Saab AB (SAAB-B.ST), the Swedish protection and safety firm, has reported a robust third quarter in 2024, with vital development so as consumption and gross sales. CEO Micael Johansson and CFO Anna Wijkander introduced the corporate’s monetary outcomes, highlighting a 40% improve so as consumption year-over-year to SEK 21 billion and a report order backlog of SEK 190 billion.
The corporate’s money movement improved to SEK 3.2 billion, largely on account of substantial buyer funds and profitable deliveries of the Gripen Echo plane to Sweden and Brazil. Saab additionally introduced plans for a brand new precision weapon methods facility within the U.S., reflecting its dedication to increasing its footprint within the worldwide protection market.
Key Takeaways
- Order consumption surged by 40% to SEK 21 billion, with a report backlog of SEK 190 billion.
- Money movement strengthened to SEK 3.2 billion, propelled by vital buyer funds.
- Saab is increasing its U.S. presence, planning a brand new facility and rising its workforce to over 1,000.
- The corporate has set a sustainability objective to chop CO2 emissions by 42% by 2030, regardless of an 8% improve this yr.
- Worker numbers rose by 2,400 in 2024, reaching a complete of 24,000, with a deal with steady studying.
Firm Outlook
- Saab anticipates natural gross sales development between 15% to twenty% for the yr, aiming for the upper finish in 2024.
- The corporate expects to double manufacturing capabilities by late 2025 and preserve a constructive operational money movement by the top of subsequent yr.
- A deal with upkeep and ammunition provide is according to the Swedish protection invoice, and the T-7 coach program is projected to spice up Aeronautic gross sales by 2026.
Bearish Highlights
- Regardless of sturdy money movement in Q3, year-to-date figures are unfavourable on account of elevated inventories and investments.
- Combined efficiency throughout enterprise models led to a decline in gross margin and working earnings.
- Margins in Surveillance and Dynamics are anticipated to fluctuate on account of undertaking combine and supply timing.
Bullish Highlights
- Gross sales development reported at 17.5%, with EBIT development of 38% and a web earnings improve of 48%.
- The corporate maintains a strong stability sheet with a web debt of SEK 0.5 billion and SEK 10.6 billion in money reserves.
- Dynamics benefitted from elevated demand for coaching and simulation capabilities.
Misses
- The quarter noticed sturdy money movement, however year-to-date figures stay unfavourable on account of elevated inventories and investments aimed toward future capabilities.
Q&A Highlights
- Manufacturing of the T-7 coach program is underway, with a contract for about 35 aft elements.
- Gripen gross sales campaigns are ongoing in Colombia and the Philippines, with constructive developments in Thailand and Brazil.
- The corporate is cooperating with a Division of Justice subpoena and has discovered no proof of wrongdoing.
- Stock ranges are being intently monitored in relation to the Ukraine battle.
- Collaboration in European protection initiatives is emphasised, with partnerships in key markets just like the UK, Germany, and Poland.
Saab’s report displays an organization on the rise, with sturdy demand for its protection merchandise and a strategic growth into the U.S. market. The corporate’s monetary well being seems sturdy, supported by a strong stability sheet and a transparent imaginative and prescient for development and sustainability. As Saab continues to navigate the complexities of the worldwide protection business, its deal with innovation, effectivity, and worldwide partnerships will probably be vital to sustaining its upward trajectory.
Full transcript – None (SAABF) Q3 2024:
Merton Kaplan: Good morning everyone and welcome to the presentation of the Third Quarter 2024 Outcomes. I am Merton Kaplan, Head of Investor Relations, and with me right here at the moment I’ve our CEO, Micael Johansson; and CFO, Anna Wijkander. Micael and Anna will information us by means of the small print of the report, and we’ll comply with that with a Q&A session. With that, I hand over the mic to you, Micael.
Micael Johansson: Thanks a lot, Merton, and thanks for becoming a member of us this morning. And we’ll now undergo the third quarter end result 2024. And let me begin with some highlights. I believe the demand continues to be excessive out there, so it is a sturdy quarter in relation to order consumption. And I believe the demand is long-term, as a result of if you consider the wake-up name that we had in Europe, many international locations need to type of begin constructing capabilities, replenish stockpiles, proceed to help Ukraine, and in addition when hopefully the battle ends in Ukraine in the popular method, we might want to assist them to construct sovereign functionality in Ukraine as nicely. So this can be a signal of a robust type of demand out there, after all. And now we have additionally been capable of ship wonderful in our initiatives proper now on our buyer commitments, whereas we’re persevering with to construct capability and functionality within the firm, each by means of new manufacturing traces, new amenities, using many new workers. After which, after all, wanting on the merchandise that must be type of now manufacturing excessive volumes, tips on how to industrialize for extra environment friendly manufacturing. So that’s what we’re working with on a regular basis, and this can be a sturdy quarter in that respect. And likewise, as we talked about within the second quarter, we had giant buyer funds within the second half of the yr, and this quarter now reveals that these funds have type of come into the corporate, and now we have a robust money movement within the quarter as nicely. So these are a couple of highlights. So wanting on the numbers, now we have an order consumption of SEK 21 billion, which is a 40-plus p.c improve year-over-year, which is great. It is in all probability 79% up – 71% up on the 9 months in comparison with final yr. We nonetheless proceed to develop 17% natural development, a gradual good development and 21% within the 9 months. And whereas we’re rising, we now see scale results of that, so we elevated our EBIT development extra, which can be our ambition on a regular basis than the gross sales development. And that may be a good signal that we’re rising in a managed manner as a result of development on this type of tempo just isn’t with out ache factors. So we’re managing that, I believe in a great way. And likewise the money flows, I talked about is robust within the quarter, SEK 3.2 billion on account of giant buyer funds. If we take a look at the order consumption as such over the 9 months and in addition throughout the quarter, fairly an enormous portion of that’s worldwide orders, 80% roughly. And that’s, after all, a superb signal of how engaging our portfolio is within the market, and now we have a report excessive order backlog now of SEK 190 billion and that spreads out in a pleasant manner over the following few years, which Anna goes to speak a few bit later. And now we have obtained orders primarily within the Surveillance and the Dynamics enterprise areas, so superior weapon methods and sensors and passive and