Saab Role in US Military Program Will Drive Margin Improvement: CEO-X
February 15 2019 - 4:12AM
Dow Jones News
By Robert Wall and Dominic Chopping
Saab AB's (SAAB-B.SK)role as a key supplier to Boeing Co. on the
T-X future-trainer plane program for the U.S. military will help
boost margin performance, particularly once the aircraft goes into
production, the Swedish defense company's chief executive, Hakan
Buskhe, said Friday.
Boeing last year won a hotly-contested battle to supply the T-X
and initial 351 airplanes to the U.S. Air Force. Saab was closely
involved in the development of the prototype and in October won a
contract to help make the planes.
The deal will help Saab meet its target for 10% operating margin
in the next few years, Mr. Buskhe said. The volume production
associated with the T-X also will help lower costs for Saab's
Gripen fighter program by sharing suppliers, helping boost
earnings, he said.
Saab on Friday posted higher-than-expected fourth-quarter
earnings. The Swedish defense company said net profit for the
quarter rose to 982 million Swedish kronor ($105.8 million) from
SEK601 million, compared with analysts' expectations for SEK921
million, according to a FactSet poll. Sales rose 8.6% to SEK11.02
billion, compared with a forecast of SEK11.07 billion.
Saab set the 10% margin target in 2016. It hasn't set a firm
date to meet the goal, though it is expected to occur around 2021.
Saab Friday reported a 7.7% operating margin for last year after
stripping out one-time costs for some layoffs.
Saab said its operating margin this year should advance and that
2019 sales growth will be in line with its long-term goal of annual
organic growth of 5%.
Mr. Buskhe said he doesn't want to set a firm timeline for the
10% target because it could limit the company's flexibility when
chasing business overseas. Winning arms sales overseas can be
expensive and weigh on margins. Saab is pursuing several
opportunities for its Gripen combat jet, for instance, including in
Finland and Switzerland.
Once the margin target is met, the Saab boss said he will pursue
a higher figure. The partnership with Boeing on T-X could be
important. The profitability of the program should improve
meaningfully around 2023 when development comes to an end and
production starts, Mr. Buskhe said,
The company also said it identified and implemented a series of
measures during the year to bolster its long-term prospects and
raise productivity, including operating efficiencies and a plan to
adapt the product portfolio, improve marketing efficiency and
increase digitization and automation. In the third and fourth
quarters of 2018, a large share of the identified efficiencies were
completed, the company said.
Saab said order bookings in the quarter rose to SEK10.79 billion
from SEK6.59 billion in the same period last year, while the order
backlog stood at SEK102.18 billion, from SEK107.23 billion.
The company announced a SEK4.50 dividend, down from SEK5.50 last
year.
Write to Robert Wall and Dominic Chopping at robert.wall@wsj.com
and dominic.chopping@wsj.com
(END) Dow Jones Newswires
February 15, 2019 03:57 ET (08:57 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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