Jędrzej Graf: First, I would like to ask you for a kind of a summary. Last year, for obvious reasons, has created numerous challenges, interruptions of supply chains, interruption of manufacturing processes in many sectors, defence sector included. How do you assess the business activities undertaken by the company in 2020 and in Q1 of 2021? What are the financial results? How the pandemic has impacted the business?
Krzysztof Kluza, President of the Management Board, PIT-RADWAR S.A: Despite the pandemic, and the related restrictions, we have managed to finalize all of the contracts envisaged for the period on schedule. Not only has the above been possible thanks to the involvement of the team, but it also results on the grounds of production planning and component supplies - both of which had been scheduled in advance. These steps made it possible to avoid potential disruption or to mitigate it. Procedures tied to continuity of manufacturing in pandemic-related circumstances have also been successfully implemented at the production plant. Initial estimates make it possible for us to positively assess our finances.
When it comes to Q1 of 2021, we are already noticing the impact the pandemic has on our supply chain. In many areas we work in the role of systems integrator, thus we are, to some extent, dependent on subsuppliers.
This year marks the finalization of the delivery contract concerning the Poprad anti-aircraft systems. What are the directions of development envisaged for this system, when it comes both to the missiles, but also to the integration of new elements, such as non-kinetic counter-UAS assets, or improved mobility?
Designing the Poprad system, similarly, as in the case of other solutions we offer, we took great care about the modular nature of its architecture, creating a possibility to implement new solutions and develop the system, tailoring it to the ever-changing battlespace requirements and newly emerging threat profiles. Currently, responding to the requirements of the Polish Armed Forces, we are working on integrating a non-kinetic counter-UAS effector, and a tracking radar.
These elements may significantly increase the range of Poprad's capabilities, when it comes to acting against the threat posed by UAS, on the contemporary battlefield. We also acknowledge the possible integration of longer-range missiles in this system - the missiles that will be introduced in the inventory of the Polish military in the future. Furthermore, we may also introduce a capability to engage targets on the move, should a requirement as such be expressed by the military.
We have developed a concept of a complex VSHORAD system utilizing different fire means, the employment of which allows for achieving optimal effectiveness in acting against a whole range of targets, both when it comes to air threats, as well as the land ones. A system as such consists of kinetic effectors, taking on a form of the upgraded Poprad SAM system, and artillery, namely the 35 mm automatic cannon system coupled with ABM/programmable rounds. These assets may be fitted with target-tracking radars, non-kinetic effectors, and radars, and optoelectronic sensors, integrated with command and fire control systems.
Furthermore, the results of that work may also be utilized in the development of a naval variant of integrated optronic sensor that would be coupled with missile launchers and fire control systems. This would make it possible to enhance the vessel's armament with missiles.
Poprad may be an element of a broader VSHORAD solution. Elements of that system have been presented in a video clip last year. To what extent is that system ready for implementation?
VSHORAD system is a unique, and prospective one. Apart from the Poprad system, a 35 mm dual-feed anti-aircraft gun firing ABM programmable rounds has been made ready for production, reaching level 6 of development - the system may be rapidly introduced into use, and manufacturing may be launched. This system, given its accuracy, broadens the capabilities of the gun, when it comes to acting against a broad range of small threats, such as UAVs. PIT-RADWAR also has a tracking radar demonstrator ready. When it comes to non-kinetic counter-UAS systems, we can make use of ready-made solutions. We are already working on the integration of those.
We are also working on solutions that will take into account the methods of neutralizing drone swarms, including dynamic target assignment for the individual weapons, or optimization of the launch cycles when using advanced swarm-analysing algorithms, assessing the swarm's size, movement patterns, and shape changes.
We also have a readymade, automated fire control system at hand, along with target detection and tracking radars - such as Soła, and Bystra. We can also integrate all of those elements: effectors, sensors, and command and fire control systems, on vehicles. Based on the aforesaid components, we are offering a comprehensive and coherent VSHORAD system, with its architecture tailored to contemporary threats.
The experience gathered during the fights that happened in Nagorno Karabakh lead to a conclusion that even a perfect kinetic, or non-kinetic, effector would not be enough. Only a full integration of different effectors with advanced fire control systems, command systems (supported by AI-based expert algorithms), and radar and optronic sensors (for target detection, recognition, tracking, and fire control) may create an actual opportunity to effectively act against the threat posed by the UAS.
The concept of that system is somewhat aligned with the SONA programme assumptions - the project is aimed at finding a solution for protecting mobile land forces elements. A certain trend may be witnessed in NATO member states, with those taking steps to recover the capacity to defend the elements on the move. The US Maneuver SHORAD program is a good example here. How the PIT-RADWAR company is going to address the requirements that the Polish Armed Forces may have within that scope?
