Saab AB (publ)

Good morning, everyone, and welcome to the presentation of Saab's fourth quarter and full year report for 2025. My name is Johan Andersson, responsible for investor relation, and I will be the moderator here today. With me here in Stockholm, I have our CEO, Michael Johansson, and our CFO, Anna Vikander. Michael and Anna will present the report, and then thereafter we will conclude with a Q&A session. And just to remind you, you can either ask your questions over the phone, or you can write them in the web interface. So with that, warm welcome, and I'll leave it over to you, Michael.

Thank you, Johan, and also a warm welcome from my side, and thank you for joining us today. I will start by jumping right into sort of the perspective of last year, looking at how we met sort of our guidance and our growth perspective. So we ended up with almost 80 billion in organic growth, 79.1, which was excellent, 25% organic growth. And then also had a very good development on our operating income, of course, growth 37%. And the cash flow was extremely good in the quarter, the last quarter, last year. So we ended up all in all at 5.3%. So we had an extremely good year last year, meeting all our expectations. And it is, of course, based on very good sort of delivery tips. capabilities and how we actually performed in delivering to our customers over the year and showing that our capacity investments that we have comes into play. Going forward and looking at some highlights, obviously looking at the extremely high order intake in Q4, but also over the year. We see a high customer demand in the market and there's very many initiatives that we're working on, of course. And the product contracts continue to grow, but also we have a strong interest on the sort of bigger platform side. And that's why the balance of the large orders towards the medium-sized orders and the smaller orders have changed a bit. So we still see, of course, volatility in the political tensions around the world, as you all know. But I would say what's dominating the growth right now from our perspective is still that the European nations and the pillar of NATO, the European pillar of NATO, has to sort of expand the capabilities. Also quite clearly stated by the U.S. that we have to take responsibility for our own continent when it comes to the threat environment. So that is driving, of course, lots of spendings in Europe, but not only, to look forward to future growth. And that drives mainly the growth for us, I would say. So we have record order bookings, as I've said, and a very high backlog of 275 billion in Swedish crowns. Now, a big thing that happened during the quarter, of course, was the selection by Poland for the 826 submarines and that is extremely important to us and we really appreciate that and it will be good for our security policy between the countries the Baltic Sea protection of course and a close collaboration between Sweden and Poland but also between industries between Sweden and Poland now we are diligently working that contract of course it's not a contract yet But I really look forward to finalizing that contract during this year. And then, of course, we have shown that we are capable in extending our capacity and expanding that. All the time we get new capacity expansions in play to support our growth. But there's still much more to do, of course, both when it comes to facilities and factories that will come into play. We have a US factory that will be up and running late this year. And we also have an Indian factory, as examples, coming into play next year. So those are a few highlights. Coming back to the market position and looking at what I tried to sort of describe on a very high level, that the mix of the product side of the portfolio, we are very well positioned in the marketplace, I would say, and I'm really grateful that we have a portfolio consisting of both sort of products, but also platforms and also being able to integrate systems together. So, of course, looking at last year, A few very important parts of contracts that happened was, of course, the grip into Colombia, 3.1 billion euros, that we are now executing, of course, according to plan. And then we have the global eye that came in very late last year, which was... Really a good win, of course, to globalize to France. And then the contract in Q4 also on the A26 submarines for Sweden, the extending capabilities that added to that contract. But also things like the electronic warfare capacity for the German Eurofighter is a very important contract to us. And then, as I said, product contracts on the missile side and the support weapons side is adding to an excellent sort of year for us when it comes to order intakes. Order bookings of 169 billion in 2025. And a really good outlook, I think, going forward also because of the market interest that we have. Coming back to the contract. Quarter, last quarter then, 25, the fourth quarter. Of course, we have all noticed the fantastic order intake of 100 billion in the last quarter, which is then a mix of large contracts with many good product contracts as well. So an extreme increase, of course, from the 17 billion we had in the Q4 of 2024. An extremely good quarter, highest ever, of course. But also the sales growth, 35% organic growth, It's really good, including also the EBIT growth of 50%. And then, as I said, the volatility and the operational cash flow side over the year is quite sort of big. So, of course, we had an extremely good fourth quarter to generate the 5.3 over the year, 6.3 billion. And as we've said all the time, we promise good operational, positive cash flow. But over the year, it will vary a lot, of course. So this is absolutely the best quarter. I think that's all that ever generated. Not only the best Q4, but the best quarter ever. So I'm really pleased with that, of course. A few comments on the different business areas then. For aeronautics, the Colombia contract was really the big event, of course, another contract on the Gripen E. So now we have three countries and we're increasing capacity to deliver all these Gripen E fighters. And we have a number of campaigns going forward also, a big interest in the