Appendix 3a - Annual Report 2016

152 Pages·2017·11.85 MB·English

ANNUAL AND SUSTAINABILITY REPORT 2016
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CONTENTS
Vision and mission 1
22
Saab in brief 2
Saab 2016 3

page
Comments by the Chairman and the CEO 4
VALUE CREATION 8
External factors 10 MARKET
Saab creates value 12 A strong local presence built on
collaborations, partnerships, longevity
Strategy 14
and responsible business strengthens
Continued growth 16 our market position and growth.
Goals and result 18
Saab's share 20
MARKET 22
Defence and security market 24
Partnerships create opportunities 27
Zero tolerance for corruption 28 32
Defence exports are a great responsibility 30
PERFORMANCE 32 page
Continuous improvements 34
Reduce environmental impact 36
PERFORMANCE
Developing employees and leaders 38
Our focus is on making functional
Responsible supplier relationships 40
processes more efficient, creating a more
Information security and product safety 41 business-oriented culture and
developing leaders and employees.
INNOVATION 42
Our innovative product portfolio 44
Pioneering technologies 46
Engaged employees 48
Gender equality and diversity 49
SUSTAINABILITY GOVERNANCE 50
42
AND GRI
ADMINISTRATION REPORT 56
page
Group – Financial Review 2016 57
Business areas 58
INNOVATION
Other significant events 64
We concentrate our product portfolio
Risks and risk management 66 on innovations in systems integration and in
Corporate governance report 70 five core areas. We strongly believe that
diversity and engaged employees drive
Board of Directors and Auditors 76
innovation.
Group Management 78
Other information 80
FINANCIAL STATEMENTS AND NOTES 84
DIVIDEND MOTIVATION 138
PROPOSED DISPOSITION 139
OF EARNINGS 2016
140
AUDIT REPORT
146 As of 2016 Saab publishes an integrated annual CALENDAR
SHAREHOLDER INFORMATION and sustainability report. The formal annual
147 Annual General Meeting 5 April 2017
report comprises pages 56–139. Certain figures
MULTI-YEAR OVERVIEW 148 have been rounded off, due to which tables and Interim Report Jan – Mar 26 April 2017
GLOSSARY calculations do not always add up. A printed Interim Report Jan – Jun 20 July 2017
149
SAAB IN THE WORLD copy of the annual report can be ordered from Interim Report Jan – Sep 24 October 2017
[email protected].
Year-end report Jan – Dec 16 February 2018
Cover: Ellen Molin,
Some of the images are enhanced with
Head of Business Unit Gripen Support,
Augmented Reality (AR) technology.
Support and Services.
Download the ‘Saab AR’ app, and hold AR
Right: GlobalEye – Saab’s new airborne early your mobile device over images with the
warning & control (AEW&C) system. See page 45. icon for a three-dimensional experience.
MISSION
To make people safe by pushing intellectual
and technological boundaries.
VISION
It is a human right to feel safe.
It is a basic human need and a human right
to feel safe. Safety is subjected to many
different types of threats, however. This
includes military threats, terrorism, accidents
or natural disasters.
Saab develops innovative, cost-efficient
high-tech systems to increase security for
societies and individuals. At the same time,
there is a realisation throughout the business
that some of the systems and solutions that
contribute to greater security are not only
used in a state of peace, but can also be used
in conflict. This entails a large responsibility.
By acting responsibly in everything we do, we
build the confidence of customers, employees
and society and contribute to a safer world.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2016 – 1
SAAB IN BRIEF
Saab supplies the global market with world-leading products,
services and solutions for military defence and civil security.
Saab has operations and customers on every continent.
FIVE MARKET AREAS
61
To ensure a presence in key local markets, %
Saab has five market areas: Europe,
Middle East & Africa, North America,
10 EUROPE
Latin America and Asia Pacific
%
NORTH AMERICA 9
%
MIDDLE 13
EAST & AFRICA %
7
% ASIA PACIFIC
LATIN AMERICA
Share of Saab’s total sales 2016.
The organisational structure applies as of 1 January 2017.
SIX BUSINESS AREAS
Saab’s operations are divided
into business areas based on
products and technologies.
23
%
9
AERONAUTICS 17
%
%
INDUSTRIAL
PRODUCTS AND DYNAMICS
SERVICES Share of Saab’s
total sales 2016.
