* Rheinmetall CEO sees boost from German orders, EU projects
* Sees avg annual German army orders of 2 bln euros
* Sees 2018 sales up 8-9 pct thanks to defence order backlog
* Sees 2018 operating margin of 7 pct vs yr-earlier 6.8 pct (Adds CEO comments on export restrictions)
DUESSELDORF, Germany/BERLIN, March 15 (Reuters) - Germany's Rheinmetall RHMG.DE said on Thursday it expected its annual defence sales to grow by an average 10 percent through 2020 on the back of orders from the German military forces, European Union defence projects and a shift to digital applications.
"In the coming years we expect an average of 2 billion euros in orders (per year) from the (German army) Bundeswehr," Chief Executive Armin Papperger told journalists at a news conference.
Germany's new governing coalition has agreed to add 10 billion euros ($12.4 billion) to the military budget over the next four years. Defence Minister Ursula von der Leyen has said further increases will be needed to rebuild the military after years of spending cuts.
Rheinmetall expects Germany to account for more than 30 percent of its defence business in the future, Papperger said.
France, Germany and 21 other EU governments also signed a defence pact in November that should bolster the arms industry.
Papperger said unilateral actions by the German government, as seen in the coalition agreement, would harm efforts to streamline the fractured European arms industry and stood in the way of partnerships with other European producers.
"France will never accept the German export rules if we have a German-Franco project and then the German government says, 'You can't export,'" Papperger told lawmakers, military officials and industry executives at an evening event in Berlin.
The same was true for Italy, Poland and other German allies.
"There will not be a consolidation of the industry in Europe if there is no Europe-wide export law. That is a must," he said, calling for swift work to enact such legislation.
Papperger is the latest German arms industry executive to express concern about plans by Chancellor Angela Merkel's conservatives and the more dovish Social Democrats to further reduce arms exports. executives have said that Germany's restrictive posture poses risks to their business and will harm European defence integration plans.
Papperger ruled out moving Rheinmetall's base out of Germany, but warned that industry would be unable to support the European security needs if the situation grew worse.
Rheinmetall said it also expected success in Australia with further vehicle types after beating BAE Systems BAES.L to a $2.5 billion order for armoured reconnaissance vehicles. group has targeted 2018 group sales growth of 8 to 9 percent, driven by a jump in defence sales by 12 to 14 percent thanks to a backlog of orders, including a previous contract with Australia, Puma infantry fighting vehicles for Germany and parts for Fuchs vehicles in Algeria.
The group operating margin is estimated to improve only slightly, to 7 percent from 6.8 percent in 2017, partly due to costs related to marketing new technologies. ($1 = 0.8090 euros)