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Edited Transcript of SAAB B.ST earnings conference call or presentation 26-Apr-17 8:00am GMT

Thomson Reuters StreetEvents

Q1 2017 Saab AB Earnings Call

Stockholm Apr 29, 2017 (Thomson StreetEvents) -- Edited Transcript of Saab AB earnings conference call or presentation Wednesday, April 26, 2017 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ann-Sofi Jonsson

Saab AB - Head of IR

* Hakan Buskhe

Saab AB - President & CEO

* Magnus Ornberg

Saab AB - EVP & CFO

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Conference Call Participants

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* Mats Larsson

Swedbank Markets - Analyst

* Bjorn Enarson

Danske Bank - Analyst

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Presentation

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Operator [1]

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Welcome to the presentation of Saab's first quarter result this year. Welcome to those of you who are here in the room and also for those who are viewing us online. Please feel free to put your questions throughout the whole presentation. And after the presentation, we then take a Q&A session and we take questions from you in the room and we'd pick up from those of you who are online. Also welcome to those who might be listening into the conference call. You will also be able to put your questions after the presentation. I'm Ann-Sofi Jonsson, Head of Investor Relations, and with me here today, I have our CEO, Hakan Buskhe and our CFO, Magnus Ornberg. Over to you.

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Hakan Buskhe, Saab AB - President & CEO [2]

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Thank you, Ann-Sofi, and welcome to you all and also on the web, of course. I will take you through some slides and give some comments for the first quarter as I normally do. So, it works. Before I go deep into more of our activities in the first quarter or during the first quarter, I would like to underline the overall market situation. As you know, you can see the tensed situation around the world. It's a little bit scary, what you can see, especially with North Korea and the tension over there, but also the increased tension in our part of the world in the Middle East and all the asymmetric warfare with terrorists around the world and of course the things that happen in [Stockholm is saying] that we are also involved in these type of activities sadly. That has an effect on the overall global growth that is negative, but also the movements in many countries around the world when it comes to be more protectionist and other things create an uncertainty I would like to say for growth -- for global growth. That has a negative impact on business and of course also our business. So, that's one trend. The other trend that is very much connected to the increased tension and the security situation around the world is the increased awareness of strengthening and the security and defence capabilities of different countries. And of course, for the time being, that is much stronger than the other trend and increase our capabilities or possibilities around the world doing business, but you can also augur what type of reasons and the outcome what it could be.

One important part that I would like to underline is the situation in Europe even before and especially the connected NATO European countries, before -- already before the Obama -- or the Trump administration, Obama also was very clear that NATO countries and other countries in Europe needs to increase their spending to balance the big deficit between -- the spending between United States and the European NATO countries. And there are two goals, one goal that is very familiar that you know that's the 2% target spending on -- of gross national product on defence, but it's also another target that basically most of the European countries are meeting up to and that's 20% of the defence spending should go to defence material.

I think it's around 19.8% in the European countries, NATO countries today. However, now when the country is moving towards these 2% gross national spending of gross national product, that means an extremely big increase in defence procurement of equipment between 20% to 30% yearly for the years to come. And that of course will give a total different view on the European market that have been downscaling at least the last seven years or more or less than last seven years, at least when I've been involved and -- but you can see signs already last year that it's picking up. At the same time, of course, we have still good business opportunities around the world for different reasons. Asia, where we are increasing our presence, we have much more activities in South America, but that's mainly due also to the total different view on Saab and our capability due to the Brazilian Gripen deal and a growing start to growth again in North America.

