Saab AB (publ)

Good morning everyone and welcome to Saab's first quarter 2024 earnings presentation. With me here today in the studio I have the company's president and CEO Michael Johansson and Chief Financial Officer Christian Lujiga. Before we start to the presentation I would like to highlight that you can find this material on the Investor Relations section of the website and we will as usual follow on with a Q&A and take your great questions in that session. We remind you that you can also send your questions live directly through the webcast to me. I would like to now give the turn to you Michael.

Thank you Mertun and good morning everyone and thanks for joining this call for the Q1 report 2024. Let's start by looking at a few highlights of this quarter. In summary this has been a strong quarter with high interest in the market and big demand and you can see that in the order intake that is almost 18.5 billion. We also have been managing to grow the business as you will see later on 24% during the quarter which is about high activity in our projects of course and we are progressing well with the capacity increases that we are doing. We have employed more than 700 people net up this quarter and our investments in new infrastructure capacity is progressing well as also of course. Lots of things are happening around us and in EU for example we've seen during the last few weeks now it's been a new European defense industry strategy tabled and also a plan to set up a fund called EDIP European defense investment plan which will incentivize collaboration in Europe between countries and also companies of course to do common acquisitions but also to develop things together that will be really important to increase the capabilities and deterrence in Europe. And now finally eventually Sweden is part of NATO and that is of course initiating a number activities in terms of how that affect the company in many forums that we can take part in now to look at future capabilities that NATO will be needing. We're looking for the capability targets which is about what is the Nordic countries going to manage in terms of the Baltic Sea, the Arctic perspective, the surveillance perspective in the Nordic region and that will also going to affect us as a company going forward and we have also received contracts from Acquisition Authority and the SPA within NATO already on the support weapons side and the missile side. We have had a couple of really important deliveries many of course but a couple that I would like to highlight this delivery to Poland when it comes to an airborne or the warning aircraft based on the Saab 340 turboprop aircraft already there that we contracted that last year in July and we have already delivered the first aircraft and soon we will deliver the second aircraft. We have also early in April delivered the Ford Global Eye to UAE very important delivery so now we have delivered four aircraft within four years time which is really excellent and so many good things are happening within the company as highlights. So number-wise then we as I said we increased our order intake with nine percent -on-year quarter to quarter which shows that we have a great portfolio in the marketplace the demand is really high and we are growing the medium sized and small orders more and of course that depends on sort of what larger orders we are negotiating but this is a really good trend and a good foundation for the company so the order backlog is also growing of course now which creates also a good foundation for continuous growth. Excellent organic growth of 24 percent based of course about on that we are capable of delivering things from our backlog and we increase our pace in the organization high project activity good material inflow and also an effect of that we are progressing well when it comes to capacity increases both when it comes to employees coming into the company but also what we do to increase efficiency and also new infrastructure facilities parallel production lines and things like that to be able to get sort of more out of the company continuously. We are continuing to increase our profitability levels more than our revenue growth which is really important to us and as you can see on the cash flow side this is a quarter where we have been investing quite a lot and then we have fluctuations between the quarters in sabas you know when it comes to milestone payments so this is nothing unusual we're still confident that we will deliver a positive cash flow for the full year but we've said that during this year next year we will be a little bit front loaded when it comes to investments and we have to do that to be able to grow the company long term. Orders if we zoom in a bit on orders we we have had a number of really important ones we had an order from Canada on the rbs 70 1.7 billion roughly and we also had a support contract for global eye in UAE similar size we got four new gripen fighters for Hungary which is really great for that organization and that has already driven sort of the the sales growth in aeronautics. We have done a fantastic breakthrough when it comes to electronic warfare together with Airbus defense for the Euro fighters in Germany where we will equip them with really sophisticated electronic warfare capabilities 15 of these Euro fighters and there is more potential of course in that that's why I say it's a breakthrough and as I mentioned a couple of very important contracts when it comes to the natus acquisition organization on Carl Gustav but also on rbs 70 has now come into the company and then we've started the next yen discussion on what do we do sort of how to complement the gripen e maybe with maybe with unmanned capability in the concept study with Sweden and what comes beyond the gripen e as well of course which is many decades to come but this concept study which includes demonstration and things like that is really important to us of course connected to the aeronautics business area so large portion of the contracts are of course from international customers and you can see how that is divided in in the numbers here or the backlog has increased 19 percent so 150 billion now in order backlog a few highlights then from each business area and kombutech as i said the the growth when it comes to revenue in aeronautics has been really during the quarter and it's been driven by all programs Sweden and Brazil of course has really high activity in those gripen e programs but also the Hungarian program now with the four new gripen fighters added to this growth in the quarter and that drives an improved profitability in aeronautics but still we have under absorption in the facility in west lafayette indiana and we have production ongoing but we don't have full rate production going yet so that will still be the case for a while but that will be a good program in the end but it's good to see that the gripen programs now is driving an improved profitability in aeronautics we have a few campaigns going as we talk about a lot and the main ones that i see right now apart from the next batch in brazil is of course thailand and who needs to replace their f-16 wing we have grippens in thailand and now they're looking at the other sort of they have a mixed fleet so they will need to replace the f-16s in thailand and that process is now ongoing and also philippines are in the process of of creating a stronger force and that is an important campaign to us and in latin america we are working colombia those are a few of the campaigns we are putting effort into dynamics is not a business business area that grows a lot this quarter and that is mainly related to fluctuations in deliveries specifically from ground combat that will change in quarter two and three definitely with more output the training and simulation business is very strong in dynamics this quarter and continuing to be strong because of all the troops that needs to be trained now when defense defense defense exercises and defense boosting in many countries requires training and we run complete training centers for in many countries which and that's why this is growing we have as you've seen started now to build manufacturing capability in india and that is ongoing as we speak and we will have output from that next year and now we are quite sort of soon going to select the state in in u.s where we will also build a new facility for ground support support weapon and ground launch small diameter bomb to to manufacture that in the u.s but we haven't selected the state yet we have you know signed a big contract in poland that we expect to come into effect now in q2 when when the financing part of that contract has