Gyttorp AB

2.1 Group Performance and Results: Summary Analysis

Revenues and Profitability

• Net Revenues: The Group's consolidated net sales for 2022 amounted to EUR 1,438.1 million, marking a significant increase from EUR 958.0 million in 2021.
• Net Income: The net income for 2022 was EUR 159.5 million compared to EUR 145.9 million in 2021.
• EBITDA: Increased to EUR 286.5 million in 2022 from EUR 216.5 million the previous year, translating to an EBITDA margin of 19.9% (down from 22.6%).

These numbers indicate strong revenue growth and an overall increase in profitability, although the EBITDA margin slightly contracted.

Key Drivers of Performance

1. Acquisition Impact: The consolidated revenues include a significant boost from the acquisition of Ammotec, which contributed to the group's revenues for five months in 2022.
2. Geographical Revenue Distribution:
   • North America: Revenues increased from EUR 541.2 million in 2021 to EUR 690.8 million in 2022.
   • Europe: Significant rise from EUR 277.4 million to EUR 558.3 million.
   • Rest of the World: Increased from EUR 139.4 million to EUR 189.0 million.

The increase in European revenues is primarily due to the Ammotec acquisition.

3. Sector-wise Distribution:
   • Civil Sector: Contributed to 78% of revenues, down from 86% in 2021.
   • Defense/Law Enforcement: Increased to 22%, a notable rise compared to previous years.

Expenses

• Cost of Goods Sold (COGS): Increased from EUR 319.5 million in 2021 to EUR 528.7 million in 2022.
• Personnel Costs: Rose significantly from EUR 208.8 million to EUR 309.5 million.
• Service Costs: Increased from EUR 213.5 million to EUR 304.9 million.
• Amortization and Depreciation: Increased from EUR 26.5 million to EUR 48.3 million.

The substantial rise in COGS and other expenses is consistent with the expanded scope due to the Ammotec acquisition and organic growth.

Investments and Capital Expenditures

• Capital Expenditures: Totaled EUR 54.8 million, up from EUR 33.9 million in 2021. Investment focus areas included machinery, plant, tools, buildings, and other assets essential for expanding production capacity.
• R&D Expenses: EUR 25.1 million, representing 1.8% of net sales, slightly down from 2.0% in the previous year.

The increased capital expenditure and steady R&D investment indicate a focus on enhancing operational capabilities and product innovation.

Financial Position

• Non-Current Assets: Increased from EUR 169.0 million to EUR 444.2 million, reflecting investments and acquisitions.
• Operating Working Capital: Increased from EUR 337.0 million to EUR 664.9 million.
• Net Cash Position: Decreased from EUR 475.0 million to EUR 148.7 million, primarily due to funding the Ammotec acquisition.

Headcount

• Total Employees: Increased from 3,479 to 6,547, largely due to the inclusion of Ammotec's workforce (2,935 employees).

2.2 Outlook

• Geopolitical Impact: Ongoing geopolitical tensions and high inflation rates could impact demand and pricing, especially in tactical products and ammunition.
• Market Trends: Strong demand persists for long guns in the United States, while demand in Europe shows signs of cooling in key markets.
• Defense/Law Enforcement: Multi-year contracts should support stable revenue generation in this sector.

Given these factors, the Group anticipates good commercial and economic performance for 2023, though potentially not as exceptional as in 2022.

2.3 Risk Management

• Financial Risks: Managed through currency hedges, investment diversification, and prudent liquidity management.
• Operational Risks: Addressed by focusing on market diversification, product innovation, strict quality control, and regulatory compliance.
• Environmental and Safety Risks: Regular assessments and improvements in workplace safety and environmental initiatives.

2.4 Performance of Main Group Companies

• Fabbrica d'Armi Piefro Beretta: Showed record sales and increased production efforts.
• Benelli Armi: Slight growth at same exchange rates, strong brand performance.
• Beretta USA: Notable sales growth and significant production increase.
• Sako and Stoeger Canada: Strong performance in both civil and military segments, showing robust growth.
• Burris Company and Steiner Optik: Varied performances with Steiner showing strong growth.

Conclusion

The overall financial health and strategic positioning of Beretta Holding S.A. appear strong, leveraging both organic growth and strategic acquisitions to expand its market footprint and capabilities. However, external economic and geopolitical factors pose ongoing challenges that will require focused risk management and strategic agility.