So, the activities and the number of leads and the number of offers out there still increasing, but it's also very much a focus on the short lead times. We have an extremely good portfolio updated as we speak that we can deliver on a short lead time and that positioned our Company in a good way to meet those demands. So, if we go a little bit more into the quarter, I'm extremely happy to see that we had a good order intake, we had a very good execution on our order backlog. It's a one thing to have a good order backlog, but if you can't convert that to sales, it doesn't really matter. It could be [contradictory] by the way if you can't, but we can see that we have a good productivity, good efficiency during the first quarter and that's in line with my expectation of the Company and what the activities in the projects, but also in our administration and sales. We have improved our gross margin, operating margin and positive cash flow have been generated in this quarter. We were able to receive the order that we had expected last year for the GlobalEye, the third aircraft that has an impact of course on our order intake this quarter that's expected last year. On the other hand, we have also some significant order that, we believed, should have come this quarter, but slipping to quarter two or quarter three. So, it's a little bit of a compensation of that. And of course, extremely important for our missile business RBS15 order received to the Swedish Armed Forces and that will be a state-of-the-art, nothing compared to that one. And we'll give total different capabilities for the forces who will use it and of course have a negative effect on the forces that will not have this capability and have some bad plans. We are increasing our activities in Finland, not only due to the upcoming or ongoing Gripen deal, but also due to supply of knowledge we signed with the Aalto University microwave research program for the next 10 years of EUR20 million should lead to 11 PhDs. And if I look at last year, we employed in Sweden around 1500 employees, of those little bit, well, roughly 1,000 Master of Science. And we have managed that well. We have increased our overall attractiveness for the last years, but the most important thing is that the increased attractiveness among females. We have now 65% of all the students on university and higher education are females. And if you can't attract them, it will have a tremendous negative impact on the companies. We're working very hard and with long-term perspective, but also with very quick action to increase the equal activities if I may say so and increase the possibilities and also try to work on that females and men should have the same possibilities in our Company and we can also see that and we measure that, as you know, when it comes to female managers that is going in an upward trend.

Some activities, I will not go through all of them, but as I said, we have dynamics, extremely good to see the increased order backlog that we have received in the last years, but of course, during the first quarter with RBS15 and I will come back a little bit on the dynamics order backlog. We have had a good trend on traffic management, the GlobalEye activities on our radar and high activity still and we foresee an increase of leads and increase of offers that we are sending out to different customers. Some financial highlights. Magnus will of course go more into details and -- but anyway order bookings from roughly SEK4 billion to close to SEK10 billion and that's good because last year due to, thanks for slipping to the right as well, we had a fairly low level on book to bill as you know, but with this order intake, we still remain on a very high order backlog. And I think that's a strength that we have. We are growing Saab consume more order backlog than we did a couple of years ago and still we are able to remain on a high order backlog. Increase of sales, that shows that we have a good conversion and increase of our operating margin shows also increase of productivity.

If I go back to the order backlog. This is an extremely important thing for us to be able to keep the order backlog on a high level even without mega orders that we proceed to have once, well, in the 24 months cycle or even more and we are able to do that. Also very stable aeronautics order backlog, because that's, as you can see, well, 45% of our order backlog, extremely important that we keep that, but also -- and that's a sign of the market development after the closing down basically of the [Rockford and load] activities at least during that time in Afghanistan, we could see the need of our products for dynamics around the world was going down, but also in a more peaceful situation and view of the world in -- well, all over the need to fill up your stores with this type of products was not so big. But now changing again due to the activities and the activities in Europe, United States, India and others and also Nordic is very high when it comes to dynamics. And if I look at our order backlog today compared to couple of years ago, the same level, but we have -- it's much more divided into the overall six business groups than we had a couple of years ago and I think that's a good thing to have. Productivity of course, measuring that, tried to do as much, digitalization, automation to have the possibility to put forward our order backlog to convert that to sales and products, but also to build up our capability in a flexible way that we can handle ups and downs in different areas. So, we don't build in too much fixed cost and that is something that is going in the right direction and we will look forward to have an increased improvement of that as well. Another thing that we are measuring that -- of course we have both fixed and flexible variable costs above the gross margin. So, first of all, tried to keep those fixed costs the same even above gross margin, but we don't see the big need or rather it should go in other direction. If you go under the line of gross margin when it comes to operational cost that is connected to manage the Company, the volume should give an effect and it does. So, this is combined administration and market expenses. And you can see the productivity, also they're going in the right direction. So, execution of course is extremely important for us and to be able to convert now the big programs that we have, the other programs or order backlog, but at the same time continuously work on receiving more orders to build this Company for the future and increase our profitability, as we have said, Magnus and I, that we're moving towards our targets in the years to come. And I would like to restate the outlook that we presented in February as the same and we are sticking to that. Thank you. So, Magnus?

