What is a VP9? Anyone who has an affinity for guns and lives in the USA might know that this is a Heckler & Koch pistol. The US business is very successful – that also attracts critics.
The arms manufacturer Heckler & Koch is increasingly relying on the USA for its business. As the company announced at its annual general meeting in Rottweil, the USA’s share of sales last year was 43 percent. In 2019 it was 25 percent, in 2020 it was already 34 percent and in 2021 it was 41 percent. Within three years, sales in the US rose from 60 million euros to 132 million euros (2022).
Since 2020, the USA has been the most important market for the Swabian gunsmiths, previously it was Germany. H&K has a pistol assembly plant in Georgia. “The civilian market in the United States is extremely important for Heckler & Koch,” says company boss Jens Bodo Koch. Civil market refers to sales to private individuals. In Germany this market is a niche, but in America it is particularly large because of the strong and controversial gun tradition in society. In America, H&K mainly sells pistols, but also rifles to civilian shooters.
The competition is fierce, big competitors are Smith & Wesson, Colt and Sig Sauer. The latter company had a plant in Eckernförde (Schleswig-Holstein) until 2020, but then relocated production to the USA – a step that illustrates the economic appeal of the arms market on the other side of the Atlantic.
Weakened US business
Although US business has weakened somewhat this year, the management of the German gun manufacturer expects demand to recover in 2024. This is due to the presidential elections: Before such a ballot, some Americans go on a shopping spree to stock up on firearms in anticipation of a tightening of gun laws.
Pacifists, who had gained access as small shareholders, were also present at the general meeting. Charlotte Kehne from the association “Living Without Armor” complained that H&K was “making profits from the deadly US civilian market”. She pointed out that tens of thousands of people are victims of gun violence in the North American state every year.
Heckler & Koch’s total sales last year were 305.1 million euros, 5.1 percent higher than in 2021. Operating profit (Ebitda) soared 41 percent to 82 million euros and net profit more than doubled will be at 50.6 million euros. The latter was partly due to a positive tax effect for the company.
This year, however, the tide has shifted somewhat. Long-term energy contracts have expired, follow-up contracts have become more expensive and H&K is also having to dig deeper into its pockets for raw materials. In addition, the dollar rate has fallen – so there is no longer any exchange rate tailwind for the H&K stores. All in all, the management expects lower sales and lower earnings in the current year than in 2022.
Long-term growth path intact
At the beginning of the year, skid marks were already noticeable in the business: In the first quarter of 2023, sales fell by 4.3 million to 73.2 million euros compared to the previous year and the operating profit (Ebitda) fell by 2 million to 18 million euros. Company boss Koch emphasizes that after the “exceptional year” 2022, it is only a matter of normalizing business and that the long-term growth course is intact.
Heckler & Koch had 1131 employees last year, 45 more than in 2021. A good 90 percent of the workforce works at the main plant in Oberndorf. In Europe, Beretta (Italy), FN (Belgium) and the Colt mother CZ from the Czech Republic are among the competitors. A domestic competitor is the Thuringian armory Haenel.
The shareholders of the company, which has been listed since 2015, will receive a dividend for the first time this year. However, only 4 cents per share should flow – the company wants to transfer a total of 1.1 million euros to the shareholders.
Source: Stern