been settled and i look forward to kick that off as well of course in surveillance also good order intake and good growth it's huge interest in all the sensor capabilities and electronic warfare as i mentioned in germany for the euro fighter but also on the ground-based radar side and it's the factory sort of stepping up and producing more radars which is really important for this growth and i would say that the the improvements when it comes to profitability is driven by by scale effects and very important delivery as i mentioned on the bonnet warning to poland and and ui so surveillance is also performing well in this quarter and also big demand in the market of course on the naval side and when you saw comes to sub cocombs we also have great growth and this is a that is important to us between surface vessels support contracts upgrade contracts and how much is international and how much is swedish and the mix right now is giving us a good growth and and also a good increase in profitability and it's interesting now to see that we have now started the next gen corvette type of ships for sweden called the lulu class and that is the design phase we're talking about and that will of course continue to give us growth in the naval business yes to come now and then as you know we moved the underwater capabilities from dynamics to sub cocombs because there is synergy effects between what we do unmanned autonomous between what we do in sub cocombs and also what we have in this underwater business that used to be part of dynamics and this will create sort of synergy effects on r&d but also in the portfolio management and in the marketplace what we offer for example to manage surveillance of infrastructure at the bottom of the sea but also unmanned capabilities underwater but also on the surface so that is a good move and initiatives have started finally kombotek big demand in the defense and security area both when it comes to the total defense perspective but also the military defense and helping authorities so we have extended the framework agreement with the swedish fnv to support some equipment that we have been supporting them with for a long time extended that for two years and then we also have other contracts with this swedish civil aviation administration on the total defense perspective and an important one will also conspire on the for in integrated logistics support so kombotek is doing well in growing business with authorities and also industries going forward and we see a good margin level and we also see a good growth in the kombotek business and all that is of course related to how many how many employees can we get into that organization and what efficiency can you get from the contracting with different customers and this business is doing really well now so a little bit of a deep dive into an interesting initiative that we did actually this week but i want to highlight the innovation activities that we are doing within solve we have in different sites in sweden but also this one is in the u.s where we have where we acquired crowd ai a smallish company with with expertise in artificial intelligence and now around that we are building an innovation hub i would call it called scapa and that will be about naval autonomy so we have moved one of our kombat boat nineties and made that autonomous with software and with different sensors and now we are creating use cases and working with customers to to create the capability around that and so they will focus on the maritime domain but much will be about ai and cloud technology and how that can be also spread to other areas within sob we opened a new facility in san diego just this week and there has been significant interest from research institutions and customers and potential partners to work with us on this and this is why i mentioned it is because this is a good example of where you actually build demonstrators build that you actually use what you have in house but you add new technology to to create a new capabilities for the future so this is really something i look forward to to grow in our company embracing new technology so it's been a great launch this week when it comes to sustainability a big focus area for us we updated our strategy last year and for 11 areas now we have a short medium and long-term targets and we have all the initiatives going now to meet our objectives in these areas it's not only about environment it's about anti-corruption it's about diversity it's about technology development and so many more things so i just want to underline how that this is important to us and we want to be an industry leader in our business segment in this area so we're putting a lot of effort into it and then we have been rated on the a list when it comes to the carbon disclosure program which is a good step forward and that just proves that we have a good leadership and transparency and we're doing well in this area then we have fluctuations we have decreased our emissions since we started this and with the base year 2020 with 23 percent and we've said we're but some years and some quarters depending on on how cold it's been and how much we have been flying with our test aircrafts and both on the globalized side but also on the gripping side it might fluctuate but all in all we are having a trend that going in the right direction but some quarters will be up but some another quarters will be down that's how it will be going forward we're still confident that we will reach the 42 percent target 2030 and then we are upgrading our growth outlook for this year a few percentages to 15 to 20 percent and that is because we have better visibility now in how we can execute our backlog and we've good signs how capacity is increasing in the organization both when it comes to infrastructure as i said and how we manufacture things but also when it comes how many employees we can actually get into our operations and that's been also done really well in this quarter so we will grow more somewhere between 15 and 20 percent this year which is really pleasing me to see that we pace in the organization finally you recognize priorities and of course they don't change every quarter our priorities and i just want to sort of give a view of that how important eu and nate initiatives will be that we allocate and spend effort into getting into these programs into these collaboration programs and that we spend effort also catching now nate opportunities going forward i think europe is getting its act together spending more money together also including member states of course separately so there is more money being spent over the next 10 years in europe the last forecast i saw from january 23 to january 24 the the projection for the next 10 years increase with 500 billion u.s so there will be lots of growth going forward in in this region then of course we have to deliver and i'm pleased to see that this quarter has shown that that we are delivering on our commitments with our customers that will give us that's the best way of selling things that you show that you meet your commitments and that is about increasing capacity of course but then you will also get new contracts and there is a strong demand monothere and we need to catch that of course continue to focus on capacity and production ramp up which has now been progressing really well but it will be as important going forward and including onboarding all our new employees which i'm happy to see that would they will join and we are an attractive company today but we also have excellent employees already in the company that we also need to make sure that they remain in the company and that they have energy to help us grow this company and they need also upskilling of course to some extent or in the it's not only about capacity this is about future technologies and that's why i mentioned this initiative in the u.s we have many more things like that embracing new technologies connecting to cloud technology ai autonomous systems working together with man systems so lots of things are happening in that area as well and i need to underline that it's not only us growing we have to make sure that we have an ecosystem of companies joining us in this growth so there are sort of weak links which we have to manage we have to create redundancy we have to make sure that they can afford to vest to come with us growing so the the focus on supply chain and how we manage that and mitigating any risk in that which we've done really well so far needs to continue so these are our priorities to name a few going forward with that i will hand over with an excellent picture in the background to to our cfo christian liga