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Magnus Ornberg, Saab AB - EVP & CFO [3]

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Thank you.

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Hakan Buskhe, Saab AB - President & CEO [4]

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That's the financial department that you see there.

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Magnus Ornberg, Saab AB - EVP & CFO [5]

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I was wondering, what that was. Okay. Thank you, Hakan, let's dig into some of the details. First of all, I would like to say that the first quarter show a very good start of the year and we are very happy to see that. It's very much in line with our expectation and it supports our outlook as Hakan said, so a good start of the year. The order intake of course is very strong. The airborne surveillance area and dynamics of course makes up the biggest part, I will dig into some other small orders as well in a bit. The backlog, as Hakan said, is the good thing with what happens now in Q1 is that we strengthened the backlog in dynamics. So, basically, now all BAs, I would say, has a very solid backlog.

Sales growth 9%. We are happy to see that. It's two things. Mainly, that sticks out in this quarter, one is the new order in Airborne Early Warning, which gave us a bit of a kick start of the year in January and also the execution of the large contracts are continuing. So, these are the backbones of the growth in the first quarter. Gross margin increasing, I mentioned that a bit in Q4 that that was the first time in many years that we had an increase. Now, we have a little bit more of an increase this quarter. That's very good. And we also see now the net income, operating margin coming up and this is of course also helped by the volume. So, we get the better cost absorption in the Company.

Cash flow, very pleased to see the positive cash flow of about SEK1 billion in the first quarter. This is probably a little bit higher than our expectation, especially in light of the good cash flow in Q4 last year. But we continued to do that and we got some good milestone payments and some good advances in the quarter. We foresee in the quarters to come an increased utilization of the advances and the payments in the next few quarters, so that will happen in line with the execution of the project.

Balance sheet continued to be strong and we increased slightly our equity-to-asset ratio in the quarter. The key data, as we said, almost SEK10 billion on orders, still strong backlog, SEK110 billion, sales up 9%, margin of 6.6% and also net income following the operating income and cash flow roughly SEK1 billion. I dig into some of these details as we go along.

The backlog, we have now a strong backlog as we've said, we have some SEK20 billion to be executed throughout the year. We have done SEK7 billion, so SEK20 billion plus SEK7 billion, SEK27 billion, so we need some SEK3 billion to SEK4 billion book-and-bill for the year and that is perfectly doable. We have also strengthened the backlog for next year and that is of course important. Our lead times are fairly long in our cycle, so we need to build that one and the ambition is of course to have a backlog when we end this year to support growth also going forward.

On the order size, we had a quarter, which was the best order intake quarter since Q4 2015. The small orders are slightly lower. We think this is more of a timing issue than anything else, even though they are important and we are pushing for them. What happens instead in this quarter was of course the medium, call it, small and large orders, not the mega deals, but they came in this quarter, that is very important for the long-term planning as well. And the book-and-bill done are roughly around (inaudible) book-to-bill and that is important for us when we look at it over long term, slightly picked up. And for BA, we have mentioned that it's very good to see that the order intake for dynamics is picking up and improving and it's mainly there on surveillance and support and service this quarter. And we can also see here that on the backlog is now robust in all BAs. Obviously, we have some areas where we still want to increase orders, and as I normally say, that's always part of each BA where we need to build that. But on the overall BA level now, we have a solid base.

