INTERIM REPORT January - March 2000
* Sales increased 125% to SEK 4,498 m. (1,995, pro forma 4,182).
* Operating income increased 53% to SEK 256 m. (167, pro forma 196).
* Net income amounted to SEK 170 m. (150) and earnings per share to SEK
* Order bookings amounted to SEK 13.8 bn, of which 9.3 bn related to the
order of 28 Gripen from South Africa
* The acquisition of Celsius has now been completed and the new
organization is in operation since March.
Comment by the President
"During the last five years, Saab has shown uninterrupted growth in its
core activities. With the acquisition of Celsius, which doubles our size,
we are taking a quantum leap in this development. The merger creates the
breadth of high technology competence needed to continue supporting our
customers in the future and to be their natural first choice. We will
continue to take part in international joint programs and occupy a strong
position in the rapid restructuring currently in progress internationally,
while creating prospects for considerable cost and market synergies.
We are now in an intensive process of integration that demands both
financial and personnel resources, nevertheless our goal is to regain our
operating margin targets in this new constellation within about three
At present, we are working to streamline the Group, partly through
divestments of operations outside the core activities, in order to release
both capital and management resources. During the first quarter, Traffic
Systems has been divested together with two ship repair yards and in
April, Combitech Network was sold to the American IT group Computer
Sciences Corporation when we formed a partnership in the IT field.
However, we will also continue to grow both organically and through
acquisitions in our core operations. The markets where we are active have
good growth prospects, some in the short term, others in the long term.
This is our first report for the new constellation and although only a
short time has elapsed since the acquisition, our expectations so far have
already been fulfilled."
Following the acquisition of Celsius, Saab consists of the core business
areas Infomatics, Aerospace, Dynamics, Technical Support & Services and
Space, in addition to Aviation Services and Other operations. The process
of finding other owners for Aviation Services has started.
Business area Infomatics focuses on command and control systems,
simulation systems, avionics and electronic warfare, as well as commercial
operations in IT and electronics.
Sales amounted to SEK 1,027 m. (886). Almost every unit in the business
area increased its sales compared with the previous year, in particular
those operations in the areas of command and control systems, simulation
systems and electronic warfare. Operating income was SEK 61 m. (pro forma
-13), corresponding to an operating margin of 5.9 percent. The increased
operating margin is mainly attributable to considerably lower investments
in certain commercial development projects.
Order bookings totaled SEK 955 m. (pro forma 444) and included combat
management systems for an additional two "Visby" class corvettes for the
Swedish Armed Forces and laser simulators for the USA. In mid-April, an
order valued at over SEK 200 m. was received for upgrading the HeliTOW
anti-tank system on Danish army helicopters.
Business area Aerospace develops and manufactures military aircraft
systems and is a partner and supplier in subsystems for manufacturers of
large commercial aircraft. Business unit Gripen is the largest unit in the
business area. Gripen is the world's only fourth generation air combat
system in operational service.
Sales amounted to SEK 923 m. (pro forma 861), of which Commercial Programs
including sales of spare parts to Saab Aircraft was SEK 69 m. (64). The
increase is mainly due to the delivery during the period of four Gripen
aircraft, compared with three during the corresponding period last year,
and larger deliveries of spare parts and support. A total of 85 aircraft
have thus been delivered out of the total of 204 ordered by the Swedish
Defence Materiel Administration, FMV. Gripen is currently being delivered
to FMV at a rate of 17 aircraft per year. Operating income was SEK 94 m.
(pro forma 82), corresponding to an operating margin of 10.2 (9.5)
percent. The improvement in income is due to higher number of Gripen
delivered and the larger deliveries of spare parts and support. The
period's expenditures on the export program for the Gripen were higher
than for the corresponding period in the preceding year and are expected
to be higher also on a whole-year basis.
Order bookings was SEK 10,329 m. (pro forma 723), including the South
African order for 28 Gripen aircraft with related equipment, training,
etc. of SEK 9.3 bn.