thank you michael and i have my own one today and it's it's great to be here today i love to have this this fantastic picture in behind here that that as michael said illustrates our platform and our actually excellence that we have done in the past with our future technology and also the international expansion going to san diego we have a very strong momentum right now sab teams around the world are working very hard to deliver and bring up capacity and we do that well we continue to report a margin improvement and we have a very strong financial position so that's my summary in essence if we then step into the order and momentum that we have we see in this quarter it is orders to the international market that brings up the the percentage which is something we we love and like we are a company that will have an international expansion that is important not least in europe which we also see see the result of right now the increase of order backlog of 19 percent is good and the 24 percent for the rest of the year is also comforting and give us actually less order to sales that is needed to to to deliver within our our forecast but what is also very i'm very happy to see is that we have 50 billion already in the box for next year for that year's sales which gives a comforting start now for going into 2025 as this is a business as you you also share that we need to look at over years and and and it's a long-term business on the financial summary the reported and the the organic sales growth was very close to each other and it was 50 50 pretty much between how much was currency and how much was mma related the gross margin was quite flat even though sales increased with 24 percent and the main reason for that is that dynamics grew slower than aeronautics surveillance and cocoms and dynamics has the highest margin so when dynamics comes back with higher growth during the rest of this year that will also have a positive impact on the gross margin as now we see only a gross income increase similar than to the sales increase on the ebit side we do have some some effects on opex and i'll come back to them financial net negative 182 and here we have around 170 million coming from from currency effects in our tender portfolio so our financial net of course which is positive shouldn't drive a negative financial net from from interest which is doesn't it has a slight positive but the negative 170 comes from then tender portfolio very simply put because i want to explain this so how does this come out this is when we have a very close to finalized deal and we do a hedging and until that is actually closed we cannot take that in to the program as as a full hedge and therefore we need to take the fluctuations in the market every day into our income statement in case just very pragmatic put this out if we would close this deal on the first of april that loss will actually result in a profit in the project and and vice versa so this is not something to be scared about these fluctuations as long as we sign the the the tender portfolio which we only do this on very likely and close to signed deals then on the tax rate we have guided around 21 to 23 percent and we see now that during the last year we have been within that that frame and so there's nothing really to report there and because of this 182 negative and financial net the eps only grows five percent in this quarter going into the development of sales and ebit and ebta sales is continuing up based on then the the growth we have right now mainly driven then by aeronautics and cocoms and surveillance and the the growth in the regions are driven by europe mainly if we look at our our strategic countries germany is is growing very strong right now and portfolio in total of of australia germany uk and us is growing only just below 20 percent but but it will fluctuate also quarter there in this group the ebitda margin is is a little bit lower and the last quarter compared to previous and that is because that depreciation is is growing slower than opex right now the rest of the opex portfolio and in the opex portfolio what is increasing in this quarter well there's three things that drives that in this quarter one is hr and i would like to just emphasize that hr increases comes from the recruitment not from having people on board so as long as we recruit a lot of people we will need to put effort on both recruiting and and onboarding as long as they are on board it's it's not the higher cost to drive the hr in itself it we are doing the transformation like many others and and that is costing money but it is also fluctuation quarter by quarter and then we have consolidated in some minorities that we have acquired therefore they have moved in the income statement up to ebit and therefore it looks like we have a higher opex but the income statement in itself is not that that much worse it's actually better but it goes from the line minority up to opex so so it explains a bit on how the the opex changes in essence i would say this is not a trend for the medium term rather an impact now in quarter one and and for the year i don't feel that we have that risk on on the scale effects on opex a little bit this is a new picture we have added to make sure we we actually have also the data we have in our quarter report available in our presentation and i want to just point out a couple of things on this one first is dynamics which um maybe is a surprise for some people but not for us and there was a lot of trucks going out from dynamics in in quarter two in april we are in april right now and that therefore we know that