Earnings Transcript for SAAB-B.ST - Q4 Fiscal Year 2023

Merton Kaplan: Hello, and a warm welcome to Saab's Q4 Results and Strategy Execution Update Event. My name is Merton Kaplan. I'm the Head of Investor Relations here at Saab, and I will also be your moderator. So, with that, I want to welcome you again here. We have a full live audience, and we also have viewers online. So we'll be webcasting this and streaming this online for our viewers. So, 2023 was a year with a lot of things happening and impacting our industry. And this, obviously, had implications and impacts on Saab as well. So, we're here today to discuss and talk about Saab's growth journey and the next steps that we're taking on that path. That is also what we'll cover in today's agenda. So I'll walk through that with you briefly. So, we will focus on three things, actually, and that's the recap of the Q4 results, and then we'll have a deep dive into the strategy execution updates. And we have saved a Q&A that is a bit longer than usual for you. So we're going to take all the questions afterwards. And for our viewers online, you have a link in the press release from this morning and also in the report that you have to click to, and we have a telco moderator that will assist you. So, we will do Q&A live and with the audience online. We also have a chat for those who wants to type in their questions. So, without further ado, I want to start the program. And with great pleasure, I want to invite you, Saab's CEO, Micael Johansson, to the stage.

Micael Johansson: Thank you. Good morning, everyone, and most welcome to Saab today, and also to you all online. Great to see so many people in the room. This is sort of a bit unusual now to have this setup, but I look forward to it. Of course, I'm - we'll try to give you a view of the Q4 result as a start and then talk about the full year and what happened during the year, and then look forward a bit and give you a strategy update on what we talked about in the Capital Market Day in February '23. So, it will be a whole package, and we have a little bit more time today, myself and Christian Luiga, and I look forward to all the questions, of course, that you might have. And we'll discuss the future as well and why we have updated our long term and mid-term targets, of course, looking at what we see around us and our position in the marketplace. So let's start directly then with looking into what happened during the year. We had a very strong year and, I mean, look at the market position that we have now, generating almost SEK78 billion in order intake. We are strong in all the home markets, as I call them, or focus markets, strong in Sweden and all the other countries where we have established ourselves as a company. And this is an order intake that is not built upon what we call the mega deals. So it's lots of mid-size orders and small orders as well. And of course, we are chasing the big orders as well, but we don't build our whole future on them. So, this is really strong. And for the first time, we have passed the SEK50 billion mark in terms of turnover, SEK51.6 billion. And we grew almost 23% organically last year. And this is sort of in the higher end then of the guidance that we gave for '23. EBIT grow more than the turnover, which we have always said it will, and it was 30%. And we take the right steps all the time. So, we improved our margin with 0.5%. And this is, of course, in a very strong growth scenario, which we have to think about. We need to be able to invest and spend money on capturing marketing opportunities, of course, and we employed lots of people and - but we still have to have the right trend on profitability. And we had a very strong Q4 on cash flow. So, we ended up with SEK3.2 billion in cash flow, which is SEK0.6 billion higher than last year. And that is also a good, good sort of cash flow level. Looking at that, we actually spent SEK1.3 billion more in investment in '23 than we did in '22. A few highlights from the fourth quarter, also strong quarter, building the full strong year, 16% growth, SEK31.5 billion order intake, and also a good profitability level. The profitability level was affected by minority write-down; and if you had added that back SEK66 million, we would have been at 9.2 roughly. And then again, you have to remember, we spend lots of money in marketing now, trying to catch market opportunities. But also, we have evened out the quarters over a year quite a lot. So I still think this is a very strong quarter, adding up to a very strong year. So, we see a very strong demand in the market. We have a few things that happened during the quarter that I think is really important to us. We have now got an approval to set up a company in India and owning 100% ourselves on that company, first defense company that got that approval. And this will be an important factory for ammunition to Carl-Gustaf and Carl-Gustaf manufacturing. We have done a number of things when it comes to NATO, collaborating with them, but also seeing some good things happening when it comes to getting the first contracts from the so-called procurement organization within NATO, the NSPA. So things are coming now in terms of RBS 70 missiles and AT4 Carl-Gustaf. And then we have done a change in our organization. So we - since we have a naval business around Saab Kockums, we have now moved the underwater business from Dynamics, who is more focused on the army side of things, doing the support weapons, but also training and simulation, so that we think the underwater business will have greater synergies with what Saab Kockums is doing today. And of course, we have continued on recruitments, of course. We have fantastic staff in the company supporting this growth. And we've added 2,500 people net last year to our company. And as said last quarter, last year was 700-plus. So it's an incredibly strong growth in the company in many aspects, as we see it. When it comes to orders, the - during the quarter, we had a few important things happening. As I said, the NATO part of this. But we also got the second batch on the T-7A. So, now we start sort of - we are still in a low rate initial production phase when it comes to T-7 in the U.S. This is in West Lafayette, Indiana, but it's a continuous production. It will become more and more profitable, of course, when we get more volume into the factory. So this is a very important contract to us now to continue the T-7A production. We got some parts connected also to the success of Saab - not Saab, the Hagglunds - BAE Hagglunds success in the Czech country. So, we have content in these vehicles. So that was a contract roughly SEK1 billion. We got new contracts on the naval side and the radar side in the U.S. So, that business is developing really well. And we got the big support contract from South Korea on our weapon locating radars, Arthurs. So, you can pick many examples of important contracts, but you won't see a huge big one in sort of what we're seeing now. It's many mid-sized contracts looking, and that looks good, I think, and that still builds up to this big volume of almost SEK7 billion to SEK8 billion over the year. A few highlights from our four BAEs then and Aeronautics is sort of an organization that has two big contracts when it comes to the Gripens for Sweden and Brazil. And Brazil got another aircraft delivered, so they have now seven in operation. And we are sort of delivering a handful to Sweden as well, as we speak. But we're still in the early phases of delivering these from a production perspective. We have already started to think about how do we create a future combat air system together with a Swedish customer, Swedish defense forces. And that might seem early. The Gripen E will have its lifetime up until 2060, but we will have to add capabilities maybe in the systems of systems. And beyond that, we need to figure out what we do when it comes to their domain. So, this is an important study which will lead to some sort of decision, how do we handle this going forward maybe in a couple of years' time. And we have got an important contract from a very important area when it comes to the total defense, and that is to be able to do firefighting, both in EU, but mainly in Sweden. And we handle that as a service and we got a new contract for a few years now from our agency in Sweden. We have also aligned sort of how we view the value of our contracts in the organization. This is more of a technical thing. But of course, everyone - every contract needs to have the same value in terms of the - how it looks like in the index clauses we have in the contract. So that affected this with SEK4.3 billion in Aeronautics. The T-7 is really important to Aeronautics, and long term, this will be very important program. We have to remember that we have 350 aircrafts to deliver. We have just now started to deliver the first five to the U.S. Air Force for testing. And we've started, as I said, to manufacture the low rate initial production of aircrafts, but it will be much to come. Today, we do have an under-absorption that is affecting Aeronautics' profitability. And of course, that is why it will take some time before they come back into recent profitability levels, I would say. So, this is why Aeronautics is a bit lower than the other business areas. Dynamics, extremely strong growth. Look at it. I mean, I think they had on order intake a couple of years now - improving the order intake 60% a couple of years in a row. And the demand is extremely high. The book-to-bill is great. We have also, on top of that, done a fantastic thing together with Boeing in launching a new product called Ground-Launched Small Diameter Bomb, and we did this in nine months together with Boeing. We took existing SDB missiles from the inventory of U.S. Air Force. We did a new setup on the missiles, so it could be ground-launched in a six pack, so to say. We built a launcher system, a fire control system, put that together in nine months, and we have now started the deliveries. We're going to deliver more than 600 of these now, and there will be more to come. So, this is an incredibly important start of a fantastic system, of course. And we will do the main part of this in the U.S. because of supply chain issues and so forth. And we're really happy to have something that can actually target something on ranges like 160 kilometers with extremely high accuracy ground-to-ground. Strong sales in Dynamics, growing dramatically, as you know, and the margins are still high, but a bit normalized because of the mix that we had last year. But they will be continuously high going forward. And we are building capacity as we speak. We invest heavily in capacity in Sweden, both in Karlskoga and Linkoping, but also, as I said, starting our production facility, building that in India. And we will set up shop in the U.S. as well, because we need redundancy going forward in this area. Surveillance, also a growth area. They have picked up incredibly well in terms of profitability, but also growth. And the interest in our radar portfolio is very high. We have contracted more than plus 50 radars on the Giraffe 1X last year. So, that is a very successful part of the portfolio. And we have launched a new product, which is a very compact EW equipment that you can either have on a drone or on a mast or something. And we have great potential also, of course, when it comes to the bigger systems like GlobalEye. So, the sensor business and command and control in all domains is really looking favorable going forward. And the U.S. portion of this is developing really well. We found out niches in the U.S., and I think we have more to do in the U.S. on the sensor side, and it's quite, branding-wise, nice to be on one of the aircraft carriers with our radar technology in the U.S., which happened this quarter. And as I've said earlier, we have a journey on the profitability with Surveillance, but now we're getting back to the reasonable levels. Saab Kockums is also doing really well. And why they are doing that is, of course, a mix. International contracts, mainly on the surface side, and the support of surface vessels is mixing with the submarine activities, generating a good mix and a good margin and a good growth. We had done the second Keel-laying activity for the SIGINT ship we're going to deliver to Poland, and that program is going well. And we are now entering into an incredibly exciting phase of will we or will we not be selected in the Netherlands when it comes to the submarines. And hopefully, that will be some sort of decision during the first half of this year. We have capacity limitations, which we are mitigating by actually doing activities also in Landskrona, not only in Karlskrona, on certain parts of the systems to boost capacity. So that's why we're establishing ourselves in Landskrona. And we have this fantastic mix now, so Saab Kockums is now a very healthy business area going forward, and both a good mix of international contracts and Swedish contracts. Combitech is also developing really well, and I would say the total defense activities within Sweden that - to get back to a more constructive way of managing infrastructure, transport, energy, prepare for security matters in different sites and so forth is something that Combitech is really good at. And also, the relationship with the defense forces and FMV is important. And then they have, of course, some consultants working with Saab. So, this is an important resource sort of flow and competence flow between the two organizations. They are a fully owned Saab company, of course, but it's important that they have a mix of working with new technologies in other business segments then and bringing capabilities and competence back into Saab. And they are developing in the right direction as well. And they do that, of course, based on that they employ people and get more hours into the organization, even though they try to do more of sort of firm contracts rather than to sell hours. But they are developing extremely well also, I think. So, looking at this year, we have now settled on a guidance of organic sales growth between 12% and 16%. And we will grow our margin more than that, and we will continue to generate a positive cash flow, even though we will continue to invest. As I said, we invested SEK1.3 billion more than '22, and we will continue to invest quite heavily in the next two years as well at least to build capacity. But we have the strength to do that and still generate reasonable positive cash flow. So it's - I look upon the future in a very positive way. And I will come back, of course, later today to talk about this in a broader perspective and how our strategy looks like. So, with that, I think that was my last slide, and I will hand over to my CFO, Christian Luiga.

