Rheinmetall shares drop 40% after F126 frigate order cancellation

Rheinmetall shares fell from a peak of 2,000 euros to a low of 900 euros, currently trading at 1,085 euros with a P/E ratio of 29. The decline follows the cancellation of the F126 frigate project by German Defense Minister Boris Pistorius, a contract worth over 6 billion euros that Rheinmetall had taken over from a struggling Dutch shipyard two years prior. CEO Armin Pappberger had acquired the Lürssenwerft in Bremen to handle the project. While Rheinmetall maintains an order backlog of over 80 billion euros, only about 70% is considered fixed, leaving a safe backlog of approximately 56 billion euros. The company reported negative free cash flow of 1.62 billion euros in the first half due to massive capacity investments and inventory buildup. Revenue guidance for the current year was lowered to between 13.7 and 14.2 billion euros, still representing a 30% increase year-over-year. Pappberger targets 24-25 billion euros in revenue by 2028 and 40-50 billion euros by 2030, goals viewed as ambitious given historical delays in defense projects.