Saab Annual Report 2011

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Saab Annual Report 2011

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Saab Annual Report 2011

  1. 1. ANNUAL REPORT 2011ANTICIPATE TOMORROW75 YEARS OF INNOVATION FORA SAFER SOCIETY
  2. 2. CONTENTSSaab in brief Innovative technology and cost Pages efficiency for 75 yearsSaab 2011 1 4–5Events by quarter 2011 2–3 Saab has been supplying innovative, cost-effective and competitive productsSaab 75 years 4–5 and systems to customers around the 6–7 world for 75 years. The key to success isChairman’s statement to focus on partnerships, alliances andCEO comment 8–9 information sharing.Market and driving forces 10–11Saab’s core competence 14–15 2011 – An important year for GripenStrategic goals 16–17 Pages 12–13 Gripen’s success in 2011 demonstrates– Profitable growth 18–21 the system’s world-leading– Performance 22–23 capabilities to meet the tough demands of the international market in terms of– Portfolio 24–27 function, quality and cost.– People 28–29Market segments 32–33Markets by region 34–35 Sensis – Bridgehead to a globalSaab’s responsibilities – Pages 20–21Sustainability 36–37 marketSaab’s responsibilities – The acquisition of Sensis of the U.S. isBusiness ethics 38 fully in line with Saab’s strategic prioritiesSaab’s responsibilities – to create profitable growth, increase itsEmployees 39–41 geographical presence and continuously adapt to portfolio.Saab’s responsibilities – Society 42–43Saab’s responsibilities –Environment 44–47Financial review 2011 48–49 Local presence around the world Pages 30–31Business areas 50–61 A local presence is vital to success. In 2011, we therefore established aRisks and risk management 62–65 stronger presence in a number ofOther information 66–68 countries, e.g., through new research and development centres in India, theFinancial statements 69–81 UK and Brazil.Notes 82–130Dividend motivation 131Proposed disposition of earnings 132Audit report 133Corporate governance report 134–144Shareholder information 145–151Financial information2012 and contact details 152Glossary 153While every care has been taken in the transla-tion of this annual report, readers are remindedthat the original annual report, signed by theBoard of Directors, is in Swedish.
  3. 3. SAAB IN BRIEFOUR COMPETENCE MAKES SOCIETY SSaab offers world-leading solutions, products and services for military de- 100 countries. Our most important markefence and civil security. We develop, adapt and improve new technology to Australia and North America. We have aromeet our customers’ changing needs. We are represented in around 30 sales amount to around SEK 23 billion, ofcountries, while our solutions, products and services are sold to more than to research and development. BUSINESS AREASOur operations are conducted in six business areas that work together to utilise the Group’scompetencies as effectively as possible.Aeronautics Security and Defence SolutionsOffers a product portfolio Offers a product portfoliocomprising the Gripen comprising C4ISR sys-fighter and Unmanned tems, airborne early war-Aerial Systems (UAS). ning systems, trainingAeronautics also manu- and simulation, air trafficfactures components for management, maritimeSaab’s own aircraft and safety, security andfor passenger aircraft manufactured by others. monitoring systems, and solutions for safe, robustExamples of products: Gripen and Skeldar. communication. Examples of products: 9LV (combat management system), remotely operated towersDynamics (RT) and tactical systems for communicationOffers a product portfolio integration.with ground combatweapons, missile sys- Support and Servicestems, torpedoes and sig- Offers mainly supportnature management sys- solutions, technicaltems for armed forces. maintenance and logis-The business area also tics, as well as products,offers military and civil niche products from spinoffs solutions and services forsuch as rremotely operated vehicles for the offshore military and civil missionsindustry and mapping solutions for the defence mar- in locations with limitedket. Examples of products: Carl-Gustaf, RBS 70 and infrastructure.Rapid 3D Mapping. CombitechElectronic Defence Systems Combitech is an inde-Offers a product portfo- pendent, wholly ownedlio comprising airborne, subsidiary that offersland-based and naval technical and operationalsystems in radar, signals consulting services withintelligence and self- an emphasis on techncalprotection. The busi- systems. Combitech combines technology withness area also supplies environmental and safety thinking.civil and military customers with avionics to increaseflight mission efficiency and flight safety. Examples ofproducts: Giraffe AMB, Erieye and Arthur. For more information see pages 50–61.SALES DISTRIBUTION 2011BUSINESS AREAS MARKET SEGMENT GEOGRAPHICAL MARKETS 4% 3% 5% 6% 8% 14% 6% 25% 9% 37% 45% 22% 22% 17% 31% 8% 18% 19% 1% Aeronautics Security and Air Civil security Sweden Asia Defence Solutions Dynamics Land Commercial EU excl. Sweden Africa Support and aeronautics Electronics Services Naval Rest of Europe Australia Defence Systems Other Combitech North and South America
  4. 4. SAFER GEOGRAPHICAL MARKETS The defence market is expected to decline in the West in the coming years as a result of the sovereign debt crisis and changing defence priorities. At the same time, the global market for civilets are Europe, South Africa, Asia, security and commercial aeronautics is expected to grow.ound 13,000 employees. Annual Sweden and rest of Nordic region Central and South Americaf which about 22 per cent is related The Nordic region accounts for about one per cent of The South American defence market is relatively mo- global defence spending, a figure that is expected to dest in size. Brazil, one of the strongest economies in rise slightly in the years ahead. Sweden is the single the region, represents the largest market. We have largest market for Saab, and it is where the majority of been established in the region for many years. In our research and development is conducted. 