Saab sees profits slip

Sweden's Saab AB said its nine-month pretax profit fell 1.9 percent from a year earlier to 1.269 billion kronor ($194 million) despite rising sales, due to increased spending on research and development and lower net financial income.

Market expectations were for a pretax profit of 1.307 billion kronor, as recorded

by SME Direkt.

Sales increased 14.2 percent to 15.663 billion kronor, mostly on the back of acquisitions, with organic sales growth at 2 percent.

“For 2007 we expect growth in line with 2006 and an operating margin including structural costs slightly higher than last year, assuming no negative effect from the recently announced Swedish defence budget cuts,” Saab said.

Operating margin fell 8.7 percent from 9.6 percent a year earlier.

Order bookings fell 39.0 percent to 12.285 billion kronor, with 72 percent of orders

coming from customers outside of Sweden, and 66 percent attributable to defence-related operations.

The order backlog at the end of the period amounted to 46.719 billion kronor, versus 51.398 billion. International orders accounted for 81 percent of the backlog, down from 79 percent.

Saab said that Sweden’s defence budget proposal calls for further cutbacks and a continued focus on the military’s international missions.

This will provide the company with new opportunities and, to a larger extent, will mean it will have to finance technological development and increase international marketing efforts.

“To create the necessary resources and sustain our 10 percent operating margin target, we have launched an internal efficiency program. The aim is to improve the gross margin by generating annual savings of approximately 1 billion kronor by the end of 2010,” Saab said.