The concept of implementation of the SONA programme that we propose does take these global trends into the account - with artillery systems returning, alongside the perfected missiles, especially when it comes to the protection of mobile land forces elements. Due to the threat posed by the UAS, more and more countries decide to go back to guns. Cost-effectiveness also plays a key role here. It is simply unaffordable to act against the smallest UAVs with missiles, even SHORAD and VSHORAD ones.
Within the framework of our offer for the SONA programme, we are proposing a staged approach. As for now, we are offering capabilities that we have been demonstrating working together with other PGZ Group companies - a system with effectors in a form of 35 mm guns with sabot and ABM rounds, missiles, including extended-range missiles, and non-kinetic counter-UAS solutions. As I already said, we remain in possession of comprehensive expertise, when it comes to sensors, and fire control systems, including ones that allow for engagements on the move. Also, the experience that we have when it comes to advanced stabilized drive systems - for weapons, radars, and optronic tracking-targeting systems - allows for rapid and effective implementation of solutions as such.
We are also ready to integrate elements of the system on any platform meeting the relevant requirements, as indicated by the Ordering Party.
When it comes to the command suite, our solutions are aligned with the general trend that sees the greatest advantage in the coherent, net-centric command suites that would bring all of the components used on the battlefield together. According to the aforesaid recommendations, SONA is ready for being fitted with BMS terminals. This is especially pronounced, as the ROSOMAK BMS system is to be created by the PGZ Group - and our company would play a key role in this undertaking.
Thus, the Polish Armed Forces would acquire a net-centric, mobile, and highly advanced command system that would provide them with battlefield situational awareness. The hardware, software, and cryptography components would all become a part of the inventory of virtually all mobile units, also beyond the realm of the land forces. At the same time, the solution mentioned here would ensure integration and interoperability with similar systems operated by NATO member states. Within the framework of this project, we also want to create some new competencies, through R&D.
The 35 mm gun has been showcased on Jelcz truck, but also on the Rosomak APC. The APC configuration resembled the naval gun though.
The goal of integration efforts tied to the 35 mm gun, as presented in the video, was to practically verify the option of placing a system as such on a range of different self-propelled platforms. And these assumptions have been met. If the Ordering Party is interested in the integration of the 35 mm gun on this platform, we would be able to deliver a fully functional, and ergonomic solution in a short period - with these features being relevant for the mechanized and motorized elements.
The second of the configurations presented, on Jelcz trucks, is, in essence, ready for manufacturing. The gun may also be integrated on a different vehicle with similar performance, supporting the protection of critical infrastructure, airbases, or command sites. A system as such is capable of acting against threats in a stationary setting, and on the move. Its reaction time is also very short.
The 35 mm gun also can use ABM programmable rounds - often referred to as a solution that is usable in fighting against UAS.
The 35 mm gun system itself is very well prepared to act against unmanned aircraft. Above all, it is incredibly accurate, and thus, effective. When shooting, MJ-7 Szogun aerial target drones have been, quite frequently, eliminated with a single round. This is a very good performance, as opposed to other solutions that are currently in use.
After the 35 mm gun is introduced, it could play a key role in the counter-UAS domain, along with the non-kinetic solutions. In a system as such, missiles could be used primarily against the manned aircraft, at greater distances. The 35 mm gun features a dual-feed solution, thus it may also use sabot rounds to act against faster targets, at a greater distance. It may also act against armored vehicles, by neutralizing their optronic systems with ABM programmable ammunition.
We have also developed a fully automated fire control system allowing for shortening of the time between detecting and hitting the threat. The engagement steps, such as target classification or assignment of the asset and lock-on are all completed automatically. The human is only there to make a decision to engage the specific target. Thanks to the above, we can act against multiple targets over a short period. Obviously, the command and fire control system also integrates the missiles and the non-kinetic means.
VSHORAD system should include the Bystra radars, the first Polish AESA radar systems. At what stage the production of those is?
Bystra is the first domestically manufacture GaN AESA radar. The qualification test program did confirm that the solution is highly reliable in detecting combat aircraft, helicopters, drones, and RAM threats (rocket, artillery, mortar).
In September 2019 agreement was signed, covering the delivery of these. According to the provisions of the agreement, the deliveries should begin as of 2022. Considering the effects that the pandemic had, and the disruption of work undertaken by our subcontractors, including the foreign ones, we do accept a chance of delay. We are intensely working on minimizing that delay, to finalize all deliveries of equipment scheduled within the framework of this agreement on the originally set deadline.
