Rheinmetall AG — Call Transcript 2024

Nov 7, 2024

CONFERENCE CALL Q3 2024

Armin Papperger, CEO
Dagmar Steinert, CFO

November 7, 2024

Disclaimer

This presentation contains "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to Rheinmetall's financial condition, results of operations and businesses and certain of Rheinmetall's plans and objectives. These forward-looking statements reflect the current views of Rheinmetall's management with respect to future events.
In particular, such forward-looking statements include the financial guidance contained in the outlook.
Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "will", "anticipates", "aims", "could", "may", "should", "expects", "believes", "intends", "plans" or "targets". By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. In particular, such factors may have a material adverse effect on the costs and revenue development of Rheinmetall. Further, the economic downturn in Rheinmetall's markets, and changes in interest and currency exchange rates, may also have an impact on Rheinmetall's business development and the availability of financing on favorable conditions. The factors that could affect Rheinmetall's future financial results are discussed more fully in Rheinmetall's most recent annual and quarterly reports which can be found on its website at www.rheinmetall.com.

All written or oral forward-looking statements attributable to Rheinmetall or any group company of Rheinmetall or any persons acting on their behalf contained in or made in connection with this presentation are expressly qualified in their entirety by factors of the kind referred to above. No assurances can be given that the forward-looking statements in this presentation will be realized. Except as otherwise stated herein and as may be required to comply with applicable law and regulations, Rheinmetall does not intend to update these forward-looking statements and does not undertake any obligation to do so.
This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire or dispose of securities in Rheinmetall AG or any of its direct or indirect subsidiaries.

Rheinmetall AG and its affiliates are neither associated with nor provide any support to American Depository Receipts programs (ADR) or comparable offerings or investment schemes related to shares in Rheinmetall AG in the United States of America or any other jurisdiction. Therefore, neither Rheinmetall AG nor any of its affiliates has and or will accept any responsibility or liability whatsoever in relation to such ADR programs or comparable investment schemes.

Please note that all figures in this presentation have been rounded on a standalone basis. This can result in minor differences when adding figures together or calculating \% shares.

Q3 2024 Group Highlights
Business acceleration continues and provides high confidence for the full-year

Q3 2024 Group Highlights

New truck framework drives quarterly increase in Rheinmetall Nomination

Vehicle Systems

• 6,500 military trucks (UTF) for $€ 2.9$ bn for GER (frame) with first call-off
• Leopard 2 for Czech Republic lot $1+2$ for $€ 151 \mathrm{~m}$
• Fox kits $€ 280 \mathrm{~m}$

Weapon and Ammunition

• Ukrainian order for local 155 mm production plant in low three-digit million Euro range
• Framework with Spain for propellant charge modules worth up to $€ 205 m$

Electronic Solutions

• 16 Skyranger 30 turrets for Denmark in the low three-digit million Euro range
• Intercoms frame contract for $€ 356 \mathrm{~m}$

Power Systems

• Exhaust gas recirculation valves in the three-digit million Euro range
• Exhaust technology order for $€ 20 \mathrm{~m}$

Total Rheinmetall Nomination: $€ 6.1 \mathrm{bn}$

Q3 2024 Investor Call

Leonardo Rheinmetall Military Vehicles as new player in European tank production

• New nucleus for the development and production of military combat vehicles in Europe
• 50:50 JV with HQ in Rome and operational HQ in La Spezia, $60 \%$ of the activities will be carried out in Italy
• Establishment of the company LRMV expected by Q1 2025
• Promising future export prospects
  

  €20bn vehicles \& service $\quad+$ ammunition \& export

Q3 2024 Investor Call

Forging new strategic alliances

• MoU signed to establish strategic cooperation in various technology fields
• Developing new visual systems and collaborating on auxiliary power units for tactical vehicles
• Exploring other areas of collaboration including localized maintenance such as for example helicopters
• Pursuing joint approaches for industrial high-energy applications, specifically in building automation and overarching thermal management

Q3 2024 Investor Call
Strengthening existing strategic alliances

• Successfull testing of the laser weapon
  demonstrator on the frigate Sachsen already completed in 2023
• Decision to continue the successful cooperation
  in the field of laser weapons concluded in a new
  cooperation agreement
• Plan to launch a joint maritime drone defence product on the market
  

