YEAR-END REPORT 2017 16 February, 2018 Hkan Buskhe, President and - PowerPoint PPT Presentation

YEAR-END REPORT 2017 16 February, 2018 Håkan Buskhe, President and CEO Magnus Örnberg, EVP and CFO

2 MARKET DEVELOPMENT • High global spending on defence and security • Geopolitical tensions and improving economic conditions driving factors for increased spending • Global defence spending in 2018 expected to increase vs 2017 • The US and Europe expected to grow defence budgets • Several European countries estimated to meet the NATO target of 2 per cent of GDP spending on defence in 2018 • Next generation technologies in focus • Cyber security

3 HIGHLIGHTS 2017 Order bookings Order backlog MARKET Australia, Australia, etc Africa etc Africa 2% 2% 6% 1% Asia Sweden Sweden 12% 45% Asia 37% • High interest globally in Saab offering 18% Latin • Several strategic partnerships formed to strengthen Latin America America 3% local market position 35% North America North RoE 9% RoE America 9% • Offers US, based production capability for T-X trainer 17% 4% aircraft, if Boeing/Saab selected* • Slovakia became first customer to deploy the Carl- Gustaf M4 System • Australia pointed to Saab for Control Management Systems (CMS) in future Naval platforms *Saab together with Boeing are competing to win the tender process to supply the United States Air Force with an advanced trainer aircraft

4 HIGHLIGHTS 2017 PERFORMANCE • Strong order bookings, increase of 41 per cent y-o-y* • Strengthened sales and operating income • All business areas improved sales • Improved operating margin • Good cash flow; strong balance sheet • Taken a step towards our long-term operating margin target of 10 per cent *Year-over-year

5 HIGHLIGHTS 2017 INNOVATION • 23 per cent of sales invested in R&D • Succesful first flight Gripen E in June; supersonic flight in October • Order for New Generation anti-ship missile system from Sweden (FMV*) • Saab Digital Air Services, provide remote digital air traffic control to further airports in Sweden • Order for delivery of a Special Purpose Ship for Signal Intelligence (SIGINT) to Sweden *The Swedish Defence Material Administration

6 ORDERS RECEIVED IN 2017

7 FINANCIAL HIGHLIGHTS YEAR-END 2017 Order Bookings Order Backlog 35 30.8 120 107.6 106.8 +41% 30 BSEK 100 BSEK 25 21.8 80 20 60 15 40 10 20 5 0 0 FY 2016 FY 2017 FY 2016 FY 2017 Sales Operating Income 3 35 31.4 +10% 28.6 30 2,5 2.2 BSEK BSEK 25 2 1.8 20 1,5 15 1 10 0,5 5 EBIT-margin 6.3 6.9 0 0 FY 2016 FY 2017 FY 2016 FY 2017

8 CONTINUED EFFICIENCY IMPROVEMENT • Continuously focus on efficient project execution • Digitalisation drives efficiency improvements ‒ Automation ‒ IT-infrastructures ‒ Aligned organisational setup • Focus on improved cash conversion • Shorten lead-times

9 OUTLOOK STATEMENT 2018 • Sales growth in 2018 is expected to be in line with Saab’s long-term goal: annual organic growth of 5 per cent. • The operating margin in 2018, excluding material non- recurring items, is expected to improve compared to 2017, bringing Saab a further step closer to its financial goal: an operating margin of 10 per cent over a business cycle.

10 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 depreciation and amortisation 10% • Operational excellence and portfolio mgt (EBIT) of at least 10 per cent annually over a business cycle. • Continuoulsy develop leaders and employees • Further strengthen core technology areas INNOVATION Equity/assets ratio of over 30 >30% • Invest in research and development per cent. • Diversity drives innovation

11 FINANCIAL UPDATE

12 SUMMARY 2017 • Strong order backlog; good level of medium-sized order bookings • Continued strong sales growth, sales increase in all business areas • Strengthened operating margin; Dynamics, airborne surveillance operations and support business good margin development • Good cash flow, with large milestone payments related to large projects received • Balance sheet strong

13 FINANCIAL KEY DATA MSEK FY 2017 FY 2016 Change Order Bookings 30,841 21,828 41 Order Backlog 106,849 107,606 -1 Sales 31,394 28,631 10 Operating Income 2,155 1,797 20 operating margin, % 6.9 6.3 Net Income 1,438 1,175 22 Operational Cash Flow 1,388 2,603 Free Cash Flow 852 2,359

