capital markets day 2016 - saab ab€¦ · *outlook 2016: in 2016, we estimate sales to be in line...

COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIEDInvestor Relations | CMD 2016 | 24 November 2016

CAPITAL MARKETS DAY 2016

Håkan Buskhe, President and CEOMagnus Örnberg, Executive Vice President and CFOThis document and the information contained herein is the property of Saab AB and must not be used, disclosed or altered without Saab AB prior written consent.


AGENDA13.00 Welcome to Saab Capital Markets Day

Nordic Realpolitic coping with the New Cold WarEdwards Lucas, Senior Editor at The Economist and Senior Vice President at the Center for EuropeanPolicy Analysis (CEPA)

Saab in Transformation Håkan Buskhe, President & CEO and Magnus Örnberg, Executive Vice President & CFO

15.00 Coffee break

15.20 Innovation Session‒ Gallium Nitride: From research to customer capabilities.

Large scale development of sensorsFredrik Wising, Strategic Portfolio Manager, Saab business area Surveillance

‒ Industry and academia in collaboration with Alfred Nobel science park;how 3D printing of metals creates new innovationsGöran Backlund, Business Development, Saab business area Dynamics

‒ How to make the visible, invisibleRobert Edlund, Senior Sales Executive, Saab Kockums

‒ Saab cooperating on technology and innovation for customer valueAnn-Cristin Adolfsson, Head of Strategy and member of Group Management

‒ At the forefront of digitalised model-based fighter aircraft developmentLars Ydreskog, Head of Aero Operations, Saab business area Aeronautics

17.00 Transport to Djurgården

18.00 Dinner at Vasamuseet

2


SAAB IN TRANSFORMATION

3

Market update

Strategic priorities1. Market2. Performance3. Innovation

Håkan Buskhe, President and CEO


A CHANGING MARKET ENVIRONMENT

4

• Geopolitical changes and increasingdefence budgets

• Interoperability and partnerships

• Proven, cost-efficient solutions

• Technology development

• Demands for technology transfer and local partnerships

• Transparency

• Sustainable solutions


MARKET TRENDS – NON-DEFENCE

5

• Aerostructures market: demand is strong for solutions to increase fuel efficiency.

• Civil Security - The Traffic Management and Securitysystems market: demand is driven by the need to secureborders and critical infrastructure as well as the flow ofpeople and goods.

• Combitech (Nordic technical consultancy) sees steadygrowth, partly driven by an increasing demand for cyber security solutions.


Brasilia, Brazil

Washington, USA

Stockholm, Sweden

London, United Kingdom

Bangkok, Thailand

SAAB ORGANISATIONS - FROM 1 JANUARY 2017

BUSINESS AREASBUSINESS AREAS

CEOCEO

GROUP FUNCTIONSGROUP FUNCTIONSMARKET AREASMARKET AREAS

Asia Pacific

North America

Europe

Latin America

Middle East & Africa

BOARDBOARD

Our headquarters…

Aeronautics

Support and Services

Dynamics

Saab Kockums

Industrial Products and Services

Saab Kockums/Nautics

Surveillance

Abu Dhabi, United Arab Emirates

6



7

Market update



PRIORITIES SET 2010

8

Product renewal Market focus

FROM 2010 TO CURRENT POSITIONEXECUTION UNTIL TODAY:

0

20

40

60

80

100

120

2011 2012 2013 2014 2015 Sep.2016

SEK

bn

0

5

10

15

20

25

30

2011 2012 2013 2014 2015 Outlook2016*

Order backlog Sales

*Outlook 2016: In 2016, we estimate sales to be in line with Saab’s long-term financial goal: annual organic sales growth of 5 per cent.

COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIEDInvestor Relations | CMD 2016 | 24 November 2016 9

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

5

10

15

20

25

30

2010 2011 2012 2013 2014 2015 Outlook2016*

Sales ROW Sales Sweden EBIT margin excl. non-recurring items

PORTFOLIO OF LEADING TECHNOLOGIES

SE

K b

n

*Outlook 2016: In 2016, we estimate sales to be in line with Saab’s long-term financial goal: annual organic sales growth of 5 per cent.The operating margin 2016, excluding material non-recurring items, is expected to be in line with 2015.

