Interior Ministry’s concession for arms and ammunition trade: next step in development strategy

As part of the implementation of the development strategy for 2024-2026, adopted by the Company’s Board of Directors on March 21, 2024, a decision was made to start the procedure for obtaining a license from the Ministry of Internal Affairs and Administration to trade in arms and ammunition. This is an important step that stems from both global geopolitical conditions and the growing demand for military equipment and dual-use products. Taking this decision is a natural continuation of MBF Group SA’s existing activities. Obtaining the concession was included in the aforementioned strategy as one of the steps in the Issuer’s development.

The company has consistently fulfilled its key contracts for the supply of food and chemical raw materials, including sugar, urea, and refined and unrefined oils, which continue to be its priority. Diversifying operations by entering a new market segment does not mean abandoning existing business areas, but rather complements them, increasing competitiveness and opening up new opportunities for expansion. It also conforms to the strategy published almost a year ago and its plan to enter new markets.

An important advantage of MBF Group SA in the accreditation process and future arms trade is the actual, rather than theoretical, experience and wide network of contacts of the company’s CEO, Janusz Czarnecki. He is a retired Polish Army colonel, a specialist in radiolocation systems, who graduated with honors from the Faculty of Electronics at the Military University of Technology in Warsaw and from the Faculty of Organization and Management at the Adam Mickiewicz University in Poznan. During his career, he served as a chief specialist at the Ministry of Metallurgy and Machinery Industry, where he supervised and coordinated research and development, production, cooperation and foreign cooperation in the field of professional electronics. He was a member and then chairman of the Polish Delegation to the Working Group of the Permanent International Commission of the Defense Industry, as well as a participant in the Sejm of the Republic of Poland’s defense-related committees. His practical experience and in-depth knowledge of military equipment trading procedures provide a solid foundation for this line of business for MBF Group SA.

The decision to seek a license also stems from the company’s previous experience in dealing in protective equipment. Following the outbreak of war in Ukraine, MBF Group SA became involved in the supply of bulletproof vests and helmets, which allowed it to gain practical experience in the military and protective products sector. These activities have shown that in view of the dynamic changes in the market and the growing demand for strategic goods, it is worthwhile to develop business in the direction of arms and ammunition trading.

All activities carried out under this initiative will be carried out in a responsible and transparent manner, in accordance with applicable laws and the highest standards of business ethics. MBF Group SA remains a company of public trust, operating within the strict regulations of the capital market, which is an additional guarantee of reliability in the new business area.

Geopolitical context – Russia’s war with Ukraine and its impact on the arms market

The armed conflict between Russia and Ukraine, which erupted in February 2022, not only changed the balance of power in Europe, but also triggered profound changes in the global economy and international security system. Russia’s aggression has led to the biggest military crisis in the region since World War II, bringing the topic of defense and strategic military supplies back to the forefront of policy for both states and private actors.

One of the key effects of this conflict has been an unprecedented increase in the demand for military equipment, munitions and protective gear. Ukraine, which had to face Russia’s military superiority from the first day of the war, did not have enough resources to conduct long-term defense operations on its own. This has led to massive procurement of military equipment, both through official government channels and private initiatives. Many entrepreneurs, international organizations and logistics companies have become involved in supplying armaments and protective equipment to the fighting Ukrainian forces, often working directly with governments or aid organizations.

Poland played a key role in this process as a logistics hub, being the first transit point for arms and military equipment deliveries to Ukraine. Polish companies, with experience in trading strategic raw materials and cross-border logistics, quickly began to adapt their business models to the new situation. MBF Group SA was one of the entities that actively joined the relief effort early in the war, organizing the supply of bulletproof vests and helmets. The experience gained during this period has become the foundation for further development of the company’s competence in the military and protective products sector.

At the same time, the consequence of the war is an increase in defense spending by NATO member states, including Poland. Record budgets for modernizing the armed forces and investing in the defense sector are opening up new opportunities for arms and ammunition trading companies. Over the past two years, Poland has signed numerous contracts to purchase military equipment from foreign suppliers, but is also increasingly supporting the domestic arms industry and the middlemen operating in the industry.

