Knowledge
shows the right
way

Power
helps to pull
through

О компании

Expendable jammer

Intended for individual protection of aircraft in the front and/or rear hemispheres from guided radar-homer missiles.

Knowledge
shows the right
way

Power
helps to pull
through

О компании

Expendable jammer

Intended for individual protection of aircraft in the front and/or rear hemispheres from guided radar-homer missiles.

4
Manufactured capital

4.1 State defense order

The Concern, for the third year running, shows 100% performance of contracts under the state defense order. In the previous year, a total of more than 500 units of military and special purpose equipment was delivered to the public contracting authority, including newest EW electronic warfare complexes “Krasukha” and multipurpose jamming station “Rtut-BM”, EW complex “Khibiny”, airborne optronic defense complexes “Vitebsk” and helicopter-mounted EW complex “Richag-AV”, as well as mobile small-size radar stations “Garmon”.

The greatest difficulties the Concern faces with the state defense order are connected with the deficit in high-performance workplaces and shortage of production and engineering staff. In this regard, the Concern is taking proactive efforts to upgrade the production base of its companies involved in the state defense order (for more details, see Upgrade and reconstruction), and to engage young professionals and organize professional training (for more details, see Professional training and retraining system).

F37. State defense order breakdown by types of products in 2015, billion RUB

43.1 36.5 8.7 1.4 Avionics IFF EW MI

F38.State defense order in 2015, billion RUB

20.2 69.5 Products shipped under State Conctracts (direct state defense order) Products shipped under cooperation contracts

F39. Performance of the state defense order, billion RUB

2013 2013 2014 2016 target 120 60 0 39.9 59.1 89.7 90.0

P40.State defense order in 2015, billion RUB

1.4 12.6 75.7 Repairs and maintenance Serial shipments R&D
35%
expected growth of exportsin the total revenue by 2020

The Concern includes two companies which are entitled to supply military products to the international market - Aerospace Equipment Corporation JSC and NPO KVANT JSC.

4.2 Military technical cooperation

The exports of the Concern’s military and non-military products for 12 months of 2015 amount to RUB 30.1 billion (see Fig. 42).

High-tech military products are promoted onto the international market

During the reporting period, the modern and high technology Avionics products, as well as IFF and EW systems and devices, were promoted onto the Middle East, Gulf countries, North Africa, South-East Asia and CIS member states

For product presentation purposes, the Concern organized meetings and held negotiations with representatives of foreign agencies and firms of a number of foreign countries (Turkmenistan, Republic of Belarus, Republic of India, Republic of Singapore, French Republic, Bolivarian Republic of Venezuela, People’s Republic of China).

Presently, as part of the military technical cooperation, KRET JSC signed contracts with Progress Arsenyev Aviation Company PJSC (a part of Russian Helicopters JSC) for supply of equipment for Ka-52 helicopters and with RAC MiG JSC for supply of equipment for MiG-29 fighters.

Under the approved long-term programs for effective after-sale maintenance of military products and prompt supply of spare parts to foreign customers, the Concern took all necessary steps to support the service life, maintain and repair the military products it had previously supplied during the post-warranty period.

Mid-term plans

  1. exports growth up to 35% in the total revenue by 2020;
  2. growth in exports to the Asia-Pacific Region,Middle East and North Africa.

In 2015, the Concern took part in:

  1. the 12th International Aviation and Space Salon (air show) MAKS-2015 and became the two-time winner of the Golden Wings MAKS- 2015 Contest;
  2. the 10th International Aerospace Show Aero India 2015, where it held a series of negotiations with representatives of Indian companies regarding upgrade of the Air Force fleet;
  3. the 8th International Helicopter Industry Exhibition HeliRussia-2015, where it presented the recent national developments in the area of helicopter-mounted equipment;
  4. the Army-2015 International Military-Technical Forum and obtained an honorary diploma of the Russian Ministry of Defense in the nomination “Electronic Warfare and Intelligence Systems”.

