Ratings of Russian Defense Companies in 2001

CAST and Eksport Vooruzheniy Journal continue the project of publishing annual ratings of the leading Russian defense companies. The first step was taken last year when the rating for 1999 and 2000 were compiled. The results were published in Export Vooruzheniy Journal #6, 2001. Below is an analysis of data for 2001 and also information about the operations of defense industry companies for the year. After publishing the ratings, CAST will continue work on the project as it collects new information and/or discovers mistakes or inaccuracies in the data.

Ratings structure

The ratings structure system has not changed much compared to 2000 and it still consists of the following criteria:

• Sector. It is defined according to the standard SIPRI method. The following sectors are included: aircraft (Ac), rockets and missiles (Mi), electronic equipment (El), military vehicles (MV), shipbuilding (Sh), SALW and ammunition (SA/A).

• Type. All industrial facilities and companies are divided by type into private (P, with private owners having controlling shares), state (S, federal-state unitary enterprises (FSUE), state unitary enterprises (SUE) and 100% government-owned companies), semi-private (SP, private owners do not have a controlling stake but actually control operations) and semi-state (SS, the state owns controlling shares and actually runs it).

• Annual sales volume.

• Annual profit (loss) volume.

• Share of export in overall sales.

• Number of employees.

• Labor productivity calculated as a ratio of sales volumes to the nominal number of employees.

• The Control section indicates the company owner or groups actually controlling company operations.

The main difference from the last years study, when integrated companies and corporate associations with a low degree of integration were rated equally, is that this time the two types of economic entities have been separated. The most important currently emerging vertically integrated structure, however, the formation of which has not been completed - Sukhoi Aviation Holding Company (Aviatsionnay Kholdingovaya Kompaniya "Sukhoi", AKhK "Sukhoi"), is given in the table as a single economic entity.

Sources of information

The information came mainly from the indus­trial facilities and companies themselves and also from other open sources. It should be said that in 2002 the number of companies that re­ported information grew considerably compared to 2001. Partly this happened thanks to the rec­ommendation from the Russian Agency for Con­ventional Armaments to place such information at the disposal of CAST, except to the share of military production. Naturally, the recommen­dations applied only to companies supervised by the agency. The press service of the Russian Aerospace Agency refused to cooperate. As the largest corporations and enterprises in ship­building and air-defense manufacturing re­sponded to our questions, CAST did not seek cooperation from the Russian Agency of Control Systems or the Russian Shipbuilding Agency. Information about some companies that refused to disclose information or which didn't reply to CAST inquiries was taken from open sources.

Limits of representation

Naturally the representation of the current rat­ing is limited. One can assume with a high de­gree of confidence that the top ten companies are featured quite adequately. The only possible difference in it could be the presence of UMPO because CAST estimates its receipts at no less than $160-170 million.

It should also be borne in mind that production in the defense industry sharply varies from year to year, so an adequate picture may be formed only after comparing production volumes for two to three years. The absence of information on a number of companies, primarily RAC "MiG", KBP and engine-making companies (UMPO, Salyut Machine-Building Production Association and Saturn NPO) also distorts the general rat­ing.

Conclusions

Data on the operations of the largest Russian defense companies in 2001 permit us to conclude that last year confirmed all the key tendencies and main features of 1999 and 2000. The main features of the Russian defense industry remain:

• Extremely low receipts of each concrete manufacturer. The top two - AKhK Sukhoi and Uralvagonzavod - would have ranked at the end of the Top 20 and in the mid­dle of the Top 50 of the world defense compa­nies respectively. The Russian defense industry is also marked by low labor productiv­ity caused by personnel redundancy and a low number of orders. The causes remain un­changed: the absence of government contracts and slowness of restructuring in the sector and in forming integrated companies.

• Like in previous years export contracts guar­anteed the bulk of production volumes. The ex­istence or absence of such contracts cause the changes in the ratings. Thus the leading position of AKhK Sukhoi, IAIA, Kurganmashzavod and Antey Concern stems from their contracts with China (Su-30MKK, Su-27UBK) and Greece (Tor-M1). The transfer of 30 Su-30MKK multi­role fighters for $1.2 billion to China, 10 Su-24 frontline bombers to Algeria for $50 million and also a large volume of R&D operations at its de­sign bureau guaranteed Sukhoi the first place on the list. The disappearance of the Shipbuilding Plant Severanaya Verf from the leading group and the rating altogether is also export-related. In 2000 it completed the fulfillment of the first contract for the delivery of the destroyers to China and did not carry out any major operations in 2001. If the new contract for project 956EM de­stroyers is not diverted again, we can predict that the shipyard will return to the group of de­fense companies with the highest receipts in 2003. The only exceptions to this rule are Sevmash shipyard which in 2001, transferred the nuclear project 971 submarine Gepard to the Russian Navy and the manufacturers of SALW whose core business lies in nonmilitary produc­tion.