MBF Group SA, as an entity with experience in international trade and logistics, intends to take advantage of this situation by entering a new business segment by obtaining a license from the Ministry of Internal Affairs and Administration to trade in arms and ammunition. Possession of such a license will allow the company to participate in tenders for the supply of armaments, both for state entities and companies operating in the security sector. Importantly, MBF Group SA already has experience with contracts requiring compliance with strict regulatory requirements, which will significantly facilitate accreditation and future operations.

The initiation of the accreditation procedure is therefore a logical consequence of the global changes and MBF Group SA’s previous involvement in the protective products segment. The company sees this not only as an opportunity to increase its revenues and further grow, but also as an opportunity to participate in shaping Europe’s new security architecture by providing equipment through legitimate and fully controlled commercial processes.

Legal conditions and procedure for obtaining a license for trade in arms and ammunition

Trade in arms and ammunition in Poland, as in most European Union countries, is subject to strict regulations aimed at ensuring full control over the trade in military goods and protecting national and international security interests. The procedure for obtaining a license from the Ministry of Internal Affairs and Administration (MIAA) to trade in arms and ammunition is a multi-stage process and requires compliance with a number of restrictive conditions that ensure that an enterprise engaged in this type of activity operates in full transparency, in accordance with applicable national and international laws.

The legal basis governing this sector is Law of June 22, 2001. On conducting business activity in the field of manufacturing and trading of explosives, weapons, ammunition and products and technology for military or police use (Journal of Laws 2001 No. 67 item 679, as amended).. These regulations set out detailed requirements for companies applying for a license, including the safety of trading, storage of goods and the liability of entities conducting such activities.

The process of obtaining an arms and ammunition trade license consists of several key steps:

  1. Submission of a license application to the Ministry of Internal Affairs and Administration – MBF Group SA, as an entity that meets all the formal requirements, intends to apply for the relevant license in the near future. This application must include full documentation on the company, including information on the ownership structure, scope of operations, and procedures related to the circulation of weapons and ammunition.
  2. Verification of organizational and technical capabilities – as part of the accreditation procedure, the Ministry of Internal Affairs and Administration verifies that the company has adequate organizational and logistical facilities and security systems to legally and safely trade in military goods. MBF Group SA has many years of experience in trading goods requiring special inspection procedures, which significantly facilitates meeting these requirements.
  3. Verification of members of the board of directors and management – a key element of the concession procedure is the verification of those responsible for the company’s activities in terms of their qualifications, experience and the absence of legal contraindications to such activities. In the case of MBF Group SA , an important advantage is that the company’s CEO, Janusz Czarnecki, has many years of experience in the defense sector, being a retired Polish Army colonel, a specialist in radiolocation systems and a participant in numerous security and defense projects. His actual knowledge of military systems and his long-standing contacts in the military community make a compelling case for the company to win the concession.
  4. Analyze compliance of activities with international regulations – Trade in arms and ammunition is not only regulated by national law, but also by numerous international treaties, including the Arms Trade Treaty (ATT) and the EU Common Policy on Arms Exports. As a result, MBF Group SA will be required to comply with strict export rules, especially in the context of trade with sanctioned countries and those supervised by international institutions.
  5. Inspection and issuance of a decision by the Ministry of Internal Affairs – the final stage of the concession procedure is an inspection of the company’s infrastructure, security systems and compliance of operations with accepted standards. Upon positive verification, MBF Group SA will receive an administrative decision to grant a license, which will enable it to legally trade in arms and ammunition in domestic and international markets.

With years of experience in trading raw materials that require strict regulation (such as chemicals), MBF Group SA is well positioned to meet all concession requirements. The company already applies high standards in terms of transaction security, counterparty control and financial transparency, which is a key prerequisite for obtaining permits to trade in military products.

It should be noted that holding an MIAA license will enable MBF Group SA to participate in tenders for the supply of military equipment and ammunition, both for state institutions and for companies in the security sector, which is an important part of the company’s business diversification strategy. Once licensed, the company will be able to work with both the Polish Armed Forces and security companies and critical infrastructure security entities.

It is worth noting that MBF Group SA does not intend to abandon its current pillars of business, such as trading in sugar, urea, refined and unrefined oils. The new business segment will operate in parallel with contracts already in progress and will not affect the company’s core business areas.