from quarter two and forward we will have a higher delivery out of dynamics and dynamics is reporting their revenue recognition more on deliveries than on poc and the other units are reporting more on poc so that's why it becomes a little bit more fluctuating and therefore we'll see very high numbers and and maybe one quarter it will be a little bit lower and this one is a little bit lower so we feel extremely comfortable that that sales growth will come back already in in quarter two and and with that of course the the margin will also come up in dynamics and that will also the the share of sales and the increased margin will also support the group the other thing i want to point out this is cockums where we reported last year a bit higher numbers and and we talked about the eight to ten percent target which we have on cockums that they should be on operating margin in that level over time but they could be higher if they have a good impact and right now they have still a good impact from the surface ship side and international side but we have added a underwater business that as you understand then is negative in the numbers because you have seen how we have restated this that underwater business is is negative in the quarter but we have a very clear plan and we see that it's it's actually going to happen that we move out of the negative territory in the end of this year and into next year so it's a it's a very clear path there i just want to also then emphasize that that means that we will move back into the eight to ten operating margin region which we have said that cockums could could perform in where surface ships and international drives higher margin and submarines is a bit bit lower in total also i want to add to to cockums to give them a little bit credit on this this combat boat 90 it's been a tough business for a couple years but now with new orders they have have actually the excellent team up there in doxstar has has moved into positive territory and we have a good backlog so it will be a a hard work and and fun only up there for the coming years on the cash flow and in investments this quarter should be seen as something that can happen in the the line of business we are in in in defense the the working capital is is quite negative in this quarter and and it could be quite positive there is a couple of things that drives that the first thing is that if you ship out less from dynamics the trucks don't come because they go out in april instead then the invoicing wall that maximum up speed of of growth will be in delivery pace in in dynamics is driving a higher impact on the inventory then we also have the the customer payments that could shift between quarters in last year in quarter one we had from our customer programs payments in quarter one and in this year we will have them in other quarters so that's not something that is strange that happens in this line of business and therefore we feel quite comfortable with that that with this negative two billion without actually compromising on our view of the full year guidance of positive cash flow and then in general what what happens here which is actually a positive thing and this is what we have said can we build capacity faster this will help us to actually drive growth so therefore we actually think it's quite good that the the investments are moving from 0.5 to 1.0 billion and that i also can say with better comfort today because as we explained last year we have much more granular follow-up and and we have much more control or of our investment process in sab and therefore we also keep track on that we are really doing what we need to do to bring capacity and nothing else and finally we have also added the return on capital which is is is increasing and which i think is also something that is positive hopefully for the shareholders at least it is for me this is one of the more important thing over time that we return on capital for our shareholders so solid balance sheet as we talked about the net debt to ebta is is strong it's it's negative and so it's a net positive and we we continue to have a strong balance sheet when it comes to cash and short-term investments we did pay out the first half of the 6.4 krona dividend that we announced at the shareholders meeting in april and the second half will be paid out in october in between we will make a share split of one to four so on the four shares you will get a 80 or 0.8 swedish krona compared to the then free 20 on one share before so it's just math to get there and so all money will be paid out but there will be a split in between so i just want to highlight that for for your information finally we have then a new outlook when it comes to our sales growth we have then increased that from 12 to 16 to 15 to 20 and technically you could also say then that we have moved the floor from 12 to 15 percent we have a bit of a challenge but that we also have had all the time to figure out how fast can we grow and and so the range now 15 to 20 percent is within the range we we believe we have a great potential for and the reason why it could be in the lower or upper end of this as we have always said is really the capacity and delivery pace that we can make out of this company which so far knock on wood has been very good we do not change our our view on operating income therefore that the the higher than organic sales growth on operating income stands that means it's going to be above whatever 15 to 20 percent mark we reach and we will deliver a positive operational cash flow is our best estimate with that i leave back to you mariton

