COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED Investor Relations | Year-end report 2016 YEAR-END REPORT 2016 13 February, 2017 Håkan Buskhe, President and CEO Magnus Örnberg, EVP and CFO This 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.
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 2 Investor Relations | Year-end report 2016 AGENDA HIGHLIGHTS 2016 MARKET SITUATION AND TRENDS OUTLOOK 2017 FINANCIAL UPDATE
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 3 Investor Relations | Year-end report 2016 HIGHLIGHTS 2016 MARKET Strong interest in Saab offering globally Record high tender levels Sales growth in line with long-term financial goal of an organic growth p.a. of 5 per cent PERFORMANCE Strong order backlog in all business areas; about 4 times our sales Improved gross margin year-on-year; strong cash flow generation, despite no sold receivables Historic year with launch of three new platforms: INNOVATION Launched a new generation Airborne Early Warning system, GlobalEye Rolled out new generation of Gripen Rolled out the trainer aircraft for the US Air Force T-X-programme; the T-X aircraft flew in December
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 4 Investor Relations | Year-end report 2016
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 5 Investor Relations | Year-end report 2016 AGENDA HIGHLIGHTS 2016 MARKET SITUATION AND TRENDS OUTLOOK 2017 FINANCIAL UPDATE
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED Investor Relations | Year-end report 2016 MARKET SITUATION • Geopolitical unstable situation • Increasing demand for cost-efficient solutions • Short lead times important • Ongoing focus on improving supply chain efficiency • Local partnership for research and development and production
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 7 Investor Relations | Year-end report 2016 GLOBAL DEFENCE MATERIEL MARKET Russia 4% Europe 14% - North America 40% 3% -1% Asia 25% Middle East & 11% 4% Africa South America 3% 3.0% 3% Australia 2% Share of global defence 3% X% procurement market, 2016 Compound annual growth rate, X% 2017-2021 (constant USD) Source: IHS Group, February 2017
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 8 Investor Relations | Year-end report 2016 FINANCIAL HIGHLIGHTS, 2016 Sales Order backlog Order bookings 113,8 120 120 120 107,6 100 100 100 81,2 80 80 80 60,1 59,9 BSEK BSEK BSEK 60 60 60 49,8 40 40 40 28,6 27,2 23,8 23,5 22,6 21,8 20 20 20 0 0 0 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016 Gross margin Operating margin Free cash flow 3 000 2 359 26,6% 2 500 25,8% 23,9% 24,0% 2 000 1 500 1 000 MSEK 500 6,7% 0 6,3% 2013 2014 2015 2016 6,6% 6,6% -500 -1 000 -726 -1094 -1 500 -1460 2013 2014 2015 2016 2013 2014 2015 2016 -2 000 Operating margin adjusted for non-recurring items
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 9 Investor Relations | Year-end report 2016 OPERATING INCOME AND OPERATIONAL CASH FLOW 5 000 4 000 3 000 2 000 MSEK 1 000 0 * * * 2010 2011 2012 2013 2014 2015 2016 -1 000 -2 000 Operational cash flow Operating income (EBIT) *Free cash flow
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 10 Investor Relations | Year-end report 2016 LONG-TERM FINANCIAL GOALS • Focus on areas with strong market position MARKET Organic sales growth • Strengthen position in areas with growth 5% averaging 5 per cent annually possibilities over a business cycle. • Local partnerships PERFORMANCE Operating margin after • Project execution 10% depreciation and amortisation • Operational excellence (EBIT) of at least 10 per cent annually over a business cycle. • Continuoulsy develop leaders and employees INNOVATION • Further strengthen core areas Equity/assets ratio of over 30 >30% • Invest in research and development per cent. • Diversity drives innovation
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 11 Investor Relations | Year-end report 2016 AGENDA HIGHLIGHTS 2016 MARKET SITUATION AND TRENDS OUTLOOK 2017 FINANCIAL UPDATE
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 12 Investor Relations | Year-end report 2016 OUTLOOK STATEMENT 2017 • We estimate that sales growth in 2017 will be higher than Saab’s long-term financial goal: annual organic sales growth of 5 per cent. • We expect the operating margin, excluding material non-recurring items, to improve compared to 2016 and thus the company will take a step towards its financial goal: an operating margin of 10 per cent.
