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CEO of Rostec State Corporation Sergei Chemezov: It is time for the corporation’s annual performance report.

(He hands over a presentation.) This presentation features 100 landmark development projects we have completed in the 15 years since the corporation’s establishment. We celebrated the anniversary in 2022. Thank you very much for visiting us to congratulate the team. Many workers received well-deserved state and departmental awards because Rostec has achieved a great deal in these 15 years.

I would like to revisit our history and figures to demonstrate our progress. In 2007, you signed an executive order on founding the corporation. As soon as in 2008, we took 443 companies under our wing, including 148 companies in critical condition, 28 going through insolvency procedures, 17 inactive and 27 partly deprived of their property or at a high risk of losing their property.

We have grown over these 15 years: today the corporation comprises around 800 research and production facilities in 60 Russian regions. They are responsible for producing thousands of military and civilian products.

President of Russia Vladimir Putin: What is the approximate percentage of the corporation’s civilian production?

Sergei Chemezov: I can give you the exact figure: currently, 44.5 percent of Rostec products are for civilian purposes, as opposed to 45.5 percent last year, due to a substantial increase in the number of state defence orders.

Yet we have grown in absolute figures as well. For comparison, Rostec manufactured 939 billion rubles worth of civilian products in 2021, increasing to 942 billion in 2022. It is a slight increase although the share is smaller against the total volume of our state defence orders and the total volume of all orders.

I will quote some more figures. In 2009, we released the first consolidated financial statements showing 511 billion in returns and 64 billion in losses. This year, we reached 2.1 trillion, growing 2.5 percent year-on-year; unfortunately, our net profit has dropped significantly to only 39 billion, as opposed to 163 billion last year. This outcome is mainly due to the corporation taking more state defence orders, with zero or even negative profitability. We compensate the losses with profits from civilian products that we, thankfully, continue to produce. It helps us to maintain positive financial results.

In 2022, we built up investment by 20.6 percent, to 292 billion rubles in absolute figures. The funds were primarily spent on scaling up production, upgrading equipment and expanding military production, in response to the demands of the special military operation.

On average, we have about 592,000 employees. Unfortunately, we are still short of people. This year, we will have to fill 23,000 vacancies as soon as we can. We will focus on highly skilled specialists.

We have increased salaries; we increased them by ten percent since the Government decided that the average salary at defence companies should be ten percent more than the average figure for the regions. In fact, we paid even higher salaries – 17.2 percent more than last year. This happened because last year many of our companies worked during days off, holidays and at night, and naturally work on these days is paid at increased rates. That said, I would also like to note that output per worker also went up by 2.5 percent compared to last year.

As for the state defence order (SDO), this is the main goal for our companies because they are mostly in the defence industry. In fact, they receive about half of the entire SDO. Last year, in 2022, the SDO was fulfilled by 99.5 percent. This figure is high. We have increased production of all types of military products that are being used in the special military operation on a very high scale today.

Speaking about this operation, our products account for 90 percent of all military hardware involved in it. This is primarily barrel and rocket artillery, light and heavy armour, transport helicopters, combat aviation, heavy fire systems, small arms and all types of ammunition. The following hardware has demonstrated brilliant performance in the current combat operations: BMP-3, BTR MDM, T-90 Proryv (Breakthrough) tanks, Iskander missile systems, Kinzhal (Dagger) hypersonic air-launched missile systems, Ka-52, Mi-28, Su-57, Su-35, and Cube and Lancet drones. Today, we are producing everything the Defence Ministry needs. We are meeting the demand in full.

Vladimir Putin: We need to increase the production share of the newest weapons.

Sergei Chemezov: This is exactly what we are working on now.

Vladimir Putin: Proryv T-90 and aircraft systems. You know what I am talking about.

Sergei Chemezov: Yes, I do.

Vladimir Putin: Lancets and the like.

Sergei Chemezov: I will say a few words about civilian products that are also a major part of our work. I have already told you that the corporation’s share of civilian products is high compared to any other company in the defence industry. I can give you a few examples of our civilian products, in particular, new developments created last year.

