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Saab has presented its results for January-September 2020. The company’s president and CEO, Micael Johansson, made the following statement:
The coronavirus pandemic has continued to impact the world negatively and not least the global aviation industry. For Saab, the uncertainty surrounding COVID-19 has mainly been associated with supply chain disruptions within the company’s business areas and the market conditions for the civil business. Due to the ongoing pandemic and drawn-out global recovery, Saab now sees an increased risk related to the effects of COVID-19.
In recent assessments, the future risks have increased foremost for business area aeronautics. The prolonged pandemic and slow recovery is primarily affecting subcontractors and material supply for the Gripen E/F program, with consequences for development, verification and production work.
The Gripen program is characterized by long lead times and small series where components must be certified for airworthiness, which means the assessment of future possible economic impact within aeronautics has become increasingly uncertain. Saab has managed the increased risks by adjusting the project estimates, which affected the operating income negatively by SEK 1.1 billion in the quarter. Our view is that the risks in the supply chain for other business areas have also increased, but to a lesser extent, why an additional SEK 0.4 billion has been allocated for adjustments in other project estimates. Our assessments assume that the effects of the pandemic will continue during 2021.
In connection with the interim report for the first quarter 2020, the outlook for organic sales growth and operating margin for the full year could not be confirmed due to the great uncertainty caused by COVID-19. This still applies. The projection of a high delivery rate in the fourth quarter, including important milestone payments, have not changed, nor has our projection that operational cash flow for the full year 2020 will be positive, excluding the state support package. Saab remains committed to its long-term financial goals in terms of growth and profitability.
Strong order bookings and continued internationalization
In challenging times, Saab has continued to win important contracts. Order bookings increased by 8 per cent in the quarter and by 27 per cent in the first nine months of the year and amounted to SEK 24.2 billion (19.1). Small orders grew by 7 per cent in the same period. During the first nine months, the work of developing the business in a more international direction has continued. In the U.S.A., the establishment of local production capacity for the T-7 aircraft is progressing, and in connection with Australia’s order for Saab’s solution for deployable health modules, a global development centre is being established in the country.
Stable sales and profitability affected by COVID-19
Sales in the first nine months of 2020 amounted to SEK 22.9 billion (24.9). The lower volumes in the quarter were mainly due to COVID-19 related adjustments to project estimates and weak demand in civil aviation operations. Excluding adjustments to project estimates, sales were down 2 per cent in the year’s first nine months. Operating income for the first nine months amounted to SEK 549 million (1,739). Items affecting comparability for the quarter includes capital gain from the divestment of Vricon SEK 1,0 billion, COVID-19 related adjustments to project estimates SEK 1,5 billion and provisions and write-downs SEK 0,6 billion. Excluding items affecting comparability, operating income amounted to SEK 1,657 million, equivalent to an operating margin of 6.8 per cent (7.0).
Cash flow improvement in the quarter
Operational cash flow showed an improvement compared to the first nine months of 2019 and amounted to SEK -128 million (-4,356), thanks to several important deliveries during the year, including GlobalEye to the U.A.E. and Gripen E to Brazil.
Outlook statement for 2020
Due to uncertainty related to the scope and duration of COVID-19, it was stated in the first quarter interim report of 2020 that the previous forecast for the full year 2020 could not be confirmed. Saab reiterates this assessment.
