interim report - saab ab · dec. 2008 dec. 2009 dec. 2010 dec. 2011 dec. 2012 june 2013 capitalised...

INTERIM REPORTJANUARY – JUNE 2013

President and CEO Håkan Buskhe19 July, 2013

SUMMARY JAN-JUNE 2013Despite challenging market conditions; increasing order intake in 4 of 6 business areasSales development flat; organic decline by 1 per cent Adjusted for non-recurring items, operating margin increased in 4 of 6 business areas• Continued investments in development and lower sales led to an operating

loss in Electronic Defence Systems• Weaker sales and demanding market situation in Dynamics led to lower

operating margin

Efficiency measures in order to create prerequisites for achieving long-term targets; actions in 2013 aim at improvements of MSEK 500

VISIBLE SHIFT IN MILITARY SPENDINGIn 2012, world military spending fell for the first time since 1998Noticeable shift in spending from the West to other parts of the worldIn the western world austerity measures reduced military spendingRest of the world, except for the Middle East and North Africa, show a slowdown in growth rate of spending

100

7.9

23.2

22.2

40.3

44.5

2.2

% of total

Change (%)

Spending (USD billions)

Region

WORLD MILITARY SPENDING, 2012

-5.5708North America

-0.41,756World total

8.3138Middle East

2.0407Europe

3.3390Asia and Oceania

-4.7782Americas

1.239Africa

Source: SIPRI YEARBOOK 2013, Summary

Increased demands for European competitiveness in the world marketAffordability, multi-functionality and time-to-market essential

SPENDING SHIFT MEANSDIFFERENT MARKET DEMANDS

JANUARY - JUNE IN BRIEF 2013

Jan-June 2013SwedenInternational

66%

57%

55%

29%

Sales

Order backlog

Order intake

Jan-June Jan-June

MSEK 2013 Change, % 2012

Order bookings 22,036 89 11,644Order backlog 44,337 20 37,069

Sales 11,748 - 11,805

Operating income 545 -52 1,133Operating margin, % 4.6 9.6

Net income 263 841

Net liquidity 1,264 2,988

Operating cash flow -1,091 196

INTERNATIONAL GROWTH MSEK, change in %

Americas

1,8171,682 1,4071,201

Jan-June 2012 Jan-June 2013

8%17%

Africa

180380 462

698


-53%-34%

Rest of Europe

268460

247142


-42% 74%

EU excl. SE

1,6641,973 1,8982,243


-16% -15%

Asia

2,096

402

2,1272,468


421% -14%

Order intakeSales

6,2825,025

4,391


151%

22%

15,737Sweden14%

Australia, others

274465 582662


-41%-12%

Growth driven by Gripen E development order

Austerity measures impact the European market

Market conditions in Africa demanding; political turbulence

Sequestration in the USOrders received in Brazil in first half 2013

Increased competition in Asia

GRIPEN E/F UPDATE

Production of next Gripen E/F test aircraft started in June 2013• First flight during 2015

Phase 5 upgrade finished• IRST - Infrared Search and Track• Digital HUD• 4 channel AESA fully integrated

Political process in Switzerland is on-going and procurement decision is expected in 2014

FOCUSED INVESTMENTS FOR GROWTH

4 of 6 business areas improved underlying profitability; mainly due to improved project execution • Electronic Defence Systems operating loss mainly as a consequence of

investments in early stage product development

Adjusted for material non-recurring items, operating income of MSEK 776 (926), operating margin of 6.6% (7.8) Non-recurring items of negative MSEK 231 in 2013; compared to positive MSEK 207 in 2012Operating cash flow generation – remains a key focus

4,5%7,8%7,2% 6,6%

3,1%

2,6% 2,6%1,9%

Jan-June2010

Jan-June2011

Jan-June2012

Jan-June2013

24,4% 26,9%30,3%

27 ,3%

Jan-June2010

Jan-June2011

Jan-June2012

Jan-June2013

Gross margin Operating margin

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Amortisation and write-down of capitalised development costs

