Bloomberg News

Saab Sets 2014 Efficiency Goal to Counter Slowing Defense Sales

October 29, 2013

Saab AB (SAABB), the Swedish maker of Gripen fighter jets, said efficiency measures are materializing more quickly than anticipated as the manufacturer works to offset a slowdown in sales and increased competition overseas.

Actions to generate 500 million kronor ($78 million) in earnings improvements are going according plan and “our confidence is higher” targets will be met, Chief Financial Officer Magnus Ornberg said in a telephone interview. Stockholm-based Saab said today that the goal will be reached by the end of 2014 after previously saying only that benefits would come in coming years.

Saab outlined plans last month to eliminate as many as 245 jobs at a defense-electronics unit and its Dynamics missile division amid limited sales-growth prospects because of government budget cuts. Saab also is shifting some groupwide activities to business units to manage costs more tightly.

“The defense industry needs to adjust,” Chief Executive Officer Hakan Buskhe said by phone. “We will see different price levels, shorter lead times so, even in areas that are doing well, you need to adjust to increase competitiveness.”

Saab rose as much as 2.1 percent and was trading up 0.2 percent at 131.3 kronor at 10:16 a.m. in Stockholm. That pared the shares’ decline this year to 2.8 percent, valuing the company at 14.3 billion kronor.

Bidding Abroad

Widening competition in international markets has created pricing pressure as U.S. and European defense suppliers battle to offset declining military spending in their home markets with business abroad, Buskhe said. The greater number of offers in procurement tenders has contributed to protracted decision making among buyers, he said.

European defense companies have been slower than U.S. counterparts to adjust to drops in military spending. Reduced profit forecasts this year at Saab and Dusseldorf, Germany-based weapons producer Rheinmetall AG (RHM) contrast with more optimistic projections by Bethesda, Maryland-based Lockheed Martin Corp. (LMT:US), the world’s biggest arms maker, and Northrop Grumman Corp. (NOC:US)

Saab’s third-quarter earnings before interest and taxes rose 1.5 percent to 266 million kronor, the manufacturer said today in a statement. Operating profit beat the 249 million-krona average of four analyst estimates compiled by Bloomberg. Sales, which the company forecasts will be little changed for the full year, fell 4 percent to 4.7 billion kronor, with new orders dropping 29 percent.

Buskhe said Saab is confident it can book enough revenue, about 7.6 billion kronor, to meet the 2013 target, even after the two-week U.S. government shutdown earlier this month delayed some activity.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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Companies Mentioned

  • LMT
    (Lockheed Martin Corp)
    • $177.19 USD
    • 1.59
    • 0.9%
  • NOC
    (Northrop Grumman Corp)
    • $131.93 USD
    • 1.36
    • 1.03%
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