Bystra is associated with the Narew air defence system. If the implementation is accelerated, the Bystra radar is the sensor that would be acting in a role of a multi-functional fire control radar. Narew has become the most significant modernization programme for years, with a value estimated at the level of several bn. zlotys. How does the PIT-RADWAR company perceive the implementation of this programme, because the Polish military urgently needs the new system to be delivered?
The proposed Narew system concept, which would involve more than 10 PGZ Group's companies, assumes that the PIT-RADWAR's know-how is used, with PIT-RADWAR acting as the technological leader and integrator in three key domains: guidance and command systems, missiles, and radars. PIT-RADWAR would also be directly responsible for developing the key radar technologies, and software development expertise, covering the aforesaid areas.
As a result of a dialogue with the Ordering Party, we have also developed the so-called Initial Operational Capability concept. The first stage assumes that the Bystra radar is used, along with elements delivered by the foreign partner. The above refers to the missile, some of the equipment, and C2 system software, such as the firing solution calculator for instance. Deliveries of the first batteries would be happening in parallel with the transfer of technology. This could begin three years after signing the agreement with the foreign partner.
Narew is a programme that bears a key relevance for the Polish defence industry, and for the process of technology development, and the Polish defence and security domain itself, considering the challenges that our state may be facing. The system for this programme should be interoperable, scalable, modular, mobile, and it shall also exhibit numerous features usually associated with net-centric solutions. PIT-RADWAR has begun to develop command systems based around the idea of net-centric concept more than 2 decades above when this breakthrough concept was not really treated as a serious one. The C2 systems developed by us have been introduced, and for years successfully used by the Polish military. We are a trendsetting company in many areas. DUNAJ tactical reconnaissance system integrating all of the radars of the radar component and aggregating the radar data, also offering cooperation within NATO IADS, is an example here.
One should also mention several functionalities already contained in our systems. The possibility of selecting a proper asset for the given task, redundant nature of the system, data fusion, data exchange protocol for battle management, implementation of the allied LINK 11B, LINK16/JREAP-C protocols, using radio network in mobile solutions, cybersecurity, and many other matters - these elements are an indispensable ingredient of the modern net-centric systems.
We have these matters covered already. And, what is even more important, these systems also give us the capability of integrating them effectively, with the existing and prospective VSHORAD solutions. We are thus ready to develop a completely sovereign, national Narew system, within the scope of air defence C2 and radars.
There are numerous, different concepts as to how the Narew programme should be accomplished. During the last year’s Defence24 DAY conference, one of the variants was mentioned, in which some of the Air Force’s systems would be integrated with the IBCS system, while the remaining ones, dedicated to the Army, would utilize the Polish C2 solution.
We are ready to implement the Narew programme in different variants, depending on the requirements of the Ordering Party, the Minister of Defence. Not only should the process in which a system as such would be created, worth several billion zlotys, be considered within the scope of its price and operational capabilities, as other criteria shall also be taken into the account. These include the sovereignty of operation, the ability to control the functions of the system by the Polish government, the ability to modernize and maintain this solution domestically, also in the event of war. All of these factors have a relevant impact on national security.
The system shall also allow for joint operations with other air defence elements and secure integration with domestic and NATO command systems.
The impact on the economy and the state budget is also relevant. Should a domestic solution be selected, more than half of the money spent on that system comes back to the budget. We believe that considering these criteria, employing the capabilities of the Polish industry to the broadest extent possible is optimal.
Ultimately, Sajna radar is expected to be taken into account in the final configuration of Narew. What is the status of that project?
Sajna radar, developed within the framework of a project pursued by the National Centre for Research and Development, is a GaN AESA radar that is resistant to jamming and that is also capable of tracking up to several targets at once, with fire-control capable resolution. The antenna of this radar would be placed on a tall, extendible mast which would enhance the capabilities to act against low-flying threats, including helicopters that use terrain to hide from the radars.
We have already accomplished the lab tests of the antenna in an anechoic chamber, with those tests confirming the assumed performance and reliability of the key components. Manufacturing readiness should be achieved in late 2023. The delivery deadlines would be dependent on the provisions of the agreement signed with the Armament Inspectorate, and on the production cycle.
Both Narew, as well as Wisła, would utilize the Polish early detection radars: active P-18PL system, and passive PET-PCL solution. What is the status of progress, when it comes to these?
P-18PL is a long-range radar that is being developed within the framework of a project co-financed by the National Centre for Research and Development. It can detect both conventional air threats, including ones with low RCS, but it can also detect ballistic targets. It can be used both as a surveillance early detection radar for the SAM systems, as well as a source of information on air picture, for the IADS. P-18PL can also work in a passive mode, utilizing radar signals emitted by other radars.