The organisational
structure applies as
of 1 January 2017.
17
26
%
%
SUPPORT AND
8 SURVEILLANCE
SERVICES
%
KOCKUMS
Cobra for Gripen C/D with a helmet-
mounted display (HMD) is integrated
with other systems on Gripen. The pilot
is better able to effectively combat
targets on the ground and in the air.
2 – SAAB ANNUAL AND SUSTAINABILITY REPORT 2016
SAAB 2016
Saab further strengthened its market position in 2016. It is clear
that demand is growing for cost-efficient systems and solutions
that quickly increase operational capabilities.
LAUNCH OF GLOBALEYE SAAB AND LFV ESTABLISH COMPANY 5
In February, Saab introduced the GlobalEye system, which In June, Saab and LFV signed an agreement to establish %
combines Saab’s Erieye ER radar system with Bombardier's a new company – Saab Digital Air Traffic Solutions AB
Global 6000 jet aircraft. GlobalEye is a world-leading – which will market, sell, develop and operate products
Organic sales growth
system that further improves Saab’s offering. and services for remote air traffic control.
Goal: 5 per cent per year
over a business cycle
ENHANCED CAPABILITIES FOR GRIPEN BOEING AND SAAB PRESENT T-X
A major enhancement of the operational capabilities of In early autumn, Boeing and Saab revealed the T-X, an
the Gripen C/D was implemented during the spring. all-new aircraft and training system designed specifically 6.3
Gripen is now the world’s first and only fighter aircraft for the U.S. Air Force’s training mission for the pilots of %
equipped with the Meteor. The next step in Gripen’s the future. The first flight was completed in December.
development was taken in May with the rollout of the next The U.S. Air Force is expected to select a contractual
Operating margin
generation Gripen. Gripen E is a totally new platform with partner at the end of 2017 or in early 2018.
Goal: At least 10 per cent per
more sophisticated capabilities and has been ordered by
year over a business cycle
Sweden and Brazil. Deliveries begin in 2019. SAAB A POPULAR EMPLOYER
Saab climbed to sixth place in Universum's ranking
#6
ORDER FOR AEW&C RADAR SYSTEM of Sweden's most popular places to work among
In the spring, Saab received an order for the airborne early engineering students. Interest in Saab has especially
warning and control system AEW&C, which provides increased among female students.
detailed situational awareness and can be used for border During the year, Saab climbed
surv eillance and rescue operations at sea and on land. DIVIDEND from eighth to sixth place in
Deliveries will be made during the period 2016–2018. For 2016, the Board of Directors is proposing that Universum's ranking of the
the Annual General Meeting approve a dividend to most popular employers among
AWARD-WINNING GENDER EQUALITY WORK share holders of SEK 5.25 (5.00) per share, corre- engineering students in Swe-
Saab was awarded the Industry Equality Prize for 2016 sponding to 49 per cent (39) of net income. den. The goal is to be among
for strategic work with gender equality and the progress the top five.
we have made in a traditionally male-dominated industry.
Order bookings Share
and sales of sales
MSEK
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000 Sales 83% defence-related products and services
0 Order bookings 17% civil products and services
12 13 14 15 16
Financial highlights (MSEK)
2016 2015 2014
Order backlog at year-end 107,606 113,834 60,128
Sales 28,631 27,186 23,527
Operating income (EBIT) 1,797 1,900 1,659
Operating margin (EBIT), % 6.3 7.0 7.1
Net income 1,175 1,402 1,168
Earnings per share after dilution, SEK 10.60 12.79 10.78
Free cash flow 2,359 -726 -1,094
Dividend per share, SEK 5.25* 5.00 4.75
Equity/assets ratio, % 32.3 36.8 38.5
Internally funded R&D, share of sales, % 7.2 6.5 5.7
Number of employees at year-end 15,465 14,685 14,716
* Board of Directors' proposal 2016.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2016 – 3
CHAIRMAN’S STATEMENT
INNOVATIVE SOLUTIONS FOR A SAFER FUTURE
My fellow shareholders and others with an interest in Saab, for
80 years Saab’s products and solutions have helped to maintain
security and to make people safe, promote democracy and
encourage development in the world. This is a role that is
becoming increasingly important in a turbulent environment.
