Speech Ceo Micael Johansson Agm Saab 2020 SD

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CEO Speech at Annual General Meeting 2020

The spoken word applies.

Mrs. Chairwoman, dear shareholders, board of directors, staff and guests,

I would like to begin by thanking you for taking the time to attend the Group’s
Annual General Meeting, both physically and virtually.

Saab, like the rest of society, is affected by Covid-19, something which is


particularly evident in this room today.

We are grateful that you, our shareholders, are so understanding of the situation
and I hope that we will be able to welcome you in person next year.

I intend to take this opportunity to reflect on the past year, but also to touch on
the time ahead for Saab as a company.

***

During the autumn, Saab’s Board entrusted me to take over as CEO of Saab when
Håkan Buskhe, after nearly 10 prosperous years, chose to leave the Group.

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For 35 years I have had the privilege of being a part of this company, most
recently as Vice President and, before that, as Head of the Surveillance business
area.

Leading a company like Saab comes with great responsibility. The company was
founded in 1937 with a mandate to produce fighter aircraft for Sweden. This has
been the core of the business for decades.

However, the company has evolved to assume responsibility for a number of


other key Swedish defence interests, not least of all in the fields of sensors and
underwater systems.

With Sweden as our base, we are now also an important supplier of defence
capabilities to several countries. Saab is becoming an increasingly global
company.

Two thirds of Saab’s sales occur internationally, while an increasing share of the
company’s development and production takes place outside Sweden which leads
to an increased defence capability within Sweden.

For me, taking responsibility means continuously working to develop Saab’s


capabilities.

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It’s about understanding the world around us, both in terms of technology and
the political -security landscape. It involves the timely development and
production of the solutions nations require to protect their citizens.

Ethical business is a given for Saab, and it is equally natural for us to be an


employer that protects our most important asset, our staff.

The work they do every day contributes to the safety and security of people and
communities all over the world, it is an important and meaningful duty.

***

Before I look back on 2019 in more detail and look to the future, I would like to
speak briefly about Covid-19 and how we are handling the situation at Saab.

It is clear that the virus is placing considerable strain on society. People are
worried, countless are falling ill and, tragically, many are dying.

Companies are dealing with major challenges.

Here at Saab we are working in a structured manner to handle the crisis.

The central crisis management team is leading and coordinating our efforts,
medical expertise closely follows the recommendations from the authorities,
ensuring that the basis for management’s decision-making is continuously up-to-
date.

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Firstly, it’s about ensuring the health of staff. Recommendations from both
Swedish and foreign agencies form the basis for the measures we implement, but
further safety precautions are also being taken.

Secondly, it’s about ensuring continued operations and production.

Supply chains are being carefully analysed and closely monitored. The digital
workplace is being safeguarded by increasing capacity so that staff can work from
home to a greater extent. To ensure preparedness, access to capital is being
secured early on.

Thirdly, we are engaging in close dialogue with customers in order to assess the
extent to which purchasing processes can be postponed and how business
transactions can be completed according to established schedules.

Under these circumstances, it’s important to remember that Saab has a solid
footing, with long-term customer commitments, extensive projects and a large
order backlog. This also means that inventory is important.

Production of Gripen, A26, Global Eye, RBS 15, and Carl-Gustaf is continuing at a
high rate.

Saab is therefore handling the situation well, but we are well-aware that this is a
worldwide crisis which may have a long-term impact on companies and people,
and the same is true for us.

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It is against this backdrop that the Board of Directors decided to withdraw the
proposal on dividends in order to ensure we are prepared and have the power to
act in the future.

Once the crisis is over, we can reassess the dividends.

***

In summarising the 2019 business year, I can proudly say that it was a strong year
for Saab in which we experienced growth and enjoyed higher profitability.

Our stable order intake, where, among other things, small and medium-sized
orders increased by 10 percent, contributed to continued growth in sales by 7
percent, amounting to SEK 35 billion.

In addition, operating profit increased by 15 percent year-on-year, and our


operating margin was 8.3 percent.

Earnings per share amounted to SEK 14.81.

At the end of the year, Saab also secured important milestone payments which
generated strong cash flow during the fourth quarter.

Operating cash flow for the full year amounted to minus SEK 1.3 billion, a clear
improvement on the previous year.

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The ambition for 2020 is to have positive operating cash flow.

Altogether, it’s clear to me that the strong year we had is the result of continued
execution according to our clear strategy.

We are maintaining the long-term financial targets pertaining to an annual


organic growth of 5 percent and an operating margin of 10 percent per year, over
a business cycle.

***

Demand for Saab’s products and solutions has been high and the market is
expected to continue to grow over the next few years, at the same time as we
enter a production and delivery phase.

Owing to our increasingly strong market position, interest in long-term


collaborations with Saab is on the rise.

In 2019, we saw a number of important contracts signed, collaborations started


and milestones reached in our long-term journey of growth.

In Finland, we won the prestigious Squadron 2020 order, which means that
Finland has chosen Saab as a supplier of combat management systems for its new
corvettes.

In Germany, contracts were signed concerning the operation of the German


Army’s GÜZ training facility, and the UAE announced that it intends to acquire
two additional Global Eye aircraft.

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Framework agreements were signed both with the US and Sweden regarding the
crew-served weapon Carl-Gustaf, and, in partnership with the American company
Raytheon, we launched a new ammunition type for Carl-Gustaf that will further
strengthen the system’s position on the market.

The Gripen programme reached a number of important milestones during the


year.

