Manufacturer optimistic about future orders despite Swedish government's proposal to slash military spending

Saab is confident that this week's Swedish defence reform bill will result in sustained domestic orders despite a planned SKr3 billion ($396 million) cut to overall military spending by 2007.

Saab president and chief executive Ake Svensson says the company's sales outlook is already dominated by export orders and this trend is expected to continue, hopefully offsetting any potential downturn in the Swedish defence market. Acquisitions are also planned, with some 20 international companies now being reviewed as possible takeover targets.

Svensson says the Swedish government is expected to continue to prioritise funding for ongoing research and redevelopment projects by local industry, which should enable Saab to continue to pursue leading-edge work. The phased introduction of the defence cuts over three years should allow time for the company to adjust. "It will not happen overnight," he says.

International takeovers of second and third-tier suppliers will be an important part of the expansion of the company's export activities, Svensson says. "The expansion will be related to niche products...we have a list of about 20 or so potential objects that we are looking at."

Takeover targets are companies in the "advanced, high-technology products where we already have a footprint...We are strong in the signature management, we are strong in anti-armour, we are very strong in training systems. We are strong in areas like sub-systems for aircraft or for missiles, co-development of missile systems, etc."

Saab Dynamics will remain wholly owned for the near to medium term, Svensson says, despite most European missile houses now being part of MBDA with Germany-based LFK about to be merged into the entity. Longer term mergers are possible although MBDA is not Saab's only option. "I don't want this to be just a European issue," he says.

Saab will continue to reduce its existing workforce as domestic development projects slow. Saab's workforce is now down to 12,760 with the bulk of job losses coming from research and development centres. Svensson says this pattern is likely to continue on the back of next week's proposed cuts to defence spending.

"I think you will see a continuous decrease in the Swedish amount of development work, but on the other hand I think you will see an increase in the international part of the work. So I hope that we will be able - and our view is that we will be able - to grow, but that will have to be by becoming more and more an international player."

Total Saab sales at the end of the first half of 2004 stood at SKr8.37 billion compared to SKr8.28 billion for the same period in 2003. The ratio of defence versus civil sales was 80:20. Svensson says 67% of all new sales in the first half of the 2004 financial year were to international customers. The company is currently recording an operating margin of 8%. Aerospace now represents approximately one third of total business activities.



Source: Flight International