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 13 Investor Relations | Year-end report 2016 AGENDA MARKET SITUATION AND TRENDS HIGHLIGHTS 2016 OUTLOOK 2017 FINANCIAL UPDATE
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 14 Investor Relations | Year-end report 2016 SUMMARY 2016 • Strong order backlog; small orders continued to increase • Sales growth of 5 per cent: ‒ Driven by large projects in order backlog, and; ‒ Strong development in business area Dynamics • Gross margin and operating margin stable – in line with management expectations • Operating cash flow strong; no trade receivables sold • Balance sheet continued strong with equity/asset ratio >32 per cent
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 15 Investor Relations | Year-end report 2016 FINANCIAL KEY DATA MSEK 2016 2015 Change Order bookings 21,828 81,175 -73 Order backlog 107,606 113,834 -5 Sales 28,631 27,186 5 Operating income 1,797 1,900 -5 Operating margin 6.3% 6.6%* Net income 1,175 1,402 -16 Free cash flow 2,359 -726 *Adjusted for non-recurring items • Sales growth driven by large orders as well as growth in business area Dynamics • Major advances and milestone payments received, resulting in strong cash flow; no trade receivables sold in 2016
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 16 Investor Relations | Year-end report 2016 ORDER BACKLOG Order backlog duration, SEK bn Order backlog 31 Dec 2016 31 Dec 2015 31 Dec 2014 120 100 2017: 24.5 2016: 21.8 2015: 17.8 80 BSEK 2018: 17.0 2017: 15.9 2016: 10.2 60 2019: 13.5 2018: 12.3 2017: 5.7 40 20 2020: 15.8 2019: 11.7 2018: 5.6 0 After 2020: 36.8 After 2019: 52.1 After 2018: 20.8 '11 '12 '13 '14 '15 '16 Total: 107.6 Total: 113.8 Total: 60.1 Order backlog distribution 35% Sweden • Strong order backlog in all business areas 65% RoW
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 17 Investor Relations | Year-end report 2016 ORDER SIZE DISTRIBUTION 50 000 3,5 45 000 3 40 000 2,5 35 000 30 000 2 MSEK 25 000 1,5 20 000 15 000 1 10 000 0,5 5 000 0 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 '11 '12 '12 '12 '12 '13 '13 '13 '13 '14 '14 '14 '14 '15 '15 '15 '15 '16 '16 '16 '16 Small orders* Large orders Book-to-bill ratio *Small orders = <MSEK 100 Book-to-bill ratio calculated as 12 months rolling
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 18 Investor Relations | Year-end report 2016 ORDER BOOKINGS AND ORDER BACKLOG Order bookings 20 000 40 000 Dynamics received several important 16 000 orders, for example for the new generation of the weapon system Carl- 12 000 MSEK Gustaf 8 000 Support and Services saw strong growth in small orders, 11 per cent increase y-o-y 4 000 Major order in airborne early warning area 0 Aeron. Dyn Surveillance S&S IPS Kockums received in January 2017 2015 2016 Order backlog 40 60 Regional distribution, Order backlog 1% 1% 30 13% Sweden BSEK 35% 20 RoE Americas 10 Asia Africa 0 Australia etc 41% Aeron. Dyn Surveillance S&S IPS Kockums 9% 2015 2016
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 19 Investor Relations | Year-end report 2016 SALES 9 000 Regional distribution 3% 2% 8 000 5% 18% Sweden 14% RoE 7 000 43% Americas -15% Asia 6 000 17% Africa 5 000 Australia etc MSEK 23% 17% 1% 4 000 3 000 Sales growth mainly driven by the Gripen 25% programmes, GlobalEye and the 2 000 submarine A26 Sales in Dynamics strengthened due to 1 000 good order development 0 Aeron. Dyn Surveillance S&S IPS Kockums 2015 2016
COMPANY RESTRICTED | NOT EXPORT CONTROLLED | NOT CLASSIFIED 20 Investor Relations | Year-end report 2016 OPERATING INCOME 600 549 535 509 500 454 449 447 400 320 MSEK 300 228 213 200 175 Dynamics increased volume led to strong 2 margin recovery 134 134 Operating income affected by 100 investments in T-X-programme EBIT-margin 8.1 7.5 4.4 9.1 4.4 5.9 9.1 8.9 12.3 5.8 6.0 3.7 Minority stakes in Venture portfolio, early 0 stage investments had a negative impact Aeron. Dyn Surveillance S&S IPS Kockums on earnings in IPS 2015 2016
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