Interim Report January - September 2002

INTERIM REPORT January - September 2002 · Order bookings after nine months amounted to SEK 16 billion, of which SEK 3 billion in the third quarter. Order backlog amounted thereby to SEK 44 billion. · Sales SEK 11,708 m. (10,605), an increase of 10%. · Operating income SEK 678 m. (580 m., excluding capital gains) and income after financial items SEK 593 m. Earnings per share SEK 3.85. · Latest version of the Gripen delivered to Sweden. · Export orders for serial production of the Taurus standoff missile and the air defense missile system RBS 70. Statement by the CEO "Order bookings were good also during the third quarter and the order backlog thus stands unchanged at about 44 billion SEK, corresponding to almost three years invoicing. Bookings include orders from Germany for serial production of the Taurus standoff missile developed jointly by Saab and the German LFK, and from Finland for the RBS 70 air defense system. We have also expanded our participation in the Swedish helicopter program through an order for sonar systems for the NH90. Last week, we received a Swedish order for further maintenance equipment for the Gripen. During the third quarter, we passed an important milestone in the Gripen program with the handing over of the first aircraft of the new C-version to the Defence Materiel Administration. The Swedish C-version is identical to the Gripen aircraft intended for export and includes among others in- flight refueling, full color displays and new pylons. This combination of advanced technology and increased capabilities brings a step change in the operational effectiveness of the aircraft over a wide range of missions. So far this year, we have seen good growth in the defense-oriented operations. As in previous years, the customary variation in income over the year means that the third quarter is weak as a result of the vacation period. The earlier assessment for the whole year, which indicated continued improvement in operating income and operating margin, excluding capital gains, remains unchanged." Structural changes As part of the streamlining process of the Group, Aerotech Telub Information & Media AB has been divested during the third quarter to Sörman Information and negotiations are in progress on divesting further operations of a minor nature. Earlier this year, BAE SYSTEMS' signature management operation in the U.S. and the remaining 35 percent in Combitech Systems were acquired. With effect from January 1 this year, Nyge Aero has been transferred from Saab Technical Support and Services to Saab Aerospace. Operations 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 and Electronics, Saab Aerospace, Saab Technical Support and Services, Saab Bofors Dynamics, Saab Ericsson Space and Saab Aviation Services. For a brief description of the business areas see the end of the report. Sales, income and orders Sales Group sales increased organically by 10 percent to SEK 11,708 m. (10,605). Seventyfive percent of sales were related to defense and 40 percent of total sales were export. Sales during the third quarter increased by 9 percent to SEK 3,424 m. (3,147). Sales of all operations in Systems & Electronics have increased compared with the same period last year. The increase in Aerospace is mainly attributable to defense and the internal acquisition of Nyge Aero. Sales included 16 (11) Gripen aircraft, of which 4 (3) in the third quarter. The changes compared with the previous year for Technical Support & Services are mainly due to the transfer of Nyge Aero and lower volumes for the aircraft maintenance operation in Saab Aviocomp, while sales for AerotechTelub, however, have increased slightly. Total sales for Dynamics have increased compared to the previous year, which also applies to most of the constituent business units. The decrease in sales for Space is mainly attributable to the situation in the commercial telecom market, as well as to reduced public funding of space research. The decrease in Aviation Services is related to the customer support activities and is a result of the general situation for air travel. Income and profitability Operating income amounted to SEK 678 m. (1,230), of which SEK 204 m. (171) in the third quarter. The result for the previous year included a capital gain from the divestment of Saab Marine Electronics of SEK 650 m. Operating income before capital gains was thus SEK 678 m. (580), corresponding to a margin of 5.8 percent (5.5). The nine-month income has compared to the previous year been positively affected by SEK 184 m. related to capitalization of development costs and negatively affected by SEK 40 m. related to structural costs in the space operation. Income from the defense business has improved compared to the previous year, but the total income has been affected by the general market situation for the space business and Aviation Services. Operating income per business area is reported before goodwill amortization, see table on page 7. Operating income for Systems and Electronics has improved mainly as a result of volume increases for Saab Training Systems and Saab Avionics. However, income is lower for Combitech Systems as a result of the general market situation for consultants and for Saab Tech Systems as a result of the project mix. Operating income for Aerospace has improved as a result of volume increases and capitalization of development costs. Operating margin excluding capitalization is on level with previous years. Operating income for Technical Support and Services is on a level with last year with an improved margin mainly due to higher utilization ratio and cost reductions. The improvement in income for Dynamics is mainly due to volume increases and a favorable product mix and certain project finalizations during the quarter. In addition to the provision made in the Space business in the first quarter of SEK 40 m. for structural changes, a provision of SEK 20 m. was made in the third quarter for project overrun. Lower volumes have affected operating income for Aviation Services, but the margin continues to be above 8 percent, the same level as for the whole year 2001. Operating income for Corporate/Other Operations has improved as a result of continued structuring, but temporary group eliminations