Rheinmetall (ETR:RHM) shares climbed approximately 1.4% on Friday, reaching near €1,035 during early Xetra trading. The stock was poised for its fifth consecutive daily advance, buoyed by significant capacity expansion plans at its Aschau facility and broader sector gains.
Aschau Expansion Details
The Aschau site is set to undergo a major transformation. Powder output is expected to surge by 147%, rising from 1,700 tonnes annually to 4,200 tonnes. This increase will be achieved by expanding the cultivated area from 90 hectares to approximately 110 hectares, a 22% expansion. The density of production will nearly double, reaching about 38 tonnes per hectare, up from roughly 19 tonnes.
The €350 million budget for this expansion translates to €140,000 spent for each additional tonne of annual capacity. The additional 2,500 tonnes represent 12.5% of Rheinmetall's group target for 2030. Propellant-charge modules are also set to increase dramatically, from 300,000 units annually to over 1 million, representing a more than 233% rise. The workforce at Aschau will expand from over 800 employees to 1,300, an increase of roughly 60%.
Chief Executive Armin Papperger emphasized the strategic importance of the project: "None of these components shall be a bottleneck." He noted that international suppliers of propellant are limited, making the Aschau site crucial. By 2030, Aschau is expected to account for 21% of Rheinmetall's targeted 20,000-tonne total capacity.
Market Context and Sector Performance
The broader German market also showed strength, with the DAX trading approximately 0.8% higher. Shares of other German defense companies advanced as well: Hensoldt (ETR:HAG) rose 2.6%, and Renk Group (ETR:R3NK) gained 0.4%.
Despite the recent uptick, Rheinmetall shares remain nearly 49% below their all-time high from October 2025. The stock has rebounded roughly 5% since last Friday's close, following a steep correction in June. On June 24, shares dropped 18.7% after Germany scrapped the F126 frigate project, citing potential costs exceeding €18 billion for six vessels. The comparison underscores the importance of the Aschau expansion, which operates with a set budget, scheduled timeline, and defined output milestones starting in 2027.
Geopolitical Risks
New trade tensions emerged as China on Friday imposed a ban on dual-use exports to Rheinmetall and 13 additional EU entities. The export prohibition is already in force. The European Union is currently evaluating China's export controls, which cover some rare earth elements. Any delays in construction or qualification at the Aschau site could also postpone the targeted ramp-up scheduled for 2028.
Upcoming Catalysts
The next key milestone for Rheinmetall is August 6, when the company is set to release its first-half results at 14:00 CEST. In the first quarter, sales increased by 8% to €1.94 billion. However, operating free cash flow stood at a negative €285 million, attributed to higher inventories and working capital.