Saab's activities in precision engagement have been gathered in business
area Dynamics, which develops and produces missile systems, portable anti-
armor systems and underwater systems for land, sea and air applications.
Sales amounted to SEK 572 m. (pro forma 678). Sales decreased in all parts
of the operation, mainly due to large deliveries of STRIX during 1999.
Operating income continued to be negative and amounted to SEK -23 m. (pro
forma -12). Intensive integration work has started in the business area
with the aim of realizing planned cost synergies.
Order bookings totaled SEK 438 m. (pro forma 618) and included Swedish
orders for the AK4, Carl Gustaf ammunition for various countries, and
orders for the RBS 70 from countries such as Australia and the USA.
Technical Support & Services
Business area Technical Support & Services provides advanced services for
both commercial and military customers. The business area is dominated by
AerotechTelub, which was formed on January 1 this year and is owned to 57
percent by Saab, which has an option of purchasing the remaining 43
percent, currently owned by TietoEnator, during autumn 2001. AerotechTelub
is an advanced service company primarily oriented towards technical
services, operation and maintenance, and systems for testing, simulation,
traffic management and customized information systems. The business area
includes Saab Nyge Aero, which is active in aircraft maintenance, aerial
target towing and special flight operations, in addition to upgrading and
retrofit work on earlier Saab aircraft.
Sales amounted to SEK 622 m. (pro forma 548). The increase compared with
the preceding year is mainly due to the acquisition of Nyge during the
second quarter of 1999 and acquisitions within Aerotech Telub earlier this
year. In recent years, Saab has grown both organically and through
acquisitions in the field of advanced services, which is considered to be
an interesting future market. Operating income was SEK 46 m. (pro forma
44), corresponding to an operating margin of 7.4 (8.0) percent. The
decrease in operating margin is attributable to normal variations between
Order bookings totaled SEK 723 m. (pro forma 556) and contain a large
number of small orders.
Space, which is owned to 60 percent by Saab and 40 percent by Ericsson,
develops and manufactures onboard computers, antennas and other electronic
and mechanical equipment for the space industry.
Sales amounted to SEK 163 m. (176) and included a number of onboard
computers for satellites and launch rockets. Just over 50 percent of sales
went to the commercial telecom market and 95 percent of total sales went
to markets outside Sweden. The slight decrease in sales compared with the
preceding year is attributable to normal variations between the quarters.
Operating income was SEK 16 m. (17), giving an operating margin of 9.8
percent, which is on a level with the preceding year.
Order bookings amounted to SEK 167 m. (216) and included further orders
for both the European and American meteorological satellite programs and
the scientific satellite, Rosetta. Half the order bookings related to
markets outside the institutional sector.
Celsius Aviation Services, CAS, is a commercial aircraft maintenance
company focused on the USA. CAS operations lies outside the strategy and
orientation chosen by Saab for the future and work has already been
started on finding another owner.
Sales during the first quarter amounted to SEK 820 m. (629) and operating
income was SEK 26 m. (47). The decrease in income is partly due to
seasonal variations and as reported earlier an increased competition in
the American market. Order bookings during the quarter amounted to SEK 836
Other operations include long-term commitments in the form of the leasing
portfolio and maintenance operations for Saab's regional aircraft, as well
as Bofors Weapon Systems and a number of small niche companies. To handle
the long-term provision of capital for these companies and to realize
values, we are seeking structural solutions for several of these
operations. Among other things, negotiations have been in progress for
some time for the sale of Bofors Weapon Systems and during April,
Combitech Network was divested.
In March, we announced together with nine other leading companies the
largest European initiative in electronic trading solutions between
companies, known as B2B. Our primary motive for investing EUR 10 million,
almost SEK 90 million, in this field is to enable both future growth
potential and cost savings through knowledge exchange.