market. So this is an area that is now growing for us going forward. And we are also looking into the next-gen fighter capability. But I think in the beginning we will work to complement a Gripen E fighter with a collaborative combat aircraft, a sophisticated, you can call it a loyal wingman, an autonomous system. And that, I think, is sort of the first thing that will happen in the future fighter sort of avenue that we're running. We have also the T-7 and the first one is now with Randolph Air Base. Now they are using it to start sort of creating the training for the pilots, but there's still many to deliver. And we're still sort of affected by the underabsorption that we had in the facilities in West Lafayette, Indiana. And that will be continuing for a couple of years more, I would say. So that is going to be a good business for us, but we need to ramp up the deliveries. And we have only delivered a few so far of the 350 that we have on contract. And then a very important thing that happened, of course, that we were working diligently to sort of organize a contract around this. And this is a government to government and industry to industry initiative, I would say, was from the letter of intent that was signed between Sweden and Ukraine. regarding fighter capabilities going forward. So of course we would like to see Ukraine flying the Gripen's going forward. But we're working that and we hope that the financing side of that will be sorted and also for us then to prepare for industrial collaboration but also capacity increases. Dynamics still has a very strong demand in the market for their entire portfolio, I would say, from training simulation to camouflage net, but not the least from the missile and ground combat perspective. So we have had quite a few large missile and ground combat orders in the quarter. So they have an amazing order backlog of 90 billion orders. And this is also an area where we have invested heavily to increase capacity to deliver to our customers. There are more to come into play, as I said in the beginning, in both India and the US. But we have also already taken some capacity increases into operations, I would say. And we are booming our expansion also in Sweden, of course. So this looks very good and they had a growth of 50% quarter to quarter over the years. So that's an amazing result. Surveillance did have a very good quarter. I mentioned the globalized from France, from a market and order intake perspectives, but also a strong demand when it comes to our EW equipment, our sensors, the ROF-1X, our fire control sites for the CV-90s, but also other sensors, the weapon locating radars, authors. And they are picking up on the project execution, and we see a substantial growth also here, quarter to quarter, of about 50%. And we just want to mention that we have now divested completely TransponderTech, which affected the EBIT of the operational income of surveillance by $336 million. But even without that, they did a 10% result during the quarter. So that was a very good step for surveillance. Kokums was of course extremely happy and so am I on the selection by Poland so now we are expanding capacity to build more submarines and we have other segments of course in the underwater business which is autonomous systems and a number of things in that area that has a high customer interest and then of course we are working on the on the campaign to be part of the new Swedish frigates or corvettes, but I don't know exactly when that decision will be made. We have a partnership with Babcock, and of course that is something that we worked diligently on the surface side going forward. But we have a growth, very good growth also in Saab Kockum, so 20% and good project execution. And of course also the Swedish 826 contract was important here. So they are developing in a very good way as well. And lastly, we have CombiTech, good momentum. Of course, the total defense perspective and how many things are happening in that area in Sweden now from an industry, from an agency perspective. is supporting the growth of CombiTech. The new agency MCS, the Swedish and also on the civil aviation side generates lots of business for CombiTech and they are good in this area both from a cyber security perspective but also how you set up resiliency in an organization. So that is, of course, the growth is driven by an increased number of consultants, but they are growing in a very nice way. And they are now a $5 billion entity within Saab, which is absolutely fantastic. And they're really important for Saab as well, since they have a number of very important participations in our contracts within the Saab business areas as well. A couple of comments on the sustainability side. We have done a number of important things during the quarter. We have adopted formally now a human rights due diligence policy, supporting our responsible sales policy. And this is something that generates a due diligence every time we do a contract with someone and sell something. We actually go through in detail that we're not affecting anything related to human rights or things that we shouldn't be involved in. That's very important to us. We have a good development on the share of women managers in the organization, which has increased now to 29%. And we have a higher ambition than that, of course, but we are growing all the time, which is absolutely fantastic. And we have done well also on the emission perspective, the environmental perspective. We have reduced our emissions 7% year over year, and we are in a good path supporting the scientific-based targeting initiatives, targets that we have set that we have to be down 42% 2030 and we are now at 36% after 2025, so that's very good. And we have the ambition to be a market leader when it comes to, in our segment, when it comes to sustainability, which is not only environmental perspectives, of course, But we have been highly ranked within the CDP when it comes to climate and water. We're in the highest ranking of 4% of the companies right now, which I'm impressed and I'm really pleased with that development. So I think with that, I will hand over to Anna to go through the numbers in a little bit more detail.

