It was excellent news that Saint-Etienne SME, Verny-Caron announced to the press last November. For a company that positioned itself as the oldest French manufacturer of hunting weapons and the last industrial armory with French capital—which had been diligently moving its pawns to the military for many years—it was able to win a very significant market.
As part of a French support fund for Ukraine created in 2022 and supplemented by 200 million euros at the end of 2023 to allow Ukrainians to buy military equipment from French companies, Verny-Caron signed a 36 million euro contract with the Ukrainian state. On the company program: supply of 10,000 assault rifles (label VCD 15), 2,000 precision rifles and 400 grenade launchers.
The contract should result in delivery of the first series of qualification batches in early 2024, followed by industrial production starting in mid-2024. All this spread over about ten months and required an increase in the production rate of the Saint-Etienne company (100 employees; 2022 turnover: 6 million euros).
A non-priority file?
This agreement, and so it was expressly stated, was suspended upon the lifting of the suspensive clauses. In which was the subject of financing by France. And that’s where the problem hurts. Even after more than four months of this formality these conditions have not been fulfilled. While the first qualification batch has been completed, with an on-site inspection in Saint-Étienne by a Ukrainian delegation, Verny-Caron still cannot start industrial production. Which will delay the delivery accordingly. the best
Because the director of Verny-Caron, Hugo Brugier (notably the head of the Cybergan group of which Verny-Caron became a subsidiary in 2022 but also of Boostit in Lyon) fears that the order will simply be cancelled.
“Ukrainians need a lot of stuff. So they should choose only within the envelope allotted to them. It is they who make the final choice but France also emphasizes its own priorities and approach. And according to our Ukrainian contacts, unlike the big groups, our file has never been sent to them by the DGA as a priority, and they won’t approve if they don’t get a guarantee of financing. On the French side, we are told that it is the Ukrainians who choose…”Related to Hugo Brugière.
Varney-Carron has opened discussions with foreign, European and non-European support funds for Ukraine. According to Hugo Brugier, countries that wish to strengthen their position in terms of small arms, while “Perhaps in passing”observes the company director thumbing his nose at France.
When asked, the Directorate General of Armaments (DGA) did not want to comment on the matter. For Thomas Gasilaud, deputy of the Renaissance for Rhône and president of the Commission for National Defense and Armed Forces, he told us that the realization of this mandate does not fall under his mandate. In recent months, his intervention at the formalization of the order was highlighted as capital by Hugo Brugier, a passionate defender of the reconstruction of the French industrial sector (which no longer exists) of small arms.
Same as Quentin Batelon, Renaissance deputy for Loire. The latter did not respond to our requests.
Could the agreement signed last Friday between France and Ukraine on large-scale military aid change the situation? Nothing is certain, according to Hugo Brugier who explains that he has had no news since and admits to being quite pessimistic about the future.
A tight financial context for the Cybergun group
This pending order is apparently not the business of the Cybergun group (43 million euro turnover). And more so because it currently finds itself in a tight financial context.
Built around two centers of activity – its historic civilian center on the production and distribution of replica weapons intended for the recreational practice of airsoft, and its military center with Arcania and Verni-Caron -, it is currently facing a tight cash flow.
After experiencing growth of +17% at the end of June 2023, its civil division experienced a violent market reversal in the second half of 2023 and posted a turnover of 21 million euros for last year, compared to 27 million in 2022.
Among the reasons put forward by the company: a decline in household consumption, a strong presence in the leisure sector, and some distribution network difficulties. However, Cybergan notes, “This activity is now intrinsically profitable”.
“When we took him over he was 50 million euros in debt. Today, it is debt free and records EBITDA of 5 million euros. The turnaround was well done.”, Hugo Brugier notes that developing this activity will now require very large investments. Cyborg has therefore decided to sell all or part of the capital, preliminary discussions are underway.
In its military division, turnover is 22 million euros in 2023 compared to 16 million in 2022. With the significant development of the Arcania branch in the field of aeronautics.
“This strong surge in activity generates a working capital requirement of several million euros that is not financeable as it looks at the already subscribed PGE (3.8 million euros by June 30, 2023) to compensate for the sharp reduction in activity during the health crisis. “writes the group in a recent communication.
Under these conditions, the conversion of commercial potential into turnover is conditional on obtaining new credit. “a few million” It is necessary according to Hugo Brugier, who decides to get it from his banking partners, his customers and, potentially, the financial market.
There is no threat to the durability of Varney-Caron
If the Ukrainian order slips into oblivion, it will be bad news for Varney-Caron, which wants to gain recognition in the military market.
It would also be a step on the turnaround path that began in 2022 after Cybergan Group took over the Saint-Etienne family business when it was in trouble.
However, Hugo Brugier has promised, this will slow progress but not question the company’s sustainability. His historical activity in weapons hunting is said to be going very well. Additionally, its investment in building a new factory is still on the agenda.
