand for diesel passenger cars, which could not be offset by higher sales in the commercial vehicle business and pumps. Operating earnings slipped from €90 million in the previous year to €66 million in H1/2019.

The Hardparts Division's sales of €503 million in the first half of 2019 remained at the previous year's level (€504 million) despite the troubled market environment. The market-driven decline in the Plain Bearings unit was offset by higher sales of large-bore pistons and an asset disposal. Operating earnings amounted to €22 million after €35 million in the previous year.

In the Aftermarket Division, sales in the first six months of 2019 fell by €12 million, year-on-year to €177 million. The sales regions of Western Europe and North America were particularly weak. Despite the decline in sales, stable profit contributions and a strict cost management policy resulted in operating earnings of €17 million, like in the previous year, after the first six months of 2019.

The joint venture companies in China, which are not included in Rheinmetall Automotive's figures, achieved sales of €457 million in the first half of 2019, an increase of €10 million or 2.2 percent (prior year: €447 million) in a significantly declining market environment where light vehicle production dropped by 13.5 percent year-on-year. Adjusted for acquisitions, the joint ventures in China posted a slight decline in sales of 1.3 percent, but this was well below the decline in the country's passenger car production.    

Outlook

The expert forecasts for the further development of global automobile production in the second half of the year, for which a noticeable market recovery was originally expected, have worsened. The experts at IHS Markit have meanwhile reduced their annual forecast for 2019 to a decline in production of 3.7 percent.

A number of large automobile manufacturers and major suppliers are now expecting global automobile production to fall by between 4 percent and 5 percent compared with the previous year's figure. Rheinmetall shares this assumption.

Against the backdrop of these clouded market expectations, Rheinmetall is no longer forecasting stagnating to slightly positive sales for its Automotive sector, but anticipating a slightly negative sales trend of between 2 percent and 3 percent for 2019 as a whole.

On the basis of this market expectation for the automotive business and the new sales forecast derived from it, Rheinmetall Automotive is counting on an operating margin of around 7 percent in 2019, after a previous forecast of around 8 percent, which had still been based on a significant market recovery in the second half of the year.

Forward-looking statements and forecasts

This release contains forward-looking statements. These statements are based on Rheinmetall AG's current estimates and forecasts and the information currently available to it. These forward-looking statements should not be construed as guarantees of future developments and results. Rather, they depend on a variety of factors; they involve various risks and uncertainties and are based on assumptions that may prove to be incorrect. Rheinmetall assumes no obligation to update the forward-looking statements contained in this release.

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