Thank you, Michael, and good morning everyone from my side as well. Yes, it's clear that we have closed yet another successful year, and I will soon go into the details of the financials in the quarter. But before doing that, I would like to take the opportunity to show you some trends on what we have achieved so far. So let's start looking at our graphs and what we have achieved for sales growth. We are growing the company substantially, and during the last three years we have grown an average 24%. And what's so good to see is that we have had double-digit growth in all our business areas during this period. And that is achieved, of course, through our strong offering and our strong portfolio that we have, but also our operation and our ability to grow our operation. And an important factor to that is that we also have increased the number of employees by around 10,000 people and now adding up to the 28,000 employees that we are today. And we have a really strong company culture where we have a good focus on both delivering on our commitment, but also building the company in the future. The EBIT has also grown in this period by 33% compounded average growth rate. And that really shows that we are leveraging and scaling on our growth, growing the EBIT more than we grow our sales growth in average. And we should remember that during this period we have invested substantially both in R&D and in capacity investments. So over this period we have doubled our R&D and we have actually tripled our CAPEX. Now look into the quarter then more in detail. We have increased the EBIT by 50% this quarter. I think one should remember that this is an exceptionally strong quarter. And that is, of course, largely driven by our sales growth. And what's also visible in this slide is that we have a volatility when it comes between quarters. That is really reflected here in this slide. This quarter, I want to highlight dynamics. Here, the EBIT grows by 19%. Although the margin is a bit lower compared to what it was last year in Q4. And that is primarily related to product mix within Dynamics when comparing year over year. But if you look at the trend for Dynamics, it's very strong for the year. The EBIT growth was 46%, and the EBIT margin for the full year was 18.1%, an increase from last year as well. Also, surveillance is worth mentioning this quarter, with the growth of EBIT of 83%, and that was very much driven by high project execution and several deliveries in the fourth quarter. In addition to that, we had a positive effect when we received the order for the Global Eye France contract in the last days of December, since we, in that project, had started some activities already when we got the letter of intent in the summer. I can also mention that we had this divestment of transponder tech that is visible in the numbers of surveillance, but it's excluded here in the figures that you see for the EBIT for the quarter. For the full year then, the financial summary, we grow our sales with 24.1% reported organically, 25.6% impacted by currency, so 79 billion in sales. Good growth also in gross income and EBIT was growing 37% and we ended up with 9.8% EBIT compared to 8.9% last year. That was mainly driven by dynamics and surveillance. Another thing to point out here in this slide is the financial net that improves substantially compared to last year. And here we have a positive impact this year from the seek appreciation where the revaluation of our tender portfolio from currency hedges in the tender portfolio had a positive impact this year. Last year it was negative. So that's why we have a big swing there in the financial net. Also good, the net income and the EPS grow by 51% over the year. We have talked about the cash flow. Michael talked about the cash flow. It was very strong in the fourth quarter where we both had several deliveries and received a lot of customer milestone payments. And as we can see on the slide, we have the cash flow from operations now amount to $12 billion approximately. And we have increased our investments. They are now $7.2 billion this year. If you compare to last year, they were $4.8 billion. And so all in all, we achieved a cash conversion this year of 68%, which is well above our midterm targets. And also our return on capital employed increased to 16.5% this year. So driven also by this strong cash flow, the net cash position has improved this quarter, and we're ending up the year with 4 billion in net liquidity. So our balance sheet continues to be strong, and we have a cash and liquid investment amounting to 18.7 billion. And adding to that, we have an unutilized revolving credit of 6 billion as well. So following this strong financial performance, financial position, the board of directors will propose to the annual general meeting that we increase our dividend by 20% amounting to 2.46 per share. So let's again zoom out a bit and look at some trends on what we have achieved so far in 2023 to 2027. Cumulative over these first three years, we have delivered cash flow before operation of 26.4 billion Swedish crowns. That is a strong enabler for us that we have been able to invest more in capacity expansions, which is important for our foundation growing our company, as we know, investing in new capabilities, new facilities, new production sites, and new products. And in total over these years, we have had investments amounting to 15.5 billion. And measuring of the period, we have achieved a cash conversion of 62% so far and generated approximately 11 billion in operational cash flow for our company. Another parameter that has strengthened this quarter is our backlog. We had a strong order intake this year, 169 billion on the year and 100 billion this fourth quarter. So we have built a substantial order backlog to deliver from going forward. And compared to last year, we have extended both the duration of the backlog for the years to come, but also increased the backlog for the closest years, 26 and 27. So it's increased 29% for 26 and 46% for 27. So this really gives us a good comfort for future growth and a good foundation for growing the company within the years to come. And finally, just look at the trend of the backlog. The growth has been strong over the last years. It amounts now to 275 billion and corresponds to 3.5 times our sales that we had in 2025. So this is really supporting our long-term growth. So by that, I hand over to you again, Michael, to guide us through the mid-term targets.