lively sensors are actually engaging within the market. Examples are an enormous contract from a Western nation, which I can not discuss actually after which greater than that. After which now we have the Cell Quick Air – air protection system [ph], the place we acquired the contract from Lithuania within the quarter after which one other contract early on this quarter in October, including to that roughly the identical measurement, SEK 1.3 billion. And the Swedish buyer have positioned contracts on us for ground-based air protection methods, together with Giraffe 1X radars. So that’s the quantity – quantity sort of product now within the surveillance space. And now we have a number of contracts in relation to fight administration methods on the naval facet additionally. So a very nice quarter in relation to order consumption. Taking a look at a couple of highlights on the completely different enterprise areas, we’re persevering with to ship the brand new Gripen Echo plane to Sweden and Brazil, and deliveries have been made on this quarter for each international locations. As a result of quantity will increase now, now we have a greater margin in aeronautics, so that’s growing in a pleasant manner, however we nonetheless have startup prices and beneath absorption due to the low fee manufacturing in – for the T-7, the coach plane within the U.S. That can appropriate itself over time, however we nonetheless are burdened by {that a} bit, I have to say, throughout the subsequent couple of years, I’d say, it is going to take earlier than we get again to type of actually good numbers in aeronautics. And now we have a very nice information from Thailand that they’ve down chosen the Gripen E, and now we’re shifting right into a strategy of negotiating a contract with them going ahead. In order that’s very nice. Taking a look at Dynamics, it is an especially sturdy order consumption from Dynamics. They’re constructing a report excessive order backlog and it is a substantial to have virtually SEK 80 billion in backlog for Dynamics. And that is additionally the world the place we’re constructing our capability and investing closely to guarantee that we are able to proceed to satisfy the demand within the market. And this an excessive exercise, after all, in all of the enterprise models, it isn’t solely Floor Fight weapons that we’re speaking about, but additionally the opposite enterprise models are rising in a really good manner. We’ve got a barely decrease margin, however nonetheless type of on a excessive degree, and that is the combo throughout the enterprise space, relying on the place the deliveries on our contracts for Floor Fight weapons are literally delivered. So that blend will type of fluctuate a bit type of quarter-to-quarter, however we’ll type of proceed to have a excessive margin in Dynamics going ahead. An enormous occasion, which I’ll come again to, is that now we have now introduced, and now we have began now the method of constructing a brand new facility for precision weapon methods and munitions in U.S., however I’ll discuss just a little bit extra about that later. Surveillance additionally continued good order consumption and good demand out there, as I mentioned on the sensor facet, each the passive sort of sensors and lively sort of sensors, together with additionally command and management methods. And all of the enterprise models in that enterprise space is rising, and now we have increased volumes and we get scale results by that. Now the margin is enhancing and naturally, Surveillance ought to be type of on this vary simply barely increased going ahead, I believe, in relation to margin, wanting on the portfolio that they’ve. We’ve got a vital milestone that now we have achieved throughout the quarter. We’ve got delivered now 5 methods to UAE for the GlobalEye. And now we’re additionally type of refurbishing or upgrading, I’d say a few these methods that they’ve been working for some time. In order that’s a superb program for us with UAE on the GlobalEye. And now we have additionally delivered a brand new era of the weapon-locating radar system, Arthur, to the UK, which is also an especially necessary system for finding artillery with excessive, excessive accuracy and in addition that’s necessary going ahead for Ukraine, I believe when you look about that sort of functionality. So good development quarter-to-quarter in Surveillance and in addition a superb EBIT development on this enterprise space. After which now we have Saab Kockums. We’ve got seen an excessive curiosity now for fight boats in Saab Kockums. So I believe our shipyard up within the north, the Docksta shipyard is now actually constructing capability and ensuring that they’ll ship type of a lot many extra Fight Boats going ahead and in addition the following era. And now we have very excessive exercise in lots of applications. So the combo is good nonetheless in Saab Kockums in relation to floor actions, the underwater actions, which, after all, primarily the submarines. After which, after all, now we have now the brand new enterprise unit in Saab Kockums the place now we have invested quite a bit in R&D to construct autonomous underwater methods and remotely operated underwater methods and that’s going to be a superb enterprise to us going ahead, nevertheless it’s nonetheless burdening a bit the EBIT facet of the entire of Saab Kockums. And now we have already with these methods that now we have which Saab unmanned [ph] collaborating in NATO train and carried out rather well. So the combo in Saab Kockums is wanting good, and we’re nonetheless rising this enterprise going ahead in a pleasant manner. And we’ll enhance the margin, after all, going ahead after we – after we get by means of type of all of the R&D efforts that now we have within the underwater methods related to unmanned and remotely operated underwater methods. After which now we have Combitech, which is the marketing consultant firm in Saab additionally performing rather well, using folks. We’ve got a partnership settlement now with our protection materials group FMV to assist their very own forces, now digitalized along with Surveillance and Dynamics, we’ll assist them integrating methods and ensuring that the whole lot may be related and digitalized within the military, and that’s – Combitech has a vital half in that. So the exercise is extraordinarily excessive, and the profitability is growing, and now we have an excellent step now within the EBIT margin, as you may see, above 10%, which incorporates then a capital acquire of SEK 80 million from the divestment of the Norwegian operations within the quarter. In order that was a couple of highlights from the enterprise areas and Saab Combitech. And digging down just a little bit in what’s occurring within the U.S. We’ve got an growth within the U.S. We are actually greater than 1,000 workers. And when you take a look at the gross sales development from the U.S. operations, now we have, after all, we promote issues into the U.S. from Sweden nonetheless, however we even have gross sales development in relation to the U.S. operations, promoting from these operations within the U.S., and that’s growing dramatically a 54% year-on-year. However crucial half now, now we have sensor functionality in Syracuse, New York