On the same side, we have a growth of 9%. It is, to a large extent, coming in support and service this time in light of this large order in airborne surveillance, but aeronautics continuing to grow. This is very much in line with the execution of the projects. Dynamics should be -- it's slightly negative here in the quarter, but that should be just seen as a timing effect on deliveries. In dynamics, we have more of a delivery type of revenue recognition. So, this is -- we have a lot of things going on there and we will see increases there as well. Surveillance roughly in line, like I said support and service, big increase in IPS, it's mainly Combitech, has a very good quarter, probably the best quarter we have seen in many years now. So, that is also very good for -- when it comes to profitability and Kockums in line with the execution of the large orders.

Margin wise or operating income, aeronautics, in proving the absolute amounts, very much in line with the volume. We are still impacted by TX spending here, even though they are slightly lower than previous year as we have indicated. Dynamics, significant improvement and here is our volume is a little bit down, but we have good execution of what we have been doing and it's a good product mix as well. So, this is now coming back to the margins where we want to see that BA. Surveillance, improvement both in terms of volumes, but mainly in the execution in this quarter. Support and service, both volume and execution, and IPS, I would say Combitech drives really that improvement and Kockums is in line. So -- and then we have also on the, which is not shown on the picture, positive also on the corporate level here now, because we have a positive group consolidation effect due to how we execute the projects. We always have plus or minus there, but this quarter we have a little bit more of a positive. Cash flow, positive from the cash from operations, good level to start the year, and then on top of that, we have also had a good working capital development both in terms of milestone payments and advances. We are investing significantly continuous. I would say that these three things, normal CapEx in -- which is very much driven by the large contracts. We have also the total remake and upgrade of the Kockums in Karlskrona and of course also our R&D capitalization when it comes to the new platform in GlobalEye, that's also part of that. So, we continue that journey. Financial position, we had a positive cash flow down helping our financial position and reducing the net debt to now some SEK900 million and also slight tick-up on the equity-to-asset ratio as well and above where we want to be. So, that's a good solid balance sheet after Q1.

Going forward, yes, we are in the position of execution in our projects and this is our key. If it was important one quarter ago, it's even more important now as we move along in each of these projects. So, this is our number one focus obviously, but of course, we need to continue to build backlog also in selected areas and we are doing that and that's an important area as well. And then of course, in order to do this execution now in a very good way, we need of course to be efficient internally and we have programs in place both for functional improvements to be more efficient when it comes to [order logs] and also in our operations obviously. And that's very, very important for us, and all of this, of course, should help us to deliver on our outlook and our long-term financial target.

And with that, I'll open up for some Q&A.

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Questions and Answers

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Ann-Sofi Jonsson, Saab AB - Head of IR [1]

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Thank you. Shall we start with this room to see if there are any Q&A, just state your name and the company.

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Bjorn Enarson, Danske Bank - Analyst [2]

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On T-X spending, if that's along the lines of your expectation that you continue to invest in that project?

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Magnus Ornberg, Saab AB - EVP & CFO [3]

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Yes, now we are very much done, the financial impact of it so far is very much in line with our plan.

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Hakan Buskhe, Saab AB - President & CEO [4]

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And also if you look at, of course, that's correlation between the technical capabilities that -- and the outcome of the tests that we have done with the first aircraft, the other aircrafts that fly this -- beginning of this week and things are going better awhile and that means also that we have given and already submitted an offer that we should have done in the end of this -- the first quarter and we will be able to fulfill all the flight test data that is needed until the end of June and then we expect, according to the plan, the US airport should take a decision in the end of this year, but I assume it will go probably three weeks to four weeks in next year. So, it looks good.

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Bjorn Enarson, Danske Bank - Analyst [5]

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And on spending in Q2 for the same project, should that be down then dramatically year-on-year?