Thank you so much, Anna. And coming back then to our medium-term targets, I mean, one has to reflect a bit upon that this is our way of – Measuring progress over time, of course, and our best assessment of how this business will evolve over time. And we have performed really well, as you know. Anna mentioned we have had 24% in average growth over the period of 2023-2025 and as I will show shortly we are increasing our now target to 22% in average over the period of 2023-2027. We think we have a very strategically positioned portfolio of course that is fitting the market demand in a very good way. And now when we see the product offering growing and the contracting order intake on that side growing in combination with better performance on the platform side, even though I recognize the fact that many of these sort of campaigns are not only about the great offering that we have, but also political decision. I think we have a very good position having both in our company. And we have shown now during the last few years that we are able to ramp up both from sort of increasing our company in terms of great employees supporting us, and we have a very attractive company to come and work for, but also our capacity increases when it comes to production and getting a lot of the backlog sort of delivered to our customers, which is incredibly important. We will continue to invest and never compromise sort of anything that has to do with the future when it comes to R&D and new capabilities, embracing new technologies and continue to expand capacity, of course. So we will continue to invest to make sure that we can meet this market demand. And now also going into the target upgrade that I will show you, we of course, as Anna showed just shortly before, we have a record order backlog of 275 billion, which has now also increased in terms of how that is spread over the years. So all in all, this is a very good position that has led us to... Going from a previous target perspective of 18% average growth over the period 2023-2027, we have upgraded up now to 22%, quite a step for the full period up until 2027, which implies then, of course, that we will generate roughly 20% average over the next two coming years, including 2026 and 2027. We continue to reiterate our targets of growing our EBIT more than the sales growth. And we also continue to reiterate our target of having a good cash conversion of more than 60%. despite all the investments that we are doing now and going forward. So that's a good sort of sign of that things look very good going forward. And from that, I am pleased to take questions.

Thank you, Michael and Anna. And let's go over to the Q&A session. And we are quite a lot of analysts in the call, so I recommend you to limit yourself to one question per person and then go back to the queue so everyone has the chance to ask the question. So please operate. Do we have the first question from the telephone conference?

Anyone who has a question may press star and one on their telephone. The first question comes from the line of Daniel Duberg, Handelsbanken. Please go ahead.

Thank you, operator, and good morning, Johan, Michael, and Anna. Congrats to stellar performance. I would like to ask a little bit, you obviously have a great order visibility on both volume and mix for 26, and I was wondering if you could share any more information about how to think on operational margin development in 26 based on this visibility, perhaps on group level or possibly in some of the business areas. That would be grateful.

Well, thank you. First of all, I mean, I think we, as I said, we have a good market position. And we, of course, see a good trend in terms of growth on the product side. When I say product side, I mean, you're off one axis, the RBS 70, the support weapon side, training and simulation, you name it. It's lots of products that is growing in a very good way. But then there are sort of a number of campaigns that are quite big and they are of course more difficult to sort of assess when the decisions will be made and how political they will become and all that. So I mean an obvious one is that we must contract now Poland on the submarine side which is roughly as we've mentioned before a 30 billion Swedish type of contract. but that's sort of something everyone knows apart from that of course there are an assessment of the global eye within NATO that will come to a decision hopefully now in the first six months of this year but I can honestly not sort of predict completely how the mix will look like in the end of the year. But broadly speaking, we have quite a few campaigns that sort of can generate good order intake supported by the continuous growth on the product side. I won't go into talking about operational margins and what have you more than that. We continue to grow the stock line and we continue to grow the EBIT more in terms of growth. And obviously, I think we are doing well on that side. The mix will define and there will be different mixes in different quarters exactly where we will be. But sort of that's the trend that we have right now. And this is something we... We are careful about also looking into the investments we have to do and the R&D efforts we have to sort of continue to perform really well and to be capable going forward. So you won't get sort of a specific number or range or anything. You have to unfortunately live with sort of the guidance that we've given on growth of EBIT, I think.