thank you very much christian and now we have the time for to tune into our q a session so if you haven't done that yet you can do that on the links that we provided you in the reports and press release this morning so if we have a moderator i'm gonna invite that person we do have a couple of guests online already but i would like to also as usual remind you that please take your questions one or two questions at a time so we can allow for everyone to to come forward with questions so with that let's start

we will now begin the question and answer session anyone who wishes to ask a question may press star and one on their touchtone telephone you will hear a tone to confirm that you have entered the queue if you wish to remove yourself from the question queue you may press star then two participants are requested to use only handsets while asking a question anyone who has a question may press star and one at this time the first question is from sam bargas city please go ahead

morning guys thank you for taking my question thank you for the color you've given on dynamics margin just so we have a sense for the full year should we expect margin to be fairly stable versus the pro forma 23 margin obviously adjusted for the underwater business and just a second one on dynamics margin when we think about training and simulation growing within that business going forward should should we see that as a creative or dilutive to mix thank you

well i mean we you can comment christian but i mean on the dynamic side on the top line side we said as i tried to say alluding to that there will be and you said even trucks leaving sort of the facilities and that's true i mean the next quarters will be much more of delivery output so that will drive volume and there will be good margins there exactly what number i won't sort of guide you on but it will be good numbers on the on the on the well to net margin on on dynamics because that's profitable business so if that grows dynamics grows as well so that's another portion of dynamics include if you look at ground combat that is a good growth machine and good profitability machine but training is similar so that is good if training is growing that's how much i can say

