Saab 2012 Annual Report Download - page 10

6 SAAB ANNUAL REPORT 2012
CEO COMMENT
ENTERING 2013 WITH A
STRONG FOUNDATION
Following an exciting 2012, a year with
many positive announcements, Saab is
well-equipped to tackle a global market
characterised by tough competition. Focus
is on achieving protable growth through
continued cost-efciency measures and
close cooperation with our customers. We
are investing even more in markets that
have a clear need for competitive products,
systems and solutions.
A step in the right direction
During the year we secured several important orders and in the
third quarter order bookings reached their highest level in several
years. For the full year 2012, order bookings increased to MSEK
20,683 and the order backlog at the end of December amounted
to MSEK 34,151.
Sales increased 2 per cent to MSEK 24,010 and gross income
increased to MSEK 7,190, corresponding to a gross margin of
29.9per cent. Operating income amounted to MSEK 2,032, cor-
responding to an operating margin of 8.5 per cent, with excluding
extraordinary items was in line with the 2011 results.
Operating cash ow decreased to MSEK -396 as a result of a
higher utilisation of, and reduction in, advances and milestone
payments as well as a higher net amount spent on acquisitions
and divestments. It is normal in our industry that working capital
varies over time depending on the project mix and milestone pay-
ments.
Market conditions are challenging, and the situation is likely
to continue. Our view is that we need to strengthen the portfolio
and further increase our international presence. Therefore we an-
nounced during the year three additional market areas and a new
organisational structure, with a total of six market areas, which
came into operation on 1 January 2013, and two major acquisi-
tions that give us leading positions in areas such as aviation and
maritime trafc control.
Success for Gripen
Everyone who worked at Saab this past year and everyone who
followed us from the side lines can probably agree that this has
been a year of historic events. The rst six months were marked
by the grand celebration of our 75th anniversary, and the second
half of the year by positive announcements about Gripen. We
received news in late August that the Swedish government had
reached an agreement with Switzerland for the procurement of 20
or so Gripen E aircraft, and in mid-February 2013 we announced
an agreement with the Swedish Defence Materiel Administra-
tion that includes development and modication of Gripen E for
Sweden during the period 2013-2026 and a possible order to
manufacture new Gripen E aircraft from Switzerland. In total the
agreement contains potential orders totalling SEK 47.2 billion.
This is an historic event for Saab and as CEO I am extremely
proud of the condence placed in this unique ghter aircraft
system, its development potential and defence capacity. Today,
Gripen is operational in six countries and we see continued strong
interest throughout the world. It is thanks to our high-tech exper-
tise and leading edge employees that we can offer an entirely new
ghter aircraft system, something very few companies can.
Stronger local presence, globally
Many of you who have heard me speak during 2012 have learned
that I want global development to be our starting point. This is be-
cause things that happen in our market are, to an increasing ex-
tent, impacting the way we do business. Saab has for some time
had the goal of 5 per cent organic growth per year over a busi-
ness cycle. Achieving this requires more than doing business only
at home – we also need to continue to increase our market shares
beyond Sweden’s borders. We therefore introduced, in early 2013,
a new market organisation with six geographic areas that have
favourable conditions for protable growth. Based on this, we will
now run our operations and receive rst-hand information on what
is happening in different markets. Being close to our customers is
essential for building better, lasting industrial collaborations.
Local roots also mean that we take an active role in the
development of society. This may involve collaborations in the
educational eld, research and development and local produc-
tion. Brazil and India are two concrete examples where we are
currently operating successful research centres. In all of our most
important markets we apply what we call “The Saab Way”. This
means that, in everything we do, we deliver high quality at reason-
able cost, and create and maintain close customer relationships
and collaborations in research and development.
Continued portfolio development
However, our growth will not be generated solely through expan-
sion in prioritised markets. We must also ensure that we have
an offering that satises our customers’ demands. We therefore
worked actively with our product portfolio during 2012 – work that
will continue at the same level of intensity in 2013. A key part of
this work is our investments in research and development.
Each year, Saab allocates around 20 per cent of sales to R&D
commissioned by customers and our own work, and in 2012 we
allocated 25per cent. This is a signicant amount and, as such,
imposes requirements for results. We believe that the combina-
tion of being close to our customers to capture their needs and
investing heavily in high-tech development is the recipe for suc-
cess in building a well-focused portfolio of solutions, products
and services with internal and external synergy opportunities. By
growing smart, and with our unique expertise in system integra-
tion, Saab can develop competitive advantages that produce
concrete results.
We develop the portfolio through product and systems devel-
opment and through regular divestments and acquisitions. One
strategically interesting acquisition this year was the acquisition
of HITT N.V., a leading supplier of advanced software applications
for aviation and maritime navigation, trafc and logistics mainte-
nance. Trafc monitoring and control is becoming one of our most
important civil market segments.
Challenges and bright spots
The business climate in 2012 continued to be characterised by
scal problems and an economic slowdown. When governments
allocate fewer and fewer resources to various budget items,
companies like Saab naturally nd it more challenging to create
growth. Global defence expenditures are expected to grow by