2011, we strengthened our presence by opening a new research centre in Brazil. Rest of Europe After the U.S., Europe is the largest defence market in Asia, Middle East and Australia the world, representing about 23 per cent of global The region has maintained its strong economic spending. Economic uncertainty and the sovereign growth. Military spending is expected to continue to debt crisis have led to delays in many defence pro- increase in the years ahead. The civil security market jects, due to which the market is expected to shrink in is relatively immature and strong growth is expected, the coming years. France, Germany and the UK are driven in part by increasing infrastructure needs. A expected to account for the largest relative cutbacks. growing share of our sales is in the region, and in The civil security market is anticipating growth. A 2011 we strengthened our presence in India. large share of our sales is to the rest of Europe, and in 2011 it strengthened our position in the UK through Africa our new office in London. The African continent has experienced positive eco- nomic growth in recent years. Several countries face North America political turbulence and tough economic situations, The U.S. is the world’s largest defence market, ac- however. Spending on defence and civil security is counting for about 43 per cent of global spending. expected to increase in coming years. Since the ac- The market is expected to shrink due to the sovereign quisition of Grintek in 2005, Saab has a strong posi- debt crisis and changing defence priorities. The U.S. tion in South Africa. civil security market is also the largest in the world For more information see pages 34–35. and is expected to continue to grow. We strengthe- ned our U.S. position in 2011 through the acquisition of Sensis. MARKET SEGMENTS Saab’s market segments differ in terms of drivers and needs. Our offerings are partly based on the same basic technologies. Thanks to our expertise in system integration, we can offer our customers entire systems comprised of various products and solutions that cover the needs of every market segment. Air by sea, the need to protect these trade flows is gro- Driven by alliances wing. Technological advances are also driving deve- and political deci- lopment, including ships with smaller crews and more sions. Purchasing sensors, which are used, e.g., to monitor and record decisions are made at traffic along coasts and in harbours. the highest national Civil security level, where custo- Investments in civil se- mers demand fighter curity are made to aircraft that offer high- protect citizens, criti- performance, flexibi- cal facilities and trans- lity, economic efficiency and upgradability. ports of goods and Land people. The market is Complex conflicts, in- driven by the growing cluding in urban envi- awareness of ronments, are driving society’s vulnerability, tighter regulations and a reali- demand for new ma- sation that disruptions to society’s flows are costly. teriel systems and This places demands on sustainability, flow efficiency technology. The gro- and interoperability. wing number of multi- Commercial aeronautics national missions and The market fluctua- alliances between national forces and different types tes in pace with the of forces are placing high demands on system inte- economy and is cha- gration, interoperability and command and control racterised by long capabilities. development cycles. Naval High fuel prices and The trend toward new environmental broader industrial alli- requirements are ances is making inte- creating greater de- gration and lifecycle mand for fuel-efficient aircraft models. The market commitments more has few dominant players, which are now being chal- important. Since over lenged by companies from China and elsewhere. 90 per cent of global For more information see pages 32–33. trade is transported
  5. 5. SAAB 2011SAAB 2011 Key financial ratios (MSEK) 2011 2010 Sales 23,498 24,434 EBITDA 4,088 2,187 EBITDA margin, % 17.4 9.0 Operating income (EBIT) 2,941 975 Operating margin (EBIT margin), % 12.5 4.0 - Income after financial items 2,783 776 Net income 2,217 454 Operating cash flow 2,477 4,349 Earnings per share, SEK (after dilution) 20.38 3.97 Operating cash flow per share, SEK 22.69 39.84 Dividend per share, SEK 4.501) 3.50 Return on equity, % 18.1 4.1 Equity/assets ratio, % 41.1 39.1 Order bookings 18,907 26,278 Order backlog at year-end 37,172 41,459 Total research and development (R&D) expenditures 5,116 5,008OUTLOOK FOR 2012: Internally financed R&D 1,355 1,203 No. of employees at year-end 13,068 12,536 Share of women, % 22.0 22.0 Academic degree, % 54.1 51.4LONG-TERM FINANCIAL GOALS AND RESULTSSALES GROWTH OPERATING MARGIN EQUITY/ASSETS RATIOLong-term goal: Our organic sales growth Long-term goal: Our margin goal is formulated Long-term goal: Our goal is an equity/will average five per cent over a business as an average over a business cycle. The operat- assets ratio exceeding 30 per cent.cycle. ing margin after depreciation/amortisation (EBIT) At year-end 2011, the equity/assets ratio will be at least 10 per cent.In 2011, organic growth was -4 per cent (-1). was 41.1 per cent (39.1). In 2011, the operating margin after depreciation/ amortisation (EBIT) was 12.5 per cent (4.0). % %MSEK 15 5025,00020,000 12 4015,000 9 3010,000 6 20 5,000 3 10 0 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2 Trend line Goal Goal SAAB ANNUAL REPORT 2011 1
  6. 6. EVENTS BY QUARTER 2011EVENTS IN 2011 JAN-MARCH APRIL-JUNE - - - - - -2 SAAB ANNUAL REPORT 2011
  7. 7. EVENTS BY QUARTER 2011 JULY-SEP OCT-DEC - - - - SAAB ANNUAL REPORT 2011 3
  8. 8. SAAB 75 YEARSINNOVATIVE TECHNOLOGYAND COST EFFICIENCY –75 YEARS OF SAABThis year marks the 75th anniversary of Saab’s founding An important factor for Saab has been its ability to cooperate with thein 1937 through a resolution by the Swedish Parliament. Swedish armed forces and to constantly deliver cost-efficient, com- petitive products and services. Doing more with less has been Saab’sWhen it created Saab, the Parliament was of the opinion that Sweden motto for years. It has shaped Saab and the way we work.should have its own capability to design fighter aircraft, since defence The Gripen fighter aircraft system is an example of this: efficientmateriel were difficult to obtain from other countries at the time. internal processes, close cooperations with partners and a limited Saab’s creation was a milestone for Sweden’s non-aligned status and number of carefully selected suppliers. Together with the Swedishfor the Swedish defence industry. armed forces and the FMV, we have succeeded in improving per-Market development MARKET DEVELOPMENTThe concept of security policy has been broadened and today in-cludes dimensions other than defence. Military attacks are certainlystill relevant from a long-term perspective, and localised militaryincidents and operations in the near term cannot be ruled outeither. International crises and conflicts will also continue to call for MILITARY OFFENSES INTERNATIONAL ACTIONSboth civil and military responses. But society’s basic functions arebecoming more complex, which is accelerating questions of vulner-ability. Saab has therefore continuously broadened its operations toinclude civil applications to address this expanded threat scenario,which today also includes impacts on our environment.HISTORIC MILESTONES FOR SAAB1941 1979 1990 1992 1993First B17 delivered First order – RBS 15 First laser simulator BT 46 ANZAC combat management First Gripen delivered system for Australia’s frigates First order from U.S. from BOL 1937 1990 2000 Saab is founded Saab Automobile – independent Saab acquires Celsius company 1646 1894 1948 1998 Bofors is founded Alfred Nobel acquires Bofors First order for StriC in operation Carl Gustaf4 SAAB ANNUAL REPORT 2011