Christian Luiga: Thank you.

Micael Johansson: And I won't do this for you. So, you have to do it yourself.

Christian Luiga: Okay, as always.

Micael Johansson: As always.

Christian Luiga: Thank you very much, Micael, and good morning, everyone, and welcome to Saab here in Stockholm, and welcome on the web and on the phone. I'm going to walk through now the financials, and then we'll come back in the second section a little bit more on the outlook and strategy execution. So, I'll try to keep it brief in this first section. But before I start, we have a very good momentum right now. Many people are working very hard in this company to both improve our market position and deliver on all the bids, but also to build capacity and make sure we actually deliver according to the numbers now we have showed. And I'm very satisfied with the margin improvement that we are doing. We have said steady margin improvement over time. EBIT should grow faster than sales, and we are delivering on that in a very comfortable way. And we have a very strong financial position, and we also balance our earnings and net working capital and investments in a good way to still deliver a positive cash flow. But starting looking a little bit at our order position. And one would say Saab Group now has 3 times sales in its order backlog. Actually, it's pretty much the same as last year. So, most of these numbers look very much the same. So, Dynamics at 3.7, I think it was 3.6 a year ago, but they have been growing close to 40%. So that's impressive in itself, growing 40% and keeping this backlog increase. I think that's the message with these numbers, not the numbers in themselves. The other thing that we have already seen getting into this year is that Surveillance and Dynamics part of the order book is increasing. So, the balance in the Group now is that Aeronautics, Dynamics, and Surveillance pretty much have the same order backlog, around SEK46 billion and one for each. So - and then 10% on Kockums and a bit on Combitech. That gives a better picture also in stability. If you just go back two years in time, Dynamics was like 24% of the backlog; now, they are 31%. Looking at the next year number, which is important here. We are growing our order with 20% the order backlog with 20%. Next year is 19%. We look at that as a good foundation then for the outlook of 12% to 16% growth. Looking at these numbers and looking back at history and what you need to achieve in order to sales, this actually comes in quite good compared to our outlook for the year. A bit details on this, we'll come back more and we talked about more on the profitability and sales on the different business areas. But the quarter had a strong sales growth of 16%. We had a very strong sales growth last year as well of 16%, the same number. Organic and reported sales is pretty much the same number. The EBIT did have an impact of items affecting comparability of SEK66 million, as Micael said. Without that, EBIT would have been growing 13% in this quarter. And that is the - on back of a very strong Dynamics and Aeronautics profitability improvement in quarter four last year. So, the comps were a bit tough. Something else very interesting on this picture is of course the financial net positive that improved, and I'll come back to that on the next page. In the quarter itself, if you look at the corporate costs, they were quite flattish if you take away our minority portfolio. So, looking at the minority portfolio losses last year and this year and take that out, we had a quite flat year-on-year cost in the corporate cost. If we step into the full year a bit and look at those numbers - I'm going to go down directly on the financial net. It went from more or less SEK450 million minus to plus SEK150 million, a big shift. One item of that is the balance sheet that we have in combination with the interest rates that have moved, have made our net interest from minus SEK70 million to plus SEK110 million. Another thing that we talked about already two years ago was that we have quite a big bond portfolio, because we have so high liquidity. And with the revaluation, we had a loss of SEK300 million that now is a small positive. So it's around SEK350 million just on the revaluation effects, comparing year-over-year. So, those two impact most of this change. So, you can say we're moving into - and this year's impact from revaluation or 2023 was not that big. So we're moving into a more normalized net financial position here net - financial net. We also have a tax that was impacted last year and we have said we should be between 21% and 23% in tax cost, and we are delivering 22%. So we are in the middle of that range. And we also said that the tax - paid tax should be around 90% to 110% of the tax cost. And we are within that range. So we are, this year, having a normalized position on that tax position. Then sales development. As expected, sales grew and the - we had - all expected, because we had guided that way, that the first throughout the third quarter would be stronger than the last quarter, and that's how it became. We came in, in the upper part of our range of 23% for the full year. The fourth quarter had stronger comps, as I said, last year and we have a more even sales pattern this year. And this is when we move up in capacity. It's harder to have sort of fluctuations. We are going more and more on full capacity in each quarter. Something that is very notable, we'll come back to that in Micael's later presentation, is that you look at the strategic countries of the U.S., U.K., Germany, and Australia, in those combined, we grew 50% in 2023 and in the last quarter - in the last quarter we grew 50% and 46% in the last quarter. So it's pretty much the same number, which is a strength and something that is part of our strategy. If we look at sales per business area, we already talked about it, that Aeronautics was weaker, but they had a strong last year. They had 17% growth in quarter four last year, even though they only had 6% on the full year. This year, we have 6% on the full year. But then from a comparison perspective, we had minus 2%. That means that the total production and PUC buildup is not that high - I mean, 6% growth on this. And T-7 is not growing that much on sales yet, very few, as Micael said that we're working with. The civilian business is quite also flattish from a sales point of view when you look at the total numbers, and Gripen is growing a bit small in this. And as we can increase that volume over time, we will also have a higher PUC to bring into the sales. And when T-7 comes in, and also if we get more support and services, innovation services, that will be triggers to drive growth. Something else here is Dynamics, which is growing nicely with 34%, and I think that is something that is interesting when we get to the next picture and look at their profitability. And Surveillance is also growing. And this is two areas where we are now investing hard to meet this increased order backlog and order intake to deliver to our customers in a very important period. But also, Kockums was growing and they were growing on surface ships and on submarines. They have a lot to do down there. And we have just announced that we are opening up an extra facility in Sweden to actually support the production. The growth here is both on material coming through that we help the customer to put on the ships or repair with, but also then on labor and work. So it's not only that we can grow this massively with labor in Kockums. Combitech, it's a good year, 15%; 8% in the fourth quarter. It's a lot about bringing up employees' utilization and also the price. We see that the civilian side is becoming a bit weaker, but the total defense side is becoming stronger. And we have a very good foothold in the defense side. So, that makes us very comfort that we will continue to be able to gain market share. If we look at then the margin here and the EBIT, one of the big things here is Dynamics. Dynamics is actually going down in its EBIT year-on-year, even though the sales growth of 34%. And that is the margin decline that we have talked about since last quarter four and throughout the year, that this is a year where will we sort of go back to more normalization. What I would say is then that we have probably met sort of the bottom of that margin decline. And from here, as we build up capacity and we can get more scale, we should be able to slowly improve this, if anything, rather than the opposite. So it's been a tough year from that point of view, from a financial point of view on EBIT, but it was all expected, and we tried to be very clear on that last year with this normalization discussion. And it actually delivers in line where we expected. On this picture as well, we can see that Surveillance is improving, and that is something we also said last year. At the Capital Markets Day, I think it was very clearly said if there's any unit I know will increase its margin and improve its EBIT this year in 2023, its Surveillance. I don't know how much, and I will not tell how much I said, but it is - it's very nice to see that they have improved from 8% to 11% and that the sales growth is also coming with a good margin improvement, and the scale effects are coming through. In Surveillance, they also done hard work and we talked about for a couple of years of improving efficiency and profitability in certain units. We talked about foreign units like South Africa being loss-making before. Now, they start to show black numbers. So, we have worked through and done a good job in improving profitability in that unit. Cash flow. So, first question probably from you, is this as expected? Well, we did expect this kind of investment uplift. We said that we will have to bring up investments to meet the capacity that we already saw in 2022. In 2022, actually, we said we're going to take a bet and start to invest in Dynamics because we felt that it's quite sure that we will have a demand coming. We talked about building up inventory and we talked about starting to invest. And we have continued then to build up inventory this year around the same numbers last year. So, even if we have a much higher sales growth, we don't have a higher increase in inventory. And that means, which I said last year, we are sort of full in the barns with everything we can get in. And everything we can get in that we will be able to use the next 12 months to 18 months, we will try to bring in, because we want to make sure that we can deliver, because it will generate sales and it will generate profitability and scale, and the cost of capital is less than actually that gain. And we continued to try to do that. But this is as much as we can bring in, actually, from an inventory point of view, because the barns are quite full in Surveillance and Dynamics on the stuff that we know we're going to deliver for the next 12 months to 18 months. And investments, we have then ramped it up, and I will come back to that in my second session. This number is very close to what we expected for this year. It's hard to start to invest faster, because investments takes time to plan; make sure you do the right negotiations, make sure you have actually control of how you work in the group together, and make sure that we don't build something we already have, or we utilize the synergies between the different business areas. And for that reason, we have actually implemented a sort of a better investment control. We know this is going to be a big area and hired investment controllers, and made sure that we have detailed plans of everything and can follow up both on the purpose, the timing, the cost, the procurement for these investments. Very important part of now, how we steer this company going forward. We do have a solid balance sheet. It is very similar to last year's picture. We had around the SEK2.3 billion in net liquidity last year as well. So it feels like reporting the same thing. With the financial stability and the position and also the growth in earnings that we have, the Board has proposed to go to the AGM with an increase in dividend of 21% to SEK6.40, compared then to SEK5.30 last year. Good. Then it's time for me to hand over to the next session.