Q3 2024 Investor Call
Loc Performance acquisition well on track

• Received first positive feedback in the US
• Closing expected until end of this year
• Paving Rheinmetall's growth in the largest defence market globally

Q3 2024 Investor Call Landmark defence agreement signed

• Fundamental shift in the UK's relations with Germany and for European security as a whole
• New artillery and tank gun barrel factory to open in the UK, creating more than 400 local jobs
  Annual sales potential in the mid three-digit million Euro range
• Capex requirement of around $€ 50 \mathrm{~m}$

Q3 2024 Investor Call

Short-term uncertainty but long-term fundamentals fine

• No impact on Rheinmetall's US defence program decisions expected
• Loc Performance acquisition already received supportive feedback
• Higher pressure on European NATO-partners to move to 3\% defence spending
• Possibly asking for a negotiated settlement of the Ukraine conflict

Q3 2024 Investor Call

Multiple experts emphasize need to increase NATO's resilience and deterrence

"A Russian attack on NATO territory is no longer an abstract possibility, but a real danger. According to our calculations, Russia will have its forces reconstituted in five to eight years so that they could attack NATO territory."

Abstract

Inspector General Carsten Breuer

"The Kremlin views the Federal Republic of Germany as an adversary. (...) Moscow's willingness to engage in further hybrid and covert activities has reached an unprecedented level. Putin will test the West's 'red lines'."
"We need more, better equipped forces; a more robust transatlantic defence industry; increased defence production capacity; greater investment in innovation; and secure supply chains."

FINANCIALS

Q3 2024 Investor Call

Very profitable growth on elevated levels

Q3 2024 Investor Call

Strong cash flow improvement by more than half a billion Euros

Q3 2024 Investor Call
Sufficiently untapped financing sources available for Loc Performance acquisition

Net financial position ${ }^{2)}$
in $€ \mathrm{~m}$

Q3 2024 Investor Call

Backlog crosses the 50 billion Euro barrier

1) Rheinmetall Nomination = Order Intake (W+A, ES, VS: Order intake - Frame Utilization) + Frame Nomination (W+A, ES, VS) + Booked Business (PS)
2) Rheinmetall Backlog = Order Backlog (signed and fixed contracts) + Frame Backlog (signed frameworks) + Nominated backlog (future call-offs expected for the civil business from existing customer agreements)

Q3 2024 Investor Call
Outstanding performance of Vehicle Systems in a strong defence quarter

Q3 2024 Investor Call
Actual call-offs from frame contracts have tripled since 2021

Call-off volume in €bn

• Frame work contracts only with selected customers for a few products
• Customers:
• Germany
• Netherlands
• United Kingdom
• Spain
• Norway / Sweden
• Products:
• Trucks
• Ammo contracts for 120, 155 and 30mm
• Propulsion
• Intercoms

Q3 2024 Investor Call
Nominations already above FY2023 with more potential

Q3 2024 Investor Call
High sales coverage gives confidence for the rest of the year

In €bn

• Backlog coverage of $>95 \%$
• In-for-out business in
• Service business
• Civil chemicals
• Trade business
• High inventory levels as per end of September underpin our ability to execute Q4 sales successfully

Q3 2024 Investor Call
Full-year guidance confirmed

2024e

Sales

Operating Margin

OFCF to operating result* ("Cash conversion rate")

$\sim 10$ 10bn

$\sim 15 \%$

$\geq 40 \%$

2023

$€ 7.2 b n$

$12.8 \%$

38.8\%

Next events and IR contacts

Statement of financial position

€ million	09/30/2024	$12 / 31 / 2023$
Assets
Goodwill	1.132	1.125
Other intangible assets	904	952
Right-of-use assets	260	271
Property, plant and equipment	1.595	1.370
Investment property	20	22
Investments accounted for using the equity method	352	373
Other non-current assets	494	339
Deferred taxes	176	164
Non-current assets	4.933	4.615
Inventories	4.107	3.244
Contract assets	694	516
Trade receivables	1.830	2.021
Other current assets	377	251
Income tax receivables	68	13
Cash and cash equivalents	474	850
Assets held for sale	1	196
Current assets	7.551	7.092
Total assets	12.484	11.707

