Germany’s defense giant Rheinmetall is making strategic moves to address the surging global demand for ammunition. The company recently announced an agreement to acquire a majority stake in South African engineering firm Resonant Holdings, positioning itself to meet the urgent needs of military forces worldwide.
Rheinmetall will own 51% of the newly formed joint venture, with existing Resonant shareholders retaining the remaining 49% stake. Resonant, known for its expertise in chemical and explosives plant engineering, employs approximately 150 professionals. The acquisition aims to enhance Rheinmetall’s capabilities in ammunition production, with an estimated annual sales potential exceeding €100 million (U.S. $109 million).
“The planned acquisition is Rheinmetall’s response to the growing global demand in the ammunition sector and the resulting customer requirements for the construction of corresponding production facilities. Rheinmetall is therefore significantly expanding its existing capabilities in ammunition production by vertically integrating further competences, thus positioning itself even more robustly for the independent planning, construction and operation of production facilities for the manufacture of chemical products such as propellant powder and explosives,” Rheinmetall said in a statement.
The ongoing conflict in Ukraine has underscored the critical importance of ammunition stockpiles. NATO members, including Germany and the U.K., have realized that years of defense budget cuts left them ill-prepared for high-intensity warfare. Consequently, governments are urgently replenishing their ammo reserves, resulting in substantial orders for shells and powder from companies like Rheinmetall and BAE Systems.
Rheinmetall’s acquisition of Resonant is a strategic response to this growing demand. By vertically integrating further competence, the German defense company aims to expand its existing ammunition production capabilities significantly.
Resonant’s expertise aligns seamlessly with Rheinmetall’s plant engineering capabilities. The South African firm specializes in chemical, energetic, and explosives technology. Notably, Resonant’s Nuteq division has contributed to rocket and satellite fuel development and led the establishment of South Africa’s first nitration plant, capable of producing explosive materials like RDX, PETN, and NTO.
This expands Rheinmetall’s ability to offer a comprehensive range of services, including the design, construction and commissioning of state-of-the-art plants tailored to the specific needs of global partners.
“At the same time, the partnership offers Resonant a strong global reach, industry expansion and access to new markets. The combined expertise of both entities will drive innovation and efficiency, delivering unparalleled value to customers. Rheinmetall aims to preserve the company’s existing technology and workforce. The planned acquisition of Resonant Holdings underscores Rheinmetall’s dedication to expanding its technological capabilities and delivering state-of-the-art solutions to its partners. This strategic acquisition of the controlling stake ensures that Rheinmetall remains at the forefront of innovation in the engineering and defence industries, providing unparalleled expertise and comprehensive solutions.”
This acquisition follows Rheinmetall’s successful purchase of Spanish munitions maker Expal Systems in August last year, a deal valued at approximately €1.2 billion. Additionally, Rheinmetall Denel Munition, the company’s South African subsidiary, secured a contract for 155mm shells from a long-standing NATO customer in December 2022.
In the 2023 fiscal year, the Rheinmetall Group generated consolidated sales of €7.176 million, up from €6.410 million the previous year, with a backlog of €38.3 billion, a new peak. Earnings before interest and taxation (EBIT) for 2023 stood at €918 million – an increase of 19% and a new record.
Weapons and ammunition generated sales of €1.756 million for Rheinmetall in 2023, up 29% from the previous year. In addition to Germany, significant growth impetus came from other NATO states in Eastern Europe and from Ukraine. Two multi-year framework agreements for tank ammunition (€3.2 billion) and artillery ammunition (€1.4 billion) from Germany stand out as well as direct orders from Ukraine with a volume of around €1.7 billion, Rheinmetall said.
Looking ahead, Rheinmetall plans to invest €300 million in a new ammunition plant in northern Germany. The facility will have an annual capacity of 200,000 artillery shells and 1,900 metric tons of explosives. The company aims to produce 700,000 artillery rounds annually by 2025, along with 10,000 tons of explosive powder.
The European Union’s Act in Support of Ammunition Production program awarded €500 million in subsidies, benefiting Rheinmetall’s shell production projects in Germany, Hungary, and Spain, as well as powder production in those countries. Meanwhile, the U.K. ordered £410 million worth of munitions from BAE Systems, emphasizing the need for robust investments in ammunition manufacturing.
A parliamentary report highlighted the significance of ammunition stockpiles, raising concerns among military leaders across the county.
Rheinmetall Denel Munition (RDM), a South African company, is working around the clock and investing significant funds to meet the global demand for artillery ammunition. The CEO of RDM, Jan-Patrick Helmsen, disclosed this information during a recent military attache demonstration at the company’s Boskop facility near Potchefstroom. Helmsen explained that with the current state of global instability and uncertainty, countries are allocating more resources to national security, leading to a thriving defence industry worldwide. In Europe, the trend of shrinking defence budgets has reversed, and global military spending surpassed $2 trillion last year.
Rheinmetall Denel Munition (RDM), a joint venture between Rheinmetall and Denel, is expanding its operations to meet the growing demand for artillery ammunition. The company is running 24-hour-a-day shifts at its plants across South Africa and is investing hundreds of millions of rands in its expansion
Meanwhile, Rheinmetall Denel Munition (RDM) is poised to significantly benefit from a historic framework agreement for 155 mm artillery ammunition from the German military.
The contract, valued at up to €8.5 billion, marks the largest in Rheinmetall’s history and was signed on June 20 by Annette Lehnigk-Emden, President of the Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support (BAAINBw), along with Rheinmetall representatives in Koblenz, Germany.