LIMOGES, France — French land vehicles manufacturer Arquus saw earnings drop to around €550 million ($601 million) in 2022 from €569 million ($620) million a year earlier.
The earning figures were originally revealed by company CEO Emmanuel Levacher, during a March 23 Senate Committee for Foreign Affairs and Defense hearing.
On Thursday, he told journalists that 40% of annual turnover was from after-sales services but detailed “a disappointing” return of €100 million from export sales.
Arquus is one of three companies involved in the joint development and production of the next generation of French Army wheeled armored vehicles — the Griffon, Jaguar and Serval.
Sensitivities relating to Arquus’ holding company, Sweden’s Volvo Group, prevented Levacher revealing results in detail, despite financial figures up to and including 2021 being publicly available on the internet.
Levacher was circumspect about the company’s outlook for 2023. He said he hoped for growth of between 5-10 percent, supported notably by after-sales support and services.
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Concerning the longer-term future, largely linked to the upcoming 2024-2030 LPM (loi de programmation militaire or military program law) and France’s Scorpion program, he said “the 2035 targets are maintained but it would seem that the delivery targets towards 2030 will be lowered,” adding that “we’re waiting to see what happens in the parliamentary discussion but are expecting deliveries to be spread out over a longer period than initially planned.”
Scorpion aims to replace and modernize by 2030 the close combat capabilities of the army, centered on the Griffon, Jaguar and Serval which can operate collaboratively using a single combat information system.
Levacher said the upside was that if the army doesn’t get all the new vehicles in the timeframe it was expecting “then that means the existing vehicles will need to be maintained in operational condition, they will need to be repaired and upgraded. So we hope this aspect will be strengthened.”
But he also said the worse scenario was what he called “stop-and-go,” in other words if the government orders vehicles sporadically, it will have a negative impact long term.
Levacher said that in order to meet the objectives of the “war-time economy” called for by President Emmanuel Macron, mainly to produce more equipment, faster and cheaper, “we need visibility to enable us to anticipate and would rather have a firm contract to produce one vehicle a month for 30 months than lots of small contracts.”
Why Are Numbers Down?
Arquus, which manufactures 90% of the French army’s wheeled vehicles, has been struggling since 2019 when it made a record €569 million and the new results mean the company will have to win some major contracts if it is to reach its 2030 objective of $1 billion in earnings.
An industry observer told Breaking Defense in a telephone interview that this objective would have been achievable if the company had won a French tender for military trucks which has since been severely cut back and for which no contracts have yet been awarded.
Additionally, the company’s outlook would be considerably more healthy “if at least 30 percent of income came from exports, but this is clearly not going to be the case because their products are too sophisticated and too expensive for a saturated market and where there are newcomers supplying to their own national markets,” added the industry expert.
In 2020 earnings had dropped 2.8 percent to $546 million, heavily impacted by COVID, before rising marginally by 4.3 percent in 2021.
Exports fell dramatically against the €150 million recorded in 2020 and €116 million in 2021, when Levacher had said he’d hoped for a much improved situation in 2022, in order to meet the target of 50 percent of turnover from exports.
He attributed the poorer-than-expected 2022 performance in exports to COVID, greater competition from rising industries outside Europe and to the plummeting relationship with some of France’s former colonies.
Speaking to media in Limoges, at one of the company’s four production sites, he said that “COVID meant less contacts with our clients, and it put some of our clients, notably those in the Middle East, in tighter financial situations than they’d been used to.”
In 2021 Asian clients accounted for €35.6 million of exports and in 2020 a whopping €100.6 million.
He added there was increased competition from industries in Turkey, South Africa, South Korea and Israel “and on top of that France’s relationship with the Sahel countries (Mali, Burkina Faso, Niger, Mauritania and Chad) has become so degraded that we can no longer sell to some of them, notably to Mali.”
This is bound to have an effect in 2023 given that, after France, it is clients in Africa that have brought in the most income. In the 2021 results, for example, the last for which detailed figures are publicly available, Africa accounted for €75.3 million of the company’s turnover compared to €4.4 million for the European Union and €436 million from France.
Sophie Rol, director of the Limoges site, said the company had invested €8.5 million to build a logistical platform, stocking zone and parking area and would invest a further €1.3 million in 2023 to secure a zone where the company is building vehicles for the special forces.
Rol said the Limoges site could produce up to six vehicles a day but last year only 107 vehicles came off the production line. “Our production lines are extremely flexible because there are no robots, only humans.” A floor manager explained that it was impossible to robotize production because the vehicles were all too different and in too small quantities.
The site is currently producing 36 Caesar weapon systems. Arquus manufactures the motorized platform which is then sent to Nexter for gun integration. “Technically we could make one a day,” Levacher said.