Our pharmaceutical holding Nacimbio released a new immunodeficiency drug called BioGam, the first Russian immunoglobulin administered intravenously. This medication is used in replacement or immunomodulatory therapy – for example, in patients with HIV, for treating and preventing infectious diseases as well as in patients undergoing organ transplantation.

In engine manufacturing, our company United Engine Corporation developed the GTA-8, a power generation system for offshore production platforms. The system is resistant to extreme weather conditions and can operate in a range from −50 to +50 degrees Celsius, both on gas and liquid fuels.

I believe we have made a serious breakthrough in medicine. We developed our own EBCT [electron-beam computed tomography] scanner. The project was initially termed as international and involved a great number of countries but, due to recent events and sanctions, we had to take substantial research and development efforts to localise this CT scanner.

Vladimir Putin: Very good.

Sergei Chemezov: Earlier this year, we already had a demo and launched Russia’s first localised electron gun, the main component of a CT scanner. It was developed by Rostec company Istok. This CT scanner is 25–30 percent localised to date; however, we plan to increase the share of localisation to 60 percent by 2026 and to 90 percent by 2029. We expect an output of 100–150 devices per year by 2029. This is actually very important because currently, all CT scanners are imported from abroad.

The flight booking system: in the past, we used foreign systems, mostly American and European ones, and all information about the movement of Russian citizens in the country and abroad was accessible outside the country. Today we have our own system, Leonardo, which we launched very quickly last year. It is an interesting solution. Today, Aeroflot, Pobeda and many other of the more than 60 airlines are using the Leonardo system. About five million passengers use it to book their flights every month. The system offers all levels of comfort, from the usual flight booking transactions to the sale of additional services, airport registration, bonus and loyalty systems, and the like.

Vladimir Putin: Why is it called Leonardo if it was designed in Russia?

Sergei Chemezov: I don’t know; the designer picked the name.

Vladimir Putin: Well, ok, Leonardo is part of global culture.

Sergei Chemezov: Product labelling: we have done a great deal in this sphere over the past few years. Our coverage has increased to 220 million people not only in Russia but also in five allied states. We label 10 groups of products, including medicines, dairy products, water, footwear, softgoods, furs, tyres, perfumes, photography equipment and tobacco. We started labelling beer in April 2023. We use labelling for 570,000 companies in Russia, and all cash registers in the country are connected to this system.

What are the results? We have reduced the volume of illegal goods turnover and increased tax revenues for the treasury. According to preliminary calculations, 435 billion rubles have been transferred to the budget from 2019, when the system was launched, to 2022.

The face recognition system: it was first used during the 2018 FIFA World Cup Russia and has been recognised as one of the best in the world. In 2021, NtechLab was recognised as the most accurate face recognition neural network in the world, especially in light of the terrorist threat. In 2022, we implemented it in 36 countries, including at the FIFA World Cup in Qatar. We are using the system in many Russian cities to ensure security. It has become easier to find criminals or missing persons, because all surveillance cameras have been equipped with the NtechLab system.

As for the helicopter industry, in 2022, Russian Helicopters produced 296 helicopters. The year before that, the company built 134, which means a significant increase. This, of course, is primarily due to the increase in the state defence order: under the state defence order, we doubled the production of military helicopters, but we also worked on civilian helicopters last year. We created a new Mi-171A3 which performed its first flight from St Petersburg to Moscow in 2022. It is a passenger helicopter that can also be used in the fuel and energy sector.

Vladimir Putin: It can be used offshore.

Sergei Chemezov: It can fly offshore. Its take-off weight is 13 tonnes, it can carry 24 passengers, the maximum range is 1,000 kilometres with regular fuel tanks; with added fuel tanks, it will fly even further. It is an all-weather aircraft, from −50 to +50 degrees.

By the way, we have also created one of the first unmanned helicopters, the BAS-200. It has a take-off weight of 200 kilos and a payload of 50 kilos.

Vladimir Putin: To carry mail?

Sergei Chemezov: If used for civilian purposes, it can certainly carry mail. In December 2022, we tested it beyond the Arctic Circle, that is, at temperatures lower than minus 50 degrees. The equipment performed excellently, so today the government of Yakutia is ready to sign an agreement with us to deliver mail to the region’s remote areas. I think it can be used not only in Yakutia, but throughout Siberia, where transport logistics are complicated and even delivering mail is a challenge. And we will certainly use this helicopter in the special military operation. We are testing it now, and I think it will also show itself well, because 50 kilograms is quite a good payload for this.

