Channels: Air Combat | Air & Missile Defense | Armor & Survivability | Defense Electronics & C4ISR | Electro-Optics & Night Vision | Fire Support | Future Combat Systems | Homeland Security | Infantry & Special Operations | Logistics & Support | Missiles & Precision Strike | Naval Warfare | Training & Simulation | Unmanned Systems & Robotics | Defense Exhibitions
SAAB Group: Defense Programs Compensate for a Grim Outlook
Saab is restructuring its Aeronautics segment and its business units aerostructures, Aerosystems and Gripen International, to better sustain the current business level. The Saab Group today reported a net loss of -27 Million Swedish Krones (MSEK) [equivalent to US$3.23 million). Expecting the current situation to continue, Saab announced today plans to lay off 300 employees. The Company remains positive about the prospects of Gripen in the international market and maintains its goal of selling 200 Gripen on the export market in the upcoming years.
According to the report, the main cause is the weakness in the commercial aviation, where Saab provides both complete aircraft and subcontracting to other aircraft manufacturers. As a consequence of the reduced profitability within the Aeronautics segment the company decided to lay-off 300 employees and, anticipates its workforce to be reduced by 800 over the next year. Facing uncertainties in the business environment the company expects 2009 sales to be flat and profit margin drop by about 4 percentage points.
The company's future health relies on the development and procurement spending by the Swedish Armed Forces, which remain critical to Saab’s ability to develop future technology. The bill for the future of the Swedish Armed Forces presented by the Swedish Government in March reiterated the Armed Forces’ long-term development plan for Gripen. In the bill, the Swedish government also points out the ambition to acquire ”off the shelf” equipment.
Saab's defense operations fared much better than other group's segments. Defense and security related orders have weathered the drop Saab experienced in the aerostructures orders. Defense businesses fared as good as in the first quarter of 2008. (2,249 MSEK = $270 million) while defense order backlog increased by over 500 MSEK ($60 million) to 11,221 MSEK ($134 million). Yet these orders are becoming less profitable, as defense group's operating margin have dropped to 6.7% from 9.2% last year. Defense cash flow has improved in the period, to 17 MSEK ($2Million) (compared to -152 last year $18 million).
In contrast, the entire group's financial picture was quite bleak. New order booking was down to 4,101 MSEK ($490 million) from a level of 7,749 MSEK ($927 million) reported in last year's first quarter. Operating margin droped to 2.8% down from 7.7% last year. This drop was clearly reflected in the order backlog, which dropped by 5,450 MSEK ($652 million) to 44,158 MSEK ($5.28 billion) by the end of March. The operating cash flow of the Saab group was negative: -456 MSEK ($54 million) in the quarter, compared to +303 MSEK ($36 million) last year.
