German defence supplier says investment in sector does not contradict ESG principles
Tank-parts maker Renk’s total order backlog reaches a record €4.6bn as orders in 2023 jump by almost a third
German tank-parts maker Renk reported an all-time high number of orders as its chief executive called for sustainability-minded investors to embrace companies that defended a “peaceful, democratic, free world” if they wanted to meet climate targets.
The Bavarian manufacturer of gearboxes and transmissions for tanks and frigates, which counts on military applications for 70 per cent of its revenues, said orders increased almost a third to €1.3bn in 2023, bringing its total order backlog to €4.6bn.
The company listed on the Frankfurt stock exchange in February as investors warmed to the defence industry following the outbreak of ground wars in Europe and the Middle East.
“Ultimately a peaceful, democratic, free world is the fundament of sustainability,” said Renk chief executive Susanne Wiegand. “It’s not in contradiction to ESG logic . . . otherwise nobody will take care of windmills and the energy transition.”
European defence groups have long been frustrated by strict EU regulations that dictate which activities are “sustainable” and in some cases have struggled to obtain financing. The European Investment Bank has come under pressure from some EU member states to change its mandate to lend to defence groups.
Renk reported revenues of €926mn in 2023, up 9 per cent on the previous year, and said it expected to cross €1bn in sales this year as orders have come in from around the world including Norway, the Netherlands and India. It proposed a dividend of €0.30 per share.
Wiegand, who had just returned from a visit to New Delhi, said the company planned to “ramp up capabilities and training of local personnel in India”.
She confirmed that the company was in “final discussions” with the Indian government on producing parts for the next generation of its Arjun battle tank.
“India is a great market and great country with respect to its power and people, with its closer cultural proximity to us,” said Wiegand, who added that the company preferred it as a manufacturing base to China to produce for the global market.
“We are also following China’s ambitions with respect to Taiwan and this is telling us to de-risk from our China exposure,” she added. Wiegand specified that Renk had no military production in China, and only produced some industrial parts for local customers.
Analysts at Berenberg called the company’s first annual results post-initial public offering “reassuring”, noting that supply chain challenges faced by the whole European defence industry continued to “linger”.
Wiegand said that supply chain issues were now “under control”, adding “you have to work a lot harder to get your parts and demand punctuality”.