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Saab's Defense Contracts, International Orders Grew 2015 Sales

February 10, 2016 (Photo Credit: Katsuhiko Tokunaga)

Originally published Feb. 10

HELSINKI — Saab Group’s strong growth in sales in 2015 was primarily driven by several major international orders buoyed by a steady flow of significant homegrown defense contracts.

The Swedish defense corporation reported sales of $3.22 billion in 2015, representing a 16 percent increase compared to 2014. The growth in organic sales rose by 11 percent in a year in which all business areas within the company posted increased orders and revenues.

The company’s improved operating climate saw Saab lift its income to $225.3 million in 2015, a level substantially higher than the corresponding result of $196.7 million for 2014. The company’s operating margin dipped slightly from 7.1 percent in 2014 to 7 percent in 2015.

Saab’s CEO Håkan Buskhe said the improved performance was helped by savings in the group’s cost base that were delivered by efficiency-led reorganization programs.

"In an uncertain world, high efficiency and reduced lead times is a precondition to meet customer requirements," Buskhe said, adding that Saab’s overall performance in 2015 was all the more notable against a backdrop of geopolitical shifts, destabilizing political events and the difficult global economic situation faced by defense sector companies.

The reorganization continues within Saab. In January, the company implemented a new round of cost and production restructuring after which its business area, Security and Defense Solutions, was dissolved and its activities transferred to other business areas.

"At the same time, we continue to increase sales efforts in selected markets and to grow the volume of small- and medium-sized orders," Buskhe said. Saab raised the volume of small- and medium-sized orders by over 30 percent in 2015.

Saab saw a surge in significant orders in 2015. At year-end, the company’s order backlog stood at $13.5 billion, a rise of almost 95 percent over the comparable figure for 2014 and equivalent to four times the Swedish defense group’s annual sales.

Major orders included a $4.66 billion deal reached with Brazil in September, under which Saab’s business area Aeronautics will produce and deliver 36 Gripen-NGs to the Brazilian Air Force from 2019-2024.

Saab also secured a $1.27 billion order to deliver a Swing Role airborne surveillance system to the United Arab Emirates (UAE). On the homefront, Saab received operational capabilities-related orders connected to the Gripen-NG program that amounted to around $ 220.8 million.

In June 2015, Saab secured a landmark contract from FMV, Sweden’s defense material procurement agency, to design and deliver two new A26-type submarines. The order also included midlife upgrades to two of the Swedish Navy’s Gotland-class submarines.

Saab’s cash-flow position was positively affected by milestone payments related to the Gripen-NG Brazil and the A26 Swedish orders during the second half of 2015.

Some 80 percent of Saab’s contract bookings comprised international orders in 2015. The corresponding figure for 2014 was 45 percent. The value of order bookings from Sweden rose by 33 percent in 2015 to $1.94 billion. The value of orders from customers within the European Union (excluding Sweden) increased by 7 percent to $ 550 million.

The most significant growth in order bookings came from Saab’s market area "Americas." Bolstered by the export order to Brazil, the order value amounted to $5.21 billion. Order bookings from market area Asia also rose sharply, rising from $226 million in 2014 to $1.64 billion by year-end 2015.   

Saab’s order bookings from market area Africa grew by 8 percent to $58.7 million in 2015, while the value of order bookings from Australia and the immediate region declined by 18 percent to $77.4 million for the year.

Around 95 percent of Saab’s order bookings in 2015 were in the defense domain.

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