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Saab YEAR-END REPORT

Saab YEAR-END REPORT
By Eric Gourley

Defence and security group Saab increased profits in 2011 despite a sharp decline in orders from the previous year.

The Swedish company announced last year’s financial results and market highlights last Friday in Stockholm. While sales slid 4 percent to 23.50 billion kronor ($3.5 billion) and orders plummeted 28 percent to 18.91 billion kronor, net income quintupled to 2.23 billion kronor from 433 million in 2010.

President and CEO Håkan Buskhe called 2011 “a very interesting year,” noting that market conditions shifted midway through the calendar.

“The first half-year we had a situation where we could see the market environment and activity was increasing,” Buskhe said. “However, the second half-year, due to the debt burden in Europe, but also the economic downturn that was highlighted in United States, put us back again and increased the negative trend, especially in continental Europe. There we could see a decrease of activities.”

Key U.S. breakthroughs

Although Saab failed to repeat the success of its pair of multibillion kronor orders from 2010, the company did use a few important breakthroughs in 2011 to offset the downward trend in Europe.

As an example, 2011 saw the U.S. Army place its first order for the Carl-Gustaf M3 84mm recoilless rifle system. U.S. Special Operations Command has used the weapon for two decades, but the November order for 126 weapons and 3,000 rounds of ammunition, valued at 209 million kronor, is the system’s first broader U.S. Army application and the order for two brigades’ worth of systems could represent the start of broader service fielding.

Saab also secured a key order with the U.S. Department of State for the Giraffe AMB multi-mission radar system and related services for air surveillance, valued at 155 million kronor.

The Department of State selected the Giraffe AMB system to create superior situational awareness and provide sense and warn capability to protect deployed U.S. personnel from incoming enemy threats from rocket, artillery and mortar attacks. The program will reportedly involve both Saab’s newly acquired subsidiary Saab Sensis, located in Syracuse, New York, as well as Saab in Gothenburg, Sweden. Deliveries are slated to take place during 2012 and 2013.

Gripen gaining recognition

Another 2011 breakthrough order came from FMV, the Swedish Defence Material Administration, for continuous technical and maintenance support of its existing fleet of Gripen fighters. Since the fighter’s introduction 15 years ago, Saab has delivered more than 200 to its largest and longest customer.

“The commitment that we have from the Swedish state for the Gripen system is of course a key thing to be able to convince others,” Buskhe said. “The interest for the Gripen system has never been so large as it is today and I think there are many reasons for it. The affordability is more and more discussed around the world. Many countries see that they need to be able to secure their airspace, but you need also to have money to something else — healthcare, schools — and Gripen has extremely strong performance compared to other systems and in tests shows the best performance-to-cost ratio.”

The Swiss government apparently recognized this late last year when it down-selected Gripen for negotiations as its future fighter, eventually selecting it as the preferred bidder. To clinch the contract Saab reportedly cut the original price and Switzerland is expected to formally approve the choice this month.

“That really proves what will be important going forward in the global defense and security market, that you need to have a good product that stands sharp competition,” Buskhe said. “At the same time, it needs to be affordable so countries have money for other things.”

Gripen has been in service for almost a decade with the Czech Air Force and also in Hungary, where the air force extended its 14-Gripen lease until 2026. Thailand

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