well we did say so i can reiterate that is that and that it was before and same conclusion after underwater has been moved that if there is any potential to the margin in dynamics is upwards as we grow we said that that the quarter four report so we can restate that very clearly today nothing has changed the potential when they grow now into quarter two to quarter four is that the full year numbers actually rather can go up a bit

great thank you

the next question is from henrik hince abg sandal kolye please go ahead

good morning so you mentioned as a reason for raising your your full year guidance there are better visibility on deliveries and timing of of capacity capacity increases i'm just wondering if you could expand a bit on what has changed there and what makes you more confident now

well i i would say that you can start in the end of saying that if you add people you can actually increase pace in in your programs which is absolutely necessary in some programs and since some of them are puc programs that will give you more growth and output but then of course capacity parts which is related to how we work shifts and add more automation into the production of the volume parts of sob like ground combat and and things like that and that increases of course output all initiatives we're taking on that side adding equipment into production all the facilities that we also are investing in both in lindköping and kalskoga of course not up and running all of them yet but this is not sort of a one stepwise thing they will be more coming of course when we get those facilities in play as well but other things are happening in production those are examples of things that creates growths but also included is of course how well we can forecast the material flow and how much we have in stock to be sure that we can build and integrate our systems and we have better visibility and have been managing the supply chain in a way that we can now forecast growth in in a more optimistic view than than we could for a quarter ago actually so those are a few examples i

just i just want to reiterate because it is it is more complex than just thinking that when the building is done everything is going to go so it is people that is capacity uplifted is supply chain it's dependent on partners and and just take an example if you if you start a year and and they say well will the production be up running in august or will it be in october well that depends on the machine that comes in april and they could take three weeks to test that machine or they can take eight weeks to test that machine depending on how well it works out in that testing before we can get going on putting carbon fiber or whatever in in that in that line and then it made me work out to be three weeks instead of eight weeks and and that it are a simple small thing that is everyday life for our people which out there in in this capacity uplift they have to remember it's it's an enormous capacity uplift we're doing right now

these things come together in better visibility in the end and better sort of planning how to get things out of so yeah that's a number of things right

thank

you the next question from your enerson thanks kebeng please go ahead

thank you i have a question on aeronautics we have previously talked a lot about the civil business and the new contracts and also the t7 development as i've understood it there are both weighing on the margins or actually at loss as we speak could you update us again on how you expect those segments to develop and when to start contributing to profitability and when up and running are they positive to to versus uh divisional margins or dilutive thank you

well i i would say that we have production as you know ongoing if we start with t7 west lafayette we call that low rate initial production that will probably be the case also through the end of next year i would say so i would sort of look at 26 from getting into profitable numbers and that would add to the division margin and i would say the same we are improving continuously within their structures business so it's less loss but we still have a year to go roughly before we are out of the contracts that we have now renegotiated to be something more profitable that will come into play correct me if i'm wrong so for next year exactly so that's how it looks like

so one is one is not dependent on something else we already have the contracts and the loss is less in the civil business than in t7 and t7 it's more to move in this this production which is is still a bit uncertain but but it looks very i mean promising and and to two early 2026 it

will gradually improve under absorption during next year but i i think forecasting it it's probably positive sort of from the end of next year

correct perfect very clear and then i mean you talked a lot about capacity and investments both in in people and plants with the plans that you have and given the the market demand is where it is is it to get a sense on for how long you can basically grow at around these levels as you are growing this year in the years to come forever yeah

i mean you know the outlook that we have given i mean is 15 average until i mean in the time frame up until 27 and that's still our view we reiterate that and what we do in capacity wise supports that of course then then then we will see i mean the demand is high in the marketplace and and of course it's about lead times also you continue to get to get sort of the orders and the contracts and then you need to sort of squeeze the lead times and the capacity is a lot about that and that's about the growth as well of course but it supports the 50 average and we're fighting to do as quickly as possible to of course to do that in a good way and as you know we are soon selecting a state in the us also to build a facility to do these things to have redundancy between sweden india and us and that would be excellent going forward and that hopefully will drive also the demand in those markets because it's sovereign capability that us and india will get that's as much as i can say the