  9. 9. SAAB 75 YEARS formance at the same time that operating expenses are significantly The key to success is an approach that focuses on partnership, col- lower than similar systems. laboration and information sharing. This is because it is not about Today this capability extends beyond Gripen to include our the number of technologies and systems; it is about having the right entire portfolio of products and solutions for a range of situations technology and systems for each customer’s specific needs – the from military attacks and multinational missions to civil security right capabilities at the right price delivered in time. and environmental and climate threats. Our systems can help coun- This is our history and our future. tries to better meet security threats today and in the future, while promoting peace, democracy and development. THREATS AND RISKS IN SOCIETY CLIMATE AND ENVIRONMENTAL THREATS2002 2004 2005 2006 2008 2011First contract – NLAW Installation of RAKEL Contract for NEURON Saab 2000™ AEW&C First flight for Gripen Demo RBS 70 NG – launch communication system 2005 2006 2011 Saab acquires Grintek Saab acquires Ericsson Saab acquires Sensis Microwave Systems (EMW) Corporation 1950- 1970- 1980- 1990- Development of radar for Development of Giraffe AMB Development of Arthur Sea Giraffe AMB is Gripen launched SAAB ANNUAL REPORT 2011 5
  10. 10. CHAIRMAN’S STATEMENTA COMPLEX WORLD WITHCHALLENGES AND OPPORTUNITIESThe sovereign debt crisis, which has been a problem for the West, through acquisitions andespecially Europe, for some time, further intensified in 2011. The expansion in accordanceglobal economy recovered after the financial crisis in 2008-2009, with our strategic goals. Thisbut reversed course in 2011 driven by the growing crisis in the euro includes the acquisition ofzone. Fiscal constraints have contributed for several years to shrink- the U.S. company Sensis,ing defence budgets, a trend which was exacerbated last year. which strengthens our exist- At the same time, global security conditions have become more ing product portfolio andcomplex, causing major transformations, especially in North Africa improves our market pres-and the Middle East, which are not only important to the world’s ence globally and in the US.energy supplies but also to global trade. This has also affected Swe- Saab is an open and trans-den, in part because it decided to participate in the NATO opera- parent company that activelytion in Libya with aerial surveillance and related support resources. takes part in establishingThe mission was carried out with five Gripen aircraft. global guidelines and rules 2011 was a breakthrough year for the Gripen system by the fact on business ethics. Our codethat the Swiss Armed Forces announced its selection of Gripen in a of conduct is an importantmajor international procurement. The main reason mentioned was part of how we work and wasthe one generally cited as Saab’s biggest competitive advantage: its developed based on the OECD’s guidelines for multinationals. Wesolutions provide better value for the money. As part of the offer, also abide by the UN’s Global Compact and its principles on humanSweden is also able to offer extensive industrial collaborations with rights, labour conditions, the environment and anti-corruption.Swiss companies, so-called offsets, which will create value for bothSwiss and Swedish businesses. We have to maintain our financial strength Our long-term financial goals remain firm, and our strong financialInnovative capabilities are crucial to our competitiveness position is an important asset in the current market climate. SaabSweden has historically had an innovative business sector, where will continue to focus on strengthening profitability and generatingSaab is one of a number of key players. Saab has long been one of strong operating cash flow, which will be needed in the future to in-the country’s most engineering focused and innovation focused vest in research and development. This is critical if we are going tocompanies, where around 20 per cent of sales is reinvested in maintain a high technological level, further improve our competi-research and development. This has not only led to major export tive advantages and create long-term value for our shareholders.successes and new jobs in our operations but also created a number I am convinced that Saab has major opportunities goingof new operating areas and spinoffs, where technologies that origi- forward. Saab’s strength is being able to deliver high-quality solu-nated in defence solutions have found broad civil application, e.g., tions that are cost-efficient to buy, operate and maintain, makingin road tolls and web-based mapping solutions. In this way, Saab them competitive in a world where fiscal and economic conditionshas served as an incubator for Swedish high-tech innovation. It is remain uncertain.important that we remain one. Staying innovative in a changing financial, geopolitical and Stockholm, February 2012market landscape is a challenge for both Sweden and Saab. It is inno small measure a question of access to capital for the necessaryinvestments in R&D and development work. Faced with shrinkingdefence budgets, we must increasingly finance this work ourselves.This and the large customer projects we are working on are two Marcus Wallenbergbig reasons why Saab has built up a strong balance sheet and cash Chairman of the Boardreserves. Continued success also requires that we can build on themany international alliances and relationships we have established,especially in 2011, when Saab’s internationalisation was advanced6 SAAB ANNUAL REPORT 2011
  11. 11. CHAIRMAN’S STATEMENT “Sweden has historically had an innovative business sector where Saab is one of a number of key players. Saab has long been one of the country’s most engineering focused and innovation focused companies, where around 20 per cent of sales is reinvested in research and development.” SAAB ANNUAL REPORT 2011 7
  12. 12. CEO COMMENTWITH A STRONG BALANCE SHEET WECAN IMPLEMENT OUR STRATEGY - -Profitable organic growth - - - -On site around the world Active portfolio management - - -8 SAAB ANNUAL REPORT 2011
  13. 13. CEO COMMENT - In 2012 we celebrate Saab’s 75th anniversary - - -Cost efficiency is one of our biggest competitive advantages - - -Talent management cannot become a problem SAAB ANNUAL REPORT 2011 9