Saab and the Swedish state have progressed in the test programme with joint
flight testing, and the first Brazilian Gripen-E aircraft conducted its maiden flight.

All three Global Eye aircraft ordered by the UAE are now undergoing flight testing,
which is progressing superbly.

Work on A26 submarine is proceeding from development to production and is a


top priority.

Initial construction began on the facility in Indiana, USA, where Saab’s section of
the T7 Red Hawk trainer aircraft will be manufactured.

We have very high aspirations and will develop a facility with extensive
automation in line with what is referred to as industry 4.0.

It will be one of Saab’s most modern facilities.

***

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Saab has a clear strategy that rests on four integral aspects: portfolio, innovation,
marketing and project execution.

They are all important individually, but are highly dependent on each other for
the continued success of the company. Sustainability is clearly integrated with all
aspects.

Let’s start with Saab’s strong product portfolio. We are a system provider with
expertise in building major platforms by integrating a wide array of sophisticated
systems.

By having an extensive portfolio, Saab can continue to create synergies for


stronger business deals. At the same time, I want to clearly communicate that
products approaching the end of their life cycles, as well as less profitable
products, will be phased out.

The aim is to create opportunities for further investment in the core of the
portfolio.

In 2019, extensive work was carried out to optimise the portfolio, and we have
reduced the number of products from just over 600 to just under 500.

In terms of the second aspect of our strategy, innovation, Saab carries out
purposeful and structured work in the product areas so as to always remain one
step ahead so that we are able to meet our customers’ needs in time.

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Gripen, Global Eye, and A26, to use three examples, will carry the same names
over time but with vastly improved capabilities.

At the moment, Saab is investing heavily into future technologies within sensors,
artificial intelligence, autonomy, cyber, digitisation, and additive manufacturing,
commonly called 3D printing, for broad application among our products.

An important milestone is that Gripen E’s avionics system is now being test flown
with much success.

By having separate flight-critical and tactical control, we have created a unique


ability to successively and continuously improve the Gripen E platform.

This means that Gripen can be constantly upgraded with the latest capabilities
and makes tactical functional upgrading faster and easier.

Let’s look at the third aspect, marketing.

Saab’s growth significantly depends on our products’ capabilities in combination


with purposeful internationalisation.

Ten years ago, we expanded our marketing organisation and moved closer to our
customers in roughly 35 countries around the world. Based on the experience we
have gained, we have carried out extensive work to focus the marketing
organisation, which is now being implemented this year.

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Clearer management of marketing efforts has been established. We are
increasing our focus on three strategic countries: the US, Australia, and the UK,
where we intend to expand operations, actively invest in developing local
intellectual property rights, and foster more local partnerships with other defence
companies.

Strategic international partnerships constitute an important element in Saab’s


continued internationalisation. However, Sweden will remain Saab’s most
important market.

A new Defence Act is expected this autumn to address an increasingly uncertain


landscape.

The extent to which it will impact Saab is too early to say, but a strong Saab with
major exports will always remain of great importance for Swedish defence
capabilities. This means that our total base must be bigger than what we have in
Sweden.

At the same time, in order for Saab to be able to grow by investing in products,
innovation and marketing, the fourth aspect of the strategy, projects must be
executed well.

Over the last year, operations have moved from a substantial development phase
to more production in the respective programmes.

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The projects are ongoing here and now, and will be executed with high efficiency
and precision. Partly because this creates financial opportunities and because it
forms the basis of the respect shown to Saab by the market.

Projects being executed in parallel are Gripen E for Sweden and Brazil, Global Eye
for the UAE, Squadron 2020 for Finland, as well as A26, RBS15 and New Light
Torpedo for Sweden.

In addition, there is plenty of demand for crew-served weapons and ground-


based sensors.

The execution of our major projects is something that I personally and constantly
follow – not least of all on location at our facilities – and which I feel a great
personal commitment to. There has never been such a high degree of activity in
Saab – it is a development we can all be proud of.

By working according to the four aspects of our strategy, I am confident that Saab
will fulfil its goal of progressing from being a Swedish defence company with a
large international business to being a multi-local company with a very
sophisticated product portfolio over the course of a few years.

The lasting relationships being cultivated with partners and customers


internationally will be a contributing factor when it comes to achieving our
growth target and continuing to win business across the globe.

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***

Saab’s sustainability work contributes to the safety and security of people. It


permeates Saab’s entire strategy.

Specifically, it involves developing technologies able to protect people.

It also involves developing sustainable technologies that actively reduce society’s


environmental impact, such as the fibre optic sensors we have developed to
detect and prevent overheating in aircraft wings.

The sensors allow the number of components used in a wing to be reduced by 90


percent, which leads to an 80 percent reduction in weight. This reduces fuel
consumption and, as a consequence, the carbon footprint.

We have zero tolerance for corruption and it is my firm belief that Saab can only
be profitable in the long term if the business is conducted in a socially and
environmentally sustainable way.

Saab’s compliance programme must be industry-leading.

With customer relationships that endure over decades, a high-tech portfolio and
a global presence, Saab creates steadfast business in times of uncertainty.

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Saab is a loyal partner to states around the world in their efforts to protect their
societies. I am therefore convinced that Saab will continue to create long-term
and sustainable value for society and shareholders alike.

***

I would like to close by thanking Saab’s fantastic staff for the superb work done in
2019 and at the start of this year – including during the global crisis that has
recently emerged.

Your drive is phenomenal and your commitment to fulfilling our obligations is


beyond question, and I know that when we meet at the AGM next year, we will
be looking back at yet another important year for Saab.

Thank you!

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