Operating margin excluding material capital and other non-recurring items

ELECTRONIC DEFENCE SYSTEMS Lower level of sales in first half 2013 as a consequence of lower level of order bookings in 2011 and 2012Operating loss in first half year 2013 a result of lower level of sales, increased investment in development and a different project mix compared to 2012Focus for investments in development:• Radar technologies • Module based multifunctional systems• Time-to-market

Measures have been taken to increase efficiency; including are-organisation during second quarter

EFFICIENCY IMPROVEMENTS TO REACH LONG-TERM TARGETS

To remain one of the most cost effective companies in the industry, it is a must to continuously adjust operations to market demand

Measures in 2013 aim at efficiency improvements of MSEK 500 during coming years

Actions:• Volume adjustments

• Introduction of new working practices to reduce development, production and overhead costs across the company

• An increased focus on prioritised areas within product development

Outlook Statement 2013As a consequence of the market situation, continued high investments in product development and costs for measures to increase efficiency, we have adjusted the outlook:

In 2013, we estimate that sales will be in line with 2012.

The operating margin in 2013, excluding material net capital gains and other non-recurring items, is expected to be in line with the operating margin in the first half-year 2013, excluding material non-recurring items.

Interim reportJANUARY – JUNE 2013 Financials more in detailMagnus Örnberg, CFO19 July, 2013

SUMMARY JAN-JUNE 2013P

RO

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TH Order intake strong, flat sales developmentMarket situation with tough competition – important to adapt operations

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Pension net liability changes as discount rates changeOperating cash flow negative; mainly due to timing differencesin milestone paymentsNet liquidity decreased due to negative operating cash flow, investments and dividend paid

Different project and product mix impacted gross marginFocus on reducing overhead costs; Marketing, Administrative costs reduced in the first half year 2013Focused investments in future product launches; mainly in Electronic Defence Systems

Q2 2013Q1 2013Q4 2012Q3 2012Q2 2012Q1 2012Q4 2011Q3 2011Q2 2011Q1 20110

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6 Large ordersSmall orders*Book-to-Bill ratio

5,215

Book-to-bill ratio(12 months rolling)

58%

42%

5,431

46%

54%

3,14740%60%

MSEK

ORDERS RECEIVED

5,114

43%

57%

4,00019%81%

7,644

70%

30%

4,111

46%

54%

4,928

53%

47%

86%

14%

Order intake of orders below MSEK 100 held up well in the second quarter

Order intake of orders below MSEK 100 held up well in the second quarter

18,865

77%23%

3,171

*Small orders = Orders below MSEK 100

3,873

1,427637

2,9832,1061,547

11,239

2,464

1,364749

2,563

4,633

Aeron. Dynamics EDS SDS S&S Combitech

MSEK

GROWTH PER BUSINESS AREA

Austr, etc1%

Asia10%

SE71%

EU excl SE8%

RoE1%

Americas8%

Africa1%

Sales per region

3,123

2,394

672

1,623

2,677

2,289

3,482

2,774

1,848

820

1,6601,969

Aeronautics Dynamics EDS SDS S&S Combitech

MSEK 11%

-23% -14%

Austr, etc5%

Asia18%

SE43%

EU excl SE

16%RoE2%

Americas12%

Africa4%

Order bookings per region

4%

2%

22%

Sales per business area

Order bookings per business area

Jan-June 2013

Jan-June 2012

Jan-June 2013

Jan-June 2012

ORDER BACKLOG Order backlog duration(SEK billion):

June 2013 June 2012 Dec 20122013: 10.5 2012: 10.4 2013: 16.12014: 13.4 2013: 11.9 2014: 7.92015: 9.4 2014: 6.6 2015: 4.62016: 6.7 2015: 3.7 2016: 2.7After 2016: 4.3 After 2015: 4.5 After 2016: 2.9