Stable operating margin Major product development projects in recent years:

• A next generation of Gripen

• GlobalEye, new generation of airborne earlywarning system

• New family of surface radars

• New version of the weapon system Carl-Gustaf

• Development of a new generation submarine, A26, to Sweden

• T-X programme, a joint development projectwith Boeing for the next generation trainer to the US Airforce


STRATEGIC PRIORITIES - 2016

10

• INNOVATION – we find the smart solution, giving our customers an edge

• MARKET - we understand the opportunities, and work closely with customers to meet their needs

• PERFORMANCE – we work more efficiently, bringing products and solutions quicker and cheaper to market

2010-2015 2016-


-1% -4% -2% -1%-3%

11%5%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

2010 2011 2012 2013 2014 2015 Outlook2016

Long-term

target

Sales Organic growth

Execution 2010-2015

Long-term target: Organic growth of 5 per cent p.a.

M&A driven growth

Target for growth

TODAY: GROWTH OPPORTUNITY MARKET

11


MORE GLOBAL AND LOCAL

12

• Strengthened backlog support growth target

• Marketing and sales hubs in selectedmarkets

• Focus on small and medium-sized orders

• Partnership and cooperation; business models adapted to local requirements

• Transfer-of-technology

• Greater transparency, diversity and innovation

020406080

100120

2011 2012 2013 2014 2015 Sep.2016

SEK

bn

Order backlog

MARKET


MARKET OPPORTUNITIES

13

MARKET



14

Market update



PROJECT EXECUTION KEY FOR PROFITABILITY

15

PERFORMANCE

• Order backlog increased three times since2012‒ Gripen to Sweden and Brazil ‒ Submarine A26 to Sweden ‒ GlobalEye to UAE‒ Increased demand for weapon system

• Majority of order backlog consists of largeprojects

• Project execution key to profitability going forward ‒ Governance‒ Training‒ Best practice


COST-EFFICIENCY THROUGHOUT

16

• Digitalisation continues to drive change for all processes

• Shorter lead times• Industrialisation• Functional processes to be

aligned• Performance management and

leadership skills

Actions 2010-2015:

• Streamlined operations• Cost-efficiency initiatives on all

levels of the organisation• Civil Security operations

turnaround• Aligned Market Area organisation

with Group wide processes• Improved contract management

skills• Alignment of processes globally,

including portfolio, sales, product, procurement, and quality processes

• Cash flow focus• Performance management

Going foward

PERFORMANCE


PRIORITIES SET 2010: FOCUS GOING FORWARD

• Invest in products that strengthen our system offer and knowledge

• Invest in products that strengthen our international presence

• Invest in product innovation and renewal

• Prioritise areas with competitive technology and/or competitive market position

• Acquisitions to strengthen the portfolio in prioritised areas

• Continue to invest in product innovation and renewal in prioritised areas

• Bolt-on, selective acquisitions to strengthen the portfolio in prioritised areas

Create a more focused, highly competitive product portfolio with a strong market position in chosen markets

AMBITION

PORTFOLIO MANAGEMENT PERFORMANCE

17


MORE FOCUS ON THE PORTFOLIO

• Higher degree of digitalisation enables Saab to utilise the same technology platform for more products

• Resulting in an aligned, broad portfolio

Systems and architectures

Number ofproducts 0%

5%

10%

15%

20%

25%

30%

0

2

4

6

8

10

2010 2011 2012 2013 2014 2015

SE

K b

n

%-age ofsales

• Total R&D spend willcontinue to be above 20% of sales over coming years

Align development of products

PERFORMANCE

R&D spending

Aeronautics AdvancedWeaponSystems

Command and Control Systems

Sensors Underwatersystems

• Focus in the coming years will be on developing areas whereSaab has a market leading position; or

