Saab, the Swedish defense company, reported a significant surge in third-quarter earnings and revenue, driven by a substantial increase in new orders, notably a deal to supply Gripen fighter jets to Ukraine. The company announced that new orders soared to 65.8 billion Swedish kronor ($6.6 billion), a sharp rise from 20.9 billion kronor a year ago, surpassing FactSet's forecast of 56.4 billion kronor.
The third-quarter sales reached 20.6 billion kronor, exceeding expectations of 20 billion kronor. Earnings before interest and taxes (EBIT) were reported at 1.95 billion kronor, slightly above the anticipated 1.9 billion kronor. Following the announcement, Saab's shares, listed in Stockholm, rose by about 2% despite a mixed performance in the defense sector, with the Stoxx 600 index down 0.4%.
The surge in orders comes as European governments intensify efforts to convert defense spending commitments into tangible military capabilities. A key contributor to Saab's order intake was a 24.6 billion kronor contract for 16 Gripen E fighter jets with the Swedish Defence Materiel Administration for Ukraine, signed in June and recorded in the third quarter. These jets are scheduled for delivery between 2029 and 2030.
Saab's CEO, Micael Johansson, highlighted the growing demand from customers, evidenced by major contract awards such as the Gripen deal for Ukraine, the GlobalEye military surveillance aircraft, and an order related to Germany's new frigates. The quarter's orders also included a 10.1 billion kronor contract for GlobalEye with an undisclosed Middle Eastern customer and an 8.7 billion kronor order to equip German Navy warships.
Since Russia's full-scale invasion of Ukraine in early 2022, Saab has experienced exponential growth in orders. Despite this, the company's stock, like many in the defense sector, has faced pressure recently as investors question whether current valuations are sustainable given the industry's delivery capabilities.
Geopolitical tensions, including airspace violations and drone incidents, are fueling demand for enhanced defense capabilities, according to Johansson. He noted that Saab is expanding its production capacity and investments to meet these growing needs. "The long-term market outlook remains favourable, " Johansson stated, pointing out that large orders surged more than sixfold to 52.1 billion kronor, while small orders increased by 84%. However, medium-sized orders saw a 16% decline.
As of the end of September, Saab's total order backlog stood at 364.2 billion kronor, up from 274.5 billion at the year's start, marking the sixth consecutive quarter of order book growth. In July, Saab announced plans to increase its jet production from 15 per year to between 20 and 30, with the potential for further expansion if partnerships are strengthened.
Johansson also stressed the need for European governments to rethink their approach to weapons procurement, advocating for a shift from fragmented national strategies to long-term partnerships with the defense industry.