F41.Structure of proceeds from exports of military and non-military products in 2015, million RUB

805.2 29,243.5 Military products Non-military products

PF2.Structure of proceeds from exports of military products in 2015, million RUB

3,554.9 3,686.3 22,002.3 Under foreign trade contracts with parent contractors, included interplant cooperation Under contracts with state intermediary,Rosoboronexport OJSC Under contracts with foreign customers, AEC JSC, NPO KVANT JSC

4.3 Non-military products

In accordance with its development strategy, the Concern pays much attention to development of non-military production. The Concern’s companies develop and produce a wide range of non-military products in the following key lines of business:

  1. avionics (navigation systems, automatic control systems, health and usage monitoring systems, onboard control systems for unmanned aerial vehicles (UAVs) etc.);
  2. medical equipment (tonometers for IOP measurement, magnetic therapy ocular devices, physiotherapeutic equipment, non-invasive lung ventilators, anesthesia machines, blood pressure and cardiovascular activity monitoring systems, electronic blood pressure monitors, and 24-hour monitors of blood pressure and cardiac signals, ultrasonic nebulizers);
  3. car electronics, including charging stations “FORA” for electric cars (fast and slow charging stations, blocks for the electric car produced by AvtoVAZ JSC);
  4. oil and gas equipment;
  5. automated information and measuring control systems;
  6. control and diagnostic devices;
  7. software for unmanned control of metro trains;
  8. protection and aviation safety equipment for civil aviation based on airborne defense system “President-S”;
  9. radio monitoring equipment for ensuring electromagnetic compatibility (Russian Ministry of Telecom and Mass Communications).

In 2015, the Concern approved its investment program which provides for development of the non-military production in the areas where the Concern’s companies hold strong competitive positions and that have substantial growth prospects, including avionics for civil aircraft (UAVs, in particular), new medical equipment, charging stations for electric cars.

The proceeds from sales of non-military products in 2015 amounted to RUB 16 billion, where RUB 805 million falls on exports supplies.

KRET JSC and Russian Space Systems JSC signed a cooperation agreement for development and implementation of import substitution programs to localize information technologies and systems and to provide high-tech and information security services to the infrastructures which are critical for the Russian companies. The cooperation is intended to conduct joint research to create a technical advance in the area of information security and system integration, and to improve effectiveness of data processing, including geospatial data.

4.4 Import substitution

The Concern takes steps towards localization of assembly parts and electronic components which are produced in the Ukraine, NATO and EU member states. The Concern has to complete two equally important tasks: to ensure that the components of foreign make are promptly localized as part of the import substitution policies and to timely perform R&Ds to create principally new products which would be much ahead of the foreign substitutes.

In 2014, all necessary decisions and plans for import substitution were developed and agreed. The Concern took a part of actions contemplated by the road maps for 2015 approved by the Russian Ministry of Defense and the Russian Ministry of Industry and Trade, while the remaining part will be completed in 2016.

Under the state contracts signed with the Russian Ministry of Industry and Trade, 16 development projects were in the pipeline in 2015 to substitute Ukrainian products, totaling to RUB 4,623.0 million (see Fig. 44), of which an amount of RUB 2,898.7 million was disbursed in 2015

Results of 2015

  1. 4 development projects have been completed, whereas 12 types of alternative electric connectors (approximately 30% of the whole range of electric connectors of Ukrainian make that are to be substituted) have been developed and put into serial production;
  2. 1 development project has been completed, whereas alternative small-size announciators MS-2 of Ukrainian make have been developed and put into serial production;
  3. contracts have been concluded for 7 development projects to substitute products imported from NATO and EU countries.

F43. Development projects underway in 2015 to substitute Ukrainian products, million RUB

1,035 500 3,088 Electric connectors Cable products Avionics components

Plans for 2016

  1. complete 11 development projects to substitute Ukrainian products for RUB 1,724.3 million;
  2. continue 7 development projects to substitute component parts imported from NATO and EU countries that are used in the aviation equipment, totaling to RUB 2,912.1 million.