Merton Kaplan: Yes. Actually, before we do that, thank you both, Micael and Christian, for the wrap-up of the results. So we're going to deep dive into our second part, which is the Strategy Update Session. So, bear with us. Also, for those viewers online, we do have, before that, a video clip that we would like to show you. And then I'll have you on board here again, Micael. [video presentation]

A - Micael Johansson: As you saw, we talked about - or this film said that our test pilot, Marcus Wandt, is about to go to space, but he's on his way back. As you know, there will be, I think, a splashdown in a few hours only. Look forward to that. And I had the privilege of seeing the launch event and talking to him in Florida before he left. So, it's an exciting day in many respects, I would say. But let's talk a little bit about sort of where we are and how we see the context around us and how things are developing and what that - how that affects us as a company. That's sort of what this portion is about. And one has to sort of take a look at things that we thought would happen when we looked at this a year ago. And unfortunately, many of the predictions or things going in the wrong direction has been materializing. There is a big tension in the world in many respects. Many things have happened in terms of that. Countries have sort of realized that now we have to spend more money on defense. There is actually an aggressive Russia that won't give up, there is no negotiation. There are many incentives being set up to do collaborations, have countries come together to sort of specify the same requirements. And then us as industries working together to quickly increase capacity. It's been clear that we are incredibly dependent on U.S. to have sustainable support to Ukraine. And Europe has to get her act together. We have great industries in Europe, we can do much more, but the balance is wrong. And we talked about that and it's been so clear now, and it's quite scary to see now, U.S. is sort of wobbling a bit in the support of Ukraine and how important it will be for Europe to step up quickly. And it will take some time before we increase capacity. So, realities are not better, I would say, from a political tension perspective, as far as I see it. And look at how our politicians are talking about the tensions and the situation we have. I've never been part of a seminar in Salen before, where politicians have clearly stated that it can actually come to war in Sweden, we have to be prepared, we have to create resilience, and we have to be better at the total defense. So it's times of lots of intensity to sort of get into a situation where we have deterrence, where we can protect our societies and people. And there is no end to how we see the war in Ukraine is going to turn out. And the support to Ukraine in many ways is so incredibly important, not only donating from different countries, but also making sure that we, as an industry, finally can start delivering directly to Ukraine to support them to win this war. That is not so easy. We are doing that as far as we can and it will be more and more. So there are several steps in this, donating - supporting countries that's donating, delivering directly, being able to support them on repair and overhaul close to the border and eventually inside Ukraine, and eventually also collaborating with Ukrainian industry, because they have to build their own capacity if - when things are different going forward to have resilience in their society. There are many, many steps, and this is a long-term thing. We're also seeing, of course, a completely shift in what is the rule-based order now. This is not only the Western sort of view of the rule-based order. They are - we're going into a multipolar world and how will that affect us as industries? Who are our like-minded countries? Who can we work long term with, without risking sort of things and have a risk profile of the company that is reasonable and have resilient supply chains and all that. It's not only U.S., China. Where is India going? Where is the Middle East going? How is Latin America thinking about things? And also, a strong movement when it comes to Europe in terms of we have to get together to do more things together. We are not the United States of Europe. We are different countries with natural sovereign perspective of things. But we have to come together to actually get our resilience up to another level. EU is trying a lot of incentives to do that, which I support fully, but we have to do more. And it's all about sort of - it starts with the same requirements from different countries. So, we as industries can collaborate and move forward and increase capacity. I must say that the state visit that we had from France last week was a big sign of how much we talked about Europe rather than Sweden and France bilaterally, but how important Europe was. And France is acting in that direction also now. So, many things are sort of moving in a - it's a scary situation, but we're taking many mitigating actions. But I mean, in our part of the world, we have to sort of step up. That my - is my take. And it is also incredible to see if you look at upon the market, especially Europe, and how that has changed only from sort of end of '21, where there was a sort of a plan. And this is, of course, independent assessments and not us sort of talking to every country, but it's - the source here is Janes. And then in the beginning of last year, that has dramatically changed. And now again, when we aggregate the demand in terms of what spending will look like over the next 10 years, it's another $500 billion up. So, of course, that is one of the reasons, looking at our position in this marketplace, why we have now taken a step mid-term to increase our view of how we can grow as a company. It's also, of course, as our Secretary General, NATO said, which is very sort of good to hear, that there is a connection between capacity and capability with professional defense industries and how good the defense forces will be in building their capacity and create resilience. And without good industries and professional industries, there will be no defense. So, this puts the whole debate about ESG, whether we are a sustainable type of business segment, completely off the map. I mean, this is the foundation of sustainability that we can create this resilience. And what we do as industries now in discussion with different governments on how to build capacity to handle potential large conflicts, wars like we see in Ukraine or other types of war, is so incredibly essential. Now, I would say that what worries me the most is that we don't do enough. We are taking fantastic steps, and I'm so proud of our employees supporting the growth of this company, and 23% is great. And we are investing heavily, proactively ourselves to support this. But we might have to do even more in the context of what's happening around us. Because we come from a peace perspective of things, we have sort of a lot to do to get back to a level where we really, as European countries, can feel confident that there will be no aggressive actions from Russia. And that takes long-term commitments from governments. I am prepared to take risk, but it has to be in some sort of a handshake with governments if we're going to do more in terms of new sites, high capacity, because there is no way around this. Either we build stockpiles which is substantial in combination with production capacity that is substantial, and we will have to agree that we will never let us sort of pass a critical mass downwards if things looks better in the future. We can't afford to dismantle things once more. That's what the long-term commitment is all about. So there's still discussions that we have to have in terms of taking steps here. But it's not only capacity, it's also technology, as you know. I mean, it's - what we see in Ukraine is this mix of doing conventional stuff, mixing that with new tech, and quickly get that into the theater and adapting all the time. This is a new way of handling things and we need to get our act together on that as well. I'm not saying we're not absorbing new technology, we are, in many of our systems today, and I'll get back to that. But we can't just focus on capacity and ammunition and missiles and sensors and aircrafts. We have to look upon how can we change, how we actually accomplish capabilities going forward by absorbing AI, autonomy, connectivity, do things in a different way. So, we have to do both. There are incentives in place. Both NATO and EU are creating incentives to make us work together and increase capacity. Is the money enough so far? No, there has to be more. Absolutely. The ASAP is a good thing within EU to sort of come together, and the calls will be decided now in March time frame to sort of support us build missiles or support weapons and 155 millimeter ammunition. But look at the facts. Russia is doing probably 5 million artillery grenades a year now. Europe is at the level of 350,000, 400,000. Ukraine is using 2.4 million a year. So, we have a way to go. We need to do a lot more. So, this is, of course, a step up in our growth journey. We have a great backlog today. We're growing and we're going sort of in another direction. And this is why we're taking the step now to say we'll grow averagely on 15% in the next coming years. And we have to continue to invest to build this company and we have to add people to do this, of course. I'm so proud of the existing employees, and we're adding 2,500 net last year. We probably will add a lot of people also this year, a couple of thousand probably. But we will have to do things in a different way to grow even more. And that is, of course, about our automation, using new ways of working, developing software using copilots in a - to a larger extent, we do that. But I mean, there are so many things to do when you grow as a company, not only investing in infrastructure and - but the ways you work with things changes dramatically when you have volumes. And this is something, which is part of our growth journey. And we will grow, but we will have to do that with increased trend of profitability, so we've said the EBIT has to grow more than our sales all the time, while we are growing. But it's a step change and an extremely inspiring environment to work with all our employees. Strategy-wise, I want to make a few comments on these blocks. You can't summarize a strategy in sort of one slide, but this is a try. Of course, it's about market and where we go in the market and how we capture the market and position ourselves better in the market and how we actually gain market position. What do we do with our core areas? I think we are exactly right when it comes what we do. People are asking us, why don't you - don't you have to sort of limit yourselves in what you're doing going forward now, looking at this growth? But I think, being in the air domain with fighters, the GlobalEyes, and doing submarines and surface vessels, sensors and advanced weapon systems and command and control is absolutely right. But they will develop using new technology. Will we not sort of think about things we shouldn't maybe do or whether we should collaborate with someone and so forth? Of course, we will, but those are details. The main portions of Saab are right. And I think those are exactly the right core areas that we need to keep up developing. Operational efficiency is truly important to us, I touched upon that. And then, of course, the whole thing about sort of who will we attract as employees? We had more than 100,000 applicants last year who wanted to start to work with the company. We sort of raised our 2,500 net, so 21,600 roughly now, and that will continue. But the interest to work with Saab and in Saab is huge now. The sort of perception of what we do and the importance of what we do, the purpose of what we do has been understood to a much larger extent. There are still people asking me about, do you do cars anymore and so forth. But that doesn't happen that often anymore, I must say. So, looking at the market and our strategic markets and how we're growing in this market. Sweden is, of course, spending more and we're growing with that, I would say. We have a big portion of what Sweden is spending in defense today, and it always depends on what kind of systems will - you will add to the capabilities. But we - of course, Sweden is our home market, very, very important to us. So when the market is growing - the bars here show sort of the - how the market is growing in itself. And the yellow - the vertical bar shows how the market is growing, and the yellow bar is showing how we comply with that. Are we growing faster in the market than the market itself, taking market positions, or are we sort of behind Sweden? We're proportionately growing with how the market is looking. And that is a big portion. We're roughly between 30% and 40% on a yearly basis in terms of revenue in Sweden. And then it's - if FMV spent SEK80 billion last year in contracts, we get a big portion of that, but that varies over the year. So you have to look at sort of the yearly revenue to have a view of this. But you can say that roughly Sweden is 30% of our share, a third of our share. The operational countries or the focus markets, which is Germany, U.K, U.S., and Australia, represent a third, and the rest of the world represent a third. That's how we look like today. And Germany is picking up dramatically. We're