In 2020 we have successfully finalized the preliminary, factory test program for the P-18PL radar. Currently, the system is going through qualification (state) tests. We expect that this stage would come to an end this year. Next, the technical documentation would be reviewed, based on the test results. We assume that, at this stage, we would join the negotiation pertaining to the radar delivery agreement.
When it comes to the Passive Location System, the development of which is also supported by the National Centre for Research and Development, the field test programme has been delayed, due to the coronavirus pandemic. The factory test programme is scheduled to be completed in June this year. So far, the tests have shown that the assumed performance and functionalities are available for these radars. Later this year, in the second half, we are planning to submit the SPL system to the qualification tests stage. The work on that system is also fairly advanced, even if the progress is slower than it was in the case of P-18PL.
The Wisła programme assumed that both SPL and P-18PL would be integrated with IBCS, within the framework of the offset tied to the establishment of the medium-range air defence system. So far, no agreements have been signed on the performance of the offset, tied to the previous stage of the Wisła programme. Can these delays influence the work progress and delivery schedules, regarding the P-18PL and PET-PCL solutions?
P-18PL and SPL radars can be integrated within the Wisła system via the A/B-Kits, the transfer of which was planned to happen during the first phase of the offset. However, the communication can also be established with the use of the standard JREAP-C/Link 16 protocols. We can deliver the P-18PL and SPL systems and use them alongside other solutions, Wisła included, via the JREAP-C/Link 16 datalinks, regardless of the offset negotiation.
I should also add that we are already acquiring some of the capabilities from Raytheon, originally expected to be implemented through offset, based on B2B agreements. We have already initiated the process of implementing the ILS (Integrated Logistic Support) system within our business, which would define the design and operational, and maintenance, and upgrade principles for the products, in a long term. This system is used, among other domains, within the framework of the Warta radar development.
We have been mentioning the Wisła programme, or Warta radars, meanwhile the Narew programme alone may create a necessity to deliver more than 100 radars, including early detection and multifunctional fire control radar systems. How would PIT-RADWAR get ready to complete deliveries at that scale, greatly exceeding the current involvement?
PIT-RADWAR is establishing its manufacturing capacity in alignment with the expectations of the Ordering Party, similarly as it happens in the case of the global defence industry leaders. The scope of investments would depend, to a great extent, on the agreements signed with the Polish Ministry of Defence.
We are preparing an investment in Kobyłka, with SPL and P-18PL deliveries in mind, and other projects as well. We have already received acceptance of all of the required corporate decisions within the group. We are making detailed arrangements pertaining to that investment. We assume that it would include a 5,500 sq. m production hall destined, primarily, for the new systems.
We also have a long-term investment plan in place, envisaging construction works pertaining to further facilities, and relevant instrumentation. We have both the areas required for such investment at hand, as well as technical resources, and proven cooperation potential. However, the scope of implementation of that programme depends on whether, and to what extent, the Polish Ministry of Defence would assign implementation of the future modernization to the Polish industry - future modernization tasks refer to Sona and Narew programmes here.
Let us discuss something else. Alongside the air defence radars, PIT-RADWAR Liwiec firefinder radars are also operated by the Army. The deliveries were finalized a few years ago. Is that system still under development?
Liwiec Artillery Reconnaissance (Firefinder) Radar System is a solution that has brought us significant operational experience, gathered during the Afghanistan deployments. It was also used as means of protection for important events in Poland, such as the NATO summit in Warsaw in 2016, and the World Youth Day. Currently, we are developing an upgrade concept for the Liwiec radars used by the Polish military. These can be equipped with AESA antenna arrays.
We are also observing interest in delivery of newly manufactured radars - expressed both by the Polish Army, for instance in the context of the requirements of the newly-formed 18th Mechanized Division, as well as by foreign customers. We are planning to develop next-generation radars for the artillery units, based on Liwiec, with greater capabilities. We assume that these would have a greater range, thus they would be capable of effectively supporting the Homar rocket artillery squadrons. New artillery radars are also to be capable of 360 degrees sweep.
Many of the products that we discussed come from development projects launched in the early 2010s. I would like to ask: Is PIT-RADWAR already working on the next generation of products, solutions, that would see implementation in 2030, for instance?
Last year we have adopted a development strategy for the upcoming 15 years, which is aligned with the extended term of Armed Forces' development programming. This strategy is divided into three areas. The first one pertains to the efficiency of the business activities undertaken by the company, and to the establishment of specific manufacturing capacity, tied to the expected implementation of modernization programmes pursued by the Polish military.