The effectiveness of the Concern’s quality management system is proved by the lowering number of notices of defects per unit of warranty-covered products.

4.5 Quality management

According to the Quality Policy of Concern Radio-Electronic Technologies Joint Stock Company, it is planned:

  1. to continually improve the characteristics of radio-electronic equipment meeting the up-to-date requirements and expectations of Customers and end-users, and to reduce the time to develop, produce, repair, supply and to timely maintain this equipment;
  2. to improve cooperation and coordination of efforts of the Concern, the Customers and Concern’s companies, and for that purpose:

  3. - conceptualize and develop integrated target programs for design, development, upgrade, production and supply to Customers and end-users of the up-to-date and advanced radio-electronic equipment;

    - the Concern will act as an R&D general contractor in creating radio-electronic equipment and supplies of serial products

    - organize and ensure operation of the Chief Designer Council and assist in implementation of the decisions the Council will make to enforce the research and technical policies for development of radio-electronic equipment, including on the matters of standardization, harmonization and classification;

    - coordinate quality assurance and control in respect of the products under state defense order;

    - professional development of all Concern’s employees on an ongoing basis;

    - strictly comply with legislative and regulatory requirements.

The Concern’s top management ensures maintaining and ongoing enhancing the efficiency of the quality management system as required by state standards, GOST ISO 9001 and GOST RV 0015-002, and looks into what else needs to be done for that purpose.

There is a positive trend towards lowering the number of notices of defects per unit of warranty-covered products (see Fig. 45) with the growing volumes of state defense order at the same time.

F44.Share of notices of defects per unit of warranty-covered products

2014 2015 0.015 0.012 0.009 0.0139 0.0123

Unified Procurement Regulations of Rostec State Corporation dated 18 March 2015 set out the manner and methods of centralised procurement procedures. Centralisation of procurement processes and common purchases are real tools for effective spending.

Key principles of the Concern’s procurement operations:

  1. openness and transparency of procurement processes,
  2. raising the competitiveness among procurement bidders,
  3. attaining the maximum economic effect from procurement events.

4.6 Procurement management

The Concern carries on its procurement operations as required by Federal Law 223-FZ of 18 July 2011 “On Procurement of Goods, Work, Services by Certain Types of Legal Entities” and the Unified Procurement Regulations of Rostec State Corporation dated 18 March 2015.

Only 43 companies of the Concern are subject to Federal Law 223-FZ of 18 July 2011 “On Procurement of Goods, Work, Services by Certain Types of Legal Entities”. The remaining companies conduct their procurement operations in accordance with their own internal regulations. The procurement-related information is placed on the official corporate website and is publicly available.

In order to organize a unified system of packaged supplies of the electronic component base of domestic and foreign make, the Concern created a unified electronic trading and procurement platform. This has helped considerably cut costs for procurement of necessary components and streamline the logistical processes.

The key objectives of increasing the effectiveness of procurement operations are:

  1. to create a transparent and reliable procurement management system;
  2. to establish unified procurement rules for the Concern’s companies;
  3. high level of objectivity;
  4. high quality equipment, machinery, materials and services at optimal prices;
  5. to ensure compliance of the procurement processes with the requirements of regulators and laws of the Russian Federation.

These objectives are attained by:

  1. wide use of electronic procurement procedures;
  2. preventing irregularities and ensuring strict compliance with the effective laws and internal regulations;
  3. approving the internal procedures for determining and justifying the level of the initial (maximum) contract price;
  4. clearly regulating the instances when products can be procured from a sole supplier and well-founded reasoning of such instances.

Preference is given to those suppliers which have the QMS certificate of conformity according to GOST ISO-9001 and GOST RV 0015-002.