• A niche position withstrong growth potential

18

Five core technology areas



19

FINANCIAL UPDATE

Current position

1. Market2. Performance3. Innovation

Magnus Örnberg, EVP and CFO

REACHING OUR LONG-TERM TARGETS


FINANCIAL KEY DATA JAN-SEP 2016

MSEKJan-Sep 2016

Jan-Sep2015 Change FY 2015

Order bookings 14,960 62,599 -76 81,175

Order backlog 109,521 105,486 4 113,834

Sales 19,615 17,116 15 27,186

Operating income 837 553 51 1,900

Operating margin 4.3% 3.2% 7.0%

Net income 536 293 83 1,402

Free cash flow 1,740 -1,595 -726

20

• Order bookings for Jan-Sep 2016 in line with 2015, excluding largeorders for Gripen, Airborne Early Warning and submarines

• Sales growth driven by Gripen, Airborne Early Warning and submarine orders as well as growth in business area Dynamics

• In third quarter, cash flow impacted by utilisation of advances and milestone payments and less sold trade receivables


CURRENT POSITION

21

MARKET• High interest in Saab solutions

and products• Record high order backlog• In a phase with sales growth

PERFORMANCE• Continuous efficiency

improvements• Amortisation of R&D diminishing

near-term• Increasing utilisation rates due to

growth

INNOVATION• High level of self-funded R&D• Focus on cooperation and

partnership• Digitalisation and

automatisation


ORDER BACKLOG DURATION

22

35%

65%

Order backlog distribution

SwedenRoW

Order backlog distribution

0

20

40

60

80

100

120

Sep. 2011 Sep. 2016

Year 1 Year 2 Year 3 Year 4 After Year 4:

Order backlog duration

SE

K b

n

• Backlog supports long-term growth targets

• Growth driven by orders from RoW

• Organisation set for growth

MARKET


PROJECT EXECUTION KEY

23

0123456789

'11 '12 '13 '14 '15 Jan-Sep'16

SE

K b

n

Order backlog Dynamics

Order backlog mainly consists oflarge projectsFocus on small and mid-sized orders secured through Market Area organisationDynamics has improved backlogsignificantly

0

20

40

60

80

100

120

2012 Sep. 2016

Aeronautics Dynamics SurveillanceSupport and Services IPS Saab Kockums

Order backlog

SE

K b

n

MARKET


SALES JAN - SEP 2016

0

1 000

2 000

3 000

4 000

5 000

6 000

Aeron. Dyn Surveillance S&S IPS Kockums

MS

EK

Jan-Sep 15 Jan-Sep 16

24

Sales growth mainly driven by the Gripen programmes, Globaleye and the submarine A26

Sales in Dynamics strengthened dueto orders in 2015 and recent important wins

19%

18%

16%

11%

-

33%

MARKET

2015 Outlook 2016 Long-term target

M&A driven growth

Organic growth target

5 per cent p.a.

COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIEDInvestor Relations | CMD 2016 | 24 November 2016 25

STABLE OPERATING MARGIN

0%

2%

4%

6%

8%

10%

12%

14%

2010 2011 2012 2013 2014 2015

Operating margin excluding non-recurring items

Reported operating margin

PERFORMANCE


ON TRACK TO REACH LONG-TERM MARGIN TARGET

2016 Target10%

margin

Long-term target of10 per cent operating margin within reach:

• Volume increase• Efficiency gains• Current spending

on T-X programmedevelopmentfinalises in 2017

• Less amortisationof capitalised R&D

PERFORMANCE

26


CAPITALISED R&D

27

0

800

1600

2400

3200

2010 2011 2012 2013 2014 2015 Sep. 2016

MS

EK • Capitalised R&D decreased during latest year; risk

carried on balance sheet diminished

• Increase in capitalisation related to GlobalEye, new generation of Airborne Early Warning system

0

200

400

600

800

1000

2010 2011 2012 2013 2014 2015 Sep. 2016

MS

EK

Level of capitalised R&D on balance sheet

Amortisation of R&D • Amortisation of R&D capitalised before 2011 will be reduced further in 2017

