Germany's Renk sees orders boom as Europe steps up defence spending

By Paolo Laudani

(Reuters) -Germany's Renk beat forecasts on Wednesday with a more than doubling in first-quarter order intake and said it expected the boom in demand to continue as Europe, led by Germany, ramps up defence spending.

The company, which makes gearboxes for the Leopard 2 tanks sent to Ukraine, said its order intake leapt to 549 million euros ($617 million) in the quarter, more than analysts' consensus forecast of 500 million euros as compiled by Vara.

However, revenues came in at 273 million euros, just below the forecast of 279 million.

Renk's shares were down 0.3% at 1110 GMT. The jump in order intake was reflected in the stock's strong run this year, Jochen Stanzl, chief market analyst at CMC Markets, said in a note.

"After tripling the price this year, the stock has already anticipated much of the good results," he said.

Defence stocks have surged this year on Europe's plans for a huge increase in military spending, following pressure from U.S. President Donald Trump for the region to take greater responsibility for its security.

CEO Alexander Sagel told Reuters that Renk was working on scenarios to understand what the NATO summit in June could mean for the company, adding he saw "a range between 400 million euros up to, at the maximum level, 1.5 billion euros in additional order intake potential just coming from the German customer."

Defence firms face a challenge to meet the surge in demand.

Sagel said Renk could manage by changing its shift model at its main plant in Augsburg, rebuilding assembly lines to allow greater flexibility, and adjusting production at its European factories.

"By using these capacities, we get additional headroom by leveraging our footprint. And we do not need to build any new plant anywhere in the world, at least for the European market," he said.

Renk reported an order backlog worth 5.5 billion euros, and confirmed its annual and mid-term guidance.

($1 = 0.8905 euros)

(Reporting by Paolo Laudani in Gdansk. Additional reporting by Daniela Pegna. Editing by Sharon Singleton and Mark Potter)