State. We’ve got coaching capabilities in Florida. We’ve got underwater functionality in Rhode Island. And we are actually – and now we have the T-7, the coach plane facility in Indiana, West Lafayette. And now we will construct a brand new facility for the – for the munitions functionality. We have to construct ammunitions within the U.S. and in addition precision weapon methods, and now we have now gained and been chosen by the U.S. Military for what we name the Particular person Assault Munition program, which is a tailorized model of the AT4, so that may require quantity, and we have to have type of the ecosystem of provide chain within the U.S. So it is essential to start out this facility construct now. It will likely be began this yr, and we’ll be up and operating in 2026 to start with of 2026. We’ve got additionally been chosen by the U.S. Air Drive now for the Carl-Gustaf help weapon, which is great. So now now we have it in all branches kind of within the U.S., the Military, the Marine Corps, the Air Drive and a few others. So it is an especially fascinating growth, and now we have been programming a report for a very long time. We’re additionally investing in ex-hubs [ph] within the U.S. The scope accelerator that now we have in San Diego is now specializing in unmanned capabilities, floor automobiles and AI. So we’re increasing quite a bit within the U.S., and we’re beginning to have a very sturdy place on this nation, which, as , have a considerable protection funds on a yearly foundation. So it is a vital market to achieve success in. Just a few phrases additionally concerning the sustainability space, which is basically necessary to us, and now we have, as I’ve mentioned earlier than, now we have divided that in focus areas, 11 of them, and now we have short-term, medium-term and long-term targets in all the areas in relation to sustainability. We are actually implementing an power technique to guarantee that we’re extra environment friendly in relation to the power resilience, wanting on the amenities. It is the whole lot from the amenities as such, how we use air flow warmth in a extra type of environment friendly manner. One other solution to ensuring photo voltaic panels and so forth to make our amenities rather more environment friendly going ahead. We’ve got such a excessive exercise within the firm in relation to the enterprise as such, each in relation to the place we’re on the earth and the enterprise exercise the place now we have to be to make contracts going ahead, but additionally how we do take a look at flights on the GlobalEye and the Gripen fighter. So we even have an 8% year-on-year increased CO2 emissions now than we have seen earlier than. However from the start line 2020, we’re nonetheless down 17% and we nonetheless have the ambition and goal to succeed in the 42% in 2030. It is not solely about environmental and emissions, after all, it is also about many different areas. And one necessary factor that I wish to point out is how we have applied a digital college, you may say. So it is potential for all the staff to entry completely different sort of studying actions digitally within the firm on a really excessive degree, college degree, after all, but additionally tutorials. And now we have a goal now to guarantee that we repeatedly be taught in an organization. So we set a goal of 40 hours per worker a yr, and we’re monitoring that, after all, to guarantee that we’re at all times on the sting of what it’s important to know, and skilling growth is necessary to us, after all. And particularly how we make use of within the firm, we’re up web 2,400 folks this yr. Solely within the quarter three, we expanded 750 folks web up, and it is implausible to see how engaging we’re as an organization. Many needs to work with us, and now we have additionally a superb current workforce, after all. So we are actually 24,000 workers and one other 4,000 consultants working for us. So we’re increasing quite a bit in relation to the employment half as nicely. So lastly, the priorities, then they do not change quarter-to-quarter, after all, not so much, after all, they should not, nevertheless it’s very a lot about capturing market alternatives and ensuring that we may ship on the commitments to our clients. We put lots of effort in that. And that should go in parallel, after all, the capability and the manufacturing ramp-up to type of meet this demand is extremely necessary to us. And I believe we’re doing that in a very great way and there will probably be extra to come back subsequent yr after we get new amenities up and operating and new manufacturing traces up and operating, so we are able to meet a good increased demand utilizing them. The industrialization half is, after all, necessary. Some merchandise that wasn’t truly designed to be excessive quantity must be redesigned to industrialize for manufacturing, and we have to automate many elements of the manufacturing to satisfy the demand. So lots of effort is within the industrialization a part of the corporate to create extra effectivity. The opposite transformation is, after all, how we take a look at creating software-defined merchandise. The way in which we develop software program is extremely necessary and that must be remodeled a bit as nicely. To me extra software-defined to have frequent architectures within the firm and to have extra of a software program manufacturing facility sort of setup within the firm, in order that’s lots of deal with that as nicely. And whereas we’re rising capability, after all, the investments in future applied sciences to embrace these and utilizing them in buyer capabilities is essential. That is the whole lot from Counter Unmanned Aerial Techniques to what we name Loiter Munitions, connectivity elements between manned platforms and unmanned platforms. So we’re doing lots of investments in these areas as nicely. Provide chain continues to be one thing now we have to observe and work with each day to guarantee that now we have resilient provide chains. We have been doing that fairly nicely in a mixture of ensuring that now we have redundancy within the provide chain the place we are able to, but additionally to create a little bit of inventory to – stock to help our demand, nevertheless it’s a unending story. We have to type of transfer in numerous instructions on a regular basis to guarantee that we’re resilient in relation to provide chain. And so I simply wish to say, we work diligently on that daily. And as I discussed, the large type of influx of latest implausible workers into the corporate is – the implication of that’s, after all, that the onboarding ensuring that they shortly grow to be productive and that they arrive into the groups and add worth to the corporate is basically instrumental to us. And when you’re that now we have within the final 20 months now, employed web up 4,500 folks. You perceive that the onboarding course of of individuals is an enormous effort within the firm, as we converse. However I am actually happy with the best way we’re dealing with this development, and I stay up for the longer term development as nicely. So thanks from my facet, and I would like – then I wish to hand over to our CFO, Anna Wijkander, who will dig just a little bit extra into the numbers.