The past year has been one of conflicts, political Value-creating relationships are built on lasting
turmoil and, for many people, an increased sense of trust, which in turn is built on long-term rules and
insecurity. Defending basic human freedoms and regulations. International trade is a pillar of develop-
rights is most important at times like these. ment and growth around the world. For the defence
For Saab, global relationships and partnerships market, the international harmonisation of export
are a way to bring people, technology and businesses laws is extremely important. Saab is therefore
together, but also to contribute to national and inter- strongly engaged in the discussion of global trade
national security. Building long-term industrial rules for defence materiel.
partnerships better enables us to develop technolo- Sustainable business, in accordance with interna-
gies and finished products. Relationships and tional and national law, is a non-negotiable demand
partnerships also give Saab new knowledge and when Saab competes in the challenging market for
experience that are invaluable to future business. defence and security products around the world.
Saab is a strong proponent of openness and Saab has zero tolerance for any form of business that
results-oriented partnerships, and working closely fails to live up to ethical standards.
with customers and local businesses – whether in Taking responsibility for people and the environ-
Brazil, Poland or India – is a key element in our ment is a strategic choice for modern companies.
long-term business strategy. We are borrowing the world from future genera-
While partnerships are a common theme tions, and our promise to them is to manage and
throughout our business, essentially what drives develop it in the very best way. Therein lies a strong
Saab is its cutting-edge technological expertise and incentive for Saab: to stay on the forefront of innova-
business strategy. It is thanks to Saab’s technological tive solutions.
strength and innovation that we in a year like 2016 Technological development is accelerating and
were able to unveil the new Gripen E, a completely competition is growing. This in turn requires an
new jet trainer together with Boeing, and a new organisation that can help us meet future challenges.
generation of airborne radar in GlobalEye. The company continues to develop and improve
4 – SAAB ANNUAL AND SUSTAINABILITY REPORT 2016
efficiencies, and to deliver on an order backlog four
times higher than sales. Saab’s sales growth was 5 per
cent in 2016, in line with the long-term goal. This is
a result of conscious choices over several years, with
strategic investments in the development of new
technologies and products and a new strategy to
closely partner with customers through the market-
ing organisation we launched just over four years
ago. Taken together, this has laid a stable foundation
for profitable growth, which is also a prerequisite to
creating long-term value for shareholders, custom-
ers, employees and the communities that we serve.
On behalf of the Board of Directors, I would like
to express my heartfelt thanks to Saab’s CEO, Group
Management and all of our employees. For 80 years,
thousands of fantastic employees have found new
technological ways forward. Technological develop-
ment is and has been the core of the company’s
operations and success. Our mission has been to
contribute to a safer society through modern
defence and civil security. That was the case in
1937, and it remains so in 2017. This is what we
contribute to Sweden and to many other countries
around the world.
Stockholm, February 2017
Marcus Wallenberg
Chairman
Taking responsibility for
people and the environment
is a strategic choice for
modern companies.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2016 – 5
CEO COMMENT
POSITIONED FOR CONTINUED GROWTH
Saab continued to develop in the right direction in 2016. We have a strong order
backlog, we have more tenders being evaluated by customers than ever before,
and our product portfolio and the way we collaborate are seeing growing
interest in global markets. Our position for continued profitable growth is strong
and our way forward to create value for our owners and customers is clear.
OUR JOURNEY OF GROWTH CONTINUES Being close to our customers, constantly looking for
Many of our biggest programmes made significant ways we can work more efficiently, and innovation
progress in 2016. In February, we launched the are the guiding principles in all our businesses. At
airborne surveillance system GlobalEye, in May we the same time, sustainability is part of everything
rolled out the Gripen E, and in September the two we do, and engaged employees are the key to our
prototype jet trainers developed together with continued journey of growth.
