David Štěpán is a Czech manager who, as a member of the negotiating team, helped Czech industrialist and arms dealer Michal Strnad acquire a majority stake in the Italian arms factory Fiocchi and recently became its CEO. Fiocchi is so far the largest investment notch of the Czechoslovak Group holding. "We have acquired a new product range, with which our sales agencies, such as Excalibur International, can trade," says Fiocchi's CEO and CSG board member David Štěpán in an interview for iDNES.cz.
You recently took the reins of the Fiocchi group after playing a significant role in negotiating this acquisition. What are the plans and investments in the near future?
Internally, we want to digitize the company more, streamline production and logistics. Externally, we want to expand to new markets and broaden our range of products and services. And, of course, we will invest in technologies and the production of related products: In the US, we are investing tens of millions of dollars in a factory for the production of primer caps.
And finally, we promised the Fiocchi family, who are still involved in management, that we would bring in new orders and open new markets, mainly in the defense sector. We are working on that and have already secured the first orders for Fiocchi. Generally, we are strengthening the DLE area (note: Defense, Law, and Enforcement segment, i.e., customers from official police and military forces), where we are working to increase production capacities, preparing new investments in the order of tens of millions of euros, and expanding our product range.
Is Fiocchi sold out? Does it have to increase production?
In some lines and products, we are completely sold out, especially in the DLE segment, but we still have capacity elsewhere, which are generally rather marginal calibers of the civilian market. In some cases, we are dependent on component supplies. The bottleneck, which now applies not only to small caliber but also artillery ammunition, is gunpowder. There is a shortage of it on the market. At the same time, I must add that Fiocchi is a supplier of components, e.g., the aforementioned caps, for other ammunition manufacturers. On the other hand, we also purchase some components from other manufacturers. It is one of the specifics of this industry when individual companies compete with each other but also trade with each other.
The greatest interest of other manufacturers is in our patented "non-toxic primer", which does not use heavy metals or other toxic materials during production, thus eliminating the inhalation of substances that have a negative impact on human health, especially for shooters in enclosed spaces.
You produce ammunition for pistols, revolvers, shotguns, and rifles. What is the most significant demand in the market where Fiocchi operates?
It varies from market to market. In the USA, there is currently a high demand for premium hunting ammunition. Hunters are very specific customers, for whom the Fiocchi slogan, "Responsible Passion," applies 100%. Hunters shoot little, but they want to use top-quality ammunition tailored to their conditions. That's why we have hunting ammunition for shooting in the mountains and other ammunition for shooting in wet, swampy terrain.
Another group of customers are sports shooters, who need not only quality but also high volumes of ammunition. For them, our production is more of a commodity. Of course, there are also elite athletes among the users, who are aiming for medals from the Olympics or World Championships, and they receive top-quality ammunition based on sponsorship contracts. Then there is the personal defense and recreational shooting segment. The main product here is 9mm Luger ammunition, and the main competition is in price.
For example, a small innovation was when the Belgian arms manufacturer FN Herstal came up with weapons with a new 5.7mm caliber. We are the only manufacturer of this ammunition for the civilian market in the USA. Although these weapons have excellent performance, the market is growing relatively slowly, which is also due to the limited supply of weapons.
About 85% of Fiocchi's production goes to retail, for sports shooters and hunters. Is this changing in connection with the global security situation, and is the share of armed forces among Fiocchi's customers increasing?
We are also a significant supplier to the armed forces market. It is probably no surprise that our customers include Italian Carabinieri and the Italian Army. Recently, Fiocchi won a tender for military ammunition in the Baltics.
We would like to increase the volume of deliveries for the defense and internal security segment. This is a long-term effort. The pillar of Fiocchi has been and will be the civilian market; public sector orders, i.e., the army and police, are prepared long-term and then fulfilled for several years. Therefore, we are trying to increase our share in this market, but we do not want to grow among soldiers and police at the expense of reducing capacities for the civilian market.
Fiocchi also produces eco-friendly Green Core ammunition, which decomposes in nature within one year. Is this already an important production segment, or rather a product with potential for the future?
It is good to clarify that this currently applies to shotgun ammunition, where we have achieved an ecological effect through new materials for plastic cartridges and also for shotgun pellets, which are traditionally lead and we have replaced lead with bismuth and other metals.
Sales are not yet very high, but given the development of regulation, they will certainly gradually increase. I would like to modestly note that it is not easy to produce such a product that has comparable performance to ammunition from traditional materials, but we have succeeded, and in some respects, we are ahead of the competition. Overall, the trend in the entire industry is to reduce the occurrence of lead in ammunition.
How has the acquisition of Fiocchi advanced CSG? What did it bring to the parent holding?
Aside from the impact on financial results and the growth of the group's prestige, we have acquired a new product range that our sales agencies, such as Excalibur International, can trade with. At the same time, this acquisition brought new, demanding administration. The production of ammunition is subject to very strict compliance rules that we must fulfill not only in the Czech Republic and Italy but also in the USA.
The owner of the group, Michal Strnad, recently mentioned in an interview for Forbes that he is trying to build business verticals, and in this context, I think that a manufacturer of handguns is still missing in CSG. Are you considering an investment in this direction?
That is a question for the owner, not for me.
Let me ask differently: Are there any other acquisitions planned for CSG that would logically follow Fiocchi?
Definitely yes, but I cannot comment on investments under negotiation.
What are your current priorities on the managerial table?
Right now, I am getting to know the team and working together on a development strategy for the next five years. Managing a company that produces in three countries and sells its products worldwide is certainly not a reward; I perceive it as a huge responsibility that I accept with humility. I appreciate the trust of Michal Strnad, but my appointment was a pragmatic decision, given that I am the closest to Fiocchi from the Czech CSG management. I know the company well because I was a member of the team that negotiated this acquisition last year.
Interview for news portal iDNES.cz