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Magnus Ornberg, Saab AB - EVP & CFO [6]

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I think Q2 is probably a little bit too early to see the significant -- but it would be roughly the same numbers, I would say, spending in Q2 as in Q1. We are in that phase now, I mean like Hakan said, we're supposed to supply the flight data and all the information until the end of June and this is where we now are spending our time to support Boeing on this.

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Hakan Buskhe, Saab AB - President & CEO [7]

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But I think it's important to say that if you look at the last three years when we started up this project, we have taken all the development costs over our P&L. We don't book anything on our balance sheet still, but the activity level for us right now is much, much lower compared to the previous years.

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Bjorn Enarson, Danske Bank - Analyst [8]

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And activity level and spend, but the spending is high or --?

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Hakan Buskhe, Saab AB - President & CEO [9]

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No, I mean, no, it's connected to the activity level.

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Magnus Ornberg, Saab AB - EVP & CFO [10]

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But we are spending on T-X in line with our plan, which is lower, still lower than previous year.

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Bjorn Enarson, Danske Bank - Analyst [11]

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And on Gripen, you have talked about signing -- ambition to sign a contract every year. Are there anything that has moved more quickly or more delays than expected?

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Hakan Buskhe, Saab AB - President & CEO [12]

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When we have said that, we have taken in consideration both the present month's C/D that have high capability and we can deliver that in a very short lead time and I hope that at least during this year we will sign one C/D order.

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Bjorn Enarson, Danske Bank - Analyst [13]

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And your decision to use the Polish yard for the manufacturing of (inaudible) is that in any way linked to submarine?

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Hakan Buskhe, Saab AB - President & CEO [14]

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I mean we signed an LOI with that shipyard before, I think it was quarter three last year when it comes to corporation-enabled activities, that of course is linked to our hope to sell our [RA-26] to Poland and this also shows that we are fulfilling our commitments towards them building this ship, you can say the few (inaudible) as you like and then we will equip it in Sweden. So, that's the deal.

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Bjorn Enarson, Danske Bank - Analyst [15]

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Thank you.

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Operator [16]

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Okay. Another question from the room?

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Mats Larsson, Swedbank Markets - Analyst [17]

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Yes, hi, Mats Liss, Swedbank. I have three questions. First, I mean the gross margin trend was very good. And you also mentioned that execution and -- well, you have been doing things right. But should we expect the trend to continuing to the next quarters or is it more like one-offs in the first year?

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Magnus Ornberg, Saab AB - EVP & CFO [18]

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Yes, I think we can comment. I mean, of course, our target is to grow our gross margin in general. What we have seen, if you go back to years, I would say, the reason why we have had a lower gross margin in those years has mainly been the product mix or project mix. So, of course, if you take that into account, it can go both ways. But if you look at the business that we do today, our ambition is that those businesses should improve. And little bit like what Hakan at least tried to say is that we have above the gross margin costs, which are both fixed and variables. So, we should also see positive effects of a growing volume. So, yes, with those comments that our ambition is to (multiple speaker).

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Hakan Buskhe, Saab AB - President & CEO [19]

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And then, of course, we don't guide on quarter-by-quarter, but our aim is exactly what Magnus is saying this year.

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Magnus Ornberg, Saab AB - EVP & CFO [20]

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And on top of that, of course, we want to see exactly what we saw now in Q1, the cost absorption improving below gross margin, that's obvious.

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Mats Larsson, Swedbank Markets - Analyst [21]

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And then you mentioned (inaudible), orders needed to be or you expected them to be or it wasn't a problem, I guess, SEK3 billion to SEK4 billion to reach the sales target. Could you give the figure for 2016?

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Magnus Ornberg, Saab AB - EVP & CFO [22]

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Normally, I would say that if you go back and look at when you start the year, we have probably some SEK7 billion, SEK8 billion for a year, sort of, and then that goes a little bit up and down of course. So, I mean that's why I'm saying SEK3 billion to SEK4 billion should be doable. But then of course, it depends sometimes on the mix again, but we feel that this is fine.