Perfect. Makes it more exciting as well. Thanks.

Many thanks.

Thank you, Daniel. Thank you.

Do we have the next question?

The next question comes from the line of Ian Douglas-Penna, UBS. Please go ahead.

Thanks very much for my, thanks very much for taking my question. On your medium-term guidance, so there's some language in the press release saying it's implied 20% growth expected in 2026 and 2027. Can you help us understand the phasing within that? I mean, I know you don't want to give 2026 guidance, but can you just help us roughly understand presumably there's more growth in 2026 and 2027? And then related to that, again, how much of that guidance is secured by orders you've already received? and where's any risk around that guidance. Thank you so much.

Well, as you saw, I mean, from what Anna showed on how the backlog is spread over the years, it's high numbers already in the backlog, both for 26 and 27. And then, of course, it's up to us to generate sales new orders. And that is sort of varying every year. But it gives us quite the confidence that we can reach sort of an average, as I said, 20% growth over this year and next year. And I won't sort of go into any details. sort of specifics on 26 versus 27 because then we go into guiding for both years simultaneously and that we've decided not to do that but take a look at the backlog how it's spread and you can have a view of sort of what can we achieve in terms of sales new orders which can be also looked upon in a retrospective perspective of course but that's where we are so I won't divide 26 with 27 in any more sort of detailed way This is where we are, and 20% average is good.

Perfect. Thank you. Thank you very much for your question, Ian. Do we have a next question from the telephone conference?

The next question comes from the line of Tom Gunschar. Pareto, please go ahead.

Thank you. A question on surveillance margins here, just looking into 26, 27, 28%. You mentioned on the Capital Markets Day earlier last year that you had some unprofitable business that you were managing and how much of that has been dealt with as of today and sort of margin potential there for surveillance going above the 10% EBIT margin line. Can you comment anything on that?

Well, I think, I mean, as we're showing right now, surveillance should be a profitable business. I'm not going to guide in detail on that, but they should be on or above 10%. So that's sort of the business they have in the mix. And I would say that we have taken steps to sort of either mitigate loss-making business or sort of making sure that we... have a sort of crossroad decision on whether that business should be within surveillance or not. But we're not done yet. That will continue a bit this year to improve even further. So if you're asking, have we divested the loss-making business yet or sort of stopped sort of the losses completely? No, not yet. We're working it. We'll tell you when we have done it completely.

great thanks and just a quick follow-up on the t7 you said a couple of years ahead with negative numbers here and increasing cost you said throughout 25 that costs actually accelerated for the t7 program are we looking at 28 29 or mid 27 that you previously indicated

I think we're looking at 2029 actually, but with one sort of comment on that. This is based on the numbers we have now in our contract and how quickly the US Air Force wants to receive sort of the aircrafts going forward. This can change a bit depending on renegotiations between Boeing and the US Air Force that will sort of flow down to us and it can change from a margin perspective overall in terms of getting an additional contract into the business. This has not happened yet but as we speak I mean You have to think, we have probably 25 to 30 aircrafts in the pipeline in the factory right now. And it's just sort of to get the flow out to the customer that we need to achieve. And it's a bit sort of... I can't be sort of exactly sure on which... which year we will now pass sort of going positive perfectly, but it's not this year, I would say, if I'm going to be honest, but aeronautics as a whole will improve, but this is where we are on that program. It will be a good program to us. It will be Many, many aircrafts delivered to US Air Force and others. So this is numbers that we're not used to on aircraft side. This is 1,000 aircrafts and beyond that in the end. And we're just in the beginning having delivered a handful of aircrafts. So, yeah, that's where we are. It will be a good thing, but unfortunately it takes some time.

Perfect, thank you. Many thanks Tom. Let's take two questions that we have received over the web here. One is around Canada and Gripen and it was a lot of discussions and media around that for a couple of months ago. Are we seeing any progress or is that relation progressing?