€ million	09/30/2024	12/31/2023
Equity and liabilities	0	0
Share capital	112	112
Capital reserves	688	676
Retained earnings	2.557	2.533
Treasury shares	(4)	(5)
Rheinmetall AG shareholders' equity	3.352	3.316
Non-controlling interests	373	327
Equity	3.725	3.643
Provisions for pensions and similar obligations	555	562
Other non-current provisions	320	230
Non-current financial debts	1.494	1.503
Other non-current liabilities	52	51
Deferred taxes	304	260
Non-current liabilities	2.725	2.605
Other current provisions	699	690
Current financial debts	316	410
Contract liabilities	3.529	2.594
Trade liabilities	1.020	1.222
Other current liabilities	398	274
Income tax liabilities	73	108
Liabilities directly related to assets held for sale	0	161
Current liabilities	6.034	5.459
Total equity and liabilities	12.484	11.707

Income Statement ${ }^{1}$

Region	Q3 2024	Q3 2023	Q1-Q3 2024	Q1-Q3 2023
Sales	2.453	1.758	6.066	4.698
Changes in inventories and work performed by the enterprise and capitalized	(50)	173	301	798
Total operating performance	2.323	1.931	6.569	5.336
Other operating income	51	41	103	96
Cost of materials	1110	1007	3,286	2,761
Personnel costs	572	495	1731	1502
Amortization, depreciation and impairment	95	81	277	207
Other operating expenses	247	219	751	584
Result from investments accounted for using the equity method ${ }^{2}$	(5)	9	(17)	(3)
Other financial result	(8)	(8)	(9)	(6)
Earnings before interest and taxes (EBIT) ${ }^{3}$	278	172	615	379
Interest income	5	5	14	24
Interest expenses	26	30	86	72
Earnings before taxes (EBT) ${ }^{3}$	247	146	541	322
Income taxes	(74)	(35)	(90)	(67)
Earnings from continuing operations ${ }^{3}$	173	111	379	236
Earnings from discontinued operations ${ }^{3}$	0	0	(73)	5
Earnings after taxes ${ }^{3}$	173	111	306	241
Of which:
Non-controlling interests	38	9	61	24
Rheinmetall AG shareholders ${ }^{3}$	125	102	245	217
Basic earnings per share ${ }^{3}$	€3.11	€2.36	€6.64	€4.99
Basic earnings per share from continuing operations ${ }^{3}$	€3.11	€2.35	€7.32	€4.66
Basic earnings per share from discontinued operations ${ }^{3}$	€0.00	€0.01	€(56)	€0.11
Diluted earnings per share ${ }^{3}$	€3.05	€2.36	€5.70	€5.88
Diluted earnings per share from continuing operations ${ }^{3}$	€3.05	€2.35	€7.26	€4.67
Diluted earnings per share from discontinued operations ${ }^{3}$	€0.00	€0.01	€(56)	€0.11

Note: 1 In the fourth quarter of 2023, the purchase price allocation for the Rheinmetall Equal Munitions S.A.U., acquired in 2023, was updated with adjustments, so that the previous year's figures had to be adjusted retrospectively. The purchase price allocation was finalized in the third quarter of 2024 without further adjustments. 2 The figures for the previous year have been adjusted as a result of the amended schedule for the disposal of and the resulting retrospective at-equity valuation of the investment in Shriram Pistons \& Rings Ltd.

