Saab defence group raises targets, shares hit all-time high

Reuters

Published Feb 09, 2024 06:42

Updated Feb 09, 2024 10:06

By Marie Mannes and Jesus Calero

STOCKHOLM (Reuters) -Swedish defence equipment-maker Saab reported an 8% rise in fourth-quarter operating profit on Friday, and lifted growth targets based on increased military spending, driving shares to an all-time high.

In early trading, shares hit an all-time high of 742 crowns, up 6.8%, before paring gains slightly. The value of the stock has more than tripled since Russia's invasion of Ukraine.

For the period 2023-2027, Saab lifted its organic sales growth target to around 15% from a previous goal of 10%.

Agency Partners analyst Sash Tusa said the increase in defence demand appeared structural as European countries faced a need for major defence spending.

He added the company looked "really well positioned in what we see as a likely decade-long defence up-cycle".

Profit climbed to 1.42 billion Swedish crowns ($135.6 million). The company cited strong performance from its dynamics division, which includes missile systems and ground combat weaponry, as well as from its surveillance division, which includes airborne early warning and naval combat systems.

Saab's fourth-quarter order bookings surpassed expectations at 31.5 billion crowns compared to the 12 billion expected by analyst Tusa.

However, for this year Saab, predicted organic sales growth of 12%-16%, much lower than the 22.6% in 2023.

To tackle the jump in demand, Saab last year recruited nearly 2,500 employees and increased capital expenditure by more than 50%.

The spending was in part the cause of a fall in its operating profit margin to 8.8% from 9.5% during the quarter.

"We see a further increase in investments as both attractive and crucial, as this will support our growth and longterm value creation," CEO Micael Johansson said.