Well, Canada is, of course, looking into a crossroad decision, I would say. There are two parts of Canada. One is campaigning to win a globalized business in Canada. And we're waiting for that procurement to happen. That's a campaign. Then Canada is looking into do we want to have sovereign capacity when it comes to aeronautics, having more of a not to be too dependent on the U.S. by having a dual fleet, maybe both S-35 and the Gripen's. And there we are providing all detailed information that they need to understand what it would mean to Canada. How quickly would we do a technology transfer? How quickly can we build up a grip and hub in Canada for manufacturing? And how would they be involved in the full export market perspective of a fighter business? We're providing that. And they're asking questions. We are providing that. But it's sort of a very high level political decisions that they have to make. And exactly when they will make that decision, I don't know. But of course, we have intensive discussions around this. Absolutely.

Perfect. Many thanks, Michael. Another question on that is that we have seen media figures that you're ramping up the grip and production capacity to around 2030 in the coming years. Are we progressing with that? Is that going according to plan?

We are taking many, many initiatives and investments to make that happen. And we already now have three contracts to deliver to Sweden, Brazil and Colombia. So that is going according to plan. And you will see more and more aircrafts leaving the factory in Linköping, but also in Brazil. And if we are successful in the market, maybe we'll build another hub somewhere. But right now, we're focusing on the Swedish and the Brazilian hub, of course, to expand that. And that is going according to plan.

Perfect. Thank you very much. Operator, do we have any further questions on the telephone conference?

The next question comes from the line of Carlos Iranzo Perez, Bank of America. Please go ahead.

Hey guys, good morning and thanks for taking my questions. On the GlobalEye, how should we think about the delivery timeline of the three GlobalEyes to Sweden? Any chance you could put forward those three deliveries? And if you can share any timeline to go to for per year on the GlobalEye?

Well, on the GlobalEye contract to Sweden, I'm not sure we're going to say an exact delivery date on that, but it's not far away. We are working diligently on all three aircrafts now, so Sweden quickly needs the capabilities. In the next couple of years they will have it. That's all what I can say about the Swedish contract. Then, if the question was the pipeline on Global Eye going forward, There are quite a few. I mentioned the NATO initiatives. We have provided information, a request for information from NSPA, the Acquisition Authority within NATO. And because there are nine countries now, the partner countries that want to have a common, use a common NATO capability. And I think we have a great offer there with a great schedule. And there is a gap here, so they need it. So that's an obvious one. The Nordic perspective, I think it's interesting. How can the Nordic countries combine efforts in using a airborne early warning capability It hasn't materialized yet. Sweden has contracted three. Let's see if we can get the other countries involved in that. Then we have an interest that France actually contracted two, but there's an option for two more in France. We have an interest from a couple of countries in the Middle East for this capability. So, yes, there is a great interest for GlobalEye. and we're also increasing our capacity to deliver a number of aircrafts per year also on that side.

Perfect. Thank you, Michael. Sounds promising. Operator, do we have the next question, please?

The next question comes from the line of Bjorn Einarsson, Danske Bank. Please go ahead.

Thank you. A question on the dynamics and the capacity expansion that you are doing in India, also Sweden and the United States. Are there any, how would that impact the profitability like near-term, mid-term? Are there anything that will distort the picture or will it be a good drop-through from day one? Thank you.

I think the mix of things will, we haven't taken into account that that will have sort of a moment effect somehow at a specific moment, an effect on our profitability. I think it will be a very automated setup in the US and also to some extent in India. And it more depends on the mix of how the contracts looks like in our facilities there going forward. When the individual assault munition production comes into play in Grayling in Michigan, of course, it depends on volume rather than whether the facility is efficient. And also combine that with ground-launched small-diet bomb. It will be good contributions to capacity. we haven't sort of taken any assumptions on that it will affect profitability really we will of course have some sort of learning curve in these facilities but the dynamics will still sort of have good numbers going forward in terms of the mix that we see i wouldn't sort of connect a specific factory that comes into play to any effect on dynamics as such. It's not at that level anyway, that it will affect us.

I think one can just add, I mean, the capacity increases every happening stepwise. It's not just a big boom. It's happening in different places and different steps. So, gradually.

Good. Thank you very much, Björn. Operator, do we have another question from the telephone conference? Yes.