Total: 44.3 Total: 37.1 Total: 34.2

S&S15%

AN42%

Dyn.9%

EDS18%

SDS15%

Combitech1%

Austr, etc3%

Asia14%

SE45%

EU excl SE

17%

RoE2%

Americas16%

Africa3%

Order backlog splitJune 2013

-166

17

162

283

60

161149

301

237

142187

75

195

-125

Aeronautics Dynamics EDS SDS S&S Combitech Corporate

PAGE 16

EBIT PER BUSINESS AREA AND CORPORATE

The Group generated EBIT of MSEK 545 (1,133), an EBIT margin of 4.6 (9.6) per centExcluding material non-recurring items an EBIT of MSEK 776 (926), an EBIT margin of 6.6 (7.8)

The Group generated EBIT of MSEK 545 (1,133), an EBIT margin of 4.6 (9.6) per centExcluding material non-recurring items an EBIT of MSEK 776 (926), an EBIT margin of 6.6 (7.8)

5.2% 6.8% 11.8% 10.1% 13.1%(6.4%)

-6.3%

5.6%(3.6%)

5.1% 9.9% 11.7%8.9% 9.1%

MSEK

Operating margin, %(excl. non-recurring

items)

Jan-June 2013Jan-June 2012

(excl. material non-recurring

item MSEK 65)

HIGHLIGHTS INCOME STATEMENT

Sales 11,748 11,805 -

Gross margin 27.3% 30.3%

Marketing expenses -1,046 -1,079 -3%% of sales 8.9% 9.1%

Administrative expenses -554 -567 -2%% of sales 4.7% 4.8%

Research and development costs -892 -1,057 -16%% of sales 7.6% 9.0%

Operating income 545 1,133 -52%Operating margin 4.6% 9.6%

Financial net -180 -8

Income before taxes 365 1,125Taxes -102 -284Net income 263 841 -69%

Jan-June Jan-JuneMSEK 2013 2012 %-change

Earnings per share after dilution, SEK 2.48 7.96Tax rate 28% 25%

Organic decline of 1 per cent

Focused monitoring of marketing and administrative expenses

Higher focues on prioritisedareas in R&D

Operating income distorted by material non-recurring items

Financial net distorted by material non-recurring items

FINANCIAL NET

Jan-June2012

Jan-June2013MSEK

21-33Currency gains/losses

-32-35Financial net related to pensions

-13-106Other net financial items

24-4Net interest items

-8-180TOTAL

-2 -8Interest from unutilised advancepayments

Financial net reduced mainly due to a non-recurring item, booked in other net financial items, of MSEK 83, related to a lost legal dispute*Due to higher interest rates net interest items was impacted negativelyas the market value of marketable securities decreasedNegative impact from strengthened USD, GBP and Euro vs. SEK

*On 25 April, Saab announced it had lost a dispute in the Danish Supreme Court related to a command and control system for the Danish Army, DACCIS, developed to create common situational awareness and to monitor and lead forces. Under the verdict Saab was to repay the damages awarded by the Maritime and Cómmercial Court in 2012, payments received under the DACCIS contract, interest and court cost. MSEK 83 was related to interest costs and booked in Other net financial items.

AMORTISATION OF CAPITALISED DEVELOPMENT

545(4.6%)

1,133(9.6%)

1,042(8.9%)

1,695(14.4%)


MSEKEBITDA(margin)

EBIT(margin) 3 628

1,5401,7511,9502,4283,038

June 2013Dec. 2012Dec. 2011Dec. 2010Dec. 2009Dec. 2008

Capitalised development costs

Total depreciation, amortisation and write-downs

Amortisation of capitalised development costs 2013: 227, 2012: 306

Amortisation of development costs of MSEK 227 (306) in the period Amortisation of development costs of MSEK 227 (306) in the period

