19 September 2014

Kalashnikov has presented a new development strategy

Concern Kalashnikov, part of Rostec Corporation, has presented a strategy for technical re-equipment and production modernization. More than RUB 4 billion will be invested into this process. When implemented, the project will qualitatively improve production technology and greatly reduce running costs and energy consumption while also improving working conditions and overall productivity.

The presentation of the strategy took place during a visit of Rostec Corporation CEO Sergey Chemezov to the Izhevsk Mechanical Plant, which coincided with Gunsmith Day, celebrated on September 19 for the third consecutive year. This holiday is closely linked with the legendary Izhevsk designer Mikhail Kalashnikov, after whom the concern is named, and who also first proposed celebrating Gunsmith Day.

Concern Kalashnikov has already embarked on the large-scale modernization program, the first year of which has seen more than RUB 1 billion  of investment to update the current stock of machines. Overall, from 2014 to 2017, more than RUB 4 billion will be invested in technical re-equipment, major repairs, and new construction at the concern.

“Thanks to Concern Kalashnikov’s chosen development strategy and the involvement of private investors, we can already see a serious increase in the effectiveness of the concern’s endeavors,” said Sergey Chemezov. “In the first half of this year, the production of small arms more than doubled, a complete modernization of production has begun. New technologies have been introduced, which in turn has increased the competitiveness of products. According to our estimates, in the near future, these changes will facilitate a 30% decrease in labor ineffectiveness. All of this allows us to say with confidence that our experience with public-private partnerships has proven successful and can be implemented in other enterprises as part of the overall development strategy of Rostec Corporation.

One of the key areas of work for optimizing the concern’s production is the introduction of MIM technology, which facilitates the production of parts with complex shapes with littler or no additional processing. This has led to a 90% decrease in labor ineffectiveness and has freed up 140 units of equipment and 1,200 square meters of production space. In 2014-2015, more than 40 new manufactured parts will be introduced, 15 of which have already undergone testing.

“One of our strategic objectives is to increase the competitiveness of our products in the global market through systematic and consistent work aimed at increasing productivity and efficiency. The projected revenues of Concern Kalashnikov for 2014 are more than RUB 9 billion, compared to the slightly more than RUB 2 billion earned in 2013,” said Concern Kalashnikov CEO Alexey Krivoruchko. “The program to modernize production will reduce by more than two times the amount of unnecessary equipment. The production space will be decreased  by more than 40 %.  We also expect to reduce costs for producing specialized equipment by 15-20% while simultaneously increasing capacity, thus expanding the range and volume of our production.”

The program for industrial re-equipment continues the comprehensive process for the financial recovery and reorganization of Kalashnikov, which began following the sale of 49% of the concern’s shares to private shareholders and the naming of a new CEO in late January 2014. In 2013, Kalashnikov operated at a loss of RUB 1.7 billion. In the first half of 2014, the production of small arms has already doubled, and the enterprise has been tasked with maintaining this momentum and continuing to increase its production.

In accordance with a development strategy for the small arms industry extending through 2020 developed in collaboration between Rostec Corporation and the Ministry of Industry, revenue from the sales of small arms is planned to increase to RUB 24 billion.

While in Izhevsk, Sergey Chemezov also noted that the sanctions imposed on Concern Kalashnikov can be interpreted as an attempt by some Western partners to unfairly interfere and compete with the high-quality, Russian-produced weapons made by Kalashnikov. However, as confirmed by Vasily Brovko, head of Rostec Corporation’s Department of Information and Communications, all joint ventures with the enterprise’s foreign partners remain in effect, with Rostec Corporation fulfilling all of its existing contracts.

During his time in Izhevsk, Sergey Chemezov visited the arms production of Concern Kalashnikov, examined samples of small arms, and stopped by the control and testing station, which featured an exhibition of developmental designs for small arms.