interesting strategic sort of conflict here is not a conflict but but we i mean in in nature it's harder to see and going out three to five years how the market will be for us we we we need to do what we can on a technology shift and and be as good as we are today in a position on the market in the same time we are actually learning as every year goes on how to grow which is also something to bring in for saw we will be better in in growing in two years time than we are today and we are better than we were two years ago so that that's also something to put into account

thank you and on the same topic if i may one more question it is this discussion in europe and and not the least in in sweden on supporting the industry in terms of capacity build out that there been a discussion of guarantees or the certain demand or perhaps also instead of that some financial help for building out capacity are there anything that you could add to that i mean the political will is clearly there but what is is something happening that is more tangible

still discussions but but you're right i mean the if you want to take bigger steps we're taking big steps we're investing heavily looking at sort of the business case the forecast but if you really want to realize that and set the sort of the target level of where you have to be when it comes to deterrence and stockpiles and what areas where you have to have production capacity in and critical mass and all that those things are not really settled in many countries we have a report coming out today from the the defense committee that will turn into a proposition in the fall which will this sort of decide the level of where we need to go in the next few years and that probably will be reiteration because of the nato now integration and what capability targets we will get from nato but i i must say that if you want to go further to really do big investments we need to know as companies and industries that we will not have to sort of go below a critical mass again dismantling let too many people go and all that so we have some security in the 10 15 year time period so to say and then we can take the bigger investments and hopefully we'll get sort of european investment bank to say we can and they can invest in in defense as well which will bring with them lots of big funds like pension funds these things needs to happen i think but of course growing a lot today but you have to set where is the target we have to realize that we have this aggressive neighbor to these for decades to come and it's going to be interesting to see these things then you need long-term commitment that's a risk sharing model i can take risk on the global market so to say but i need to know that we need sort of to keep certain areas of capacity and files so we can sustain a higher level of capacity then you need long-term commitments beyond mandate periods which politicians are looking at

thank you and let's get back to the defense committee i think i have the press conference how to speak yeah thank you

the next question is from sash toza agency partners please go ahead

um thank you good morning um i've got two slightly detailed questions the first is on the fx impact on your tender portfolio and i just wondered whether you could give some color on this the sort of period that you are exposed are we talking about weeks or months in terms of uh tenders here and then my second question is on stocks you were very early in the current upturn to start building your uh stocks up i think particularly for dynamics i just wondered whether you still had the same level of stocks proportionately for your business or have you actually eaten into eaten into your stockpiles uh and would it be harder to rebuild thereafter

well if we take the the detailed question on on fx it depends not so much on if it's a week or a month depends on how certain we are that this will probably close so so we could be very certain that this will close but it needs an approval from some kind of authority that we know will happen most most most likely and and therefore we can take a risk on that but it's still not signed so if that is two months away or one week away that depends sort of on on on the high probability rather uh secondly uh on the stockpile we we um we couldn't we have high stock level today period and and and on an average we do have a high stock level so we are are quite fully um filled in our as i usually say then of course on specific things that we have issues with as we have said we have issues every day on different things but on average we have a very full stockpile today

okay thank you very much

next question from i'm eric please go ahead

yes good morning thank you for taking my question i've got three if i may the first is on aeronautics and perhaps contribute a bit more detail on the contribution of the gripen and recent rnd contract with sweden how sustainable the the current momentum is for for this division of secure you gave already some color on the t7 and and the civil activities but just to to get a sense of of the the new momentum we're starting to see uh at this division the second question is on the swedish performance you reported five percent growth i think inflation in sweden is around four percent so that would mean one percent real growth just curious about what it means especially given the kind of budget that the country has should we expect a massive catch up later in the year what would be the normalized rate of growth for for sweden that is my question and and last on on the margin performance 40 pips which i think was was expected there's a lot of moving part obviously but would you be able to to give an idea of the the impact of the various effect whether it's opex leverage mix inflation on the cost side or the the self-inflicted investment cost effect thank you

i i i'll try to take the two first the two last questions now leave michael to to aeronautics and sustainability but i i'm i'm not sure i will answer your questions probably a bit but i'll try so on the five percent growth in a quarter it really doesn't mean anything for us uh that sweden only grew five percent in quarter one you have to look more in a 12 month maybe 18 month rolling perspective when you look at sab sales numbers and therefore in the same way i said that they are strategic countries was actually slightly below 20 percent this quarter that's not something to worry about they were 54 percent last quarter so so you need to add this together and i think that that strategic country growth illustrates also how swedish growth could be one quarter more and quarter less depending on what is delivered and what we are doing in in the production plant at this moment on poc

