Saab Earnings Drop as Gripen Aircraft Deals Await Approval

Feb 13, 2014 4:14 am ET

(Updates with shares in fourth paragraph, CEO comments starting in sixth.)

Feb. 13 (Bloomberg) -- Saab AB said earnings declined 26 percent last year amid sustained European and U.S. budget pressure as the maker of Gripen combat jets awaits the completion of export deals with Switzerland and Brazil.

Earnings before interest, taxes, depreciation, and amortization dropped to 2.37 billion Swedish kronor ($373 million) from 3.19 billion kronor a year earlier, the Stockholm- based company said today in a statement. Net income in the fourth quarter fell about 49 percent to 281 million kronor, missing the 383 million-kronor estimate of analysts surveyed by Bloomberg.

“Market conditions are challenging and the competition fierce,” Chief Executive Officer Hakan Buskhe said in the statement.

Saab shares fell as much as 5.6 percent, the biggest decline since July, on a day that aircraft engine maker Rolls- Royce Holdings Plc said its sales won’t grow this year for the first time in a decade.

Saab expects to complete a deal this year with Brazil for the sale of 36 Gripen NG, or next generation models, on top of 60 single-seat jets that Sweden is buying. It faces a May 18 referendum in Switzerland over the sale of 22 of the planes. The company is cutting jobs and reducing product offerings to compensate for reductions in defense spending in major markets.

Gripen Talks

Interest in its Gripen “has never been greater,” according to Buskhe. The company is in talks with governments in Asia, Latin America and Europe for more sales of the single- engine combat plane, he said in a telephone interview today.

To bolster the possible Swiss contract, Saab is ready to deliver more than 400 million Swiss francs ($446 million) in industrial work to local companies, even ahead of a deal, beating a previous commitment of 300 million francs, the CEO said. If the order is approved, a contract could be finalized this year, he said.

Bookings more than doubled last year on the strength of a Swedish government deal for single-seat Gripen E planes and non- fighter orders from Thailand and Brazil.

Sales this year will be little changed from the 23.7 billion kronor recorded in 2013 with operating margin performance excluding some items improving slightly from the 6.6 percent level achieved last year.

Earnings were hurt by the writedown of the value of Saab’s stake in India’s Pipavav Defence and Offshore Engineering Co., a naval equipment provider, reflecting the unit’s 46 percent share price decline and a weak rupee. The total impact was 133 million kronor last year, Saab said.

Saab, which last year put in place a cost cutting program including job reductions, is ahead in implementation and has booked most of the costs associated with job losses, Chief Financial Officer Magnus Ornberg said. The company is “confident” the program will deliver the 500 million kronor in savings without requiring additional steps, he said.

Saab shares were down 3.9 percent at 159.90 kronor as of 9:45 a.m. in the Swedish capital, paring the 12-month gain to 17 percent.

--Editors: David Risser, Kim McLaughlin