Anna Wijkander: Thanks, Micael, and good morning, everybody. I am happy to be right here for the primary time to current the quarterly report. And as now we have heard, now we have a robust quarter this quarter with a robust order consumption. We’ve got gross sales development continued and EBIT enchancment and in addition constructive money movement. So now I’ll dig into extra into the small print into the financials. Order consumption within the quarter was SEK 21.2 billion, and this was largely pushed by worldwide markets, which was 80% of the entire bookings this quarter, and the principle improve we see in Dynamics, the place we now have a backlog of SEK 79 billion. The book-to-bill can be growing 1.9 occasions and with a rolling – 20% rolling development of gross sales. And the backlog elevated to SEK 190 billion, which is up 37% year-over-year. And this quarter, we see actually that we’re additional strengthening the period of our backlog, which is superb for our long-term development. So we are able to see that we develop the period within the years – after 4 years and after, so what are the 2027 and 2028, however already subsequent yr, now we have SEK 55 billion in our order backlog to execute on gross sales as deliberate. In case you look extra into the detailed monetary abstract for the quarter, the gross sales development was 17.5%, natural 17.4%. We’ve got gross sales development in all enterprise areas with the strongest development in Dynamics and Surveillance within the quarter. The gross earnings improve is pushed by the expansion, however the gross margin is flat in comparison with final yr, and that’s primarily due to the enterprise combine that now we have within the third quarter with a bigger share from Dynamics, however decrease margins in that enterprise space. We even have EBIT development of 38% within the quarter, and the margins improved with – to eight.8% in comparison with final yr, 7.5%, and this was supported by the expansion, as now we have mentioned, however we additionally had a robust end in Surveillance exceptionally this quarter with some undertaking completions. We additionally had considerably decrease company prices within the quarter. And we even have this constructive impact of SEK 18 million from the divestments within the Combitech of the Norwegian enterprise that now we have divested. The monetary web within the quarter was constructive. Now now we have a constructive impression there from our revaluation of our tender portfolio because of the energy in Swedish krona. And with the earnings and enchancment and the higher finance web, we’re having a superb web earnings growth within the quarter, elevated 48% and in addition the EPS development 48% within the quarter. Once we take a look at the complete 9 months, we see the identical development as we did within the quarter on the important thing parameters. Gross sales development 21%; EBIT development 30%, monetary web year-to-date continues to be unfavourable because of the Swedish krona, which was weak to start with of the yr the place we had a big impression of the revaluation of the tender portfolio and in addition some lease contract that was impacting the unfavourable within the monetary web. Tax fee in 2023 was 23%. And – sorry, the tax fee in 2023 was a bit decrease and it was at 21.7% and that was impacted by the divestment that we had of the MTM enterprise. Now we’re at 22.3%, which is within the regular vary that now we have mentioned that we should always have our tax fee round 21% to 23%. And likewise year-to-date, now we have an EPS uplift of 27%. So let’s take a look at the traits a bit. Rolling 12 months, the compounded common development fee is now 14% over the past three years and now we have a robust gross sales development, the final 12 months of 20%. So that is actually supported by the truth that now we have good development in all enterprise areas. Yr-to-date, we had development in Aeronautics of 16%; Dynamics, 22%; Surveillance, 21%; and Kockums 34%. On the EBITDA, we’re again to the constructive development after this quarterly end result. The EBITDA margin within the quarter was 13.9%. And likewise, now we have a constructive development for the margin enchancment going as much as 8.7%. Simply shortly noteworthy on the outcomes from the enterprise space. In Aeronautics, now we have strong growth each in gross sales and margin, however a bit weaker money – unfavourable money movement on account of timing of milestone funds. Sturdy gross sales development in Dynamics, however the combine between enterprise models, primarily fight impacting makes the gross margin – the working earnings to lower year-over-year. We’ve got additionally a robust money movement within the quarter pushed by giant buyer funds in Dynamics, SEK 3.6 billion. And Surveillance, sturdy gross sales development and working margin from undertaking completions on this quarter. Kockums impacted as we heard from the underwater enterprise, the unfavourable outcomes. And I’d say, sturdy efficiency inside Combitech, there we should always exclude – if we exclude the divestment of the Norwegian enterprise, now we have 8.3% working margin. And money movement then. The quarter, as now we have mentioned, got here in sturdy and constructive. As we mentioned within the earlier quarter, we had giant buyer funds and each milestone and superior funds, primarily inside Dynamics. Yr-to-date, although, we’re nonetheless unfavourable, and we’re impacted by increased inventories and better investments, all based on plan to have the ability to construct for our future capabilities. We even have, the investments are growing in comparison with final yr, and that’s as now we have mentioned, based on our plans. And huge of the growth is coming from Dynamics and Surveillance, the place we additionally had the biggest development. And in relation to investments, it is one thing that we intently screens to be safe, that we spend money on the areas the place now we have our present contract to have the ability to ramp up and to ship. So – actually so we safe good return on funding. Constructive additionally to say that – to see that our KPIs, are on the right-hand facet, is enhancing year-over-year. We’ve got a strong stability sheet. And this yr, now we have improved – additionally pushed by the constructive money movement and we finish the quarter with a web debt of SEK 0.5 billion and web debt to EBITDA virtually zero. We’ve got SEK 10.6 billion in money place and one other SEK 6 billion in undrawn credit score amenities. Vital additionally to say that now we have equity-to-asset ratio that has elevated to 38.9%, which is above our goal of 30%. So it is necessary, after all, for us now to have a robust stability sheet to have the ability to do the expansion that we have to do and do the investments and additional M&As and issues like that, that we have to do to develop our portfolio. Lastly, check out our outlook and our targets. In order we proceed to execute on our technique, we preserve our outlook. We’ve got mentioned that we anticipate an natural gross sales development on this yr to be between 15% to twenty%. Nevertheless, we foresee that the expansion will probably be within the higher finish of this vary for 2024 and we stay assured that we are going to develop our working earnings quicker than we develop our gross sales development and in addition that we are going to have a constructive operational money movement by the top of 2024. So with that, I hand over to you, Merton.
