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Saab Interim Report January-June 2020

Interim Report Q2 2020

CEO comment

Strong orders and continued good profitability

During the second quarter of 2020, the COVID-19 pandemic had a major impact on people, countries and companies around the world. The situation affects Saab as well, but our defence business remains strong.

Micael Johansson
President & CEO
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Our civil business, on the other hand, is facing a larger impact from the pandemic, with demand in civil aviation being significantly down. Despite these challenges, Saab showed a strong performance in the second quarter and results for the first half-year were in line with last year.

Since the COVID-19 outbreak, Saab has effectively utilised modern technology to interact with existing and new customers. This enabled further increases in orders during the quarter and successful execution of key milestones. A number of measures were taken to adjust costs in operations that have been adversely impacted by the ongoing crisis. This work is expected to continue in 2020. Given the ongoing pandemic, Saab cannot however rule out further impact on its business, particularly in the supply chain. Saab is entering the third quarter with a strong order backlog, which continues to support a significant portion of this year’s expected sales. For 2020, the aim remains that operational cash flow will be positive.

Saab continues to execute on its strategy with a focus on further internationalisation and investments in the product portfolio’s core areas. Focus is also on project execution and Saab remains committed to its long-term financial goals for growth and profitability.

Orders

Order bookings in the first half of 2020 increased by 45 per cent to SEK 14,070 million (9,710). The increase was a result of continued demand for defence products and solutions, where Saab in this challenging time, signed both large and mid-sized orders. Growth in small orders was 9 per cent. Orders in the second quarter included support contracts for both Gripen and SK60 for Sweden, orders for Airborne Early Warning and Control (AEW&C) systems and orders from the U.S., Estonia and Latvia for Carl-Gustaf systems.

Sales and operating income

Sales in the first half of 2020 were in line with the same period in 2019 at SEK 16,876 million (16,941). In the second quarter, Saab reported sales growth of 5 per cent driven by good project execution and increased deliveries in several business areas.

Operating income amounted to SEK 1,212 million (1,221) in the first half of the year, corresponding to a margin of 7.2 per cent (7.2). The negative impact on the civil business was offset by higher sales volumes within the defence business and cost reductions.

During the quarter, Saab delivered the first GlobalEye Swing Role Surveillance System to the United Arab Emirates. In addition, the first flight trials were completed with the new fighter
X-band AESA radar. During the quarter, the partnership with the UK regarding the Future Combat Air System (FCAS) was intensified and new studies were conducted.

Operational cash flow

Operational cash flow strengthened in the first half and was SEK 235 million (-2,702). The improvement mainly relates to milestone payments from major programmes as well as deferments of taxes and fees.

Outlook statement for 2020

Due to uncertainty related to the scope and duration of COVID-19, it was stated in the first quarter interim report of 2020 that the previous forecast for the full-year 2020 could not be confirmed. Saab reiterates this assessment.

Key Figures

Saab as an investment

Saab’s strong growth in recent years has been supported by conscious choices in focus markets, international partnerships, and research and development. This has laid the foundation for a unique position, as Saab is entering a production and delivery phase and focus is on cash flow.

Order bookings

BSEK
14.1

Sales

BSEK
16.9

Operating margin

%
7.2

Adjusted operating income and operating margin

MSEK

Order bookings
and sales

MSEK

Saab Interim Report
January-June 2020

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A STRATEGY TO SUPPORT OUR GOALS

Saab’s strategy is based on four priority areas

Market

Saab is active in a constantly changing market and has to react quickly to stay a step ahead. The focus is on a number of selected markets and areas where the company already has a strong position to build on for future growth.

Innovation

Only by constantly challenging, questioning and refining new innovations can Saab stay on the forefront and remain a leader in the development of cost-efficient systems and products. For this, Saab needs skilled and engaged employees with a diversity of perspectives.

Portfolio

Saab has broad expertise in military systems and can also offer competitive systems in civil security. To ensure future profitability, the company works strategically and long-term to further sharpen its portfolio. The goal is to concentrate development in product areas that give customers the most value.

Performance

High efficiency and short lead times are essential for Saab to meet its customers’ needs and to compete in the market. The focus is on fulfilling current commitments and continuously work to increase efficiency, not least with the help of digitisation.