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Mats Larsson, Swedbank Markets - Analyst [23]

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And finally you mentioned the [tender] portfolio looks very promising and very high levels. And could you give some comparison compared to last year or normal, is that really difficult (multiple speakers)?

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Magnus Ornberg, Saab AB - EVP & CFO [24]

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I utilize some numbers in percentage, but I haven't summarized that in the last quarter compared to last year, but we have more outstanding offers now compared to the end of the last year. And there are more activities due to the situation in the world as we see. So, we are not lacking business opportunities. I think that's important too and it's also very interesting to see that, I mean the competition especially in Asia and outside Europe, if I look at the competition in Asia, you have most of the competitors that you can see in the world, the Russians, Chinese, Americans, Europeans, but I can also see when -- the increase now is needed with short lead times in Europe and United States, you can also see and also predict that some of their activities, they already have 80% of their market in their own country domestic. So, let's see what also happens outside Europe when we foresee this increase in Europe. But that's the biggest trend shift as I can see that we see much bigger activity in Europe compared to the last year.

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Ann-Sofi Jonsson, Saab AB - Head of IR [25]

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Do we have any further questions from the room. Not? Then, we'll go to take some questions from the web. The first question is from Sindre Sorbye at Arctic Fund Management. According to Bulgarian Bloomberg TV today, Bulgaria has down-selected Gripen C/D. Can you comment on that. Will it be a government to government deal?

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Hakan Buskhe, Saab AB - President & CEO [26]

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Well, we don't comment on media rumors. What we can say it's an ongoing activity in Bulgaria, and there are different [set-ups] and we know that we have an extremely strong offer. So, the formal way what have been written in the media is not confirmed yet.

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Ann-Sofi Jonsson, Saab AB - Head of IR [27]

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Okay. The next question is from Matt Johnson and it's related to Belgium. How do you view the fighter competition in Belgium now that Boeing has left the project?

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Hakan Buskhe, Saab AB - President & CEO [28]

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That's of course a question that should be put forward to Boeing. I think it's all that each and every company looking into the possibility and what type of capability you can fill customer's gap with, but I think it will be a very tough competition. They are very much linked to United States today, flying F-16 and of course, I think we have a product that it's of course superior going forward, but again when we have discussed this type of huge businesses, you need to always look into one thing is the capabilities that you can offer and I think there we have a very strong case. But then you have to figure out the political links as well. And today, Belgium, have a very strong connection operational wise with Denmark and the Netherlands. So, we are very much looking into that and we see we have a great possibility, but we are not naive in that perspective and things that you need to do that you don't spend good manner or something that you don't earn anything on.

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Ann-Sofi Jonsson, Saab AB - Head of IR [29]

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The next question is from Mikael Laseen, Carnegie or actually three questions. So, I start with the first one, can you please explain the results for corporate in this quarter?

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Hakan Buskhe, Saab AB - President & CEO [30]

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That's something for you.

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Magnus Ornberg, Saab AB - EVP & CFO [31]

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Yes, something for me. As I tried to say in my presentation is that, I mean we have said that the underlying cost is, of course, higher than what we present now and roughly in line more with how it was last year. This quarter, we had a separate positive consolidation effect, I would say, on the large projects. So, we got a bit of that and we have that every quarter, either positive or negative. Over the length of the projects, it's zero, but over some quarters, it's either slightly negative or slightly positive. And then this quarter, it's a little bit more positive. So, that's the reason why the cost level looks low.

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Ann-Sofi Jonsson, Saab AB - Head of IR [32]

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The second question, can you discuss the competitive situation in the T-X project after the RFP deadline?