Merton Kaplan: Thanks very a lot, Micael, and thanks very a lot, Anna. So now we’re sharp on time. With out shedding that momentum, I wish to open up the ground for Q&A. We’ve got a moderator that will help you take part within the convention name. I am going to simply give particulars. You might register to get onboard to the road by means of the press launch hyperlink or within the hyperlink on the report. Try this and you’ll get a affirmation to ask questions? We’ve got a line-up now, so the moderator, I wish to hand over to you to take the questions. And please ask two questions at a time so everyone will get an opportunity to get their questions requested.
Operator: [Operator Instructions] Our first query comes from the road of Bjorn Enarson with Danske Financial institution. Please go forward.
Björn Enarson: Sure. Good day. I’ve two questions. First one is on capability investments that you simply talked so much about and lots of capability is approaching stream subsequent yr. I assume your capability improve subsequent yr is just a little bit depending on when capability is approaching stream subsequent yr. So when you can elaborate on whether or not you might be more likely to meet the demand by way of capability 2025 or is 2025 is just a little little bit of a yr between? Second query is on the Swedish protection invoice. In case you can elaborate just a little bit on that and assist us perceive the completely different elements there? Thanks.
Micael Johansson: Thanks a lot. Nicely, on the capability will increase, there are a number of elements of this, after all. I imply, whereas we’re delivering now, we elevated our worker workforce and we type of work shifts and do the whole lot we are able to to make use of the amenities and the manufacturing that now we have to output even rather more than we did earlier than, then step-by-step subsequent yr, however rather more in the direction of the top of the yr, we’ll see new manufacturing traces coming into play and in addition automating current and refurbishing current traces in order that they grow to be extra environment friendly. I imply precisely by way of the will increase in step-by-step, it is laborious to say. However we have mentioned that if now we have doubled the capability, so we’re able to manufacturing like 200,000-plus munitions as we converse, all in all, in a mixture. We’ll go in the direction of finish of 2025 and early 2026 right into a manufacturing capability of 400,000. After which in 2026, you should have the Indian facility developing in play and in addition the Michigan facility up and operating in 2026. So it will proceed for 2, three years to come back in growing our capability. That is how a lot I can say. And it is the whole lot from type of the capability of constructing tubes for the help weapons and the munition on the facet can be one other capability will increase. And proper now, we type of patch our manufacturing traces when you should use robotics as a substitute of guide labor and the automation will proceed as nicely going ahead to a big extent, so we create extra effectivity. On the entire protection invoice that was desk, I do not assume there have been many surprises in relation to the way it seems like as compared with what the Protection Committee mentioned after they gave the report. The main focus appears to be so much on type of the reliability, availability of a lot of the fabric that they’ve acquired by way of restore supplies and spare elements and upkeep and all that, and ammunition and munitions in relation to the military and naturally, now we have an incredible capability to help that. The opposite applications are persevering with as type of ready for. So now we have so much ongoing on the deliveries on the Gripen facet. We’re in an idea program in relation to what comes to enrich the Gripen with probably unmanned functionality and past 2050 what comes after that. In order that’s type of in play. Similar factor on the submarine facet. The deliveries for the A26, after which in parallel come type of what can we construct after that by way of the idea program for underwater functionality. So it is according to what now we have seen, I believe, to a big extent. What I believe will occur is, after all, that the NATO functionality targets will grow to be increasingly agency throughout subsequent yr, and which may type of regulate it a bit, so can we – how can we defend the Baltic Sea particularly? How can we deal with the surveillance capabilities within the Nordic area? And which may twist it a bit, so to say. However all in all, I believe it is according to what the Protection Committee truly tabled within the protection report earlier this yr.
Björn Enarson: Thanks.
Merton Kaplan: Thanks, Björn.
Operator: Our subsequent query comes from Henric Hintze, ABG Sundal Collier. Please go forward.
Henric Hintze: Hello, that is Henric right here. So I wished to ask a bit concerning the Surveillance and Dynamics margins right here. So Surveillance got here in a bit stronger this quarter and Dynamics a bit weaker. You mentioned it was on account of combine and Dynamics and a few undertaking completions in Surveillance. So first on Surveillance. Did you imply to say that it was perhaps a bit increased than the underlying run fee or no matter you’ll name it, on account of these completions? And the way risky ought to we anticipate the margins to be notably in Dynamics since we have seen fairly some fluctuations between the quarters now?
Micael Johansson: Nicely, if I can begin, and Anna can, you may complement, after all. On the Surveillance facet, I imply, that enterprise space is many, many initiatives, so to say. And the combo of these initiatives and deliveries in a mixture between share of completion, sort of income and supply sort of initiatives, it is a substantial enterprise. We’re speaking 1,000 initiatives in all probability in Surveillance. So – nevertheless it ought to be going ahead. We at all times mentioned that it ought to be a double-digit sort of margin enterprise space, and we’re shifting in the appropriate route, precisely how the combo seems like. Each quarter can fluctuate a bit, completely. However trend-wise, it simply go in that route. That is how a lot I wish to say about that. Dynamics just isn’t actually the identical, however they’ve a number of enterprise models rising dramatically and producing good margins. Now the combo of whether or not it is Floor Fight deliveries a sure quarter and or not will type of have an effect on the place the margin will probably be within the mixture of the enterprise models, however it is going to at all times be on a fairly excessive degree as we see. I imply it would fluctuate a share or two or one thing, nevertheless it’s not type of dramatic. And that is what I can say about type of how the enterprise areas appear to be. If you wish to add one thing…
Anna Wijkander: No I can simply fill in. I agree with what you are saying. I believe what we are able to emphasize is basically that the significance of us the traits, enhancing traits fairly than wanting into the small print within the every quarter as a result of it fluctuates so much, as we mentioned.