taking market shares in Germany where we've been successful now in the Eurofighter with a very sophisticated EW system together with Airbus Defence. We have grown our Nuremberg facility in EW and SIGINT. We are training the army in Germany and running the whole training site for them. We are successful in the naval domain, supplying combat management systems and sensors. So, many positive things are happening in Germany. And Germany and Sweden are quite close also. So, that is an important collaboration country-wise. U.K, the same. We have invested in BlueBear. We're setting up a new facility in Fareham in U.K to build sensors. Many new contracts on the sensor side. U.S. also - U.S., I will come back to it, but you can talk about U.S. It's a huge market. I mean, it's $800 billion, $900 billion a year. Not all of that is acquisition, of course. And there are many, many big players. So, strategy-wise, we have to think about, do we compete with them? Northrop Grumman, Lockheeds, the Raytheons, the - yes, what have you, Boeing, or do we find partnerships with them or sort of take sort of niche contracts in the U.S.? We've reached a level in the U.S. now with more than 1,000 employees, 500 of - no, 1,000 employees roughly, where we are looked upon as a competitive player from the other players. So we have to be standing on our own feet more and more going forward, I would say, to increase our capacity or increase our - or increase our volumes in the U.S. And we're doing that in a fantastic way. I talked about the sensor side of things. We deliver sensors to aircraft carriers. We have the Ground/Air Task-Oriented Radar. It's a huge program. We are on the T-7 together with Boeing. We're going to be able to support every pilot being trained in the U.S., a Swedish company. Think about that. And we have now launched a Ground-Launched Small Diameter Bomb - it's easy to say it like that than the acronym, GLSDB, together with Boeing and that will also be big volumes going forward. So, doing really well. But strategically, I think we have to think about who we want to be in the U.S. going forward, little bit of a major player rather than just a small partner. That is sort of the direction I'm seeing. Australia, we are - have been selected as the supplier that will deliver all the command and control systems to the naval vessels in Australia, surface vessels. And we are taking market shares and we are diversifying into other areas as well, really going well. So we have selected the right sort of focus markets, I would say. And then, of course, we won't let go of the Asian market or Latin America or anything like that. And Sweden will always be super important to us. But this is also why we spend quite a lot of money now in marketing and offering new things to the customers. It's a huge intensity in the marketplace. A couple of examples on how we boost capacity now. We're building a new facility in Linkoping to do the tubes for support weapons. I mean, you know - I mean, order backlog has doubled in this last year in ground combat. Now, this is ground combat of Dynamics, this is not the full Dynamics. We're investing between SEK1.5 billion and SEK2 billion now going forward to boost capacity even further. We have been selected to run a company 100% owned in India to build Carl-Gustaf and other things there. We will have to establish ourselves in the U.S. here. We are a program of record when it comes to Carl-Gustaf and AT4. But U.S. is going sort of from a security perspective and Make in America and ITAR regulations, or what have you, we have to be even more localized in the U.S. going forward. It will be more difficult to sell into U.S. sort of directly from Sweden or elsewhere going forward. So, that, we are working as a strategy now to also set up shop in the U.S. So this is - do as much as we can as quickly as possible, both to increase capacity, but also to shorten lead times. Because this is the question about, are we doing enough, if you talk to our customers. If they - if you want sort of even more to get to a position, where lead times will be 18 months instead of four years, we have to take bigger steps, because we are doing this to large - this is what it's all about. We can add things to the backlog, but the lead times will increase unless we take big steps in capacity. So that's really what's happening here. On the sensor side, it's the same, very successful story. I think I said that we had 50-plus bookings of Giraffe 1X radars during the last year. And we are investing also to boost capacity in Gothenburg to manufacture things, but we also set up shop in Fareham, U.K, together with our underwater business. It has really nothing to do with each other. It's sort of the autonomous and remotely operated vehicles from Seaeye, but they have facilities we are using and building a new facility to do also radars here. That's sort of an efficient way of doing it. And we, of course, employ a lot of U.K people and we become sort of more of a home market to us. We do the same thing in Finland. The new product, Sirius Compact electronic warfare system, small thing that can be put on drone or on a - on land also, of course, different domains, have now been successful. So, we have to boost capacity, building these things in Finland, which is good for us redundancy-wise also. So, lots of things are happening in the sensor side as well. And one has to remember, adding 2,500 people also needs capacity growth in terms of where people have their offices and where we can work together and all that. There are limitations to existing facilities. So, infrastructure investment is going in - up, of course, to support this. But it's all about capturing market. Now, I talked about how important it is not only to look at here and now, but to have a view also on technology. And we are boosting our investments in new technology. We've said that we will add another SEK1 billion to this in the next coming years, and I think we will reach that level much earlier than '27 as we look upon it right now. The things we're looking at, we call it swimlanes, but it's about autonomy both in the naval domain and the air domain; it's about handling connectivity, because everything will be connected going forward. Everything will be proliferated with sensors, it will be huge amount of information that have - will have to be digested using AI technology and it has to be cybersafe, and we will have to have a connection to space. And then again, we will continue with our advanced weapon systems. One version of that is, of course, the Ground-Launched Small Diameter Bombs. What we're doing right now, as examples, is a huge market in what we call seabed awareness and seabed monitoring and seabed operations. After what we saw happening in the Baltic Sea and realizing how much communication and energy and other flows that will be - or subsurface, we will have to find ways of adding capability. And we have that, we have the Seaeye capabilities, we have contracts already for monitoring energy, transmissions, subsea. We got the SEK700 million contract last year doing that with autonomous vehicles. And there will be more in this going forward. And it's still not so much exploited market, doing things subsea with smaller type of unmanned vehicles. Same thing in the air domain. We will have to look into how to complement manned vehicles in the air with unmanned vehicles. Manned/unmanned teaming, loyal wingman, adding small drones, communicated with other equipment is something we are testing and doing right now. And then, of course, how do you counter all these small drones flying around, being used, for example, in Ukraine. So must - we must come up and we have ideas now. We've tested things, where you have cheap ways of actually taking out drones, because today, people are using missiles that are much more expensive than many of these drones, because the infrastructure they're trying to destroy is so expensive. But they must - there are 100 companies working smart ways of doing counter-UAS, as we speak, and we as well. AI is something that will have to be used, of course, also not only with the products, but today, AI is within what we do within GlobalEye, it is what we do on the EW side. We call it cognitive EW, cognitive radars, that adapts to the situation around you. There's no way with normal technologies to handle all that information and getting quickly a view of what you have to do and what the situation looks like. It's a big difference of using AI and have a 10 time quicker picture on what you need to do than not using it. That's a big advantage for the end user. So, that's what we do on the product side. Operational efficiency is also about new technologies to a large extent. You don't build software today the same way we did a number of years ago. You have your copilots, you use anonymous open source code, you do it in a completely different way. You use AI to - this is not news to you, of course, to simplify many administrative tasks, of course, when it comes to - and understanding situations and context and data much quickly - much quicker. Knowledge-based AI in the organization, just to find out, did anyone do an algorithm to solve a situation or a complex problem in a company with 21,500 employees with many sites, just to be able to ask a question like that and have all the data in the data lake to support that will expedite what we do in a fantastic way. HR is an area, legal is another area, procurement, of course. We're all in that now. The systems that we use in our internal network has to be more efficient and supporting cloud technology without risking sort of the security of what we do in terms of data. So, we're doing a lot of these things as well. And then, of course, continuous learning. We have a full-fledged continuous learning capability now with links to very high level MIT and so forth. And we do complete packages now to have our engineers to become more expert in software developing using copilots, or whether it's AI, or whether it's systems engineering. You can do that in a digital way whenever you have time, because we have that online in the company today. And I also have to learn a lot. It's also about us in management. You can call it AI for dummies or something, but we have also to understand all these new technologies, and that makes it so efficient to have this in a digital way. Last but not least, I've talked about this. We're adding a lot of new employees to our fantastic workforce today. That is also a challenge to quickly get to productivity having new employees in the organization is something we need to work. Onboarding is so important. We have a fantastic HR organization now doing all these things in a much more automated way. But also a leadership is required, of course, that handle all these new employees. We have seen reduced people turnover in the company, and it used to be in different sectors, like 14%. That has been reduced dramatically, which I really like to see. And we have a huge pressure on people wanting to start to work from Saab - at Saab in many areas. And we're not just talking software developers and AI people and data managers and all that. We're talking skilled welders, skilled production technicians and production people in assembling Gripen aircrafts in Linkoping. There are many categories where we need people. So we're not only talking software or something, there are more categories that we need. And we will continue to employ also this year. Finally, from my side before I let Christian summarize this in numbers, sustainability is very important. We want to be a leading company in this area in our segment. So we're taking this seriously. We have our scientific-based targets. We have been improved by a scientific-based target initiative. We are now taking another step with a new strategy to make sure that we are really strict on where we want to go mid and long term. And of course, the foundation is protecting our societies and people. A sustainable society, a safe society. As examples, I mean, we have a clear target and zero tolerance on corruption. And we shall be a world leader when it comes to our compliance program always going forward. That is absolutely the foundation to what we do. When it comes to environment, we have set up targets now and initiatives to reach zero emission by 2050, and a step on the way is 2030 by reducing - or by 42%. And then that will continue, of course, and lots of initiatives in the organization, and we have reduced more than 25% - 20% now since 2020. So, we are on the right path. Another example is diversity, where it's super important to us to have a diversified workforce. I am a strong believer of that. And it sounds like sort of a low ambition, but to me, to get, yes, sort of have a female population in the company that goes from 24% today to 35% as quickly as possible will generate a much more efficient company. We are higher now today, 29% on female leaders in the company. But the base is so important, and that's why we support STEM and all the initiatives in all our relationships we have with universities also. So, believe me, we have specific goals and targets, mid and long term, in many of the material areas now that you see on this slide, even though it's really busy. But this is super important to me. So, that was a bit of how I see the context and where we're going. And it's not the full-fledged strategy, but at least a snapshot in each and every area. And I guess, you want to talk numbers again.