  14. 14. MARKET AND DRIVING FORCESA CHANGING MARKET IS DRIVINGSAAB’S BUSINESSCompetition for resources and living standards is a strong Competition for raw materials, resources and living standards is adriver of social development and is clearly impacting de- strong driver of social development. As society develops, competi-fence and security companies like Saab. Essentially, it is a tion increases for resources such as capital and people, which are critical to drive innovation and growth.question of which products and services we will offer the The competitive picture has become more complex of late. Themarket and how we do it. old world order, where the North and West had the upper hand over the South and East, no longer applies. While Western EuropeAccording to the UN’s World Population Clock, the global popula- and North America are struggling with tough challenges and slowtion passed 7 billion on 31 October 2011. In recent years, Africa, economic growth, Africa, Latin America and Asia also face chal-Asia and Latin America have seen the largest population gains and lenges, but are experiencing higher growth. When this competitiveeconomic growth, in contrast to the U.S. and Europe, where the dynamic changes, conflict patterns change as well.population growth and economic growth has been lower. Economic In addition, new economic centres are being created around thegrowth is important to social development, and economic stability world such as China, India and Brazil, which are growing in promi-and social stability are closely interlinked. nence through a combination of population density, education and vigorous growth, and are leading the way to a multipolar world.The primary drivers in Saab’s markets are The first dimension is dominated by nationalthreat scenarios and security needs. This governments and military organisations, whileapplies to the defence sector and civil so- the second is dominated by cities, compa-ciety as well as the grey zone in between. nies, organisations and individuals. UrbanUnderstanding the development of, and security, efficiencies and sustainability areoverlap between, the two main dimen- essential to a well-functioning society.sions of security policy is critical to alsounderstanding the opportunities, breadth The three areas of training, command andand potential in Saab’s market. control, and maintenance are “links” as well as the lowest common denominator be-One dimension of Saab’s markets focuses tween these two security dimensions. Foron traditional security policy, the purpose Saab, these areas originate in a traditionalof which is to maintain national sover- border-protecting military context, but areeignty by defending borders. Another just as relevant and possible to implementdimension stresses the vulnerability of civil in an urban-centred, flow-protectingsociety, where supply chains and infra- environment.structure must be protected to safeguardsociety’s essential functions.10 SAAB ANNUAL REPORT 2011
  15. 15. MARKET AND DRIVING FORCESNew security and functionality needs and bilateral agreements. Moreover, large defence orders almostSociety today contains global flows of capital, goods and people always include extensive offsets through industrial partnerships.(flow society), which are strongly interdependent. As a result, major Large development projects are increasingly part of public-privatecrises can quickly spread through the system. This is exemplified partnerships.by the sovereign debt crisis, which is now threatening the financialsystem and global growth. New conditions for R&D The trend toward a global flow economy has increased security International cooperation and system partnerships require openneeds in the civil sector, creating greater demand for systems to systems that can be coordinated and integrated operationally. Thismonitor and protect critical flows and hubs such as airports, ports, is why a growing share of development work is being done collabo-railways, highways, and information and energy systems. As ICT, ratively. As a result, the defence industry can expect less financinginformation and communication technology, has become more im- through national defence budgets, alongside the fact that shrinkingportant to society’s infrastructure, our vulnerability has increased. government budgets no longer allow for research and developmentICT is also an important driver behind the integration of military to the same extent as before. To a growing extent, defence authori-and commercial technology, where there is a growing overlap, espe- ties around the world want access to the best the market has to offercially in surveillance and control. regardless of country of origin, and they want it delivered on short In times of limited resources, the focus is not only on security notice. A larger share of research and development (R&D) thereforebut functionality and efficiency. Customers in both military and has to be financed by the industry itself. On the other hand, gov-civil markets increasingly want broad-based, integrated solutions ernments around the world are devoting more research resourcesthat include more services: education, training, support and main- to civil security, energy, the environment and sustainable urbantenance. Solutions are evaluated based on not only performance development. Access to energy is a critical factor in the develop-but also in terms of cost of ownership and operation. The trend is ment of living standards and energy security and hence is central toshifting toward full operational and functional commitments cover- both military and civil strategies. Developing new sources of energying the entire lifecycle. Outsourcing of activities that had previously is now a high priority in both old and new economies. The aim isbeen performed internally is becoming more common, including in to become less dependent on undesirable and politically sensitivethe military field. sources, capitalise on the economic benefits of new technology and reduce global environmental risks. Development and security goReduced defence budgets and shift toward emerging countries hand in hand in this area as well.The deficits and sovereign debts in many major Western economiesrequire comprehensive austerity programs, which are triggering Local presence is decisivedefence cuts. The U.S. and Canada accounted for the largest share Despite the trend toward international alliances, the need for aof global defence spending in 2010, approximately 43 per cent, strong local presence is critical to success in both the military andaccording to the Stockholm International Peace Research Institute civil markets. Customers want integrated solutions from compa-(SIPRI). The U.S. is expected to reduce its spending in the coming nies that understand local conditions and can adapt their solutionsyears. The biggest increases in defence spending are in China and accordingly. This makes it important to be established locally, buildother countries in Asia, and the trend going forward is expected local competence and understand local conditions if you hope to beto favour emerging markets over traditional markets. Purchasing successful. It significantly increases your chances of being selectedhabits have also changed. Demand is increasing for proven systems as a supplier or subcontractor and to have a portion of your devel-that offer “more bang for the buck” and work in combination with opment financed through government appropriations.other systems.New cooperation and alliances with a regional focusInternational cooperation is important to ensure cross-borderflows and keep conflict zones under control. The long-term trendis still toward alliances for peacekeeping and economic develop-ment purposes. Right now, however, it is toward regional alliances SAAB ANNUAL REPORT 2011 11
