German Defense Firm Rheinmetall Plans Ukraine Arms Factories

German arms manufacturer Rheinmetall said Thursday it plans to set up at least four factories in Ukraine, as it targets a record 10 billion euros ($10.9 billion) in sales this year.

The Ukraine war has boosted Germany's weapons industry as countries seek to re-arm in the face of the growing threat from Russia, and soaring demand last year propelled Rheinmetall onto the blue-chip DAX index.

The company said the factories in Ukraine – which has been suffering from ammunition shortages as Moscow makes battlefield gains – would be for producing shells, military vehicles, gunpowder and anti-aircraft weapons.

“Ukraine is now an important partner for us, where we see a potential of between two and three billion euros (in sales) per year,” Rheinmetall CEO Armin Papperger said at the presentation of the company's 2023 results. 

The Duesseldorf-based group – which makes parts of the Leopard tanks that Berlin agreed could be sent to Ukraine after much hesitation – reported record sales of 7.2 billion euros last year, and is aiming to top 10 billion in 2024. 

The company's shares soared five percent in Frankfurt after the results were announced.

Germany's largest manufacturer of military equipment had already announced an agreement with a Ukrainian company in February to build artillery shells in Ukraine.

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The arms manufacturing company’s CEO told TSN that its first factory in Ukraine, its second is nearing completion, and two more are on the way in the coming months.

The ground-breaking will take place soon for the plant – in an undisclosed location – and it will be modeled on an ammunition factory that Rheinmetall is building in Germany. 

The company already operates a joint venture in Ukraine for repairing military vehicles.

Rheinmetall is also going to build a factory in Lithuania, where Germany plans to deploy a brigade-sized military unit on a permanent basis to help secure NATO's eastern flank. 

The company said it was planning to ramp up production of artillery shells, as Ukraine's European allies struggle to boost output so they can provide Kyiv with more ammunition.