Cashflow Statement ${ }^{1}$

	01-03 2624	01-03 2623
Earnings after taxes ${ }^{2}$	206	247
Amortization / depreciation / impairment of property, plant and equipment, intangible assets and investment	277	207
Allocation of CTA assets to secure pension and partial retirement obligations	(5)	(8)
Other changes in pension provisions	(5)	(9)
Income / expenses from disposals of non-current assets and divestments in consolidated companies	66	(5)
Changes in other provisions	94	(22)
Changes in working capital	(6)	(554)
Changes in receivables, liabilities (without financial debt) and prepaid \& deferred items	(54)	(6)
Pro rata income / loss from investments accounted for using the equity method ${ }^{3}$	6	4
Dividends received from investments accounted for using the equity method	9	8
Other non cash expenses and income	67	50
Cash flow from operating activities ${ }^{3}$	493	(226)
Of which continuing operations	516	(204)
Of which discontinued operations	(9)	(22)
Cashoutflows in property, plant and equipment, intangible assets and investment property	(46)	(234)
Cash inflows from the disposal of property, plant and equipment, intangible assets and investment property	6	1
Cashoutflows/inflows from divestments in consolidated companies and financial assets	(6)	77
Cashoutflows for investments in consolidated companies and financial assets	(5)	(1058)
Cash flow from investing activities	(437)	(1214)
Of which continuing operations	(430)	(1160)
Of which discontinued operations	(8)	(25)
Dividends paid out by Rheinmetall AG	(248)	(167)
Other profit distributions	(30)	(4)
Borrowing of financial debts	297	816
Repayment of financial debts	(469)	(346)
Cash inflows from the issuance of convertible bond - Addition to equity	-	10
Cash inflows from the issuance of convertible bond - Fair value financial liability	-	887
Transaction costs for the issuance of convertible bond	-	(7)
Cash flow from financing activities	(450)	1275
Of which continuing operations	(527)	(343)
Of which discontinued operations	(52)	32
Changes in cash and cash equivalents	(394)	(165)
Changes in cash and cash equivalents due to exchange rates	(4)	(8)
Total change in cash and cash equivalents	(398)	(173)
Opening cash and cash equivalents January 1	873	568
Closing cash and cash equivalents September 30	474	394
Closing cash and cash equivalents September 30 from discontinued operations	-	0
Closing cash and cash equivalents according to statement of financial position	474	378

Note: 1 In the fourth quarter of 2023, the purchase price allocation for the Rheinmetall
Equal Munitions S.A.U., acquired in 2023, was updated with adjustments, so that the
previous year's figures had to be adjusted retrospectively. The purchase price allocation
was finalized in the third quarter of 2024 without further adjustments. 2 The figures for the
previous year have been adjusted as a result of the amended schedule for the disposal of
and the resulting retrospective at-equity valuation of the investment in Shriram Pistons \&
Rings Ltd. 3 Of which: income tax payment balance: €-225 million (previous year:
€-126 million); interest payment balance: €-44 million (previous year: €-22 million)

Derivation of diluted earnings per share

Derivation of diluted earnings per share

	Continuing Operations	Discontinued Operations	Q1-Q3 2024	Continuing Operations	Discontinued Operations	Q1-Q3 2023
Earnings after taxes in $€$ million - Rheinmetall AG shareholders ${ }^{1,2}$	318	(73)	245	212	5	217
Adjustment for interest expense in respect of the convertible bond in $€$ million	30	-	30	25	-	25
Tax effects on the adjustment for interest expense in respect of the convertible bond in $€$ million	(9)	-	(9)	(8)	-	(8)
Diluted earnings after taxes in $€$ million - Rheinmetall AG shareholders ${ }^{1,2}$	339	(73)	266	230	5	235
Weighted number of shares in millions - basic	43.43			43.41
Effect from the potential conversion of the convertible bond in millions ${ }^{3}$	3.23			2.78
Weighted number of shares in millions - diluted ${ }^{3}$	46.66			46.19
Basic earnings per share ${ }^{1,2}$	€ 7.32	€ (1.68)	€ 5.64	€ 4.88	€ 0.11	€ 4.99
Diluted earnings per share ${ }^{1,2,3}$	€ 7.26	€ (1.56)	€ 5.70	€ 4.97	€ 0.11	€ 5.08
Adjusted diluted earnings per share (due to antidilutive effect) ${ }^{1,2,3}$	-	-	-	€ 4.88	€ 0.11	€ 4.99

Note: 1 The figures for the previous year were restated as a result of the amended schedule for the disposal of and the retrospective at-equity valuation of the investment in Shriram Pistons \& Rings Ltd. 2 In the fourth quarter of 2023, the purchase price allocation for the Rheinmetall Expal Munitions S.A.U., acquired in 2023, was updated with adjustments, so that the previous year's figures had to be adjusted retrospectively. The purchase price allocation was finalized in the third quarter of 2024 without further adjustments. 3 Previous year's figures adjusted.

Adjusted PnL

TAKING RESPONSIBILITY IN A CHANGING WORLD