Micael Johansson: Precisely.
Merton Kaplan: All proper. Thanks, Henric.
Operator: Our subsequent query comes from Ian Douglas-Pennant at UBS. Please go forward.
Ian Douglas-Pennant: Thanks very a lot for taking my questions. So first on the commentary on steering that you simply mentioned you anticipate the excessive finish of the steering vary. What likelihood, I assume, is there that you simply come out the excessive finish of – sorry, when you beat the gross sales development steering this yr, given the order development you have acquired? And likewise I wished to push and see if I may get you to slim the commentary on the free money movement steering being constructive in any manner. I imply, are you able to give us some form of indication of how constructive or how near breakeven that is perhaps in your estimation? The second query, I simply wish to comply with up on the earlier one on Dynamics margins. I imply I perceive it’s totally risky quarter-to-quarter and the drivers of that. However within the 9 months of this yr, we have seen it very roughly flat. Given you are operating, I’d assume, over 100% capability utilization throughout this enterprise on common, is there margin upside? And I assume how necessary can combine right here be as you shift in the direction of extra exports? Thanks.
Micael Johansson: So on the steering of development, I imply, we make sensitivity evaluation. And right here comes into play type of how a lot is share of completion forms of revenues within the quarter to come back and the way a lot is definitely supply milestones probably type of in Floor Fight in different enterprise models that may give us a sensitivity evaluation, whether or not we truly meet these milestones or not. And the most effective estimate now we have with confidence we’re within the higher vary of 15% to twenty%. However I cannot discuss type of how the sensitivity hole seems like intimately. And I believe we is not going to provide you with additional steering then that we are going to be constructive on money movement and that we – what we mentioned within the second quarter final yr have occurred now within the third quarter. We acquired giant milestone funds, and we mentioned we can have these within the second half of the yr, however it will likely be a constructive money movement, that is all we are able to say. Relating to the margin fluctuations in Dynamics, once more, nicely, I believe as we have tried to say, I imply relying on the whether or not you’ve gotten giant deliveries in a sure quarter with Floor Fight or not. And within the combine with the opposite enterprise models, it is going to – some quarters, will look actually good and a few quarters will look good, nevertheless it will not fluctuate that a lot. However as we have mentioned earlier than, this enterprise share ought to at all times be on the midpoint of double-digit margins. That is type of our ambition degree. And additional than that, I can not type of information you on these items. I believe that was all of the questions, proper?
Anna Wijkander: Sure.
Merton Kaplan: All proper. Thanks very a lot, Micael. May now we have the following query, please? Moderator are you continue to with us? Let’s examine.
Micael Johansson: Did we lose them or?
Merton Kaplan: Okay. Let’s do this. We’re attempting to unravel the technical points now we have with the moderator. So I’ve truly some questions right here from you, Micael.
Micael Johansson: Okay.
Merton Kaplan: From certainly one of our analysts asks a few questions, however certainly one of them could be, when you may spotlight a bit the T-7 coach program that you simply talked about briefly throughout the presentation, how is that going to impression Aeronautic gross sales and EBIT by 2026? And we are able to come again to another questions that he had. I am going to begin with that one.
Micael Johansson: Nicely, on the coach plane manufacturing, I imply, to start with, it is to one of the crucial fashionable amenities now we have for a superb movement of aft elements of the plane that we manufacture. And we are actually on contract for like 35-ish afts and we’ll ship many over the yr. And as , the fundamental type of first framework contract was 350 aircrafts. We nonetheless have startup type of points within the movement which now we have to appropriate and the ecosystem must type of grow to be extra flow-oriented in relation to not solely us, however the provide is round it. And now we have – nevertheless it’s a really excessive depth now. So it’s kind of of start-up points and in addition a little bit of beneath absorption as a result of we’d like extra movement within the manufacturing facility. And that – it is going to take a few years earlier than we truly get to the extent the place we begin seeing a burdening in impact, I believe, on aeronautics. However take a look at this as a franchise program over a few years the place, I imply, Boeing (NYSE:), have estimated there will probably be a few 1000’s of those plane on the market coaching pilots world wide and lots of within the U.S. So we simply must get by means of this, and I am assured within the capabilities such that now we have on the amenities. It is not technical issues, it is extra like type of cease and go in manufacturing that we have to get the movement going.
Merton Kaplan: All proper. One other query that now we have on the Gripen campaigns and Gripen has been shortlisted in a lot of international locations, together with Colombia, Philippines. So how do you see these processes develop and the likeliness of Saab successful these contracts?
Micael Johansson: Nicely, we’re blissful to see an enormous curiosity within the Gripen E plane, in order that’s implausible. And now now we have been down-selected in Thailand as we all know, and we now get into type of extra of a contractual course of in that nation. In Colombia, we’re ready for some type of resolution on type of political degree to say, go and begin. And I can not decide precisely when that may occur, and we’ll see who will probably be chosen. There may be an curiosity from Peru who’ve type of now set a funds for twenty-four aircrafts, and they’re beginning an acquisition course of hopefully quickly. After which, after all, now we have Brazil which have each type of the continuation of the Gripen E program, and we even have a dialogue with them on the transport functionality for Sweden. So a lot of issues occurring, on the Gripen facet now going ahead, that are necessary to us. So sure, that is the way it seems like. We’ve got a lot of intensive campaigns as we converse.
Merton Kaplan: Sure. Thrilling to listen to. So we do have some points on the cellphone line. So I wish to ask those that you might be on the record to ask Micael and Anna questions, please ship them on the chat on the webcast. So I’ve extra questions right here, Micael.
Micael Johansson: I hope they’ll hear us.
Merton Kaplan: Sure, they hear us.