i can add a comment on that because i mean if you look at the uh sort of the strategic update that we did in the beginning of the year we we looked upon the different markets the important ones to us and we have a big portion of the swedish market and we are following the you would say uh proportionally and we are so it's more important to look at that that we actually get the same market share of the swedish market going forward which is what we've seen and then the other countries where we have invested building mini subs i call it we gain market shares quite a lot from beyond their growth so that's the important trend to look at and that will transfer of course into sales growth going forward yeah and i'll make it remind you

yeah and i'll make a very simple example as usual if if the guys down in cascrona is working on the ziga chip for poland this quarter and next quarter they actually step over and work on the the swedish ships to do support on them it will be a lot of swedish sales next quarter and a lot of polish sales this quarter so so it's it's very hard to just judge from a quarter on that percentage and and we try to be most efficient in just how we we produce things on the impacts on on on the currencies and and and the the um on on the inflation i i tried to to to read in that of course we will probably then our sales growth will be impacted by by the the effect of uh the the inflation as we have a lot of inflation coverage in our contracts so if inflation goes up we will move that to the customer and therefore if inflation is two percent we will have two percent added on and if it's five percent it will be five percent added on uh because we have around 80 percent of our contracts uh sort of um hedged in that sense in in our customer contracts so if that was what you meant i didn't really understand but but that's the answer to maybe question

and the notic side then finally or do you want to sort of follow up on that

just to just do what would be the the level of inflation pass through effect on the top line at the moment

now i say we have pretty much around 80 coverage on on on on our contracts and so so um um but it doesn't say if we are a little bit better hedged or less hedged sometimes because these indexes are are very different there's not one package that sab uses it's actually different package that customer demands and we negotiate and we have probably over 150 variants of how the inflation coverage is made between our customers quickly

on the aeronautics side i mean the gripping programs for sweden and brazil will continue of course to create momentum in in in also that a sustainable important part of our business will be this news concept thing uh the the it's not just sort of paperwork it's of course simulations it will be demonstrators be flying and all that so that will be a sustainable business for years to come so that's an important addition to aeronautics uh to to sort of create this good trend uh the yes it was sort of a little bit of a peak in in quarter one because we had something to uh recognize this revenue already and then of course it will be more a normal development of that program going forward good

are you happy with that amirik

yeah thank you thank you

we have literally less than two minutes left so we and but we have to do have one more question um perhaps two on the line so please let's invite them as well

we

will answer quick sorry

go

ahead

next question from tom green card party to securities please go ahead

thank you uh two quick ones for me can just provide a split on the working capital changes here for business area and then comment a bit on the supply chain risk that you see moving forward and how you're mitigating them

okay so so so first of all which we also wrote a report in aeronautics is more on the payment side from customer where does the swedish and brazilian customer pay in which quarter this year on the inventory side it is more surveillance but primarily dynamics because we had lower sales out therefore the stuff is still in inventory before the trucks comes and picks it up and makes it the delivery and the other one was on supply chain or

supply chain is um it's a mix of things i mean you have the larger suppliers of important subsystems that needs to perform of course and and that is being managed more on a strategic level and then of course you build stocks on things like powder which we've been successful of doing and it still looks good you have some other raw materials of that are important to us components looks a bit better now in terms of supply so that's the one reason we can grow the training and simulation business in a good way but i mean this is something we have to manage all the times and we do have initiatives to make sure that we well we can create redundancy we will where we can maybe ensure something we might things like that are happening all the time but when you're growing like we're doing now 24 which is fantastic you have to be sure that you bring with your supply chain and looking at where we're going this year 15 to 20 percent that's so incredibly important because we have to have them with us and so far so good but i'm just saying we put a lot of effort to making sure that they are also performing as we are that's all i can say but it's not sort of one specific weak link that i can point at right now

all right thank you all right with that michael and so thank you very much and thanks for listening in to this quarter would you like to say anything thanks for listening

in and thanks for good questions and we have a very strong quarter behind us looking good for

the year thank

you so much