The Ukrainian crisis that has already prompted Sweden to
consider raising military spending is boosting interest in military
hardware in other European states, Saab AB Chief Executive Hakan
Buskhe said.
"The number of questions about enhancing defense capabilities
from a handful of nations in continental Europe and also in the
Nordic area have increased," Mr. Bushke said in an interview. "The
discussion about possibilities is more active today than just a
couple of months ago."
David Wajgras, chief financial officer of Raytheon Co., the
world's largest missile maker, also said this week that several
countries were considering higher levels of military spending,
including Latvia and Lithuania.
The Swedish government said on Tuesday that spending on defense
should raise an extra 5.5 billion kronor ($836 million) and be
spent on items such as submarines and Gripen combat planes that
Saab builds. The government's position is "a major mind shift," Mr.
Buskhe said Friday, cautioning that "to turn that into activities
for us will take some time."
Saab generated about 70% of sales outside Sweden in the first
quarter that saw net income fall 33% to 176 million Swedish kronor
after revenue in the first three months fell 10% to 5.3 billion
kronor, the Stockholm-based company said in a statement Friday.
Operating income for the period fell to 5.1% compared with 6.8%
in the year-ago quarter. The company nevertheless maintained its
full-year goal of beating last year's 6.6% operating margin and
said sales in 2014 will be on a par with 2013.
Saab shares fell as much as 3% after the stock had advanced 15%
this year.
Earnings were impacted by fewer milestone payments in the first
three months and restructuring costs at an unprofitable defense
electronics unit where Saab is cutting jobs and investing in new
generation radars. Mr. Buskhe said the turnaround at the defense
electronics unit has now been achieved.
Saab also has opened negotiations with ThyssenKrupp AG to
acquire the German company's submarine operations in Malmö,
Karlskrona and Muskö after the Swedish government decided it wanted
a national industrial capability for such vessels. The due
diligence process has begun and is going well, said Saab Chief
Financial Officer Magnus Ornberg, with talks likely to conclude
this quarter or next.
The acquisition won't keep Saab from pursuing other growth
opportunities through acquisitions, Mr. Buskhe said.
Mr. Buskhe also sees "growing" interest in the company's premier
product, the Gripen combat plane.
Saab, which last year won backing for a new version of the
Gripen fighter from Brazil, expects to conclude the contract this
year and is trying to parlay that success into further exports. The
company faces a crucial vote in Switzerland on May 18 in a
referendum that will determine whether the Swiss go ahead with
plans to buy 22 of the planes.
Other export opportunities include Malaysia, where Saab and
competitors are in talks over a possible lease deal for combat
jets, while Denmark is exploring a combat aircraft purchase in
which it is considering Gripen along with the Lockheed Martin Corp.
F-35 Joint Strike Fighter, Boeing Co. F/A-18 Super Hornet, and
Eurofighter Typhoon built by a consortium of Airbus Group NV, BAE
Systems PLC, and Finmeccanica SpA.
Write to Robert Wall at robert.wall@wsj.com
25-04-14 0815GMT
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