Christian Luiga: Well, a little bit about different things, but numbers...

Micael Johansson: It can't be one hour during a day when we talk - don't talk numbers.

Christian Luiga: Numbers are the result of everything good and bad we do. So, I'll try to summarize how it looks for us right now and going forward. I want to start with - coming back to our profitability model that we presented last year, where we have three sections here, the scale effects, the efficiency measures, and then the portfolio management. And then how we then have succeeded to deliver that during the year is that we have improved our gross margin very much last year based on the scale effects. But we also do efficiency measures. We have, since a couple of years now, started to measure procurement. This is maybe not a super, super impressive number, but it is a number where we actually take down cost on procurement and we start to measure it, and we see it as a very important part of the package. OpEx is growing, it's growing at 20%, and sales is growing 23%. Something that will be, hopefully, coming through better over the years, we need to do that. Right now, our focus is, as we have said, very much on expansion, both in the market but also in capacity. And that makes it difficult to do everything on cost at this point. But as we mature, we are also thinking about, as Micael talked about, efficiency measures to bring in there. I also wanted to go back and remind us a little bit on the profitability model and related to our different business areas. So, what is the - what is sort of the drivers in Aeronautics? Well, there is scale effects when T-7 and Gripen is growing. There is contribution from new contracts that will help to support the margin. We have the civil business that is still negative, and we have said that that will be negative throughout the 2025 year, and the same with T-7. So, those will come into black numbers over time. We know that the civil business will come into black numbers, because we have signed new contracts and done the reshaping that will deliver us into that state. And then we have, if we can grow and if we can then do more in the aviation services. That is a very profitable business that can also support the average number for Aeronautics. If we look at Dynamics, sales growth is important. They are growing very hard and - but they also have a lot of bidding processes and a lot of expansion. But a more stable production and getting into the higher capacity will be the main driver for margin and EBIT expansion over time. On the sort of negative side of Dynamics is that, it is still - you think about it as a production engine, but it is still also a company that has a lot of R&D. So the more R&D we do on new anti-tank weapons or missile systems, et cetera, that will also put some pressure. And this is important, of course, to be relevant also down the road. Surveillance, we did see and we do believe that the scale effects from growth is important. We could see that throughout the previous year. More standardization, more efficiency and more improved project execution is something that also have come through, and we continue to work. It is a very project and people-oriented organization. The multi-domestic will both be a pressure on margin as we expand, but it also improves margin as we expand. So, Germany is a good example, where we build up infrastructure and presence, but also we get very good solid contracts. And then, of course, if any of the units, Surveillance is also going to have a negative push on this, all these positives on the R&D, because we are doing a lot of R&D in there. And this is just reminding us what we have talked about already a year ago. Kockums, I didn't say that in the previous presentation, but they had a very solid and very good profitability margin and profit. And we have said that Kockums should be between 8% and 10%. They should be just below 10%, as Aeronautics and Dynamics and Surveillance will be above 10%. That's how we should think in general. And now, they outbeat us all in the sense. But this is very much driven by international and surface deals in previous years. So, I think that's something to remember. The submarine business, that solid core business, is not driving up the margin in Kockums, and they will not do that over time. So surface and international shows that we can do higher margins occasionally in Kockums, but it's not something we should expect as a strong driver. Enough about our profitability model and that we are executing and we are following this and we haven't changed over time. We did say, and we still believe, and we are continuing that journey, that two years ago, when we started to talk about this, our margin is too low, it needs to improve. And that has not changed. And we are disciplined, but it needs to change in a way that is sustainable. We are not going to jeopardize just to make good numbers for a year the sustainability of the profitability over time. CapEx. A extremely important part of making sure we can grow is to invest, and we have two very clear and good examples that Micael presented both in ground combat, in Surveillance. Surveillance and ground combat is the majority of the investments. They are probably more or less 60%, 70% of the investments compared to then the rest of common IT and Aeronautics and in Kockums. And that is because the growth is also so heavy in these two units, and the backlog is coming in so fast. We have 21 units under the BAs in total, and they are pretty much all growing. So, there's not one specific only that needs to invest. So there is some big chunks, and then we have some small increases. If you have 21 units and pretty much 20 are growing, you need to also make sure that they can grow. So, this is going to impact this. We did say last year that we would grow in investments. I did say that it came out pretty much where we expected, but we also showed a number last year that was lower than this number on what we predict that the 2023 and 2027 average would be. And we have increased that. So, last year, we said, this number we believe is enough to grow 10% CAGR over the period '23 to '27. Now we say, we're going to grow 15% and we will need to invest more to cater for that growth. So - but as I said, we are very disciplined and we try to front-load, but not without losing control, to make sure we can build capacity and delivery as fast as possible. So, that leads into cash flow. And cash flow management is, of course, extremely important. The view we have is that we should be able to drive this company forward, including these increases in investments, with a positive cash flow. We have said in our quarter report that the next two years, we'll have higher pressure from these investments as we are trying to front-load them and they become a little bit higher. But we are also growing faster than we did, say, one year ago. We said we're going to grow 15% in 2023, we ended up with 23%. And now, we have a growth target of then 12% to 16% for next year. So, this is pushing investments up. But on the other hand, we are managing through higher EBITDA and also then a good control of our net working capital. And as you see on these numbers, we have managed the pressure on working capital, the lower part of this presentation. And that means also that the key metrics there, the net working capital to sales, is going down. We believe that we have good control of both payments, customer payments, customer prepayments, and then outflows for suppliers, together with the inventory build-up that we need to do, in a good way. And back again, when we started a couple of years ago and the war came, we said fill the barns. That is, actually, we pushed up inventory to a level that is probably more relevant when we look one year or two year in front of us of being more normal. So, that is also something that helped us in this journey. The return on capital employed is increasing. It is hampered by the big cash and short-term investment portfolio that we have. But it is improving, which I also think is important for both me and the shareholders, hopefully. The reminders of the conversion. We have a target and we have kept that target, it's a minimum 70% cumulative over the 2023 to 2027. As you see on this picture, it's calculated as an operational metric. And this is also how we measure and drive internally. So, EBITDA less the things that you need to go back to cash and amortizations and items not including in the cash flow. And then you - we look at the net working capital, and then we take out the CapEx. And last year, we were 74% above this average. We will have a bit more pressure in the next two years and then it will be probably less pressure from investments in the years after that. That's how we look at it to deliver on this 15% sales CAGR between '23 and '27. We have a solid balance sheet. And I think the purpose of having a solid financial position could be many. But for us, it is the combination of what we look on this. So, one single thing you may be able to handle in a different way, but to do - have the flexibility on investments in combination with the M&A that we are doing and may want to do also going forward with being flexible and resilient no matter what happens really in the world, together with that, what kind of opportunities can come out of partnerships in the future. That gives us something, a portfolio of things that we want to be able to handle having this strong balance sheet. We want to be prepared and we have the opportunity to do what's best to grow this company and make it even more profitable if we get the chance. And that's why this balance sheet and this strong position is not only good, it's important for us going forward. Finalizing from my side, the medium-term targets. So, they, in one way, look the same and we have phrased them the same. The content of how they are driven, the white text is the same as last year. We have then upgraded. We said, from 2023 to 2027, CAGR, when we stood here one year ago, we said it would be 10%. Things are pushing very good in the right direction. So, even though there's a lot of pressure on our employees to deliver, to grow capacity [technical difficulty] and that we will capture and to our best to capture and that has led to the increase to 15% very, very positive thing, really. We still see, and nothing has happened with the model and how we steer and drive our bidding processes into how we drive our costs and how we look at things, that we can still make the margin improvement over these years. And that means that EBIT will grow higher than sales, still, throughout this journey, as Micael also said. And then even if we have this increased CapEx then, and also so in the short term, a bit more than maybe we expected a year ago, we will still manage to do a cash conversion above 70% through the cumulative of this period, '23 to '27. So, in reality, only one number has changed, 10%, to 15%. But what it means on bottom line, on EPS, and actual number in cash flow, it's, of course, quite a lot if we succeed with this target, which we are super determined to do, and we are in a good way delivering on it. Thank you. I'll hand over to Micael. I stand here and let you come up.