OPERATING CASH FLOW

Non-recurring item of MSEK 314 related to lost legal disputeChange in working capital impacted by build up of projectactivities and timing differences in milestone paymentsMajor investments in 2013:


89

-467

-1,091

196

-1,076

1,183

107

622

Cash flow beforechange of working

Capital

Change in Workingcapital

Investments Operating cashflow

-1,246

-624

MSEK

MSEKPipavav Defence 247TIKAB 11Tangible fixed assets 231

STRONG BALANCE SHEET

Positive net liquidity, despite negative operating cash flow

Strong balance sheet supports investments in marketing, research and development and mergers and aquisitions activities

At the end of the first half-year the Equity asset ratio was 42.7 per cent (37.6)

FOCUS GOING FORWARD

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Secure impacts from Market Area organisation

Focus on reducing overhead costs

Monitor and control outcome of measures to increaseefficiency

Cash flow management

• Project tendering and execution

• Improve capital efficiency

www.saabgroup.comwww.saabgroup.com

APPENDIX

AERONAUTICS – HIGHLIGHTS

Jan-Jun Jan-JunMSEK 2013 2012 %

Order bookings 11,239 3,873 190

Split between larger orders

>MSEK 100 and smaller orders 96/4 82/18

Order backlog 19,061 13,841 38

Sales 3,482 3,123 11

Operating income 237 162 46

Operating margin, % 6.8 5.2

Operating cash flow -341 -129 -

Number of FTEs 3,101 2,764 12



Split between larger orders

>MSEK 100 and smaller orders 96/4 82/18


Sales 3,482 3,123 11



Operating cash flow -341 -129 -


28%

Order bookingsSales Backlog

28%

6%

42%

Sales, % of total

Markets outsideSweden

84%

Split Defence/Civil

% of sales

DYNAMICS - HIGHLIGHTS


Order bookings 1,364 1,427 -4

Split between larger orders >MSEK 100 and small orders 43/57 27/73

Order backlog 4,282 4,481 -4

Sales 1,848 2,394 -23

Operating income 187 283 -34


Operating cash flow 396 382 4






Sales 1,848 2,394 -23



Operating cash flow 396 382 4


15%


85% 88% 91%

Sales, % of total


88%

Split Defence/Civil

% of sales

ELECTRONIC DEFENCE SYSTEMS -HIGHLIGHTS



Split between larger orders > MSEK 100 and small orders 69/31 42/58


Sales 1,969 2,289 -14

Operating income -125 301 -142

Operating margin, % -6.3 13.1Operating cash flow 432 75 476






Sales 1,969 2,289 -14

Operating income -125 301 -142

Operating margin, % -6.3 13.1Operating cash flow 432 75 476


16%


72% 44% 60%

Sales, % of total


Split Defence/Civil

% of sales 97%

SECURITY AND DEFENCE SOLUTIONS - HIGHLIGHTS





Sales 2,774 2,677 4



Operating cash flow -482 -324Number of FTEs 3,034 3,041





Sales 2,774 2,677 4



Operating cash flow -482 -324Number of FTEs 3,034 3,041

22%


79% 80%85%

Markets outside Sweden

Sales, % of totalSplit Defence / Civil

% of sales

70%

SUPPORT AND SERVICES - HIGHLIGHTS





Sales 1,660 1,623 2



Operating cash flow -37 535 -107






Sales 1,660 1,623 2



Operating cash flow -37 535 -107


13%


28% 19% 29%

Markets outside Sweden

Sales, % of totalSplit Defence / Civil

% of sales

75%

COMBITECH - HIGHLIGHTS


Order bookings 749 637 18

Order backlog 376 385 -2

Sales 820 672 22



Operating cash flow 149 3Number of FTEs 1,278 1,144 12


Order bookings 749 637 18

Order backlog 376 385 -2

Sales 820 672 22