Two other areas are - development of technologies and maintenance of full capacity in key areas (from design to manufacturing, and maintenance and upgrades of the most important systems), and the development of PIT-RADWAR's expertise in a role of a systems integrator.
Based on the aforesaid strategy, we have prepared a balanced portfolio of projects. We have some products that are manufactured or implemented now, but also some that are in the stage of early development, or even some that are just a concept. This is a derivative of the assessment of the technology development and threat trends - with those threats potentially being the ones that the Polish military would be facing in the future.
When it comes to radars, the functionality of these is more and more dependent on software. This allows for enhancements of functionality with limited hardware changes but within the scope of possibilities provided by the given hardware architecture and its computing power. We will be developing the next generation of AESA radars with enhanced performance, also improving their survivability by allowing them to work in EW environment, making them more concealed, using means of camouflage, and so on. We want to follow the path within which the cognitive capacity of the radar would be enhanced so that the system would become a solution that is capable of solving problems, self-learning, adapting, autonomous. We would also like to pursue the path aimed at creating the capability to detect new threats - such as hypersonic objects.
Obviously, the development of technologies and software also needs to include command and control solutions, or effectors, including non-kinetic and beam-based ones, be it electromagnetic or laser weapons. To develop all of those areas, we place a relevant emphasis on the software-development competency, in the areas of the latest IT tech, also referred to as the cutting-edge technologies: AI (Artificial Intelligence), Cloud Computing, Big Data, and Data Science. Thus, we are also becoming a software house.
To what extent PIT-RADWAR is dealing with matters related to cyber-security? This is tied to the use of systems that utilize networking and software.
Cyber-security is a domain that is one of our priorities. We invest a lot in both systems as such, as well as in our team of experts. As a technological leader, we also support the remaining PGZ Group companies in establishing ICT security and establishing competency in this area.
This is an obvious, yet natural direction that makes it possible to utilize the potential of engineers and programmers that we develop at our company, with other programmes in mind. And at the same time, the aforesaid capacity would be used in the implementation of R&D, so that our products procured by the Polish Armed Forces meet the cyber-security requirements.
I should add that cooperation with Raytheon has been an important factor in the enhancement of our capabilities - including the design, manufacturing, and deliveries of IFF antennas for the Patriot systems. When launching that project, we have, for the first time, adopted the standards developed by the Americans. Today, we are developing these capabilities to benefit the PGZ Group as a whole.
You have mentioned international cooperation. What are the key products and export markets for PIT-RADWAR?
PIT-RADWAR has been present on the export markets - in this way we gain around 15 percent of our income. We are focusing on selling the high-tech solutions that we have developed. IFF antennas for the upgraded Patriot system radars are an example here. These are based on our own designed, approved, and certified by the Americans.
We also provide expert services for the Kongsberg group - engaged in the establishment of a test range.
We are also involved in a project financed by NAGSMA/NATO AGS, where we are supplying a set of IT tools developed by PIT-RADWAR, including AGS CSOP client software. Ultimately, this software suite is going to be used by the program members to access the intel gathered, among other assets, by the Global Hawk UAV.
What about ready-made products, such as radars, or air defence systems?
We do witness the interest that the potential foreign customers express concerning our AESA radars - with those projects being finalized - and VSHORAD systems. When it comes to the latter, I am also referring to comprehensive solutions based around SAM/AAA effectors, target detection, tracking, and fire control radars, and an advanced, automated C2 suite. We are engaged in talks on potential sales of those systems - for instance to Asia.
In the first decade of the 21st Century, the Kobra system was exported to Indonesia.
Currently, our solutions are far more advanced - both when it comes to command and control systems, providing a far more automated target neutralization process, as well as radars and effectors. The Kobra system had no fire control radar, or 35 mm guns at its disposal, allowing for precise engagement of targets. Currently, we remain in possession of capabilities as such.
Dynamic development of low-flying threats, UAVs included, means that global demand for defence systems as such is growing. As PIT-RADWAR, working with other PGZ Group companies, such as Mesko, delivering VSHORAD missiles, we can effectively neutralize this type of threat. These capabilities are broad, and - which is also relevant for the foreign customer - attractive when it comes to cost-effectiveness.
From our point of view, the best-case scenario is that the Polish Armed Forces procure this system first. The industry needs a clearly defined set of requirements that need to be consulted, thus made realistic - technologically and financially. Cooperation with the military is also relevant here. This always increases the credibility of the offer on the international market. We are promoting our VSHORAD solutions already today, they perfectly meet the market requirements.
Thank you for the conversation.