Germany plans to cut spending on ammunition in 2027, which could hit Rheinmetall - Bloomberg
Kyiv • UNN
Germany plans to reduce spending on ammunition in 2027 to 9.6 billion euros from 11 billion in 2026. This could exacerbate difficulties for Rheinmetall, whose shares have fallen more than 30% since the beginning of the year.
Germany plans to cut spending on ammunition next year in favor of other defense areas, which could increase difficulties for one of the industry's largest representatives - Rheinmetall AG. This is reported by Bloomberg, writes UNN.
Details
The draft budget for 2027, which the government may still change, provides for spending on ammunition at about 9.6 billion euros ($10.9 billion) in 2027 compared to 11 billion euros in 2026, according to a copy of the document obtained by Bloomberg. Overall, Germany's defense spending is set to increase significantly by 2030.
Rheinmetall has lost investor favor, and its shares have fallen more than 30% since the beginning of the year. The company, which traditionally bet on tanks and artillery, is now losing ground to drone manufacturers — technologies that have demonstrated their critical role in the wars in Ukraine and Iran.
The draft document, which was circulated among traders and hedge funds, adds new doubts about the investment attractiveness of traditional defense contractors, even giants like Rheinmetall with a market value of 49 billion euros.
The preliminary allocation of funds could intensify ongoing discussions about shifting priorities in German defense spending, particularly regarding the balance between traditional equipment such as ammunition and higher-priority areas
According to Bloomberg, the Goldman Sachs index of European defense companies has remained almost unchanged since the beginning of the year, lagging behind the 9.6% growth of the Euro Stoxx 600 index.
Investors fear that defense sector profits are not growing fast enough to justify the high valuations of companies that rose amid Europe's promises to increase defense spending. Before Russia's full-scale invasion of Ukraine in February 2022, Rheinmetall's market capitalization was 4.2 billion euros.
According to the preliminary budget document, about 7.7 billion euros in 2027 will be allocated for the purchase of ammunition, and another 1.9 billion euros from the special defense fund.
These figures still exceed the 2025 level, when the country began to significantly increase its defense capabilities and spent a total of less than 4 billion euros on ammunition procurement.
A representative of the German Ministry of Defense stated that she cannot comment on individual budget items until the federal financial plan is finalized. At the same time, she added that "the procurement of ammunition is and will remain a priority."
Addendum
Rheinmetall, the world's largest manufacturer of 155 mm artillery shells, also suffered due to an unsuccessful acquisition of a shipbuilding company, which was bought because of its position as a likely prime contractor in the German F126 military ship project. However, last month the government terminated the ship deal, causing Rheinmetall's shares to fall 19% in one day.
On July 2, the company stated that it would assess the impact of the contract cancellation on its annual forecast during the presentation of second-quarter results on August 6. A Rheinmetall representative did not immediately respond to Bloomberg's request for comment on the draft budget.
In addition, last week China imposed export restrictions against 14 European companies, including Rheinmetall, stating that this is a response to European Union sanctions.