• The incomplete information available about the share of military production in overall re­ceipts continues to indicate a low degree of di­versification in the Russian defense industry. Uralvagonzavod and other companies manufacturing SALW and ammunition may have the most di­versified structure. Aircraft manufacturers have the smallest share of civil production.

• Helicopter-makers, especially the Ulan-Ude Aviation Plant, reported especially impressive production growth figures. While in 1999 and 2000 the average sales of the three serial plants making helicopters of the Mi family stood at $150 million, last year the figure soared to $440 million.

Top 20 Russian Defense Companies in Sales Volume for 2001

2001 Rank	2000 Rank	Change	Company	Sector	Type	Sales Volume, $ mln	Profit/ Loss, $ mln	Export Share in Overall Sales	Number of Employees, persons	Control
1	-	*	AkhK “Sukhoi”*	A	S	1 522	-	> 90%	30 000	State
2	-	*	Uralvagonzavod	MV	S	273.4	29.5	49.5%	24 834	State
3	9	­	FIG “Defense Systems”	El	S	259.2	8.9	-	21 695	State
4	5	­	IAIA	A	P	230.7	56.5	93%	14 800	Manage­ment
5	13	­	JSC Kazan Helicopters	A	P	219.2	27.4	92.82%	8 000	Manage­ment
6	6	~	JSC Izhmash	SA/A	SS	199.5	- 11.6	12.4%	27 326	State
7	2	¯	Promyshlennaya Kompaniya “Antey”	Mi/El	S	184.3	-	97.2%	48 000	State
8	4	¯	Baltiysky Zavod	Sh	P	179.6**	1.7	91.9%	6 523	IST Group
9	-	*	Sevmash	Sh	S	155.4	3.25	6.7%	27 221	State
10	14	­	Rostvertol PLC	A	P	app. 130	19.2	87%	7 000	Manage­ment
11	10	¯	Zvezda-Strela	Mi	S	102	21.8	92.84%	2 204	State
12	-	*	Ulan-Ude Aviation Plant	A	SP	88.56	30.5	77.13%	5 087	Manage­ment
13	12	¯	V.A.Degtyarev Plant	SA/A/Mi	P	84.3	15.7	-	>15 000	Manage­ment, MDM Group
14	-	*	Ural Optical Mechanical Plant	El	S	82.2	25	70.7%	5 634	State
15	18	­	ALMAZ Shipbuilding Company	Sh	P	72.7	11.8	80%	1 058	Ob’edinennye Mashi­nostroitel­nye Zavody (OMZ)
16	16	~	Izhevsky Mekhanichesky Zavod	SA/A	S	57.7	6.5	35.5%	15 228	State
17	15	¯	Nizhny Novgorod Aviatsionny Zavod Sokol	A	SP	51	-	97%	8 800	KASKOL Group, state
18	-	*	Kovrovsky Mekhanichesky Zavod	SA/A	P	22.2	3.8	50%	> 3 000	New Pro­grams and Concepts (NPC) Ltd
19	-	*	Vyatsko-Polyansky Mashinos­troitelny Zavod “Molot”	SA/A	SS	21.2	1.54	12%	7 432	State
20	-	*	Moscow Mil Helicopters Plant	A	SP	17.1	-	15%	2 000	State, In­terregional Investment Bank

* In process of formation. Calculated as summed volumes of KnAAPO, Sukhoi Design Bureau and NAPO.

** The figure used is the volume of “sold output” that includes interim payments for ships under construction and sales of other company’s products.

Changes: ­- growth, ¯- fall, ~ - no changes in ranks, * - new entry

Exchange Rates: 2001 - $1/29,02 RUR

Top 10 Russian Defense Companies in Profits in 2001

Top 10 Russian Defense Companies in Arms Sales

ⁱ – in Top 20 included in as part of AkhK “Sukhoi”

* - CAST estimates

** all production is dual-use

Top Russian Defense Corporate Associations in 2001

* In process of formation. Calculated as summed volumes of KnAAPO, Sukhoi Design Bureau and NAPO.

Exchange Rates: 2001 - $1/29,02 RUR