  16. 16. GRIPENA YEAR FOCUSED ON GRIPENAt the start of 2011, the first six Gripen were delivered from Sweden to In November, the Swiss government announced that it had cho-the Royal Thai Air Force, as planned. Thailand has ordered a further sen Gripen as a potential future combat aircraft – a clear acknowl-six Gripen C/D aircraft, which are in production. edgement that Gripen is a world-class and highly cost-effective Last spring, Gripen was involved in a conflict situation for the combat aircraft system. Besides the Gripen system being offered,first time when the Swedish Air Force joined the NATO-led opera- the programme also includes a long term industrial cooperationtion in Libya. between Switzerland and Sweden. “We received confirmation that both the aircraft and the unit Gripen’s successes in 2011 are indicators of the Gripen system’sperformed well. We provided what was asked of us without any world-leading ability to meet the international market’s demands –damage or losses. For me, this is an affirmation that practice makes in terms of function, quality and cost.perfect – with realistic training, we can assist in such actions,” said Gripen is operated by the air forces in Sweden, South Africa,Lt Col Anders Segerby, who was Chief of Operations for the unit in Thailand, the Czech Republic and Hungary. The UK’s Empire TestLibya, FL01. Pilots’ School (ETPS) uses Gripen for training test pilots from In April, the Indian Ministry of Defence announced that Gripen across the world. Gripen’s development is supported by the Swedishwould no longer be included in the Indian Multi-Role Combat government and Armed Forces, which has stated that Gripen willAircraft (MMRCA) procurement programme. India remains one of form the backbone of the Swedish Air Force until at least 2040.Saab’s most important markets and we see great business potential Countries that have been offered Gripen are: Brazil, Bulgaria, Den-within the aviation, defence and security industries. mark, the Netherlands, India, Croatia, Switzerland and Romania.Throughout Saab’s 75-year history, operations have grown from militaryaviation into a portfolio of products and solutions for defence and civilsecurity. These systems can help countries develop their capacity tomeet current and future security threats.12 SAAB ANNUAL REPORT 2011 SAAB ANNUAL REPORT 2011
  17. 17. GRIPEN – today and in the future Air combat Gripen C/D Facts:Gripen is the world’s first new generation multi- Gripen is one of the most agile fighters around. Length: 14,1 metersrole fighter that can perform a complete range Its highly developed aerodynamic construction Wingspan: 8,4 metersof different roles. It is suitable for reconnais- and triplex digital flight control system, com-sance and monitoring (air policing) missions as bined with its world-beating new-generation Thrust: >18,000 lbswell as air-to-air and air-to-ground operations. weapons system, gives it enormous advan- Weapons Stations: 8Gripen was designed with ease of handling in tages in air combat.mind – both for the pilot and ground crew. Turnaround-time, i.e. the time it takes for Digital cockpit an aircraft to land, fill up fuel, change cargo andThe Gripen system Gripen has a state-of-the-art, fully integrated take off again:The Gripen system was designed for continu- digital cockpit with clear, manageable displays Less than 10 minutes with weapons forous development. New sensors and weapons and Hands-On-Throttle and Stick (HOTAS) Air-To-Air Combat, less than 20 minutes withare easy to integrate, thus making Gripen controls. This, along with the on-board inte- weapons for Air-To-Ground combat.flexible and cost-effective to develop further as grated data link capability, gives the Gripennew technologies become available.  pilot total Situational Awareness and, with its advanced weaponry, the pilot has a decisive Gripen E/F Facts:Cost-effective system edge in combat situations. Length: 14,9 metersGripen is designed for minimal cost in terms of Wingspan: 8,6 metersprocurement, logistics support and mainte- Gripen Next Generationnance. The cost of ownership was catered for Gripen NG is the next generation of Gripen, an Thrust: >22,000 lbsin the aircraft design from the very beginning, enhanced version of the well-established multi- Weapons Stations: 10since this was one of the driving requirements role fighter. It is the next and natural step in theset by the Swedish customer. successful development of Gripen, which will Turnaround-time: Less than 10 minutes withOperating costs are low due to: secure the system’s life span and competitive- weapons for Air-To-Air Combat, less than ness beyond 2040. Gripen NG is equipped - 20 minutes with weapons for Air-To-Ground with a more powerful engine, increased range, nance and fuel usage thanks to the efficient combat. new AESA (Active Electronically Scanned single engine. Array) radar and a new avionic system, giving the user new and improved capabilities in the battle arena. average time to repair is short. based – so they do not require as many expensive hardware modifications. SAAB ANNUAL REPORT 2011 13
  18. 18. SAAB’S CORE COMPETENCESYSTEMS EXPERTISEIS OUR CORE BUSINESSWe address the global market and meet traditional defence needs as well as the needs of the growing market for civilsecurity. Our core offering consists of systems know-how in products and systems to safeguard national borders aswell as the functional and security needs of the global flow society. OUR VIEW OF THE MARKET OUR CORE COMPETENCE Our customers increasingly want integrated solutions that Our core competence is systems engineer- meet local requirements. These solutions are evaluated based ing, i.e., understanding and being able to on performance as well as the cost to own and operate. De- integrate complex systems: our own and mand is increasing for proven systems that offer “more bang others’. At the same time we have developed for the buck” and can be combined with other systems. world-leading technologies in a number of important areas and today work with open systems as far as possible. OUR MARKET POSITION Our strongest position and good growth opportunities are in fighter aircraft, com- mand and control systems, radar, reconnais- sance and surveillance systems, including Airborne Early Warning (AEW) systems, tactical weapon and missile systems, and Command, Control, Computing Intel- ligence, Surveillance and Reconnaissance (C4ISR) systems. We also have a strong niche position in commercial aviation and in selected regions in civil security, support and services, train- ing and underwater systems, as well as in niche segments such as signals intelligence and countermeasure systems. Geographi- cally we have a strong position in Sweden and good positions in South Africa and Australia. Read more on pages 10–1114 SAAB ANNUAL REPORT 2011
