In 2007, Saab celebrated 70 years as a company, and a lot has happened over that time: in the world, in Sweden and at Saab. To be successful in times of change requires the ability to create new opportunities, and this is Saab’s biggest strength.
When Saab was founded in 1937, the threat of a major war loomed ominously. Today the world is totally different, and what it will look like tomorrow is anyone’s guess. In this rapidly changing world, a successful company must adapt. Our ability to quickly change together with our technology, which has distinguished Saab for as long as we have been in business, will remain success factors in the future.
A market in change
The market for defence materiel continues to change. In Europe, discussions are under way to reach a consensus how defence materiel should be procured. Slowly but surely, the trend is shifting away from limitations by national affiliation to a more open market. It will take time, but Saab is positive to every step that creates a more transparent market where the country a supplier comes from is of little concern.
This shift is also reflected in the intensive cooperation between countries and defence contractors in the EU. A growing number of major development projects are being carried out by multinational alliances. The idea, of course, is to share costs and bring together the best expertise. By offering cutting edge competence, Saab is an attractive partner in such situations, benefiting not only the company but Sweden as well. Today Saab is part of a number of collaborative projects.
Dual use
Another distinct shift is from product to system and the growth in civil security. It is becoming more common for deliveries to entail more than just a product. We are facing increasing demands to combine our capabilities into full-service solutions for both military and civilian customers. Examples include Saab Training Systems’ complete training concepts, Saab Aerotech’s lifecycle support commitments, surveillance systems for airports and harbors, and the order received from Thailand in 2008 in which Gripen is just part of the delivery.
A crucial factor in these international alliances and large-scale system deliveries is that we maintain a close cooperation between the government and industry in Sweden. Major defence orders always have a political dimension, and in that way are similar in nature to multinational security agreements and alliances. Sweden’s public-private cooperation has been successful for many years, and it is vital that it continues. As a respected supplier of high-tech systems, Saab has been able to serve as a “technology incubator” for society. This has been possible thanks to a close cooperation on development projects with the Swedish defence.
Global and local
Outside Europe, we have continued to strengthen our operations in South Africa and Australia. New orders from the Australian Navy consolidate our position as a major supplier to the country. In South Africa, the integration of Grintek with the rest of Saab continues. This is creating an effective platform for the local market and strengthening the country’s export opportunities.
Saab’s international footprint must be bigger. Only then can we maintain our position as a leading supplier in a dynamic market. This means that we will look to new markets, and we will become more important in the markets where we already operate.
A good year for Saab
An important event in 2007 was the order from the Swedish defence for an upgrade of the Gripen fighter and development of a demonstrator program for the next generation of the aircraft. This ensures the continued development of the Gripen system for years to come, strengthening our sales arguments in markets that are in the process of procuring new aircraft. It is also gratifying that a number of leading international companies have joined Saab in devoting resources to this project.
We have worked actively in recent years to find applications for Saab’s technology and products in the area of civil security. This is particularly true of the protection of flows of various types as well as infrastructure. This work has produced results, and in 2007 this sector represented approximately 10 percent of our sales, a figure that continues to grow.
The results for 2007 are distinguished by a steady flow of orders, totaling nearly SEK 21 billion (27.5), and continued sales growth. Sales rose by 9 percent to slightly over SEK 23 billion (21). Operating income rose by 49 percent to MSEK 2,607 (1,745), an improvement mainly due to the acquisition of Saab Microwave Systems, higher sales, capital gains and other non-recurring items.
The operating margin was 11.3 percent for the year, but it is important to note that the adjusted operating margin after non-recurring revenue was 9.4 percent, which shows we are still slightly below our long-term objective of 10 percent.
Working together, we will now implement the efficiency program announced in late 2007. Being more efficient is essential. The goal is to gradually reduce expenses and achieve annual cost savings of SEK 1 billion by 2010. This will allow us to increase marketing efforts and strengthen research and development so that we can continue to offer world-leading products in the future.
Code of Conduct
The defence industry and sales of defence systems in the international market often draw considerable attention and are the subject of speculation. Saab has been accused of bribery in connection with the lease of Gripen aircraft to the Czech Republic and Hungary. The Director of Public Prosecutions for the Swedish Anti-Corruption Unit has launched an investigation of the alleged improprieties.
Bribes have never been, and will never be, permitted at Saab. We are fully cooperating with the public prosecutor and providing all the information needed in the investigation. Until the investigation is completed, we cannot comment further on the case.
I would point out, though, that we worked actively during the year to build support for Saab’s common values. Among other things, a revised, expanded code of conduct will soon be shared with all our employees. For us at Saab, it is extremely important to do business with the highest ethical standards and to thoroughly comply with the authorization granted by the Swedish government.
Saab – a strong brand
We celebrated our 70th anniversary with a number of activities for employees, customers and partners. It also gave us the opportunity, in a natural way, to continue the work on our vision and values we started in 2006. The feeling of being part of one company, sharing the same values and the same approach, has been greatly strengthened. And this is important. Saab is the product of acquisitions, mergers and divestments. It is why we are so pleased to have progressed so far with this work that began a few short years ago. At that point, when Saab and Celsius had merged, the new company could almost be described as a conglomerate. Now we see the advantages of being a unified company with a strong brand.
The future is in our hands
If our history is any indication of what lies ahead, one thing is certain: changes will continue. And if Saab successfully takes advantage of the potential that changes always create, it will open many new opportunities for us.
What is important is that we can impact how Saab develops. With our financial freedom and leading experts in our priority areas, we ourselves can decide our future. I am convinced we will soon be writing another successful chapter in Saab’s history.
Linköping, February 2008
Åke Svensson
President and CEO