I mentioned drones, the Cube and the Lancet, which have shown excellent performance. Both are Kalashnikov products.

Vladimir Putin: Both the Cube and the Lancet proved to be very effective: their impact is powerful, and any equipment, including foreign-made equipment, not only burns, but ammunition also explodes. The manufacturers promised me that they would step up production. They are delivering on that promise, but production needs to be increased even more.

Sergei Chemezov: We will work on that.

In addition, Rostec companies make anti-drone systems. For example, Ruselectronics manufactures anti-drone guns known as the Pishchal-Pro and Serp (Sickle) systems for countering UAVs. The KRET holding [Concern Radio-Electronic Technologies] produces radioelectronic warfare equipment.

Our holding company High Precision Systems is working on an airspace monitoring system. We have developed small radars capable of identifying small and slow targets – these are drones, to be clear, because today’s radars cannot always identify these targets since they fly low whereas radars are designed to intercept high-flying targets like aircraft or missiles.

As for aircraft engineering, apart from combat aircraft the output of which doubled last year, we are also paying much attention to manufacturing civilian aviation technology. You have approved our programme for their production until 2030. In 2024, for the first time, we will launch serial production of Superjet aircraft – Superjet New. This aircraft is using our PD-8 engines, the avionics are all ours and de facto this is our aircraft that fully consists of Russian components. We will manufacture 20 of them every year, starting in 2024.

In 2024, we will also start producing the MC-21 and deliver the first six aircraft manufactured to Russian airlines. By 2025, we will manufacture ten Tu-214 aircraft a year. Our airlines need them badly because starting in 2025 they will have to part with all foreign planes that will require major repairs and so on.

Vladimir Putin: This is a real chance for our manufacturers to fill the niche that will be freed up.

Sergei Chemezov: Yes, we would like to use this opportunity.

Vladimir Putin: It must be done.

Sergei Chemezov: Of course, we will be working on it.

Vladimir Putin: You should do it before foreign producers return wanting to do it instead.

Sergei Chemezov: We need to stay ahead of them.

Vladimir Putin: Yes, exactly.

Sergei Chemezov: And of course, we are focusing on training personnel. We are working with over 300 universities and vocational high schools. We have 130 basic departments, and we have developed three training programmes, primarily for the aviation industry – the basic university is the Moscow Aviation Institute and all aviation departments in the country’s technical universities.

Second, there is the Rostec Code project designed for the radio-electronic industry and IT. Our core universities include the Moscow Institute of Radio Engineering, Electronics and Automation and Southern Federal University. The Rostec-BIOTECHMED project is for the manufacture of medical optoelectronic equipment, with Bauman Moscow State Technical University as the core university.

I would like to say a few words about the Wings of Rostec programme. Its goal, of course, is to train engineers and technicians for the aircraft engineering industry. We are recruiting students and they are actually working at our companies while also studying practically from the first year. They are paid salaries, an extra material support in addition to their scholarships, and they also acquire skills in a specific company in which they may work in the future.

We are also supporting leading engineering schools. Last year, we spent over 350 million rubles for this purpose. In cooperation with colleges, we are upgrading our personnel training and taking part in the relevant federal programme. Four thousand students will graduate from universities they entered in 2022/2023. These highly skilled specialists will come to work at our companies.

We are creating training centres at our companies. The first one was opened in Ufa. We are planning to open the next one in Moscow and then more centres in Perm, Rybinsk, Kazan and Samara. In other words, students will study and hone their skills in the education centres that are located in the same regions as our companies.

Now about social responsibility. Of course, our social spending went up by 16 percent last year – from 12.2 to 14.2 billion rubles. This primarily applies, of course, to our housing programme that amounts to one billion rubles.

Vladimir Putin: What is the average salary at your company?

Sergei Chemezov: It is 72,000 rubles as compared with the national average of 64,000 rubles, I think. I think it is much higher, and specialists are eager to join us.

Vladimir Putin: Good.

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