Micael Johansson: Please remain.

Christian Luiga: I'll remain.

Micael Johansson: So, not being long now, we'll take Q&A quickly - shortly, I mean. In essence, the markets will grow long term, and that's what we are adjusting to. And I hope we will take even more steps in handshakes for governments. We are having a step change in our growth journey that affects everything we do that we've tried to explain today. And we are prepared to invest in a professional way, taking this company to another level. Everything is about the market positions, which I hope I've described, that we're doing in a proper way and that we are actually taking market shares now. We are - we need to work with other companies, and Christian showed a few here, like MBDA, Embraer, Helsing, Boeing and so forth, Babcock. Much about here and now, lot of initiatives, but also doing many really interesting things on the R&D side. Combination with organic growth and M&As will continue. We are looking, of course, in our main markets to continue to do M&As if it fits our portfolio or will give us another position. To deliver to the customers, we haven't talked too much about that, but that has never been more important - it's always important. You have your commitments, you have your milestones when you have to deliver. But the end user is shouting and screaming to get stuff now. And that means that the companies that will have the capability to deliver on time with reasonable lead times will take market shares, the other guys will not. So that is - so that's why we have that as a thing on our every group management meeting, on every day we do things, it's all about supporting that. And then the whole ecosystem, looking at the tension in the world, it's a big part of our work right now to have a resilient supply chain and manage the cost included in that work. And then our fantastic employees that is supporting this journey, they will have friends coming in continuously and there will be many more competencies now added to the company. You can see at the M&A, some of them we're doing, it's a little bit of a shortcut getting into competence areas, which we need quickly to deliver new capabilities into the market. So this is a one-slide summary of where we're heading right now as we speak. And I guess, from that, we will take questions, right? And this is the guy that's doing a splashdown later today on the slide here, Marcus Wandt. He's happy in space, but I think he's happy coming back as well. And I look forward to him - to get him back into Saab, of course.

A - Merton Kaplan: All right. Thank you, both, again, and thank you for your patience and listening in. So we have a bit of time for Q&A and we will focus on taking your questions from the floor first. We have one or two guests online as well. So I'm going to ask you to raise your hand and try to keep one or two questions at a minimum so everybody gets a chance to ask questions. And we have Chris and Mary here with microphones. So, they will come to you fast. So, with that, I will start - let's go with the first question with Erik. Please state your name and company as well.

Erik Golrang: Thank you, Merton. Erik Golrang, SEB. I'll suffice with one question then. Quite comprehensive presentation. And it's on - you talked about towards the end there, Micael, on those 5% in additional growth, meaning quite a lot. Should we interpret that - I mean, I know you don't guide on margins, but everything else equal, that also means you now see a higher profitability level at the endpoint year 2027. So, we haven't just sort of shifted the curves in parallel with higher growth, but that there's some incremental leverage on profitability from higher growth.

Christian Luiga: That's too early to say. We - as we said, I think I tried to be very clear on that. We have pressure right now on certain cost of doing expansion, both in market and capacity. We are determined to do a EBIT growth that is higher than the sales growth and we are determined to make sure it's sustainable. So we want to create a company that doesn't fall back to the old seven numbers and so on. We want to make sure we have a company that has a good foundation for profitability over time. And that is actually superior to finding another couple of tenths on the margin, just because you can do it for a short period.

Erik Golrang: And then a follow-up, if I may, drilling down into Dynamics specifically then. The margin in the past couple of years have moved quite a bit related to mix. The mix now, maybe it's tricky, but is it sort of about average? Is it a particularly unfavorable mix, or where are we now on the - as a starting point then?

Christian Luiga: Well, if I answer that as well, Micael. If the mix - sorry for stealing you.

Micael Johansson: No, no, no.

Christian Luiga: But I think that if we...

Micael Johansson: It's fine. As long as you say the right things.

Christian Luiga: Yes. We want all these entities to improve in different way their margins. And I said, Dynamics is now sort of more on a - not a floor per se, but they have more opportunities to grow margin than the opposite. Surveillance is on a journey where they have moved up and should move up sort of to more positive territory. And Aeronautics should move up. We have also said that. So, everyone will contribute in margin expansion in their own mix, and not only on a mix on a Group level. So we want to not be too dependent on the mix over time - that's my statement with that, and make sure that, actually, the entities deliver the profitability we think is reasonable, and then the mix will be less an issue to discuss when we get there.

Micael Johansson: But it's fair to say that we had a sort of a specific situation last year with Dynamics, a little bit sort of a very good mix. And that can't be all the time. But there will be high profitability levels, definitely. Whether it's a percentage up and down, now, it's hard to say, but it's going to be high levels, absolutely. And volume will drive this also, of course, when we get all the facilities up and running and demand is increasing. It will be good. But we won't guide exactly on numbers.

Merton Kaplan: So, we have Bjorn. And then after Bjorn, we have Sash.

Bjorn Enarson: Bjorn Enarson, Danske Bank. On the capacity situation in Europe and spending a few days on the Salen Conference, I mean, it's quite clear views that the politicians are, at least in Sweden, very much in favor of some support to the industry to build out capacity. And I guess, it's a matter of time until we see that also some kind of decision on this in Europe. So, that's my first question, if you agree upon that? But also, how would such a decision look like and how would this support look like?

