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Defense Markets Summary
Saab Group – 2006 review

March 9, 2007: The Swedish Saab group (SAABB.ST) continues to demonstrate strong performance; for five consecutive years, Saab has increased annual sales by an average of 6%, slightly higher than its predicted long-term growth target of 5%. Last week the company reported sales of SEK 21.063 billion ($2.976 billion), with net income of SEK 1.347 billion ($190 million), representing SEK 11.91 ($1.68) earning per share. Its sales of defense related systems and products, including military aviation, amounted slightly over SEK 17 billion ($2.4 billion) in 2006. The order backlog at the end of 2006 amounted to SEK 51.099 billion. ($7.220 billion).

In 2006 Saab sales in the Swedish market amounted SEK 7.3 billion ($1.03 billion), representing 35% of its total sales. However, challenged with long-term consolidation of its domestic market, as the Swedish military shifts into an operational force for international deployments and national emergency, Saab expects a decrease in domestic sales. The company plans to compensate for the anticipated reduction by exploiting new opportunities assuming greater responsibilities for system integration and life cycle support services. One such contract was announced by the company last week, as Saab and the Swedish Defense Materiel Administration (FMV) announced a technical support, operation and maintenance of wheeled vehicles and nuclear and biological and chemical (NBC) protection gear worth up to 230 million SEK ($32.5 million) over two years.

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Seeking fort growth overseas, Saab is establishing partnerships and cooperations in selected export markets, including South Africa and Australia. Among the latest mergers that went through in 2006 was the acquisition of Ericsson Microwave Systems (now Saab Microwave Systems). The signing of cooperative agreements with Norway and Denmark, pursuing future prospects for the sale of Gripen fighter aircraft and the acquisition of Maersk Data Defense in Denmark. It also included the establishment of a new operating unit in South Africa, in partnership with Denel. Saab also divested from Saab Metech AB, gaining SEK 180 million ($25.4 million) in capital.

In the aeronautics field Saab focused on the continued upgrades of the Gripen aircraft, under SEK 1 billion ($141 million) award by the Swedish Air Force supporting continued development of the aircraft. Another program which proceeded this year was the sale of the Erieye airborne surveillance systems to Pakistan, under a SEK 8.3 billion ($1.17 billion) program. In 2006 Saab continued the development of the Neuron unmanned combat air vehicles, in cooperation with Dassault and unveiled an indigenous unmanned helicopter, the Skeldar. The company focuses its operations on niche markets, where its offerings are found competitive and attractive. For example, in 2006 Saab won a contract to supply RBS15 Mk3 missiles to Poland, valued at just over SEk 1 billion ($141 million). The company also provided Spain with Arthur weapon detecting radars, under a contract worth SEK 549 million ($77 million, 59 million euros). Saab camouflage specialist subsidiary Barracuda reached a ten year agreement with the US Army, to supply ultra-lightweight camouflage net systems (ULCANS). This subsidiary well represents the company's niche strategy, recognized as the world leader in camouflage systems, holding 70% of the world market of multi-spectral signature management..