INTERIM REPORT January – June 2005

•Sales amounted to SEK 8,433 m. (8,370)

•Net income for the period was SEK 386 m. (519)

•Earnings per share amounted to SEK 3.52 (4.65)

•Order bookings during the first half-year amounted to SEK 6,962 m. (8,734)

•The order backlog totaled SEK 43 billion (46)

•Operating income was SEK 570 m. (763) and income after financial items was SEK 544 m. (725). Operating income includes a provision of SEK 250 m. allocated for the helicopter project

•The whole year projection is adjusted with the provision regarding the helicopter project

Statement by the CEO
“The first half-year developed in line with our plans and previous forecasts, with the exception of the provisions needed for one of our development projects. As in previous years, sales were slightly lower than the annual rate. Income as a whole remained stable and the margin before provisions and structural costs was 11.1 percent, against 9.8 percent in the first half of 2004. Operating income has improved for the Defense & Security Solutions and Systems & Products business segments, while we are seeing a decline in Aeronautics, mainly due to lower margins in the Gripen program and the recent provisions for the Helicopter project.

We continue to strengthen our position internationally and are seeing increased business opportunities in all our business segments. Moreover, we are broadening operations in key areas such as expanded lifecycle commitments and civil security. Order bookings continue to be dominated by the international market, and 62 percent of our orders during the first half-year are attributable to the foreign markets. The largest single order was for subsystems of the IRIS-T IR-guided air-to-air missile worth approximately SEK 850 million. Series production will continue until 2011. During the first half-year orders were also received for a fire control system and vehicle computers for the Dutch Army's CV9035 combat vehicles worth SEK 700 m. Additionally an order was received from Australia to upgrade the command and control system for the ANZAC frigates valued at SEK 650 m.

We are awaiting a decision by the government on Sweden's participation in the European development of a demonstrator for the Neuron unmanned combat aircraft. The project complements our Gripen program and represents an important opportunity for Saab, by taking a leading role in such a future-oriented research project, to ensure that it retains its aeronautics competence. Investments in unmanned aerial technology are completely in line with the defense decisions and the aviation and space strategy that the Swedish parliament and government have supported after several years of analysis. We are concerned that the decision on the Neuron project participation has yet to be made.

We have previously noted that appropriations for the Swedish defense will gradually decline in the years ahead. This will lead to fewer development projects and shorter production series for the defense industry. Saab will therefore continue to pursue efficiencies and adapt its Swedish operations. More than a thousand employees were laid off in Sweden in 2003 and 2004, and during the first half-year a total of 760 employees were given their notice. Our previous estimate of 1,000 – 1,500 redundancies in 2005 and 2006 remains unchanged.
This makes Saab’s strategy to internationalize even more important. The previously announced acquisition of an additional 56 percent shareholding in Grintek Ltd of South Africa has now been finalized, making Saab the majority owner, with a total of 77 percent of the capital, representing 70 percent of the votes. The integration of operations in Sweden and South Africa has begun and already in June the next step in the cooperation was taken when a joint unit for electronic warfare and aeronautics, Saab Avitronics, was established.

On July 4 we had to announce that the development of the Tactical Mission System (TMS) for the 18 helicopters that the Swedish Defense Materiel Administration, FMV, has ordered from NH Industries is greatly delayed, leading to unavoidable added costs. We feel that a provision is necessary in the second quarter, so income for 2005 has been charged with SEK 250 m. The total contract value is approximately SEK 2 billion.

In our full-year forecast we are projecting sales growth of slightly over 8 percent, of which organic growth accounts for approximately 5 percent. Other growth refers to the net of the acquisition of Grintek and the deconsolidation of Hawker Pacific, which is reported as an associated company this year. As previously announced, operating income is expected to generate a margin below last year's reported level of 9.3 percent and income after structural costs slightly lower than reported 2004, which was SEK 1 657 m. In addition, income was charged with provisions of SEK 250 m. that we decided to make for the helicopter program, which in itself reduces the margin by slightly over 1 percentage point. Our long-term objective of 10 percent remains unchanged.”


For further information, please contact:
Media:
Peter Larsson, Press SecretaryTel.+46-734-18 00 18

Financial market:
Göran Wedholm, Manager Investor Relations Tel. +46-13-18 71 21, +46-734-18 71 21
Lars Wahlund, CFO Tel. +46-13-18 71 35, +46-734-18 71 35


Press conference with CEO Åke Svensson and CFO Lars Wahlund
Today, Tuesday, July 12, 2005, 10:00 a.m. (CET)
World Trade Center, Stockholm
Contact Peter Larsson, Press Secretary, tel. +46-734-18 00 18


International teleconference:
Today, Tuesday, July 12, 2005, 4:00 p.m. (CET)
Contact Marita Sidén to register and for further information
Tel. +46-13-18 71 49, +46-734-18 71 49
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