  19. 19. SAAB’S CORE COMPETENCEOUR VISION OUR STRATEGIC HOUSEIt is a human right to feel safe. Since 2010, our strategy has focused on four priority areas. Our aim is to create long-term value by accomplishing these strategic priori-OUR MISSION ties. We will also maintain a solid balance sheet, focus on capitalTo make people safe by push- efficiency and generate strong cash flow.ing intellectual and technologi- Our long-term financial goals since 2011 relate to organic salescal boundaries. growth, the operating margin after depreciation/amortisation (EBIT) and the equity/assets ratio; see also page 48.OUR BUSINESS CONCEPTSaab constantly develops, adopts and improves new Profitable growth Performancetechnology to meet changing customer needs. Saab We continuously evaluate our We work with efficiencies and positioning and identify growth continuous improvements.serves the global market of governments, authorities opportunities. We focus on areasand corporations with products, services and solu- with a strong market position and Peopletions for military defence, commercial aviation and on strengthening in areas with good growth opportunities. We want to be an employer ofcivil security. choice in the global market. Our Portfolio employees are the backbone of our offering and our growth.OUR VALUES We adapt our portfolio to areas with strong competitive advantagesExpertise – We combine a strong history of and growth opportunities. We alsoknowledge with constant learning. target areas with a strong market position or leading technology.Trust – We are global citizens, honest and reliableand we keep our promises.Drive – We have a passion for innovation, we areopen to change and we are committed to being fastand flexible. PERFORMANCE PROFITABLE PORTFOLIO GROWTH PEOPLE Read more on pages 16–29 SAAB ANNUAL REPORT 2011 15
  20. 20. STRATEGIC GOALS PERFORMANCE PROFITABLE PORTFOLIO GROWTH PEOPLEDELIVERING ON STRATEGIC GOALSSaab’s four strategic priorities are profitable growth, performance, a focused portfolio and people. In 2011, we took anumber of important steps toward meeting them. PROFITABLE1. GROWTHActivities during the year Outcome/goal attainment Priorities 2012During the year, we focused on expanding operations Sales decreased in 2011 compared to 2010 as a In 2012, we will continue to focus on ain priority markets, including through focused acquisi- result of lower activity levels in major projects and the number of key markets, including thetions. Among other things, we expanded in the UK challenging business climate in South Africa. US, Sweden, India and the UK. Ourthrough a new office and a design centre for the de- priority is to increase local competencevelopment of Sea Gripen. We also strengthened our and establish a stronger local presencepresence in the US, through the acquisition of Sensis Sales EBIT in selected markets.Corporation. In addition, we established a researchcentre in Brazil and a product and technological MSEK %development centre in India, where we also signed a 25,000 20number of strategic agreements with partners. 20,000 16 15,000 12 10,000 8 5,000 4 0 Long-term financial goals and outlook for 0 2009 2010 2011 2009 2010 2011 2012, see page 1.2. PERFORMANCEActivities during the year Outcome/goal attainment Priorities 2012We have continued to focus on standardising opera- Profitability increased in 2011 compared to 2010. In 2012, we will continue to focus ontions and our functional processes to achieve func- This included capital gains MSEK 1,169 (14), improving tied-up capital and generat-tional synergies. Our improved processes for project compared to structural costs of MSEK 616 in 2010. ing strong cash flow. It is important toimplementation and risk management have enabled Underlying profitability increased in 2011, with us to have a strong balance sheet andus to identify savings and improve our forecasting successful project execution as one of the most sound profitability to facilitate growth-abilities. Our cost base is now more transparent, important drivers. enhancing investments.which has given us greater flexibility when costadjustments must be made. Administrative Gross margin costs MSEK % 1,500 30 1,200 24 900 18 600 12 300 6 Long-term financial goals and outlook for 0 0 2012, see page 1. 2009 2010 2011 2009 2010 201116 SAAB ANNUAL REPORT 2011
  21. 21. STRATEGIC GOALS3. PORTFOLIOActivities during the year Transactions Priorities 2012We completed several transactions during the year First half-year 2011: We will continue to invest in productin order to focus operations. This included streamlin- development and renewal as well asing the corporate portfolio, acquiring companies in Investment in Scandinavian Air Ambulance prioritise and strengthen our currentgrowth areas and divesting non-core operations. The Acquisition of E-COM of the Czech Republic competitive position in a number ofdivestments included the shares in the 3D mapping Divestment of interest in Grintek Ewation selected markets and a number ofcompany C3 Technologies AB and the Norwegian technological specialties. In several Divestment of interest in Denel Saab Aerostruc-company Aker Holding AS, where we exercised an markets, we are cooperating with tures (Pty) Ltdoption. In the US, Sensis Corporation was acquired, selected partners to build a local pres-a transaction that strengthens our offering in air traffic Additional consideration was received from the ence and gain better access to themanagement as well as radar and sensors. In the sale of Saab Space in 2008 market.Czech Republic, we acquired E-COM, a company Divestment of interest in Image Systems ABactive in training and simulation. Exercise of option to sell Aker Holding ASIn total, more than 10 transactions were completed. Investment in ISD Technologies Int AB Second half-year 2011: Acquisition of Sensis Corporation in the US Divestment of shares in the 3D mapping company C3 Technologies AB4. PEOPLEActivities during the year Results 2011 Priorities 2012During the year, we started building Saab Academy We will continue to develop Saabto ensure we have the competence needed to grow HR goals Results 2011 Academy.now and in the future. Employer of choice – internally We will improve long-term talentWe are continuously evaluating our employees. Dur- (index) 67 management.ing the year, we implemented a uniform performance Employer of choice – externally We will develop HR support globallymanagement process. (ranking by Universum) 12th place and locally. Communicative leadership (index) 68 Employee reviews, % 84 Development plans, % 72 Percentage of female managers, % 21 SAAB ANNUAL REPORT 2011 17
