It was just a throwaway line in a March 7 post about possible Chinese yuan weakness but there must have been something in the air:
The last time we saw this sort of stockpiling behavior the yuan was under 7-to-the-dollar and our guess was that the order had gone out to importers to convert currency into storable commodities ahead of a devaluation in the yuan....*****....So who knows? But if I was long the German export industry I would be concerned that further weakening in the yuan would make Chinese exporters even more competitive than they already are.Except maybe for Rheinmetall. The armaments industry seems pretty well insulated from currency fluctuations. RHM.de 437.40 +1.18%
Getting a bit of that 'ol "Arms of Krupp" vibe.*
From the Wall Street Journal, March 14:
Rheinmetall expects sales and profit margins will continue to grow this year as the Ukraine and Israel-Hamas wars show little sign of abating and governments ramp up spending on military hardware.
The German arms maker said Thursday that sales should climb to around 10 billion euros ($10.95 billion) this year from the EUR7.18 billion reported for 2023. Rheinmetall expects an operating margin between 14% and 15%, above the 12.8% it posted for last year. Sales guidance is above analysts’ EUR9.64 billion projection, while the operating margin is within expectations of 14.5%.
The company’s sales forecast marks an improvement of roughly EUR2.82 billion on year and the first time in its history that sales are expected to reach the EUR10 billion mark, signaling confidence among Rheinmetall management that geopolitical tensions will continue to translate into orders in the coming months.
“A new decade of security policy has begun,” Chief Executive Armin Papperger said. “We are investing massively, building new plants and significantly increasing our personnel.”
Rheinmetall, best known for its armored vehicles and munitions production, emerged as a key beneficiary of Russia’s invasion of Ukraine in February 2022, securing a steady stream of orders from members of the North Atlantic Treaty Organization seeking to replenish their stockpiles after diverting significant caches of weapons to Kyiv.
In the fourth quarter alone, the group signed two contracts valued at about EUR860 million in total to modernize air-defense systems in Austria and Romania. Meanwhile, orders for ammunition continued to pour in, including one valued at more than EUR300 million to supply multiple-rocket launcher ammunition to an undisclosed European NATO member.
Rheinmetall’s weapon and ammunition division reported sales of EUR1.76 billion for 2023 as a whole, while the group’s vehicle systems business—which includes military wheeled and tracked vehicles—contributed EUR2.61 billion in sales. Rheinmetall’s order backlog reached EUR38.29 billion at the end of December.
The volume of orders shows demand for ammunition remains resilient after more than two years into Russia’s invasion of Ukraine. In a deal completed last year, Rheinmetall acquired Expal Munitions in Spain in an effort to boost production.
Meanwhile, the stock continues to climb. Shares were up about 4% at EUR438.00 on Thursday morning, giving Rheinmetall a market value of roughly EUR18.35 billion, according to FactSet. The stock traded at roughly EUR95.00 in the days prior to Russia’s invasion of Ukraine in February 2022, and at roughly EUR235.00 before the Israel-Hamas war broke out in October 2023....
....MORE
Also at the Journal this morning: "After the Putin Rally, Europe’s Defense Stocks Get a Trump Bump"
One of the reasons we read books
is so we can learn from the mistakes of other,s avoid making those
mistakes, and get on with making mistakes of our own.
Here's the key takeaway from the insolvency of venerable and giant
Krupp, brought low by what was in effect maturity transformation:
because it destroys the very existence of a firm"
-William Manchester, The Arms of Krupp
The family dynasty had a pretty good run, 1587 to 1968, for a while becoming the largest company in Europe before needing to be bailed out which required the fam to relinquish control.
Manchester's book is something like a half-million words long but it's those 18 in the quote above that really hit a nerve.
From an August 2007 post just after the quant-quake:
Liquidity in Business and Markets
I don't remember if it was Johannes or Ernst, it was a long time ago that I read Manchester, quoting one of the Schroeder boys on the insolvency of Krupp. That line has stuck with me. Here's the book.