Operating cash flow 149 3Number of FTEs 1,278 1,144 12

7%

22% 17%43%

Sales, % of total

Split Defence / Civil % of sales

57%

OPERATING INCOME, EBIT/EBITDA

Aeronautics EBIT 237 6.8% 162 5.2%EBITDA 311 8.9% 278 8.9%

Dynamics EBIT 187 10.1% 283 11.8%EBITDA 215 11.6% 368 15.4%

Electronic Defence Systems EBIT -125 -6.3% 301 13.1%EBITDA 113 5.7% 515 22.5%

Security & Defence Solutions EBIT 142 5.1% 149 5.6%EBITDA 206 7.4% 217 8.1%

Support & Services EBIT 195 11.7% 161 9.9%EBITDA 204 12.3% 170 10.5%

Combitech EBIT 75 9.1% 60 8.9%EBITDA 79 9.6% 63 9.4%

Corporate EBIT -166 17EBITDA -86 84

Saab Group EBIT 545 4.6% 1,133 9.6%EBITDA 1,042 8.9% 1,695 14.4%

Jan-Jun Jan-JunMSEK 2013 Margin 2012 Margin

COMPREHENSIVE INCOME

Net income for the period 263 841

Other comprehensive income:Revaluation of net pension obligation 1,086 54Translation differences -38 51Net loss on cash flow hedges -277 -68Net loss on available-for-sale financial assets -63 -Tax attributable to other comprehensive income -175 4

Other comprehensive income for the period 533 41

Net comprehensive income for the period 796 882

Jan-Jun Jan-JunMSEK 2013 2012

OPERATING CASH FLOW VS STATEMENT OF CASH FLOW

Operating cash flow -1,091 196

Cash flow from financing:Repayments of loans -144 -54Dividend paid -477 -474

Cash flow from investments –Interest-bearing:Short-term investments 2,314 672Other financial investments 4 -5

Cash flow for the period 606 335

Jan-Jun Jan-JunMSEK 2013 2012

30 Jun 31 DecMSEK 2013 2012 Change

AssetsIntangible fixed assets 6,605 6,849 -244Tangible fixed assets 3,182 3,162 20Lease assets 233 304 -71Biological assets 304 306 -2Investment properties 33 33 0Shares in associated companies 319 300 19Financial investments 378 193 185Long-term receivables 115 138 -23Deferred tax assets 237 213 24Total fixed assets 11,406 11,498 -92

Inventories 4,568 4,420 148Derivatives 312 514 -202Tax receivables 45 39 6Accounts receivable 2,956 3,454 -498Prepaid expenses and accrued income 1,077 886 191Other receivables 3,030 2,548 482Liquid assets and short-term investments 3,827 5,579 -1,752Total current assets 15,815 17,440 -1,625

Total assets 27,221 28,938 -1,717

STATEMENT OF FINANCIAL POSITION

30 Jun 31 DecMSEK 2013 2012 Change

Shareholders’ equity and liabilitiesParent Company’s shareholders’ interest 11,535 11,168 367Non-controlling interest 81 112 -31Total shareholders’ equity 11,616 11,280 336Long-term interest-bearing liabilities 103 105 -2Other liabilities 309 315 -6Provisions for pensions 1,792 2,874 -1,082Other provisions 1,144 1,286 -142Deferred tax liabilities 371 184 187Total long-term liabilities 3,719 4,764 -1,045

Short-term interest-bearing liabilities 1,485 1,637 -152Advance payments from customers 801 553 248Accounts payable 1,738 1,904 -166Derivatives 406 254 152Tax liabilities 37 228 -191Other liabilities 661 760 -99Accrued expenses and deferred income 6,262 6,993 -731Provisions 496 565 -69Total current liabilities 11,886 12,894 -1,008

Total shareholders’ equity and liabilities 27,221 28,938 -1,717

Equity/assets ratio,% 42.7 39.0

STATEMENT OF FINANCIAL POSITION

CHANGES IN SHAREHOLDERS’ EQUITY

Capital Other Net res. Translation Revaluation Retained Total excl.stock capital of cash f. reserve reserve, etc earnings non-.

contr. hedges controlling intr.

