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Saab Interim Report January-June 2019

Interim Report Q2 2019

CEO Comment

Sales growth remains strong and operating margin improved

Saab continues to drive internationalisation of the business and several steps were taken in the first half of the year to strengthen the local presence.

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Magnus Örnberg
EVP and CFO
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Sales growth remains strong and operating margin improved

During the first half of 2019, Saabs sales increased by 8 per cent and the operating margin improved. Saab continues to drive internationalisation of the business and several steps were taken in the first half of the year to strengthen the local presence. A clear example of this is the decision to establish a new U.S. development and production facility in West Lafayette, Indiana, where Saab will manufacture its parts for the T-X advanced jet trainer ordered by the U.S. Air Force.

Orders

Order bookings during the first half of 2019 amounted to SEK 9.7 billion (12.7). During the period, an order was received from the U.S. Coast Guard for the Sea Giraffe Multi Mode Radar, and the United Kingdom Royal Navy ordered an anti-submarine training system. The business area Dynamics saw continued strong demand. Two major framework agreements were signed for the Carl-Gustaf multi-purpose weapon system and AT4 disposable weapon system.
Small orders increased strongly compared to the same period in 2018. Market demand remains strong and during the remaining part of the year, Saab see substantial business opportunities.

Sales and operating income

Sales in the first half year amounted to SEK 16,941 million (15,719) with organic growth of
7 per cent.  The increase in sales is primarily related to higher level of deliveries within business area Dynamics and a higher activity level within business area Industrial Products and Services.
Operating income amounted to SEK 1,221 million (905) with an operating margin of 7.2 per cent (5.8).  Measures taken to increase productivity contributed to improved margin in the period. Saab has a strong focus on securing delivery of milestones in major projects. The HMS Gotland was relaunched in the second quarter, which means that two of Sweden’s Gotland-class submarines have now concluded comprehensive mid-life upgrades. Development and production of the Gripen E fighter continued according to plan and during the period a third aircraft performed its first flight.
Efforts to adapt the product portfolio, increase marketing efficiency and accelerate the pace of automation and digitisation in operations continues.

Operational cash flow

Operational cash flow amounted to SEK -2,702 million (-2,750). Cash flow was negative mainly due to increased working capital within the business area Aeronautics, where preparations for the first deliveries of Gripen E to Brazil and Sweden continue.
Saab expects operational cash flow to be negative for the full-year 2019, but at a better level than 2018. Operational cash flow will continue to be affected during the year by timing differences in payments for major projects with a high activity level.

Key Figures

Our growth journey continues

Why invest in Saab?

To achieve the strategic and financial goals that have been set, Saab operates based on specific objectives. Saab is working to further strengthen its presence in key markets, develop innovative solutions and acquire companies in priority areas. Internally, efficiency programmes are used to continuously improve productivity.

The focus is on continuously developing leaders and employees to build a culture focused on performance, innovation and motivation. Saab’s employees drive the business forward and sustainability is reflected in everything Saab does. Saab is an international partner that contributes to increased security and defence capabilities in Sweden and other countries, which is the foundation of Saab’s commitment to sustainability.

A local presence close to customers creates stronger relationships and collaborations and greater insight into customers’ needs. Better understanding these needs creates opportunities to develop the right combination of products and solutions, which in turn means that Saab also becomes more efficient and more focused on project execution, marketing and sales.

Sales

BSEK
16.9

Organic sales growth

%
7

Operating margin

%
7.2

Adjusted operating income
and operating margin

MSEK

Order bookings
and sales

MSEK

Saab Interim Report
January-June 2019

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A step ahead

Saab’s strategy is based on three priority areas

Market

The market Saab operates in, both nationally and internationally, is changing rapidly, and Saab has to act faster to stay ahead. The focus is on areas where the company has a strong market position and on further strengthening that position in areas with good growth potential.

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Innovation

Saab has been shaped by fierce competition and strict requirements on low product lifecycle costs. Saab knows what is needed and how to get there: the latest technology, the smartest solutions and the newest innovations. Saab’s competent and engaged employees are the key, and Saab believes that diversity drives innovation.

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Performance

In a world of constant change and fierce competition, high efficiency and shorter lead times are essential in order to meet customer demands with technology and solutions that increase their capabilities and profitability. Saab has to be able to deliver more for less, which is why raising efficiency is a continuous process. 

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Focus and priorities generate good margins

The business unit Training & Simulation, with nearly 500 employees in 11 countries, has delivered a significant earnings improvement in recent years. In 2015, the unit reached breakeven, but in 2016 the numbers turned higher and in 2018 Training & Simulation again delivered good results.
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