This Company Wants To Beat The COVID-19 Supply Chain Crises Facing The Ammunition Industry With Acquisitions And Production Expansion

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Americans are reportedly short on ammunition, and unfortunately, there isn’t enough available to reload. Thanks to the coronavirus pandemic, the situation has degenerated into a growing global problem — it’s been dubbed the great ammo shortage.

Supply Disruptions

Like many industries, the COVID-19 pandemic and subsequent lockdowns have caused supply chain disruptions. As a result, manufacturing facilities and port terminals are impeding businesses such as shooting sports manufacturers, distributors, and dealers from meeting increased demand for ammo.

Unfortunately, the supply chain conundrum is expected to continue deep into 2022 and possibly beyond.

As if that was not enough, truck and rail companies are constrained by a lack of workers. According to the American Trucking Associations (ATA), the U.S. alone has a shortage of around 8,000 truck drivers — a record high and increase of 30% since before the pandemic.

Copper Shortage

Another challenge the ammunition industry is grappling with is the availability of the materials used to produce ammunition. Manufacturers compete with the automotive industry for copper.

Copper prices have surged because of high demand. Copper is used in many green energy projects such as electric cars and renewable energy sources like solar, wind, and hydro.

However, despite the challenges, opportunity still exists for players in the industry because the global ammunition market has been projected to continue a growth trajectory.

According to a report released from Research Dive, the market is expected to increase to nearly $20 billion annually by 2028 — up from $15 billion in 2020, a compound annual growth rate (CAGR) of 3.7%.

Reducing Supply Shortfalls

AMMO Inc. POWW, an American ammunition and munition components manufacturer and technology researcher, has reported an expansion route to help meet supply and demand.

The company in May last year acquired GunBroker.com, which a press release by the company described as the world’s largest online auction marketplace dedicated to firearms, hunting, shooting, and related products.

The GunBroker.com Transaction

GunBroker.com is the world’s leading online marketplace for the legal sale of firearms, ammunition, and accessories with over 6 million registered users.
GunBroker.com’s estimated 2020 revenue was approximately $60 million, over $40 million of earnings before interest, taxes, depreciation, amortization (EBITDA), positive net income, and strong free cash flow.
Purchase price of approximately $240 million, representing a purchase price to EBITDA multiple of fewer than six times.
The transaction further expands upon AMMO’s vertical integration strategy.
Current AMMO shareholders will own the majority of the combined company.

Launched in 1999, GunBroker.com is an informative, secure, and safe way to buy and sell firearms, ammunition, air guns, archery equipment, knives and swords, firearms accessories, and hunting/shooting gear online. The company promotes responsible ownership of guns and firearms.

The deal brings AMMO’s products, solutions, and merchandise to GunBroker.com, expanding its customer base.

Aiming For Expansion

Apart from the acquisition, the company is also expanding its production capacity — which is currently at 750 million rounds per year. AMMO is developing a $24 million ammunition and brass case manufacturing plant in Manitowoc, Wisconsin.

The new plant, which is expected to come online in the summer of this year and funded through the company’s cash, is expected to triple AMMO’s current manufacturing output.

The same month last year, AMMO again announced that it had entered into a non-binding Letter of Intent (LOI) with Mill City Ventures III Ltd. MCVT, a non-bank lender and specialty finance company.

The deal enables customers to purchase items through the GunBroker.com website using short-term consumer financing provided by Mill City.