Defense industry presents potential opportunities for Heidelberger Druck
In the face of a rising German defense budget and the geopolitical impact of the war in Ukraine, several German companies are diversifying and expanding into the defense sector.
One of the most notable companies making a significant move is Rheinmetall, a traditional German defense contractor. With its stock rising dramatically (nearly 25x in four years), Rheinmetall is benefiting directly from Germany's re-armament efforts, aligning with the country’s substantial increase in defense spending planned through 2029 and beyond.
Notably, investments in cutting-edge technologies such as deep-strike drones and territorial defense modernization are also on the rise. Companies like Helsing are emerging with innovation in radar-transparent drone designs, targeting Germany’s new defense priorities.
The German government's current defense budget of €503 billion in 2025 (2.4% of GDP) is a historic shift, with plans to grow to 3.5% of GDP by 2029, supported by €143 billion in defense loans and wider European initiatives like the EU’s ReArm Europe Plan (€800 billion by 2030). This surge is fostering opportunities for both established defense contractors and AI-native startups focused on defense technologies.
The broader industrial stimulus under the "Made for Germany" initiative, which involves over 60 companies committing €631 billion to new projects including defense-related R&D and production over the next three years, indicates that traditional manufacturing firms and private corporates are also entering or expanding their footprint in the defense sector.
Among these companies, Heidelberger Druck is focusing its technological expertise more on security-critical technologies. The company, known for its 175-year history in the printing industry, is contributing its manufacturing and industrialization expertise to the defense sector, marking a significant shift from its traditional sheetfed offset printing business.
The surge in military-related demand, fueled by the war in Ukraine and doubts about the United States as a protective power in Europe, has caused the share prices of companies like Rheinmetall, Hensoldt, Renk, and Heidelberg Druck to soar. Since early April, the share price of Heidelberger Druck has been rising and has doubled to over 2 euros by early August.
Interestingly, other struggling companies in sectors like automotive are finding alternatives in the defense sector for growth. For instance, Deutz, an engine manufacturer based in Cologne, is expanding into military tracked vehicles and generates 2% of its sales from defense contracts.
As digitalization continues to reshape industries, the trend of companies diversifying into the defense sector is spreading. Heidelberger Druck's foray into the defense sector is a result of this digitalization and the declining importance of printed products in its traditional business. The company expects sustained sales growth in the coming years due to its venture into the defense sector.
In conclusion, the defense sector in Germany is experiencing significant growth, with traditional defense contractors like Rheinmetall and emerging tech-focused companies like Helsing leading the charge. Meanwhile, many German industrial firms are diversifying their capabilities into defense-related areas as part of government-backed investment drives spurred by geopolitical urgency from the war in Ukraine and the growing importance of European security autonomy.
[1] Germany’s Defense Budget to Rise to €153 Billion by 2029 [2] Germany to Boost Defense Budget to 2 Percent of GDP by 2024 [3] Rheinmetall Shares Soar on Defense Spending Prospects [4] Helsing: The Startup Revolutionizing Drone Technology for Germany's Military [5] Germany's Industrial Stimulus Plan: Made in Germany
Technology plays a significant role in the defense sector's growth, with companies like Helsing focusing on developing cutting-edge technologies such as radar-transparent drone designs. Traditional manufacturing firms, such as Heidelberger Druck, are also leveraging technology, particularly digitalization, to diversify into defense-related technologies, as seen in their shift towards security-critical technologies.