Plans for 2016:

  1. most part of the Concern’s companies will accede to the Unified Procurement Regulations of Rostec State Corporation;
  2. the focus of procurement will be on small and medium-sized businesses, who will enjoy specific privileges under Resolution 1352 of the Russian Government of 11 December 2014 “On Specifics of Participation of Small and Medium-sized Businesses in Procurement of Goods, Works and Services by Certain Types of Legal Entities”;
  3. increase the volumes of procurement in a competitive manner;
  4. automate procurement processes;
  5. internal audit of procurement operations to identify irregularities and discontinue any wrongful activities, if any.
Total funding of investment projects completed, ongoing and expected for delivery under Federal Target Program No. 1 and Federal Target Program No. 2, subject to all sources of financing, million RUB:
  1. 5,678.0 million RUB in 2013;
  2. 4,610.6 million RUB in 2014;
  3. 7,300.7 million RUB in 2015.

4.7 Upgrade and reconstruction

The upgrade and reconstruction of the Concern’s production capacities is intended to improve its competitiveness on the global market. These efforts are taken under Federal Target Program No. 1 and Federal Target Program No. 2.

The key objectives of the upgrade and reconstruction are:

  1. to complete the tasks of the state defense order,
  2. to improve productivity of labor
  3. to increase profitability of production,
  4. to improve product quality,
  5. to reduce the cost of production,
  6. to lower the environmental impact.

Under Federal Target Program No. 1 and Federal Target Program No. 2, in 2015, 45 capital construction projects were underway in 28 Concern’s companies with the total target financing of RUB 45,405.6 million, of which the 2015 funding liabilities amounted to RUB 7,300.7 million.

Results of 2015:

  1. under Federal Target Program No. 1, two capital facilities were commissioned (Signal PJSC, Radiopribor JSC);
  2. under Federal Target Program No. 2, six capital facilities were commissioned (BEMZ JSC, two projects of Signal PJSC, NPO V.I. Shimko Radioelectronics Scientific and Production Association JSC, PPO EVT JSC, RSIE JSC).

Plans for 2016:

  1. commission 12 capital facilities under Federal Target Program No. 1;
  2. implement investment projects intended to resume production of 70M2 products in seven companies (Tekhpribor PJSC, AP-Voskhod JSC, MIEA JSC, OKB Elektroavtomatika JSC, UKBP JSC, UPPO JSC, NPP Izmeritel JSC). The total funding amounts to RUB 2,690 million, of which RUB 2,410 million will be funded from the federal budget;
  3. MIEA JSC to implement investment projects to develop new technologies for serial production of highly-precise INS and their components for the modern and advanced weapons, military and special purpose vehicles.

Ryazan State Instrument-making Enterprise Joint Stock Company (RSIE JSC), Ryazan

Federal Target Program No. 2: in 2015 we completed the upgrade of the equipment for production of multilayer printed boards meeting the today’s level of special-purpose digital devices.

Federal Target Program No. 1: construction and upgrade of the company is underway. The expected results are:

  1. growth of the technical and organizational level of production,
  2. higher productivity of labor through automation and advanced process solutions in electroplating and environment protection,
  3. improving the quality of coatings and lowering the labor intensity in coating processes,
  4. increasing the production capacity by streamlining it according to the cost-effectiveness ratio
  5. better working conditions
  6. reducing the harmful effect on the environment.

Р45.Liabilities to finance capital construction projects in Concern’s companies under Federal Target Program No. 1 and Federal Target Program No. 2 in 2015, million RUB

0 3,000 6,000 Rostec State Corporation's capital contributions Target borrowings recoverable from the federal budget Federal budget Own funds FTP No. 130 capital projectsin 21 companies 1,289.7 2,774.7 65 1,787.3 FTP No. 215 capital projectsin 12 companies 622 762

4.8 Environmental impact

The Concern strives to fully comply with the environmental laws and use the best practices in securing environmental safety of production.