Micael Johansson: Well, on the Swedish side, I mean, I wouldn't speculate too much, but I heard statements about sort of state guarantees and what have you in Salen, as you are relating to. And that must be agreed in the committees, of course, and brought political decisions. This was one party stating that. Now, they will probably discuss that within - in the political system, and it could be done in different ways. I mean, if there is an agreement with us to say that we will never allow things to go below a certain critical mass. So, if you invest and take risk in the world market, so to say, we will always say that this is the volume we will guarantee. That's what I hope it will be in the end. But the political process to get there hasn't been done yet, Swedish side. Then in EU, I would say Europe then, there is European defense industry strategy now being defined, which will come out end of February. That will say a few things about how we must focus on building sovereign capacity in Europe and security of supply and how that should be managed. That could be followed or coupled with EDIP, as we call it, the European Defence Investment Programme, which will be an incentive program, hopefully, with lots of money in it to make countries - a few, and a few industries come together based on the same requirements to build 155 millimeter or support weapons or sensors or what have you. So that's how I think it will look like. But all of these things haven't happened yet, and we will have elections in EU - in the Commission this year. So how quickly it will go forward, I don't know. But those are the things I see ahead of us.

Bjorn Enarson: Do you think it is a possibility for Sweden to move ahead on the first step, given that there is consensus among politicians in Sweden to support the industry?

Micael Johansson: Yes, I hope so. I think it's a good idea, because that's exactly what we need. We can never allow ourselves to dismantle this again. And don't misunderstand me, we are prepared to take risk as an industry based on the market that we see. But we - if we invest in big capacity in our country, we have to be agreeing that we will never have to sort of let too many people go, or we have to sort of dismantle the structure again, or something like that. So, this is sort of a handshake. We prepare to invest if you commit to this. And this must be done over mandate periods, of course - political mandates.

Bjorn Enarson: Thank you. Second question is on the cooperation with France. I mean, you're entering a new segment on anti-tank, more long-range weapons there. Can you say some details on the potential value, market size, et cetera versus what you're exposed to - towards today?

Micael Johansson: Too early. But, I mean, you look at MBDA and the reach they have in the marketplace and how pan-European they are. This is a good collaboration. And there is potential in this, for sure, when it comes to anti-tank, both sort of more conventional - I won't call it conventional, but the way we do things today and more long-range type of weapons. But I can't talk about the complete business case, but it really makes sense to get our act - get our people together to do something common in this, to reach markets, but also to be more efficient when it comes to developing the next capability. This is a very important collaboration to us with MBDA.

Bjorn Enarson: Thank you.

Merton Kaplan: We have Sash. And I actually forgot to remind the moderator on the telco that we have some questions from the - from online viewers as well. So, we'll try to pick that question after Sash.

Sash Tusa: Thank you. Sash Tusa from Agency Partners. Two questions. Just the first one, in terms of contribution to margins and mix, I may have misunderstood, but I think, Christian, you said that submarines would not improve the margins of Kockums, which implies that submarine margins are fairly much steady state. Is that was a - is that the correct way of reading it…

Christian Luiga: Yes. I didn't say what level, but they're not on the high level that we have in the quarter four result for Kockums.

Sash Tusa: And you don't expect them to...

Christian Luiga: It's a business where you work with very big contracts and very close to your customer, and that brings a certain sort of level of margin in those programs.

Sash Tusa: Okay. Thank you. And then following on from the big contracts theme, is there any correlation between the fact that mega contracts are probably a rather smaller proportion of your overall business going forward than they were three years, four years ago and the fact that you feel and you're sounding much more confident about your ability to control working capital?

Micael Johansson: Well, of course. I mean, it's a very important and sound foundation to have this mix of contracts that we have today. But then we're running the campaigns, and those would be excellent upsides when we succeed with next Gripen order or GlobalEye order, they will add, of course, tremendously well to our company. But we don't base all our sort of investments or our future strategy on that, but we work the campaigns diligently. So, this is a good position we're in. We don't have to have sort of a discussion in the company with or without this mega deal to do the sort of important decisions going forward.

Christian Luiga: So on working capital, we don't work that different today on the mega deals, or we don't try to work different, Sash, compared to the mid-sized deals. We try to be actually very equal and be, as Micael mentioned before, cash neutral in a sense, as much as we can over the period.

Merton Kaplan: All right. Great. Moderator, do we have a question from the online?

Operator: [Operator Instructions] And yes, we have a question from Sam Burgess from Citi. Please go ahead.

Sam Burgess: Thank you. Good morning, guys. Sam Burgess from Citigroup here. Just a couple of questions, if I may. Firstly, as Christian, I think pointed out, corporate costs were actually a little bit down after some of the one-off items. How should we think about corporate costs for FY24? I know you've been investing in some IT upgrades and there's been some other expenses. But should we expect flattish again, or are there other upcoming expenses we should be aware of? And just secondly, on supply chain, are there any particular bottlenecks that you'd call out on supply chain at the moment? Obviously, you've done a lot of inventory stocking. How comfortable are you that that's sufficient to mitigate some of that supply chain risk? Thanks.

Christian Luiga: Just on corporate cost, I said it was flattish, not down, but in the same range, and we have inflation. We don't have a headquarters structure that should grow that fast. We are quite - we're leaning on the business areas and the business units to actually drive their marketing, sales and their admin to do things. We do comment things together, but if we do something in IT that is common and everyone uses, it's allocated already into their business area's numbers. So, therefore, I don't see that, that we have a high increase in corporate cost over time. We have had this - I don't want to call it a cleanup, I want to call it that we had to sort out and make sure we were focused on the right customer aspects. And actually, we took over one company now just before year-end on a minority portfolio, make sure we do things proper, get the cost down, get the outflow down, and make sure we can deliver to those very important customers in those programs. These are maybe companies we don't want to own over time, but it is important that we get the negative flow out. And that is going to be a big shift also from this year into next year, because you've seen quite high numbers on that in what we have presented. Before I let Micael in on supply chain, I just want to say that if you don't wake up every morning and think about - a little bit paranoid about supply chain and a little bit afraid that something can happen, you probably will fail. And that's what we do every morning, sort of wake up and think, what can we do differently to make sure we have control of our inflow? I don't know...

Micael Johansson: No, it's an extremely important area to work with every day, of course. And I'm happy that we took decisions to have reasonably big stockpiles of certain things so we can actually contract and deliver to customers. But in the end - meanwhile, we'll have to work to see what are the sort of ecosystems that we have to invest in or bring with us investments in that ecosystem. We can talk about this at length, sort of specific components, products, and what have you, but everyone talks about powder and nitrocellulose and things like that. And I think that's super important. I think it's a wake-up that people have realized that, okay, much of the nitrocellulose is now sort of based from cotton from China. And what happens if they sort of cut that supply? We don't do nitrocellulose ourselves, but there are companies doing that that quickly needs to go into be - making powder. And then we are prepared to stockpile powder, because that you can do, but then it's about sort of boosting that ecosystem. Fortunately, we have a company, EURENCO in Sweden, doing powder for us, but they are also dependent on things that I mentioned. So, these things we're working with to make sure that we have other ways of supporting the whole value chain. Doing nitrocellulose from wood instead of cotton, for example, and maybe to have that within Europe at least as a capability. And then I think NATO has to think about this. Where do we put security supply hubs as capability targets? Who should be responsible of having a hub on the powder side or certain materials that can quickly be used to ramp up production of certain systems? That is not sort of done yet, but there's interesting discussions around that. But yes, I - there's not one specific. But since we're talking so much about supply of ammunition - ammunitions of different sorts, I think I want to point out how important these value chains are.

Sam Burgess: Great. Thank you.

Merton Kaplan: Thank you. We have some questions from the online viewers, and I have actually three questions from Aymeric from Kepler Cheuvreux. So, I'm going to shoot the first two to you, Micael, the first one. And Aymeric is wondering how much of the 2023 sales were directly attributable to Ukraine. And is there something you can say about the commitment of the Western countries to Ukraine, how long they will continue, how can Ukraine and the ongoing U.S. elections, discussions on that. So, interested to know your views on that.

Christian Luiga: I'm also interested, Micael.

