Indumil sells weapons of already proven effectiveness in combat. It is a 'plus' for this firm that it grows in exports, sales and profits. So he does it.
The armed conflict and drug trafficking have been the country's main burdens. However, in the fight to combat them, Colombia has developed skills in which it stands out internationally, such as a strong private security industry, prevention and detection of money laundering, and weapons production.
In this last field, the Military Industry (Indumil), a state industrial and commercial company attached to the Ministry of Defense, produces weapons of Iraqi origin (the Galil rifle), the parts of which are currently exported to Israel itself. He has also created his own weapons, the Córdova pistol, which he already has patented in several markets and aspires to market in the United States, one of the largest arms sales centers in the world.
Admiral Hernando Wills, manager of Indumil, says that national weapons, precisely because of the conflict, have the comparative advantage of having been tested in combat. This is highlighted by buyers, especially from the Middle East, one of the main clients of Colombian weapons.
Indumil currently exports 18% of its total sales, which last year totaled $585,000 million. When excluding income from the sale of explosives, the company's other major line of business, external sales are equivalent to 70% of military equipment.
Indumil, which turns 65, is also doing well with its exports, because it sells at prices below the average, in a highly competitive sector, since all countries have their military industry. For example, a good quality pistol in the United States costs US$700 and Colombian ones cost about 15% less.
The situation is different in the local market, where the State strongly controls legal weapons and only Indumil can sell them. These controls make weapons more expensive and the pistol that in the United States costs US$700 in Colombia costs $10 million.
Efficiency and profits
Admiral Wills explains that Indumil has been strengthening its internationalization process as internal conflict decreases, especially in the last five years. Its exports reached US$30 million in 2018, the highest level on record and 370% more than a year ago. In the first quarter of 2019 they already amounted to US$12 million, according to Dane statistics. This has also resulted in a growth in profits, which last year totaled $73,000 million, that is, 57% more than a year ago.
The manager of Indumil attributes the increase in profits to the fact that they have achieved greater efficiency in their production, adjustments in their staff, which reaches 1,600 people, and a stabilization in their pricing policy, which improves profitability.
Indumil operates in three plants. One is in Soacha, where they manufacture weapons and ammunition, even for hunting or sports shooting. For example, for this sport, the company was a supplier in the Central American Games.
The second plant is in Sibaté and produces explosives. Among its main clients are mining and construction, especially now that with 4G projects there are several tunnels and roads in process. In addition to the raw materials, they manage the warehouses where they store the explosives, known as powder magazines, and they also supply the blasting and detonators. Indumil is also responsible for authorizing the import of explosives for fireworks.
The third plant, located in Sogamoso (Boyacá), works on metalworking. In this, one of the largest factories in the region, they do metallurgy, foundry and micro-casting and produce large devices, such as bombs for airplanes or artillery grenades. At the same time, it has an electronics department that works on fuzes, that is, the mechanism that activates military explosives.
Climate impact
Admiral Wills explains that this business is not affected so much by the economic cycle, but rather by budgetary factors and the weather. With the beginning of the peace process, the budgets of the Military Forces have been reduced, which has impacted their sales. However, for 2019, an increase is expected due to the replacement and maintenance of basic loads, that is, the ammunition required by each soldier and each military unit. That is precisely one of the factors that motivates them to look for external markets.
On the climate front, when it rains more than average, as happened last year, miners cannot carry out their excavations and, therefore, require less explosives. However, international coal prices have remained on the rise, and that is why Indumil sees some stability in that demand for the next five years.
For 2019, they plan to make sales of around $700,000 million and maintain the level of exports and production of explosives, which they estimate at about 250,000 tons. "That is our operational plan, which we must execute in advance, since a contract to bring raw materials for explosives does not take less than 6 months, while the contract is signed and the ship arrives at a Colombian port," the manager says.
The armed conflict has boosted this industry, first to improve its quality and production and now in its internationalization. Perhaps the only positive consequence of that terrible scourge.
Source: Dinero.com
