Saab AB Interim Report January-September 2001

INTERIM REPORT January - September 2001

· Order bookings after nine months amounted to SEK 11 billion.

· Sales amounted to SEK 11,000 m. (12,313), an increase of 3% for
comparable units.

· Operating income amounted to SEK 1,230 m. (876).

· Earnings per share amounted to SEK 8.28 (4.81).

· After-tax return on shareholders' equity 24.2% and pre-tax return
on capital employed 18.1%.

· AerotechTelub becomes a wholly owned subsidiary.

· Helicopter purchase is expected to bring Saab business worth SEK 2

· Hungary has started negotiations on leasing Gripen aircraft.

Statement by the CEO

"The defense-related operations continue to develop satisfactorily and
during the third quarter it was decided that the highly qualified
service company AerotechTelub will become a wholly owned subsidiary of
Saab, which will create even better possibilities for collaboration and
synergies within the group.

Order bookings during the third quarter also continued to be good. Among
other things, a Swedish order of about 500 million SEK was placed with
Gripen for the integration of new precision weapons. Training Systems
gained its fourth NATO customer for instrumented training systems with
an order from Italy. The order backlog thereby continues to be some 40
billion SEK, equivalent to about two and a half years' sales.

By utilizing the know-how in systems engineering from Gripen, together
with the command and control competence added through the acquisition of
Celsius, Saab can now undertake total responsibility for the tactical
system in Sweden's new medium-weight helicopter, a contract that
together with production of helicopter cabins is expected to give Saab
contracts directly worth 2 billion SEK. In addition, negotiations are in
progress on the sale of further RBS70 air defense missiles to Australia
and in September Hungary decided to start negotiations with Sweden on
leasing used Gripen aircraft.

Streamlining and development of the group have continued also during the
third quarter. The majority in American Aero Systems Engineering, which
was part of Celsius Aviation Services, has been divested. Collaboration
with BAE SYSTEMS in marketing and sales of Gripen, which started in
1995, has been further strengthened through the formation of a jointly
owned company named Gripen International and we have acquired
TietoEnator's 43 percent share in AerotechTelub.

The tragic events in the USA last month and the subsequent world
situation will have a negative influence on our operations in commercial
aircraft, but it is too early to totally overview the consequences and
quantify the effects on income. Our operations in commercial aircraft
currently account for just over 10 percent of total sales. Owing to
lower utilization of aircraft, the after market for the Saab 340 and
Saab 2000 will probably see decreasing volumes with related fall in
income. We are also analyzing the long-term consequences and impact on
value for those parts of the former Celsius Aviation Services where we
still have owner interests. For the leasing fleet of regional aircraft,
revenues may be influenced, but here we have already made provisions and
reduced risks through insurance, and therefore we do not expect any
effect on income. In the case of deliveries to Airbus, operations are
still in a build-up phase and volumes are small; consequently, any
impact on income is expected to be limited.

After nine months of the year, we can see that operating income both
before and after capital gains has improved compared with the same
period last year. We forecast that the profit per share for the whole
year will be broadly in line with last year. The result depends on the
possible impact on Saab Aviation Services of the recent events."

Major events and structural changes

During the third quarter, 51 percent of the shares in American Aero
Systems Engineering Inc. have been divested to Minnesota ASE, LLC. Saab
continues to own 29 percent of the shares and the remaining 20 percent
are listed on Nasdaq. The effect on earnings of the divestment has been
considered in the fair value analysis that was done in connection with
the acquisition of Celsius, and will not affect the earnings of the Saab
Group. The divestment has had a positive effect of about 70 million SEK
on net liquidity.

With closing during the fourth quarter this year, the minority share in
AerotechTelub has been acquired from TietoEnator for 1,100 million SEK.
The acquisition has been approved by the Swedish Competition Authority.
Discussions on the acquisition of 65 percent in Fokker Space are
continuing. Although the EU Commission has approved the purchase, we
have still not received satisfactory guarantees from the seller
regarding certain earlier contracts. The risk that the acquisition will
not be completed is therefore significant.

Saab Marine Electronics was sold earlier this year with a capital gain
of 650 million SEK. The divestments of Celsius Amtec, Celsius Aerotech,
the military division of Hawker Pacific, the Kockums engineering
workshops and other operations have taken place without any impact on
income, and agreement has also been reached on the gradual divestment of
Hawker Pacific. Through the venture capital function, the share in
Triangle Equipment A/S, 60 percent in A2 Acoustics and Sanguistech has
been divested during the first six months. With effect from the
beginning of the year, the minority share in Ericsson Saab Avionics has
been acquired for 225 million SEK.


Saab is one of the world's leading high-technology companies, with its
main activities focusing on aerospace and defense. The operation covers
clearly defined areas within defense electronics, missile systems and
space electronics as well as military and civil aviation. Saab also
focuses on high technology services and maintenance. Saab comprises the
business areas Saab Systems & Electronics, Saab Aerospace, Saab
Technical Support & Services, Saab Bofors Dynamics, Saab Ericsson Space
and Saab Aviation Services. For a brief description of the business
areas see the last page in the report.