The next question is from Afonso Osorio Barclays. Please go ahead.

Hello, yes. Thank you very much for this. It's my caller. Michael, can I just follow up on this backlog situation? Given the significant number as of today, can you tell us the average duration of the contracts that go beyond 2029? I'm just looking at this slide 21 where you showed the facing over the coming years and it would be super helpful to have your views on the story beyond 2029. That would be great, thank you.

Anna showed a slide on that, but it stretches of course until 2029, right? Yeah, okay. So, well, I think I think it's a good spread over the years. I mean, already, if you look at 29, it's like after that, we have still like 35 to 40 billion in backlog to deliver. So it's a good spread, but it's also... quite high level sort of during the first few years that has increased substantially from sort of the same position we had last year. So it looks good from a long term perspective. I mean, the big platform contracts are adding to the long term perspective, while the product side of things is very much more short term, like sort of within two years. When we get contracts on the platform side, submarines, globalized, grippens, of course, that sort of extends our backlog over many years to come. And that's good for us. So that's why the balance is important. But then you can't predict in the same way exactly when you get more product contracts. You don't get balance. 10 year contracts on Carl Gustav ammunition, for example. That's not what we have, but the platform contracts are quite sort of beyond five years in terms of how they spread. So I can only say we have a very good market position, as I tried to say, and we are confident that the capacity increases that we now taking to the operations will sort of give us a possibility to meet the market demand. And we don't see that sort of diminishing in any way as we speak. And as I said, difficult to say exactly when the bigger contracts will come into play and how political they will be. So this is the world we live in every day. But it's a good spread and a good backlog.

For sure. We're okay with that, Ozer? Thank you very much. Thank you. The next question, please, operator.

The next question comes from Michael Levin, BNB Carnegie. Please go ahead.

Okay. Hi. Thank you. I have a question around the order backlog and the capacity situation. I'm wondering if you can say something about where you are most capacity constrained today, and where are the two, three concrete bottlenecks that you could fix in 26, and also comment on the CapEx, the common cap levels.

Well, when it comes to where are we most constrained, I mean, I would say if there's one thing that we work diligently now, it's maybe not our factories or capacity increases as a prime that we're worried about them being set up. It's the material supply, it's the supply chain that we work diligently. So we know that the ecosystem of companies we work with supports us in this growth journey. There are pain points there. But I wouldn't point to any specific. We have certain issues on the missile side. We have certain issues on the ground combat side. But we also have issues on the sort of fighter side. everything if it's summarized comes down to we have to be extremely diligent on making sure that we have a balance by sort of what kind of inventory level do we have to have to support our commitments and how can we assure that we have commitments from our supply chain to support us in this growth journey. I wouldn't point to any specific area where we have more problems or possibilities than any other areas, I would say. We're doing well, but I'm just saying that this is a huge ecosystem of companies in the supply chain at different tier levels that everyone uses. So it's not only us. So we also have to make sure that we are sort of proactive in how we work with our suppliers so we get priority.

Maybe to add on regarding your question regarding investment levels, we have increased investment substantially this year and we see continued need for high investment levels going forward as well.

Absolutely. Good.

Let's take another one here from the... It won't be less than the 7.2 that you saw this year. That much I can say. But still with good sort of... As you've seen, good targets.

Good. Another question here from the web. You were selected by Poland in quite fierce competition. Why do you believe you won there? What was your edge on the submarine side?

But first of all, this is about how do we in this region make sure that we protect the Baltic Sea and create deterrents through acting in the Baltic Sea. And of course, the 826 is a fantastic conventional submarine with capabilities that are adapted to that environment. And then, of course, Poland and Sweden have... have both countries have naval capabilities that can work together in an interoperable way. And we can train together, of course, if we use the same submarines. So it's both a security policy perspective, a defense and deterrence perspective, adding to the capability in the Baltic Sea. But then it's about that we have a great product as well. And on top of that, we want to establish industrial collaboration so we can have redundancy and capacity at both sides of the Baltic Sea. So it's a number of parameters, of course, that are really logical to sort of make this happen between Sweden and Poland and between Saab and Polish industry. But the foundation of everything is that we have a great product.

For sure. Yeah, good. Another one. You talk a lot about innovation. Can you give one or two examples, either of something you just have released or something that you're really keen about that's coming out?