14 ORDER BACKLOG Order Backlog Duration BSEK 31 Dec 2017 31 Dec 2016 31 Dec 2015 25.0 24.5 21.8 2018 2017 2016 20.0 17.0 15.9 2019 2018 2017 17.0 13.5 12.3 2020 2019 2018 17.0 15.8 11.7 2021 2020 2019 27.8 36.8 52.1 2021- 2020- 2019- 106.8 107.6 113.8 Total Total Total

15 ORDER SIZE DISTRIBUTION FY 2017 50 000 3,5 Large Orders 45 000 Small Orders* 3 40 000 35% 2,5 35 000 30 000 2 MSEK 25 000 1,5 20 000 15 000 1 65% 10 000 0,5 5 000 0 0 Small orders* Large orders Book-to-bill ratio** *Small orders = <MSEK 100 **Book-to-bill ratio calculated as 12 months rolling

16 ORDER BOOKINGS & BACKLOG PER BA Order Bookings 10 • Significant orders within the 8 Airborne Early Warning and 6 BSEK Control Segment 4 • Kockums signed contract for 2 modification and upgrading of 0 Swedish Corvettes Aeronautics Dynamics Surveillance S&S IPS Kockums FY 2016 FY 2017 • Dynamics received orders for Order Backlog Next Generation Light Anti-Tank 40 60 Weapon System (NLAW) 30 • Continued support and maintenance of Gripen C/D BSEK 20 involving several business areas 10 • Good level of medium sized orders 0 Aeronautics Dynamics Surveillance S&S IPS Kockums FY 2016 FY 2017

17 SALES PER BUSINESS AREA 9 000 +5% 8 000 +2% 7 000 +22% 6 000 +7% 5 000 MSEK +12% 4 000 • Sales increase in all business areas +17% 3 000 • Dynamics delivering growth from 2 000 record high order backlog • Support & Services had strong growth 1 000 in airborne surveillance operations • Combitech, part of IPS, delivered 0 Aeronautics Dynamics Surveillance S&S IPS Kockums strong growth FY 2016 FY 2017

18 OPERATING INCOME PER BUSINESS AREA 800 700 600 500 MSEK • Substantial growth in operating income 400 and margin for Dynamics, Support and Services and Surveillance 300 • Higher activity level in operations related to airborne surveillance 200 systems • Support business strong profitability 100 EBIT Margin 6.6 5.9 7.4 • Lower operating earnings related to 7.5 9.1 10.9 8.9 10.9 3.7 3.4 5.8 5.8 Gripen C/D due to changed projectmix 0 Aeronautics Dynamics Surveillance S&S IPS Kockums FY 2016 FY 2017

19 CASH FLOW JAN – SEP 2017 4 000 MSEK Change in Working Capital Cash Flow from Operating Activities before 3 000 3,593 Changes in Working Capital Change in Working Capital -73 2 000 MSEK Investing Activities -2,132 Investing Activities 1 000 Tax and Other Acquisitions and Sale Financial Items of Subsidiaries and Operational Cash Flow 1,388 Other Financial Assets 0 Tax and Other Financial Cash Flow from Operating -356 Activities before Changes Items in Working Capital -1 000 Acquisitions and Sale of Subsidiaries and -180 Other Financial Assets Free Cash Flow 852 -2 000

20 FINANCIAL POSITION MSEK Net Liquidity (+) / Net Debt (-), 31 December 2016 -1,836 32% Cash Flow from Operating Activities 3,164 Change in Net Pension Obligation -222 Equity/Assets Ratio Net Investments -2,132 Dividend -559 Currency Impact, Unrealised Results from Financial Investments and -249 Acquisition of operations Net Liquidity (+) / Net Debt (-), 30 September 2017 -1,834 133 Net Pension Obligation, 31 December 2017 2,646 Total Interest-Bearing Assets, 31 December 2017 -468 Equity per Share (SEK) Liquidity 344

21 FOCUS 2018 • Continued focus on execution of large projects – project management • Build order backlog in selected areas • Drive efficiency improvements throughout the organisation ‒ Functional and operational excellence

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