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Saab Interim Report January-September 2019

Interim Report Q3 2019

CEO Comment

Strong orders, organic growth and continued margin improvement

During the first nine months of 2019, Saab reported a strong order intake and an organic growth of 11 per cent.

Håkan Buskhe
President & CEO
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Strong orders, organic growth and continued margin improvement

During the first nine months of 2019, Saab reported a strong order intake and an organic growth of 11 per cent. The development is in line with Saab’s goals: continued sales growth and improved margins. The focus has continued to be on the implementation of Saab’s major programs. Executing them according to plan is the basis of Saab’s development, together with further investments in technology and internationalisation.

Orders

Order bookings amounted to SEK 19,093 million (17,183) in the first nine months. Several orders contributed positively to the quarter, primarily the order from Finland’s Ministry of Defence to provide and integrate combat system for Finland’s new corvettes as part of the Squadron 2020 programme. This is a major milestone for Saab as it means a reference customer in advanced combat systems, integration and sensors. Further, it is of strategic importance for Saab when other countries procure this type of advanced systems.

Small orders continued to grow compared to the third quarter of 2018. Increasing the number of small and medium-sized orders has been a goal for Saab. Market demand remains strong and going forward Saab sees good business opportunities.

Sales and operating income

Sales in the first three quarters amounted to SEK 24,855 million (22,138), corresponding to an organic growth of 11 per cent. The increase is mainly driven by business area Dynamics but also from strong development in other business areas.

Operating income amounted to SEK 1,739 million (1,142) with an operating margin of 7.0 per cent (5.2). Saab has continued to strongly focus on implementation and delivery of key milestone projects, while at the same time, it is important to efficiently develop the smaller sized and recurring businesses.

Efforts to improve efficiency and increase productivity are continuing and the measures taken are reflected in the period’s stronger operating margin compared to the third quarter of 2018. The work to adapt the product portfolio is also making progress. Digitalization and automation of operations are continuing and during the quarter several steps were taken to more efficiently manage markets and sales, such as the appointment of Chief Marketing Officer, who will become a member of the Group Management.

Operational cash flow

Operational cash flow amounted to SEK -4,356 million (-5,197) and is in line with the development previously communicated for 2019. The negative cash flow can mainly be attributed to the high level of completion of Saab’s major contracts, mainly in Aeronautics. Saab maintains its view that operational cash flow will be at a better level for the full-year 2019 than 2018, as large milestone payments are scheduled in the fourth quarter.

CEO change

During the third quarter, Håkan Buskhe announced that he is stepping down as President and CEO of Saab. The Board appointed Micael Johansson as his successor, he takes over on October 23.

Outlook statement for 2019:

We estimate that sales growth in 2019 will be in line with Saab’s long-term financial goal: annual organic sales growth of 5 per cent.  The operating margin in 2019, excluding material non-recurring items, is expected to improve compared to 2018, bringing Saab a step closer to its long-term financial goal: an operating margin of 10 per cent per year over a business cycle.

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
24.9

Organic sales growth

%
11

Operating margin

%
7.0

Adjusted operating income
and operating margin

MSEK

Order bookings
and sales

MSEK

Saab Interim Report
January-September 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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