The Leningrad Optical-Mechanical Association, or LOMO, plans to become the center of the local optical-mechanical sector by uniting enterprises of the same profile into a single holding company. The process will begin with the transfer of part of the company?€™s orders from St. Petersburg to the Vologda Optical-Mechanical Factory, a block of shares that was recently acquired by one of LOMO?€™s shareholders. General director Arkady Kobitsky says the company should go further and expand by utilizing production operations that are in decline.
LOMO is part of the defense industry holding Noviye Programmy i Konseptsii, or New Programs and Concepts. NPK owns about 30 percent of LOMO?€™s shares. Last year LOMO manufactured goods worth 760 million rubles ($27.2 million). LOMO produces optical equipment for the consumer market, such as telescopes and night vision equipment, as well as medical equipment, including microscopes and endoscopes. Parts for the Igla self-guided missile are also produced by the company.
Q:
Recently one of your shareholders, Finansovy broker BOSI [owning 1.5 percent and the nominal holder of 32.5 percent of the shares of LOMO], acquired 24 percent of the Vologda Optical-Mechanical Factory, or VOMZ. LOMO announced it has plans to work with VOMZ and transfer a part of its orders there. Why did this need arise? Which orders will you send to Vologda?
A:
LOMO is having trouble keeping up with demand. All the necessary documentation has been submitted for making a number of lines to produce military equipment. We plan on passing $1 million in orders to Vologda. Most likely these will be for the production of certain types of microscopes. We also plan to build a workshop for high accuracy lenses. The factory was in an appalling state when BOSI bought it ?€” it had massive debts. In one year, the company made 120 million rubles while costs totaled 160 million rubles. Furthermore, production levels have been falling every year, workers have been laid off and April?€™s wages were paid in August. In fact, the place has essentially been bankrupt for three or four years.
The general director at the plant has been changed ?€” this was a necessary step. Progress since then has been apparent. The previous management would simply give up when confronted with difficulties. They had no idea of how to work in the market.
The factory?€™s new team has set about the job with a vengeance ?€” fundamental changes have been made to the control system. With our help, they have begun paying off debts.
Q:
The head of NPK, Boris Kuzik, has spoken of the possibility of forming an optical holding. Could the union of the Vologda factory and LOMO be seen as the first move in this direction?
A:
The creation of a holding is still a long way off. The principles by which a holding would be established have yet to be agreed. Kuzik believes it should include the Mechanical Engineering Design Bureau and the Degtyarev Factory as designers while LOMO would act as the manufacturer. But LOMO only produces parts for the Igla. The self-guiding technology in the rocket?€™s head is the responsibility of other factories in Tula and Izhevsk. We also work with Moscow?€™s Vimpel design bureau in this area.
There are all sorts of problems connected with an optical holding. Not all enterprises in this area have been privatized. ?€¦ At meetings of the Conventional Weapons Agency, I always say, "we must privatize." But in the provinces, the Soviet Union lives on. The directors of these factories just sit waiting for state help. ?€¦ In the meantime, competition has kicked off. For example, we used to buy domestic glass for endoscopes, but now we buy imports ?€” they make better quality and cheaper glass abroad. Russian technology is getting old fast.
Q:
What role does [defense industry holding] NPK play at LOMO?
A:
NPK owns about 30 percent of LOMO stock via two offshore companies. They put no pressure on us whatsoever. We simply work together. For example, we are winding up a very serious project for building a new self-guided ground-to-air missile. It will most likely be unveiled next year at the earliest.
LOMO is an independent enterprise both on the securities market and on the loan market.
Q:
What projects does LOMO have in mind for the consumer market?
A:
In 2000, we will focus on semiprofessional telescopes that we are manufacturing specially under contract with the LOMO-America company that distributes our goods in North America. So far, we do not plan to sell these goods on the Russian market ?€” it isn?€™t ready for them. The market price of a home telescope varies between $300 and $3,000. We are launching our night-vision equipment on the U.S. market, though sales are difficult. However, they [LOMO-America] give us ideas about what would be better suited for the U.S. market and we develop equipment in line with their orders. So far, we are winning in terms of price in developed countries?€™ consumer markets.
We supply medical technology to Iraq, where we also participate in a UN tender. Today, LOMO trades with 32 countries worldwide. We have signed a deal with Austrian lomographists to supply them with 550,000 LOMO compact cameras worth $20 million over 15 years.
Q:
Who are your competitors on the international market?
A:
As far as weaponry is concerned, we have no local competitors, while in the West, I can only think of the Stinger company.
As far as nonmilitary goods are concerned, then we have plenty of competition, but we are trying to carve out new niches. Olympus, for example, no longer makes color endoscopes or spare parts for them. We bought a production line from it 15 years ago for manufacturing optical parts, and consequently, we are able to repair old Olympus endoscopes.
Q:
So the company is loaded with work. How are next year?€™s orders looking?
A:
I should say that this year is ending with difficulties. We had hoped to make serious money. We planned to make $40 million, but unfortunately, signing has dragged on with a number of contracts with India ?€” in connection with the president?€™s visit. Contracts for military goods will not be signed earlier than November, so funds will only start to come in after six months. As a result, our figures will be rather humble ?€” about 900 million rubles. That is still up by 23 percent on 1999.
We are hoping that in 2001 our production will grow a further 33 percent. Our nonmilitary production would then comprise 50 percent of our total output. LOMO?€™s consumer goods are entirely geared to export. We are putting our money on medical equipment ?€” we hope endoscopes and microscopes will be in demand, particularly in connection with the government?€™s anti-tuberculosis program.