Sales, income and orders
Group sales increased by 125 percent to SEK 4,498 m. (1,995, pro forma
4,182). Sales of core business was SEK 3,094 m. (pro forma 2,950). Growth
in several of the core business areas has been offset by the shrinking
sales in Dynamics. For other operations, the increase is mainly
attributable to CAS and Saab Aircraft.
Operating income increased 53 percent to SEK 256 m. (167, pro forma 196),
corresponding to an operating margin of 5.7 percent. Operating income of
the core business amounted to SEK 255 m. (pro forma 133), equal to an
operating margin of 8.2 (4.5) percent. The improved operating income is
mainly attributable to lower investments in certain commercial development
projects in Infomatics, to the capital gain of SEK 55 m. from the sale of
Traffic Systems and to lower overhead costs. Project interest on non-
utilized advance payments, accounted for in gross margin, amounted to SEK
48 m. (71).
The period's losses for closing Regional Aircraft of SEK -105 m. (-89) and
in Saab Aircraft Leasing of SEK -35 m. (-22) have according to plan been
charged against the termination reserve and loss risk reserve
Marketing activities in general have been higher during the first quarter
this year compared to the corresponding period last year. Research and
development costs amounted to SEK 210 m. (pro forma 177). The increase is
partly attributable to development work on the export version of Gripen.
Other operating income consists among others of capital gains from
divesting operations of SEK 55 m. (5).
Net financial income and expenses amounted to SEK 12 m. (pro forma -25).
The income improvement is mainly attributable to the income portion of
HDW, which amounted to SEK 21 m., being reported as financial income. The
average return on liquid funds was 3.14 (4.6) percent. Income after
financial income and expenses amounted to SEK 268 m. (pro forma 171).
Current and deferred taxes amounted to SEK -77 m. (pro forma -52),
corresponding to an effective tax rate of 29 percent on income after
financial income and expenses.
Group order bookings during the first three months amounted to SEK 13,790
m. (pro forma 3,485), including among others 28 Gripen aircraft with
related equipment, training, etc. to South Africa to an order value of SEK
9.3 bn. The order backlog at the end of the period was SEK 41,914 m.,
compared to SEK 31,871 m. at the beginning of the year.
Liquidity, finance and investments
Finance and liquidity
Cash and marketable securities, less liabilities to credit institutions,
have compared to pro forma opening balance decreased by SEK 791 m. to SEK
5,633 m. (6,424). The decrease is mainly due to the utilization of
advances as the projects progress within Gripen and the
phasing out of Regional Aircraft. The Group's financial position is strong
and net liquidity after deduction for provision for pensions amounted to
SEK 2,025 m., compared to SEK 2,820 m. in the pro forma opening balance.
The Group's capital expenditures in property, plant and equipment,
excluding leasing assets, amounted to SEK 85 m. (pro forma 128). The
decrease is mainly due to lower investments in buildings and a few major
investments within Commercial programs during 1999.
At the end of the period, the number of employees in the Group was 16,795,
compared with 17,213 at the beginning of the year.
Saab's principal owners are Investor AB, BAE SYSTEMS, US funds, the
Wallenberg foundations, Fifth National Pension Insurance Fund, AMF and
This Interim Report has been drawn up in accordance with earlier
accounting principles. Celsius is included in the Saab Group as from
January 1, 2000. For comparability pro forma figures are published, which
refers to the Saab Group including Celsius for the whole year 1999 and the
first quarter of 1999. The pro forma figures will be adjusted in pace with
the restructuring of the Group.
Linköping, April 27, 2000
President and CEO
This Interim Report has not been subject to review by the Company's
Dates for financial information:
Interim Report for January - June will be published on July 13, 2000.
Interim Report for January - September will be published on October 25,
For further information, please contact:
Lars Jagerfelt, Vice President, Corporate Communications
tel. +46 13 18 71 65
Agneta Kammeby, Investor Relations, tel. +46 13 18 71 25
(President Bengt Halse will be available for questions by phone today
between 5.30 pm and 6.00 pm)
The interim report can also be accessed on the Internet at www.saab.se
Please visit http://www.bit.se for further information
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