March 13, 2019 / 1:01 PM / 6 days ago

UPDATE 1-Rheinmetall ready to ship Saudi trucks as defence drives profit

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BERLIN, March 13 (Reuters) - Rheinmetall is ready to ship 120 military trucks to Saudi Arabia as soon as Berlin decides on an export licence the German firm said on Wednesday as it reported a 40 percent rise in full-year profit driven by growth in its defence business.

The German government imposed an arms export embargo on Saudi Arabia following the killing of journalist Jamal Khashoggi in October, leaving the Rheinmetall trucks deal, which is worth 136 million euros ($154 million), in limbo.

Despite the uncertainties surrounding doing business with Saudi Arabia, one of the world’s top arms buyers, Rheinmetall said its defence division, with a record order-book worth 8.57 billion euros, helped lift net profit to 354 million euros, beating an analyst consensus forecast of 277 million euros.

“Germany has to make a decision”, Rheinmetall CEO Armin Papperger said, adding that it was not necessary to sue the government as German law determined the compensation Dusseldorf-based Rheinmetall would be entitled to.

“According to the law, I would be allowed to deliver today”, Papperger added with reference to the military trucks.

Berlin, which has repeatedly said it was aware of the urgency, has said that it would decide before the end of March whether to extend the embargo.

But Berlin’s governing coalition appears divided between Angela Merkel’s conservatives and the Social Democrats who want to impose a ban on arms exports to Saudi Arabia.

Rheinmetall, which said it will propose a dividend of 2.10 euros ($2.37) per share against analyst estimates of 2 euros, is targeting revenue growth of 4 to 6 percent in 2019, mainly by driven by its defence units. It aims to maintain its operating profit margin at around 8 percent.

“Noticeable contributions to grow from the Automotive division cannot be expected in fiscal 2019”, Rheinmetall’s executive board said in its annual report, adding that global defence budgets, on the other hand, are set to increase.

Rheinmetall expects defence sales, which contributed around 52 percent of total sales in 2018, to rise by as much as 9 to 11 percent, while automotive sales are expected to only grow by 1 or less this year.

The operating profit margin of its defence branch should rise to 8.5 percent from 7.9 percent, while its automotive branch is expected to fall to around 8 percent from 8.9 percent in the previous year, Rheinmetall said. ($1 = 0.8853 euros) (Reporting by Anneli Palmen, Writing by Tassilo Hummel Editing by Riham Alkousaa and Alexander Smith)

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