Micael Johansson: Okay. Good.
Merton Kaplan: So Micael, this query has popped up right here a few occasions throughout the day. The remark – any feedback relating to the DoJ subpoena from the U.S.? And what are you able to give us from that?
Micael Johansson: I do not actually have any information on that. It was a shock. We’ll, after all, collaborate with the authorities and supply info as they request. And we have completed that earlier than with the Swedish authorities and Brazilian authorities. No wrongdoings have emerged from that. And that – that is the place we’re. And now we have confidentiality elements on this course of. So I can not – I cannot speculate. I cannot say something about it. We’ll simply go forward and do what now we have to do to help them.
Merton Kaplan: Nice. Thanks. I’ve a query right here from a shareholder and asking what may we anticipate on the subject of the brand new Swedish corvettes and our JV with Babcock?
Micael Johansson: Now I hope we’ll get into the section of type of setting the design. We’re within the design sort of undertaking proper now along with Babcock and hopefully, we can have type of completed that quickly now in order that Sweden can proceed and begin the precise growth program for that. It is a vital program, the LuleÃ¥-class corvettes going ahead, however I am assured that we are going to now type of converge on what it must be by way of capabilities. So we’re within the last phases of that.
Merton Kaplan: Okay. Thanks very a lot. I am getting knowledgeable that now we have the road again. So ought to we attempt once more to present these names one other likelihood on-line?
Operator: Our subsequent query over the cellphone comes from Erik Golrang from SEB. Please go forward.
Erik Golrang: I am going to attempt once more then. Are you able to hear me?
Merton Kaplan: Hello, Erik.
Micael Johansson: Sorry about that. We do not have – I haven’t got management over the cellphone line.
Erik Golrang: No downside. Two questions then. First one on the – one on inventories, I assume. And if we take into consideration the a part of your portfolio, I assume, primarily in Dynamics, the place merchandise are being consumed within the battle within the Ukraine, and now we have this debate about the necessity to refill inventories. I imply the place are we in that? In case you – I assume it’s totally tough relying on the particular product. Are we type of catching up in any manner the extent of manufacturing now or are you see stock depletion slowing down and we began to rebuild them in sure areas, even when it is slowly? May you give any type of tackle the place precise manufacturing and order ranges are relative to the necessity to rebuild inventories?
Micael Johansson: I believe it is a superb…
Erik Golrang: Are they both coming down or are they developing?
Micael Johansson: No, I believe it is a superb query. I imply when you look upon the long-term perspective right here, in the most effective of worlds, I wish to see type of a goal degree of that is the place we wish to be in relation to inventory ranges and safety of provide and that functionality now we have to type of implement. We get contract by contract, and now we have no details about how depleted all of the shares in a sure nation or one thing. We do not know after we ship giant batches of ammunition or one thing, whether or not they go instantly into the stock or stockpile of the nation or whether or not they donate that to Ukraine. So truthfully, I do not know in type of – on the particular in every nation, and I should not in all probability however it might be good if we had a long-term dialogue with sure governments on what sort of stockpiles do we’d like for deterrence ranges and what sort of functionality is now wanted to construct to help that? However I do not know. It is simply step-by-step and a superb development in relation to growing the volumes and the contracts, as you see, is sweet. However do I do know precisely the place the targets is or in every nation? No. However I see the long-term development of development, after all.
Erik Golrang: Sure.
Merton Kaplan: All proper.
Erik Golrang: Then on the second query on, I do know you do not information something on gross margins. However nonetheless, when you may type of give a touch upon how blissful or sad you might be with the event of the gross margin and maybe additionally from a divisional standpoint with out naming particular ranges? I imply is that this a degree you would be proud of to drive the earnings development you undertaking over the following couple of years or do we’d like gross margin enchancment and what are the overall variables impacting it right here?
Micael Johansson: You are proper; we can’t information you on gross margin. However after all, gross margin is instrumental to us. We’ll by no means be happy on a sure degree. We’ll enhance it as a result of we have to proceed to spend money on R&D and guarantee that we’re related to 1, two, three, 5 years. After which the gross margin is basically necessary to us to have the ability to do this. We’ve got been in a position to do this to a big extent, however after all, a greater gross margin would improve the type of the room for that also giving excessive profitability margins in the long run. However you see the connection is necessary to us, however I will not information you the place now we have our targets, so to say. However after all, now we have targets.
Erik Golrang: Thanks.
Merton Kaplan: All proper, thanks, Erik. Subsequent query?
Operator: The following query comes from Sam Burgess in Citi. Please go forward.
Sam Burgess: Hey, morning. Thanks for taking my questions. A few huge image ones truly. I famous that 80% of the order bookings this yr have been worldwide and round 60% of gross sales. I assume within the context of the latest Draghi report and the aspiration for extra European protection integration. Are you actively in search of extra collaborative applications? And do you assume you are more likely to develop your footprint in different European nations, is query one? And I’ve acquired a second query, however I am going to allow you to go for that one first.
Micael Johansson: Collaborations are extraordinarily necessary, I believe, going ahead. And I hope that we are going to get our act just a little bit higher collectively in relation to European perspective of that each between international locations aligning necessities and as this business is collaborating and an enormous necessary think about reaching that’s, after all, whether or not international locations are ready to place cash on this European protection industrial program primarily based on the European protection industrial technique as underlaying desk within the spring. That isn’t negotiated totally but. However to create scale, after all, it’s worthwhile to collaborate. And collaboration may result in joint ventures. So I believe that’s what we’ll see if we come collectively and put some type of cash in doing issues collectively. So collaborations are necessary. We’ve got a couple of at the moment. We’ve got collaborations with Diehl and MBDA on the missile facet, now we have an AI collaboration with Helsing. We’ve got a naval collaboration with Babcock. So now we have a lot of them. And we’re at all times establishing kind of a bigger footprint in international locations additionally in Europe. And clearly, international locations which might be necessary to us at the moment are like UK, as , in Europe and in addition Germany and Poland. So we go in that route, after all, to the place now we have an enormous presence in relation to buyer contracts, after all, we have to collaborate with business regionally, and that may result in an even bigger footprint within the nation. So strategy-wise, we’re moving into that route. You had one other query, I believe.