Impact on MBF Group SA strategy – new opportunities without changing the fundamentals of the business

MBF Group SA’s entry into the arms and ammunition trade segment by obtaining a license from the Ministry of Internal Affairs and Administration is a key element of its business diversification strategy, but does not imply a change in the company’s basic business model. This is an expansion of the business, not a reconstruction, which means MBF Group SA will continue to fulfill its key contracts to supply food and chemical raw materials such as sugar, urea, and refined and unrefined oils. The new business segment will operate in parallel with existing business areas and will be introduced gradually so as not to adversely affect the company’s current business relationships or operational stability.

The decision to expand into arms and ammunition trading was made thoughtfully, based on an in-depth market analysis and projections of long-term trends in the security and defense sector. Increased spending by NATO member states to modernize their armies, the growing importance of private security companies and the continued demand for arms and ammunition in the wake of the conflict in Ukraine mean that this market offers stability and high profitability, which is in line with MBF Group SA’s long-term strategy to grow the company’s revenue and profitability.

Thanks to its experience in trading strategic goods and the high security standards applied to its operations, MBF Group SA is perfectly positioned to enter a new market that requires rigorous control of transactions, verification of counterparties and compliance with regulations on arms exports. The company has operated for years under strict capital market regulations, under the supervision of the Financial Supervision Commission and the Stock Exchange, which testifies to its transparency and high quality of management.

Key steps in the process of obtaining a license

MBF Group SA intends to go through the full accreditation procedure in the coming months and meet all the requirements for obtaining an arms trading license. This process includes both formal and legal issues, as well as operational issues that will enable the company to enter the new market smoothly.

  • Preparation of full documentation – the company has already started analyzing the concession requirements, and the management is working on gathering all the necessary documents required to submit an application to the Ministry of Internal Affairs.
  • Adapt internal procedures – to meet security and transparency requirements, MBF Group SA will implement new procedures for trading military goods, including detailed processes for verifying contractors and monitoring the flow of goods.
  • Cooperation with state institutions – the company intends to engage in dialogue with key government institutions and arms trade regulatory organizations to ensure full operational compliance with national and international regulations.
  • Obtaining all the necessary certificates and permits – in addition to the MIAA license, the company is also considering certification in international export control standards and cooperation with NATO, which could open up more markets in the future.

Transparency and compliance with international regulations

The arms trade is one of the most regulated sectors of the economy, so MBF Group SA will operate in full transparency in accordance with national and international regulations. The Company undertakes to comply with all applicable standards for export control and legality of transactions, including:

  • Arms Trade Treaty (ATT), which sets rules for the international circulation of armaments and prevents their illegal transfer.
  • The EU’s Common Policy on Arms Exports, which aims to control arms sales to countries subject to sanctions or armed conflict.
  • European Commission and NATO surveillance rules that regulate trade in dual-use items.

Summary

The decision to start the procedure to obtain a license from the Ministry of Internal Affairs and Administration to trade in arms and ammunition is a step for MBF Group SA to further develop and diversify its business. In view of the dynamic geopolitical changes and the growing demand for armaments, both in the Polish and international markets, entering the military products trading sector is a logical and well-thought-out move that can significantly increase the company’s growth potential. The decision is in line with the 2024-2026 development strategy adopted on March 21, 2024, which calls for expansion into new markets and growth in high-margin sectors. With years of experience in international trade, strict regulations overseeing the company’s operations, and CEO Janusz Czarnecki’s expertise in the defense field, MBF Group SA has a solid foundation to successfully implement this new business segment.

It should be noted that the new business will not affect the company’s existing business pillars, such as trading in sugar, urea, refined and unrefined oils. MBF Group SA will continue to execute all concluded contracts and maintain stable relationships with existing business partners, which will ensure its further growth in areas that have been its main source of revenue to date. Entering the armaments market is an expansion of the business, not a change in it, which will allow the company to become more competitive and independent of one sector. This will make the company more resilient to cyclical changes and enable it to respond flexibly to new market trends.

In pursuit of the license, MBF Group SA intends to carry out all required procedures in a transparent manner and in accordance with national and international legal regulations. Cooperation with government institutions, oversight of transaction compliance and strict security procedures will be key to long-term success in the new business area. The company also plans to expand into international markets, participate in tenders and build relationships with key defense sector players. MBF Group SA’s entry into the arms and ammunition trading market is a deliberate step in implementing its development strategy, which will strengthen its position as a modern and flexible partner in the global trade of raw materials and strategic products.


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