have affected income negatively during the third quarter. Administration and marketing expenses are somewhat lower than previous year. Of the period's research and development costs, a total of SEK 184 m. (0) has been capitalized in accordance with new accounting principles and SEK 309 m. (546) has been charged to income. If these rules had been applied in 2001, SEK 140 m. would have been capitalized in the balance sheet for the first nine months of that year. Other operating income during both the present and previous years consist mainly of trading income in Treasury and currency gains etc. The previous year also included a capital gain of SEK 650 m. Other operating expenses consist mainly of currency and capital losses. The present year also include the provision made for structural changes in Space of SEK 40 m. Project interest on non-utilized advance payments, which has decreased financial net and is reported as gross margin, amounted to SEK 133 m. (85). Net financial income and expenses amounted to SEK -85 m. (-33). The average return on external investments was 4.37 percent (4.63). The decrease in financial net compared to the previous year is mainly attributable to increased interest level on the pension debt. The positive financial net in the third quarter is mainly due to revaluation of the bond portfolio due to decreasing market interests during the quarter and termination of currency forward contracts. Income after financial items amounted to SEK 593 m. (1,197). Current and deferred taxes amounted to SEK -193 m. (-267). Minority interest in income is positive as a result of the negative income in Saab Ericsson Space and as a result of the acquisition of the outstanding minority in Combitech Systems. Net income for the period was SEK 410 m. compared with SEK 882 m. for the same period previous year including the capital gain from the divestment of Saab Marine Electronics. This corresponds to an income per share of SEK 3.86 (8.28). Pre-tax return on capital employed was 10,0 percent (18.1). After-tax return on shareholders' equity was 10,0 percent (24.2). Orders Group order bookings amounted to SEK 15,714 m. (10,483), of which SEK 3,258 m. (2,939) in the third quarter. Of order bookings, 75 percent came from customers outside Sweden. Order bookings during the third quarter included serial production for Germany of the Taurus standoff missile, the air defense system, RBS 70, for Finland, sonar systems for the Swedish helicopter program, further development of command and control systems for air and army forces, separate orders and spare parts for Gripen, data handling systems and anti-armor weapons and ammunition for the Carl-Gustaf system. The order backlog at the end of the period amounted to SEK 43,786 m. compared to SEK 40,034 m. at the beginning of the year. Liquidity, finance and investments Finance and liquidity Liquid funds less liabilities to credit institutions compared to the beginning of the year have decreased by SEK 1,460 m. to 3,103 m. (4,563). The decrease is mainly related to utilization of advances within the Gripen program, payment of dividend and the amortization of the pension liability. The Group's net debt after deduction for allocations to pensions amounted to SEK 357 m., compared with a net liquidity of SEK 885 m. at the beginning of the year. Group equity/assets ratio amounted to 23.0 percent (21.3), compared to SEK 22.3 percent at the beginning of the year. Shareholders' equity amounted to SEK 6,578 m. (6,495), corresponding to SEK 61.79 (61.01) per share, compared with SEK 62.74 at the beginning of the year. Cash flow Operating cash flow was negative during the first nine months by SEK - 702 m. Working capital has increased mainly due to VAT payments, increase in inventory related to among others the A380 project and payments related to utilization of previously made provisions. Operating cash flow of SEK -702 m. is distributed between cash flow from the operations of SEK -634 m., acquisitions SEK -77 m. and from the regional aircraft leasing business SEK 9 m. Capital expenditures The period's capital expenditures in property, plant and equipment, excluding lease assets, amounted to SEK 425 m. (335). Personnel At the end of the period, the number of employees in the Group was 14,109, compared with 14,028 at the beginning of the year. Ownership Saab's principal owners are BAE SYSTEMS, Investor AB, the Wallenberg foundations, AMF, Robur funds, Eikos fund, GMO International Funds, The AP funds, Skandia, Pictet & Cie, Fidelity funds, SHB funds and several U.S. and U.K. funds. Accounting Principles The Group follows all the recommendations of the Swedish Financial Accounting Standards Council, which are applicable to 2002. This means that from 2002 onwards, the new accounting principles will be applied also in regard to intangible assets, allocations and depreciation, etc. Only the recommendation on intangible assets, RR 15, has been of material significance for the Group's income and financial position. In all other respects, the report has been drawn up in accordance with earlier applied accounting principles. Sales and operating income by business area for the year 2001 has not been adjusted for the internal re-organization regarding Saab Nyge Aero. Linköping, October 16, 2002 Bengt Halse President and Chief Executive Officer This Interim Report has not been subject to review by the Company's auditors. Dates for financial information: The 2002 Report will be published on February 14, 2003. For further information, please contact: Agneta Kammeby, Manager Investor Relations tel. +46 13 18 71 25 Jan Nygren, Head of Corporate Communications tel. +46 13 18 19 99 Press conference with CEO Bengt Halse: Today Wednesday October 16, 16.00, World Trade Center, Stockholm Telephone interview with CEO Bengt Halse: Today Wednesday October 16. Contact Marita Sidén tel.+46 13 18 71 49 International teleconference: Today Wednesday October 16, 17.15 (CET). tel. +46 13 18 71 49 Contact Marita Sidén for registration and further information. The Interim report can also be accessed on the Internet at www.saab.se ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/10/16/20021016BIT00340/wkr0001.doc The Full Report http://www.waymaker.net/bitonline/2002/10/16/20021016BIT00340/wkr0002.pdf The Full Report