Boeing were unveiled. The first T-X trainer also flew In 2017 and the years beyond, our focus will still
in December in St. Louis, in the US. We signed the be to develop, produce and deliver more efficiently
first contracts for the new generation of Carl-Gustaf, and in a shorter time. Our customers, whether mili-
the M4 version, and the Swedish Defence Materiel tary or civilian, are aware that they have to improve
Administration (FMV) ordered the development their capabilities in a fairly short time, and Saab is
and production of the New Lightweight Torpedo well equipped to help them.
system, an important order to develop our capa-
bilities in this area. STRONGER THROUGH COLLABORATION
At year-end, Saab’s order backlog wa SEK 108 bil- With the Swedish tradition of openness and our
lion. With a backlog nearly four times higher than knowledge of how to collaborate on technological
sales, we are positioned for further growth in 2017 development, Saab is a sought-after partner. Today
and beyond. Sales increased to SEK 28.6 billion. customers often require collaborative models as part
Operating income amounted to MSEK 1,797
with an operating margin of 6.3 per cent. Opera-
tional cash flow amounted to MSEK 2,603, which is
a result of a conscious focus on cash flow in recent
years. We saw important payments relating to our
major projects and a high level of activity, including
in Business Area Dynamics.
A safer world enriched by differences
Many places in the world are unsafe. War, conflicts,
migration and unpredictable terrorism are discon-
certing and horrifying. Terrorism in particular is
intended to spread fear in people. This is why we
remain steadfast in defending equal rights and the
right of people to feel safe. With our products and
services, we contribute to a more secure world.
As CEO of Saab, I know how important and posi-
tive diversity is in a team, in a management group or
in a workplace. We don not get stronger in spite of
our differences, but because of them. Our work with
gender equality was awarded the Swedish Industry
Equality Prize in autumn 2016, and in the same
spirit, we will continue to work with diversity in a
broader sense in 2017.
FROM IDEA TO CAPABILITY
In recent years, we have focused on developing our
product portfolio and investing to strengthen our
position in the market. This has made Saab one of
the most competitive companies in the industry.
Investments in research and development will con-
tinue, since they are a key to remaining competitive.
To stay a step ahead and meet our customers’
needs in the best way, we have a strategy built on
three areas: marketing, performance and innovation.
6 – SAAB ANNUAL AND SUSTAINABILITY REPORT 2016
Our customers, whether
military or civilian, are
aware that they have to
improve their capabilities
in a fairly short time, and
Saab is well equipped to
help them.
of any deal, so that they can develop their domestic Saab has identified four main focus areas for our
defence capabilities and industrial competence. sustainability work, which are integrated into our
Throughout our history, our strategy has been to business strategy. We are continuously getting better
work closely with Swedish industry and academia. at integrating sustainability in all our operations,
This has served us well and contributed to techno- and it was natural therefore that this year we publish
logical development and new business. As we have an integrated annual and sustainability report.
grown into a global company, our research and Through Saab’s products, innovation collabora-
development collaborations have also grown inter- tions and social engagement, we are already contrib-
nationally, in line with our strategy to have a strong uting to several of the 17 global development goals
anchor in every country where we do business. The that the UN adopted in 2015. Based on our estab-
sale of Gripen to Brazil, our largest export order lished focus areas for sustainability and the oppor-
ever, entails an extensive development cooperation tunity we have to make a difference, we set five goals
and technological transfers. This applies not only to during the year. One concrete example is in educa-
Saab, but also to many Swedish and Brazilian com- tion, where we in Sweden began working with
panies and institutions in various sectors. It is one of schools in disadvantaged areas, with our employees
many examples of how we, with the so-called “triple serving as role models for young people there.
helix” model, create collaborative value together Our most important resources are our employees.
with industry, academia and authorities. We have just over 15,000 driven and highly skilled
people, and together we are curious, want to learn
SUSTAINABLE CHOICES and create. We know what customers need and how
Sustainable business in a broad sense drives innova- to deliver the highest quality and cost efficiency with
tion and profitability. Our commitment to sound the shortest lead times. Together with others, we are
business is one of our competitive advantages. It also building national and international security. That is
helps us when young people today and in the future what we have done for 80 years. Saab’s journey of
choose where they want to work. To stay viable in growth will continue in 2017.
the long term, we have to choose sustainably.
We act responsibly according to the company’s
values, code of conduct, regulations and processes. Stockholm, February 2017
The UN Global Compact is an important base. Two
areas of great importance are the rules and internal Håkan Buskhe
processes on anti-corruption as well as on defence President & CEO
exports. Saab has absolutely zero tolerance for any
form of business that deviates from ethical standards.
SAAB ANNUAL AND SUSTAINABILITY REPORT 2016 – 7
VALUE CRE ATION
8 – SAAB ANNUAL AND SUSTAINABILITY REPORT 2016