Push forward, relying on traditions

The head of Shvabe Holding told "Nezavisimaya Gazeta" about prospects of the key enterprise of Russian optoelectronic industry.

According to the materials of "Nezavisimaya Gazeta", 05.04.2014

The situation with modern big business is such that the results of economic activity for the year are summarized not on Christmas Eve, but at best in the onset of spring. Managers of enterprises and production workers are eagerly awaiting the verdict of financial experts, accountants and planners, who make up on their computers an objective digital picture, in the literal and figurative sense, of the results of work during the past year. CEO Sergey Maksin told the correspondent of "Nezavisimaya Gazeta" Mikhail SOLOPOV about 2012 results of Russia's largest optical holding - JSC Shvabe.

"Sergey Valerjevich, not all readers are familiar with Shvabe’s new name. Let us recall what does your holding represent."

"JSC Shvabe, which is a part of Rostec corporation, brings together key enterprises of Russian optoelectronic industry. The Holding includes 19 organizations - research institutes, design bureaus, research and production associations. We develop and manufacture high-tech optoelectronic systems and complexes for military and civil purposes, optical materials, medical equipment and energy saving lighting equipment.

Our enterprises employ about 20 thousand people, including 4.8 thousand researchers. The following figures speak volumes about the place of the Holding in the Russian market: optoelectronic systems for military use for all kinds and types of troops occupy 72% of the market, optical materials - 75%, medical equipment and energy-saving lighting equipment - about 20%. The portfolio of orders is made up for the next five years.

“You have repeatedly stated that the strategic goal of the Holding lies in stable dynamics and innovative development. Strategic objectives are rarely reached within a year but after all how efficient do you approach them?"

"To change means to improve. To become perfect you need to introduce frequent changes." These are the words of one of the classical authors, and for us they have become the standard of life. Only onward movement and all-round development in the scientific and industrial affairs are the key sources of our achievements. In this sense, the past year was successful for us. Not to be unfounded, I will state some figures. Thus, the net profit in 2012 amounted to 934 million rubles. Growth in relation to 2011 accounted for 13%. In 2013, we plan to increase net profit to 1,051 million rubles.

In 2012, the volume of sales reached 26 billion rubles, which is 27% more than the previous year. And for the current 2013 we plan to raise this figure by another 21%, to reach 31.5 billion rubles.

We detected the increase of other indicators, with one exception - the average number of employees slightly but steadily declined.”

“The number of employees decreased, while economic indicators rose. This attests to the fact of the growth of labor productivity. How can this growth be explained?”

“You're right. By the end of 2012 labor productivity growth was 123%, the rate of worker efficiency - 1,208 thousand rubles per employee. We are scheduled to work on reducing the number of managerial staff. In 2012, it was reduced by 16%. At the same time the share of technicians increases. In 2012, it increased by 33%. The proportion of regular labor force is stable.

Productivity growth in Shvabe is based on two components. First of all it is conditional upon Holding policy of technical upgrading that is aimed to create high-tech workplaces. Secondly, due to formation of long-term portfolio of orders and output growth.”

“You have mentioned technical upgrading that is a vital issue for the majority of domestic enterprises. Could you dwell on it in more detail?”

“Most enterprises of the Holding are involved in the process of technical upgrading and creation of high-tech workplaces. It is realized mainly in the framework of federal target programs. Resources aimed at modernizing our facilities will allow to prepare for the production of large series of products.

From 2011 to 2020, as part of Holding development strategy tens of billions of rubles will be allocated on technical upgrading and reconstruction of fixed assets. In the result of production modernization we will reach the level of replacement of fixed assets of 38%. We are implementing more than 40 projects at the same time. They are extremely effective. For example, in March 2012, the first stone was laid at the construction site of a new highly automated assembly plant on the basis of Ural Optical Mechanics Plant. Design capacity – 3,825 products per year, with total staff of only 40 people."

“Optical-electronic industry is inherently innovative. Tell me about this direction of your activity and prospects for the near future.”

“The Holding has established management and expert commissions on innovative development of its member organizations. They support new projects, promote the introduction of advanced developments.

In 2012, Shvabe spent more than 3.7 billion rubles on R&D, which is 48% more than in 2011 (2.5 billion). The amount of expected costs in 2013 is 4.2 billion rubles.

On average, the creation of a new Holding product, from an idea to the release of a production sample, takes from one to five years. Each year, Holding enterprises record 150-170 patents, including international patents. All in all, today we have 765 patents.”

“What are the most promising innovative projects?”

“Today, priority innovative projects of the Holding include the establishment of optoelectronic system for the newest Russian fighter. We have completed official trials of a unique optoelectronic sighting system for Ka-52 helicopter. Optoelectronic sighting systems are being created for advanced models of armored vehicles. We create optoelectronic reconnaissance and sighting instruments for military equipage as well.”

“Do you have products that are not produced by anybody in the industry, neither in the Russian Federation, nor abroad?”