  22. 22. STRATEGY > PROFITABLE GROWTH PERFORMANCE VERKSAMHET PROFITABLE PORTFOLIO PORTFÖLJ EFFEKTIV TILLVÄXT GROWTH LÖNSAM MEDARBETARE PEOPLE1. PROFITABLE GROWTHGROWTH THROUGHMARKET FOCUSOur business targets markets with strong demand where Priorities 2012–2016: Clearer market focusour technologies and solutions can meet security needs. Through acquisitions to support our financial goals in defence andDuring the year, we continued to deliver on our strategic civil security, we will continue to build a strong presence in key markets. A focused Gripen strategy is also critical.goal to focus on key existing markets and strengthen our Our customers can be found in around 100 countries, at thepresence in selected markets. same time that the majority of order bookings come from around 30 countries where for the most part we also have our own opera-Saab has a strong position in Sweden. While we expect this to con- tions. We will concentrate our efforts primarily on these countries.tinue, the large share of future growth will come from outside the Decisions where we operate around the world are based oncountry. Becoming a more international business – in both military extensive market analyses of political, regulatory and competitiveand civil security, through investments in selected markets and a conditions and growth potential. We also look at how our productdeeper market presence – is also one of our principal strategies. portfolio fits the local market’s needs.Our sales outside Sweden have gradually increased in recent years. A stronger local presence is necessary to meet our goals. ThisToday, Sweden and the rest of Europe currently account for slightly includes everything from marketing to joint ventures, partner-over 56 per cent of sales. ships, industrial cooperations and technology transfers. Our local Profitable growth is one of our financial goals. Our organic sales presence can also be strengthened through acquisitions, with thegrowth will amount to five per cent over a business cycle. In 2011, acquisition of Sensis Corporation in the U.S. in 2011 being a primeour sales decreased slightly compared to 2010 as a result of lower example.activity levels in major projects and the challenging business cli- Naturally we continue to do business in other countries wheremate in Africa. Despite the decrease, we took a series of steps in line the conditions are right.with our strategic goals to create a stronger platform for growth. We will also be intensifying efforts to find applications for our know-how and technologies in new areas such as green technology.Priorities 2011: Measures to increase our global presence At year-end 2011, we had 13,068 employees, about 79 per centTo create profitable growth, we are gradually building our global of whom are in Sweden, five per cent in the U.S. and 11 per cent inpresence in priority markets by giving employees in Sweden the South Africa and Australia.opportunity to work abroad and by recruiting local competence.In 2011, we signed important agreements in markets where we areexpanding our local presence, e.g., with the Thai Royal Navy, and inkey markets such as the U.S. and Asia. We acquired Sensis Corporation in the US, broadening ourfoundation for growth in the North American market and globally.Sensis has a strong local presence in the U.S. in radar and sensorsand a world-leading position in the market for air traffic manage-ment systems; see also page 20. During the year we also acquired the Czech company E-COM,which specialises in the development and production of virtualsimulators. We have also established research and developmentcentres in the strategically important markets of India, Brazil andthe UK; see also pages 30–31.18 SAAB ANNUAL REPORT 2011
  23. 23. STRATEGY > PROFITABLE GROWTHSALES TREND BY MARKET SEGMENT SALES TREND BY MARKET REGION MSEK MSEK12,000 12,000 9,000 9,000 6,000 6,000 3,000 2010 3,000 2010 2011 2011 0 0 Air Land Naval Civil Comm. Other Sweden Rest of North Central and Asia, Africa Security Aeronautics and Europe America South Middle rest of America East and Nordic region Australia FOCUS ON SELECTED MARKETS OUR EXPANDING OPERATIONS IN THAILAND One of our criteria to establish in a new geo- graphical market is that there is a demand for our products, services and solutions. We want there to be in a growing market or a market where we can gain a strong position. There have to be op- portunities to build partnerships with authorities and businesses. In addition, we have to have ac- cess to engineers and other skilled workers. Another important factor is that the business environment, in both the state and private sectors, is trans- parent and complies with international- ly accepted principles. Our operations in Thailand are a successful example where we have found excellent opportunities for our civil and military products and services. Thailand has ordered twelve Gripen in two batches, two Saab 340 Erieye AEW (Airborne Early Warning), one Saab 340B and an air command and control system – a complete air defence concept. Moreover, we received an order in 2011 for the upgrade of combat management and fire control systems. A cornerstone of our Thai venture was becoming part-owner of the Our presence and the deals we have finalised also open up other Thai company Aviasatcom, which develops and supplies products to business opportunities in Thailand and the region. the Thai defence forces. This consolidates our presence in the country and gives us good opportunities to support customers locally. SAAB ANNUAL REPORT 2011 19
  24. 24. STRATEGY > PROFITABLE GROWTHSENSIS – BRIDGEHEAD TO AGLOBAL MARKETIn 2011, Saab acquired the U.S. company Sensis Corporation Stronger position in important market(Sensis), a leading provider of air traffic management solutions Through the Sensis acquisition, we strengthen our offering inand surveillance technology. The acquisition is fully in line with advanced air traffic management and surveillance. There areour strategic priorities to create profitable growth, increase our several factors driving demand in this market:geographical presence and continually adapted our portfolio. Demand for air traffic management and infrastructure is Sensis has a strong position in the U.S. in radar and sensors driven by growth between and within regions.and is a world leader in air traffic management, an important Global air traffic is growing, increasing congestion. By 2030,complement to Saab’s existing offering. For example, Sensis has around 50 per cent of growth is expected to come froma strong position with major airports, while Saab is a leader in travel to, from and within Asia.Remote Towers for small airports. With this combination, theGroup creates a stronger product portfolio – and new growth Higher fuel prices and increased security demands.opportunities in a growing global market. A desire among customers to meet future security, capability The acquisition of Sensis also gives us a growth platform in and environmental needs.the important North American market, where a local presence Access to new technology.is critical to success. We have also identified operational syner-gies in both the medium and long term, which we are currently The Air Traffic Management (ATM) market is cyclical,working to capitalise on. programme-driven, dominated by increased automation and Sensis has developed and distributed air traffic management characterised by limited growth in Europe and North America.and air defence systems since 1985. It maintains a global base Emerging regions, on the other hand, will account for a largeof more than 200 installations among over 60 customers in 35 share of market growth, since growing traffic volumes are creat-countries on six continents. Operations rest on two divisions: ing demand for new systems. At the same time, it remains a factAir Traffic Management, which accounts for about 75 per cent that existing systems will not be able to satisfy future needs. Aof sales and has installations at more than 85 airports, and De- large number of players are now planning to modernise theirfence & Security Systems, which works with defence organisa- systems and implement new technology.tions around the world. Saab Sensis’ products and systems are installed with over 60 customers in 35 countries on six continents.20 SAAB ANNUAL REPORT 2011