Our biggest clients for military equipment are India, China and Southeast Asian countries. The Igla brings in the biggest profits in this area.
LOMO is part of the defense industry holding Noviye Programmy i Konseptsii, or New Programs and Concepts. NPK owns about 30 percent of LOMO?€™s shares. Last year LOMO manufactured goods worth 760 million rubles ($27.2 million). LOMO produces optical equipment for the consumer market, such as telescopes and night vision equipment, as well as medical equipment, including microscopes and endoscopes. Parts for the Igla self-guided missile are also produced by the company.
Q:
Recently one of your shareholders, Finansovy broker BOSI [owning 1.5 percent and the nominal holder of 32.5 percent of the shares of LOMO], acquired 24 percent of the Vologda Optical-Mechanical Factory, or VOMZ. LOMO announced it has plans to work with VOMZ and transfer a part of its orders there. Why did this need arise? Which orders will you send to Vologda?
A:
LOMO is having trouble keeping up with demand. All the necessary documentation has been submitted for making a number of lines to produce military equipment. We plan on passing $1 million in orders to Vologda. Most likely these will be for the production of certain types of microscopes. We also plan to build a workshop for high accuracy lenses. The factory was in an appalling state when BOSI bought it ?€” it had massive debts. In one year, the company made 120 million rubles while costs totaled 160 million rubles. Furthermore, production levels have been falling every year, workers have been laid off and April?€™s wages were paid in August. In fact, the place has essentially been bankrupt for three or four years.
The general director at the plant has been changed ?€” this was a necessary step. Progress since then has been apparent. The previous management would simply give up when confronted with difficulties. They had no idea of how to work in the market.
The factory?€™s new team has set about the job with a vengeance ?€” fundamental changes have been made to the control system. With our help, they have begun paying off debts.
Q:
The head of NPK, Boris Kuzik, has spoken of the possibility of forming an optical holding. Could the union of the Vologda factory and LOMO be seen as the first move in this direction?
A:
The creation of a holding is still a long way off. The principles by which a holding would be established have yet to be agreed. Kuzik believes it should include the Mechanical Engineering Design Bureau and the Degtyarev Factory as designers while LOMO would act as the manufacturer. But LOMO only produces parts for the Igla. The self-guiding technology in the rocket?€™s head is the responsibility of other factories in Tula and Izhevsk. We also work with Moscow?€™s Vimpel design bureau in this area.
There are all sorts of problems connected with an optical holding. Not all enterprises in this area have been privatized. ?€¦ At meetings of the Conventional Weapons Agency, I always say, "we must privatize." But in the provinces, the Soviet Union lives on. The directors of these factories just sit waiting for state help. ?€¦ In the meantime, competition has kicked off. For example, we used to buy domestic glass for endoscopes, but now we buy imports ?€” they make better quality and cheaper glass abroad. Russian technology is getting old fast.
Q:
What role does [defense industry holding] NPK play at LOMO?
A:
NPK owns about 30 percent of LOMO stock via two offshore companies. They put no pressure on us whatsoever. We simply work together. For example, we are winding up a very serious project for building a new self-guided ground-to-air missile. It will most likely be unveiled next year at the earliest.
LOMO is an independent enterprise both on the securities market and on the loan market.
Q:
What projects does LOMO have in mind for the consumer market?
A:
In 2000, we will focus on semiprofessional telescopes that we are manufacturing specially under contract with the LOMO-America company that distributes our goods in North America. So far, we do not plan to sell these goods on the Russian market ?€” it isn?€™t ready for them. The market price of a home telescope varies between $300 and $3,000. We are launching our night-vision equipment on the U.S. market, though sales are difficult. However, they [LOMO-America] give us ideas about what would be better suited for the U.S. market and we develop equipment in line with their orders. So far, we are winning in terms of price in developed countries?€™ consumer markets.
We supply medical technology to Iraq, where we also participate in a UN tender. Today, LOMO trades with 32 countries worldwide. We have signed a deal with Austrian lomographists to supply them with 550,000 LOMO compact cameras worth $20 million over 15 years.
Q:
Who are your competitors on the international market?
A:
As far as weaponry is concerned, we have no local competitors, while in the West, I can only think of the Stinger company.
As far as nonmilitary goods are concerned, then we have plenty of competition, but we are trying to carve out new niches. Olympus, for example, no longer makes color endoscopes or spare parts for them. We bought a production line from it 15 years ago for manufacturing optical parts, and consequently, we are able to repair old Olympus endoscopes.
Q:
So the company is loaded with work. How are next year?€™s orders looking?
A:
I should say that this year is ending with difficulties. We had hoped to make serious money. We planned to make $40 million, but unfortunately, signing has dragged on with a number of contracts with India ?€” in connection with the president?€™s visit. Contracts for military goods will not be signed earlier than November, so funds will only start to come in after six months. As a result, our figures will be rather humble ?€” about 900 million rubles. That is still up by 23 percent on 1999.
We are hoping that in 2001 our production will grow a further 33 percent. Our nonmilitary production would then comprise 50 percent of our total output. LOMO?€™s consumer goods are entirely geared to export. We are putting our money on medical equipment ?€” we hope endoscopes and microscopes will be in demand, particularly in connection with the government?€™s anti-tuberculosis program.
Our biggest clients for military equipment are India, China and Southeast Asian countries. The Igla brings in the biggest profits in this area.
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