“The Holding has unique technologies in the design and manufacture of optical materials, hydrooptics and acoustooptics, low-temperature optics, high-energy lasers, as well as in the processing of large astronomical optics, development of mobile tracking all-altitude stations for observation of man-made space objects. Today, Shvabe develops and implements 79 unique technologies.”

“At the beginning of the interview, you mentioned that the Holding employs about 5,000 researchers. It is, certainly, a lot, but do you really cope with this volume of research activities using solely your own scientific resources?”

“Not in the least. We have an extensive program of cooperation with scientific and educational institutions. Within its framework, we implement a lot of projects. Here are some of them.

Moscow Plant "Sapphire" in conjunction with Moscow State University of Instrument Engineering and Computer Science implement the project "Creation of high-performance technologies for instruments and equipment for processing of crystalline and ceramic materials in the manufacture of electronic components”. Two leading members of the Holding, who are involved in this project – P.D. Gindin and S.D. Eizenstat, in 2012 were awarded the prize of the Russian government in the field of science and technology.

Shvabe enterprises together with Moscow State Technological University "Stankin" have developed a laser microscope with nanometer resolution. It is a powerful tool for solving a wide range of research tasks in electronics, material engineering and optical industry. The device is characterized by an optimal combination of nanometer positioning accuracy with a large (up to 400 mm) stroke length. It has no analogues in Russia.”

“Does the Holding participate in programs of military and technical cooperation with foreign countries?”

“Two of our enterprises - UOMP and Novosibirsk Instrument Making Plant - have the right to carry out independent foreign trade activities in the field of military and technical cooperation in terms of supply of spare parts and accessories. The number of countries receiving our products has increased to 18. When customers need to quickly repair the product, they do not have to go on "a great way" and to send a request to Rosoboronexport and then wait for consideration. They can directly contact the manufacturer of necessary parts.”

“What civilian industry products does the Holding produce?”

“An important direction in the activity of the Holding is the development and production of optical materials and technologies, binoculars, sights, energy-efficient lighting equipment, high-tech medical equipment. Holding enterprises produce medical equipment, using the latest technologies: respiratory, ophthalmic, laboratory and diagnostic equipment, instruments for surgery, as well as all kinds of neonatal equipment. With the help of this equipment clinics managed to nurse more than 2 million babies.

Currently, the Holding conducts extensive research on the development of new promising channels of global optical communication that will allow interaction between space, air, onshore and off-shore facilities.

One of the areas of international cooperation is the participation of the Holding in the creation of ITER - International Thermonuclear Experimental Reactor. Within the framework of ITER creation, the Holding is developing a system of optical diagnostics of plasma parameters.”

“In what countries of the world does the Holding deliver civilian products?”

“Holding products are delivered in 85 countries, including Switzerland, Germany and Holland. In 2012, we reached a 40% increase in the supply of medical equipment to the Middle East and Southeast Asia. We organized a service center on the basis of dealers in Indonesia and Malaysia. Export geography is constantly expanding - in 2012, for example, we delivered medical equipment to Kuwait and Bahrain. We also hold negotiations on deliveries in Gabon and Botswana in terms of projects funded by international organizations. Most recently - in January of this year - a batch of incubators was supplied to Lebanon. With their help doctors of Beirut hospital save lives of children born prematurely."

“Such a widespread presence of the Holding in world markets inevitably raises the question: "Does Shvabe plan to come into IPO and, if so, when might it happen? How much will the package of shares offered for IPO "weigh"?"

“We not only plan, but we also have organized the preliminary work. Firstly, Holding enterprises have to implement consolidated financial statements according to international standards. After all, in the process of incorporation all enterprises had different accounting methods and cost structures. We have analyzed about 10 thousand registers to form united consolidated financial statements. And in 2011 we first came to the balance sheet in this form. We have also received the conclusion of international auditors.

Another essential condition to participate in IPO was to make Holding companies fully paid-up. Some of the companies were previously federal state unitary enterprises. In 2012, we completed the process. We are planning to participate in IPO in 2016-2017.

As for the size of a stock of shares which will be submitted to the IPO, it is still too early to talk about it. I can only say that the audit has already been conducted. As the result, preliminary balance capitalization of the Holding is estimated today at 25 billion rubles."

“Sergey Valerjevich, in the end of 2012 the Holding took the name Shvabe. What connects the forward-looking high-tech association with the image of Moscow craftsman with German roots from the XIX century?”

“By the end of XIX century Shvabe company was already a brand that occupied one of the first places in a range of European opticists and mechanics. The name focuses on a long and rich history of the company, traditionally high quality of its products.

We preserved Shvabe’s last catalog, which was published by the company in 1912 - the eve of the well-known events that almost for 100 years excluded the significant name from the register of the domestic industry. Even today the catalogue (which comprises 400 pages) strikes the reader with the variety of instruments produced, zealous attitude of the company to the quality of its products, the desire to satisfy consumer demands. We fully share the ideology of our predecessor - Shvabe company – that was formed 100 years ago sharp: "stand at the level of the century in the scientific sense and move forward in terms of improving the design and quality of produced devices”. We are constantly pushing forward, relying on the glorious traditions of our predecessors."

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