  25. 25. STRATEGY > PROFITABLE GROWTHStrategy for civil security Air Traffic Maritime Safety Security & Safety Management & Surveillance National Security ManagementInvestments in products and solutions for civil security are in-creasing around the world. We have good positions in Sweden,Central Europe, South Africa and Australia, e.g., through thenew security system SAFE (Situation Awareness For EnhancedSecurity), which covers every security need for the protectionof critical infrastructure, prisons and emergency services . Formore information on SAFE, see page 27.We are well-positioned in the area and our offering is based onexpertise in military technology, with an emphasis on situationalcontrol as well as efficient, safe and secure trade flows.Our civil security strategy is also based on our role as a systemsupplier and integrator with a focus on airports and aviation,ports and shipping, as well as on having a competitive portfolioof solutions to measure-analyse-act. SAAB ANNUAL REPORT 2011 21
  26. 26. STRATEGY > PERFORMANCE PERFORMANCE PROFITABLE PORTFOLIO GROWTH PEOPLE2. PERFORMANCEIMPROVED COMPETITIVENESSTHROUGH COST EFFICIENCYWe will continue at a rapid pace to improve efficiencies in Priorities 2011: Organisation and implementationthe ways we work throughout the Group. The goal is to In 2011, we strengthened cash flow by further improving ourbecome even more competitive. processes for managing capital employed, finalising divestments and maintaining our programme to sell account receivables. AnAn efficient business means creating the right conditions to be the efficient organisation is especially important to project imple-most competitive partner possible for our customers and to pave mentation, which we focused on in 2011 and which will remainthe way for growth. In our daily work this means continuously a priority.developing and refining our processes and work methods. Due to the long lead times between order bookings and the We are working in a structured manner to increase harmonisa- receipt of revenue, it is critical that we can do more for less,tion and standardisation within the Group. We also continuously which is already one of our strengths. We have also continued tore-evaluate and prioritise our activities to ensure the highest pos- improve R&D efficiency through a uniform lifecycle process forsible return on our efforts. The work is measured, followed up and our products. This work requires that our organisation and man-communicated internally. To succeed, we have to promote a culture agement model support product development.that puts the entire Group’s best first. Since the cost-cutting programme was completed in 2010, we have continued to work with improvements in day-to-day operations. An important element are our centres of excellence in research and development, which we began opening in 2010. They will support our collective actions while increasing internal efficiency. FIVE PRIORITIES PRIORITIES 2011 Strengthen cash flow through divestments Priorities in our efficiency improvement efforts: Standardise and harmonise operations to achieve functional Successful project implementation synergies. R&D efficiency Focus on contract quality, project implementation and risk Continuous improvements management to improve project results and forecasting abilities. Increase the flexibility in our cost base to quickly adapt to variations in volume. Focus on cash flow and tied-up capital to facilitate investments for growth and acquisitions, R&D and marketing. Develop uniform processes for product management and development to optimise R&D efficiency.22 SAAB ANNUAL REPORT 2011
  27. 27. STRATEGY > PERFORMANCE SUCCESSFUL CENTRES OF EXCELLENCE To increase operating efficienc, not least by eliminating redundancies, In addition to the Optics Design Centre, Saab established three other we established centres of excellence within various areas of the Group centres of excellence in 2010. As planned, seven new centres were in 2010. The goal is to make important knowledge more widely avail- added in 2011. All of them are in different stages of development. able and in that way maintain our desired level of competence in certain “Before establishing each centre, we analyse detailed calculations and areas while improving it in others. The resources that are freed up will arguments,” Göran Johansson continued. “In some cases, we have be used for investments in our future. After a short time, the benefits of found commercial applications, where customers have shown interest the centres have become increasingly evident. in utilising the competence.” “We can already safely say that the centres which are furthest along The work is now continuing. In 2012, around four more centres will be in their development, such as the Optics Design Centre, have lowered established, and those already in operation will be re-evaluated accord- their fixed and variable costs and are seeing greater cooperation be- ing to various criterias. tween business areas,” said Göran Johansson, who is leading the effort to create Saab’s centres of excellence. “This means that we are erasing the dividing lines within Saab and creating synergies.” Centres of excellence that Saab has established 2010 2011 Optics Design Centre Power ILS Common Component Sourcing Centre Aerodynamics Antenna EM Field Geo Data Centre (digital maps) in a portal, a Technical Test Equipment central geodata library Publications Rugged Computers Power Electronics Design Centre Ballistics ADMINISTRATIVE MARKETING CASH FLOW FROM OUR PRIORITY 2012–2016: EXPENSES EXPENSES OPERATING CONTINUOUS ACTIVITIES IMPROVEMENTS MSEK MSEK MSEK To achieve our goal of an operating margin 1,400 2,000 5,000 after depreciation/amortisation of at least ten per cent, we have to work in a structured 1,050 1,500 3,750 manner with continuous efficiency improve- ments. Maintaining a stable cash flow and 700 1,000 2,500 high capital efficiency make us more com- petitive and facilitate investments that drive 350 500 1,250 growth. Payment plans in tenders/contracts, 0 0 0 resource-efficient project execution and 2009 2010 2011 2009 2010 2011 2009 2010 2011 reductions in working capital, for example in account receivables and inventories are important aspects. SAAB ANNUAL REPORT 2011 23

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