Micael Johansson: Those are big questions. But I mean, it's a very scary situation. I think I mentioned that. I mean, if U.S. disconnect the support to Ukraine, we are in trouble in Europe. Now, Europe will take and have taken steps now to continue to support eventually Ukraine. There's still a EUR20 billion package when it comes to direct sort of weapon systems and all that. That needs to be sort of also decided. But we need U.S. so - to have a sustainable support to Ukraine. And it cannot happen that they won't continue to do that. I really hope so. Meanwhile, we have to step up, as I said. We have to do more and do it more in Europe to have the resilience and deterrence need, and also to support Ukraine. So it is - I mean, this is a year now with so many elections, in the Commission, in the U.S., in many countries. So, I hope things sort of settles a bit so we know sort of the foundation of what we're doing. But Europe has to step up, U.S. have to decide in the right direction. And personally, I can feel it's ridiculous to do this as a political maneuver to - it's all about the Southern border. And if you look at the money, we're talking $60 billion related to Ukraine support and is - what is it? $600 million when it comes to U.S. Southern border? So, it's completely unproportional. I can just hope as everyone else that they take the right decision. I don't have an aggregated number exactly on how much of our revenue is associated with Ukraine, because that's impossible, because we don't even know sometimes which parts are donated to Ukraine from the countries we deliver to. So that's impossible to aggregate. The day we have direct channels, which we're working, I can sort of at least say what the company is providing to Ukraine, but there is no such number today.

Merton Kaplan: Thank you. So, to you, Christian, from Aymeric here again. Can you talk a bit about the M&As we have done? And also how you view - which have been mostly focused on AI and technology companies, but how do you see the M&A pipeline going forward? And would you consider - be able to do some larger deals or do we have some larger deals in the pipeline? And how would you see the trade-off between our financial position versus the valuation or price tag for such a company?

Christian Luiga: I think the amount is less important. I'm not going to say we're looking at the big companies right now or if we're not. So - but the important thing is, of course, the valuation and that we contain and secure still a good financial position for the Group. You can buy something that is loss-making, you can buy something that is actually cash generating. More importantly is, how can we strategically support Saab in this journey of grabbing market, either through market access, capacity or technology? And we want to do these in our strategic markets, primarily. If there's something in another market that is so interesting, we will look at it. But we focus on our strategic countries, we focus on our core areas, and we focus on enabling technology, market access or capacity. And honestly, when we look at our pipeline and we work with our pipeline, we don't start saying, this is too small or this is too big. We start to say, does it fit our strategic agenda?

Merton Kaplan: Thank you. One final question from me, and then I will go back to the floor and see if we have more questions. So, one question about the T-7 program here. Can you quantify or elaborate on the T-7 potential, when that program is on full capacity? And when that would be?

Micael Johansson: Well, I think it's - the information we have is that the so-called Milestone C, which is sort of when the real production starts ramping up in the U.S. and the type certificate is done. It's late '25, early '26. So, it will be a while with sort of lower volumes up until then. But then again, we have 350 aircrafts on order, and Boeing is estimating a couple of thousand aircrafts to be sort of manufactured. So, that's the potential of this. So, it will be an excellent program. It's just taking a little bit frustratingly more time to get there than we anticipated.

Merton Kaplan: Perfect. Thank you. Do we have more questions from the floor here? And then we could get back. Michael from...

Unidentified Analyst: Hi, good morning. A couple of questions on the guidance and targets. First of all, I mean, the long-term targets have been upgraded this morning to 15%. Just want to sort of double check the math here. It's a quite substantial upgrade on your 2027 sales potential, roughly 20%, 25%. Is that a correct calculation or have I missed something?

Christian Luiga: Well, it - yes, I haven't done that calculation properly. You can look at it afterwards. But it is for the CAGR. We started coming out of 2022 to 2027, and we have said 10% and now, we say 15%, and it will be a bigger number in the end, absolutely. I haven't checked, actually, if it's 25%, a higher number between those. So - but you're probably right, because I know you're good at math. So...

Unidentified Analyst: So, what are the main assumptions to reach those levels? Because it's a quite substantial compounding effect that you will achieve.

Christian Luiga: Yes, well, we started out having 23% growth instead of 15% last year. That's included in this number and now, we have said 12% to 16% for this year. And we have a very good market position. We have a very good backlog position. And we see that the requests and potential opportunities are very good out there. I mean, as I said in quarter four, we work a lot on different offers, but we don't know if we're going to win them yet. But there is a lot of potential out there to do more.

Micael Johansson: But look at the backlog and how it spreads out and look at the numbers that I showed on the - how the step has been taken to spend more money in the European perspective, adding $500 billion over this - aggregated over this time period. And what we see on the demand side for certain things that we have in our core areas, I mean, all that comes together to say that, okay, we can take another step.

Christian Luiga: Well, you're never satisfied. So, last year, when we said 10%, you said, are you not too cautious? And now we say 15%, you say, you're too aggressive. So... I was just joking.

Unidentified Analyst: I don't think it's aggressive. Okay, fair enough. And this is without mega orders, right?

Micael Johansson: We have very little sort of assumptions on really big contracts in that, depends on mega orders. I mean, there are some large contracts according to the definition, of course. But it's not - no, we're not basing this on winning this and that and this deal that are huge, no. That is an upside.

Unidentified Analyst: Okay. And when it comes to cautious assumptions, looking at the guidance, 12% to 16% growth, that's higher than consensus, of course. But you also have 19% higher order backlog for delivery and recognition in 2024. So, from that perspective, it looks a bit cautious.

Christian Luiga: Okay. But I would be a little bit careful there, because, as I said, the more we fill up our production capacity, the harder it is to get a quick order in and make that into sales. So that - until we have built up more capacity and until we move into sort of a bigger capacity in general, it's going to be harder to consume order into sales in the same year.

Merton Kaplan: Great. Do we have any more questions from the floor?

Christian Luiga: Sash?

Sash Tusa: Thank you. I've just got a follow-up on the comments you made about your position in the U.S. market. And I think you said you were being seen now as being a competitive player. That can sort of be read two ways. Either that you're now very credible - I mean, maybe either and/or that you're actually seen as being big enough to be dangerous and hence the OEMs want to start crushing you. Which do you worry about more?

Micael Johansson: No, I see it as a very positive [technical difficulty] We've had sort of collaboration, we still have collaborations that are important to us. But then we've been trying to find the niche products on certain platforms, like radar on the U.S. carrier, for example, and stuff like that. There are other programs coming up with the way we are working, where we will be very efficient in the way we go about things, where I think we can big - win. If I put it this way, big initial programs as a player in the U.S. market. Will we win all of the big ones? No, of course not. I mean, there will be a huge competition in the U.S. market and they are quite good at using their states and all that to accomplish leverage. But of course, we will win bigger contracts and more sophisticated contracts in the U.S. being who we are today. I can't be - quantify that. It's not a negative thing that we have become so dangerous to them, so they will try and crush us, so we have to leave. It's not like that. But we will be very U.S. I mean, this is Saab, Inc U.S. This is totally technically a U.S. company, even though it's 100% owned by Saab. It's technically U.S. company, which gives us a position in the market that is excellent.

Sash Tusa: Thank you. And just a follow-up on commercial aerostructures. You talked about having renegotiated contracts, which should help you, and I think you published that you've done that with Boeing. Are there any contracts that still can be renegotiated to take advantage of the clear commercial pressures on the primes in the upcycle?

Christian Luiga: There will be - I mean, there will be discussions, of course. We have contracts ongoing with Airbus and there will be new contracts coming out, both from Boeing and Airbus. And we will look at them with the perspective we've had so far, making sure that we make profit and not loss.

Sash Tusa: Thank you.

Merton Kaplan: We have one question here from Bjorn.

Bjorn Enarson: Yes. Bjorn, Danske. One question. I'm thinking about if I have underestimated the impact from NATO. I mean - and I'm not thinking about the specific order received or the request for information on GlobalEyes, et cetera, but more - a little bit on the U.S. question and also on your success in Germany is - I mean, you have invested and you had a strong position and that is strengthening. But do you believe there is something linked to NATO in this success at all? That - I mean, Sweden turning into a member state, is that also helping you out in these core markets?

Micael Johansson: I see this as a positive thing, but we learn as we go. I mean, NSPA, the acquisition authority within NATO is not really known to be acquiring so many things sort of for the NATO or for a few NATO countries. But recently, because of the situation in the world and the Ukraine thing, they have been appointed to acquire things that benefits us. And we didn't really see that coming so quickly, like AT4, Carl-Gustaf and RBS 70 and all these things. Is there more to come in that direction? I don't know. Normally, the nations will have to take care of the Article 3, strong defense thing. And what I've said before is that being a NATO - being NATO is different then, because no one will try and say that we're not sort of trustworthy or we will go away and leave them and all that, because we're connected to the whole commitment of Article 5, which is strong. But this thing with NSPA is really positive. I hope more will come. But then it's another - the capability development plan of NATO is also something we get some insight into, which we didn't have before. So we can, of course, look at that and say, this capability will be needed by a few countries. We have - we are strong in that, so we can actually direct our R&D in that direction to be sort of applicable to what's being procured. So, positive thing, directions. Then again, competition. There will be companies, industries coming to Sweden. This is an open market, I would say, to a large extent. But now seeing us as a NATO country and now it's sort of a free market, which it is, but it's not like in other countries. So, there will be competition still. So, one shouldn't overexaggerate it, but it's been very positive to us so far, being only an invitee.

Bjorn Enarson: Thank you.

Merton Kaplan: So, the time is 11