• Amortisation of capitalised R&D related to GlobalEyestarting in 2020

PERFORMANCE


OPERATING INCOME AND CASH FLOW

-1 500

-1 000

-500

0

500

1 000

1 500

2 000

2 500

2012 2013 2014 2015 2016, Q3

MS

EK

Operating income Operational cash flow

PERFORMANCE

28


CASH FLOW IMPACT FROM WORKING CAPITAL

29

-3200

-2400

-1600

-800

0

800

1600

2013 2014 2015 Q3 2016

Cash flow impact from working capital p.a.:MSEK

• Negative working capital impact in 2013-2015 mainly due to work associated with large projects

• Advances and milestone payments related to those largecontracts had positive impact in Jan-Sep 2016

PERFORMANCE


STRONG BALANCE SHEET

30

-4000

-3200

-2400

-1600

-800

0

800

1600

2400

3200

4000

4800

5600

6400

2010 2011 2012 2013 2014 2015 Sep. 2016

MS

EK

• Large part of projects run over manyyears

• Volatility in cash flow impacts liquidity

• Pension liability currently impactednegatively by low interest rates

• Higher financial flexibility throughborrowings

Net liquidity / debtFree cash flow

PERFORMANCE

• Strong balance sheet• Equity / asset ratio above 30 per cent

AMBITION


DRIVERS TO REACH LONG-TERM TARGETS

31

• Continue to build backlog

• Project execution

• Continuous operational efficiencyimprovements and capacity alignment

• Automation; adaption of new ways of working

• Governance and performance management

• Leadership development

• Develop a culture with a performancefocused mindset



32

Market update



INNOVATION ENABLERS

• Continuous improved cost efficiency and reduction of supply cost

• Triple Helix approach: Industry, Academia and Government

• Collaborative approach with partners and suppliers who share technology, ambition and pride:‒ Joint product development‒ Investments ‒ M&A‒ Industrial cooperations

• Digitalisation and automation

33

INNOVATION


DIGITALISATION – A KEY ENABLER

WAYS OFWORKING

PRODUCTSAND SERVICES

INNOVATION

34


DEVELOPMENT PHILOSOPHY

Time

TRADITIONALMid-Life Upgrades•

SAABContinuous capability enhancements

Capability

INNOVATION


STRATEGY FOR INNOVATIVE SOLUTIONS

• Come closer to customers in key markets

• Develop innovative solutions in priority areas

• Continue to improve efficiency in product life cycle

• Use systems integration knowledge

• Continuously develop leaders and employees

‒ Adaptability‒ System thinking‒ Innovative capability

36

INNOVATION


COMPETENCES FOR TODAY AND THE FUTURE

• Strengthen leadership skills, building a culture of trust

• Attract, retain and develop right competences for today and future needs

• Develop talent management processes to secure a talent pipeline

• Increase international footprint

• Diversity and gender equality catalysts for innovation

37

INNOVATION

15,000employees

30%female managers

35markets

60nations represented


LOOKING AHEAD

38

• INNOVATION – we find the smart solution, giving our customers an edge

• MARKET - we understand the opportunities, and work closely with customers to meet their needs

• PERFORMANCE – we work more efficiently, bringing products and solutions quicker and cheaper to market


Sales

• Organic sales growthaveraging 5 per cent annually over a business cycle.

Operating margin

• Operating margin afterdepreciation and amortisation (EBIT) of at least 10 per cent annually over a business cycle.

Equity/assets ratio

• Equity/assets ratio of over 30 per cent.

23,498 24,01023,750 23,527

27,186

0

10 000

20 000

30 000

40 000

2011 2012 2013 2014 2015

MSEK

12.5%

8.5%

5.7%

7.1% 7,0%

0%2%4%6%8%

10%12%14%

2011 2012 2013 2014 2015

EBIT margin

41.1%39.0%

44.0%

38.5%

36,80%

0%

10%

20%

30%

40%

50%

2011 2012 2013 2014 2015

Equity/Asset ratio

39

ON TRACK TO REACH OUR LONG-TERM TARGETS


www.saabgroup.com

40

capital markets day 2016 - saab ab€¦ · *outlook 2016: in 2016, we estimate sales to be in line...

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