I hope that people understand what we did sort of during 2025, during the summer. We're continuing to do that. To have an AI agent supporting a pilot in a fighter aircraft like the Gripen-E is something quite unique. And how much that can add to the work sort of load of the pilot in different types of a mission. It's a fantastic innovative example of, innovation example of what we quickly can achieve with existing air forces. But then, of course, as anyone else, we have innovative sort of R&D that has led to counter-US systems, for example, the Loki system, which is involving our C2 systems, our radars, and our TrackSci, which is part of what was launched this week. Sweden and Denmark spending 2.6 billion on country US systems for Ukraine. Of course, our C2 and census are part of that as well. And then we have swarm technology on the quadcopter level, so to say, that can do missions for the army. And we work in sort of specific autonomous systems also in all domains. So we have many, many innovation initiatives that we are spending money on to embrace new technology and work with partners on.

Great. Operator, do we have a final question on the telephone conference?

we have a follow-up question from renato rios inders please go ahead hi hi michael and everyone congratulations on the young you team on a great quarter thank you um thanks for taking my question too um so so you keep growing a lot and you have increased your medium term target for the revenue in absolute terms that means that you you know, from an observant point of view, it's quite challenging in terms of absolute values that have to be delivered, like, volume-wise. And, you know, in the industry, it just, you know, takes a bit to align capacity. Sometimes it takes years, and you have to build factories. So, obviously, you're ahead of that because you are hiking your medium-term revenue targets. So, based on that, could you give I guess as much context as you can on the capacity requirements to deliver the growth that you're expecting for 2027. I mean, is that capacity on the supply chain already fully or mostly aligned to delivering that? And included in that answer, it would be nice to hear you reflect out loud about the constraints that would make it difficult for SAP to deliver on the new targets.

Well, it's of course impossible to say that this specific capacity in terms of a facility or a factory needs to come into play for us to deliver this portion of our backlog. it is not happening happening sort of like one off thing it's happening gradually and specifically in Sweden when we invest heavily in in the Karlskoga area where we have 40 sort of construction projects ongoing they by one by one they come into to play to support this backlog now we have capacity to do lots of the backlog. Our investments are also meant to take us even further, of course. It's not that we have everything we've talked about in terms of investment do not have to come into play fully for us to deliver this backlog. It's not that much connected on that level. We can do lots of this with the capacity we have, but we also need to have more going forward. That's our view of things. I don't know how to elaborate more on that. Of course, the factories we've talked about with that capacity But they also need to be filled with new orders. So we have both in this. That's all I can say. I mean, we are taking a big responsibility. from the demand perspective in the market, to be proactive, to provide capacity, which all politicians are saying that we have to because the growth will continue. So, it's not a 100% clear answer, but you can look upon, we have, up until now, in certain areas, four- or five-folded our capacity compared to what we had like in 22. In terms of ammunition and sensor capability, it's a lot higher already. But we think more will be needed. And some of it is needed to deliver on the customer commitments that we have in our backlog. But some of it will be devoted to future contracts. I don't know how to answer the question in a more detailed way.

Are you fine with the answer, Renato? Thank you.

Perfect. Yes, yes, yes. As for some context, that was very, very much good context. Thank you.

Thank you. Thank you very much, Renato. Operator, do we have any final questions on the telephone conference?

The final question is from Ian Douglas Penna, UBS. Please go ahead.

Thanks for taking a follow-up question. You mentioned that late in the quarter you put some globalized milestones. Could you help size that effect, please? I'm sure you're not going to give us the exact number, but just roughly how important was it in terms of driving the performance versus expectations in that division, please?

Yes, in surveillance we did have an effect of recognizing revenue and profits from the contract we got in France, obviously. But it's not super substantive. I don't want to give an exact number to it. It would have been good numbers anyway, but there is some revenue recognition and profit recognition from that contract because we had been selected and we had agreed to start sort of our work to make sure we keep the schedules and that we did. And that we could of course recognize them when the contract was formally signed. But it was not so substantial so that drives this fantastic quarter in any sense.

Okay. Thank you very much, Ian. And operator, I don't think we have any further questions in the telephone conference. Do we?

There are no more questions at this time.

Okay, but I think with that, we will conclude the presentation of the Q4 and the full year results from us here at Saab. Importantly, we will be on the road now for both here in Stockholm, Paris, London, and Helsinki as well during the coming weeks here. So looking forward very much to see you out there, and then we report the Q1 then in April. So thank you very much for listening in today, and have a nice day.