Sales, income and orders

Group sales decreased to SEK 11,000 m. (12,313), due to divestments of
companies and operations mainly within Systems and Electronics and
Aviation Services. For comparable units, sales increased by 3 percent.
During the first nine months, eleven (twelve) Gripen aircraft were
invoiced, of which three (three) in the third quarter. The sales
increase in Technical Support & Services is mainly attributable to the
defense related business within AerotechTelub. The increase in Dynamics
is mainly related to anti-armor weapons and for Space the volume growth
continues. Sixty-seven percent of sales were related to defense and the
foreign markets' share of total sales was 45 percent.

Income and profitability
Operating income amounted to SEK 1,230 m. (876). The result includes the
capital gain from the divestment of Saab Marine Electronics of SEK 650
m. and last year's income included capital gains etc of SEK 386 m.
Operating income before capital gains was SEK 580 m. (490) corresponding
to an increase of 18 percent, which mainly is due to the restructuring
of Dynamics and good profitability in Saab Aviation Services. Both this
year and last year, third quarter operating income have been affected by
lower volumes due to the holiday period.

Operating income and margin for the remaining operations in Systems &
Electronics are on a level with the previous year. Operating margin for
Aerospace continuos to be on the 9-percent level. Operating income for
Technical Support & Services is on a level with the previous year, but
due to variations during the year the business area had a somewhat lower
operating margin. For Dynamics the positive trend following last year's
rationalization has continued. Operating margin for Space is still
somewhat low as a result of internally financed development. Saab
Aviation Services reports continued good profitability. Project interest
on non-utilized advance payments, accounted for in the gross margin,
amounted to SEK 85 m. (128).

Operating expenses are generally somewhat lower compared to the same
period in the previous year. Other operating income during both the
present and previous years consists mainly of capital gains, trading
income in Treasury business and currency gains, etc. Other operating
expenses consists mainly of currency and capital losses. Items affecting
comparability the previous year related to funds received from SPP and
provisions for certain development projects.

Net financial income and expenses amounted to SEK -33 m. (-67). The
average return on external investments amounted to 4.63 percent. Income
after financial items amounted to SEK 1,197 m. (809). Current and
deferred taxes amounted to SEK -267 m. (-234). The tax portion of income
after financial items has been affected by the fact that certain capital
gains have been assessed as tax-free and that certain capital losses
have been assessed as non-deductible and goodwill amortization. The
Group's effective tax rate for the year, excluding these one-recurrent
items and before goodwill amortization, is calculated at 29 percent.

Net income for the period was SEK 882 m. (512), corresponding to an
income per share of SEK 8.28 (4.81). Income per share before goodwill
amortization amounted to SEK 9.37 (6.10) and to SEK 11.47 for the year

Group order bookings during the first nine months amounted to SEK 10,897
m. (23,098), of which the third quarter SEK 2,977 m. (5,209). Third
quarter order bookings included the integration of new precision weapons
for the Swedish Gripen program, an order from Italy for GAMER
instrumented training systems, a new Swedish aerial target towing
agreement, an order from Norway for camouflage systems and further
development of the Swedish Armed Forces' command and control system,
StriC. The order backlog at the end of the period amounted to SEK 40,492
m., compared to SEK 41,091 m. at the beginning of the year.

Liquidity, finance and investments

Finance and liquidity
Compared to opening balance, liquid funds less liabilities to credit
institutions increased by SEK 473 m. to SEK 4,415 m. (3,942). The
increase is mainly a net of new advances and divestments of businesses
and high utilization of advances within Gripen, utilization of
structural reserves, payment of dividend and acquisitions of businesses.
The Group's net liquidity after deduction for allocations to pensions
amounted to SEK 802 m., compared with SEK 415 m. at the beginning of the

Group equity/assets ratio amounted to 21,3 percent (14.9) compared with
18.2 percent in the opening balance. Shareholders' equity amounted to
SEK 6,495 m. (5,147), corresponding to SEK 61.01 (48.35) per share,
compared with SEK 53.26 at the beginning of the year.

Cash flow
Group cash flow from operating activities continued to be good. Working
capital has despite higher advances developed negatively mainly due to
increased inventories, utilization of part of last year's provisions
within Dynamics, payments related to the regional aircraft business and
decreased lease obligations. The cash flow from investments has been
positively affected by divestment of lease assets. Operating cash flow
was positive and amounted to SEK 585 m. (88).

Capital expenditures
The period's capital expenditures in property, plant and equipment,
excluding lease assets, amounted to SEK 335 m. (304).

At the end of the period, the number of employees in the Group was
14,281, compared with 15,453 at the beginning of the year. The decrease
is mainly related to divestment of operations.

Saab's principal owners are Investor AB, BAE SYSTEMS, the Wallenberg
foundations, AMF, Fidelity Funds, MFS Funds, Skandia and Third AP fund.

Accounting Principles
The report has been drawn up in accordance with earlier accounting
principles. This means that divested companies such as Saab Marine
Electronics, Celsius Amtec, Celsius Aerotech and Aero Systems
Engineering are not included in the Group for any part of 2001. The
figures for 2000 have not been adjusted for external acquisitions and
divestments made during 2001. However, sales and operating income by
business area for the year 2000 have been adjusted for internal

Linköping, October 19, 2001

Bengt Halse
President and Chief Executive Officer

This Interim Report has not been subject to review by the Company's

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