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Hakan Buskhe, Saab AB - President & CEO [33]

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No, because there are some strong competitors, Lockheed Martin's with the Koreans, the P50 and let's see what Leonardo will come up with and there are some clean sheet designs that haven't not even been presented yet. My view on the competition, you should not neglect anyone, because naive will not win. I think we have a strong case. First of all, a new design compared to at least existing ones that have been designed during the 1970s and 1980s, and if you should buy something, that should last for the next 50 years. So, I start with the legacy on things that maybe is not really up-to-date. On the other hand, of course this is also something with political move in the end, but from a technical perspective, I'm extremely sure that we have the best system -- trainer system, the latest technology and extremely good aircraft. When we have done the flight test, we have of course our own flight test pilots from Saab as well. So, we know exactly how it feels to fly the aircraft and it's doing well, but also the systems provided for training -- ground training evaluation is nothing out there, but again the things that we have, at least our competitors present while we have been flying this machine for so long. So, we know what works. We can also show that our aircraft is working very well. So, I think it will be a tough competition. But from a product perspective, I'm pretty sure that we have the best offer.

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Ann-Sofi Jonsson, Saab AB - Head of IR [34]

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The third question from Mikael, there seems to be a great deal of interest for Gripen in Asia and also for other product from Saab from countries such as Indonesia and Malaysia, could there be a risk that changes to the Swedish defence export legislation could prevent contracts to these countries?

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Hakan Buskhe, Saab AB - President & CEO [35]

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No, I can't see that, I have no sign of that this is an issue for these types of products or countries.

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Ann-Sofi Jonsson, Saab AB - Head of IR [36]

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The next question is from Sandy Morris at Jefferies. Just two questions actually, if I start with the first one. If cash flow turned negative for a few quarters, is that just advanced payments being used, I'd like to think we keep achieving contract milestones and so those cash flows continue?

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Magnus Ornberg, Saab AB - EVP & CFO [37]

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It's correct. The main utilization is on the advances. At the same time, it is so that if you have a contract, which is roughly 10 years, it's not each and every quarter that you have a payment. So, there can also be quarters where you don't get, let's say, the normal operational inflows in that sense that, yes, combination--

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Hakan Buskhe, Saab AB - President & CEO [38]

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And some quarters that you get more than you have--

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Magnus Ornberg, Saab AB - EVP & CFO [39]

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And some you get more, which we have seen now of course, if you go back and look at the five last quarters including the last one we have now, we have the first one, SEK3 billion last year and then we have SEK1 billion in Q2 and then a negative SEK2 billion in Q3 and a positive. So, four out of five, we had very strong cash flows. And of course, there has to be the reverse as well in some quarters. So, yes, it will be the shift in [milestone] payments also.

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Ann-Sofi Jonsson, Saab AB - Head of IR [40]

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The second question, one competitor (inaudible) saying the payment terms were not good. Would you like to comment on that?

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Hakan Buskhe, Saab AB - President & CEO [41]

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That's of course we have to connect if you believe the payment terms is bad, maybe you have too high cost done. So, it's more maybe related to the cost that they saw that they have. At least, what we anticipate over the years and we should bear in mind this will be a contract starting with [SEK351 million] and then probably another [SEK350 million] and a huge global market. We believe if you just look at this single tender process that this will have, for us, at least a great impact on a positive way over the years to come.

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Ann-Sofi Jonsson, Saab AB - Head of IR [42]

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Thank you. Now, I would like to open up for any potential questions that we have from the conference call.

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Operator [43]

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(Operator instructions). And there are no questions at this time.

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Hakan Buskhe, Saab AB - President & CEO [44]

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Unbelievable.

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Ann-Sofi Jonsson, Saab AB - Head of IR [45]

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Okay, thank you. Do we have more questions in the room? No? And no more questions from the web. So, with that, we would like to conclude this presentation. Thank you for listening in and being here and viewing us on the web. We will be back on July 20 to present the second quarter results. Thank you.

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Magnus Ornberg, Saab AB - EVP & CFO [46]

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Thank you so much.

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Hakan Buskhe, Saab AB - President & CEO [47]

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Okay, Thank you.

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Operator [48]

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This now concludes our session. Thank you for attending. Participants, you may disconnect.