Ukraine war boosts Saab profits, orders as countries buy military gear

By Marie Mannes

STOCKHOLM (Reuters) -Swedish defence equipment maker Saab's Q1 results beat forecasts on Wednesday as countries continued to stock up on surveillance gear and weapons because of the war in Ukraine.

Order intake at the company that makes a range of military and civilian hardware doubled to 17.02 billion crowns ($1.66 billion) from 8.1 billion, while its order backlog increased to 132.66 billion crowns from 128 billion crowns.

Saab, which competes with U.S. defence giant Lockheed Martin, France's Dassault and Britain's BAE Systems, has seen strong demand for its products over the past year as the war raised geopolitical tensions, leading many nations to ramp up military spending.

The company's biggest customers include the Swedish government, as well as France, the United Kingdom and Germany. It also received orders from Lithuania and Finland in the first quarter.

Chief executive Micael Johansson said countries are increasing stocks to improve their own resilience, as well as to support Ukraine, which had translated into a strong order intake.

The first quarter was boosted by one order worth 8 billion crowns from the government of a Western country for a Carl-Gustaf multi-purpose shoulder launched weapon and an RBS 70 NG short-range air defence system.

Demand has been particularly strong in the surveillance and dynamics businesses, which include sensors, deterrents, support weapons and missiles, he said.

"It's mainly Europe and the U.S. we see taking that responsibility," Johansson said, adding that European countries also have depleted stocks that need to be replenished.

"I think this will be quite long term because we are still in the beginning of this growth on creating a higher capability level, including Sweden...So we need to support that by increasing our capacities along with the market," he said.

Analysts at Citi said it was a strong start to the year for Saab, with sales, operating profit and orders beating consensus.

Shares in Saab were up around 4.5% as the market opened, but reversed course later and at 1027 were flat.

In a call with analysts, Johansson said Saab had secured a large volume of materials needed to make its products such as explosives, gunpowder, semiconductors, and raw materials for the foreseeable future.

He added, however, that as a result of the high demand the need to have a strong and more reliable supply chain had increased and further investment was needed to ensure security of supply.

Operating profit for the maker of the Gripen fighter jet was 928 million Swedish crowns in the quarter, compared with 654 million crowns a year earlier.

Saab maintained that it expected organic sales growth in 2023 to be around 15%, but that growth in the remaining quarters of the year was likely to slow from the strong first quarter.

(Reporting by Marie Mannes; Editing by Terje Solsvik, Sharon Singleton and Emelia Sithole-Matarise)