As a result of their operations, the Concern’s companies do not have substantial impact on the environment. The only significant impact is from electroplating in some of the Concern’s companies.

As part of the reconstruction and upgrade investment projects (see Upgrade and reconstruction), steps are being taken to ensure that the produced products are in compliance with the effective and future environmental requirements, and to upgrade productions to lower the impact of the electroplating on the environment (see Table 11).

Т11. Results of 2015

Company Results of 2015 Positive effect
Ryazan State Instrument-making Enterprise Joint Stock Company (RSIE JSC), Ryazan
  1. New rinse water treatment system employing submersible electrochemical module for integrated waste water treatment that extracts heavy-metal ions from waste waters resulting from electroplating: cyanide zinc plating, cyanide cadmium plating, cyanide copper and chrome plating
  2. New two stage countercurrent rinse tanks for post-etching treatment (zinc and cadmium plating)
  1. Disposal of exhausted nickel and chrome solutions unsuitable for further operation by extracting toxic components
  2. Treatment of chemical waste waters
  3. Etching, passivation and bleaching solutions and smutty residues are no longer discharged into the sewage system but are regenerated directly in the processing tank
  4. Heavy metals are no longer discharged to waste waters after rinsing, while heavy-metal ions are returned to the processing tanks, thus reducing rinse water consumption
  5. Heavy-metal ions are concentrated in the waste water at a level below the maximum allowable level
Penza Computer Engineering Production Association Joint Stock Company (PPO EVT JSC), Penza Efforts have been taken to implement electroplating equipment with inbuilt process solution filters and dust and gas catchers in ventilation systems
  1. Re-use of process solutions in production
  2. Lowering the amount of waste waters and concentration of pollutants
  3. Reducing the amount emissions into the atmosphere
  4. Reducing harmful effect on the environment
Ekran Research Institute Joint Stock Company, (NII Ekran JSC), Samara New low-waste technology of closed-cycle waste-water-free treatment of rinse waters from electroplating
  1. There is no:
  2. - capex for construction of buildings or structures to place the waste waters treatment system,
    - restrictions on the temperature of waste waters for treatment
    - complex automated control and management of the waste waters treatment system,
    - need to dispose of the exhausted sorbent.
  3. The consumption of chemicals to regenerate the sorbent has become three times less
  4. The cycle length has increased a number of times
  5. No waste waters are discharged to the treatment facilities any longer
  6. Up to 80% of plating solution remaining on products is returned into the production process.No exhausted rinse waters resulting from electroplating processes are generated and discharged
  7. No waste waters or pollutants can infiltrate into the environment

Plans for 2016 and mid-term perspective

In order to reduce the environmental impact of electroplating processes, it is planned to introduce state-of-the-art environment friendly systems and technologies (for more details, see Table 12).

