Rheinmetall stockpiles €6.2B in supplies to fuel defense production surge

Rheinmetall received approximately €6.2 billion worth of supplies during the second quarter of 2026 to feed its accelerating defense production expansion, a stockpiling effort that drove operating free cash flow to negative €1.33 billion but secured the materials needed to execute a record order backlog.defence-industry

Chief Executive Officer Armin Papperger told analysts during the company's second-quarter earnings call that the inventory build-up was unavoidable. "We need these goods in our stocks, otherwise it's impossible to grow," he said. The company's backlog reached €80.4 billion after new order nominations surged 476% to €11.37 billion in the quarter.defence-industry

Factory Expansion Continues Across Europe

The supply intake underpins a network of new facilities for ammunition, explosives, and propellants scheduled to come online through 2027. An RDX plant in Várpalota, Hungary, is expected to be completed in 2027, while a powder plant in Aschau is set to begin production in the third quarter of that year with capacity for up to 4,500 tons of triple-base powder. A rocket-motor facility in Unterlüß is expected to be ready in the first quarter of 2027.defence-industry

Papperger said the company is reducing projected capital expenditure through purchasing savings and synergies — not by cutting planned output. "The capacities of our production lines are absolutely in line what we planned," he said. Rheinmetall expects capital expenditure to equal about 8% to 9% of sales in 2026.defence-industry

Revenue Surges Amid Broader Western Capacity Concerns

Second-quarter sales rose nearly 70% to €3.29 billion, while the operating result more than doubled to €562 million. First-half revenue increased 39% to €5.5 billion. Rheinmetall is hiring about 10,000 employees per year and received more than 160,000 job applications.quartr+3

The ramp-up takes place against a challenging backdrop for Western defense production. A 2025 Roland Berger survey found 64% of aerospace and defense companies still facing supply chain disruption, while CSIS analysts estimate China is expanding its munitions capacity five to six times faster than the United States. Rheinmetall's approach of stockpiling materials ahead of production capacity represents one answer to those constraints — though the near-term cash flow cost remains steep, with management expecting advance payments from Romania and Germany to ease the working-capital burden in coming quarters.defence-industry+1