Merton Kaplan: There’s yet one more query.
Sam Burgess: Sure. Thanks. The second was simply you are investing in capability ramp-up clearly rising in a short time, there’s additionally digitalization, workforce recruitment. I am simply taking a step again and your midterm working money conversion goal of 70%. Because you set that focus on, you have seen demand develop massively. Do you continue to really feel very assured in assembly that focus on? And what would you say form of key dangers to that focus on?
Micael Johansson: I believe money conversion is essential, however we will even do our greatest to guarantee that our inner funding for the corporate to develop and take market positions is instrumental to us. And we’ll, after all, at all times make sure that we generate constructive money movement and good money movement for the enterprise. However we take a look at that on a regular basis. And when and if now we have type of a second view on that, what’s finest for the corporate, we’ll come again and discuss that. However I haven’t got a second opinion on that proper now. However you are proper, we’ll do the whole lot we are able to to type of meet the demand by capability will increase. After which if that impacts our view of the long-term goal on money conversion, we’ll focus on that with you as quickly as now we have checked out that just a little bit extra long-term.
Sam Burgess: Nice, thanks very a lot.
Merton Kaplan: Thanks, Sam. We’ve got 5 minutes left, so let’s take the next questions a bit extra quicker. I believe Sash [Agency Partners], you are on the road for the following one.
Sash Tusa: Nice. Thanks very a lot certainly. I’ve acquired two questions. Initially, how lengthy do you anticipate underwater methods to proceed to burden the margins at Kockums? And what are the issues that may change at underwater methods that ought to enhance its margins? After which second query, I am barely confused by the messaging on Surveillance margins. You mentioned that you simply had some completions within the third quarter, which might are inclined to counsel that margins ought to be good then. However I believe earlier on, you additionally mentioned that the margins that you’ve got otherwise you anticipate to have within the backlog are increased than the margins you are presently doing. May you simply affirm that, that is truly the case?
Micael Johansson: Relating to the underwater enterprise, if you find yourself in a type of intensive R&D section and you progress into extra of a supply section, after all, which is regular within the undertaking, the burden will ease, so to say. We have to get by means of a couple of R&D points and precisely how lengthy that may take? Few extra quarters, I’d say. That is type of my perspective of issues, however that won’t be in a single step. Its completely different applications I am speaking about. We’ve got applications within the U.S. that wants – that goes into high-volume manufacturing, the EMATT program, which is type of a once-off Anti-Submarine Warfare Coaching Goal sort of manufacturing and its excessive quantity on these, when that goes up – ramps up in manufacturing, issues will enhance. We’ve got the identical factor on the remotely [ph] operated automobiles, which is {the electrical} model of it. And we’re additionally ramping up in relation to the AUV62, which can be extra subtle and submarine warfare sort of coaching goal and mine hunter sort of factor. So it is extra that step into extra of manufacturing than R&D that may type of ease the burden. The margins in Surveillance; nicely, I believe what I am saying is that the combo of that portfolio, the whole lot from command and management methods to sensors, passive and lively and the massive sort of enterprise like GlobalEye in a mixture of type of the extra product-oriented enterprise is a enterprise that ought to have a development in the direction of the double-digit margin. That is what we have mentioned on a regular basis. After which in a mixture of issues within the quarter, it could possibly fluctuate a bit, after all, when you’re profitable in sure initiatives, after which you may have a burden in others. That is why I discussed it is like a 1,000 undertaking sort of enterprise at the moment, the Surveillance enterprise. However what the necessary type of info is that you’ve got type of a backlog supporting a greater margin going ahead. That is all I can say.
Sash Tusa: That is nice. Thanks.
Merton Kaplan: Thanks, Sash. Let’s have the following query, please.
Operator: The following query comes from Carlos Iranzo Peris in Financial institution of America. Please go forward.
Carlos Iranzo Peris: Hey, guys, thanks for taking my questions. The primary one is on the Dynamics order consumption, which has been supported by two bigger orders. However I ponder when you may present some colour on the smaller orders that additionally drove development in Q3? After which the second, by way of hiring virtually 25,000 workers as of September, do you’ve gotten any quantity or any goal in thoughts in relation to hiring in 2025?
Micael Johansson: Relating to the Dynamics order consumption, I am unsure I acquired the query 100%. However I imply, it is the small print – it is the help and missile sort of space, which is rising that a lot I can say. However on prime of that, everybody wants to coach much more intensive proper now. So the fight coaching facilities that we – now we have an incredible coaching and simulation functionality as nicely that’s rising much more than we anticipated a couple of years in the past. In order that can be rising so much going ahead. So all the areas are rising, I have to say, however then they’re completely different by way of how they give the impression of being revenue-wise. A few of them are type of supply income and a few of them are POC, however we see development in all areas. Relating to using folks, I believe that it – we’ll proceed to draw and make use of folks, however I believe we’ll work much more with automation going ahead and be extra environment friendly in relation to software program growth. So I believe it is going to flatten out a bit. And if we’re not simply proceed to develop perhaps on this degree as we have seen throughout 2023 and 2024. However it is going to – we’ll develop, however not on the identical tempo, I’d say. That is as a lot as I can say.
Carlos Iranzo Peris: Thanks, guys. Thanks.
Merton Kaplan: Thanks, Carlos. Thanks, Micael, and thanks, Anna. We’ve got – we’re wanting time now. So now we have to shut this session. Thanks to your sturdy curiosity in Saab.
Micael Johansson: Thanks a lot for becoming a member of this morning. Thanks.
Anna Wijkander: Thanks.
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