Opening balance, 1 January, 2013 1,746 543 531 -226 11 8,563 11,168

Net comprehensive income for the period -201 -32 -63 1,118 822

Transactions with shareholders:

Dividend -477 -477

Share matching plan 22 22

Closing balance, 30 June, 2013 1,746 543 330 -258 -52 9,226 11,535

NET LIQUIDITY

Change in 2013

871 -467-477

Pensions

Investments

Dividend2,988

1,996

June 2013Dec. 2012June 2012

-624Cashflowfrom operating activities*

Other

1,264

MSEK

Development of net liquidity

-35

The discount rate used in the valuation of pension obligations increasedfrom 3.00 to 3.75 per cent in the first half year

*On 25 April, Saab announced it had lost a dispute in the Danish Supreme Court related to a command and control system for the Danish Army, DACCIS, developed to create common situational awareness and to monitor and lead forces. Under the verdict Saab was to repay the damages awarded by the Maritime and Cómmercial Court in 2012, payments received under the DACCIS contract, interest and court cost. This had a negative impact on cash flow from operating activities of MSEK 314.

NET LIQUIDITY

AssetsShort-term investments 1,620 3,963Liquid assets 2,207 1,616Interest-bearing receivables 574 579Total liquid investments 4,401 6,158

LiabilitiesLiabilities to credit institutions -1,105 -1,104Other interest-bearing liabilities -483 -638Provisions for pensions 1) -1,549 -2,420Total interest-bearing liabilities -3,137 -4,162

Total net liquidity 1,264 1,996

1) Excluding provisions for pensions attributable to special employers’ contribution

31 Jun 31 DecMSEK 2013 2012

LIQUIDITY

Liquid assets at the beginning of the year 1,616

Operating cash flow -1,091Short-term investments etc 2,314Repayments of loans -144Dividend to shareholders -477Other changes, translation differencies etc -11

Liquid assets June 30 2,207

MSEK 2013

NUMBER OF FULL TIME EQUIVALENTS

Jun 30 Dec 31Number 2013 2012 Change

Aeronautics 3,101 2,932 169Dynamics 1,577 1,568 9Electronic Defence Systems 2,574 2,578 -4Security & Defence Solutions 3,034 3,105 -71Support & Services 1,815 1,805 10Combitech 1,278 1,245 33Corporate 717 667 50Saab Group 14,096 13,900 196

APPENDIX

Quarterly information 2013/2012Q2 Q1 Q4 Q3

Sales 2013 2013 2012 2012Aeronautics 1,717 1,765 1,678 1,275Dynamics 971 877 1,512 873Electronic Defence Systems 931 1,038 1,182 805Security and Defence Solutions 1,503 1,271 2,019 1,280Support and Services 838 822 1,091 697Combitech 410 410 439 299Corporate - - - -Internal sales -484 -321 -615 -330Total 5,886 5,862 7,306 4,899

Operating incomeAeronautics 121 7.0% 116 6.6% 125 7.4% 72 5.6%Dynamics 115 11.8% 72 8.2% 233 15.4% 105 12.0%Electronic Defence Systems -80 -8.6% -45 -4.3% -106 -9.0% -78 -9.7%Security and Defence Solutions 120 8.0% 22 1.7% 209 10.4% 59 4.6%Support and Services 107 12.8% 88 10.7% 215 19.7% 34 4.9%Combitech 31 7.6% 44 10.7% 44 10.0% 18 6.0%Corporate -265 - 99 - -65 - 52 -Total 149 2.5% 396 6.8% 655 9.0% 262 5.3%

PAGE 41

www.saabgroup.comwww.saabgroup.com

interim report - saab ab · dec. 2008 dec. 2009 dec. 2010 dec. 2011 dec. 2012 june 2013 capitalised...

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