As Europe Invests More In Its Armies, Gunmaker Beretta Is A Likely Winner

Key Concepts:

• Beretta Holding's acquisition of Amotech/RWS
• Diversification of Beretta's business (hunters, soldiers, policemen)
• Shift from civilian to defense/law enforcement revenue
• Increased defense spending in Europe and globally
• Impact of the Russian invasion of Ukraine on defense budgets

Beretta's Acquisition and Expansion

• Beretta Holding, led by CEO Pro Gasali Beretta, acquired Amotech, Europe's largest maker of ammunition and pyrotechnics, in 2022 for an undisclosed sum. RWS, a German ammunition producer, is part of Amotech.
• The Amotech deal added $600 million to Beretta's annual sales, helping it surpass Sig Sauer and Smith & Wesson.
• This acquisition made Beretta the world's largest firearms company, with $1.7 billion in revenues in 2024.
• Pro Gasali Beretta stated, "This is our biggest acquisition yet."

Diversification Strategy

• Beretta's strategy involves catering to three main customer segments: hunters, soldiers, and policemen.
• The company aims to provide guns, clothing, and optics to these groups.
• The acquisition of Amotech filled the ammunition gap in Beretta's product offerings.
• Pro Gasali Beretta stated, "The three legs of our business are hunters, soldiers, and policemen. They need guns, clothing, and optics. The last piece we needed was ammunition. With this latest deal, we finally closed the circle."

Shift in Revenue Streams

• Before the Amotech acquisition, civilian sales accounted for 86% of Beretta's revenues, making it heavily reliant on the US market (37% of sales).
• The COVID-19 pandemic led to a surge in gun sales to American civilians, increasing Beretta's North American revenues by 62% from 2019 to 2021.
• Beretta lost a $580 million US Army contract for handguns to Sig Sauer in 2017.
• Defense and law enforcement sales now account for 34% of Beretta Holding's revenues, up from 14% four years prior.
• Pro Gasali Beretta stated, "The growth of the civilian market in the US offset the loss of the army contract, but in the meantime, we also built closer ties with other armies and police forces. We rebalanced."

Increased Defense Spending

• European countries' defense spending reached a record $350 billion in 2024 due to the Russian invasion of Ukraine.
• European Commission President Ursula Vanderlane announced a plan to provide EU countries with $160 billion in loans to invest in their armed forces.
• Beretta has benefited from increased defense spending globally, including in the Middle East.
• Pro Gasali Beretta stated, "It's not just in Europe. Governments all over the world are now spending more on defense. Naturally, we've benefited from that."

Analyst Perspective

• Mark Smith, an analyst at Lake Street Capital Partners, noted that government contracts on firearms can lead to business opportunities on the ammunition side.
• He added that government contracts help reduce cyclicality in the business.
• Mark Smith stated, "If you're getting government contracts on firearms, it probably opens doors to pick up business on the ammo side as well. It certainly helps take away some of the es and flows and cyclicality in the business."

Conclusion

Beretta Holding's strategic acquisition of Amotech has significantly diversified its business, reducing its reliance on civilian sales and capitalizing on increased global defense spending. The company's focus on serving hunters, soldiers, and policemen with a comprehensive range of products, including ammunition, positions it for continued growth and stability in the firearms market.