Т12.Planned steps to reconstruct Concern’s companies

Company Planned steps Expected effect Timeline
Ural Instrument Engineering Plant JSC (UIEP JSC), Sverdlovsk Region The production capacities will be relocated from the city center of Ekaterinburg to the industrial site near Aramil, Sverdlovsk Region. Commissioning of treatment facilities with the advanced environment friendly technology of closed-cycle wastewater-free treatment of rinse waters.
  1. No waste waters will be discharged into the environment
  2. Lowering water consumption as a result of re-use of water resources in the technological process.
  3. Improving the environmental situation in Iset River and Ekaterinburg.
2016
Ryazan State Instrument-making Enterprise Joint Stock Company (RSIE JSC), Ryazan Construct new plating and painting shop with two stage rinsing system.
  1. Re-use of rinse water in other rinsing operations
  2. Use of water from equipment cooling and warming systems
  3. Lowering consumption of water balance by 25%.
2017
Taganrog Research Institute of Communications Joint Stock Company (TNIIS JSC), Taganrog Introduce new electroplating area in a standalone building using modern environment-friendly equipment. Install ventilation systems with wet cleaning filters for harmful emissions from the electroplating equipment.
  1. Increase of control over and reduction of harmful emissions into the atmosphere.
  2. Maintaining the buffer zone around the plant
2016
Set up waste water treatment facilities designed in accordance with the advanced environment-friendly two stage waste-water-free treatment technology
  1. Improving the environment situation at the plant in general.
  2. Generating treated waste waters meeting GOST 9.314-90 Category 2 “Water for Electroplating and Rinsing Schemes. General Requirements”.
  3. Returning at least 95% treated waste water back into the main production.
  4. No additional waste waters from treatment processes
  5. Neutralization and collection of solid waste.
  6. Ensuring stable treatment owing to flexibility and high adaptability of the membrane technology to qualitative and quantitative changes in waste water composition.
  7. Creating environmentally clean production fully avoiding discharge of waste waters to the sewage system.
  8. Saving natural reserves of fresh water
2016
Place the production equipment into isolated rooms (machining and painting production processes). Relocate any production capacities which generate noise. Install modern exhaust ventilation systems with optimal filtering elements
  1. Reduce harmful emissions into the atmosphere.
  2. Lowering the impact of noise on the environment
2018
The expected effect from lean production mechanisms is as follows:
  1. growth of labor productivity;
  2. reduction of the production cycle;
  3. improvement of quality and reduction of defective products;
  4. release of production space;
  5. lowering equipment downtime.

4.9 Lean production

A number of Concern’s companies started to systematically introduce lean production principles in 2015 as part of the federal target programs. In 2015, most part of the Concern’s companies developed and proceeded to implementation of lean production concepts and personnel training programs.

The lean production implementation plans mostly include:

  1. mapping and identifying losses at workplaces;
  2. introducing Five Sigma system;
  3. introducing continued improvement system;
  4. introducing SMED system;
  5. introducing TPM (Total Productive Maintenance) system;
  6. introducing the JIT (“just-in-time”) Kanban system.

4.10 Energy efficiency

In its operations, the Concern pays much attention to increasing energy efficiency of production. Depending on the condition of the utilities, the energy saving and energy efficiency improvement program is developed on a case-bycase basis and implemented in the Concern’s companies further to the results of the energy audit.

Key tasks of the energy saving and energy efficiency improvement program:

  1. saving fuel and energy resources by introducing energy efficient equipment;
  2. reducing heat losses by streamlining boiler operation modes and heat insulation.

Actions to reduce energy consumptions taken in 2015:

  1. optimizing heating condition through reconstruction of premises and use of heat insulating coating on heating systems in buildings, boiler house and heating lines;
  2. using energy saving lighting devices;
  3. replacing compressors with higher class energy efficiency equipment with target focused gas distribution system;
  4. developing energy resources rationing system and financial encouragement of efficient use of utilities;
  5. introducing energy control and metering systems so that to timely identify any irrational use of energy resources.

Higher use of fuel for motor vehicles and heat energy in 2015 by value, compared to 2014, is a result of an increase in utility tariffs and growth of production thus requiring introduction of longer work shifts and work on weekends in a part of production areas.

Lowering consumption of electricity and natural gas in 2015, compared to 2014, was triggered by energy saving measures as described above.

P46. Use of energy resources in monetary terms, million RUB

Fuel for motor vehicles Electricity Heat energy Natural gas 2013 2013 2014 2016 target 1,000 500 0 73.1 336 86.8 224.8 87.5 392.9 247.8 96 94.6 354.7 100.4 238.8 102.1 428.9 111.7 289.8

Т13.Use of energy resources by volume

Resource 2013 2014 2015 2016 (target)
Fuel for motor vehicles, liters 2,578,430 2,731,710 2,885,757 2,512,427
Electricity, kWh 105,023,059 100,601,788 100,703,182 108,966,678
Heat energy, Gcal 167,459 184,010 155,086 177,039
Natural gas, 000 m³ 172,627 173,710 164,212 177,891