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STOCKHOLM, April 23 (Reuters) - Shares in Saab rose sharply on Friday after the Swedish defence company’s first-quarter earnings beat market expectations, helped by strong demand as many countries increase defence budgets.
Large orders in Saab’s defence-related business, which makes the Gripen fighter jet, boosted order intake, while the downturn in the civil aviation market continued to impact other parts of the group’s business.
Saab’s shares, down around 4% so far this year, were up 8.3% at 0903 GMT. The company’s shares fell roughly 25% in 2020.
Analysts at Jefferies said Saab exceeded its expectations, but also highlighted that the pandemic, which has hit civil aviation and affected subcontractors and material supply for the Gripen E/F programmes, was still “far from pacified”.
“It’s possible 1Q21 is something of a game-changer for the equity story,” the investment bank said in a note, adding that the modest operating cash outflow broke a pattern seen since the first quarter of 2018.
Saab kept its forecast for adjusted operating margins this year to be in line with 2020, organic sales growth of around 5% and positive cash flow.
“Apart from international expansion, our priority in 2021 is to increase focus on operational efficiency,” Chief Executive Mikael Johansson said.
Saab’s first-quarter operating profit rose to 597 million Swedish crowns ($70.89 million) from 560 million a year ago, which compared with a mean forecast based on three analyst estimates of 430 million, according to Refinitiv data.
Quarterly order bookings increased 22% to 5.87 billion crowns, while organic sales growth was 14%. Operational cash flow improved in the first quarter to -160 million crowns from -1.58 billion in the year-ago quarter.
The company’s long-term financial goals include average organic growth of 5% and an operating margin of at least 10% per year over a business cycle.
$1 = 8.4213 Swedish crowns Reporting by Helena Soderpalm; editing by Niklas Pollard and Jane Merriman